Smartstoplf Storage Reit Inc Stock

Hello, everyone. Thank you for joining us, and welcome to SmartStop Self Storage's Second Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to [ David Korek ], Senior Vice President of Corporate Finance and Strategy. David, please go ahead.

Thank you, Operator. Before we begin, I would like to remind everyone that certain statements made during today's call, including statements about our future plans, prospects, and expectations, may be considered forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements are subject to numerous risks and uncertainties, and we with the Securities and Exchange Commission, and these risks could cause our actual results to differ materially from those expressed in or implied by our comments.

Forward-looking statements in our earnings release that we issued last night along with the comments on this call are made only as of today. The company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. In addition, we will also refer to certain non-GAAP financial measures. Information regarding our use of these measures and a reconciliation of these measures to GAAP measures can be found in our earnings release and supplemental disclosure that we issued last night and are available for download on our website at investors.smartstopselfstorage.com. In addition to myself, today we have H. Michael Schwartz, Founder, Chairman, and CEO, as well as [ James Berry ], our CFO. Now, I'll turn it over to Michael.

Thank you, David. Thank you for joining us today for our second quarter earnings call. SmartStop Self Storage had a strong quarter of results, and we further reinforced our vision by communicating our long-term strategy for shareholder value creation with the announcement of our DECA initiative in July. Let me first touch on our results for the second quarter. We posted strong same-store revenue growth of 1.3%, an operating expense decrease of 3.4%, and an NOI growth of a positive 3.7%, and maintained average occupancy of 92.5%. Operationally, 10 of our top 15 markets posted positive same-store NOI growth. Our strong focus on expense control led to 150-basis-point year-over-year growth in our same-store operating margin. This is our second quarter in a row of improved margins.

This operational performance coupled with overall efficiencies resulted in reported FFO as adjusted per share of $0.49, up 17.6% year-over-year. With these results and better-than-expected momentum into the second half of the year, we raised the midpoint of our same-store revenue and same-store NOI guidance as well as our FFO as adjusted per share guidance. In July, we introduced the DECA initiative, which is our multi-year strategic framework that guides our decision-making as a management team. The DECA initiative stands for Disciplined Execution, Compounding Appreciation through six defined pillars for outsized long-term value creation. This value creation is driven by relative outperformance, margin expansion, and outsized FFO as adjusted per share growth. This is the true goal of our DECA initiative. I communicated a $10 billion capitalization level, which will be the output of executing in a disciplined fashion on those goals.

And that level is also the size that we think SmartStop's platform can begin to recognize its full potential. Our results and activity this quarter are a perfect reflection of this initiative. Strong same-store results driven by our revenue management platform, talented operations, and store-level teams, growing efficiencies as we scale, and deliberate expense control. Same-store operating margins of 67.3%, up 150 basis points year-over-year, and NOI growth of 9.4% in our Canadian joint venture properties year-over-year. 14% growth of the reoccurring revenue stream for our managed REIT platform, the acquisition of a 3-property portfolio of high-quality self-storage properties at a high 5% cap rate, the deployment of approximately $16.3 million of bridge capital at a double-digit yield, an organic reduction to our cash flow leverage to 6.2x, and finally, sector-leading FFO as adjusted per share growth of 17.6% year-over-year.

Sitting here 16 months post-IPO. We are encouraged by the sector's momentum and our successful execution of the plans we laid out at the IPO. We are excited to articulate and communicate the DECA initiative with all of you. And while the pillars we outline were on display in the second quarter, we've just begun to scratch the surface of this company's full potential. As I wrote in the letter, the DECA initiative is the future. The foundation is laid, progress has been made, and the work is underway. Now I'm going to turn it over to James.

Thank you, Michael. Starting with our operating performance, our same-store pool posted year-over-year revenue growth of 1.3%, with a 3.4% decrease in operating expenses, leading to an NOI increase of 3.7%, with quarter-ending occupancy of 92.4%. These results were slightly better on a constant currency basis. We were very pleased with our operating expenses with a year-over-year decrease of 3.4% in the same-store pool in the second quarter. This expense control led to an increase in our same-store margins of 150 basis points. We saw a decrease in payroll, property insurance, repairs and maintenance, and utilities with relatively flat growth in property taxes. Our web rates were down 3.8% during the quarter. Our achieved move-in rates per square foot were down 4.4% on average.

Occupancy in July was 92.1%, down 65 basis points year-over-year. We felt more comfortable holding our asking rates heading into Q3, as our web rates were actually up 1.2% year-over-year for the month of July, slightly better than we anticipated. Our seven properties that were impacted by L.A. County Fire ECRI restrictions posted negative 2% same-store revenue growth in the second quarter. However, with the lift of these restrictions, we are anticipating those returning to positive same-store revenue growth for the remainder of the year. On the external growth front, we acquired three properties on balance sheet in Spartanburg, South Carolina for approximately $30 million. We also closed on a preferred investment on a property in Goleta, California for $16.3 million, which we assumed property management of that asset at the end of June. The result of all of this for the second quarter of 2026 is that we posted fully diluted FFO as adjusted per share and unit of $0.49.

Turning to guidance, we raised our same-store revenue guidance from a range of negative 0.25% to 1.75% to a range of 0.5% to 1.5%. The lift of the L.A. fire restrictions account for about a quarter of that raise or 5 to 7 basis points. The remainder comes from a combination of better-than-expected second quarter, paired with better-than-expected momentum into the second half. Additionally, we are reducing our overall operating expense growth range from 1.75% to 3.75% to a range of 0.25% to 1.25%, driven by a combination of controllable expenses and property insurance. The result is an increase of our NOI growth midpoint from negative 0.25% to 1.25% to a positive 1.15%. Lastly, we raised our guidance on FFO as adjusted per share from $1.94 to $2.04 to $1.98 to $2.04. And with that, Operator, we will open it up to questions.

[Operator Instructions] Your first question comes from the line of Wes Golladay with Baird. Please go ahead.

Hey, everyone. Just a question on the acquisition pipeline that you're seeing. Are you expecting to transact around a similar cap rate of the 5.9% that you did in the quarter?

Well, the answer I think is yes. I think that's kind of what our target is. I think if I step back, I want to kind of reinforce that we do believe this is a solid acquisition cycle. It is here, and it's driven by primarily individuals and the community that have built or bought during COVID heyday. And now a lot of them are quite frankly over their skis. And so this result is a wave of high-quality properties that are coming up for sale because owners are effectively out of options. And so today we are seeing a lot of attractive opportunities out there on the stabilized front, U.S. and Canada, kind of at that mid-5.5%, and it's more between a 4% to 5%, I would say, in a lot of the Canadian markets.

Pricing, though, I think in broker market acquisitions are still a little high. I think there are deals out there. I think a lot of off-market deals seem to be the most attractive active right now if you can find those. Given where we sit in leverage, which I think is incredibly important to kind of address with respect to that question, you know, we did reduce our cash flow leverage again this quarter, even while deploying capital. And so we have raised our full-year capital deployment guidance to between $55 million and $75 million range, and we definitely have room to be more active if the right opportunities present themselves. And so I do want to be clear that we're not going to just chase volume or size for its sake. We're obviously focusing on acquisitions that can be accretive to the platform and as we said before we want to re-emphasize, you know, $300 million of acquisitions actually move our market cap by about 10%.

So that's meaningful growth for SmartStop Self Storage, which, you know, is much different than our peers. They have to chase much larger acquisitions at that sizes, and so it's a overall I think very solid acquisition environment.

Okay, thanks for that. Just one housekeeping question, you do have a $2 million 1-time fee that you're going to earn from the funds consolidating. Would that be included in your third-party management guide?

Hey, Wes, is correct. Yes, so that'll be included in the, at the managed REIT, the guidance, which falls under the managed platform. And I would expect that to hit in the fourth quarter. And for what it was, that was a consideration in the initial guidance as well.

Your next question comes from the line of [ Victor Fediv ] with Scotiabank. Please go ahead.

Thank you, and hello, everyone. So your same-store NOI margin expanded 150 basis points year-over-year, up from 30 basis points last quarter. So how much of that improvement is actually sustainable operating leverage from increased market density versus more temporary benefits such as insurance and repair and maintenance savings? And where do you see the biggest opportunity for further margin expansion going forward?

Yes, thanks, Victor. This is James. I'll jump in there. So, just to touch on some of the savings we saw from an operating expense perspective in the second quarter, as we mentioned, it was on a number of line items. So, payroll was there, repairs and maintenance, property insurance, and utilities as well. So, in terms of what's structurally happening, you know, in those operating expense savings. Obviously, we had our property insurance renewal that occurred in April. And so that's part of a just general softening in that particular market. And that's going to carry forward through the rest of this year.

In addition, repairs and maintenance, that was largely a comp consideration, although we are doing a good job of inspecting and expecting those dollars. I think the larger story is in the payroll section, right, where we were down about 2.3% for the quarter. And we believe that's part of the overall distribution clustering story that we've been talking about pretty consistently about margins improving as we add. So one of the examples we like to talk about is in the Denver market in particular, our operating expenses were down substantially. It was almost entirely attributable to payroll. And if you notice, when we took over the Argus platform in October of last year, we increased our overall presence in that market by about 4x, right? And so going from nine properties to over 50 between owned and managed is really helping drive some of those economies of scale and clustering that we've originally talked about.

Makes sense. And then my second question is on your assumptions for move-in rates and occupancy for the remainder of the year, and how can you end up being on the, for example, upper end of your FFO per share range?

Hey, Victor, it's [ Korek ]. So I'll just kind of talk through some of the operating assumptions not too dissimilar from what we talked about last quarter. So, you know, in terms of the move-in rent trends and web trends, some markets, as you can see, have already turned positive, other supply markets are still a little bit negative. We still think by the end of the year we're going to be, by the end of rental season, you know, in that fourth quarter, I think we're going to start to see a broader inflection. From an occupancy standpoint, you know, slightly negative relative to 2025 based on where we're sitting today. And ECRIs add up better than 2025 levels, right? Given the strength and the health of the existing customer, you know, our length of stay continues to increase and our bad debts are relatively muted. And then, of course, from a supply perspective, we've talked about this, but you know, the supply impact continues to decrease through the rest of the year and into '27 and '28.

In terms of talking about hitting the top end of our guidance, I'm just going to start on the revenue growth side because that's obviously the most material piece to the overall FFO. So if you look back to 2025, and I'm going to talk a little bit about the cadence and then talk about the magnitude there. If you look back to 2025, our 3Q revenue growth was 2.5%, while 4Q '25 was only up about 40 basis points. So a fairly lumpy year-over-year comp that we have in the second half of the year, which would in itself dictate the fourth quarter growth would be higher than third quarter. The other pieces that work there are, of course, the Asheville occupancy comp, which laps on October 1st, and the California ECRI restriction lift that'll have a more positive impact on the fourth quarter than the third quarter data points just from a modeling perspective. I would support a higher growth rate in the fourth quarter versus the third quarter when you think about, you know, kind of the deceleration baked in that you would calculate baked into the midpoint of guidance in terms of same-store revenue growth.

I think one of the lessons that we've learned over the past 24 to 36 months in storage is that periods of volatility or choppiness can pop up, right? It happened a few times in 2025. It happened in March and April of this year with some geopolitical noise, right? This summer we've been relatively unscathed, you know, knock on wood, of course. So if you think about, you know, our guidance this year, we're assuming, you know, that there is going to be some more periods of some volatility as we head into slow season here. We're assigning a probability that there could be some choppiness in the back half of the year. But I think if we don't get that volatility and we see a more normal off-season, I think we feel pretty good about hitting the top end of that revenue range. Again, that's the biggest piece of the overall FFO story. I think if you go down the individual line items, there's probably, if we get some acquisitions in the managed REITs, that can help out as well, but right now we're pretty comfortable with the midpoint of the guidance.

Your next question comes from the line of [ Eric Libchow ] with Wells Fargo. Please go ahead.

Great. Thanks for taking the question. I wanted to ask a little bit more about Asheville. A couple of properties contributed as part of the eminent domain proceeding and the occupancy fall-off, as you alluded to, is improving. So maybe you could talk about what you're seeing on the ground in Asheville. Obviously, I know the comps get easier in Q4, but what are your plans there perhaps grow your presence over time. I know it was your best-performing market, I believe, in 2025.

Yes, absolutely. Let me talk a little bit about the Asheville market and then I'll flip it over to James to talk about the eminent domain and new development that we have. Many of you know we've been in the Asheville market for a pretty long time. It's been about 10 years. So we know that market incredibly well. And as you said, Asheville was our best-performing market in 2025 with a 6% same-store revenue growth. We're obviously facing some tough occupancy comps in 2026. But the year-over-year occupancy gap has narrowed dramatically since December. And it's averaging down, as we've said, about 230 basis points year-over-year in the second quarter.

And so occupancy currently is a solid 91.8%. The web rates in the market have been stronger than we've anticipated at the beginning of the year, and they're actually now positive year-over-year as we've moved into July. And so I think what we're seeing is a fairly traditional cadence of occupancy for a natural disaster of this kind. And now we've moved into kind of the post-natural disaster stabilized occupancy level. Overall, we still expect Asheville to be a relative underperformer in 2026, specifically through the end of the third quarter. Now that said, the portfolio is performing slightly better than expected currently in July.

Yes, Eric, as you mentioned, we did have two properties, and we disclosed this in our earnings release. We had two properties that were subject to eminent domain proceedings in Asheville. There was a large portion of one property, about 80% of that asset that was taken in the second quarter, and a small portion of a second property that was taken subsequent quarter, and that was about 20% of that property. The way these proceedings work is that you receive an initial payment, and then there is a legal process to determine the final value for those pieces of land that are taken. In addition, the North Carolina Department of Transportation is coordinating with us to relocate existing customers in the affected buildings, and so some of that supply is coming offline.

The other thing that we wanted to note is, you know, as you may recall, we did have a loss of a property as a result of the flooding that occurred, but we are excited to announce that in early 2027, we will be breaking ground to rebuild that asset. And this property will be about 83% larger than the original property that was destroyed. It's likely a late 2027, early 2028 delivery. So, you know, we are reinvesting back into this market with some of the supply that's coming back offline as a result of the flood and these eminent domain proceedings.

Thanks, guys, for that, and just one follow-up for me. Maybe we could just chat a little bit about Canada and the GTA market. I know that's also going through some pretty tough comps versus last year, but maybe you could talk about what you're seeing in terms of the fundamentals in Canada. And once we get past these tougher comps, how do you think growth will trend? And then, you know, related to that, one of your largest competitors is moving into the Canadian market through a pending acquisition. So just wondering if that changes competitive dynamics at all, or if you feel pretty confident in your trajectory there. Thank you.

Yes, great question. Again, a lot of those questions. So let me first just start by, you know, talking about our same-store portfolio, our Canadian self-storage same-store portfolio. It consists of 13 seasoned stabilized properties, but they're all in the Greater Toronto Area. And as we say the GTA, it represents about 1.1 million square feet. The same-store revenue for this pool was down 1% on a constant currency basis in the second quarter, but we did have a tough comp at 2%. However, that was meaningful or tougher than the United States. And so when you take a look at our joint venture properties with SmartCentres, we have 10 properties, 900,000 square feet. They're currently at 92.3%. And these skew towards more recently stabilized assets, well, we were able to grow revenues at 6.7% and NOI growth of 9.4% in the quarter.

So at the end of July, the GTA's same-store occupancy was 92.2%. Yes, it was down 60 basis points year-over-year, but it actually compares favorably to the U.S. And so for the full year, we do expect that the GTA will run modestly below the U.S. portfolio, primarily a function of tougher comps for 2025. The GTA delivered approximately 2.7% same-store revenue growth last year and about 100 basis points ahead of the U.S. So part of what we believe looks like relative softness this year is a flip side of the GTA's outperformance for last year. And quite frankly, the revenue growth in our GTA portfolio has been about 3x that of the U.S. portfolio over the last 36 months.

New supply, we have to talk about in the GTA. We think it's peaked and will moderate over the next two-plus years. We know that pretty well because SmartStop is the single largest developer in the market, and which will certainly strengthen, I think, our future foothold on the GTA. Now in terms of demand, as you brought up, the Canadian consumer is pretty healthy. You know, our Canadian bad debt is currently less than half of the U.S. levels and improving year-over-year. Now macro uncertainty tied to events like the war, terror, have caused some hesitation and delay in the rental decisions. And you concentrate that in only certain pockets. It's not throughout the GTA. There's certain pockets. But other Canadian markets are showing steadier trends. So for an instance, our Alberta portfolio has grown their own occupancy by 15% in the past two quarters.

And so the structural demand drivers, such as aging and downsizing population, shrinking home sizes, and continued urban densification, it remains intact. Population growth we believe is expected to resume as the immigration policy normalizes. And we're also seeing, I think, a very unique environment as a window for disciplined external growth. We're evaluating currently numerous acquisitions and joint venture opportunities in this market. And so, look, we remain absolutely committed to the GTA and our growing Canadian portfolio.

And I will also say that I want to emphasize our GTA portfolio is irreplaceable real estate that has been built over the past, you know, 16 years. Now, having said that, there's no question we're getting a lot of questions with Public Storage and their acquisition of PS Canada. And so I think my comments are that having another competitor like Public Storage in Canada, I think it really just underscores and it's a true testament to our Canadian vision and strategy, and it certainly validates why we entered this market 16 years ago, and so we've been competing with them in the U.S. now for the last 22 years. And so there's no question, it's going to be a more competitive environment, but we welcome it. And that's one thing I think you can guarantee on SmartStop Self Storage is that we're competitors. And so I think we'll rise to the occasion.

Your next question comes from the line of RJ Milligan with Raymond James. Please go ahead.

Yes, good morning to you guys. Good afternoon. I wanted to follow up on the question about the margin opportunity. I'm just curious, you know, how much more margin expansion is there available by pulling internal levers versus how much more margin expansion can you get by expanding scale?

Yes, RJ, James, I'll jump in there. So as we've consistently said, you know, since our IPO, within pockets and markets, MSAs where we have those 10 or more properties, we tend to have margins that are about, that we see an improvement of about 300 basis points. And so, you know, for example, with the Argus company, because I mentioned the Denver expansion. You know that there were three markets where we tipped over that 10-property mark transition from September 30th to October 1st of last year with that onboarding, and so we still believe that there's a lot of margin expansion to be realized as those programs and those platforms continue to integrate, as we continue to grow both on balance sheet within joint ventures and within third-party management. And so that coupled with items such as, you know, property insurance renewals that are favorable, our solar initiative, which is ongoing and producing results in reduced utilities. So we continue to be driving on all aspects of that.

Well, and I would just add, if we continue to perform and outperform on our same-store pool, that will naturally contribute to additional margin expansion.

Thanks for that. And then you guys talked a little bit about the acquisition opportunities, but thinking about maybe other external growth areas, can you maybe give an update on the bridge lending joint venture?

Hey, RJ, it's [ Korek ]. First of all, great to have you back in the world of self-storage. The lending access kind of pipeline for us remains very attractive. We've talked previously about a pipeline in excess of $100 million with target yields in the 10% to 14% range, typically structured as mezzanine or preferred. That pipeline remains. As of June 30th, we have a book of about $20 million, all pref at this point on six properties, all of which we have property management on. We closed another $3 million pref after the quarter end, and the blended yield of everything we have today is just under 11%. We're actively also working on an A-note B-note approach or a stretch senior-type approach where we would sell off a 50% to 60% LTV A-note to another party. So really a broad array of arrows in the quiver for us at this point as the pipeline is really dictating both approaches.

As we saw again this quarter, the platform tends to generate third-party management assignments on the underlying property. So it's a really symbiotic relationship there, creating really strong, attractive returns on a capital-light basis. Additionally, the program, we expect, will inherently create a natural pipeline for future acquisitions at some point. We like the risk-adjusted returns on these deals a lot, the deals we're going after, but are certainly sensitive to the quality of the underlying properties and the sponsor and the impact on leverage and, of course, overall earnings quality. But I think you'll see us take a more balanced approach to building out this program.

That's great. Thank you, guys.

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

Thank you. So pricing regulations specifically as it relates to surveillance pricing has become a real theme for the sector this year. And we've actually seen some regulation passed in New York. So I'm just curious how you're thinking about that risk to your revenue management systems. And then separately, just given how large your Toronto footprint is, are you guys seeing any similar regulatory moves in Canada at all?

Yes, I'll touch on the U.S. in particular. I mean, obviously, we don't have any direct exposure to the New York City areas that were affected by some of the recent movements from a political perspective there. However, it's a topic we're consistently monitoring and evaluating, and we're working with local self-storage association groups and task force to make sure we're staying abreast of everything going on. And that being said, I think it is important to note that everyone has their own proprietary pricing systems, right? And so our algorithms are different than other publicly traded peers, as well as private operators. And so we're making decisions on our own with our own systems that are constantly evolving and changing. And so, and at the end of the day, this is still a month-to-month business structurally.

Yes, I would also just add that I think there's probably some more risk with organizations using off-the-shelf pricing software that's aggregating a lot of different owners. I think that was one of the issues with respect that we saw kind of in the multifamily side. And so, you know, our overall pricing side is just taking into account supply and demand factors, not taking into account, you know, personal data from individuals that can be and are highly sensitive. In concert with that, we've seen in areas, let's say in Montreal, where there were some regulatory concerns with respect to how the public is able, rentals were being offered up and their discounts and promotions. But as we went through that, what we've found, it was more or less about just making sure that you were transparent to the consumer with respect to your presenting what your price is, that the price can go up, and being clear on any additional fees in the first month, and clear what the ongoing overall expense is going to be in the second and third month. And so I think as an industry, I think what I've seen, I think it's been amazing is that they're adapting to being as transparent as possible. And more importantly, as you have individuals that may have questions or concerns is having the proper culture, people, and environment to deal with that on a one-on-one basis and not allowing people to not have kind of a voice. And I think that, you know, the industry is doing a great job from that perspective.

Okay, great. Thanks for all of that color. And then I know you provided a lot of commentary and color on the expense side and the savings you experienced with COVID. Is there anything that's been kind of achieved on the AI side that's helping you with cost savings?

As we said, from an AI perspective, it's one of our pillars within the DECA initiative, and that is something that's obviously continually evolving within our organization. There is no question that there are areas where I think we can enhance revenue, and I think there's areas that we can see some cost savings. I think that we're kind of in the early stages of addressing and developing the technology to do that. So I can't say that right now that we've implemented some of the AI strategies yet with respect to cost savings. And some of those have to do with, from an accounting perspective, they do have to do with our call center. I think some of that is some of the low-hanging fruit. In addition, kind of having an analysis of employees and hours and being able to kind of move individuals around appropriately within an AI kind of focused structure.

And so I think some of those cost savings we're going to see over more of a mid-term type of timeframe versus the short-term. We've got to be very thoughtful. It's important. We believe and we're all in on artificial intelligence, but we've just seen too often that some of these companies are just trying to sell axes and picks and shovels to people that are trying to find gold. And what we're trying to do is have a very thoughtful approach in making sure that every dollar that we spend, that we can follow it through to the ultimate savings and or revenue enhancement that we believe it can achieve.

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

Yes, hi, thanks. A couple of follow-ups, I guess. I wanted to go back first to the PS Canada and Public Storage transaction. I'm curious, you know, what the overlap is like with SmartStop's Canada portfolio. And then do you think that PSA's ownership lead to a different operating or revenue management strategy than you've historically seen in those markets?

Hey, Todd. It's [ Korek ]. So I'll answer the first question about the overlap. It's primarily all of our GTA portfolio, both in the same-store and the joint venture pools there. So it's a decent amount of overlap, less so in the Alberta pools, but certainly in the GTA. In terms of strategy, Todd, I mean, it's really tough for us to sit here and comment on another company's strategy. We can learn from history, but we also don't know. It's a new market for PS. So we're not going to sit, I can't sit here and confidently call out what they're going to do or what the impact could be.

Okay. And then in terms of, you know, some of the updates around July, appreciate some of that. Heard the occupancy and I think web rates, but looked like move-in rents improved throughout the quarter. Looked like June was a stronger month than what you reported for April and May. And I was just curious if you could talk about that a little bit and also what move-in rents looked like in July.

Sure, Todd. I'll start with the second quarter and then go into July. So the second quarter, we were able to hold web rates fairly steady. We were down about 3.5% year-over-year for the course of the entirety of the second quarter. You have some new disclosure in the SUP, as I'm sure you've seen. So you can see the move-in rates per square foot for the quarter, we're down about 4.4% year-over-year. That is an apples-to-apples stat with the rent puff that we disclose in the SUP. And so that was an improvement from the first quarter. Concessions were up modestly in the second quarter, I'm sorry. So we continue to use that tool a little bit more.

As we move into July, July ended up being a pretty good overall month for us. We ran a very successful 4th of July and Canada Day sale. Reservations were up 6.7%, rentals were up 7.2%, and again, this is across both the U.S. and Canada. Our concession usage actually declined year-over-year, and as you probably heard, web rates were actually up 1% year-over-year in July. The move-in rents were down a little bit, down about 5% year-over-year, but at the end of July, we were at an occupancy of 92.1%, down, you know, 65-ish basis points year-over-year, but in-place rates were up over 2% year-over-year. So it's a fairly consistent theme with even in terms of balancing the rate and occupancy. So I think we're fairly encouraged as we enter the shoulder seasons.

Okay. Yes, that's helpful. Then I guess along those lines with occupancy, there was some commentary there too, but it's been unusually stable over the last several quarters, a little less seasonal improvement from 1Q to 2Q than we've typically seen, but also there was less seasonality in the back half of '25 as well. Is that primarily a function of some market-specific factors or does that reflect kind of a deliberate operating strategy? And I'm just wondering how we should think about seasonality in the back half of '26 now, and sort of the earlier part of '27.

Yes, Todd, it's a good observation because you're right, our occupancy has been pretty steady, and that's been a target of ours is to be at that 92% physical occupancy level give or take. And so moving into this second quarter, you know, there was a bit of a shift in our pricing systems and the way we were approaching things on a shift towards, as David alluded to, with some of the web rates and the reduced promotions and things like that, our annualized rent per square foot was up 1.9% to kind of counteract the occupancy. To your point, there are market dynamics going on, most notably Asheville, and so if you strip out Asheville out of our same-store pool, for the second quarter, we were only down 45 basis points of occupancy, right? So there is some dilution going on and some gives and some takes as we go, but overall we still feel good about our approach into this busy season. As we've consistently said, we want to be highly occupied, you know, 92% plus, so that we can drive rate during busy season, which we've been doing. And then coming out of busy season, we do want to maintain a good base of occupancy. And so we are going to see some seasonal effects, but to your point, we're going to try and keep tenants in our storage units.

Okay, so it sounds like a more gradual return to seasonality, but perhaps still a little bit more muted in the back half of the year than what we would expect historically. Does that sound about right?

Yes, I think that's how we're approaching the tail-off of the busy season. That being said, our systems are dynamic, right? And if we see opportunities, they're going to respond to them. But yes, I think that's how we're thinking about it today.

Your next question comes from the line of Mike Mueller with JPM. Please go ahead.

Yes, hi. A couple more revenue questions. I guess first, when you're thinking about the move-in rate comps, when do you think you cross into positive territory there?

Mike. We, when we laid out the sort of building blocks to the guidance as it stands today, you know, we're going to have to, we're looking at, you know, move-in rate kind of the inflection point later this year, right? So down between the end of rental season and the end of the year somewhere in that range.

Okay, got it. And then if you're looking at ECRI, can you give us a sense as to about what portion of your units get at least one increase during the year?

Yes, I'd say it's probably the majority of our customers get a rate increase at least once during the busy season. Our most valuable customers are the ones that are going to be staying the longest. And so as they evolve in their customer journey, they are less likely to actually be receiving one of those ECRIs. And just as a reminder, we're always testing, we're always monitoring our ECRI approach. We really haven't changed the cadence over the course of this year. And we continue to be in that on average sort of low 20s percents on a blended basis over the course of 2026.

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

Hi, this is [ Robin Handler ]. I'm sitting here for Juan. I was just curious if you can provide an update on the potential timing of a JV partner and transaction and if you could share in the hurdles you've overcome to date.

Yes, thank you. I would say the following, and we've been pretty consistent kind of with our communication. We are having numerous conversations. They're ongoing. And we feel pretty good, you know, about the direction we're heading, the conversations we have. We do not have anything definitive to announce today. But if and when we have something announced on that front, you know, we'll do something. And it's going to represent incremental capacity on top of what's already embedded in the updated guidance. I think what we're finding is there are a lot of organizations in the U.S. and Canada that are very, very interested in allocating to storage. So it's not if from a SmartStop perspective, it's just when.

Thank you. And then on the momentum building in your third-party platform, one store added now in Canada down in the net base. Just curious if you can elaborate and provide some color.

Absolutely. Well, so far, we're very happy with the Argus third-party management platform. We think the receptivity thus far to the SmartStop from the current owner's base and the potential new owners remain strong. Now, with any acquisition, you have different phases of integration into our platform. So phase one for us was understanding the people and the entrepreneurial owners at Argus. Phase two was introducing our people, the SmartStop people, SmartStop culture, the SmartStop platform. And then three, as some of those private label Argus individuals, entrepreneurial individuals, moved over to SmartStop, getting those testimonials for the strength of the SmartStop and or the SmartStop legacy platform. And so overall, owners have been very impressed with the top of the funnel. I think that's one of the biggest comments that we get. And in addition to our communication platform and not losing sight of those entrepreneurial owners. And so the property performance has materially improved with those owners that have moved under our platform.

So we're kind of in phase four now. It's that broader migration onto the SmartStop platform. But, you know, we still want to provide options to meet the entrepreneurial spirit of our owners. And so we're currently coming out of phase three into phase four. And I think September will start to kickstart phase four as we kind of roll off of the rental season. We move into the SSA Las Vegas meeting. Having said that, we do continue to see new contracts being signed across the spectrum of options. We're encouraged by the adoption of the SmartStop branded and legacy platforms. Now, the broader pattern that we've called out this last quarter, private label owners are seeing stronger lead flow once they're on the SmartStop platform, and they're gradually migrating towards either of the legacy or the full SmartStop platform. And this is continuing. And each and every month, we're starting to see these owners transfer.

At this time, I wouldn't move up any kind of timeline when the full margin synergies will show up in our P&L. I think that's been more of a 2027 story as the technology migration and the rebranding work works its way through the portfolio. But we're starting to see some early signs of this. In addition, the underlying signs of owner satisfaction, lead generation are consistent with what gives us confidence in the longer-dated, you know, payoff with respect to Argus 3PM. And so we did have some off-boards on the private label platform, but we're seeing improvement in the overall quality of the managed portfolio. And so the average square feet of storage for each onboard store was approximately 73% larger than our off-boards. And so we had 90,000 net rentable square feet of on-boards as compared to 52,000 net rentable square feet for the off-boards. So the larger stores plus the stronger demographics mean these on-boarded stores will have higher overall revenues than the off-boards.

In addition, as we've announced, we've onboarded our first third-party management property in Canada in Q2, and that's obviously one small step with respect to our expansion and the third party in Canada. But, you know, interesting enough, we do have some Canadian owners of U.S. properties that are actually so happy with what we're doing for them in the U.S. There are discussions with respect to their Canadian properties. And so six of the properties that we've onboarded, which I think is important, are current bridge lending customers. And I think that demonstrates the symbiotic between our bridge program and also our third-party management.

And lastly, I think one of the biggest benefits that we're seeing out of Argus is the benefit of scale in terms of margin. And so we've kind of talked about that through the call with respect to the Denver presence and how that has impacted not only our entrepreneurial owners, but also our own same-store margins. And so, you know, year-to-date, just want to reinforce that those Denver margins are up 430 basis points. So I think overall, you know, we're far along within the integration. We still have a lot of work to do, but we're very, very happy about the progress thus far.

There are no further questions at this time. I will now turn the call back to Michael Schwartz for closing remarks. Michael, please go ahead.

Thank you, Operator. Well, SmartStop Self Storage had a phenomenal second quarter. I want to thank you for your time and interest in SmartStop Self Storage, a smarter way to store. Have a great day.

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

Greetings, and welcome to SmartStop Self Storage Q1 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to David Corak, Senior Vice President of Corporate Finance and Strategy. Thank you. You may now begin.

Thank you, operator. Before we begin, I would like to remind everyone that certain statements made during today's call, including statements about our future plans, prospects and expectations may be considered forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements are subject to numerous risks and uncertainties as described in our filings with the Securities and Exchange Commission, and these risks could cause our actual results to differ materially from those expressed in or implied by our comments.

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

In addition, we will also refer to certain non-GAAP financial measures. Information regarding our use of these measures and a reconciliation of these measures to GAAP measures can be found in our earnings release and supplemental disclosure that we issued last night and are available for download on our website at investors.smartstopselfstorage.com. In addition to myself, today, we have H. Michael Schwartz, Founder, Chairman and CEO; as well as James Barry, our CFO.

Now, I'll turn it over to Michael.

Thank you, David, and thank you for joining us today for our first quarter earnings call. I'll start with a few highlights of our first quarter results. We posted strong same-store revenue growth of 1.5%, NOI growth of 2% and maintained average occupancy of 92.5%, while facing our toughest quarterly comp of the year. Operationally, we posted very strong results despite recent geopolitical news. With that said, 10 of our top 15 markets posted positive same-store NOI growth and good expense control led to a 30 basis point growth in our same-store operating margins.

Likewise, other areas of our business outperformed expectations. We reported FFO as adjusted per share of $0.49, up 19.3% year-over-year. In February, we completed the recast of our $500 million syndicated bank facility at an all-in cost of about 30 basis points below the previous facility. Additionally, we acquired a parcel of land in Canada that we intend to develop into Class A storage in our SmartCentres joint venture. Lastly, in March, we entered into a strategic joint venture with AXCS Capital focused on providing bridge capital to self-storage sponsors across the United States.

In terms of guidance, we are now narrowing our same-store revenue growth from a range of negative 0.5% to 2% to a range of negative 0.25% to 1.75%. Additionally, we're reducing our overall OpEx growth range from 2% to 4% to 1.75% to 3.75%. The result is an increase of our NOI growth midpoint from a negative 40 basis points to a negative 25 basis points. Additionally, we are narrowing our FFO as adjusted per share of $1.93 to $2.05 to $1.94 to $2.04.

Turning to operations. January and February were strong months for us, slightly above our initial expectations. In March, we saw a pullback in demand that directly coincided with the geopolitical news. This played through from the second week of March until about the second week of April when things really started to turn for the better. Demand has returned, and it appears rental season is upon us. We are still very early in the year. And in the self-storage business, rental season can end up impacting annual results. That said, we are certainly encouraged going into the rental season.

With that, I'll turn it over to James to discuss the quarter.

Thank you, Michael. Starting with our operating performance. Our same-store pool posted year-over-year revenue growth of 1.5%, with operating expense growth of 60 basis points, leading to an NOI increase of 2% with quarter ending occupancy of 92.3%. While we did increase promotional utilization during the quarter, we were able to hold a solid average occupancy level of 92.5% with limited increases in marketing spend in the first quarter. Our achieved move-in rates per square foot were down 7% on average, while our move-in rates per unit were actually up 2% year-over-year during the quarter.

As we moved into April, we grew our occupancy, ending April at 92.6%, only down 45 basis points year-over-year and notably up 30 basis points from the end of March. We were pleased with our operating expenses as well with year-over-year growth of only 60 basis points in the same-store pool. This expense control led to an increase in our same-store margins of 30 basis points, the first year-over-year margin increase since 2023.

We experienced a tailwind from FX during the quarter for the first time in a long time. Our 13 Canadian same-store assets posted same-store revenue growth of 4.1% and negative 50 basis points on a constant currency basis. These results were in line with our expectations as the GTA had a 7% constant currency revenue comp in the first quarter of 2025, far and away our toughest comp of the year.

In terms of our Asheville portfolio, our occupancy gap has narrowed dramatically since December, averaging down 260 basis points year-over-year in the first quarter. And as of the end of April, we are only down 130 basis points year-over-year at 92.2% occupancy. That's notably up 220 basis points from the end of December 2025. On the external growth front, we acquired one parcel of land in Toronto within our SmartCentres joint venture that we intend to develop into Class A storage.

Turning to our third-party management platform. We ended the quarter with 227 properties under management, in line with our expectations. The result of all of this is that for the first quarter of 2026, we posted fully diluted FFO as adjusted per share and unit of $0.49.

Lastly, turning to the balance sheet. During the quarter, we completed the recast of our $500 million syndicated bank facility, as Michael mentioned earlier. That facility matures in February 2030 and has a 1-year extension option. And the credit agreement has built-in language that would allow for a further pricing step down upon reaching an investment-grade rating from S&P or Moody's Rating Services. At quarter end, our Canadian FX exposure is fully hedged naturally from a cash flow standpoint and 94% of our outstanding debt was fixed as of quarter end. SmartStop's balance sheet is positioned to access a wide variety of attractive capital sources, both in terms of debt and equity to execute on future growth opportunities.

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

[Operator Instructions] Our first question comes from the line of Todd Thomas with KeyBanc Capital Markets.

I appreciate some of the details on April. I was wondering if you could just provide a little bit more detail on the move-in rent trends that you saw in April and how the promotional activity trended?

Todd, it's Corak. So as James mentioned, at the end of April, our occupancy was at 92.6%, down 50 bps year-over-year. Our move-in rates on a unit basis were up about 1% year-over-year in April, while the move-in rents on a per square foot basis were down about 6.5% on a year-over-year basis.

April ended up being a pretty good month overall, even with a sort of a slower start. We had a record number of web reservations, over 10,000 for April. Our call center broke an all-time high for rentals, which was kind of up 25% over last year with a really nice low abandonment rate, something that we take a lot of pride in.

The team has done a really good job of managing receivables, which is just a really good overall practice, but also creates more unit availability for rental season, which is a nice positive for us. So I think we are really encouraged as we're getting into rental season here.

Michael, do you want to talk a little bit about Canada?

Yes, absolutely. Thank you, David. From a Canadian perspective, on a constant currency basis, the same-store revenue was down about 50 basis points in Q1. The comp that we had for 1Q 2025 was 7%. So we had a much tougher comp than in the U.S. However, that's still 6.5% growth over a 2-year period. And so I think in this environment, we think that's an excellent result.

If you look at our joint venture properties that would meet our same-store definition, they actually did even better, at around 10% year-over-year revenue growth on a constant currency basis. At the end of April, our GTA same-store occupancy was 93.1%. That was flat year-over-year, but slightly higher than the States. And meanwhile, our in-place rates were actually up 1.5% year-over-year in April. So our outlook for the full year in our GTA portfolio, it will perform slightly better than our U.S. portfolio in 2026, even with the tougher comps.

Okay. And in the quarter, can you speak to the increase in vacate activity that you experienced? What was that attributable to? Was there anything notable that occurred on the move-out side during the period?

Yes, Todd, this is James. I'll jump in. And just say, first of all, there's a couple of things going on with the increase in vacates. First and foremost, we were coming off a tougher comp. Q1 of '25 was down year-over-year in vacates. And so there is a cycling of that comp.

In addition, as we mentioned in some -- in our prepared remarks, we did see an uptick in vacates really starting at the beginning of March with some of the geopolitical uncertainty and some consumer decisions. That's abated since the first 2 weeks of March, but that's what's driving the first quarter increase in vacates.

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

I have a question on Argus Professional Storage Management platform. So you have full quarter Q1 now. So how has the operational integration gone? And were you able to identify potential synergies for SMA as a whole? And then what is the expected timing for those?

Yes. I'll jump in first. This is James. On the expense side and integrations. And clearly, it's been 6 months since the close. And we've been doing a lot of processes in terms of migrating employees over into the SmartStop platform. In addition, as it relates to the first quarter results and our expenses there, there's a lot of seasonal effect, right? We had multiple conferences that all take place in the first quarter, including our owners conference, which we talked about on our last earnings call. That doesn't happen over the course of -- over the next couple of quarters. That's an annual event. And so we would expect the margins to increase from here.

And I think it's still going to take a handful of quarters and even into 2027 before we start to really see the operating margin synergies, although we're starting to see them in smaller pockets such as Denver, where we've quadrupled our overall store count between SmartStop Managed, SmartStop Legacy as well as the private label properties under the Argus platform.

Got it. And just a follow-up on. Go ahead, sorry.

This is Michael. I was going to jump in there and just say that I think the integration has been going well. There's been a significant amount of technology upgrade for our third-party owners, which has been incredibly positive. We actually have signed up our first Canadian property in the Greater Toronto area. And we have a nice pipeline of existing private label owners who now see the power of SmartStop Self Storage with respect to the top of the funnel.

And so, those properties that we ported over, those owners are incredibly successful. Some of them are generating more leads than they ever have on a private label basis. And so we think over the next 12 months, we will start to see a strong migration from our private label platform to either the legacy or the full-blown SmartStop platform. And so, we're really, I think, pretty excited about the integration, the people and the ability to keep growing this in the future.

And I have a follow-up on move-out trends. I appreciate the details on move-in side in terms of the sizes of units that are involved there. And can you provide some additional details on move-outs in terms of what sizes were more heavily impacted in Q1?

Yes. When we look at the move-outs in terms of the average size, it's really in line with our portfolio average. What's unique is that the move-ins we're renting more of the larger units, but the move-outs are not matching that same disconnect, right, on a year-over-year basis. It's pretty consistent on a year -- move-outs Q1 '26 versus Q1 '25 in terms of the size of the units.

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

Maybe you could talk a little bit just about the acquisition environment. I know you're a little more restricted in what you can do wholly-owned on balance sheet this year, but maybe update us on the discussions around an institutional JV partnership and how those conversations are trending.

Okay. I'll jump in here. Well, let me just start by saying that I've been doing this a very long time. And from an acquisition perspective, I think this is one of the, I think, single greatest opportunities to transact in self-storage since the Great Recession on a risk-adjusted basis. You have a lot of markets that have readjusted from a rate perspective, down 25%, 35%. And so we think that there's a really nice recovery of acquiring at really solid cap rates with either management upside and/or rate upside.

There's a lot of groups out there that acquired at very aggressive cap rates in 2021, '22 and probably half of ' 23 at 4%. They had short-term debt and some of them had bridge loans, and they've had to extend those loans. And so now you're facing an environment where they're no longer willing -- these lenders are willing to extend and pretend. And so this is a result of creating a really nice wave of high-quality properties that are coming to sale, because the owners are currently out of options.

And so we're seeing a lot of attractive opportunities on the stabilized front in the U.S. and also Canada. The deals that we've closed, I think, are great examples of this. And I think we are continually encouraged about the current pipeline deal flow out there. There are some larger portfolios out there, but there's also enough onesies and twosies. And so I just want to emphasize that a lot to us may not be a lot to others. And so for every $300 million that we can acquire, it increases our market cap by approximately 10%.

And so as you guys are probably well aware that we acquired about $370 million in 2025, about $0.5 billion since 2024. And that's meaningful, I think, growth for us. and it's enough for us to move the needle. And so -- and it obviously benefits our size. And so we are still seeing a healthy amount of aggregate opportunity. So I think from that perspective, we feel pretty good.

The second part of your question was?

Yes, just around institutional JV and how those discussions are coming along.

So those discussions are having as we speak, and I think they're coming along nicely. Obviously, as you know, we have a very solid institutional joint venture with SmartCentres on the development of self-storage in Canada. And obviously, we're looking to kind of expand that for existing either lease-up or stabilized properties. And so we're out there trying to find the right partner. But as you can imagine, we currently have a lot that we are doing on a daily basis. And so, we're going to take our time to find the right capital partner that -- for the long term.

Great. And just one follow-up on the shaping of same-store revenue growth this year. I know you have some tough comps in Asheville, although it sounds like you've gotten a lot of that occupancy back, some hurricane comps in markets like Tampa and then the L.A. rent restrictions. So maybe kind of putting it all together, you could kind of talk about the shaping of same-store revenue growth in the next couple of quarters that's embedded in your guide and some of the call-outs on those items.

Yes. Thanks for the question, Eric. It's Corak. So when you look at the comps last year, obviously, the first quarter was our toughest comp at 3.2%. The comps are significantly easier in the second quarter and third quarter and then gets a little bit harder in the fourth quarter. So just on that alone, one would think that second and third quarter will probably be our best quarters of revenue growth year-over-year. But obviously, that's not exactly what the guidance would imply at this point on the midpoint.

The other 2 things that are impacting the cadence of same-store revenue growth are, as you pointed out, Asheville and the ECRI restrictions in L.A. Obviously, in Asheville, we were coming off of a really strong year, right? And we lapped that comp. And so as you get into the first quarter, we were still positive in terms of rates, but negative in terms of occupancy. However, as you get into the second quarter, that rate -- the rates will turn negative on a year-over-year basis and will continue to be negative through the second and third quarter, again, on a year-over-year basis. And then the comp gets a lot easier in the fourth quarter as you sort of lap that.

The other element is, of course, on the L.A. restrictions. We are not assuming that the restrictions will be lifted for 2026. So there's a compounding effect that happens there where the second quarter, the impact is worse than the first quarter and then the third quarter from the fourth quarter and so on. So those are the other kinds of things that are impacting the shape of the curve overall. So Asheville is in an interesting spot.

Michael, do you want to talk a little bit about where Asheville stands today?

Yes, absolutely. Obviously, in the fourth quarter, we talked about Asheville. And I think as we position and where we're at today, Asheville was our best-performing market in 2025. We had 6% same-store revenue growth year-over-year. And so we are obviously facing some tough occupancy comps in 2026, but the year-over-year occupancy gap has narrowed dramatically. And I think James discussed this a little bit.

Since December, our average is down only 260 basis points year-over-year. And in the first quarter, our occupancy was at 91.6%. And so at the end of April, we were only down 130 basis points, and we're settling in at 92.2%. That's a great position to be in as we move into the busy season. And so that's notably up 200 basis points from the end of December and generally in line with the rest of our U.S. portfolio, which is positioned nicely also. And so this is a fairly traditional cadence of occupancy for a natural disaster of this kind, and we are now at a post natural disaster stabilized occupancy level.

And so overall, we still expect Asheville to be a relative underperformer in 2026, specifically through the end of the third quarter. But that being said, the portfolio is performing slightly better than expected through April. And so I think that says a lot about our technology, our process. We were able to capture that upside with respect to occupancy and rate. And then as occupancy pulled back, we were able to refill that funnel, stabilize the physical occupancy and get it prepared for the busy season.

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

So I have 2 questions. I guess on the first one, I apologize if I missed this, but can you talk about the move-in rate expectations for the balance of the year compared to, I think it was about 6.5% down you said in April. And then just from a higher-level perspective, how should we be thinking about the bridge loan program? How it fits into the business? Can it be a needle mover going forward, et cetera?

Mike, so I'll give you kind of the operating assumptions. We went over these slightly last quarter, but I'll review them. They really haven't changed. So from a move-in rent standpoint, obviously, we have a handful of markets, some markets that have already turned positive this year. Other supply markets still sort of negative. But our assumption is that by the end of rental season, so call it, end of August, September, we'll on the whole be largely back to a neutral kind of inflection point. If we don't get back there, right, it doesn't have a material impact on the rest of the year, but we'll have some impact on, obviously, the third and fourth quarter.

From an occupancy standpoint, we are modeling kind of fairly flat to slightly positive relative to 2025 with the exception of Asheville, obviously. But for the rest of the portfolio, think about sort of fairly flat to maybe slightly positive. ECRIs, we're modeling at or better than levels in 2025, which is basically what we've been doing, given the strength and the health of the existing customer, the exception, of course, being the California wildfire impacted properties, which we assume are going to be impacted for the full year.

And I'll remind you, our length of stay is actually up year-over-year, which is a trend that us and some of our peers are seeing, which is really good from that perspective. And then on the supply front, we're obviously, like everyone else, assuming that the supply impact decreases throughout the year.

In terms of your second question, Mike, on AXCS and the bridge lending. So let me give a little bit of background on the relationship and then talk about sort of the pipeline and how we're looking at deals and what we're looking at. So AXCS is a portfolio company of Conversant Capital. For some background, they run an institutional commercial real estate finance platform. Michael and the principal of AXCS have a very long-standing relationship. So this is not something that was just sort of thrown together overnight. This was well thought out for a long time. So AXCS, their role in this relationship will help us source structure and service bridge loan investments, et cetera, and they will be a 5% participant in the JV's investments.

The partnership for us, gives us the horsepower to grow our bridge lending business efficiently without burdening our G&A essentially, right? We're really excited at this, right? We're excited at the potential of the partnership and sort of the synergistic relationship that the program will have on third-party management and our overall external growth trajectory.

When you think about the pipeline overall, it's very strong. We're very pleased with it in where it stands today. We're actively looking at over $100 million of deals with average yields of 10% to 14%. Obviously, just like an acquisition pipeline, we're not going to close on those $100 million deals, but our pipeline is filled with really strong deals in markets that we like with sponsors that we generally like.

We're typically looking at some sort of mezz or pref position on a deal that already has senior debt on it or is in market with senior debt. We would also do sort of the A-note, B-note approach, but the pipeline is really dictating the former strategy. The pipeline is a mix of recaps, acquisition financing, development deals. And though I'll note our -- we're particularly selective on any new development deals. So a ton of potential on this front, obviously, working off of a very small denominator. We really like the risk-adjusted returns on a lot of these deals that we're going after, but are certainly sensitive to the quality of the property, the quality of the sponsor, the impact on our leverage and then obviously, the overall quality of our earnings.

And I would just add that also it's opening up additional third-party property management assignments.

Your next question comes from the line of Mason Guell with Baird.

On the expense side, what drove some of the favorable expense growth? And then kind of what is driving the higher expected growth for the remainder of the year kind of compared to the first quarter?

Yes, I'll jump in there. In terms of the first quarter and some of the favorable comps there is we had a good number on our property tax line item, which is obviously our single largest expense line item. That came in at a pretty nominal level.

We also had, as we've talked about on the insurance front, we have not only realized the benefits of a strong general liability renewal that took place in November of 2025, and that's carrying forward for a full year. In addition, we also had a very strong property renewal that took place at the beginning of April. So it's not in our Q1 numbers, but it is part of that -- and the main reason behind our OpEx guide down is those savings on that property insurance renewal.

Part of the offset and part of the reason we were still positive is we had some weather-related expenses, both in utilities and R&M. And our payroll is at a nominal level, call it, in the low- to mid-single digits.

I'll also note that advertising was up about, call it, 1.9% for the quarter on a year-over-year basis, but that's a lever that we want to potentially be strategic with in terms of the trade-off, in terms of getting new rentals between concessions, pricing and marketing. That's something we want to keep that flexibility on. So that's the overall shape of the OpEx, but we felt really good about that property insurance renewal and that allowed us to reduce the OpEx guide.

Great. And then can you talk about what drove the higher managed REIT EBITDA guide and how that segment has been performing?

Yes. I'll also jump in there. And so overall, the recurring revenues from that overall portfolio in the managed REIT platform, as a reminder, those assets are largely unstabilized, right? And so they grew at an outsized pace relative to, for example, our same-store portfolio growth rate. And so those revenues came in higher than our expectations.

And cumulatively, we're talking about an annualized run rate in the first quarter on revenues in the managed REIT platform of just over $16 million on an annualized basis, right? So that's a really powerful base of recurring revenues for SmartStop.

There are no further questions at this time. I would now like to pass the call over to Michael Schwartz, Chairman and CEO, for closing remarks. Please go ahead.

Thank you. It's been a solid first quarter for us, and I want to thank you for your time and interest in SmartStop Self Storage, the smarter way to store. Have a great day.

This concludes today's call. Thank you for attending. 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 would like to welcome you to the SmartStop Self Storage REIT Third Quarter Earnings Call. [Operator Instructions]

I would now like to turn the call over to David Corak. Please go ahead.

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

In addition, we will also refer to certain non-GAAP financial measures. Information regarding our use of these measures and a reconciliation of these measures to GAAP measures can be found in our earnings release and supplemental disclosure that were issued last night and are available for download on our website at investors.smartstopselfstorage.com. In addition to myself, today, we have H. Michael Schwartz, Founder, Chairman and CEO; as well as James Barry, our CFO.

Now I'll turn it over to Michael.

Thank you, David, and thank you for joining us today for our third quarter earnings call to discuss our first full quarter as a New York Stock Exchange listed company. I'll start with some introductory remarks on SmartStop, the Argus transaction and the industry before I hand it over to James to discuss the quarter. After that, we'll open it up to Q&A with James, David and myself.

Before we dive into the high-level remarks, a few highlights of our third quarter results. We posted a strong third quarter with sector-leading same-store revenue growth of 2.5% and average occupancy of 92.6%, both largely in line with our expectations. We reported FFO as adjusted per share of $0.47, which was about $0.02 below our expectations for the quarter. This was entirely driven by 2 events that we noted in last night's earnings release, an unexpected vacate of our only notable industrial tenant and the recognition of a onetime equity-based compensation expense related to performance units issued in 2023. James will elaborate on these items later in the call.

With these pieces in mind and our 3Q strong operating results, we maintained the midpoint of our full year 2025 FFO as adjusted per share guidance. We had another robust quarter, both in terms of performance and activity. First, we opportunistically returned to the Canadian Maple bond market, raising CAD 200 million at a 3.89% coupon this time with a 5-year maturity.

During the quarter, we acquired approximately $86 million of Class A storage properties on balance sheet in both the U.S. and Canada. We also acquired one property subsequent to the quarter end for $15.3 million. These on-balance sheet acquisitions are primarily Class A properties located in top markets consistent with our communicated acquisition strategy. We also increased our loans and preferred investments to the managed REITs by approximately $20 million. Between these loans and our on-balance sheet acquisitions, we deployed about $106 million of accretive capital during the quarter. Additionally, we are proud of SmartStop's inclusion as a member of the MSCI U.S. REIT Index, more commonly known as the RMZ.

Lastly, but certainly not least, we entered into a contribution agreement with Argus Professional Storage Management. Needless to say, it was another very active quarter.

Before turning to the industry, I just want to spend a minute on the Argus transaction, which we closed on October 1. Since the IPO roadshow, we have been communicating to TheStreet that we intended to enter the third-party management business, and we're actively exploring either developing a platform of our own or acquiring an existing pure-play platform.

After thoroughly studying the merits of both paths, we decided that if we could find the right partner, the latter would be the most beneficial to our shareholders. We've known the principles of Argus for almost 2 decades and have the utmost respect for what they've built. So we have tremendous confidence that we've identified the right partner, one with a robust third-party management platform, a top-notch team of professionals, strong relationships across the United States and a managed portfolio that strongly overlapped with ours. With approximately 230 stores under management across 26 states, Argus was the second largest independent third-party storage manager in the U.S. Together, we now operate more than 460 self-storage properties in North America, nearly doubling our store count and increasing our overall owned and managed net rental square feet to over 35 million. This deal immediately jump starts our third-party management strategy in an accretive manner rather than a dilutive and lengthy process of developing one ourselves.

A few highlights of the deal. Given the size of the managed portfolio, this essentially doubles our data sets, enabling better revenue management across both existing and new geographies. We get immediate property clustering in 12 current SmartStop markets, which in time should lead to margin expansion for both managed and owned properties. This provides SmartStop with direct access to a captive pipeline of potential acquisition targets, including off-market deals. It also opens the door to bridge lending to current or potential owners, which is something that no other independent third-party manager can provide.

And lastly, this deal paves the way for SmartStop to expand third-party management in Canada, a vastly underserved management market. As for an update, as of today, we have not experienced any attrition or indications of attrition beyond what we had already known in our underwriting. The integration is going very well, and we've had no turnover of Argus employees.

Finally, I'll note that we closed our first lending opportunity with a $4.8 million preferred investment related to a 5-property portfolio that just onboarded onto our platform last week.

Turning to the industry. On the operations front, we continue to believe that 2025 will be an incrementally better year than 2024, but not as strong as a more normalized year in storage. Accordingly, we saw a more normalized rental season as compared to the past 2 years, but again, still not quite a typical rental season. The recovery in storage is happening, but the choppiness in customer demand continues.

During the quarter, we saw a healthy July and August to close out busy season, but a weaker-than-anticipated September. Industry move-in rates continue to stabilize but are still negative year-over-year, though significantly less negative than the previous 2 years. However, our strategy is working. Website visits are up significantly. Reservations remain strong. In the third quarter, we posted the highest ever lead conversion statistics in our company's history.

We also posted the highest hit rate on tenant protection in our company's history. Our customers' health remains strong. delinquencies remain at below average levels and, in fact, are down year-over-year. 25% of our new rentals utilize our Smart Pay feature for payments and nearly 50,000 customers have downloaded our mobile app. ECRIs remain healthy without any change in attrition. Customers citing their rental rates as a reason for leaving our properties is down year-over-year on our exit surveys. With our year-to-date results through busy season paired with an improved supply picture, we remain optimistic on the sector's slow and steady recovery, creating momentum as we head into 2026.

I do want to quickly touch on the retail shareholder lockup expiration. On October 1, our 6-month post lockup of our existing retail shareholders expired. Over the course of the next 2 weeks, as expected, we saw elevated volume and volatility in our stock price. Since then, both volume and volatility have normalized. While we aren't able to calculate the exact turnover of our retail shareholder base, we want to once again thank our retail shareholders who have been such an important part of SmartStop.

Taking a step back, we have accomplished a tremendous amount in a short period of time as a publicly traded company. We believe we're off to a strong start and are executing on the story that we laid out on our IPO roadshow in March. 2025 will certainly be known as a transformational year for SmartStop. We had a successful IPO raising $931.5 million in some of the most difficult capital markets and tariff concerns, AKA Liberation Day. We raised $700 million in Maple bonds at a sub-4% rate. We had more than $500 million in accretive acquisitions over the past 12 months, including the acquisition of Argus professional storage management, sector-leading same-store revenue growth even with the backdrop of the single largest self-storage supply wave in our sector's history and expected strong FFO growth that should further accelerate in the fourth quarter.

Without a doubt, we're in a choppy self-storage market with volatile capital markets and plenty of uncertainty in the broader economic environment. However, through all this choppiness, SmartStop's accomplishments over the past 7 months have positioned this company to achieve solid forward growth and take advantage of the better days ahead in self-storage. We are a small-cap company with a large cap platform built for continued growth in the U.S. and Canada.

With that, I'll turn it over to James to discuss the quarter.

Thank you, Michael. Starting with our operating performance, we are pleased to report that our same-store pool posted year-over-year revenue growth of 2.5%, the with operating expense growth of 4.5%, leading to an NOI increase of 1.5%. These were all in line with our expectations. The FX impact from our 13 Canadian same-store assets was a headwind of approximately 10 basis points to our overall same-store pool as we posted constant currency revenue growth of 2.6%, expense growth of 4.6% and NOI growth of 1.6%. Revenue growth was in line for the third quarter, and we accomplished best-in-class same-store revenue growth utilizing less concessions and limited marketing dollars while maintaining strong occupancy of over 92%.

On the operating expense front, property taxes were up 4.8% and marketing expense was up only 1.8%. We saw muted or negative expense growth in payroll, utilities, professional and administrative expenses. Notably, our property insurance was down 4.5% this quarter as we finally started to see pressure alleviate in that market. The result was that same-store operating expenses were up 4.5% year-over-year.

Our same-store pool ended the quarter at 92.4% occupancy, up 10 basis points year-over-year, while average occupancy was 92.6%, up 40 basis points year-over-year. Our web rates were down about 3.9% year-over-year for the third quarter, while our achieved move-in rates were down 8.5% on average as the stabilization of the rate environment slowly but surely continues.

As we moved into October, we put a strong emphasis on maintaining occupancy headed into slow season. In doing so, we actually grew our average and ending occupancy over September by about 10 basis points. October ended occupancy at 92.5%, up 20 basis points year-over-year. In-place rates were up 50 basis points year-over-year and flat versus September, and we are positive on a year-over-year basis for rentals in the month of October by 9%.

On the external growth front, we acquired 6 properties for $83 million and a piece of land within a joint venture for $1 million during the quarter, leading to a full year acquisition of $318 million through the end of September. Subsequent to quarter end, we acquired Argus as well as 1 property in the Orlando MSA for $15.3 million. I'll note that as of September 30, we have acquired nearly $500 million on balance sheet over the last 12 months.

Turning to the managed REIT platform. Our 3 managed REIT funds, inclusive of 1031 eligible DST programs ended the quarter with assets under management of $972 million. We recognized gross fees of $3.6 million, and the managed REITs have a combined portfolio of 48 operating properties and approximately 4 million net rentable square feet at quarter end. We also increased our loans and preferred investments to the managed REITs by approximately $20 million, all of which happened in September.

As a result, we recognized interest income of $1.5 million during the quarter. The DST programs continue to successfully raise equity, and we are excited that SST X has closed its first property subsequent to quarter end as that program gets up and running. The result of all of this is that for the third quarter of 2025, we posted fully diluted FFO as adjusted per share and unit of $0.47. As Michael mentioned, this was a few cents below our expectations, driven by 2 main items. First, we recorded an approximate $825,000 expense due to performance-based equity compensation in G&A from the expectation that legacy performance units issued in 2023 will vest at 200% of target. These units were tied to same-store operating performance relative to our peer group. The midpoint of our previous guidance for G&A expenses issued in August 2025 did not contemplate the recognition of this expense on the midpoint for the full year 2025. The impact of this expense to our FFO as adjusted per share and OP unit outstanding is about $0.015 for the full year 2025.

Second, during the quarter, a tenant renting industrial space at one of our non-same-store properties unexpectedly defaulted on their lease and vacated the space. This tenant accounted for approximately $730,000 of annual NOI. We believe the impact to our FFO as adjusted per share to be just under $0.01 for the full year 2025. We are in the process of finding a replacement tenant while simultaneously evaluating a redevelopment of that space into traditional self-storage. And just to preempt the question, this was our only industrial space in the owned portfolio.

Even in the face of those 2 items, third quarter was a much cleaner quarter from a transaction standpoint as compared to the second quarter, but there are a few more moving pieces to keep in mind headed into the fourth quarter on the capital side. These include the September maple bond, which was completed on September 26, the coupon step-down of our U.S. private placement, which occurred on October 1, and the refinance of our joint venture level debt, which was completed last week. Looking out to the remainder of 2025, we updated our guidance for the full year last night. We are now expecting same-store revenue growth in the 1.9% to 2.3% range with operating expense growth in the 4.0% to 4.4% range, resulting in NOI growth of 0.9% to 1.1%.

The other moving pieces as compared to our previous guidance were as follows: better-than-expected execution on the Canadian Maple bond, better-than-expected managed REIT EBITDA, and higher G&A, primarily driven by the previously mentioned performance units, reduction of our same-store NOI guidance by 10 basis points at the midpoint and a reduction to our non-same-store NOI due to the aforementioned industrial tenant. We also narrowed our acquisitions guidance to $365 million to $385 million. The result of all of these updates is that we are tightening our FFO as adjusted per share range to $1.87 to $1.91 for the full year 2025.

Lastly, turning to the balance sheet. In September, we priced our second Maple bond, raising CAD 200 million or approximately USD 144 million. The notes have a 5-year maturity and bear a coupon of 3.888%. We were extremely pleased with this execution, which coming off the back of our June offering was multiple times oversubscribed. In October, we closed on a CAD 160 million term loan within our SmartCentres joint ventures, of which we are 50% owners. The loan is a 5-year term and bears a fixed interest rate of 3.87%. We used the proceeds to pay off all the existing JV level debt, which had a weighted average cost of 5.7%.

The joint venture was also able to raise excess proceeds of approximately CAD 27 million as a result of this refinance. With the Maple bond and the JV level debt issued in October, we have fully hedged our Canadian FX exposure from a cash flow standpoint naturally. Additionally, over 99% of our outstanding debt was fixed as of quarter end and pro forma for the JV refinance.

While our work on the balance sheet is continuous, we are very happy with the transformation of the debt stack that we've been able to accomplish since April.

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

[Operator Instructions] Your first question comes from Todd Thomas with KeyBanc Capital Markets.

James, I wanted to ask about acquisitions. You touched on investments that you've completed. I think it was over the last 12 months, targeting $375 million this calendar year. How are you thinking about acquisitions from here with a view into '26? Do you pause given sort of some of the volatility in capital costs and with leverage in the high 5s? Or do you stay -- do you maintain this pace moving ahead?

Todd, it's Corak. I'll start and then hand it over to the rest of the team here. So what we've said from the get-go is that we've got this target leverage range in the 5 to 6x range, and we intend to stay in there. Obviously, there's going to be periods where we are below it as we were right after the IPO, and there's going to be periods that we opportunistically look to take that up a little bit. But we do want to maintain that as our target range on a go-forward basis.

When you think about the pace of acquisitions, right, this year, [ 3.75 ] is the midpoint of the range, which entails just over 10% growth of the asset base overall. We'd love to be able to grow the portfolio by 10% or more in a given year. But realistically, when you just do the math, if we wanted to do that next year, that would require some common equity to help keep us in that target leverage range. And so what we've said from the beginning is we're not going to go out and issue common equity at a 6.5% cap to go buy 5.5 cap assets on a go-forward basis. So the math just doesn't make sense to us. So I think what I would say is when we look out, we're going to be really prudent with how we deploy capital and be opportunistic on a go-forward basis.

And Todd, this is Michael Schwartz. I would add also is that as many of you are aware, we've had some significant structural changes to our balance sheet, which we're starting to see kind of that kind of flow-through with respect to kind of our FFO for the third quarter, moving in potentially the fourth quarter and then 2026. And so as we look at our levers to growth, clearly, external growth is one that we'd like to capitalize on. But we obviously need to be careful of where we're trading. But we do have other levers of growth. We do have our same-store pool. We do have our non-same-store pool. We have our joint venture pool. And we have our third-party management platform with Argus, which obviously we're spending a lot of attention.

And last but not least, we do have our managed REIT platform, which we think will be -- add some additional contribution as we move forward. And then finally, at this point, we do not have a joint venture partner. At some point in the future, we will have a joint venture partner, and we think that, that will create additional lever for growth.

Just to frame one more thing. Michael mentioned the acquisition of Argus, which obviously closed subsequent to quarter end. And some of the consideration there was in the form of equity for tax planning purposes. So actually, that transaction should bring down our leverage on a net basis when you roll from 9/30 to 10/1 just from that transaction alone.

Okay. That's helpful. And then 1 or 2 on Argus actually. First, can you talk about the integration of that platform, the time line for SmartStop to fully integrate leasing, revenue management, financial reporting, whatever else. And Michael, you talked about the scale benefits that you might expect to achieve in some of the overlapping markets. Any early update or insights on that and sort of the time line to begin to see some of those benefits?

Todd, thank you. Well, the good news here is that with the acquisition of Argus there's not this integration within SmartStop, okay? And so let me step back. When we decided to acquire Argus, we spent a lot of time understanding what Argus had built. And they had built this entrepreneurial third-party management platform that was developed for entrepreneurial self-storage owners that were fiercely independent. And so some want full service, but some actually want to stay in the overall aggregate operations. And so we've recognized that we have to respect the entrepreneurial owners within that.

And so what our strategy has been, and we've been making this clear is that we want to provide the services that these owners want. And so what we stepped back and said, how do we do that? Well, one, we didn't think it was prudent to go in there and say to these owners that you now all have to be pushed on to the SmartStop platform. That's not very entrepreneurial whatsoever. And being an entrepreneur, I'm very sensitive to that. So we put together a menu, a menu of options that gives us a differentiated experience versus some of the third-party platforms out there.

One, if you want to be on the SmartStop platform, hey, great. We will brand you, sign a couple of year agreement, and we will kick in some dollars to change signs out and brand and onward you march. Or if you like your brand, well, we love your brand, too. You can keep your brand and you can move to the SmartStop platform. We'll create a page within the SmartStop environment and you're utilizing all the benefits.

However, if you really want to maintain your independence through a private label solution, we're going to allow that. Now do we think that the properties will perform better on the SmartStop platform. Absolutely, yes. However, we think there's some significant amount of enhancements that we're going to be able to offer the current owners. So for an example, from an accounting perspective, from a reporting perspective and in addition, consultation perspective on things that they're seeing, how we look at it. And so one of the big items that we're doing, we're having a very large operator meeting at the end of January.

We need to get out and meet these operators one-on-one. We need to introduce ourselves to them. And so from that perspective, I think next year, we will start to see, I think, some of the choices that they will exercise. And so that's how we kind of look at the transaction, and that's how we're handling the transaction. But we do believe, over time, at a minimum, people will probably be choosing the SmartStop legacy brand at minimum. We're engaging a lot of the owners right now, and a lot of them are very intrigued. But I think in January, it will be a great opportunity to introduce ourselves. And I think at that point, we will get a better sense of who's going to be transitioning to the SmartStop platform.

Yes. And Todd, just to add on in terms of kind of time lines and lead flows that we've seen thus far, I would say we've seen interest across owners across the spectrum of menus, right? So we've had people that want to engage with a SmartStop branded location, some that want SmartStop legacy and some want to continue on and then learn more about the platform. So overall, the reception from the owners has been positive and definitely curious about the upgrades that are going to...

And I will add that, obviously, they're running on a separate operating system. We've received a separate data card, and we're about 3 to 4 weeks into being able to provide some similar aspects that we have at SmartStop. So that takes a little bit of time. So it's probably a 60 to 90 days just from a technology perspective.

And lastly, one of the strategies we had in this transaction is we could actually bring our balance sheet to bear to help out owners. And as we mentioned in our opening remarks, we've already closed on one of those transactions in a highly accretive manner, double-digit coupon in the preferred investment. So -- and again, that's servicing our customers from an owner perspective.

Your next question comes from the line of Jonathan Hughes with Raymond James.

I appreciate you adding the earnings bridge, I find it very helpful. I think some who see that might be inclined to annualize that implied fourth quarter figure to get a sense of next year's earnings. But what are some considerations we should be aware of as we look at that implied fourth quarter FFO and think ahead to next year? I mean I know there's overall seasonality in the business. Is there also maybe some G&A seasonality? Just some more color there would be great.

Thanks, Jonathan. It's Corak. I will try not to be long-winded here, but I will probably fail because it's a [ last one pack ]. So yes, we gave the quarterly bridge just given the step-up in FFO from 3Q to 4Q. So it's $0.56 for the 4Q on the midpoint. I'll note, just to be clear that, that $0.56 is on the 4Q share count of about 59.2 million shares, not the full year weighted average share count of 51 million shares. So that $0.56, is that a good run rate in the 2026, to your question.

And I'll try to answer that as best I can without going into actual guidance, which we will give in February. So 4Q is the first quarter that reflects all of the various financing activities that we've done this year from the IPO to the Maple bonds to the JV refi to the private placement coupon step down. It's not quite a full year of the JV, but that's the least impactful piece there. So from a financing standpoint, it's a pretty darn good run rate, right?

From a G&A standpoint, the implied guide for 4Q is about $7 million of clean G&A. That 3Q number was $9 million. So in addition to the $825,000 of performance units, which all hit in the third quarter, there's some seasonality in G&A, whereby 4Q is naturally less than 3Q. My point being that, that, that $7 million is probably not the right number, but also $9 million is probably not the right number, so somewhere in the middle. Those are the 2 sort of pieces I would call out on that front. Everything else is sort of an assumption into next year.

And so I don't want to get in the same-store necessarily just given the fact that we'll guide to that as we get into February. But for the non-same-store pool, right, we have 28 properties and another 10 that are in the JV. The non-same-store properties are obviously classified as such because they're non-stabilized and/or their recent acquisitions or both. Inherently, in those, we would expect the NOI generated by the properties to be higher next year, offset, of course, by the property with the industrial tenant that we discussed.

On the JVs, 4 of those 10 properties are non-stabilized and 6 that are stabilized are putting up better NOI growth than the same-store GTA properties. So 2 of those 3 pools of our properties in theory, would put up better NOI growth than this year. On the 3PM front, the third-party management front, obviously, we completed that transaction in October. So the accretion for the full year is not quite recognized. But if you pair that, and that should be pretty good growth for us. It was an accretive transaction, and we still feel really good about the yields that we gave on those numbers. And then on the managed REIT side, the natural growth in the fees from the revenue growth of those unstabilized portfolios paired with potential future AUM growth did benefit us into 2026. So a lot there, but those are some of the big pieces I'd point to, Jonathan.

Very helpful. I appreciate it. Just one more for me on just the acquisitions front and guidance for the year there was tightened, but can you talk about how you source investment opportunities, maybe what percent are brokered versus sourced via relationships. And maybe how much do you look at on a monthly basis versus what is acquired, so effectively like a conversion rate?

Yes, that's a good question. Obviously, we believe we see, I think, most acquisitions out there in the U.S. and also Canada. So we've got a team of about 6 people that are just carrying through acquisitions on both sides of the overall aggregate border. Many acquisitions are not institutional quality. I think they're discarded from -- at minimum. I think overall, the acquisition flow and quality has been pretty consistent from our perspective. that I think sellers are willing to trade, not all of them, but they are willing to trade. And I think it's been evidenced by our $0.5 billion.

We found that -- I think we found the right acquisitions at the right pricing, I think, at the right time. And so we feel pretty comfortable with respect to the flow. From where we get these, I mean, we -- look, we've -- this is my 21st year. So Wayne has been with me 17 years. So between the 2 of us, we're getting from the traditional brokers, we're getting traditional from owners, developers, third parties. I mean we get a lot of calls from a variety of different people that have self-storage properties. And so they can be on or off market. And so I think that has been very consistent. And obviously, Bliss in Canada has a tremendous amount of relationships within Canada. So she's hearing and seeing all those deals and starting to pitch those to us. I think with respect to kind of a hit rate, I can't say -- I give you a number from a hit rate. But what I can say, the ones we want, there's enough out there that we can transact.

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

Hello. This is Viktor Fediv on with Nick. Now as we are getting closer to the end of this year, just trying to understand your framework of thinking about 2026, kind of what is your base macro expectation for 2026? And how are you thinking about move-in rents and occupancy dynamics kind of in the next 12 months versus the last 12 months?

Thanks for the question. So I will once again be careful here on sort of the 2026 outlook. But I think from a macro standpoint, there's a lot at play, both -- a lot of moving pieces, both in the United States and Canada, right? And so I don't want to get too bogged down in the macro because honestly, I don't know.

With that said, from a storage perspective, there is one thing I do know, and it's that the supply picture in self-storage in the United States is improving, right? And the impact from that new supply will be less in 2026 than it will be in 2025. So from the demand side, I think there's a lot of moving pieces, and it's too early to really tell. But from the supply side, which is a good half of the total equation, we feel better about 2026 than 2025.

Yes. And I think if you step back also, I think that you are seeing additional listings out there. Listings are up year-over-year. You're not seeing things trade. I think you're still probably seeing the prices maybe come down to 5%, 10% to 15%. But I think that sets us up for 2026 and that in concert with the reduction in interest rates, I think could create some mobility. I don't want to overplay that. But the listing for housing, I think, is a good indicator of future transactions.

And you're seeing a lot of markets where listings are increasing and people are talking about that. So I think we're cautiously optimistic with respect to that. But in addition, I will add that what I'm seeing, even with all the choppiness we've talked about, you're seeing natural absorption in the storage market. And I think that's incredibly important. And I know that I'm a broken record on supply, and we've talked about supply, but I think that natural absorption is going to carry over into 2026.

Understood. And then a second small one for me. Now that you've added this third-party managed platform and have access to much more data across several markets, where should we expect to see the first synergies in terms of improved pricing strategies and expense control?

Yes. This is James. I'll jump in on specifically the margin expansion story. We've always said it's -- whenever we get to sort of 10 properties or so in an MSA, that's sort of our benchmark for getting to economies of scale. Within the next 12 months, we start to see that real -- that margin improvement in those economies of scale start to come in.

Clearly, we just closed on this Argus transaction on October 1. I will note, there are 4 more markets that the Argus property overlap tips us into that 10-property mark, right? So we were previously at 6, and we've added 4 more as a result of that transaction. But again, it's going to take, call it, a 12-month period before we start to see the economies of scale really chip in there. And then from a revenue management perspective, I mean, clearly, that's our mousetrap and our algorithms are continuing to incorporate that data and then further enhance their overall pricing synergies to maximize revenue, right? And so that's going to be -- that's an ongoing process, whether it's our data or the newly integrated Argus data as well.

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

This is Robin Haneland sitting in for Juan. I was curious on Toronto, what your preliminary thoughts are on the market's performance heading into '26. And if you can provide some data points on expected new supply this year and 2026, specifically for Toronto?

It's Michael Schwartz. Why don't I talk about supply, and then I'll kick it over to David to talk about some of the KPIs. From a supply perspective, there's been a lot of chatter out there, and we've heard it with respect to additional supply in Canada and in Toronto. And the answer is yes. And we've been very clear in communicating that on previous calls, there is a good amount of supply in Toronto right now.

Now a lot of the supply that is from us. We have delivered 7 properties in the GTA in the past 36 months. We have a pipeline of about a dozen identified properties that we'll look to deliver over the next 5 years and an additional pipeline -- an additional pipeline behind that. Today, about half of our properties are being impacted by new supply. Now the square foot under construction is approximately 10% from our estimation of existing stock. Now those stats are pretty consistent with what we've seen for the past 5 years or so. But when we look out and we expect to see that drop to 5% to 6% next year. And so that said, there are isolated trade areas as there always will be, particularly where multiple projects are being delivered at once, and we will see temporary softness.

But we -- this is not a structural or Toronto-wide issue. So for example, lease side, which is one of the most competitive, I think, markets within the GTA, we have 8 properties in a 0.5 mile range of competition. And we're still experiencing very high overall occupancy and $35-plus rents per square foot. I think the answer is we can compete, specifically from a technology perspective. So at scale, the GTA in Canada in general remain dramatically undersupplied relative to the population. Urban densification continues. Living spaces are shrinking and new supply, they face significant barriers. In some areas, the development charges, just for the privilege to develop self-storage is approximately $45 a square foot. So in a lot of cases, the math simply doesn't support a national, regional oversupply narrative. And so we don't think that will be for the foreseeable future. David?

Yes. So just to talk about some of the metrics in Toronto right now. On a constant currency basis, same-store revenue growth was 1.4% in the third quarter. the comp in 3Q '24 was 2.6%. So a much tougher comp than the U.S., which was actually net. If you look at our joint venture properties that would meet the definition of our same-store pool, they actually did even better at around 5.3% year-over-year revenue growth on a constant currency basis.

As we sit here today or at the end of October, excuse me, the occupancy is 92.5%. That's up 80 bps year-over-year. So that gap has widened and is actually wider than the states. And then we've added another 20 basis points in the first 6 days of November. Move-in rates were down about 9% in October, which was actually better than the States. I think our overall demand remains solid, right, in our trade areas. I think the platform continues to capture an outsized amount of that demand. And really, we haven't seen any of the weakness from changes to immigration policy or macro environment. And it appears that the recently proposed budget could be a potential economic catalyst. So given our operational advantages and everything I just said, our thesis on Canada and the GTA remains unchanged.

Just curious if it's impacting your thoughts on deploying capital for SmartCentres JV, if you'd like to take that elsewhere? Or just curious on your thoughts there?

Can you repeat that. You were a little choppy there.

I was just curious on the -- if that changes your view on deploying capital through the SmartCentres JV, if you're thinking about taking some of that capital deployment in other markets?

No. No. I mean, actually, we're leaning into the SmartCentres joint venture. Part of the strength of that relationship is their access to their retail platform and a lot of underutilized land within some of their retail that we can leverage up and put a SmartStop self-storage next to a Walmart, next to a Home Depot. So the answer is no. I think we are interested in expanding, but not at the expense of that joint venture. I think we've talked about that we believe there's a tremendous opportunity in Canada, and that's why we moved into developing on the island of Victoria, Vancouver, Calgary, Edmonton and Montreal. And so I think sitting and building out, I think, one of the nicest aggregate portfolio in the GTA is now going to benefit us with respect to our overall growth path throughout the top 5 metropolitan cities within Canada.

And now that we're past the IPO lockup, can you maybe talk about what the potential recapture rate back into your managed REIT funds has been?

Well, one of the things when it comes to the kind of the managed REIT platform, we were going to talk about this is that because we switched over to our -- a new managing broker-dealer, we were effectively about 6 months behind with respect to be able to kind of launch new products. So I think at this point, the recapture rate, we're going to have to look at 2026 from that perspective. So right now, we don't have the proper product out in the marketplace right now.

Understood. And then I was just also curious if you can maybe disclose the industrial tenant that went bankrupt.

Yes. It's -- actually, we're a little bit limited in what we can say in terms of this particular matter because obviously, someone -- we had a tenant that broke their lease prematurely. And so we're evaluating all of our options as it relates to that contract. So at this time, we're not at liberty. Just to talk about that particular property. Just to note, this is a component of this non-same-store asset where the majority of the square footage is self-storage. So if you think about it, there is a redevelopment opportunity. It could also just be a re-leasing opportunity. So we're looking at all those options.

Your next question comes from Michael Mueller with JPMorgan.

I guess for the 2 questions. First, I guess, how much higher are the margins in the markets that you were talking about where you have at least 10 properties compared to the others?

And then the second question, just going down the path of adding a JV, I guess, what hole do you see that needs to be filled by adding a JV or that you can fill by adding a JV, especially because it could, I guess, increase optically the complexity to the story overall. So I guess, how do you think about that trade-off?

Yes. I'll start with the margin question. So when we look at our markets, where we've consistently had 10-plus properties, we're generally about 300 basis points higher than our overall portfolio average. And if you look at a market like Toronto, where we have 35 properties in that MSA, we're actually closer to 500 basis points higher in terms of our -- relative to our portfolio average. So that just gives you a sense of the scalability of the platform in all of these particular markets.

Yes. So from a joint venture to your second question there, Mike, I'll be clear, we already have a joint venture, right, with SmartCentres that is a pure development joint venture. I believe what you're referring to is if we added an institutional acquisitions joint venture. So I'll speak to that specifically. What we look for and -- what we'd look for there and what the gap, I guess, we would be trying to fill is given the size of our company, right, if we wanted to go out and acquire a $1 billion portfolio, right, and I'm making numbers up here, it would be tough for us to do that with the capital that we have right now.

But if we were able to partner with an institutional joint venture where we were a smaller part of the overall deal, ELP and put 5%, 10%, 15%, 20% into a particular joint venture, that deal is all of a sudden a lot more achievable for SmartStop to take down. I think beyond that, portfolios that are maybe not pure stabilized, maybe there's a place in there. But I think the main goal would be to be able to compete for larger deals and make those deals accretive for SmartCentres.

Your next question comes from Wes Golladay with Baird.

A question on the revenue management. Sometimes it's early to detect signs of weakness in the economy. I'm just curious if your revenue management is pivoting more to an occupancy mentality right now?

I mean our strategy is currently an occupancy strategy. So we think that best positions us for success. More importantly, it best positions us in the slow seasons in the fourth quarter and the first quarter to maintain as high as occupancy as we can so that as we move into the busy season that we're only focusing on really economic overall aggregate occupancy. And so that to us has always been incredibly important. We focus on high occupancy, then we're focusing on rates and discounts and then we're focusing on existing customer rent increases. That is kind of -- has been our process.

Yes. If you think about the occupancy that we posted in the quarter and then where we are in October, we're sitting here at the end of October at 92.5% occupancy. That's up 20 basis points year-over-year. And importantly, it's up 10 basis points over September, which is a really nice sequential move for us and really illustrates our strategy that Michael laid out to maintain occupancy into the fall. So we're really happy with that.

Okay. And maybe a quick follow-up on the fourth quarter. It looks like the guidance implies like a small uptick in the fourth quarter on same-store revenue. Is that maybe going to be due to the occupancy build? Or will that be potentially easy comps, rate? What's driving that?

I -- just doing the math, I think it actually -- it's a slight downtick versus the 2.5% and absolute on same-store revenue. It implies a further reduction of the OpEx. So the OpEx is where the absolute NOI gain would be there. But we're assuming same-store revenue goes down in the fourth quarter versus the third quarter in terms of absolute dollars.

Your last question comes from Eric Luebchow with Wells Fargo.

I apologize if I missed this earlier, but it seems like your Q3 same-store came in largely in line with expectations. Q4, obviously, maybe the expectations are a touch lower. So could you maybe just touch on some of the moving parts and what you're seeing in October. I know there are some difficult comps in a handful of hurricane or storm impacted markets that you're going to lap. But maybe just give us kind of an update on how you're feeling in terms of exit rate going into '26 versus last quarter?

So I just went over the October occupancy number, so I'm not going to say that again. But we feel really good about where occupancy is sitting in the 92.5% range. When you think about move-in rates during the quarter, the third quarter, James touched on this in his remarks, but they were down about 8.9%. In October, those were down about 18% year-over-year as the building occupancy strategy played out. You pointed this out, but I'll note that October was -- October 2024 was the most difficult move-in comp of the whole second half of 2024. So not too surprising to see that down year-over-year.

As we moved into November, the trends have improved. We're still sitting at 92.5% occupancy, which is really -- really happy with that. and the move-in rates have actually improved sequentially by about 6% or 7% over the October numbers and in-place rates have actually improved sequentially over the October numbers as well. And we're now up 40 basis points in occupancy year-over-year. So those stats have improved as we've gone into November.

And then lastly, just to touch on ECRIs as they are a piece of the whole puzzle, we continue to pull that lever without changes to attrition there. Attrition is actually down year-over-year, as James and Michael mentioned. And without getting into specific numbers because some of that's a bit proprietary, we gave ECRIs to more tenants in October than the new rentals, right? And that average ECRI was above the 18% in a really healthy place. So we feel really good about all those pieces as we stand here right now.

Just to touch because you brought up the hurricane-impacted markets, just to kind of recap those. Obviously, Asheville was a hurricane-impacted market and as was kind of the Gulf Coast of Florida. We're effectively lapping the occupancy comp on Asheville. But remember, we didn't do any sort of existing customer rate increases until the first quarter of 2025. So both the Asheville market as well as the, for example, the Tampa market, while we are starting to lap the occupancy comp where we had elevated occupancy, we are coming in with a pretty healthy head of steam on the rate side.

Got it. Super helpful. Appreciate that. And maybe just one final question. I think -- how are you guys thinking about -- obviously, move-in rates, there's a little bit of tough pressure in the back half of the year. Part of it is comp based. We've heard of some of your larger peers kind of leaning in on discounts or promotions, kind of more short-term ways to bring people in the door. How are you seeing that competitive backdrop play out between discounted move-in rates versus promotions or upfront discounts? And what do you think is kind of more effective in keeping that occupancy number up?

Yes. So if you look at what we've done this year versus last year, year-to-date, our concession numbers have been down pretty materially, like in the 20% to 30% range. So we were able to drive rentals without using concessions nearly as much, and that's paid off for us I think -- and you see it in the revenue growth numbers and the results overall.

As we stand here today, that's less so the case, right? We're utilizing concessions a little bit more than we were in the third quarter, especially as compared to last year, but not drastically differently. So I'd say we're utilizing all of our tools to drive rentals right now. The one thing I would point out is that from a marketing spend perspective, we've been not utilizing that nearly as much as we were last year. I mean, in the second quarter, I think we were negative 4% or 5%. And in this quarter, the third quarter, we were only up like 1.5%, 1.8%, something like that. So not having to spend a lot to drive rentals. And those rentals for what it's worth were up 3% in the third quarter and are up 8% -- 8% or 9% into October. So the strategy is working.

And with no further questions in queue, I'd like to turn the conference back over to Michael Schwartz for closing remarks.

Thank you, operator. It's been an amazing first 7 months as a publicly traded company. We've accomplished a lot in just a short amount of time. We thank our investors, both retail and institution for their support, and we look forward to the next quarter in 2026. Thank you for your time and interest in SmartStop Self Storage, The Smarter Way To Store. Have a great day.

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