What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-01 compared with 2025-05-02 · 75 added, 60 removed, 240 unchanged (36% of the section changed)

18 unchanged sentences

self-storage operations and tenant reinsurance.

Primary sources of revenue for our self-storage operations segment include rents received from tenants under leases at each of our wholly-owned stores.

Primary sources of revenue for our self-storage operations segment include rents received from tenants under leases at stores that are wholly-owned and in consolidated joint ventures.

Our operating results depend materially on our ability to lease available self-storage units, to actively manage unit rental rates, and on the ability of our tenants to make required rental payments.

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Developed by our management team, these systems enable us to analyze, set and adjust rental rates daily across our portfolio in order to respond to changing market conditions.

We believe our systems and processes allow us to more pro-actively manage revenues.

We believe our systems and processes allow us to more proactively manage revenues.

We operate in competitive markets, often where consumers have multiple stores from which to choose.

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We consider a store to be in the lease-up stage after it has been issued a certificate of occupancy, but before it has achieved stabilization.

We consider a store to be stabilized once it has achieved either an 80% occupancy rate for a full year measured as of January 1 of the current year, or has been open for three years prior to January 1 of the current year.

As of March 31, 2025, we owned or had ownership interests in 2,424 operating stores.

Of these stores, 1,975 are wholly-owned, ten are in consolidated joint ventures, and 439 are in unconsolidated joint ventures.

We consider a store to be stabilized once it has been open for three years or has sustained average square foot occupancy of 80% or more for one calendar year.

As of June 30, 2025, we owned or had ownership interests in 2,430 operating stores.

Of these stores, 2,005 are wholly-owned, 11 are in consolidated joint ventures, and 414 are in unconsolidated joint ventures.

In addition, we managed an additional 1,749 stores for third parties bringing the total number of stores which we own and/or manage to 4,179.

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Our acquisitions have given us an increased scale in many core markets as well as a foothold in many markets where we had no previous presence.

As of March 31, 2025, approximately 2,350,000 tenants were leasing storage units at the operating stores that we own and/or manage, primarily on a month-to-month basis, providing the flexibility to increase rental rates over time as market conditions permit.

As of June 30, 2025, approximately 2,465,000 tenants were leasing storage units at the operating stores that we own and/or manage, primarily on a month-to-month basis, providing the flexibility to increase rental rates over time as market conditions permit.

Existing tenants generally receive rate increases at least annually, for which no direct correlation has been drawn to our vacancy trends.

Although leases are short-term in duration, the typical tenant tends to remain at our stores for an extended period of time.

For same-stores as of March 31, 2025, the average length of stay for tenants who have vacated was approximately 17.7 months.

For same-stores as of June 30, 2025, the average length of stay for tenants who have vacated was approximately 17.1 months.

Our store portfolio is made up of different types of construction and building configurations.

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The following table presents additional information regarding net rentable square feet and the number of stores by state:

March 31, 2025

June 30, 2025

REIT Owned Joint Venture Owned Managed Total

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Totals 2,016 152,198,959 414 32,092,189 1,749 137,165,513 4,179 321,456,661

(1) Includes ten consolidated joint ventures.

(1) Includes 11 consolidated joint ventures.

RESULTS OF OPERATIONS

Amounts in thousands, except store and share data

Comparison of the three months ended March 31, 2025 and 2024

Results for the three months ended March 31, 2025 included the operations of 2,424 stores (1,975 wholly-owned, ten in consolidated joint ventures, and 439 in joint ventures accounted for using the equity method) compared to the results for the three months ended March 31, 2024, which included the operations of 2,384 stores (1,909 wholly-owned, three in a consolidated joint venture, and 472 in joint ventures accounted for using the equity method).

Comparison of the three and six months ended June 30, 2025 and 2024

Results for the three and six months ended June 30, 2025 included the operations of 2,430 stores (2,005 wholly-owned, 11 in consolidated joint ventures, and 414 in joint ventures accounted for using the equity method) compared to the results for the three and six months ended June 30, 2024, which included the operations of 2,389 stores (1,912 wholly-owned, five in consolidated joint ventures, and 472 in joint ventures accounted for using the equity method).

The following table presents information on revenues earned for the periods indicated:

For the Three Months Ended March 31,

2025 2024 $ Change % Change

For the Three Months Ended June 30, For the Six Months Ended June 30,

2025 2024 $ Change % Change 2025 2024 $ Change % Change

Property rental $ 721,004 $ 697,100 $ 23,904 3.4 % $ 1,425,384 $ 1,385,144 $ 40,240 2.9 %

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Total revenues $ 841,618 $ 810,663 $ 30,955 3.8 % $ 1,661,615 $ 1,610,202 $ 51,413 3.2 %

Property rental— The increase in property rental revenues for the three months ended March 31, 2025 was primarily the result of an increase of $17,542 associated with acquisitions completed in 2024 and acquisitions completed in the first three months of 2025.

We acquired 58 wholly-owned stores in 2024 and an additional 17 wholly-owned stores during the three months ended March 31, 2025.

Property rental— The increase in property rental revenues for the three and six months ended June 30, 2025 was primarily the result of an increase of $30,049 and $47,591, respectively, associated with acquisitions completed in 2024 and acquisitions completed in the first six months of 2025.

The increase in revenue resulting from these acquisitions was partially offset by decreases in rental revenue of $6,027 and $10,663, respectively, due to property dispositions for the three and six months ended June 30, 2025.

We acquired 58 wholly-owned stores in 2024 and an additional 45 wholly-owned stores during the six months ended June 30, 2025.

Tenant reinsurance— The increase in tenant reinsurance revenues was due primarily to an increase in the number of stores operated.

We operated 4,099 stores at March 31, 2025 compared to 3,793 stores at March 31, 2024.

We operated 4,179 stores at June 30, 2025 compared to 3,812 stores at June 30, 2024.

Management fees and other income— Management fees and other income primarily represent the fees collected for our management of stores owned by third parties and unconsolidated joint ventures and other transaction fee income.

The increase for the three months ended March 31, 2025 was due to both an increase in the number of stores managed and an increase in the overall revenue of stores under management when compared to the same period last year.

As of March 31, 2025, we managed 2,124 stores for unconsolidated joint ventures and third parties, compared to 1,884 stores as of March 31, 2024.

The increase for the three and six months ended June 30, 2025 was due to both an increase in the number of stores managed and an increase in the overall revenue of stores under management when compared to the same period last year.

As of June 30, 2025, we managed 2,163 stores for unconsolidated joint ventures and third parties, compared to 1,895 stores as of June 30, 2024.

The following table presents information on expenses for the periods indicated:

For the Three Months Ended March 31,

2025 2024 $ Change % Change

For the Three Months Ended June 30, For the Six Months Ended June 30,

2025 2024 $ Change % Change 2025 2024 $ Change % Change

Property operations $ 227,621 $ 196,902 $ 30,719 15.6 % $ 451,203 $ 401,420 $ 49,783 12.4 %

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Total expenses $ 466,784 $ 451,243 $ 15,541 3.4 % $ 933,812 $ 914,954 $ 18,858 2.1 %

Property operations— The increase in property operations expense during the three months ended March 31, 2025 consists primarily of an increase of $10,006 related to acquisitions completed in 2024 and acquisitions completed in the first three months of 2025.

We acquired 58 wholly-owned stores in 2024 and an additional 17 wholly-owned stores during the three months ended March 31, 2025.

Additionally, for the three months ended March 31, 2025 there was an increase of $10,742 at our same-store properties primarily due to increases in property tax, utilities and snow removal, offset by marketing and payroll.

Tenant reinsurance— Tenant reinsurance expense represents the costs that are incurred to provide tenant reinsurance.

Property operations— The increase in property operations expense during the three and six months ended June 30, 2025 consists primarily of an increase of $14,612 and $24,624, respectively, related to acquisitions completed in 2024 and acquisitions completed in the first six months of 2025.

We acquired 58 wholly-owned stores in 2024 and an additional 45 wholly-owned stores during the six months ended June 30, 2025.

Additionally, for the three and six months ended June 30,

2025 there was an increase of $12,220 and $22,501, respectively at our same-store properties primarily due to an increase in property tax expense.

Tenant reinsurance— Tenant reinsurance expense represents the costs that are incurred to provide tenant reinsurance and is subject to volatility due to increased claims arising when significant events occur at stores.

General and administrative— General and administrative expenses primarily include all expenses not directly related to our stores, including corporate payroll, office expense, office rent, travel and professional fees.

These expenses are recognized as incurred.

Our overall General and Administrative expense has increased primarily as a result of our increased size through acquisitions, business combinations and growth through our joint venture partners and managed portfolio.

Our overall general and administrative expense has increased primarily as a result of our increased size through acquisitions and growth through our joint venture partners and managed portfolio.

Depreciation and amortization— The company amortizes to expense intangible assets-customer intangibles on a straight-line basis over the average period that a tenant is expected to utilize the facility (currently estimated at 18 months).

Depreciation and amortization expense decreased for the period, primarily due to the full amortization of customer intangibles associated with our merger with Life Storage which were fully expensed as of January of this year.

Depreciation and amortization expense decreased for both the three and six month periods, due to the customer intangibles associated with our merger with Life Storage being fully expensed in January of this year.

Other Revenues and Expenses

The following table presents information on other revenues and expenses for the periods indicated:

For the Three Months Ended March 31,

2025 2024 $ Change % Change

Gain on real estate assets held for sale and sold, net $ 35,761 $ — $ 35,761 100.0 %

For the Three Months Ended June 30, For the Six Months Ended June 30,

2025 2024 $ Change % Change 2025 2024 $ Change % Change

Gain (loss) on real estate assets held for sale and sold, net $ (864) $ (54,659) $ 53,795 (98.4) % $ 34,897 $ (54,659) $ 89,556 (163.8) %

Interest expense (146,128) (137,133) (8,995) 6.6 % (288,527) (270,020) (18,507) 6.9 %

Non-cash interest expense related to amortization of discount on Life Storage unsecured senior notes (11,313) (10,705) (608) 5.7 %

Non-cash interest expense related to amortization of discount on unsecured senior notes, net (11,770) (10,853) (917) 8.4 % (23,083) (21,558) (1,525) 7.1 %

Interest income 41,998 31,226 10,772 34.5 % 80,965 54,799 26,166 47.7 %

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Total other revenues & expenses, net $ (112,118) $ (164,008) $ 51,890 (31.6) % $ (180,162) $ (275,762) $ 95,600 (34.7) %

Gain on real estate assets held for sale and sold, net— We disposed of 11 previously held for sale stores during the three months ended March 31, 2025 resulting in a gain of $39,520.

This gain was offset by losses of $3,759 related to the sale of three land parcels and three properties listed for sale during the quarter where the estimated fair value, net of selling costs, was less than the net carrying value of the assets.

Interest expense— The increase in interest expense during the three months ended March 31, 2025 was primarily the result of higher outstanding debt.

As of March 31, 2025, we had approximately $12,809,851 in total face value of debt, compared to approximately $11,479,914 as of March 31, 2024.

Non-cash interest expense related to amortization of discount on Life Storage unsecured senior notes— Represents the amortization of the discount assigned to the fair value of the Life Storage unsecured senior notes assumed as part of the Life Storage Merger.

Interest income— Interest income represents interest earned on variable interest rate bridge loans, debt securities and on notes receivable from Common and Preferred Operating Partnership unit holders.

The increase in interest income during the three months ended March 31, 2025 was primarily the result of an increase in the amount of bridge loans outstanding.

The balance of bridge loans was $1,369,089 as of March 31, 2025, compared to $752,336 as of March 31, 2024.

Gain on real estate assets held for sale and sold, net— We completed the sale of 12 previously held for sale stores during the six months ended June 30, 2025 resulting in a gain of $38,656 which was partially offset by losses of $3,759.

The loss of $3,759 related to the sale of three land parcels and three properties listed for sale during the six months ended June 30, 2025 where the estimated fair value, net of selling costs, was less than the net carrying value of the assets.

The loss recorded during the three months ended June 30, 2025 related to the sale of one operating property previously listed as held for sale resulting in an additional loss of $864.

During the three months ended June 30, 2024, we listed seven properties for sale.

These properties were recorded at current fair value less selling costs which resulted in an estimated loss of $54,659.

Interest expense— The increase in interest expense during the three and six months ended June 30, 2025 was primarily the result of higher outstanding debt.

As of June 30, 2025, we had approximately $13,169,719 in total face value of debt, compared to approximately $11,803,723 as of June 30, 2024.

Non-cash interest expense related to amortization of discount on unsecured senior notes, net— Represents the amortization of the discount assigned to the fair value of the Life Storage unsecured senior notes assumed as part of the Life Storage Merger and net premium from bond offerings, offset by discount from assumed debt.

Interest income— Interest income represents interest earned on variable interest rate bridge loans, debt securities and on notes receivable from Common Operating Partnership unit holders.

The increase in interest income during the three and six months ended June 30, 2025 was primarily the result of an increase in the amount of bridge loans outstanding.

The balance of bridge loans was $1,542,693 as of June 30, 2025, compared to $1,136,306 as of June 30, 2024.

Equity in earnings and dividend income from unconsolidated real estate entities— Equity in earnings of unconsolidated real estate entities represents the income earned through our ownership interests in unconsolidated joint ventures.

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To the extent that cash or profits in excess of these preferred returns are generated, we receive a higher percentage of the excess cash or profits.

The increase is primarily due to the transaction in November 2024 in which we acquired additional ownership interest in the HF1 Sovran HHF Storage Holdings LLC and HF2 Sovran HHF Storage Holdings II LLC from our partner in the unconsolidated joint ventures.

The increase for the six months ended June 30, 2025 is primarily due to the transaction in November 2024 in which we acquired additional ownership interest in the HF1 Sovran HHF Storage Holdings LLC and HF2 Sovran HHF Storage Holdings II LLC from our partner in the unconsolidated joint ventures.

The transaction increased our equity ownership percentages from 20% and 15%, respectively, to 49% in each unconsolidated joint venture.

The decrease for the three months ended June 30, 2025 is primarily due to the acquisition of our partners’ membership interests in the ESS-NYFL JV LP and ESS CA-TIVS JV LP joint ventures, as well as the transfer and distribution of membership interests in the PR II EXR JV LLC joint venture.

The number of unconsolidated joint ventures in which we have ownership interests was 414 as of June 30, 2025, compared to 472 as of June 30, 2024.

Dividend income represents dividends from our investment in preferred stock of SmartStop and its affiliates.

In addition, during February 2025, we invested $100,000 in Strategic Storage Growth Trust III, Inc.

Preferred Stock at a dividend rate of 8.85%, which represents $1,400 of the increase.

Income tax expense —The increase in income tax expense for the three months ended March 31, 2025 was primarily the result of an increase in book income and a decrease in permanent tax deductions related to stock awards.

Income tax expense —The increase in income tax expense for the three and six months ended June 30, 2025 was primarily the result of an increase in book income and a decrease in permanent tax deductions related to stock awards.

FUNDS FROM OPERATIONS

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The following table presents the calculation of FFO for the periods indicated:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2025 2024 2025 2024

Net income attributable to common stockholders $ 249,731 $ 185,872 $ 520,606 $ 398,984

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Amortization of intangibles 3,225 28,137 14,304 57,421

Gain on real estate assets held for sale and sold, net (35,761) —

(Gain) loss on real estate assets held for sale and sold, net 864 54,659 (34,897) 54,659

Unconsolidated joint venture real estate depreciation and amortization 7,741 8,009 16,430 15,849

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The following table presents operating data for our same-store portfolio.

For the Three Months Ended March 31, Percent

2025 2024 Change

For the Three Months Ended June 30, Percent For the Six Months Ended June 30, Percent

2025 2024 Change 2025 2024 Change

Same-store rental revenues

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The following table presents additional information for our same-store portfolio:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

Same-store portfolio 2025 2024 2025 2024

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The following table presents a reconciliation of same-store net operating income to net income as presented on our condensed consolidated statements of operations for the periods indicated:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2025 2024 2025 2024

Net Income $ 262,716 $ 195,412 $ 547,641 $ 419,486

Adjusted to exclude:

Gain on real estate assets held for sale and sold, net (35,761) —

(Gain) loss on real estate assets held for sale and sold, net 864 54,659 (34,897) 54,659

Equity in earnings and dividend income from unconsolidated real estate entities (16,284) (17,255) (36,215) (32,262)

Interest expense 146,128 137,133 288,527 270,020

Non-cash interest expense related to amortization of discount on Life Storage unsecured senior notes 11,313 10,705

Non-cash interest expense related to amortization of discount on unsecured senior notes, net 11,770 10,853 23,083 21,558

Depreciation and amortization 177,266 194,809 357,622 391,775

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Same-store net operating income $ 474,191 $ 489,522 $ 941,555 $ 962,432

Cash flows from operating activities for the three months ended March 31, 2025 increased when compared to the same period in the prior year.

Cash flows from operating activities for the six months ended June 30, 2025 increased when compared to the same period in the prior year.

Cash flows used in investing activities relate primarily to our acquisition and development of new stores, sales of stores, investments in unconsolidated real estate entities, and notes receivable from bridge loans and fluctuate depending on our actions in those areas.

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A summary of cash flows along with significant components are as follows:

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Net cash provided by operating activities $ 1,025,265 $ 1,010,800

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Investment in unconsolidated real estate entities (113,285) (10,789)

Issuance and repurchase of notes receivable, net of sales and principal payments (116,241) (146,182)

Return of investment in unconsolidated real estate ventures 200,000 4,200

Issuance of notes receivable, net of sales and principal payments (281,697) (521,813)

Proceeds from unsecured term loans, senior notes, revolving lines of credit and commercial paper 6,440,431 3,263,470

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LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2025, we had $119,559 available in cash and cash equivalents.

As of June 30, 2025, we had $125,045 available in cash and cash equivalents.

Our cash and cash equivalents are held in accounts managed by third party financial institutions and consist of invested cash and cash in our operating accounts.

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The following table presents information relating to our debt:

March 31, 2025

June 30, 2025

Total face value of debt $ 13,169,719

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At any point in time, we expect to maintain available commitments under our Credit Facilities in an amount at least equal to the amount of commercial paper notes outstanding.

At March 31, 2025, we had $580,000 in issuances outstanding under the commercial paper program.

We hold a BBB+/Stable rating from S&P, which was upgraded from BBB/Stable in July 2023 in connection with the Life Storage Merger, and a Baa2 rating from Moody's Investors Service.

At June 30, 2025, we had $700,000 in issuances outstanding under the commercial paper program.

We hold a BBB+/Stable rating from S&P, which was upgraded from BBB/Stable in July 2023 in connection with the Life Storage Merger, and a Baa2/Positive rating from Moody's Investors Service.

We intend to manage our balance sheet to maintain these ratings.

Certain of our real estate assets are pledged as collateral for our debt.

As of March 31, 2025, we had a total of 1,754 unencumbered stores as defined by our public bonds.

As of June 30, 2025, we had a total of 1,773 unencumbered stores as defined by our public bonds.

Our unencumbered asset value was calculated as $30,214,990 and our total asset value was calculated as $36,039,197 according to the calculations as defined by our public bonds.

We are subject to certain restrictive covenants relating to our outstanding debt.

We were in compliance with all financial covenants at March 31, 2025.

We were in compliance with all financial covenants at June 30, 2025.

Our liquidity needs consist primarily of operating expenses, monthly debt service payments, recurring capital expenditures, dividends to stockholders and distributions to unit holders necessary to maintain our REIT qualification.

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333-278690) previously filed with and declared effective by the Securities and Exchange Commission (the “SEC”) and a prospectus supplement and accompanying prospectus, filed with the SEC.

As of March 31, 2025, no shares have been sold under the Equity Distribution Agreement, which we refer to as our “at the market” equity program.

As of June 30, 2025, no shares have been sold under the Equity Distribution Agreement, which we refer to as our “at the market” equity program.

OFF-BALANCE SHEET ARRANGEMENTS

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Results for any quarter may not be indicative of the results that may be achieved for the full fiscal year.

RECENT TAX LEGISLATION

On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted into law, which included certain modifications to U.S.

tax law, including certain provisions that affect the taxation of REITs and their investors.

The OBBBA permanently extended certain provisions that were enacted in the Tax Cuts and Jobs Act of 2017.

Such extensions included the permanent extension of the 20% deduction for “qualified REIT dividends” for individuals and other non-corporate taxpayers.

The OBBBA also increased the percentage limit under the REIT asset test applicable to taxable REIT subsidiaries (the permissible value of taxable REIT subsidiary securities that a REIT may hold) from 20% to 25% of the value of the REIT’s total assets for taxable years beginning after December 31, 2025.

We are currently evaluating the provisions of the OBBBA, but do not expect the OBBBA to have a material impact on our financial position and/or results of operations.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis