Smartstop Self Storage REIT Inc (SMA) Q2 2026 Earnings Report, Transcript and Summary

Everyone. Thank you for joining us. Welcome to SmartStop Self Storage's second quarter 26 Earnings Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press 1. To raise your hand. To withdraw your question, press 1 again. I will now hand the conference over to David Steven Corak, 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 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 well as James R. Barry, our CFO. Now I will turn 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 post positive same store NOI growth. Our strong focus on expense control led to a 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 multiyear strategic framework that guides our decision making as a management team. The DECA initiative stands for disciplined execution, compounding appreciation, through 6 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. 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 $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 communicate the DECA initiative with all of you. And while the pillars we outline were on display in the second quarter, we have 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 am 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 7 properties that were impacted by LA 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 3 properties on balance sheet in Spartanburg, South Carolina, approximately $30 million We also closed on a preferred investment on a property in Galita, 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 26 is that we posted fully diluted FFO as adjusted per share in unit of $0.49. Turning to guidance. We raised our same store revenue guidance from a range of -0.25% to 1.75% to a range of 0.5% to 1.5%. The lift of the LA 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. Result is an increase of our NOI growth midpoint from -0.25% 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.

We will now begin the question-and-answer session. You would like to ask a question, please press 1. To raise your hand. To withdraw your question, press 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Wesley Golladay with Baird. Wesley please go ahead.

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

Well, the answer, I think, is yes. I think that is kind of what our target is. I think if I step back I want to reinforce that we do believe this is a solid acquisition cycle. It is here. And it is driven by primarily individuals that have built or bought during COVID heyday. And now a lot of them are quite frankly over their skis. And so the 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. U.S. kind of at that mid, you know, 5.5%, and it is more between 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 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, 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, you know, present themselves. And so I do wanna be clear that, we are not going to just chase volume or size for its sake. You know, we are, obviously, focusing on acquisitions that can be accretive to the platform. And as we have said before, we wanna reemphasize you know, $300 million of acquisitions actually move our market cap by about 10% So that is meaningful growth for SmartStop. SmartStop Self Storage, which is much different, than our peers. They have to chase much larger asset sizes. And so it is a overall, I think, very solid acquisition environment.

Okay. And just 1, I guess, housekeeping question. You do have a $2 million 1-time fee that you are gonna earn from the funds consolidating. Would that be included in your third party management guide?

Hey, Wesley. This is Corak. Yeah. So that will be included in the managed REIT guidance, which falls under the managed platform. And I would I would expect that to hit in the fourth quarter. And that and for what it was, that was a consideration in the initial guidance as well.

Alright. Appreciate it. Thanks. Wes.

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

Yeah. Thanks, Viktor. This is James. I will 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 is structurally happening, in those operating expense savings, Obviously, we had our property insurance renewal that occurred in April, and so that is part of a just general softening in that particular market, and that is gonna 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 is part of the overall clustering story that we have been talking about pretty consistently about margins improving as we add. So 1 of the examples we like to talk about is in the Denver market in particular, our operating expenses were down substantially and was almost entirely attributable to payroll. And if you notice, we 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 9 properties to over 50 between owned and managed is really helping drive some of those economies of scale and clustering that we have originally talked about.

James. And then my second question is on your assumptions for moving rates and occupancy for the remainder of the year. And how can you end up being on the, for example, upper end of your AFFO per share-- sorry, AFFO per share range?

Hey, Viktor. it is Corak. So I will just kind of talk through some of the operating assumptions. Not too dissimilar from what we talked about last quarter. So 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, by the end of rental season, in that fourth quarter, I think we are going to start to see a broader inflection. From an occupancy standpoint, you know, slightly negative relative to 25 based on where we are sitting today. And ECRIs, you know, at or better than 25 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 have talked about this, but, you know, the supply impact continues to decrease through the rest of the year and into 2027 and 2028. In terms of, you know, the hitting the top end of our guidance, I am just gonna start on the revenue growth side because that is obviously the most material piece. To the overall AFFO. So if you look back to 2025, and I am gonna talk a little bit the cadence and then talk about the magnitude there. If you look back to 2025, our 3Q revenue growth was 2.5%. While April was only up about 40 basis points. So a fairly lumpy year over year comp that we have in the second half of year, which would in itself dictate know, the fourth quarter growth would be higher than third quarter. The other pieces that work there, of course, the Asheville occupancy comp, which lapsed on October 1, and the California ECI restriction lift that will have a more positive impact on the fourth quarter than the third quarter. So, again, those data points just from a modeling perspective 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 that you would you would calculate baked into the midpoint of guidance in terms of same store revenue growth, I think 1 of the lessons that we have 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 have been relatively unscathed. You know? Knock on wood, of course. So if you think about, you know, our guidance this year, we are assuming that there is going to be some more periods of some volatility as we as we head into slow season here. Assigning a probability that there could be some choppiness in the half of the year. But I think if we do not get that volatility and we see a more normal offseason, I think we feel pretty good about hitting the top end of that revenue range. Again, that is the biggest, you know, piece of the, the overall FFO story. I think if you go down the individual line items, right, there is probably if we get some acquisitions in the managed REITs, that can help out as well. But right now, we are we are pretty comfortable with the midpoint of the guidance.

Got it. Thank you. Thank you.

Your next question comes from the line of Eric Luebchow with Wells Fargo. Eric, please go ahead.

Great. Thanks for taking the question. I wanted to ask a little bit more about Asheville. Couple properties contributed as part of the eminent domain proceeding and the occupancy falloff, as you alluded to, is improving. You could talk about what you are seeing on the ground in Asheville. Obviously, I know 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.

Absolutely. Let me kind of talk a little bit about the Asheville market and then I will flip it over to James to talk about kind of eminent domain and new development that we have. Many of you know we have been in the national market for a pretty long time. it is been about 10 years. And so we know that market incredibly well. And as you said, the Asheville was our best performing market in 2025 with a 6% same store revenue growth. We are obviously, you know, facing some tough occupancy comps in 2026. But the year over year occupancy gap, you know, has narrowed dramatically since December, and it is averaging down, you know, as we have said, about 230 basis points year over year in the second quarter. And so occupancy currently is solid 91.8%. The web rates in the market have been stronger than we have anticipated. At the beginning of the year, and they are actually now positive year over year as we have moved into July. And so I think what we are seeing is a fairly traditional cadence of occupancy for a natural disaster, you know, of this kind. And now we have moved into kind of the post natural disaster stabilized you know, 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's performing slightly better than expected. Currently in July.

James? Yeah. Eric, as you mentioned, we did have 2 properties, and we disclosed this in our, earnings release. We had 2 properties that were subject to eminent domain proceedings in Nashville. There was a large portion of 1 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 to quarter end. 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, we are excited to announce that in early 27, 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 is likely a late 27, early 28 delivery. So you know, we are reinvesting back into this market with some of the supply that is coming back offline. As a result of the flood and these eminent domain proceedings.

Thanks, guys, for that. And just 1 follow-up for me. if we could just chat a little bit about Canada and the GTA market. I know that is also going through some pretty tough comp versus last year, but maybe you could talk about what you are seeing in terms of the fundamentals in Canada and once we get past these tougher comps. How you think growth will trend? And then related to that, 1 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.

Yeah. Great question. We get a lot of those questions. Let me first just start by talking about our same store portfolio. Our Canadian self storage same store portfolio, it consists of 13 seasoned stabilized properties, but they are all in the Greater Toronto area and as we, you know, 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 and tougher than, United States. And so when you take a look at our joint venture properties with smart centers, we have 10 properties, 900 thousand square feet. They are 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 US. And so for the full year, we do expect that the GTA will run modestly below The US 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 US. 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 US portfolio over the last 36 months. New supply, we have to talk about in the GTA. We think it is peaked and will moderate over the next 2 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 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 US levels, and improving year over year. Now macro uncertainty tied to events like the war, tariffs have caused some hesitation and delay in the rental decisions. And you concentrate that in only certain pockets it is not throughout the GTA. there is certain pockets. But other Canadian markets are showing steadier trends. So for an instance, our Alberta portfolio has grown occupancy by 15% in the past, you know, 2 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 are also seeing, I think, a very unique environment as a window for disciplined external growth. We are 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 wanna emphasize our GTA portfolio is irreplaceable real estate that has been built over the past, you know, 16 years. Now having said that, there is no question we are 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 is a true testament to our Canadian vision and strategy and it certainly validates why we entered this market 16 years ago. And so we have been competing with them in The US now. For the last 22 years. And so there is no question it is gonna be a more competitive environment. But, we welcome it, and that is 1 thing you, I think you can guarantee on SmartStop self storage. Is that we are competitors. And so, I think we will rise to the occasion. Great. Thank you, guys.

Your next question comes from the line of R.J. Milligan with Raymond James. RJ, please go ahead.

Yeah. Good morning to you guys. Good afternoon. I wanted to follow-up on the question about the margin opportunity. I am just curious, how much more margin expansion is there available by pulling internal levers versus how much more margin expansion do you think you can get through expanding scale?

Yeah. RJ, this is James. I will jump in there. So as we have, consistently said, you know, since our IPO, within in pockets and in 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, for example, with the Argus transaction, because I mentioned the Denver expansion, you know, that is there were 3 markets where we tipped over that 10-property mark. When we transitioned from September 30 to October 1. With that, with that onboarding. And so that we still believe that there is a lot of margin expansion to be realized as those programs and those platforms continue to integrate and as we continue to grow both on balance sheet within joint ventures and within third party management. And so, and 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 are 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 is Corak. 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 have talked previously about a pipeline in excess of a $100 million. With target yields in the 10% to 14% range. Typically structured as mezzanine or preferred. That pipeline remains. As of June 30, we have a book of about $20 million. All pref at this point on 6 properties, all of which we have property management We closed another $3 million pref after the quarter end. And the blended yield of everything we have today is just under 11%. So we are we are actively also working on an A-note, B-note approach or a stretch senior type approach. Where we would sell off an 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 really symbiotic relationship there, creating really a, you know, strong attractive returns on a capital light basis. Additionally, you know, the program, we expect will inherently create natural pipeline for future acquisitions at some point. We like the risk adjusted returns on these deals a lot. The deals we are going after, but are certainly sensitive to the 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 will see you will see us take a more balanced approach to building out this program.

that is great. Thank you, guys. Thanks, R.J.

Your next question comes from the line of Spenser Allaway with Green Street. Spenser Allaway, 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 have actually seen some regulation passed in New York. So I am just curious how you are thinking about that to your revenue management systems. And then separately, just given how larger Toronto footprint is, are you guys seeing any similar regulatory moves in Canada at all?

Yeah. I will touch on the US in particular. I mean, obviously, we do not have any direct exposure to the New York City areas that were affected by the recent some of the recent movements and, from a political perspective there. However, it is a it is a topic we are consistently monitoring and evaluating and we are working with local self storage association groups and task force to make sure we are staying abreast of everything going on. And that being said, I think it is it is important to note that everyone has their own proprietary pricing. Systems. Right? And so our algorithms are different than you know, other publicly traded peers as well as private operators. And so yeah, we are 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.

Yeah. And I would also just add that I think there is probably some more risk with organizations using off the shelf pricing software that is aggregating a lot of different owners. I think that was 1 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, you know, highly sensitive. In concert with that, you know, we have seen, in areas, let's say, in Montreal, where, there were, some regulatory concerns with respect to, how rentals were being offered up and their discounts and promotions. But as we went through that, what we have found, it was more or less about just making sure that you were transparent to the consumer with respect to you are presenting what you are 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, you know, expense is gonna be in the second and third month. And so I think as an industry, I think what I what I have seen, and I think it is been amazing, is that they are 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 1-on-1 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 this quarter. Is there anything that is been kind of achieved on the AI side that is helping you with cost savings? You know, we I you know, as we said from a from an AI perspective, it is 1 of the kind of 1 of our pillars within the DECA initiative, and that is something that is obviously continually evolving within our organization. There is no question that there are areas where I think we can enhance revenue. I think there is areas that, you know, we can see some cost savings. I think that we are kind of in the early stages of addressing and, developing the technology to do that. So I cannot say that, you know, right off the right now that we have implemented some of the AI strategies yet, with respect to cost savings. And some of those, you know, have to do with you know, 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 kinda move individuals around appropriately within, you know, an AI-focused structure. And so I think some of those cost savings are going to see over more of a midterm type of, time frame versus the short term. We have gotta be very thoughtful. it is-- we believe and we are all in on artificial intelligence, but we have just seen too often that, some of these companies are just trying to sell you know, axes and picks and shovels to people that are trying to find gold. And what we are 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. Thank you so much.

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

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

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

Okay. And then in terms of, you know, some of the updates around July, I appreciate some of that. Heard the occupancy and, I think, web rates, but look 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 will 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 for the course of the of the entirety of the second quarter. We do have some new disclosure in the sup as I am sure you have seen. So, you can see that move in rates were per square foot for the quarter were down 4.4% year over year. That is an apples to apples stat with the rent cost that we disclose in the sub. And so that was an improvement from the first quarter. Concessions were up were up modestly in the first quarter in the in the second quarter. I am 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 we ran a very successful fourth of July in and Canada Day Sale. Web reservations were up 0.7%. Rentals were up 7.2%. And, this is across both The US 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 our in place rates were up over 2%. Year over year.

So it is a fairly consistent theme with you in terms of balancing the rate occupancy. So I think we are we are fairly encouraged as we enter the, you know, the shoulder seasons. Okay. Yeah. that is helpful. And then, I guess, along those lines and with occupancy, you know, there was some commentary there too. But, you know, it is been unusually stable over the last several quarters, a little less seasonal. Improvement from Q1 to Q2 than we have typically seen. But, you know, also, there was less seasonality in the back half of 2025 as well. Is that primarily a function of some market specific factors? Or is that sort of does that reflect you know, kind of a deliberate operating strategy? And I am just wondering how we should think about seasonality in the back half of 2026 now, and sort of the earlier part of 2027.

Yeah, Todd. it is a it is a good observation because we you are right. Our occupancy has been pretty steady, and that is been a target of ours as to be at that 92% physical occupancy level, give or take. And so moving into the second quarter, you know, there was a bit of a shift in our pricing systems and the way we are approaching things on a on a shift towards rate. As David alluded to with some of the web rates and the reduced promotions and things like that. So our annualized rent per occupied 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 in occupancy. Right? So there is some dilution going on and some gives and some takes as we as we go. But overall, we still feel good about our approach into this busy season. As we have consistently said, wanna be highly occupied you know, 92%+ so that we can drive rate during busy season, which we have been doing. And then coming out of busy season, we do wanna maintain a good base of occupancy. And so we are gonna see some seasonal effects. But to your point, we are gonna try and keep, you know, keep tenants in the 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. Is that sound about right?

Yes. I think that is how we are approaching the tail off of the business. And that being said, our systems are dynamic. Right? And if we see opportunities, you know, they are gonna respond to them. But, yeah, I think that is, that is how we are thinking about it today.

Okay. Alright. Thank you.

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

Yeah. Hi. A couple more revenue questions. I guess I guess, first, when you are thinking about the move in rate comps, when do you think you crossed the positive territory there?

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

Okay. Got it. And then if you are looking at ECRI, can you give us a sense as to about you know, what portion of your units get at least 1 increase per year?

Yeah. I would say the majority of our customers get a rate increase at least 1 time once during the bid season. That being said, you know, as our most valuable customers are the ones that are gonna be staying the longest. And so as they evolve in their in their customer journey, they are less likely to actually be receiving 1 of those ECRIs. Just as a reminder, you know, we are always testing. We are always monitoring our ECRI approach We really have not changed the cadence over the course of this year. And, and we continue to be in that, on average, sort of low-20%s on a blended basis. Over the course of 2026.

Got it. Okay. Thank you. Thanks, Mike. Thanks, Mike.

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

Hi. This is Robin Haneland 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 any hurdles you have overcome to date?

Yeah. Thank you. I would say the following, and we have been pretty consistent with our communication. We are having numerous conversations that are ongoing. And we feel pretty good, you know, about the direction we are 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 will do so, and it is gonna represent incremental capacity on top of what is already embedded, in the updated, you know, guidance. I think what we are finding is there are a lot of organizations in The US and Canada that are very, very, you know, interested in, allocating storage. So it is not if from a SmartStop perspective, it just went.

Thank you. And then on the momentum building in your third party platform. 1 store added now in Canada, but down on a net basis. Just curious if you can elaborate and provide some color.

Absolutely. Well, so far, you know, we are very happy with, the Argus third party management platform. We think the receptivity thus far to the SmartStop and the current owner's base and the potential new owners remain strong. Now with any acquisition, you know, you have, you know, different phases of integration and to our platform. And so you know, Phase 1 for us was understanding the people and the entrepreneurial owners at Argus. 2, Phase 2 was introducing, you know, our people. You know, the smart stop people, smart stop culture, the smart stop platform. And then 3, 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. Overall, owners have been very impressed with the top of the funnel. I think that is 1 of the biggest comments that we get. And in addition, to our communication, our tech platform, and not losing sight of, those entrepreneurial owners. And so the property performance has materially improved with those owners that have moved on in our platform. So we are kind of in Phase 4 now. it is that broader migration onto the Smart Stop platform, but, you know, we still wanna provide options to meet the entrepreneurial spirit, you know, of our owners. And so we are currently coming out of Phase 3 into Phase 4. I think September will start to kick start, Phase 4 as we kind of roll off of the rental season. We move into, the SSA Las Vegas meeting, Now having said that, we do continue to see new contracts being signed across the spectrum of options, and we are encouraged by the adoption of the SmartStop branded and legacy platforms. Now the broader pattern that we have called out the this last quarter Private label owners are seeing stronger lead flow. Once they are on the SmartStop platform, and they are gradually migrating towards either the legacy or the full Smart Stop brand. And this is continuing, and we are we are, you know, each and every month, we are starting to see these, owners transfer. You know, at this time, I would not move up any kind of time line when the full margin synergies will show up in our p and l. I think that is been more of a 2027 story. As the technology migration and the rebranding works. Works its way through the portfolio. but we are 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 you know, dated, you know, payoff with respect to Argus 3PM. And so we did have some off boards on the private label platform, but we are seeing improvement in the overall quality of the managed portfolio. So the average square feet of storage, for each onboard, store was approximately 73% larger than our offboards. And so we had 90 thousand net rentable square feet of onboards, as compared to 52 thousand net rentable square feet for the offboard. So the larger stores plus the stronger demographics mean these onboarded stores will have higher overall revenues than the offboards. In addition, as we have announced, we have onboarded our first third party management property in Canada in Q2, and that is obviously, 1 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 US properties that are actually so happy with what we are doing for them in The US there are discussions with respect to their Canadian properties. And so 6 of the properties that we have onboarded, which I think is important, are current bridge lending customers. And I think that demonstrates the symbiotic, relationship between, you know, our bridge program and also this, you know, our third party management. And lastly, I think 1 of the biggest benefits that we are seeing out of Argus is the benefit of scale in terms of margin. And so I kind of talked about that through the call with respect to you know, the Denver presence and, how that has impacted not only, our entrepreneurial owners, but also, you know, our own same store margins. And so you know, the year to date, just wanna reinforce that those Denver margins are up 430 basis points. So I think overall, you know, we are far along within the integration. We still have a lot of work to do. But, we are very happy about the progress thus far. Thank you.

Thanks, Robin.

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 wanna 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.