Public Storage. (PSA) — Q4 2025 Earnings Call Transcript

Hello, everyone, and thank you for joining us for our fourth quarter 2025 earnings call. I'm here with the Public Storage leadership team, Joe Russell, Tom Boyle and Joe Fisher. Before we begin, we want to remind you that certain matters discussed during this call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. All forward-looking statements speak only as of today, February 13, 2026, and we assume no obligation to update, revise or supplement statements that become untrue because of subsequent events. A reconciliation to GAAP of the non-GAAP financial measures we provide on this call is included in our earnings release. You can find our press release, supplement report, earnings presentation, of which we will refer to during this call, SEC reports and an audio replay of this conference call at our Investor Relations website. We ask that you initially limit yourself to 2 questions. However, if you have any additional questions, please feel free to jump back into the queue. With that, I'll turn the call over to Joe Russell.

Thanks, Brandon. Good morning, and thank you for joining us. Today is a significant day for Public Storage. We're here to discuss our fourth quarter and full year results, but more importantly, we're unveiling PS4.0, the next era of Public Storage leadership and strategy. Tom, Joe and I will walk you through the full range of changes we're making to drive accelerated performance and long-term value creation. Let me start with the leadership transitions and additions we announced yesterday. Succession planning has always been a top priority for our Board, and the objective has been crystal clear: place exceptional talent in every single leadership position at Public Storage. I'm pleased to say we've met that objective. On the management side, I'm thrilled to announce Tom Boyle's promotion to CEO and Trustee. Tom and I have been partners for nearly a decade since we both joined Public Storage in 2016. As you know, Tom has proven to be an exceptional leader in both his CFO and CIO roles with outstanding accomplishments across capital allocation, operations and financial strategy. Tom is more than ready to lead Public Storage into PS4.0. Our Board, management team and I could not be more confident in his skill, drive and vision. Congratulations, Tom. I'm also pleased to welcome Joe Fisher to the executive team as President and CFO. Joe's tenure at UDR as President, CFO and CIO, along with his stature in the REIT industry, made him an exceptional fit for our senior leadership team. Joe joins Public Storage at a great time and adds outstanding depth to our leadership ranks. Welcome, Joe. Tom will cover other significant leadership changes in a moment. At the Board level, Ron Havner is stepping down as Chairman after 15 years of iconic leadership and will continue as a Trustee. Ron is a legend in our industry and has been a tremendous mentor to me and the management team at Public Storage. I can't thank him enough for his dedication and insight. John Reyes, our former CFO and current Trustee, is retiring from the Board. John has guided Public Storage with nearly three decades of financial acumen and discipline. His impact on this company is immeasurable. And I'm excited to announce that Shankh Mitra, CEO of Welltower and an independent Public Storage Trustee for the last five years, will now take the role of Chairman. Shankh brings a proven track record of value creation, strategic clarity and leadership. We're excited to have him guide and mentor the management team in his new role. And as noted in our press release, Shankh Mitra and Ron Havner have purchased $25 million and $5 million, respectively, of out-of-the-money 10-year options with a 6-year lockout, demonstrating their commitment and confidence in what PS4.0 will deliver to shareholders. Now let's go to Page 4 of the earnings presentation and briefly step back to reflect on our financial performance and highlight how we've built the platform to drive value. From 2023 to 2025, Public Storage has led the sector in same-store revenue growth, NOI growth, and NOI margins. Our core FFO per share growth leads the sector, and our total shareholder returns of 18.6% outperformed our peers over that time frame. Over the last five years, we built a platform designed to win. Here are a few significant accomplishments. First, deployment of the most robust omnichannel digital ecosystem in the industry, where over 85% of our customers engage with us using self-help tools, and we're infusing AI to optimize conversion and cost. Second, completion of the Property of Tomorrow program, a $600 million investment to rebrand and modernize all 3,400-plus properties with solar on nearly half of the portfolio by the end of 2026. Third, executing accretive growth at scale. We've invested over $12 billion expanding our portfolio by 763 assets, which are delivering outsized growth with more to come in the future. And fourth, inspiring the team through our winning culture, and also being named Best Place to Work for four consecutive years. I'm proud of what we've built, and I'm even more excited about what's next. On a personal note, as I retire from Public Storage, I want to thank the investor and analyst community for the opportunity to work with you over the last decade. I've enjoyed our relationship and the healthy respect we've developed. I've lived by a philosophy of telling it like it is, and I know Tom and the team will continue to communicate with you under that same doctrine. And to my Public Storage colleagues, thank you for the tenacity, fellowship and commitment to success. Public Storage has a strong and vibrant culture and has always been a team of winners. I've been humbled to lead you over the last ten years. I could not be more excited to hand the reins over to Tom and the team and cheer them on as they take Public Storage into its next era. Now I'll pass the call over to Tom.

Thank you, Joe. I'm incredibly humbled and grateful for this opportunity to lead Public Storage forward. Joe, to you and the entire Board of Trustees, thank you for the trust you've placed in me. I'm energized about the next era. And Joe, on behalf of the entire Public Storage team, thank you for a decade of exceptional leadership. Your accomplishments resulted in sector-leading total shareholder returns over the past one, three, and five years. But beyond the numbers, your personal impact on the team from property managers, corporate teams in Dallas and Glendale inspired us to be our best through every challenge and opportunity. Thank you for your mentorship. I also want to recognize Ron Havner and John Reyes at the Board level. The three of you have built a tremendous foundation for what's next. Now on Page 5, let's talk about where the industry is headed and where we're headed. The pandemic created noise, but the signal is clear: self-storage adoption has increased over the last decade. Generation Z, millennials, and the 65-plus cohort are all participating. Today, 10% of the U.S. population uses storage, and that trajectory is building. Storage is an affordable space solution in a high cost of living environment. Competitive supply is slowing as new development becomes harder and more expensive. And while we haven't yet seen a national inflection point on rents, momentum is building in our strongest markets. The trends are there. The self-storage industry also remains highly fragmented. Generational transitions and continued institutionalization of ownership will create more trading activity from here on. Industry fundamentals have been some of the best in real estate longer-term. And while they haven't been exciting for a few years, we're not waiting around. We're building the team and the platform for the future today. Moving to Page 6. We're unveiling PS4.0, the fourth era of Public Storage leadership, 53 years from our founding, by industry visionary Wayne Hughes. This is a generational transition and a strategic vision designed to drive accelerated performance. As Joe said, our objective is simple: build the best team to attack the opportunity ahead, and we have. We have new leaders joining the effort: Joe Fisher, President and CFO, here with us today, most recently with UDR; Ayash Basu, Chief Revenue and Marketing Officer, most recently with Boston Consulting Group; Gwen Montgomery, Chief Human Resources Officer, most recently with Gates Corp. And we have leaders stepping up: Natalia Johnson promoted to President, Chief Digital and Transformation Officer; Chris Sambar, promoted to President and Chief Operating Officer; and Paul Spittle, who’s stepping up to head our acquisitions efforts. We've brought in diverse perspectives from multifamily, consulting, manufacturing and telecommunications. This complements our multifaceted and experienced leaders in every part of the company with proven capabilities that have driven our outperformance over the last several years. We've also shifted our headquarters to Frisco, Texas, where our largest corporate presence is today. And with our L.A. team relocating to a new long-term office space, I'm delighted to lead this premier team into the next era. On the next slide, our strategic vision rests on three core pillars: PS Next, our value creation engine, and our 'own it' culture, which will collectively drive performance for our shareholders. First is the launch of the PS Next operating platform to meet the customer where they're going. Today's customer expects a fast, seamless, and quality experience, which will rapidly evolve with AI playing an important part of all customer journeys. PS Next combines the industry's leading owned property portfolio with the only scaled omnichannel digital-first platform, advanced data science, and exceptional property managers and care center agents. Customers demand more from the brands they do business with today, not only a core reliable in-store experience, which we enhanced with our Property of Tomorrow program, but also the digital and AI-led interactions of the future. We commit to innovate to meet and exceed those expectations across both the customer experience and the operational delivery of that experience. Customer obsession is critical. PS Next will drive both revenues and expenses, building on our margin leadership. Our third-party management platform fits too. The target result is organic growth acceleration. The second pillar, the value creation engine, captures the external growth opportunity. Building on PS Next operational leadership is a critical component for value creation, capital allocation. With PSA's capital resources and costs, we have a capital opportunity each and every year. I've grown increasingly passionate and energized about this opportunity over my time at Public Storage, leading to my expanded role several years ago as Chief Investment Officer. We will allocate our capital resources to: one, improve our portfolio; two, accelerate our per-share earnings and cash flow; and three, compound our returns. My vision of our value creation engine is not just about doing more, given our capital resources, but also better across our acquisitions, development, expansions, and lending investments. These four value creators will differentiate our return profile by fueling our non-same-store growth. Assets that are placed into the PS Next operating platform will earn more cash flow than others in the industry. Data science will lead our underwriting and targeting, leveraging the industry's largest datasets to enhance portfolio composition. Scale advantages compound as we reinforce PS Next and drive earnings growth. And lastly, the industry's best balance sheet is a competitive advantage and prepared to support it all. We have significant capacity paired with a differentiator, $600 million of retained cash flow that's growing and will help us execute our strategy. We're investing in this value creation engine. We're growing deal teams, streamlining processes, and infusing data science to increase the speed of execution. We've been active over the last several years amidst a slower transaction market industry-wide. The transaction market is poised to accelerate from here, driven by those generational sales and institutionalization, setting the table for our value creation opportunity. The target result is accretive portfolio growth. The third pillar is what I call the 'own it' culture. As a leadership team, we're enhancing our strong culture that's been built over the past 53 years. With an infusion of new talent and perspectives complementing our strong team, we are raising the bar for performance. We will empower with accountability. And I've been working with Shankh on redesigning our incentives, given their power as we launch our new era at Public Storage. With Shankh and the Board, we have redesigned our NEO incentive program for 2026 with a focus on per share and total return outperformance. And now with the launch, we have the opportunity to rethink the incentive structures throughout the organization to get the incentives right: meaningful incentives, not based on marginal improvements or tweaks, but on the same per share earnings growth and total return for alignment across the teams. Our goal is clear: we will win or lose as a team. The target is more energy, urgency, and engagement driving results for our shareholders. We're just getting started. PS4.0 is about customer obsession, strong capital allocation with a focus on per share earnings and cash flow growth. Over the coming year, you'll see these initiatives come to life as we showcase these pillars. Now I'd like to turn over the call to Joe Fisher for his first Public Storage earnings call. Joe, welcome to the team.

Thank you, Tom, and good morning, everyone. I want to start by saying how excited I am to be here. I've known and followed Public Storage for the last 20 years of my career, and I've known many of you and members of this team for much of that time. I want to first thank Joe Russell, Tom Boyle, Shankh Mitra, Ron Havner and the entire PS team and Board for the opportunity to join this great company. It was clear from our initial discussions last September that the vision and strategy we are unveiling here today was something I wanted to be a part of. Over the past several months, I've spent substantial time with the teams in Dallas and Glendale and onsite at properties getting up to speed. What I've witnessed is a team full of talented, dedicated A players with a will to win. There's a clear excitement for PS4.0 and a shared commitment to drive performance for our stakeholders through our three key pillars. Now let's get into the results on Slide 8. First, you'll notice we've made several enhancements to our press release and supplemental. As always, we're seeking to be best-in-class in all areas of our business, and we welcome your feedback. Core FFO in the quarter was $4.26 per share, resulting in full year core FFO of $16.97 per share at the high end of our guidance range. Same-store revenue and NOI growth in the quarter were minus 0.2% and minus 1.5%, respectively. Declines in move-in rents were offset by strong existing customer performance, resulting in in-place rents up 20 basis points and occupancy down 20 basis points. We're confident in our team's ability to continue driving outperformance in revenue growth just as we have in recent years. I've been incredibly impressed by the sophistication of our revenue platform and the intersection of pricing, data analytics, machine learning, AI, marketing, and customer experience. And I'm excited to see where Ayash and the team will take it next. Expense growth was contained for the year with Q4 at 4.2%. Property tax growth was offset by continued benefits from payroll optimization, utilities, and marketing. Outside the same-store pool, NOI growth of 20% in our non-same-store pool helped drive core FFO per share higher by 1.2% year-over-year. This is a critical area of our value creation engine and our ability to drive core FFO performance well in excess of our stabilized same-store growth. It's also worth noting, if we utilized a same-store definition similar to our peers, 2025 NOI growth would have been positive 0.2% instead of the negative 0.5% reported. On to transactions. During the quarter, we acquired $131 million of accretive new acquisitions that will drive growth through our industry-leading PS Next operating platform. This brings our 2025 total to $953 million with deployment diverse across size, geography, and seller type at stabilized yields in the high 6s. On the development and expansion front, we had openings of $409 million during the year. We ended the year with a total development pipeline of $610 million with stabilized yields targeting 8% and remaining amounts unfunded of $416 million. Our lending platform continues to grow with $131 million deployed in 2025, bringing our total outstanding lending business to $142 million at a current rate of approximately 7.9%. Lastly, our fortress balance sheet remains in excellent position from both a metric and liquidity perspective. At quarter end, we had available liquidity of $1.8 billion between our line of credit and cash on hand, plus approximately $600 million per year of annual free cash flow. Our balance sheet remains one of the strongest in the REIT sector with debt plus preferred equity to EBITDA at 4.2x and debt plus preferred equity to enterprise value in the low 20% range. Moving on to guidance on Slide 9. We've established an initial core FFO range of $16.35 to $17, resulting in a midpoint of $16.68 and a year-over-year decline of 1.7%. Negative same-store NOI growth and refinancing activity is being offset by positive contributions from our non-same-store pool and our tenant insurance program. From an economic backdrop perspective, we expect 2026 to look slightly better than 2025, consistent with consensus expectations. Same-store revenue and NOI guidance are minus 1.1% and minus 2.2% at the midpoint, respectively. We believe occupancy for the year will remain roughly stable. Move-in rents will remain negative in the mid-single digits for the year, but will improve throughout the year, and our ECRI contribution will continue to help support total revenue. Specific to Los Angeles, we've guided to the state of emergency staying in place for all of 2026, resulting in a drag on same-store revenue of approximately 80 basis points. With good demand and limited supply, it is a matter of when, not if L.A. returns to strong outperformance down the road. To attain the high end of guidance, we would need to see the state of emergency end sooner and for occupancy, new move-in rates, and ECRIs all to perform slightly better. The inverse would take us to the low end. Expense growth is expected to remain constrained again in 2026, with mid-single-digit property tax growth being offset by expense-constraining initiatives in personnel and R&M. In addition, our non-same-store NOI is once again expected to be a significant contributor with year-over-year growth of 16% before factoring in future transaction activity. We also continue to drive cash flow growth in areas beyond property operations, including our tenant insurance business and third-party property management platform. From a capital perspective, we expect to remain active in driving future FFO accretion through our various capital deployment levers. We have substantial amounts of free cash flow and debt capacity. However, we have not factored in additional acquisitions or lending into our guidance at this time. With that, I'd like to turn the call back over to Tom for some closing remarks.

Thanks, Joe. Let me close with this. The opportunity ahead for Public Storage has never been stronger. Our target is clear: elevated customer experience, strong capital allocation, a winning culture, and compounding shareholder outperformance. I'm energized by the team and the platform we're building. This is PS4.0. With that, let's open it up for questions.

It's Nick Joseph here with Eric. So I guess just asking about capturing the external growth opportunity you talked about allocating capital aggressively and intelligently. What are the greatest near-term opportunities you're seeing? Is it one-off assets, smaller portfolios, I guess larger M&A, international? And how's that different based on PSA 4.0 than what you were seeing previously?

Yes, this is Tom. I think there are a couple of components to address. We were encouraged by what we observed through 2025 regarding the diversity of seller types and the level of activity. We identified a number of single and double-type opportunities, which are essential to the industry, and we continue to pursue small- and medium-sized portfolios. Last year, we underwrote about $7 billion in real estate and ultimately completed transactions on roughly $1 billion of that. Most of what we underwrote did not trade, so there is ongoing dialogue among larger portfolios and various seller types as we approach 2026. Additionally, regarding international opportunities, we focused on that last year and will continue to do so moving forward. We see a wide range of opportunities that we believe will develop through 2026. As we transition into PS4.0, there are several important aspects to consider. It's not just about capitalizing on opportunities and growing; it's also about refining our approach. We are investing in our team, and our data science team has collaborated effectively with our revenue management and marketing teams over the past few years. We plan to spend more time with them going forward on capital allocation as we focus on site targeting and underwriting, streamlining processes to leverage the industry’s largest data set. All these efforts will enhance our buying capabilities and improve our reputation in the industry, and we look forward to capitalizing on this and deploying our capital. Lastly, I want to highlight the balance sheet opportunity that we have. The company maintains competitive advantages across its balance sheet and retains cash flow, which presents a capital opportunity every year that we aim to maximize.

That's helpful. This is actually Eric. Sorry to keep switching analysts on you, but you mentioned in your prepared remarks that momentum is building in your markets. But it does look like your same-store revenue guidance, excluding L.A., so putting L.A. aside, it looks like things are expected to get a little bit worse from current levels. So could you just talk about what you expect from same-store revenue growth, again, putting L.A. aside just for the other 85%? And what do you expect the cadence of that same-store revenue growth to be throughout the year?

Eric, it's Joe. As you all know, year-over-year revenue is a historical measure. The approximate 30 basis point decline, when considering the performance of the same-store pool without L.A., reflects recent developments rather than the future indicators that will drive revenue growth. As we approach the fourth quarter results, which faced a somewhat challenging new move-in environment, it is worth noting that occupancy increased at year-end. We anticipate that new move-ins may experience their lowest point early in 2026, although we are seeing some improvement compared to the fourth quarter. Consequently, we expect to encounter some pressure on year-over-year revenue as we progress through the middle of the year, based on a lagged perspective. However, we are enthusiastic about how we perceive the exit velocity and what we are observing as forward indicators. We expect occupancy for the year to remain relatively steady while we continue to witness strong activity among our existing customers in terms of pricing power, length of stay, and retention. For new move-ins, we forecast a mid-single-digit decline for the year, starting low and gradually improving. This optimism is driven by our outlook on macroeconomic conditions, the performance of our existing customers, and those entering our funnel, along with a decrease in supply throughout the year. We believe that year-over-year revenue will likely begin to improve by the fourth quarter of this year.

Yes. And Eric, maybe just to add to that, my comments earlier around momentum building, we've been highlighting for some time the strength in some of the markets, be it West Coast, Midwest, Northeast, that continue to show good trends there. And you can obviously see that evidence in fourth quarter performance as well. But I think big picture as we sit here today, we're focused on not knowing exactly which quarter things are going to move around. Obviously, we gave you a range of estimates. The focus is on what is it we can do now with the platform and the team to set us up for success moving forward. And obviously, that's the focus of PS4.0 and where we're headed from here.

Can you provide an update on move-in rents thus far into 1Q? And then can you just remind us how your pricing strategy has evolved with the growing use of AI?

Yes, I can cover that. January was a strong month for us. Move-in rents were down 7% in January, showing sequential improvement as we progressed through the month. We encountered some unusual weather across the country, which resulted in fewer move-ins but also fewer move-outs. Our occupancy rate remained similar to where we ended the previous year, increasing by about 40 basis points during January. Overall, it was a positive start to the year, continuing the trends we observed in the fourth quarter, which Joe mentioned.

Okay. Great. And then are you able just to comment on the pricing strategy and how often you guys are kind of resetting rents just with the growing use of your AI platform?

Yes. As I noted earlier, the data science team and revenue management team have been working together for the last several years and continue to evolve our processes there. I just highlighted we hired a new leader for that effort who is getting up to speed, and we're excited about where he and the team are going to take it from here. But continued evolution there as we think about attracting the right customers at the top of the funnel, being able to understand what we think their length of stays are going to be and their price elasticities, and then toggling our pricing, promotion, and advertising in order to be able to maximize NOI from that customer base as it goes. So continued efforts there, and we're excited about where Ayash and the team are going to take it going forward.

Congrats to all, Tom and Joe. Welcome back, Joe. Regarding the '26 same-store revenue guidance, you mentioned potential improvements by year-end. Could you provide a general sense of your expectations for the fourth quarter run rate as we consider the progressive trend anticipated in the forecast?

Yes. Juan, so we typically don't go into true quarter-by-quarter guidance. What I would say is you've kind of grouped the portfolio into a couple different buckets. And if you look at our coastal markets in combination with some of the Midwest markets, so some of the leaders like Chicago and Minneapolis, that portfolio continues to do really well in terms of plus or minus 2% revenue growth through the year. And we do think that lifts a little bit going into the fourth quarter of next year. When you look at the more supply-challenged markets, so primarily the Sunbelt markets, so Dallas, Atlanta, Florida, et cetera, that's probably going to be down a couple percent on same-store revenue throughout the year. But again, we expect that to start to lift as we get into kind of fourth quarter of this year, just given the fact that we're comping against an easier fourth quarter as we did have a little bit more challenge in new move-ins in the fourth quarter and then given that supply really starts to dissipate as we continue to move throughout the year.

Good transition to my next question. Regarding supply, I'm not sure if you're aware, but you've already released an updated supply outlook for this year. By the end of last year and into this year, it was noted that supply has actually picked up momentum in the latter half. I’m interested to know if that aligns with what you are observing on the ground. Additionally, could you quantify the exposure of assets to supply in 2026 compared to 2025, or provide any figures surrounding supply and your perspective on it?

Yes, Juan, I think we've been more right than wrong on the trajectory literally over the last 4 or 5 years debating some of the external tracking data sets out there. I think more often than not they seem to overemphasize or overplay potential momentum coming into markets. We don't really see a trend or a change in the trajectory that's been going on now for the last 4 or 5 years, which is year-by-year decelerated deliveries. So hard to justify what kind of data they're looking at to say there's a reacceleration. By all accounts, the development business continues to be quite complicated, quite commanding approval levels, costs, underwriting issues. There certainly are a handful of markets that may see supply as they have over the last year or two, but we're not seeing any reacceleration. And as you know, we have a very strong team out in the markets nationally. We're being very judicious. We're putting our own development activity, and we see that as a great tool for us to continue to deploy capital even under the umbrella of PS4.0 that Tom and Joe are talking about.

I guess with the implementation of 4.0 PS Next, which you all have talked about, I mean, what is the long-term profile, so the growth profile of the company, you think, from same-store NOI or FFO growth perspective?

I believe you mentioned several important aspects, and we can discuss PS Next further if you're interested. When we look at PS4.0, our overall goal is to enhance the strong performance we've achieved over the past few years through organic growth. This growth is fueled by our commitment to the customer, the customer experience, our leading brand, and the ongoing shift toward digitalization and AI interactions that will increasingly define our relationships with customers. Our aim is to enhance that strong performance as we improve customer experience, addressing both revenue and expense aspects of organic growth. This is complemented by our value creation strategy, which presents opportunities annually across four different areas. We consider acquisitions, development efforts, our expansion initiatives, and our lending platform, all contributing positively to FFO growth. We have seen this in recent years with our non-same-store performance, where our operational platform has generated more cash flow than expected. I am very optimistic about this potential and our direction, which will enhance FFO growth. Additionally, our ancillary businesses, such as lending, support our third-party management and tenant insurance services, both showing solid growth this year. We aim to drive organic growth and enhance our value creation strategy, effectively integrating new assets into our operational platform while leveraging our capital advantages to strengthen our FFO growth profile moving forward.

Got it. And I guess on the move of the headquarters to Frisco, I guess what's the operational or financial benefit from that and is there any sort of cost associated with sort of the relocation that we need to think about?

Yes. So I think a few things to highlight there. One, we've had a presence in both Glendale as well as in Dallas for a long time and we've been growing both offices. But as we move through the last 5 to 7 years, we oftentimes would open roles in both places, be in Dallas as well as Glendale, and oftentimes we would fill those roles in Dallas. So we did see the office increase in size there to the point where today our office in Dallas is our largest corporate presence. So it makes sense to relocate the corporate headquarters name tag to that Dallas office, and we're moving into new space there. In addition, as I noted earlier, we're going to be moving into new space in the Glendale area as well with a long-term commitment to be in that market. So it's about finding the right talent across the country and building the team going forward. And we look forward to strong leadership in both offices going forward.

Samir, just related to cost question, so that is embedded within the corporate transformation costs that the team announced about a year ago. We've incurred roughly $4 million of that, I believe, of that $15 million to $20 million. So we will see more costs this year. A lot of that's due to relocation, hiring, severance, the office change, et cetera. But what the group had talked about in the past was from a return on capital perspective, you have both offices, you have great pools of talent in both locations, but this also allows us to do more with an automation perspective and offshoring perspective to the tune of about $4 million in run-rate benefit. So it's a good ROI as well.

Congrats to everyone, first of all. But the question is just thinking about the reacceleration of organic growth that you sort of mentioned. Is there any sort of large capital plan or reinvesting plan that's sort of coming with that? Or do you think that could be done sort of based on sort of the existing platform, existing system?

Sure. Let me explain the PS Next platform and its significance along with our ongoing investments in it. Over the past year or two, we've been frequently asked about our future plans and how we intend to advance the platform. PS Next is our response to that. If you look back about 10 years, our storage approach lagged behind regarding digital customer interactions. Back then, customers would arrive at a property and sign a physical lease, for example. The progress our team has made over the last decade is impressive, and we've been sharing this story as we've improved how we engage with customers through a more robust digital presence on our website, our eRental platform, and our app. We've also been reinvesting in the brand and the overall platform while enhancing the customer experience. Our efforts in transforming the operating model have made us more efficient and effective in delivering that experience. We’ve transitioned into a truly omnichannel and digital-first environment, and we are currently at a pivotal moment moving forward. This moment revolves around AI and additional digital investments. When considering what customers expected from companies like Amazon or Starbucks a decade ago, we aimed to provide a similar level of experience. Expectations have evolved, and now customers want more than just options—they seek recommendations and quick responses to their inquiries. Our team is dedicated to creating AI-enhanced experiences for both our customers and for how we deliver that service. We are eager to share more details as we roll out the PS Next platform. The investments will spread across customer delivery, including team enhancements and technology platforms, and we believe these will yield strong returns.

Great. And then my quick follow-up is just on the top of the funnel demand, some of the other indicators that you sort of look at from website visits and so forth. Maybe can you just talk about what you're seeing there and how that sort of correlates to maybe the slow housing activity we've been seeing?

Yes. Top of funnel activity has been pretty consistent at the start of the year. The one thing I would note is January and the start of February has been pretty unique given the weather across the country. So we've had weeks where you've seen activity really drop off because of the weather and then pick right back up as things warmed up. And so the start of the year has been really embodied by that. But if you kind of look through the peaks and the troughs, as I noted earlier, seeing good trends across move-in customer demand as well as existing customer performance. Move-in rents, again, trending in a better direction into January. The existing customer continues to perform incredibly well. Move-outs down again in January like they were in the fourth quarter, just demonstrating the strength of the storage consumer.

This is Viktor Fediv on with Nick Yulico. I have a follow-up on the external growth opportunity set. So you mentioned that you executed around $1 billion of acquisitions in 2025 while roughly around $7 billion was under consideration. Have you noticed any recent shift in seller expectations? And how is this translating into bid-ask spreads and this 1 to 7 conversion ratio, so to speak?

That's something that has been evolving over the past few years. There was a period when the cost of debt was quite low and cap rates were also lower, which has led to adjustments for both sellers and buyers. As time has passed, with metrics like the 10-year Treasury maintaining a relatively stable range, there has been a greater ability for both parties to transact more rationally, contributing to some of our successes last year. I believe there is momentum building toward 2026 based on our discussions. While there is still a significant gap between buyers and sellers in many cases, we are prepared to act when sellers are ready and will keep an eye on the markets they operate in. However, we are optimistic about 2026 and 2027 as cap rate ranges begin to narrow.

And I'd just add to that, as Tom mentioned in his opening comments, part of the multiyear trend, and this has been going on literally for the last decade plus, is the number of owners coming into the sector with a different set of capital, either constraints or opportunities that can feed activity, either predictable or unpredictable, based on their need to bring assets to market. We saw a fair amount of that in 2025 where some larger portfolios ended up coming to the market. We curated a number of those larger portfolios into the assets that we thought were best suited for our own investment requirements. But that activity and that level of ownership structure within the REIT sector continues to grow, and that, too, is going to create opportunities, some predictable and in some cases some unpredictable. The team is ready to embrace those opportunities. And a lot of those conversations take time to cure. That's why some of the volume that we saw from an underwriting standpoint has yet to play through from a transaction. But step by step, we're more confident more activity along those lines could come through.

Big picture question on move-in rates. Why do you think we haven't found the floor yet? COVID was a long time ago. The consumer's been stable, housing's been stable, supply's declining. So I'm just curious like why are we still seeing these year-on-year declines? And do you think that we get to neutral at some point, maybe late in the year?

Yes. So I guess two components there. One is maybe looking back in time, how have we gotten here from a move-in rate standpoint? And I think there's a couple of things there. One is new supply in some of the markets that we operate in continues to come in. And so we spoke about some of the markets in the Sunbelt, for example, Atlanta, Dallas, Charlotte, Orlando, where new supply is weighing on performance. No question that competition of new supply drags down move-in rents. And I think we're still seeing that and absorbing that. The good thing is occupancies are lifting there and that absorption is taking place, which is encouraging in a forward look as it relates to where move-in rents will trend in some of those markets. The flip side is we are seeing move-in rent growth in lots of our markets. So we highlighted some of those stronger markets that Joe mentioned earlier, Minneapolis, Chicago, San Francisco, D.C., for instance, we have move-in rate growth, and that move-in rate growth is supported by good demand and more limited supply. And so it's really not a story of a national phenomenon, but I think really a summation of market dynamics at play.

Okay. Got it. And then on the new compensation plan, Tom, you mentioned you were working with Shankh. Obviously, Welltower has a new compensation plan as well. Are there any similarities there? Or are they unrelated?

Sure. I think there's a couple things to highlight there. The incentive is an important part of what I call the own it culture. The program that I've been working with Shankh on for the NEOs is very different than the program that he more recently announced in October, and it's more similar to a more traditional plan that you've seen from us, but at the same time very, very different. And the differences relate to the performance period being around a three-year period with delayed vesting. The focus really is around total shareholder return, absolute and relative performance versus storage as well as the RMZ as well as stretch goals. And I'd say that's one of the biggest components there is stretching the goals for us as an NEO team and obviously stretching those goals out to benefit shareholders as well if we can go out and achieve those stretch goals. So very much aligned with shareholders, 100% performance-based and the shareholders and the team will win together. And that's really the focus around that incentive redesign. It's a big shift. And as we think about taking that as part of the own it culture and PS4.0, we have an opportunity to rethink incentives across the organization. And that is really the goal to infuse energy, urgency, and engagement across the organization to drive results. So I'm passionate about how we think about incentives for the organization and excited about where we're going from here.

I wanted to ask about expenses. The expense forecast came in relatively low, about 100 bps below last year's inaugural forecast. Can you comment on some of the line items that are driving this? And maybe if there are any areas where there could be some levels of conservatism built in?

Ravi, it's Joe. So it's really just a continuation of what you've seen from this team for a number of years now. They continue to attack with a whole series of initiatives, all the various line items while also being cognizant of the delivery of the value to the customer. And so when you look at what took place in 2025, obviously, you saw from a personnel perspective, we kept that constrained. Utilities was constrained, R&M constrained. I think you're seeing a continuation of that within our guidance of that 2.2% midpoint. You have property tax leading the way. But if you jump into things like payroll, there's continued initiatives on that front from an hours perspective as we continue to use machine learning to really understand when are the customers there, what do the customers need and how can we better serve them. So more hours reductions, but a critical offset within that is increasing pay for those property managers on site at the same time. So trying to get a win-win there. I think on the R&M side, you're seeing continued initiatives around how can we reduce costs there. So there's a number of pilots in terms of in-sourcing various aspects of R&M. When you go into the utility side, we've had a pretty consistent solar effort over the last number of years to the tune of $50 million to $70 million a year. So you continue to see constraint from a utility perspective. And then you get into some of the centralization efforts that are taking place, so trying to find a more specialized approach to certain things. So thinking about sales functions, customer relations, bad debt, issue resolution, moving some of those efforts off of the field and into the centralized team to try to get better outcomes. So it's a whole slew of initiatives. There's a whole stack of them that we'd be happy to take you through offline at some point, but a continuation of what the team's done here for a number of years.

Just one more here. Can you offer some more color on your current ECRI policy? If you're expecting any other regulatory or legislative restrictions that are outside of California that may weigh on same-store revenue growth? Do you have a buffer or something like that built into the guide? Because it seems that this has become a category that more municipalities are likely to include in moratoriums.

Great. So I guess two parts to that question. One is in terms of how we think about the existing customer rate increase program. And we've communicated in the past we think about that in terms of a number of components. One is, what's the health of the customer base, what do we think the price sensitivity is and their behavior, and we continue to be encouraged by that. As I noted earlier, vacates are down, customer price sensitivity is consistent, and so a very healthy storage consumer. The other side is the replacement cost and what our occupancies are, what demand is for that unit, what marketing costs are, all those sorts of things play into the replacement cost side, and that's something we navigate on a unit-by-unit and property-by-property basis. So those two combine to really drive that program, and it's a very data-driven approach to meet the customer and move rents as appropriate based on the dynamics at play at the local market. In terms of the regulatory environment, certainly we've spoken over the last year around some of the California activities and SB 709 specifically. And we're certainly compliant with that and communicating with our customers around the disclosure requirements for customers in California. We're certainly aware of some of the recent pronouncements out of New York, for instance, and other states around pricing transparency storage specific or not and certainly monitoring those around the country and making sure we're in compliance with all of those laws and being transparent with our customers around our pricing approach and what they can expect.

First off, congrats to the team all around. Joe Russell, best of luck in retirement, and Joe Fisher, welcome to the team. Maybe just stepping back to get some perspective on sort of the PS4.0 initiative, can you give us some context? What was the genesis behind this? Joe, maybe you went to the Board, maybe it came down from the Board. It seems like it's been in the hopper for some time. So just ultimately, what was the catalyst that brought this about given that despite the headwinds the industry has faced, Public has been a leader throughout it?

Yes, Griff, I wouldn't say there was a trigger or a catalyst. This is, I would say, an outgrowth of what the Board and the management team constantly do, which is look at strategic initiatives, look at generational opportunities in terms of again, our own skills, investments, the deployment, particularly in our case, of a very robust environment where we've continued to optimize and drive the level of success through the portfolio operationally, our tools tied to capital allocation, our balance sheet, et cetera, and then putting that entire set of opportunities into the hands of very skilled and talented leaders in every part of the company. So this is the outgrowth of a very intentional and ongoing strategic process. When Tom and I and some other significant leaders of the company, Natalia Johnson, et cetera, all came into the company about a decade ago, we went through, frankly, a pretty similar process as well, and that internally was called 3.0. We've learned and optimized many things through the last decade. And step by step, we felt and everything percolated to the point it was time for 4.0. So very excited about what it entails. I think the team is going to be transparent around the more direct things that will come from 4.0 based on all the things that Tom and Joe are already speaking to. And we're excited about what's ahead. Time and again, through our history, 53 years now plus, we've led the industry on a whole host of initiatives. We've been very proud of the fact that over the last decade we continue to lead the industry in many areas. And yet again, we're going to challenge ourselves to take the next opportunity to drive forward. So it's a really great time. Super excited about Joe Fisher coming into the company as well as some other key hires, too. So it's a great time for us to launch. And with this launch, we don't stop either. We keep challenging ourselves to reinvent, to optimize, and that's the DNA of Public Storage.

Great. I certainly appreciate the context there, Joe. And then I know a question was just asked sort of on the regulatory front, but maybe if I could sort of spin it a different way. Obviously, there was one of your peers named in a lawsuit with New York earlier this week. Is stuff like this maybe the canary in the coal mine as it relates to sort of the pricing practices in the industry? I know there have been pushes whether it's at SSA or the trade level around greater disclosures, but like is there a worry that greater, I guess, regulatory oversight from these municipalities could preclude what has been this ECRI pricing strategy regime we've been in, call it, over the past couple of years?

Sure, Griff. There are a few elements to consider. First, we've observed activity in New York, and we continue collaborating with the National Self Storage Association and the State Self Storage Associations to engage with regulators and legislators. It's essential for them to understand the advantages of our business model, including the affordability of our services and the promotional rates we offer to new customers. Earlier, we discussed how our pricing is competitive compared to other space options. Communicating this effectively and educating others is vital. Additionally, part of our PS4.0 initiative focuses on enhancing the customer experience, which encompasses everything from pricing to daily interactions at our properties. Our team is very committed to improving this customer experience as we move ahead.

I guess should we expect any changes with the third-party management platform as it relates to PSA 4.0, especially revolving around, I guess, income since you've traditionally run the platform with less of an immediate profit motive in mind?

Sure. So in terms of the third-party management platform, we're excited, obviously, to launch the PS Next, next-generation operating platform. As part of that, our third-party management clients will benefit from those advances that we make in the customer experience and our operational delivery of that experience. So we're excited to share more with them as well as we move forward. In addition to that, as part of the leadership appointments, Chris Sambar, our Chief Operating Officer, is going to be working very closely with Pete Panos who runs that business day-to-day, and seeking to grow it and to grow our third-party platform from here. In terms of profitability, profitability of that program has increased modestly over time and as that portfolio stabilizes and grows from here, the profitability will grow as well in addition to the lending components and the tenant insurance components which are synergistic with that platform.

Got it. That leads to my follow-up. I guess, is there any color you could provide about how we should expect growth in the lending program over the near term?

Yes. We think that's an opportunity for us. Joe Fisher walked earlier through the book as it stands. So certainly an opportunity to grow that going forward in support of our third-party management customers and the synergistic benefits, again, around the third-party platform, tenant insurance, as well as the capital component of the investment. So something we look forward to growing from here.

Joe, congrats on a terrific career. And Tom and Joe, congrats on your new positions. Maybe a question on what the primary KPIs you are measuring when you think about the customer experience component of the platform enhancements and how we can measure the progress that you're making.

Sure. I think there's a couple there. I think stepping back, obviously PS Next overall is about customer experience, it's about brand, but it's also about our financial and organic growth performance as well. So across that metric, some customer metrics you can look at are certainly some of them operationally that you see move-ins, move-outs, tenant retention that you'll see from a financial standpoint. As we think about the platform overall, the focus is clearly around where we're headed with organic growth and organic growth performance and outperformance over time.

Great. That's helpful. And then maybe just quickly on international growth, just give us an update on what your appetite is to maybe test the waters in some of these international markets that you've looked at in the recent past.

Yes. We continue to have appetite to explore international opportunity. Obviously, you've heard from us around Australia in the past. We have a strong presence in Western Europe with our Shurgard platform there. And there are markets around the world where the storage is growing as an industry and customer demographics are supportive of a growing storage industry. And so we evaluate those over time and are looking for the right entry points in order to purchase a platform that will give us access to an expanded pie of both operational as well as capital allocation opportunities into growing storage markets. I will say, and we always caveat that with the U.S. continues to be, by far, the deepest and most vibrant storage market in the world, and we're not taking our eye off that ball, but we do think there's an expanded pie opportunity internationally, but we have to find the right fit and the right platform.

Maybe just a quick follow-up on that. When you look at the international portfolios that might be available, how do they compare to U.S. platforms that might have a more advanced data analytics and things of that nature? Like, what is the gap that the PSA platform has relative to the two different buckets of potential acquisitions?

Yes. I would say for the most part, the platforms internationally are of a smaller scale and because of that don't have some of the scale and platform and data advantages that we and others here in the U.S. have. And so I think that's probably a pretty clear opportunity. We see that in the U.S. as well as we think about smaller operating platforms and what we can do when we acquire or manage for companies that have a smaller platform to go. So there are real advantages of scale in this business. We've continuously seen that across our portfolio acquisitions over the last four or five years. And I would say the international is right in that same wheelhouse.

Great. Maybe you could talk about the development business a little bit. Your development deliveries have slowed down a bit the past couple of years, down to $300 million this year. And I guess maybe you could talk about kind of whether that's due to the tougher lease-up environment, the higher cost to develop. Anything else you could call out there?

Yes, sure. So the development business is one that, that we're passionate about internally because of the ability for us to pick that submarket, pick the land site, design the building, create the unit mix, and then ultimately place it into our operating platform where we can earn more cash flow. So it's one that we have a national team out looking for sites. It's also one that's been navigating through a challenging development environment, one with rising costs and obviously rents coming down in some of the markets with strong population growth. And so as we look at this year, we're anticipating a little less deliveries this year than last year, but we're focused on growing that business over time to take advantage of a growing storage demand environment in many of the submarkets around the country. And we view it as a very strong risk-adjusted capital return. And so as we think about the value creation engine, no question, there's a strong focus on what it is we can do there to grow that business over time.

Great. And then just one follow-up. I know you touched a little bit on how you're using AI internally. As we think about the evolution of some of the large language models, potentially including ads over time and customer acquisition and the evolution from traditional paid search, how are you thinking about that, how that may evolve over the next couple of years as a lot of these models become more and more ubiquitous?

Yes. No, I think they are. I think consumers, myself included, probably lots of us on this phone call are using the large language models more and more in our daily lives. And that speaks to the PS Next platform and not only interacting with them through the LLMs, but also as customers land on our website, for instance, or otherwise they can interact with agents or on our app, et cetera. And so we're excited about some of the initiatives we have going internally to take advantage of those LLMs and frankly the customer expectations that continue to move towards that direction. And we think we have exciting things to share there, and we'll do that over the next 6 to 12 months.

I wanted to focus on Shankh as the new Chairman of the Board and his commentary around execution even in an environment of unremarkable growth. So I was wondering if you guys could just talk a bit about what opportunities exist in such an environment and like the idea of buying assets with low occupancy at attractive basis ahead of an eventual turnaround in fundamentals. I guess if you guys could talk a bit about that, I'd really appreciate it.

Sure. Shankh's quote is quite clear. Looking ahead, we see a chance to invest capital in a market where industry fundamentals haven't been very appealing recently, but we have faith in their future. We're committed to investing in people and our platform to take advantage of this. For example, we acquired assets last year at favorable prices. Overall, we believe valuations remain attractive today, although this varies by submarket. We will continue to invest for the right opportunities, which we expect will enhance our platform over time. We are confident in the long-term fundamentals of storage, and while we hope to see improvements, we are not delaying our investments. We have the chance to invest now for future benefits to our platform.

Great. Thanks very much for everyone joining today. We're energized by the opportunity ahead and look forward to sharing more about PS4.0 down the road. Thanks very much.