PSA 10-K diff: FY 2024-12-31 → FY 2025-12-31
Paragraph-level diff of Risk Factors (Item 1A) and Management's Discussion & Analysis (Item 7).
Item 1A · Risk Factors
+33 paragraphs −29 paragraphs ~29 changed
FY 2024-12-31 (earlier)
ITEM 1A. Risk Factors
In addition to the other information in our Annual Report on Form 10-K, you should consider the risks described below that we believe may be material to investors in evaluating the Company. This section contains forward-looking statements, and in considering these statements, you should refer to the qualifications and limitations on our forward-looking statements that are described in “Item 1. Business.”
Risks Related to Our Properties and Our Business
Natural disasters, terrorist attacks, civil unrest, or other events that could damage or otherwise disrupt our ability to operate our facilities could adversely impact our business and financial results.Natural disasters, such as earthquakes, fires, hurricanes, and floods, terrorist attacks, civil unrest, and other events that damage our facilities or our customers’ property, or that make our facilities temporarily unavailable, have in the past and may in the future adversely impact our business and financial results. Damage and business interruption losses could exceed the aggregate limits of our insurance coverage. In addition, because we self-insure a portion of our risks, losses below a certain level may not be covered by insurance. See Note 14 to our December 31, 2024 consolidated financial statements for a description of the risks of losses that are not covered by third-party insurance contracts. Our exposure to these types of events is increased by potential tenant claims associated with our tenant reinsurance business. In addition, customer perceptions about the risk of property loss from these events could negatively impact self-storage demand.
We are subject to risks from the consequences of climate change, including severe weather events and the adverse impact of other steps that may be taken to prevent or mitigate climate change.
Our self-storage facilities are located in areas that may be subject to the direct impacts of climate change, such as increased destructive weather events like floods, fires, drought, and prolonged periods of extreme temperature or other extreme weather, which could result in significant damage to our facilities, increased capital expenditures, increased expenses, reduced revenues, or reduced demand for our facilities. Indirect impacts of climate change could also adversely impact our business, including through increased costs, such as insurance costs or regulatory compliance costs. In addition, government and private efforts to transition to a low-carbon economy present certain risks for us and our customers, including increased energy costs and macroeconomic risks related to high energy costs and energy shortages, among other things. Governmental, political, and societal pressures, including expectations of institutional and activist investors and other interest groups, could require us to implement or accelerate emissions initiatives and, with it, the costs of their implementation. These same potential governmental, political, and social pressures could in the future result in, among other things, (i) costly changes to newly developed facilities or retrofits of our existing facilities to reduce carbon emissions through multiple avenues, including changes to insulation, space configuration, lighting, heating, and air conditioning and (ii) increased energy costs as a result of transitioning to less carbon-intensive, but more expensive, sources of energy to operate our facilities. For example, beginning in 2026, we expect to be required to disclose our Scope 1, 2, and 3 emissions data and certain climate-related risk matters under California SB 253 and SB 261, which we expect to result in increased compliance costs. In addition, our reputation and investor relationships could be damaged as a result of our involvement with activities perceived to be causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change.Operating costs, including property taxes, could increase.We could be subject to increases in property or other taxes, repair and maintenance costs, payroll, utility costs, insurance premiums, workers compensation, and other operating expenses due to various factors such as inflation, labor shortages, commodity and energy price increases, weather, increases to minimum wage rates, supply chain disruptions, and changes to governmental safety and real estate use limitations and other governmental actions. Our property tax expense, which totaled approximately $452.0 million during the year ended December 31, 2024, generally depends upon the assessed value of our real estate facilities as determined by assessors and government agencies and, accordingly, could be subject to substantial increases if such agencies change their valuation approaches or opinions or if new laws are enacted, especially if new approaches are adopted or laws are enacted that result in increased property tax assessments in states or geographies where we have a high concentration of facilities. See also “We have exposure to increased property tax in California” below.
8The acquisition of existing properties or self-storage operating companies is subject to risks that may adversely affect our growth and financial results.
We have acquired self-storage facilities and self-storage operating companies in the past, and we expect to continue to do so in the future. We face significant competition for suitable acquisition properties and companies from other real estate investors, including operating companies and private equity funds. As a result, we may be unable to acquire the companies or additional properties we desire or the purchase price for desirable companies or properties may be significantly increased. Failures or unexpected circumstances in integrating facilities or companies that we acquire, or circumstances we did not detect or anticipate during due diligence, such as environmental matters, needed repairs or deferred maintenance, customer collection issues, assumed liabilities, turnover of critical personnel involved in acquired operating companies, or the effects of increased property tax following reassessment of a newly-acquired property, as well as the general risks of real estate investment and mergers and acquisitions, could jeopardize realization of the anticipated earnings from an acquisition.
Our development program subjects us to risks.At December 31, 2024, we had a pipeline of development projects totaling $741.6 million (subject to contingencies), and we expect to continue to seek additional development projects. There are significant risks involved in developing self-storage facilities, such as delays, cost increases, or inability to complete development projects due to changes in or failure to meet government or regulatory requirements, failure of revenue to meet our underwriting estimates, delays caused by weather issues, unforeseen site conditions, or personnel problems. Self-storage space is generally not pre-leased, and rent-up of newly developed space can be delayed or ongoing cash flow yields can be reduced due to competition, reductions in storage demand, or other factors.There is significant competition among self-storage operators and from other storage alternatives.Our self-storage facilities generate most of our revenue and earnings. Significant competition from self-storage operators, property developers, and other storage alternatives may adversely impact our ability to attract and retain customers and may negatively impact our ability to generate revenue. Competition in the local market areas in which many of our properties are located is significant and affects our occupancy levels, rental rates, and operating expenses, particularly advertising costs. There is also an increasing influx of capital from outside financing sources driving more money, development, and supply into the industry. Development of self-storage facilities may increase, which may intensify competition as newly developed facilities are opened. Development of self-storage facilities by other operators could increase, due to increases in availability of funds for investment or other reasons, and further intensify competition.Demand for self-storage facilities may be affected by customer perceptions and factors outside of our control.
Significantly lower logistics costs could introduce new competitors, such as valet-style storage services, which may reduce the demand for traditional self-storage. Customer preferences and/or needs for self-storage could change, decline, or shift to other product types, thereby impacting our business model and ability to grow and/or generate revenues. Shifts in population and demographics could cause the geographical distribution of our portfolio to be suboptimal and affect our ability to maintain occupancy and attract new customers. Security incidents could result in the perception that our properties are not safe. If our customers do not feel our properties are safe, they may select competitors for their self-storage needs, or if there is an industry perception of inadequate security generally, customer use of self-storage could be negatively impacted.
Our newly developed and expanded facilities, and facilities that we manage for third party owners, may negatively impact the revenues of our legacy facilities.
We continue to develop new self-storage facilities and expand our existing self-storage facilities. In addition, we are seeking to increase the number of self-storage facilities that we manage for third party owners in exchange for a fee, many of which are in the process of stabilization and are near our existing stabilized self-storage facilities. In order to hasten the fill-up of these new facilities, we aggressively price such space during the fill-up period. While we believe that this aggressive pricing allows us to increase our market share relative to our competitors and increase the cash flows of these properties, such pricing and the added capacity may also negatively impact our existing stabilized self-storage facilities that are near these unstabilized facilities.9We may incur significant liabilities from environmental contamination or moisture infiltration.
Existing or future laws impose or may impose liability on us to clean up environmental contamination on or around properties that we currently or previously owned or operated, even if we were not responsible for or aware of the environmental contamination or even if such environmental contamination occurred prior to our involvement with the property. We have conducted preliminary environmental assessments on most of our properties, which have not identified any material liabilities. These assessments, commonly referred to as “Phase 1 Environmental Assessments,” include an investigation (excluding soil or groundwater sampling or analysis) and a review of publicly available information regarding the site and other nearby properties.
We are also subject to potential liability relating to moisture infiltration, which can result in mold or other damage to our or our customers’ property, as well as potential health concerns. When we receive a complaint or otherwise become aware that an air quality concern exists, we implement corrective measures and seek to work proactively with our customers to resolve issues, subject to our contractual limitations on liability for such claims.
We are not aware of any environmental contamination or moisture infiltration related liabilities at any of our properties that could be material to our overall business, financial condition, or results of operation. However, we may not have detected all material liabilities, we could acquire properties with material undetected liabilities, or new conditions could arise or develop at our properties, any of which could result in a cash settlement or adversely affect our ability to sell, lease, operate, or encumber affected facilities.Elevated interest rate levels could adversely impact us and our tenants.Interest rates remain elevated compared to recent years and may increase. As a result, if we issued new debt or preferred shares or refinanced our indebtedness, our debt service costs or preferred share dividend yields would likely be, based on current interest rates, significantly higher than current financing costs. Elevated interest rates also adversely impact the relative attractiveness of the dividend yield on our common shares. Increases in our cost of capital impact our assessment of the yields we consider appropriate to support pursuing property acquisition and development opportunities and thus can impact our external growth prospects. The degree and pace of these changes have had and may continue to have adverse macroeconomic effects that have and may continue to have adverse impacts on our tenants, including as a result of economic recession, increased unemployment, and increased financing costs. For more information on interest rate risk, see Part II, “Item 7A. Quantitative and Qualitative Disclosures About Market Risk”.Economic conditions can adversely affect our business, financial condition, and growth.
Economic downturns or adverse economic or industry conditions, including those related to high levels of inflation, could adversely impact our financial results, growth, and access to capital. Our revenues and operating cash flow can be negatively impacted by reductions in employment and population levels, household and disposable income, and other general economic factors that lead to a reduction in demand for self-storage space in each of the markets in which we operate.
We have exposure to European operations through our ownership in Shurgard.We own approximately 35% of the common shares of Shurgard, and this investment has a $382.5 million book value and a $1.3 billion market value (based upon the closing trading price of Shurgard’s common stock) at December 31, 2024. We recognized $19.8 million in equity in earnings and received $22.8 million in dividends in 2024 with respect to Shurgard.Shurgard, as an owner, operator, and developer of self-storage facilities, is subject to many of the same risks we are with respect to self-storage. However, through our investment in Shurgard, we are exposed to additional risks unique to the various European markets in which Shurgard operates, which may adversely impact our business and financial results, and many of which are referred to in Shurgard’s public filings. These risks include the following:
• Currency risks: Currency fluctuations can impact the fair value of our investment in Shurgard, our equity earnings, our ongoing dividends, and any other related repatriations of cash.10• Legislative, tax, and regulatory risks: Shurgard is subject to a variety of local, national, and pan-European laws and regulations related to permitting and land use, the environment, labor, and other areas, as well as income, property, sales, and value added and employment tax. These laws and regulations can be difficult to apply or interpret, can vary in each country or locality, and are subject to unexpected changes in their form and application due to regional, national, or local political uncertainty and other factors. Such changes, or Shurgard’s failure to comply with these laws, could subject it to penalties or other sanctions, adverse changes in business processes, and, potentially, adverse income tax, property tax, or other tax burdens.
• Impediments to capital repatriation could negatively impact the realization of our investment in Shurgard: Laws in Europe and the U.S. may create, impede, or increase our cost to repatriate distributions received from Shurgard or proceeds from the sale of Shurgard shares.
• Risks of collective bargaining: Collective bargaining, which is prevalent in certain areas in Europe, could negatively impact Shurgard’s labor costs or operations. Many of Shurgard’s employees participate in various national unions.
• Potential operating and individual country risks: Economic slowdowns or extraordinary political or social change in the countries in which it operates have posed, and could continue to pose, challenges or result in future reductions of Shurgard’s operating cash flows.
• Liquidity of our ownership stake: We have no plans to liquidate our interest in Shurgard. However, while Shurgard is a publicly held entity, if we chose to, our ability to liquidate our shares in Shurgard in an efficient manner could be limited by the level of Shurgard’s public “float” relative to any ownership stake we sought to sell. Our existing relationship with our legacy joint venture partner may place further contractual limitations on our ability to sell all of the shares we own if we desired to do so.• Impediments of Shurgard’s public ownership structure: Shurgard’s strategic decisions, involving activities such as borrowing money, capital contributions, raising capital from third parties, and selling or acquiring significant assets, are determined by its board of directors. As a result, Shurgard may be precluded from taking advantage of opportunities that we would find attractive but that we may not be able to pursue separately, or it could take actions that we do not agree with.
Public health and other crises have adversely impacted, and may in the future adversely impact, our business.
Our business is subject to risks from public health and other crises like the COVID-19 pandemic, including, among others:• risk of illness or death of our employees or customers;• negative impacts on economic conditions in our markets, which may reduce the demand for self-storage;
• risk that there could be an out-migration of population from major markets where we operate;
• government restrictions that (i) limit or prevent use of our facilities, (ii) limit our ability to increase rent or otherwise limit the rent we can charge, (iii) limit our ability to collect rent or evict delinquent tenants, or (iv) limit our ability to complete development and redevelopment projects;• risk that we could experience a change in the move-out patterns of our long-term customers due to economic uncertainty and increases in unemployment, which could lead to lower occupancies and rent “roll down” as long-term customers are replaced with new customers at lower rates; and• risk of negative impacts on the cost and availability of debt and equity capital, which could have a material impact upon our capital and growth plans.11
We have been and may in the future be adversely impacted by emergency regulations adopted in response to significant events, such as natural disasters or public health crises, that could adversely impact our operations.
In response to significant events, local, state, and federal governments have and may in the future adopt regulations that could impact our operations. For example, in response to wildfires in 2018, 2019, and early 2025 and floods in 2023, the State of California and some localities in California adopted temporary regulations that imposed certain limits on the rents we could charge at certain of our facilities and the extent to which we could increase rents to existing tenants. Similarly, in response to the COVID-19 pandemic, certain localities adopted restrictions on the use of certain of our facilities, limited our ability to increase rents, limited our ability to collect rent or evict delinquent tenants, and limited our ability to complete development and redevelopment projects. Similar restrictions could be imposed in the future in response to significant events and these restrictions could adversely impact our operations.Our marketing and pricing strategies may fail to be effective or may be constrained by factors outside of our control.Marketing initiatives, including our increasing dependence on Google to source customers, may fail to be effective and could negatively impact financial performance. Approximately 67% of our new storage customers in 2024 were sourced directly or indirectly through “unpaid” search and “paid” search campaigns on Google. We believe that the vast majority of customers searching for self-storage use Google at some stage in their shopping experience. Google is providing tools to allow smaller and less sophisticated operators to bid for search terms, increasing competition for self-storage search terms. The predominance of Google in the shopping experience, as well as Google’s enabling of additional competitors to bid for placements in self-storage search terms, may reduce the number of new customers that we can procure, and/or increase our costs to obtain new customers.In addition, the inability to utilize our pricing methodology due to regulatory or market constraints could also significantly impact our financial results.We are exposed to ongoing litigation and other legal and regulatory actions, which may divert management’s time and attention, require us to pay damages and expenses or restrict the operation of our business.We have approximately 5,900 employees and 2.0 million customers, and we conduct business at facilities in 40 states. As a result, we are subject to the risk of legal claims and proceedings (including class actions) and regulatory enforcement actions across many jurisdictions in the ordinary course of our business and otherwise, and we could incur significant liabilities and substantial legal fees from these actions. Resolution of these claims and actions may divert time and attention of our management and could involve payment of damages or expenses by us, all of which may be significant, and could damage our reputation and our brand. In addition, any such resolution could involve our agreement to terms that restrict the operation of our business. The results of legal proceedings cannot be predicted with certainty. We cannot guarantee that losses incurred in connection with any current or future legal or regulatory proceedings or actions will not exceed any provisions we may have set aside in respect of such proceedings or actions or any available insurance coverage. Any such legal claims, proceedings, and regulatory enforcement actions could negatively impact our operating results, cash flow available for distribution or reinvestment, and/or the price of our common shares.
In addition, through exercising their authority to regulate our activities, governmental agencies can otherwise negatively impact our business by increasing costs or decreasing revenues, including through restrictions on rent increases or fees.
12
Our use of or failure to adopt advancements in information technology may hinder or prevent us from achieving strategic objectives or otherwise harm our business.
Our use of or inability to adopt and deliver new technological capabilities and enhancements in line with strategic objectives, including artificial intelligence and machine learning, may put us at a competitive disadvantage; cause us to miss opportunities to innovate, achieve efficiencies, or improve the customer experience; or adversely impact our business, reputation, results of operations, and financial condition. Legislative activity in the privacy area may also result in new laws that are applicable to us and that may hinder our business, including by restricting our use of customer data or otherwise regulating the use of algorithms and automated processing in ways that could materially affect our business or lead to significant increases in the cost of compliance. In addition, the use of emerging technologies, including artificial intelligence, entails risks including risks relating to the possibility of intellectual property infringement or misappropriation; data privacy; new or enhanced governmental or regulatory scrutiny, requirements, litigation, or other liability; ethical concerns; negative consumer perceptions as to automation and artificial intelligence; or other complications or liabilities that could adversely affect our business, reputation, results of operations, or financial results.The failure or disruption of our computer and communications systems, on which we are heavily dependent, could significantly harm our business.
We are heavily dependent upon automated information technology and Internet commerce, with more than half of our new customers coming from the telephone or over the Internet. We centrally manage significant components of our operations with our computer systems, including our financial information, and we also rely extensively on third-party vendors to retain data, process transactions, and provide other systems services. These systems are subject to damage or interruption from power outages, system, network, internet and telecommunications failures, hackers, including through a ransomware attack, computer worms, viruses, and other destructive or disruptive cybersecurity incidents, and catastrophic events. Such incidents could also result in significant costs to repair or replace such networks or information systems, as well as actual monetary losses in case of a cybersecurity incident that resulted in fraudulent payments or other cash transactions. Our operations could be severely impacted by a natural disaster, terrorist attack, attack by hackers, acts of vandalism, data theft, misplaced or lost data, programming or human error, or other circumstance that results in a significant outage of our systems or those of our third party providers, despite our use of back up and redundancy measures. While we may be entitled to damages if our third-party providers fail to satisfy their security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.If our confidential information is compromised or corrupted, including as a result of a cybersecurity incident, our reputation and business relationships could be damaged and our financial condition and operating results could be adversely affected.
In the ordinary course of our business we acquire and store sensitive data, including personally identifiable information of our prospective and current customers and our employees. The secure processing and maintenance of this information is critical to our operations and business strategy. Although we believe we and our third-party service providers have taken commercially reasonable steps to protect the security of our confidential information, information security risks have generally increased in recent years due to the rise in new technologies and the increased sophistication and activities of perpetrators of cyberattacks. Further, new technologies such as artificial intelligence may be more capable at evading these safeguard measures. Despite our security measures, we face cybersecurity threats, including system, network, or Internet failures; cyberattacks, ransomware, and other malware; social engineering; and phishing schemes. In these cases, our information technology and infrastructure could be vulnerable and our or our customers’ or employees’ confidential information could be compromised or misappropriated. Any such cybersecurity incident, including those impacting personal information, could result in serious and harmful consequences for us or our customers. A cybersecurity incident could also interfere with our ability to comply with financial reporting requirements. Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and threats, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.13Our confidential information may also be compromised due to programming or human error, negligence, or fraud. Although we and our third-party service providers make efforts to maintain the security and integrity of our information, including the implementation of security measures, required employee awareness training, and the existence of a disaster recovery plan, there is no guarantee that they will be adequate to safeguard against all cybersecurity incidents or misuses of data. In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and changing requirements applicable to our business from multiple regulatory agencies at the local, state, federal, or international level, compliance with those requirements could also result in additional costs, or we could fail to comply with those requirements due to various reasons.
Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disruption to our operations and the services we provide to customers, or damage to our reputation, any of which could adversely affect our results of operations, reputation, and competitive position. In addition, our customers could lose confidence in our ability to protect their personal information, which could cause them to discontinue leasing our self-storage facilities. Such events could lead to lost future revenues and adversely affect our results of operations, or result in remedial and other costs, fines, or lawsuits, which could exceed any available insurance that we have procured.
We have identified and expect to continue to identify cyberattacks and cybersecurity incidents on our systems and those of third parties we rely upon, but none of the cyberattacks and incidents we have identified to date has had a material impact on our business or operations. While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyberattacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in amounts and on terms we view as adequate for our operations.
Further information relating to cybersecurity risk management is discussed in Item 1C. “Cybersecurity” in this report.Ineffective succession planning for our CEO and executive management, as well as for our other key employees, may impact the execution of our strategic plan.
We may not effectively or appropriately identify ready-now succession candidates for our CEO and executive management team, which may negatively impact our ability to meet key strategic goals. Failure to implement succession plans for other key employees may leave us vulnerable to retirements and turnover.
We may fail to protect our intellectual property adequately.
We maintain a portfolio of trademarks and trade dress that we believe are fundamental to the success of the Public Storage® brand. While we actively seek to enforce and expand our rights, failure to adequately protect our rights could lead to loss of such trademark and trade dress protection. We also own and seek to protect other intellectual property, such as propriety systems, processes, data, and other trade secrets that we have collected and developed in the course of operating our business and that we believe provides us with various competitive advantages. Our protections could be inadequate or we could lose rights to our other intellectual property and trade secrets. Competitor use of our trademarks and trade names could lead to likelihood of confusion, tarnishment of our brand, and loss of legal protection for our marks.We may be subject to labor disruptions related to unionization efforts.
Our employees have been and may in the future be subject to unionization efforts. These activities could lead to labor disruptions which could adversely impact our ability to operate our business and could negatively impact our reputation. In addition, these activities could result in collective bargaining agreements, which could result in increased operating and legal costs.Our use of artificial intelligence could expose us to various risks.
We have begun to utilize artificial intelligence technologies in various aspects of our business. Artificial intelligence technologies are susceptible to errors and other malfunctions which could lead to operational challenges and reputational risks. In addition, we may be subject to increasing regulations related to our use of these technologies, including regulations related to privacy, data security, and intellectual property rights, which could expose us to legal risks.
14Risks Related to Our Ownership, Organization and Structure
Takeover attempts or changes in control could be thwarted, even if beneficial to shareholders.
In certain circumstances, shareholders might desire a change in control or acquisition of us in order to realize a premium over the then-prevailing market price of our shares or for other reasons. However, the following could prevent, deter, or delay such a transaction:
• Provisions of Maryland law may impose limitations that may make it more difficult for a third party to negotiate or effect a business combination transaction or control share acquisition with Public Storage. Currently, our Board has opted not to subject the Company to these provisions of Maryland law, but it could choose to do so in the future without shareholder approval.
• To protect against the loss of our REIT status due to concentration of ownership levels, our declaration of trust generally limits the ability of a person, other than the Hughes family or “designated investment entities” (each as defined in our declaration of trust), to own, actually or constructively, more than 3% of our outstanding common shares or 9.9% of the outstanding shares of any class or series of preferred or equity shares. Our Board may grant, and has previously granted, a specific exemption. These limits could discourage, delay, or prevent a transaction involving a change in control of the Company not approved by our Board.
• Similarly, current provisions of our declaration of trust and powers of our Board could have the same effect, including (1) limitations on removal of trustees, (2) restrictions on the acquisition of our shares of beneficial interest, (3) the power to issue additional common shares, preferred shares, or equity shares on terms approved by our Board without obtaining shareholder approval, (4) the advance notice provisions of our bylaws, and (5) our Board’s ability under Maryland law, without obtaining shareholder approval, to implement takeover defenses that we may not yet have and to take, or refrain from taking, other actions that could have the effect of delaying, deterring, or preventing a transaction or a change in control.Holders of our preferred shares have dividend, liquidation, and other rights that are senior to the rights of the holders of our common shares.Holders of our preferred shares are entitled to cumulative dividends before any dividends may be declared or set aside on our common shares. Upon liquidation, holders of our preferred shares will receive a liquidation preference of $25,000 per share (or $25.00 per depositary share) plus any accrued and unpaid distributions before any payment is made to the common shareholders. These preferences may limit the amount received by our common shareholders either from ongoing distributions or upon liquidation. In addition, our preferred shareholders have the right to elect two additional directors to our Board whenever dividends are in arrears in an aggregate amount equivalent to six or more quarterly dividends, whether or not consecutive.Public Storage is a holding company with no direct operations, and it relies on funds received from PSA OP and PSOC to pay its obligations and make distributions to shareholdersPublic Storage is a holding company with no direct operations. All of Public Storage’s property ownership, development, and related business operations are conducted through PSOC (which is wholly-owned by PSA OP) and Public Storage has no material assets or liabilities other than its investment in PSA OP. As a result, Public Storage relies on distributions from PSA OP, which in turn relies on distributions from PSOC, to make common and preferred share dividend payments. Although Public Storage currently wholly-owns (directly or indirectly) PSA OP and PSOC, and therefore exercises exclusive control over PSA OP and PSOC, including the authority to cause PSA OP and PSOC to make distributions, in connection with our future acquisition activities or otherwise, PSA OP may issue additional units of limited partnership to third parties, and these limited partners may negotiate for certain rights. In addition, because Public Storage is a holding company, shareholder claims are structurally subordinated to all existing and future liabilities of PSA OP and PSOC and their subsidiaries. Therefore, in the event of a bankruptcy, insolvency, liquidation or reorganization of PSA OP or PSOC, or their subsidiaries, assets of PSA OP or PSOC or the applicable subsidiary will be available to satisfy any claims of our shareholders only after such liabilities and obligations have been satisfied in full.
15Holders of our preferred shares are subject to certain risks.
Holders of our preferred shares have preference rights over our common shareholders with respect to liquidation and distributions, which give them some assurance of continued payment of their stated dividend rate, and receipt of their principal upon liquidation of the Company or redemption of their securities. However, holders of our preferred shares should consider the following risks:
• The Company has in the past, and could in the future, issue or assume additional debt. Preferred shareholders would be subordinated to the interest and principal payments of such debt, which would increase the risk that there would not be sufficient funds to pay distributions or liquidation amounts to the preferred shareholders.
• The Company has in the past, and could in the future, issue additional preferred shares that, while pari passu to the existing preferred shares, increases the risk that there would not be sufficient funds to pay distributions to the preferred shareholders.
• While the Company has no plans to do so, if the Company were to lose its REIT status or no longer elect REIT status, it would no longer be required to distribute its taxable income to maintain REIT status. If, in such a circumstance, the Company ceased paying dividends, unpaid distributions to the preferred shareholders would continue to accumulate. The preferred shareholders would have the ability to elect two additional members to serve on our Board until the arrearage was cured. The preferred shareholders would not receive any compensation (such as interest) for the delay in the receipt of distributions, and it is possible that the arrearage could accumulate indefinitely.
• Holders of our Preferred Shares have limited rights in the event the Company ceases to pay dividends to shareholders and have no rights with respect to a Company decision to discontinue listing the Preferred Shares on a national securities exchange or file reports with the SEC, including following a change of control transaction.Risks Related to Government Regulations and Taxation
We would incur adverse tax consequences if we failed to qualify as a REIT, and we would have to pay substantial U.S. federal corporate income taxes.REITs are subject to a range of complex organizational and operational requirements. A qualifying REIT does not generally incur U.S. federal corporate income tax on its “REIT taxable income” (generally, taxable income subject to specified adjustments, including a deduction for dividends paid and excluding net capital gain) that it distributes to its shareholders. Our REIT status is also dependent upon the REIT qualification of PS Business Parks, Inc. (“PSB”) through the end of its taxable year ended December 31, 2022, as a result of our substantial ownership interest in it prior to the closing of the PSB merger with an unaffiliated third party. We believe we have qualified as a REIT and we intend to continue to maintain our REIT status.However, there can be no assurance that we qualify or will continue to qualify as a REIT, because of the highly technical nature of the REIT rules, the ongoing importance of factual determinations, the possibility of unidentified issues in prior periods, or changes in our circumstances, as well as share ownership limits in our declaration of trust that may fail to ensure that our shareholder base is sufficiently diverse for us to qualify as a REIT. For any year we fail to qualify as a REIT, unless certain relief provisions apply (the granting of such relief could nonetheless result in significant excise or penalty taxes), we would not be allowed a deduction for dividends paid, we would be subject to U.S. federal corporate income tax on our taxable income, and generally we would not be allowed to elect REIT status until the fifth year after such a disqualification. In addition, for tax years beginning after December 31, 2022, we could also be subject to certain taxes enacted by the Inflation Reduction Act of 2022 that are applicable to non-REIT corporations, including the corporate alternative minimum tax and nondeductible one percent excise tax on certain stock repurchases. Any taxes, interest, and penalties incurred would reduce our cash available for distributions to shareholders and could negatively affect our stock price. However, for years in which we failed to qualify as a REIT, we would not be subject to REIT rules that require us to distribute substantially all of our taxable income to our shareholders.16Dividends payable by REITs do not qualify for the preferential tax rates available for some dividends.Dividends payable by REITs may be taxed at higher rates than dividends of non-REIT corporations. The maximum U.S. federal income tax rate for qualified dividends paid by domestic non-REIT corporations to U.S. stockholders that are individuals, trusts, or estates is generally 20%. Dividends paid by REITs to such stockholders are generally not eligible for that rate, but under current tax law, such stockholders may deduct up to 20% of ordinary dividends (i.e., dividends not designated as capital gain dividends or qualified dividend income) received from a REIT for taxable years beginning before January 1, 2026. Although this deduction reduces the effective tax rate applicable to certain dividends paid by REITs, such tax rate may still be higher than the tax rate applicable to regular corporate qualified dividends. This may cause investors to view REIT investments as less attractive than investments in non-REIT corporations, which in turn may adversely affect the value of the stock of REITs, including our stock.We may pay some taxes, reducing cash available for shareholders.
Even if we qualify as a REIT for U.S. federal corporate income tax purposes, we may be subject to some federal, foreign, state, and local taxes on our income and property. Certain consolidated corporate subsidiaries of the Company have elected to be treated as taxable REIT subsidiaries (“TRSs”) for U.S. federal corporate income tax purposes and are taxable as regular corporations and subject to certain limitations on intercompany transactions. If tax authorities determine that amounts paid by our TRSs to us are not reasonable compared to similar arrangements among unrelated parties, we could be subject to a 100% penalty tax on the excess payments, and ongoing intercompany arrangements could have to change, resulting in higher ongoing tax payments. To the extent the Company is required to pay federal, foreign, state, or local taxes, or federal penalty taxes due to existing laws or changes thereto, we will have less cash available for distribution to shareholders.
In addition, certain local and state governments have imposed taxes on self-storage rent. While in most cases those taxes are paid by our customers, they increase the cost of self-storage rental to our customers and can negatively impact our revenues. Other local and state governments may impose self-storage rent taxes in the future.If PSA OP were to fail to maintain its status as a partnership for U.S. federal income tax purposes, our financial results would be adversely impacted.
We believe PSA OP qualifies as a partnership for U.S. federal income tax purposes. As a partnership, PSA OP is generally not subject to U.S. federal income tax on its income. Instead, each of the partners is allocated its share of PSA OP’s income. There is no assurance, however, that the IRS will not challenge the status of PSA OP as a partnership for U.S. federal income tax purposes. If the IRS were to successfully challenge the status of PSA OP as a partnership, it would be taxable as a corporation. In such event, this would reduce the amount of distributions that PSA OP could make. The treatment of PSA OP as a corporation would also cause us to fail to qualify as a REIT. This would substantially reduce our cash available to pay distributions and the return on a shareholder's investment.
Changes in tax laws could negatively impact us.
The United States Treasury Department and Congress frequently review federal income tax legislation, regulations and other guidance. We cannot predict whether, when, or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted, but these changes might include, in particular, increases in the U.S. federal income tax rates that apply to us or our shareholders in certain circumstances, possibly with retroactive effect.
We have exposure to increased property tax in California.Approximately $830.4 million of our 2024 net operating income is from our properties in California, and we incurred approximately $47.8 million in related property tax expense. Due to the impact of Proposition 13, which generally limits increases in assessed values to 2% per year, the assessed value and resulting property tax we pay is less than it would be if the properties were assessed at current estimated market values. From time to time, proposals have been made to reduce the beneficial impact of Proposition 13, most recently in the November 2020 ballot. While this ballot initiative failed, there can be no assurance that future initiatives or other legislative actions will not eliminate or reduce the benefit of Proposition 13 with respect to our properties. If the beneficial effect of Proposition 13 were ended for our properties, our property tax expense could increase substantially, adversely affecting our cash flow from operations and net income.
17We are subject to extensive laws and regulations and to frequent changes in such laws and regulations.
We are subject to extensive laws and regulations, and to frequent changes in such laws and regulations, at the city, county, state, and federal level. These laws and regulations include (i) laws and regulations related to access to our self-storage facilities, including the Americans with Disabilities Act of 1990, (ii) laws and regulations related to taxes, including property taxes, income taxes, and REIT status compliance, (iii) labor and employment laws and regulations, (iv) consumer protection laws and regulations, including those related to lien sales, (v) state and local business licensing laws and regulations, (vi) zoning laws and regulations, (vii) privacy laws and regulations, including the California Privacy Rights Act and the California Consumer Privacy Act, and (viii) securities laws. Compliance with these laws and regulations, including changes thereto, have imposed significant costs and could in the future impose greater costs or require adverse changes to our business and operations. Failure to comply with applicable laws and regulations may subject us to increased litigation and regulatory actions and negatively affect our business and operations or reputation.
Our tenant reinsurance business is subject to governmental regulation, which could reduce our profitability or limit our growth.
We hold limited lines self-service storage insurance agent licenses from a number of individual state departments of insurance and are subject to state governmental regulation and supervision. Our continued ability to maintain these limited lines self-service storage insurance agent licenses in the jurisdictions in which we are licensed depends on our compliance with related rules and regulations. The regulatory authorities in each jurisdiction generally have broad discretion to grant, renew, and revoke licenses and approvals, to promulgate, interpret, and implement regulations, and to evaluate compliance with regulations through periodic examinations, audits, and investigations of the affairs of insurance agents. As a result of regulatory or private action in any jurisdiction, we may be temporarily or permanently suspended from continuing some or all of our reinsurance activities , or otherwise fined, penalized, or subject to an adverse judgment, which could reduce our net income.In the event that we recognize a significant gain from cash settlement of a forward sale agreement, the U.S. federal income tax treatment of the cash that we receive in such instance is unclear and could impact our ability to meet the REIT qualification requirements.We may enter into forward sale agreements from time to time and, subject to certain conditions, we have the right to elect physical, cash or net share settlement under these agreements at any time and from time to time, in part or in full. In the event that we elect to settle a forward sale agreement for cash and the settlement price is below the forward sale price, we would be entitled to receive a cash payment from the applicable forward purchaser(s). Under Section 1032 of the Code, generally, no gains and losses are recognized by a corporation in dealing in its own shares, including pursuant to a “securities futures contract,” as defined in the Code by reference to the Securities Exchange Act of 1934, as amended. Although we believe that any amount received by us in exchange for our common shares would qualify for the exemption under Section 1032 of the Code, because it is not entirely clear whether a forward sale agreement qualifies as a “securities futures contract,” the U.S. federal income tax treatment of any cash settlement payment we receive is uncertain. In the event that we recognize a significant gain from the cash settlement of a forward sale agreement, we might not be able to satisfy the gross income requirements applicable to REITs under the Code. If we were to fail to satisfy one or both of the gross income tests for any taxable year, we may nevertheless qualify as a REIT for such year if we were entitled to relief under certain provisions of the Code. If these relief provisions were inapplicable, we would not qualify to be taxed as a REIT.International trade disputes, including U.S. trade tariffs and retaliatory tariffs, could adversely impact our business.
International trade disputes, including threatened or implemented tariffs imposed by the U.S. and threatened or implemented tariffs imposed by foreign countries in retaliation, could result in inflationary pressures that directly impact our costs, such as costs for steel, lumber and other materials applicable to our development and redevelopment projects. Trade disputes could also adversely impact global supply chains which could further increase costs for us or delay delivery of key inventories and supplies. Tariffs and trade restrictions can be announced with little or no advance notice, and we may not be able to effectively mitigate all adverse impacts from such measures. If we are not able to navigate these changes, it could have a material adverse effect on our business.
FY 2025-12-31 (later)
ITEM 1A. Risk Factors
In addition to the other information in our Annual Report on Form 10-K, you should consider the risks described below that we believe may be material to investors in evaluating the Company. This section contains forward-looking statements, and in considering these statements, you should refer to the qualifications and limitations on our forward-looking statements that are described in “Item 1. Business.”
Risks Related to Our Properties and Our Business
Natural disasters, terrorist attacks, civil unrest, or other events that could damage or otherwise disrupt our ability to operate our facilities could adversely impact our business and financial results.Natural disasters, such as earthquakes, fires, hurricanes, drought, extreme temperatures and floods, terrorist attacks, civil unrest, and other events that damage our facilities or our tenants’ property, or that make our facilities temporarily unavailable, have in the past and may in the future adversely impact our business and financial results. Damage and business interruption losses could exceed the aggregate limits of our insurance coverage. In addition, because we self-insure a portion of our risks, losses below a certain level may not be covered by insurance. See Note 16 to our December 31, 2025 consolidated financial statements for a description of the risks of losses that are not covered by third-party insurance contracts. Our exposure to these types of events is increased by potential tenant claims associated with our tenant reinsurance business. In addition, perceptions about the risk of property loss from these events could negatively impact self-storage demand.Operating costs, including property taxes, could increase.We could be subject to increases in property or other taxes, repair and maintenance costs, payroll, utility costs, insurance premiums, workers compensation, and other operating expenses due to various factors such as inflation, labor shortages, commodity and energy price increases, weather, increases to minimum wage rates, supply chain disruptions, and changes to governmental safety and real estate use limitations and other governmental actions. Our property tax expense, generally depends upon the assessed value of our real estate facilities as determined by assessors and government agencies and, accordingly, could be subject to substantial increases if such agencies change their valuation approaches or opinions or if new laws are enacted, especially if new approaches are adopted or laws are enacted that result in increased property tax assessments in states or geographies where we have a high concentration of facilities. See also “We have exposure to increased property tax in California” below.The acquisition of existing properties or self-storage operating companies is subject to risks that may adversely affect our growth and financial results.
We have acquired self-storage facilities and self-storage operating companies in the past, and we expect to continue to do so in the future. We face significant competition for suitable acquisition properties and companies from other real estate investors, including operating companies and private equity funds. As a result, we may be unable to acquire the companies or additional properties we desire or the purchase price for desirable companies or properties may be significantly increased. Failures or unexpected circumstances in integrating facilities or companies that we acquire, or circumstances we did not detect or anticipate during due diligence, such as environmental matters, needed repairs or deferred maintenance, customer collection issues, assumed liabilities, turnover of critical personnel involved in acquired operating companies, or the effects of increased property tax following reassessment of a newly-acquired property, as well as the general risks of real estate investment and mergers and acquisitions, could jeopardize realization of the anticipated earnings from an acquisition.
Our development program subjects us to risks.There are significant risks involved in developing self-storage facilities, such as delays, cost increases, or inability to complete development projects due to changes in or failure to meet government or regulatory requirements, failure of revenue to meet our underwriting estimates, delays caused by weather issues, unforeseen site conditions, or personnel problems. Self-storage space is generally not pre-leased, and rent-up of newly developed space can be delayed or ongoing cash flow yields can be reduced due to competition, reductions in storage demand, or other factors.
8There is significant competition among self-storage operators and from other storage alternatives.Our self-storage facilities generate most of our revenue and earnings. Significant competition from self-storage operators, property developers, and other storage alternatives may adversely impact our ability to attract and retain customers and may negatively impact our ability to generate revenue. Competition in the local market areas in which many of our properties are located is significant and affects our occupancy levels, rental rates, and operating expenses, particularly advertising costs. There may be an increasing influx of capital from outside financing sources driving more money, development, and supply into the industry. Development of self-storage facilities may increase, which may intensify competition as newly developed facilities are opened. Development of self-storage facilities by other operators could increase, due to increases in availability of funds for investment or other reasons, and further intensify competition.Demand for self-storage facilities may be affected by customer perceptions and factors outside of our control.
Significantly lower logistics costs could introduce new competitors, such as valet-style storage services, which may reduce the demand for traditional self-storage. Customer preferences and/or needs for self-storage could change, decline, or shift to other product types, thereby impacting our business model and ability to grow and/or generate revenues. Shifts in population and demographics could cause the geographical distribution of our portfolio to be suboptimal and affect our ability to maintain occupancy and attract new customers. Security incidents could result in the perception that our properties are not safe. If our customers do not feel our properties are safe, they may select competitors for their self-storage needs, or if there is an industry perception of inadequate security generally, customer use of self-storage could be negatively impacted.
Our newly developed and expanded facilities, and facilities that we manage for third party owners, may negatively impact the revenues of our legacy facilities.
We continue to develop new self-storage facilities and expand our existing self-storage facilities. In addition, we are seeking to increase the number of self-storage facilities that we manage for third party owners in exchange for a fee, many of which are in the process of stabilization and are near our existing stabilized self-storage facilities. In order to hasten the fill-up of these new facilities, we aggressively price such space during the fill-up period. While we believe that this aggressive pricing allows us to increase our market share relative to our competitors and increase the cash flows of these properties, such pricing and the added capacity may also negatively impact our existing stabilized self-storage facilities that are near these unstabilized facilities.We may incur significant liabilities from environmental contamination or moisture infiltration.
Existing or future laws impose or may impose liability on us to clean up environmental contamination on or around properties that we currently or previously owned or operated, even if we were not responsible for or aware of the environmental contamination or even if such environmental contamination occurred prior to our involvement with the property. We have conducted preliminary environmental assessments on most of our properties, which have not identified any material liabilities. These assessments, commonly referred to as “Phase 1 Environmental Assessments,” include an investigation (excluding soil or groundwater sampling or analysis) and a review of publicly available information regarding the site and other nearby properties.
We are also subject to potential liability relating to moisture infiltration, which can result in mold or other damage to our or our customers’ property, as well as potential health concerns. When we receive a complaint or otherwise become aware that an air quality concern exists, we implement corrective measures and seek to work proactively with our customers to resolve issues, subject to our contractual limitations on liability for such claims.
We are not aware of any environmental contamination or moisture infiltration related liabilities at any of our properties that could be material to our overall business, financial condition, or results of operation. However, we may not have detected all material liabilities, we could acquire properties with material undetected liabilities, or new conditions could arise or develop at our properties, any of which could result in a cash settlement or adversely affect our ability to sell, lease, operate, or encumber affected facilities.9Elevated interest rate levels could adversely impact us and our tenants.Interest rates remain elevated compared to recent years. As a result, if we issued new debt or preferred shares or refinanced our indebtedness, our debt service costs or preferred share dividend yields would likely be, based on current interest rates, significantly higher than current financing costs. Elevated interest rates also adversely impact the relative attractiveness of the dividend yield on our common shares. Increases in our cost of capital impact our assessment of the yields we consider appropriate to support pursuing property acquisition and development opportunities and thus can impact our external growth prospects. The degree and pace of these changes have had and may continue to have adverse macroeconomic effects that have and may continue to have adverse impacts on our tenants, including as a result of economic recession, increased unemployment, and increased financing costs. For more information on interest rate risk, see Part II, “Item 7A. Quantitative and Qualitative Disclosures About Market Risk”.Economic conditions can adversely affect our business, financial condition, and growth.
Economic downturns or adverse economic or industry conditions, including those related to high levels of inflation, could adversely impact our financial results, growth, and access to capital. Our revenues and operating cash flow can be negatively impacted by reductions in employment and population levels, household and disposable income, and other general economic factors that lead to a reduction in demand for self-storage space in each of the markets in which we operate.
We have exposure to European operations through our ownership in Shurgard.Shurgard, as an owner, operator, and developer of self-storage facilities, is subject to many of the same risks we are with respect to self-storage. However, through our investment in Shurgard, we are exposed to additional risks unique to the various European markets in which Shurgard operates, which may adversely impact our business and financial results, and many of which are referred to in Shurgard’s public filings. These risks include the following:
• Currency risks: Currency fluctuations can impact the fair value of our investment in Shurgard, our equity earnings, our ongoing dividends, and any other related repatriations of cash.• Legislative, tax, and regulatory risks: Shurgard is subject to a variety of local, national, and pan-European laws and regulations related to permitting and land use, the environment, labor, and other areas, as well as income, property, sales, and value added and employment tax. These laws and regulations can be difficult to apply or interpret, can vary in each country or locality, and are subject to unexpected changes in their form and application due to regional, national, or local political uncertainty and other factors. Such changes, or Shurgard’s failure to comply with these laws, could subject it to penalties or other sanctions, adverse changes in business processes, and, potentially, adverse income tax, property tax, or other tax burdens.
• Impediments to capital repatriation could negatively impact the realization of our investment in Shurgard: Laws in Europe and the U.S. may create, impede, or increase our cost to repatriate distributions received from Shurgard or proceeds from the sale of Shurgard shares.
• Risks of collective bargaining: Collective bargaining, which is prevalent in certain areas in Europe, could negatively impact Shurgard’s labor costs or operations. Many of Shurgard’s employees participate in various national unions.
• Potential operating and individual country risks: Economic slowdowns or extraordinary political or social change in the countries in which it operates have posed, and could continue to pose, challenges or result in future reductions of Shurgard’s operating cash flows.
• Liquidity of our ownership stake: We have no plans to liquidate our interest in Shurgard. However, while Shurgard is a publicly held entity, if we chose to, our ability to liquidate our shares in Shurgard in an efficient manner could be limited by the level of Shurgard’s public “float” relative to any ownership stake we sought to sell. Our existing relationship with our legacy joint venture partner may place further contractual limitations on our ability to sell all of the shares we own if we desired to do so.10• Impediments of Shurgard’s public ownership structure: Shurgard’s strategic decisions, involving activities such as borrowing money, capital contributions, raising capital from third parties, and selling or acquiring significant assets, are determined by its board of directors. As a result, Shurgard may be precluded from taking advantage of opportunities that we would find attractive but that we may not be able to pursue separately, or it could take actions that we do not agree with.
Public health and other crises have adversely impacted, and may in the future adversely impact, our business.
Our business is subject to risks from public health and other crises like the COVID-19 pandemic, including, among others:• risk of illness or death of our employees or tenants;• negative impacts on economic conditions in our markets, which may reduce the demand for self-storage;
• risk that there could be an out-migration of population from major markets where we operate;
• government restrictions that (i) limit or prevent use of our facilities, (ii) limit our ability to increase rent or otherwise limit the rent we can charge, (iii) limit our ability to collect rent or evict delinquent tenants, or (iv) limit our ability to complete development and redevelopment projects;• risk that we could experience a change in the move-out patterns of our long-term tenants due to economic uncertainty and increases in unemployment, which could lead to lower occupancies and rent “roll down” as long-term tenants are replaced with new tenants at lower rates; and• risk of negative impacts on the cost and availability of debt and equity capital, which could have a material impact upon our capital and growth plans.Local, state, and federal governments have and may in the future adopt regulations that could adversely impact our
operations.
Local, state, and federal governments have and may in the future adopt regulations that could adversely impact our operations, including in response to natural disasters and public health crises. For example, in response to wildfires in 2018, 2019, and early 2025 and floods in 2023, the State of California and some localities in California adopted temporary regulations that imposed certain limits on the rents we could charge at certain of our facilities and the extent to which we could increase rents to existing tenants. Similarly, in response to the COVID-19 pandemic, certain localities adopted restrictions on the use of certain of our facilities, limited our ability to increase rents, limited our ability to collect rent or evict delinquent tenants, and limited our ability to complete development and redevelopment projects. California and other jurisdictions have also adopted regulations restricting our operations relating to pricing methodologies, restrictions on fees, procedures for selling stored property of delinquent tenants, marketing restrictions related to price changes and promotional rates, zoning restrictions and other matters. Similar restrictions could be imposed in the future, including in response to significant events and these restrictions could adversely impact our operations.Our marketing and pricing strategies may fail to be effective or may be constrained by factors outside of our control.Marketing initiatives, including our increasing dependence on Google to source customers, may fail to be effective and could negatively impact financial performance. More than half of our new storage customers in 2025 were sourced directly or indirectly through “unpaid” search and “paid” search campaigns on Google. We believe that the vast majority of customers searching for self-storage use Google at some stage in their shopping experience. Google is providing tools to allow smaller and less sophisticated operators to bid for search terms, increasing competition for self-storage search terms. The predominance of Google in the shopping experience, as well as Google’s enabling of additional competitors to bid for placements in self-storage search terms, may reduce the number of new customers that we can procure, and/or increase our costs to obtain new customers.In addition, the inability to utilize our pricing methodology due to regulatory or market constraints could also significantly impact our financial results.11We are exposed to ongoing litigation and other legal and regulatory actions, which may divert management’s time and attention, require us to pay damages and expenses or restrict the operation of our business.We are subject to the risk of legal claims and proceedings (including class actions) and regulatory enforcement actions across many jurisdictions in the ordinary course of our business and otherwise, and we could incur significant liabilities and substantial legal fees from these actions. Resolution of these claims and actions may divert time and attention of our management and could involve payment of damages or expenses by us, all of which may be significant, and could damage our reputation and our brand. In addition, any such resolution could involve our agreement to terms that restrict the operation of our business. The results of legal proceedings cannot be predicted with certainty. We cannot guarantee that losses incurred in connection with any current or future legal or regulatory proceedings or actions will not exceed any provisions we may have set aside in respect of such proceedings or actions or any available insurance coverage. Any such legal claims, proceedings, and regulatory enforcement actions could negatively impact our operating results, cash flow available for distribution or reinvestment, and/or the price of our common shares.
Our use of or failure to adopt advancements in information technology, such as artificial intelligence, may hinder or prevent us from achieving strategic objectives or otherwise harm our business.
Our use of or inability to safely and effectively adopt and deliver new technological capabilities and enhancements in line with strategic objectives, including artificial intelligence and machine learning, may put us at a competitive disadvantage; cause us to miss opportunities to innovate, achieve efficiencies, or improve the customer experience; or adversely impact our business, reputation, results of operations, and financial condition. For example, we have begun to
utilize artificial intelligence technologies in various aspects of our business, which are susceptible to errors and other
malfunctions which could lead to operational challenges and reputational risks.
Legislative and regulatory activity related to information technology, including related to privacy, may also result in new laws that are applicable to us and that may hinder our business, including by restricting our use of customer data or otherwise regulating the use of algorithms and automated processing in ways that could materially affect our business or lead to significant increases in the cost of compliance. In addition, the use of emerging technologies, including artificial intelligence, entails risks including risks relating to the possibility of intellectual property infringement or misappropriation; data privacy; quality control related to artificial intelligence outputs; new or enhanced governmental or regulatory scrutiny, requirements, litigation, or other liability; ethical concerns; negative consumer perceptions as to automation and artificial intelligence; or other complications or liabilities that could adversely affect our business, reputation, results of operations, or financial results. Although we have adopted policies with respect to these risks, including related to the development, deployment and monitoring of artificial intelligence tools, we cannot be certain that such policies will be effective.The failure or disruption of our computer and communications systems, on which we are heavily dependent, could significantly harm our business.
We are heavily dependent upon automated information technology and Internet commerce, with more than half of our new customers coming from the telephone or over the Internet. We centrally manage significant components of our operations with our computer systems, including our financial information, and we also rely extensively on third-party vendors to retain data, process transactions, and provide other systems services. These systems are subject to damage or interruption from power outages, system, network, internet and telecommunications failures, hackers, including through a ransomware attack, computer worms, viruses, and other destructive or disruptive cybersecurity incidents, and catastrophic events. Such incidents could also result in significant costs to repair or replace such networks or information systems, as well as actual monetary losses in case of a cybersecurity incident that resulted in fraudulent payments or other cash transactions. Our operations could be severely impacted by a natural disaster, terrorist attack, attack by hackers, acts of vandalism, data theft, misplaced or lost data, programming or human error, or other circumstance that results in a significant outage of our systems or those of our third party providers, despite our use of back up and redundancy measures. While we may be entitled to damages if our third-party providers fail to satisfy their security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.12If our confidential information is compromised or corrupted, including as a result of a cybersecurity incident, our reputation and business relationships could be damaged and our financial condition and operating results could be adversely affected.
In the ordinary course of our business we acquire and store sensitive data, including personally identifiable information of our prospective and current customers and our employees. The secure processing and maintenance of this information is critical to our operations and business strategy. Although we believe we and our third-party service providers have taken commercially reasonable steps to protect the security of our confidential information, information security risks have generally increased in recent years due to the rise in new technologies and the increased sophistication and activities of perpetrators of cyberattacks. Further, new technologies such as artificial intelligence may be more capable at evading these safeguard measures. Despite our security measures, we face cybersecurity threats, including system, network, or Internet failures; cyberattacks, ransomware, and other malware; social engineering; and phishing schemes. In these cases, our information technology and infrastructure could be vulnerable and our or our customers’ or employees’ confidential information could be compromised or misappropriated. Any such cybersecurity incident, including those impacting personal information, could result in serious and harmful consequences for us or our customers. A cybersecurity incident could also interfere with our ability to comply with financial reporting requirements. Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and threats, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.Our confidential information may also be compromised due to programming or human error, negligence, or fraud. Although we and our third-party service providers make efforts to maintain the security and integrity of our information, including the implementation of security measures, required employee awareness training, and the existence of a disaster recovery plan, there is no guarantee that they will be adequate to safeguard against all cybersecurity incidents or misuses of data. In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and changing requirements applicable to our business from multiple regulatory agencies at the local, state, federal, or international level, compliance with those requirements could also result in additional costs, or we could fail to comply with those requirements due to various reasons.
Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disruption to our operations and the services we provide to customers, or damage to our reputation, any of which could adversely affect our results of operations, reputation, and competitive position. In addition, our customers could lose confidence in our ability to protect their personal information, which could cause them to discontinue leasing our self-storage facilities. Such events could lead to lost future revenues and adversely affect our results of operations, or result in remedial and other costs, fines, or lawsuits, which could exceed any available insurance that we have procured.
We have identified and expect to continue to identify cyberattacks and cybersecurity incidents on our systems and those of third parties we rely upon, but none of the cyberattacks and incidents we have identified to date has had a material impact on our business or operations. While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyberattacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in amounts and on terms we view as adequate for our operations.
Further information relating to cybersecurity risk management is discussed in Item 1C. “Cybersecurity” in this report.If we fail to successfully execute our recent leadership succession, we may struggle to effectively execute our strategic plan.
We recently announced leadership changes, including a change in our Chairman of the Board, our President and Chief Executive Officer and our Chief Financial Officer. Although these changes were made pursuant to the Board’s succession planning efforts, there is no guarantee that the transition to new leadership will be executed successfully. Failure to successfully implement these successions may result in disruptions in the execution of our strategic plan. Failure to successfully implement future succession plans for other key employees may leave us vulnerable to retirements and turnover.
13
We may be harmed if we fail to protect our intellectual property adequately.
We maintain a portfolio of trademarks and trade dress that we believe are fundamental to the success of the Public Storage® brand. While we actively seek to enforce and protect our rights, failure to adequately protect our rights could lead to loss of such trademark and trade dress protection. We also own and may seek to protect other intellectual property, such as propriety systems, processes, data, and other trade secrets that we have collected and developed in the course of operating our business and that we believe provides us with various competitive advantages. Our protections could be inadequate or we could lose rights to our other intellectual property and trade secrets. Competitor use of our trademarks and trade names could lead to likelihood of confusion, tarnishment of our brand, and loss of legal protection for our marks.We may be subject to labor disruptions related to unionization efforts.
Our employees have been and may in the future be subject to unionization efforts. These activities could lead to labor disruptions which could adversely impact our ability to operate our business and could negatively impact our reputation. In addition, these activities could result in collective bargaining agreements, which could result in increased operating and legal costs.We may record losses as a result of the bankruptcy, insolvency, or other credit failure of the borrowers under our
bridge lending financing program. In that case, our revenues and results of operations may be materially and
adversely impacted.
Although we conduct due diligence and aim to carefully evaluate the risks associated with this debt and other investments, we could incur losses from our lending decisions, which includes subjective and complex judgments and forecasts of economic conditions and how these economic predictions might impair the ability of our borrowers to operate their business and/or make all required payments. For example, volatility of the capital and credit markets, increased interest rates, lower demand for self-storage and general economic conditions may adversely affect the solvency, creditworthiness or operations of our borrowers. If our forecasts prove incorrect, or if any of our borrowers fail to perform as expected, we may incur losses from these bridge loans which could have a material adverse effect on our operating revenue and results of operations.Risks Related to Our Ownership, Organization and Structure
Takeover attempts or changes in control could be thwarted, even if beneficial to shareholders.
In certain circumstances, shareholders might desire a change in control or acquisition of us in order to realize a premium over the then-prevailing market price of our shares or for other reasons. However, the following could prevent, deter, or delay such a transaction:
• Provisions of Maryland law may impose limitations that may make it more difficult for a third party to negotiate or effect a business combination transaction or control share acquisition with Public Storage. Currently, our Board has opted not to subject the Company to these provisions of Maryland law, but it could choose to do so in the future without shareholder approval.
• To protect against the loss of our REIT status due to concentration of ownership levels, our declaration of trust generally limits the ability of a person, other than the Hughes family or “designated investment entities” (each as defined in our declaration of trust), to own, actually or constructively, more than 3% of our outstanding common shares or 9.9% of the outstanding shares of any class or series of preferred or equity shares. Our Board may grant, and has previously granted, a specific exemption. These limits could discourage, delay, or prevent a transaction involving a change in control of the Company not approved by our Board.
• Similarly, current provisions of our declaration of trust and powers of our Board could have the same effect, including (1) limitations on removal of trustees, (2) restrictions on the acquisition of our shares of beneficial interest, (3) the power to issue additional common shares, preferred shares, or equity shares on terms approved by our Board without obtaining shareholder approval, (4) the advance notice provisions of our bylaws, and (5) our Board’s ability under Maryland law, without obtaining shareholder approval, to implement takeover defenses that we may not yet have and to take, or refrain from taking, other actions that could have the effect of delaying, deterring, or preventing a transaction or a change in control.14Holders of our preferred shares have dividend, liquidation, and other rights that are senior to the rights of the holders of our common shares.Holders of our preferred shares are entitled to cumulative dividends before any dividends may be declared or set aside on our common shares. Upon liquidation, holders of our preferred shares will receive a liquidation preference of $25,000 per share (or $ 25.00 per depositary share) plus any accrued and unpaid distributions before any payment is made to the common shareholders. These preferences may limit the amount received by our common shareholders either from ongoing distributions or upon liquidation. In addition, our preferred shareholders have the right to elect two additional directors to our Board whenever dividends are in arrears in an aggregate amount equivalent to six or more quarterly dividends, whether or not consecutive.Public Storage is a holding company with no direct operations, and it relies on funds received from PSA OP and PSOC to pay its obligations and make distributions to shareholdersPublic Storage is a holding company with no direct operations. All of Public Storage’s property ownership, development, and related business operations are conducted through PSOC (which is wholly-owned by PSA OP) and Public Storage has no material assets or liabilities other than its investment in PSA OP. As a result, Public Storage relies on distributions from PSA OP, which in turn relies on distributions from PSOC, to make common and preferred share dividend payments. Although Public Storage exercises control over PSA OP and PSOC, including the authority to cause PSA OP and PSOC to make distributions, in connection with our future acquisition activities or otherwise, PSA OP may issue additional units of limited partnership to third parties, and these limited partners may negotiate for certain rights. In addition, because Public Storage is a holding company, shareholder claims are structurally subordinated to all existing and future liabilities of PSA OP and PSOC and their subsidiaries. Therefore, in the event of a bankruptcy, insolvency, liquidation or reorganization of PSA OP or PSOC, or their subsidiaries, assets of PSA OP or PSOC or the applicable subsidiary will be available to satisfy any claims of our shareholders only after such liabilities and obligations have been satisfied in full.Holders of our preferred shares are subject to certain risks.
Holders of our preferred shares have preference rights over our common shareholders with respect to liquidation and distributions, which give them some assurance of continued payment of their stated dividend rate, and receipt of their principal upon liquidation of the Company or redemption of their securities. However, holders of our preferred shares should consider the following risks:
• The Company has in the past, and could in the future, issue or assume additional debt. Preferred shareholders would be subordinated to the interest and principal payments of such debt, which would increase the risk that there would not be sufficient funds to pay distributions or liquidation amounts to the preferred shareholders.
• The Company has in the past, and could in the future, issue additional preferred shares that, while pari passu to the existing preferred shares, increases the risk that there would not be sufficient funds to pay distributions to the preferred shareholders.
• While the Company has no plans to do so, if the Company were to lose its REIT status or no longer elect REIT status, it would no longer be required to distribute its taxable income to maintain REIT status. If, in such a circumstance, the Company ceased paying dividends, unpaid distributions to the preferred shareholders would continue to accumulate. The preferred shareholders would have the ability to elect two additional members to serve on our Board until the arrearage was cured. The preferred shareholders would not receive any compensation (such as interest) for the delay in the receipt of distributions, and it is possible that the arrearage could accumulate indefinitely.
• Holders of our Preferred Shares have limited rights in the event the Company ceases to pay dividends to shareholders and have no rights with respect to a Company decision to discontinue listing the Preferred Shares on a national securities exchange or file reports with the SEC, including following a change of control transaction.15Risks Related to Government Regulations and Taxation
We would incur adverse tax consequences if we failed to qualify as a REIT, and we would have to pay substantial U.S. federal corporate income taxes.REITs are subject to a range of complex organizational and operational requirements. A qualifying REIT does not generally incur U.S. federal corporate income tax on its “REIT taxable income” (generally, taxable income subject to specified adjustments, including a deduction for dividends paid and excluding net capital gain) that it distributes to its shareholders. Our REIT status is also dependent upon the REIT qualification of PS Business Parks, Inc. (“PSB”) through
the end of its taxable year ended December 31, 2022, as a result of our substantial ownership interest in it prior to the
closing of the PSB merger with an unaffiliated third party. We believe we have qualified as a REIT and we intend to continue to maintain our REIT status.However, there can be no assurance that we qualify or will continue to qualify as a REIT, because of the highly technical nature of the REIT rules, the ongoing importance of factual determinations, the possibility of unidentified issues in prior periods, or changes in our circumstances, as well as share ownership limits in our declaration of trust that may fail to ensure that our shareholder base is sufficiently diverse for us to qualify as a REIT. For any year we fail to qualify as a REIT, unless certain relief provisions apply (the granting of such relief could nonetheless result in significant excise or penalty taxes), we would not be allowed a deduction for dividends paid, we would be subject to U.S. federal corporate income tax on our taxable income, and generally we would not be allowed to elect REIT status until the fifth year after such a disqualification. In addition, for tax years beginning after December 31, 2022, we could also be subject to certain taxes enacted by the Inflation Reduction Act of 2022 that are applicable to non-REIT corporations, including the corporate alternative minimum tax and nondeductible one percent excise tax on certain stock repurchases. Any taxes, interest, and penalties incurred would reduce our cash available for distributions to shareholders and could negatively affect our stock price. However, for years in which we failed to qualify as a REIT, we would not be subject to REIT rules that require us to distribute substantially all of our taxable income to our shareholders.Dividends payable by REITs do not qualify for the preferential tax rates available for some dividends.Dividends payable by REITs may be taxed at higher rates than dividends of non-REIT corporations. The maximum U.S. federal income tax rate for qualified dividends paid by domestic non-REIT corporations to U.S. stockholders that are individuals, trusts, or estates is generally 20%. Dividends paid by REITs to such stockholders are generally not eligible for that rate but, such stockholders may deduct up to 20% of ordinary dividends (i.e., dividends not designated as capital gain dividends or qualified dividend income) received from a REIT for taxable years beginning before January 1, 2026. Although this deduction reduces the effective tax rate applicable to certain dividends paid by REITs, such tax rate may still be higher than the tax rate applicable to regular corporate qualified dividends. This may cause investors to view REIT investments as less attractive than investments in non-REIT corporations, which in turn may adversely affect the value of the stock of REITs, including our stock.We may pay some taxes, reducing cash available for shareholders.
Even if we qualify as a REIT for U.S. federal corporate income tax purposes, we may be subject to some federal, foreign, state, and local taxes on our income and property. Certain consolidated corporate subsidiaries of the Company have elected to be treated as taxable REIT subsidiaries (“TRSs”) for U.S. federal corporate income tax purposes and are taxable as regular corporations and subject to certain limitations on intercompany transactions. If tax authorities determine that amounts paid by our TRSs to us are not reasonable compared to similar arrangements among unrelated parties, we could be subject to a 100% penalty tax on the excess payments, and ongoing intercompany arrangements could have to change, resulting in higher ongoing tax payments. To the extent the Company is required to pay federal, foreign, state, or local taxes, or federal penalty taxes due to existing laws or changes thereto, we will have less cash available for distribution to shareholders.
In addition, certain local and state governments have imposed taxes on self-storage rent. While in most cases those taxes are paid by our customers, they increase the cost of self-storage rental to our customers and can negatively impact our revenues. Other local and state governments may impose self-storage rent taxes in the future.16If PSA OP were to fail to maintain its status as a partnership for U.S. federal income tax purposes, our financial results would be adversely impacted.
We believe PSA OP qualifies as a partnership for U.S. federal income tax purposes. As a partnership, PSA OP is generally not subject to U.S. federal income tax on its income. Instead, each of the partners is allocated its share of PSA OP’s income. There is no assurance, however, that the IRS will not challenge the status of PSA OP as a partnership for U.S. federal income tax purposes. If the IRS were to successfully challenge the status of PSA OP as a partnership, it would be taxable as a corporation. In such event, this would reduce the amount of distributions that PSA OP could make. The treatment of PSA OP as a corporation would also cause us to fail to qualify as a REIT. This would substantially reduce our cash available to pay distributions and the return on a shareholder's investment.
Changes in tax laws could negatively impact us.
The United States Treasury Department and Congress frequently review federal income tax legislation, regulations and other guidance. We cannot predict whether, when, or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted, but these changes might include, in particular, increases in the U.S. federal income tax rates that apply to us or our shareholders in certain circumstances, possibly with retroactive effect.
We have exposure to increased property tax in California.Due to the impact of Proposition 13, which generally limits increases in assessed values to 2% per year, the assessed value and resulting property tax we pay is less than it would be if the properties were assessed at current estimated market values. From time to time, proposals have been made to reduce the beneficial impact of Proposition 13, most recently in the November 2020 ballot. While this ballot initiative failed, there can be no assurance that future initiatives or other legislative actions will not eliminate or reduce the benefit of Proposition 13 with respect to our properties. If the beneficial effect of Proposition 13 were ended for our properties, our property tax expense could increase substantially, adversely affecting our cash flow from operations and net income.We are subject to extensive laws and regulations and to frequent changes in such laws and regulations.
We are subject to extensive laws and regulations, and to frequent changes in such laws and regulations, at the city, county, state, and federal level. These laws and regulations include (i) laws and regulations related to access to our self-storage facilities, including the Americans with Disabilities Act of 1990, (ii) laws and regulations related to taxes, including property taxes, income taxes, and REIT status compliance, (iii) labor and employment laws and regulations, (iv) consumer protection laws and regulations, including those related to lien sales, (v) state and local business licensing laws and regulations, (vi) zoning laws and regulations, (vii) privacy laws and regulations, including the California Privacy Rights Act and the California Consumer Privacy Act, and (viii) securities laws. Compliance with these laws and regulations, including changes thereto, have imposed significant costs and could in the future impose greater costs or require adverse changes to our business and operations. Failure to comply with applicable laws and regulations may subject us to increased litigation and regulatory actions and negatively affect our business and operations or reputation.
Our tenant reinsurance business is subject to governmental regulation, which could reduce our profitability or limit our growth.
We hold limited lines self-service storage insurance agent licenses from a number of individual state departments of insurance and are subject to state governmental regulation and supervision. Our continued ability to maintain these limited lines self-service storage insurance agent licenses in the jurisdictions in which we are licensed depends on our compliance with related rules and regulations. The regulatory authorities in each jurisdiction generally have broad discretion to grant, renew, and revoke licenses and approvals, to promulgate, interpret, and implement regulations, and to evaluate compliance with regulations through periodic examinations, audits, and investigations of the affairs of insurance agents. As a result of regulatory or private action in any jurisdiction, we may be temporarily or permanently suspended from continuing some or all of our reinsurance activities , or otherwise fined, penalized, or subject to an adverse judgment, which could reduce our net income.17In the event that we recognize a significant gain from cash settlement of a forward sale agreement, the U.S. federal income tax treatment of the cash that we receive in such instance is unclear and could impact our ability to meet the REIT qualification requirements.We maintain an “at the market” offering program under which we may enter into forward sale agreements from time to time to sell common shares and, subject to certain conditions, we have the right to elect physical, cash or net share settlement under these agreements at any time and from time to time, in part or in full. In the event that we elect to settle a forward sale agreement for cash and the settlement price is below the forward sale price, we would be entitled to receive a cash payment from the applicable forward purchaser(s). Under Section 1032 of the Code, generally, no gains and losses are recognized by a corporation in dealing in its own shares, including pursuant to a “securities futures contract,” as defined in the Code by reference to the Securities Exchange Act of 1934, as amended. Although we believe that any amount received by us in exchange for our common shares would qualify for the exemption under Section 1032 of the Code, because it is not entirely clear whether a forward sale agreement qualifies as a “securities futures contract,” the U.S. federal income tax treatment of any cash settlement payment we receive is uncertain. In the event that we recognize a significant gain from the cash settlement of a forward sale agreement, we might not be able to satisfy the gross income requirements applicable to REITs under the Code. If we were to fail to satisfy one or both of the gross income tests for any taxable year, we may nevertheless qualify as a REIT for such year if we were entitled to relief under certain provisions of the Code. If these relief provisions were inapplicable, we would not qualify to be taxed as a REIT.International trade disputes, including U.S. trade tariffs and retaliatory tariffs, could adversely impact our business.
International trade disputes, including threatened or implemented tariffs imposed by the U.S. and threatened or implemented tariffs imposed by foreign countries in retaliation, could result in inflationary pressures that directly impact our costs, such as costs for steel, lumber and other materials applicable to our development and redevelopment projects. Trade disputes could also adversely impact global supply chains which could further increase costs for us or delay delivery of key inventories and supplies. Tariffs and trade restrictions can be announced with little or no advance notice, and we may not be able to effectively mitigate all adverse impacts from such measures. If we are not able to navigate these changes, it could have a material adverse effect on our business.
Item 7 · Management's Discussion & Analysis
+450 paragraphs −405 paragraphs ~405 changed
FY 2024-12-31 (earlier)
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our consolidated financial statements and notes thereto.
Critical Accounting Estimates
The preparation of consolidated financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) requires us to make judgments, assumptions, and estimates that affect the amounts reported. On an ongoing basis, we evaluate our estimates and assumptions. These estimates and assumptions are based on current facts, historical experience, and various other factors that we believe are reasonable under the circumstances to determine reported amounts of assets, liabilities, revenues, and expenses that are not readily apparent from other sources.
We believe the following are our critical accounting estimates, because they are reasonably likely to have a material impact on the portrayal of our financial condition and results, and they require us to make judgments and estimates about matters that involve a significant level of uncertainty.
Impairment of Long-Lived Assets: The analysis of impairment of our long-lived assets, including our real estate facilities, involves identification of indicators of impairment, including unfavorable operational results and significant cost overruns on construction, projections of future operating cash flows, and estimates of fair values, all of which require significant judgment and subjectivity. In particular, these estimates are sensitive to significant assumptions, such as the projections of future rental rates, stabilized occupancy level, future profit margin, discount rates, and capitalization rates, all of which could be affected by our expectations about future market or economic conditions. Others could come to materially different conclusions.23Allocating Purchase Price for Acquired Real Estate Facilities : We estimate the fair values of the assets and liabilities of acquired real estate facilities, which consist principally of land, buildings and acquired customers in place, for purposes of allocating the aggregate purchase price of acquired real estate facilities. We estimate the fair value of land based upon price per square foot derived from observable transactions involving comparable land in similar locations as adjusted for location quality, parcel size, and date of sale associated with the acquired facilities. The fair value estimate of land is sensitive to the adjustments made to the land market transactions used in the estimate, particularly when there is a lack of recent comparable land market data. We estimate the fair value of buildings primarily using the income approach by estimating the fair value of hypothetical vacant acquired facilities and adjusting for the estimated fair value of land. The fair value estimate of buildings is sensitive to assumptions, such as lease-up period, future stabilized operating cash flows, capitalization rate and discount rate. We estimate the fair value of acquired customers in place using the income approach by estimating the foregone rent over the presumed period of time to absorb the occupied spaces as if they were vacant at the time of acquisition. The fair value estimate of the acquired customers in place is sensitive to the assumptions used in the income approach, such as market rent, lease-up period and discount rate. Others could come to materially different conclusions as to the estimated fair values of land, buildings and acquired customers in place, which would result in different depreciation and amortization expense, gains and losses on sale of real estate assets, as well as the level of land and buildings on our consolidated balance sheet.Overview
Our self-storage operations generate most of our net income, and our earnings growth is impacted by the levels of organic growth within our Same Store Facilities (as defined below) as well as within our Acquired Facilities and Newly Developed and Expanded Facilities (both as defined below).During 2024, revenues generated by our Same Store Facilities decreased by 0.7% ($26.7 million), as compared to 2023, while Same Store cost of operations increased by 2.4% ($20.6 million). Softness in demand for our storage space has led to lower move-in rental rates for new tenants and lower average occupancy in 2024 as compared to 2023.
We have grown and plan to continue to grow through the acquisition and development of new facilities and expansion of our existing self-storage facilities. Since the beginning of 2022, we acquired a total of 260 facilities with 18.5 million net rentable square feet for $3.7 billion. Additionally, within our non-same store portfolio, our Newly Developed and Expanded Facilities (as defined below) include a total of 132 self-storage facilities with 15.8 million net rentable square feet. For development and expansions completed by December 31, 2024, we incurred a total cost of $1.6 billion. During 2024, combined net operating income generated by our Acquired Facilities and Newly Developed and Expanded Facilities increased 48.1% ($101.0 million), as compared to 2023.
We have experienced recent inflationary impacts on our cost of operations including labor, utilities, and repairs and maintenance, and costs of development and expansion activities, and we expect to experience such impacts in the future. We have implemented various initiatives to manage the adverse impacts, such as enhancements in operational processes and investments in technology to reduce payroll hours, achievement of economies of scale from recent acquisitions with supervisory payroll and centralized management costs allocated over a broader number of self-storage facilities, and investments in solar power and LED lights to lower utility usage.
In order to enhance the competitive position of certain of our facilities relative to local competitors (including newly developed facilities), we embarked on our multi-year Property of Tomorrow program to (i) rebrand our properties with more pronounced, attractive, and clearly identifiable color schemes and signage and (ii) upgrade the configuration and layout of the offices and other customer zones to improve the customer experience. We completed the program in 2024. We spent approximately $127 million on the program in 2024. We have also embarked on a solar program under which we plan to install solar panels on over 1,400 of our self-storage facilities. We have completed the installations on 772 facilities through December 31, 2024. We spent approximately $54 million on the program in 2024 and expect to spend approximately $50 million in 2025 on this effort.
During 2024, PSOC completed a public offering of $1.0 billion aggregate principal amount of unsecured senior notes in various tranches and maturities and issued €150 million of senior notes to institutional investors. PSOC also repaid at maturity $700 million aggregate principal amount of floating rate senior notes and €100 million aggregate principal amount of senior notes.24During 2024, we repurchased 726,865 of our common shares under our previously announced share repurchase program on the open market for a total cost of $200.0 million, driven by our expected improvement in operating fundamentals and growth.
During 2024, we sold 184,390 of our common shares on the open market through our “at the market” offering program for aggregate net proceeds of approximately $60.3 million in cash.
In early 2025, multiple wildfires erupted in southern California and caused significant destruction of business and residential structures. We did not incur any direct property damage in the affected areas. In response to the devastation, a “State of Emergency” has been declared for Los Angeles County and Ventura County, under which a temporary governmental pricing limitation is in place for our self-storage facilities located in these counties. These self-storage facilities generated approximately 10% of revenues earned by our Same Store Facilities in 2024. We anticipate a potentially significant negative impact on the revenue growth from these self-storage facilities, the extent of which depends largely on the duration of the State of Emergency order and other future actions by government authorities, among other factors.
25Results of OperationsOperating Results for 2024 and 2023In 2024, net income allocable to our common shareholders was $1.873 billion or $10.64 per diluted common share, compared to $1.949 billion or $11.06 per diluted common share in 2023, representing a decrease of $76.1 million or $0.42 per diluted common share. The decrease is due primarily to (i) a $159.7 million increase in depreciation and amortization expense, (ii) an $86.3 million increase in interest expense, (iii) a $26.0 million increase in general and administrative expense, (iv) an $18.4 million decrease in interest and other income, partially offset by (v) a $153.4 million increase in foreign currency exchange gains primarily associated with our Euro denominated notes payable and (vi) a $61.6 million increase in self-storage net operating income.
The $61.6 million increase in self-storage net operating income in 2024 as compared to 2023 is a result of a $108.9 million increase attributable to our Non-Same Store Facilities (as defined below), partially offset by a $47.3 million decrease attributable to our Same Store Facilities. Revenues for the Same Store Facilities decreased 0.7% or $26.7 million in 2024 as compared to 2023, due primarily to a decline in occupancy and lower realized annual rent per occupied square foot. Cost of operations for the Same Store Facilities increased by 2.4% or $20.6 million in 2024 as compared to 2023, due primarily to increased property tax expense, marketing expense, and repairs and maintenance expense, partially offset by decreased centralized management costs and on-site property manager payroll expense. The increase in net operating income of $108.9 million for the Non-Same Store Facilities is due primarily to the impact of facilities acquired in 2023.
Operating Results for 2023 and 2022
In 2023, net income allocable to our common shareholders was $1.949 billion or $11.06 per diluted common share, compared to $4.142 billion or $23.50 per diluted common share in 2022, representing a decrease of $2.2 billion or $12.44 per diluted common share. The decrease is due primarily to (i) a $2.1 billion gain on sale of our equity investment in PS Business Parks, Inc. (“PSB”) in July 2022, (ii) a $149.5 million increase in foreign currency exchange losses primarily associated with our Euro denominated notes payable, (iii) a $79.1 million decrease in equity in earnings of unconsolidated real estate entities due to our sale of PSB in July 2022, and (iv) a $64.8 million increase in interest expense, partially offset by (v) a $231.8 million increase in self-storage net operating income and (vi) a $45.0 million increase in interest and other income.
The $231.8 million increase in self-storage net operating income in 2023 as compared to 2022 is a result of a $131.8 million increase in our Same Store Facilities and a $100.0 million increase in our Non-Same Store Facilities. Revenues for the Same Store Facilities increased 4.8% or $170.2 million in 2023 as compared to 2022, due primarily to higher realized annual rent per available square foot, partially offset by a decline in occupancy. Cost of operations for the Same Store Facilities increased by 4.6% or $38.4 million in 2023 as compared to 2022, due primarily to increased property tax expense, marketing expense and other direct property costs. The increase in net operating income of $100.0 million for the Non-Same Store Facilities is due primarily to the impact of facilities acquired in 2022 and 2023.Funds from Operations and Core Funds from Operations
Funds from Operations (“FFO”) and FFO per diluted common share (“FFO per share”) are non-GAAP measures defined by Nareit. We believe that FFO and FFO per share are useful to REIT investors and analysts in measuring our performance because Nareit’s definition of FFO excludes items included in net income that do not relate to or are not indicative of our operating and financial performance. FFO represents net income before real estate-related depreciation and amortization, which is excluded because it is based upon historical costs and assumes that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. FFO also excludes gains or losses on sale of real estate assets and real estate impairment charges, which are also based upon historical costs and are impacted by historical depreciation. FFO and FFO per share are not a substitute for net income or earnings per share. FFO is not a substitute for net cash flow in evaluating our liquidity or ability to pay dividends, because it excludes investing and financing activities presented on our consolidated statements of cash flows. In addition, other REITs may compute these measures differently, so comparisons among REITs may not be helpful.For the year ended December 31, 2024, FFO was $17.19 per diluted common share as compared to $16.60 and $16.46 per diluted common share for the years ended December 31, 2023 and 2022, respectively, representing an increase in 2024 of 3.6%, or $0.59 per diluted common share, as compared to 2023.26We also present “Core FFO” and “Core FFO per share” non-GAAP measures that represent FFO and FFO per share excluding the impact of (i) foreign currency exchange gains and losses, (ii) charges related to the redemption of preferred securities, and (iii) certain other non-cash and/or nonrecurring income or expense items primarily representing, with respect to the periods presented below, the impact of loss contingencies and resolutions, casualties, due diligence costs incurred in pursuit of strategic transactions, unrealized gain on private equity investments, reorganization costs, acquisition integration costs, amortization of acquired non real estate-related intangibles, a cash and stock hiring bonus for a new senior executive, and our equity share of tax effect of a change in tax status, unrealized gain on derivatives, merger transaction costs and senior executive severance from our equity investees. We review Core FFO and Core FFO per share to evaluate our ongoing operating performance and we believe they are used by investors and REIT analysts in a similar manner. However, Core FFO and Core FFO per share are not substitutes for net income and net income per share. Because other REITs may not compute Core FFO or Core FFO per share in the same manner as we do, may not use the same terminology or may not present such measures, Core FFO and Core FFO per share may not be comparable among REITs.
27The following table reconciles net income to FFO and Core FFO and reconciles diluted earnings per share to FFO per share and Core FFO per share:
Year Ended December 31, Year Ended December 31,2024 2023 Percentage Change 2023 2022 Percentage Change(Amounts in thousands, except per share data)
Reconciliation of Net Income to FFO and Core FFO:Net income allocable to common shareholders $ 1,872,685 $ 1,948,741 (3.9) % $ 1,948,741 $ 4,142,288 (53.0) %Eliminate items excluded from FFO:Real estate-related depreciation and amortization 1,117,752 962,703 962,703 881,569
Real estate-related depreciation from unconsolidated real estate investment 44,181 36,769 36,769 54,822
Real estate-related depreciation allocated to noncontrolling interests and restricted share unitholders and unvested LTIP unitholders (7,167) (6,635) (6,635) (6,622)
Gains on sale of real estate investments, including our equity share from investment (1,537) (17,290) (17,290) (54,403)
Gain on sale of equity investment in PS Business Parks, Inc. — — — (2,116,839)
FFO allocable to common shares $ 3,025,914 $ 2,924,288 3.5 % $ 2,924,288 $ 2,900,815 0.8 %
Eliminate the impact of items excluded from Core FFO, including our equity share from investment:
Foreign currency exchange (gain) loss (102,244) 51,197 51,197 (98,314)
Unrealized gain on private equity investments (4,355) (2,817) (2,817) (4,685)
Hiring bonus for a new senior executive 3,507 — — —
Other items 12,246 3,264 3,264 9,164
Core FFO allocable to common shares $ 2,935,068 $ 2,975,932 (1.4) % $ 2,975,932 $ 2,806,980 6.0 %Reconciliation of Diluted Earnings per Share to FFO per Share and Core FFO per Share:Diluted earnings per share $ 10.64 $ 11.06 (3.8) % $ 11.06 $ 23.50 (52.9) %Eliminate amounts per share excluded from FFO:Real estate-related depreciation and amortization 6.56 5.64 5.64 5.27
Gains on sale of real estate investments, including our equity share from investment (0.01) (0.10) (0.10) (0.31)
Gain on sale of equity investment in PS Business Parks, Inc. — — — (12.00)
FFO per share $ 17.19 $ 16.60 3.6 % $ 16.60 $ 16.46 0.9 %
Eliminate the per share impact of items excluded from Core FFO, including our equity share from investment:
Foreign currency exchange (gain) loss (0.58) 0.29 0.29 (0.57)
Unrealized gain on private equity investments (0.02) (0.02) (0.02) (0.03)
Hiring bonus for a new senior executive 0.02 — — —
Other items 0.06 0.02 0.02 0.06
Core FFO per share $ 16.67 $ 16.89 (1.3) % $ 16.89 $ 15.92 6.1 %
Diluted weighted average common shares 176,038 176,143 176,143 176,280
28Analysis of Net Income — Self-Storage OperationsOur self-storage operations are analyzed in four groups: (i) the 2,507 facilities that we have owned and operated on a stabilized basis since January 1, 2022 (the “Same Store Facilities”), (ii) 260 facilities we acquired since January 1, 2022 (the “Acquired Facilities”), (iii) 132 facilities that have been newly developed or expanded, or that had commenced expansion by December 31, 2024 (the “Newly Developed and Expanded Facilities”), and (iv) 174 other facilities, which are otherwise not stabilized with respect to occupancies or rental rates since January 1, 2022 (the “Other Non-Same Store Facilities”). The Acquired Facilities, Newly Developed and Expanded Facilities, and Other Non-Same Store Facilities are collectively referred to as the Non-Same Store Facilities. See Note 13 to our December 31, 2024 consolidated financial statements “Segment Information,” for a reconciliation of the amounts in the tables below to our total net income.
29Self-Storage Operations
Summary Year Ended December 31, Year Ended December 31,2024 2023 Percentage Change 2023 2022 Percentage Change(Dollar amounts and square footage in thousands)Revenues:
Same Store Facilities $ 3,676,632 $ 3,703,331 (0.7) % $ 3,703,331 $ 3,533,149 4.8 %
Acquired Facilities 241,314 105,592 128.5 % 105,592 14,945 606.5 %
Newly Developed and Expanded Facilities 225,845 208,235 8.5 % 208,235 182,686 14.0 %
Other Non-Same Store Facilities 252,202 242,455 4.0 % 242,455 215,248 12.6 %
4,395,993 4,259,613 3.2 % 4,259,613 3,946,028 7.9 %
Cost of operations:
Same Store Facilities 895,283 874,715 2.4 % 874,715 836,297 4.6 %
Acquired Facilities 81,583 39,833 104.8 % 39,833 7,885 405.2 %
Newly Developed and Expanded Facilities 74,414 63,823 16.6 % 63,823 54,411 17.3 %
Other Non-Same Store Facilities 85,440 83,579 2.2 % 83,579 81,616 2.4 %
1,136,720 1,061,950 7.0 % 1,061,950 980,209 8.3 %Net operating income (a):Same Store Facilities 2,781,349 2,828,616 (1.7) % 2,828,616 2,696,852 4.9 %
Acquired Facilities 159,731 65,759 142.9 % 65,759 7,060 831.4 %
Newly Developed and Expanded Facilities 151,431 144,412 4.9 % 144,412 128,275 12.6 %
Other Non-Same Store Facilities 166,762 158,876 5.0 % 158,876 133,632 18.9 %
Total net operating income 3,259,273 3,197,663 1.9 % 3,197,663 2,965,819 7.8 %Depreciation and amortization expense:Same Store Facilities 682,783 658,334 3.7 % 658,334 654,238 0.6 %
Acquired Facilities 237,892 112,247 111.9 % 112,247 18,494 506.9 %
Newly Developed and Expanded Facilities 69,430 56,163 23.6 % 56,163 49,102 14.4 %
Other Non-Same Store Facilities 139,661 143,312 (2.5) % 143,312 166,312 (13.8) %
Total depreciation and amortization expense 1,129,766 970,056 16.5 % 970,056 888,146 9.2 %Net income (loss):Same Store Facilities 2,098,566 2,170,282 (3.3) % 2,170,282 2,042,614 6.3 %
Acquired Facilities (78,161) (46,488) 68.1 % (46,488) (11,434) 306.6 %
Newly Developed and Expanded Facilities 82,001 88,249 (7.1) % 88,249 79,173 11.5 %
Other Non-Same Store Facilities 27,101 15,564 74.1 % 15,564 (32,680) (147.6) %
Total net income $ 2,129,507 $ 2,227,607 (4.4) % $ 2,227,607 $ 2,077,673 7.2 %Number of facilities at period end:Same Store Facilities 2,507 2,507 — % 2,507 2,507 — %
Acquired Facilities 260 238 9.2 % 238 74 221.6 %
Newly Developed and Expanded Facilities 132 125 5.6 % 125 114 9.6 %
Other Non-Same Store Facilities 174 174 — % 174 174 — %
3,073 3,044 1.0 % 3,044 2,869 6.1 %Net rentable square footage at period end:Same Store Facilities 169,959 169,959 — % 169,959 169,959 — %
Acquired Facilities 18,473 16,807 9.9 % 16,807 4,726 255.6 %
Newly Developed and Expanded Facilities 15,805 14,134 11.8 % 14,134 12,398 14.0 %
Other Non-Same Store Facilities 17,043 17,171 (0.7) % 17,171 17,134 0.2 %
221,280 218,071 1.5 % 218,071 204,217 6.8 %
30
(a) Net operating income or “NOI” is a non-GAAP financial measure that excludes the impact of depreciation and amortization expense, which is based upon historical real estate costs and assumes that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. We utilize NOI in determining current property values, evaluating property performance, and evaluating property operating trends. We believe that investors and analysts utilize NOI in a similar manner. NOI is not a substitute for net income, operating cash flow, or other related financial measures, in evaluating our operating results. See Note 13 to our December 31, 2024 consolidated financial statements for a reconciliation of NOI to our total net income for all periods presented.Same Store FacilitiesThe Same Store Facilities consist of facilities we have owned and operated on a stabilized level of occupancy, revenues, and cost of operations since January 1, 2022. The composition of our Same Store Facilities allows us more effectively to evaluate the ongoing performance of our self-storage portfolio in 2022, 2023, and 2024 and exclude the impact of fill-up of unstabilized facilities, which can significantly affect operating trends. We believe investors and analysts use Same Store Facilities information in a similar manner. However, because other REITs may not compute Same Store Facilities in the same manner as we do, may not use the same terminology or may not present such a measure, Same Store Facilities may not be comparable among REITs.
The following table summarizes the historical operating results (for all periods presented) of these 2,507 facilities (170.0 million net rentable square feet) that represent approximately 77% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at December 31, 2024. It includes various measures and detail that we do not include in the analysis of the developed, acquired, and other non-same store facilities, due to the relative magnitude and importance of the Same Store Facilities relative to our other self-storage facilities.
31
Selected Operating Data for the Same Store Facilities (2,507 facilities)Year Ended December 31, Year Ended December 31,2024 2023 Change (e) 2023 2022 Change (e)(Dollar amounts in thousands, except for per square foot data)
Revenues (a):Rental income $ 3,550,125 $ 3,577,609 (0.8)% $ 3,577,609 $ 3,419,212 4.6%
Late charges and administrative fees 126,507 125,722 0.6% 125,722 113,937 10.3%
Total revenues 3,676,632 3,703,331 (0.7)% 3,703,331 3,533,149 4.8%Direct cost of operations (a):Property taxes 347,511 331,982 4.7% 331,982 320,795 3.5%
On-site property manager payroll 132,493 137,162 (3.4)% 137,162 133,248 2.9%
Repairs and maintenance 75,354 69,151 9.0% 69,151 65,071 6.3%
Utilities 47,643 49,580 (3.9)% 49,580 50,606 (2.0)%
Marketing 84,936 75,080 13.1% 75,080 52,540 42.9%
Other direct property costs 101,104 98,054 3.1% 98,054 90,081 8.9%
Total direct cost of operations 789,041 761,009 3.7% 761,009 712,341 6.8%
Direct net operating income (b) 2,887,591 2,942,322 (1.9)% 2,942,322 2,820,808 4.3%
Indirect cost of operations (a):
Supervisory payroll (40,568) (41,444) (2.1)% (41,444) (44,091) (6.0)%
Centralized management costs (55,834) (60,659) (8.0)% (60,659) (64,046) (5.3)%
Share-based compensation (9,840) (11,603) (15.2)% (11,603) (15,819) (26.7)%
Net operating income 2,781,349 2,828,616 (1.7)% 2,828,616 2,696,852 4.9%
Depreciation and amortization expense (682,783) (658,334) 3.7% (658,334) (654,238) 0.6%
Net income $ 2,098,566 $ 2,170,282 (3.3)% $ 2,170,282 $ 2,042,614 6.3%
Gross margin (before indirect costs, depreciation and amortization expense) 78.5% 79.5% (1.0)% 79.5% 79.8% (0.3)%
Gross margin (before depreciation and amortization expense) 75.6% 76.4% (0.8)% 76.4% 76.3% 0.1%Weighted average for the period:Square foot occupancy 92.4% 93.0% (0.6)% 93.0% 94.6% (1.6)%Realized annual rental income per (c):Occupied square foot $ 22.61 $ 22.64 (0.1)% $ 22.64 $ 21.28 6.4%
Available square foot $ 20.89 $ 21.05 (0.8)% $ 21.05 $ 20.12 4.6%At December 31:Square foot occupancy 90.5% 91.3% (0.8)% 91.3% 92.0% (0.7)%
Annual contract rent per occupied square foot (d) $ 22.89 $ 22.80 0.4% $ 22.80 $ 22.61 0.8%
32(a) Revenues and cost of operations do not include tenant reinsurance and merchandise sale revenues and expenses generated at the facilities. See “Ancillary Operations” below for more information.
(b) Direct net operating income (“Direct NOI”), a subtotal within NOI, is a non-GAAP financial measure that excludes the impact of supervisory payroll, centralized management costs, and share-based compensation in addition to depreciation and amortization expense. We utilize direct net operating income in evaluating property performance and in evaluating property operating trends as compared to our competitors.
(c) Realized annual rent per occupied square foot is computed by dividing rental income, before late charges and administrative fees, by the weighted average occupied square feet for the period. Realized annual rent per available square foot (“REVPAF”) is computed by dividing rental income, before late charges and administrative fees, by the total available net rentable square feet for the period. These measures exclude late charges and administrative fees in order to provide a better measure of our ongoing level of revenue. Late charges are dependent upon the level of delinquency, and administrative fees are dependent upon the level of move-ins. In addition, the rates charged for late charges and administrative fees can vary independently from rental rates. These measures take into consideration promotional discounts, which reduce rental income.
(d) Annual contract rent represents the agreed upon monthly rate that is paid by our tenants in place at the time of measurement. Contract rates are initially set in the lease agreement upon move-in, and we adjust them from time to time with notice. Contract rent excludes other fees that are charged on a per-item basis, such as late charges and administrative fees, does not reflect the impact of promotional discounts, and does not reflect the impact of rents that are written off as uncollectible.
(e) Represents the absolute nominal change with respect to gross margin and square foot occupancy, and the percentage change with respect to all other items.
Analysis of Same Store Revenue
We believe a balanced occupancy and rate strategy maximizes our revenues over time. We regularly adjust rental rates and promotional discounts offered (generally, “$1.00 rent for the first month”), as well as our marketing efforts to maximize revenue from new tenants to replace tenants that vacate.We typically increase rental rates to our long-term tenants (generally, those who have been with us for at least six months) every six to twelve months. As a result, the number of long-term tenants we have in our facilities is an important factor in our revenue growth. The level of rate increases to long-term tenants is based upon evaluating the additional revenue from the increase against the negative impact of incremental move-outs, by considering customers’ in-place rent and prevailing market rents, among other factors.Comparison of the Year Ended December 31, 2024 to the Year Ended December 31, 2023Revenues generated by our Same Store Facilities decreased 0.7% in 2024 as compared to 2023, due primarily to a 0.6% decrease in average occupancy and a 0.1% decrease in realized annual rent per occupied square foot.
The decrease in realized annual rent per occupied square foot in 2024 as compared to 2023 was due to a 11.6% decrease in average rates per square foot charged to new tenants moving in over the past twelve months, partially offset by cumulative rate increases to existing long-term tenants over the same period. At December 31, 2024, annual contract rent per occupied square foot was 0.4% higher as compared to December 31, 2023.
The weighted average square foot occupancy for our Same Store Facilities was 92.4% for 2024, representing a decrease of 0.6%, as compared to 2023. Occupancy levels have gradually declined since the second half of 2022 as customer demand softened. In response, we lowered move-in rental rates and increased advertising spending to stimulate move-in activity at our facilities in 2024 as compared to 2023.
Move-out activities from our tenants were lower in 2024 as compared to 2023. More than half of our tenants have rented their space for longer than six months at December 31, 2024, which supported our revenue growth from existing long-term tenants.
Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022
Revenues generated by our Same Store Facilities increased 4.8% in 2023 as compared to 2022, due primarily to a 6.4% increase in realized annual rent per occupied square foot, partially offset by a 1.6% decrease in average occupancy.
33
The increase in realized annual rent per occupied square foot in 2023 as compared to 2022 was due to cumulative rate increases to existing long-term tenants over the past twelve months, partially offset by a 13.9% decrease in average rates per square foot charged to new tenants moving in who replaced tenants moving out with higher rental rates. At December 31, 2023, annual contract rent per occupied square foot was 0.8% higher as compared to December 31, 2022.
The weighted average square foot occupancy for our Same Store Facilities was 93.0% for 2023, representing a decrease of 1.6%, as compared to 2022. Occupancy levels have gradually declined since the second half of 2022. In response we lowered move-in rental rates and increased promotional activity and advertising spending to increase move-in activity at our facilities in 2023 as compared to 2022.
Move-out activities from our tenants were higher in 2023 as compared to 2022. Average length of stay of our tenants remained at similar high levels in 2023 as compared to 2022, which supported our revenue growth from existing long-term tenants.Selected Key Move-in and Move-Out Statistical DataThe following table sets forth average annual contract rent per square foot and total square footage for tenants moving in and moving out during the years ended December 31, 2024, 2023, and 2022. Contract rents gained from move-ins and contracts rents lost from move-outs included in the table assume move-in and move-out activities occur at the beginning of each period presented. The table also includes promotional discounts, which vary based upon the move-in contractual rates, move-in volume, and percentage of tenants moving in who receive the discount.Year Ended December 31, Year Ended December 31,2024 2023 Change 2023 2022 Change(Amounts in thousands, except for per square foot amounts)
Tenants moving in during the period:Average annual contract rent per square foot $ 13.76 $ 15.57 (11.6)% $ 15.57 $ 18.08 (13.9)%
Square footage 120,176 121,432 (1.0)% 121,432 112,410 8.0%
Contract rents gained from move-ins $ 1,653,622 $ 1,890,696 (12.5)% $ 1,890,696 $ 2,032,373 (7.0)%
Promotional discounts given $ 61,736 $ 66,031 (6.5)% $ 66,031 $ 60,839 8.5%Tenants moving out during the period:Average annual contract rent per square foot $ 20.70 $ 21.20 (2.4)% $ 21.20 $ 20.53 3.3%
Square footage 121,425 122,489 (0.9)% 122,489 116,404 5.2%
Contract rents lost from move-outs $ 2,513,498 $ 2,596,767 (3.2)% $ 2,596,767 $ 2,389,774 8.7%
Industry-wide demand was weaker in 2024 compared to 2023 partially due to lower home-moving activities offset by increases in customers who sought storage space for other reasons. Demand fluctuates due to various local and regional factors, including the overall economy, as well as new supply of self-storage space and alternatives to self-storage.
We expect industry-wide demand from new customers in 2025 to be similar to 2024. However, following the recent wildfires in southern California in early 2025, we anticipate a potentially significant negative impact on the revenue growth from the self-storage facilities located in Los Angeles County and Ventura County, where a temporary governmental pricing limitation is in place under the “State of Emergency” declarations. These self-storage facilities generated approximately 10% of revenues earned by our Same Store Facilities in 2024. As a result, we expect Same Store Facilities revenues in 2025 to be similar to those earned in 2024.Late Charges and Administrative FeesLate charges and administrative fees increased 0.6% and 10.3% in 2024 and 2023, respectively, in each case as compared to the previous year. The increase in 2024 was due primarily to higher late charges and lien fees collected on delinquent accounts. The increase in 2023 was due to higher late charges collected on delinquent accounts and higher administrative fees resulting from higher move-in volumes. Delinquency rates remained at similar levels for 2024 as compared to 2023.
34Analysis of Same Store Cost of OperationsCost of operations (excluding depreciation and amortization) increased 2.4% and 4.6% in 2024 and 2023, respectively, in each case as compared to the previous year. The increase in 2024 was due primarily to increased property tax expense, marketing expense, and repairs and maintenance expense, partially offset by decreased centralized management costs and on-site property manager payroll expense. The increase in 2023 was due primarily to increased property tax expense, marketing expense, and other direct property costs.
Property tax expense increased 4.7% and 3.5% in 2024 and 2023, respectively, in each case as compared to the previous year, as a result of higher assessed values. We expect property tax expense to grow approximately 5% in 2025 due primarily to higher assessed values.
On-site property manager payroll expense decreased 3.4% in 2024 as compared to 2023 and increased 2.9% in 2023 as compared to 2022. The decrease in 2024 was primarily due to reduction in labor hours driven by the implementation of dynamic staffing models based on customer activity levels. The increase in 2023 was primarily due to increases in wage rates as a result of competitive labor conditions experienced in most geographical markets. We expect on-site property manager payroll expense to decrease moderately in 2025 as compared to 2024 as we continue to enhance operational processes.
Repairs and maintenance expense increased 9.0% and 6.3% in 2024 and 2023, respectively, in each case as compared to the previous year. Repairs and maintenance expense levels are dependent upon many factors such as (i) damage and equipment malfunctions, (ii) short-term local supply and demand factors for material and labor, and (iii) weather conditions, which can impact costs such as snow removal, roof repairs, and HVAC maintenance and repairs.
Our utility expense consists primarily of electricity costs, which are dependent upon energy prices and usage levels. Changes in usage levels are driven primarily by weather and temperature. Utility expense decreased 3.9% and 2.0% in 2024 and 2023, respectively, in each case as compared to the previous year, due primarily to our investment in energy saving technology such as solar power and LED lights, which generate favorable returns on investment in the form of lower utility usage. We expect a decline in utility expense in 2025 as compared to 2024 as we continue our investment in solar power.
Marketing expense includes Internet advertising we utilize through our online paid search programs, television advertising and the operating costs of our website and telephone reservation center. Internet advertising expense, comprising keyword search fees assessed on a “per click” basis, varies based upon demand for self-storage space, the quantity of people inquiring about self-storage through online search, occupancy levels, the number and aggressiveness of bidding competitors, and other factors. These factors are volatile; accordingly, Internet advertising can increase or decrease significantly in the short-term. We increased marketing expense by 13.1% and 42.9% in 2024 and 2023, respectively, in each case as compared to the previous year, primarily by utilizing a higher volume of online paid search programs to attract new tenants. We plan to continue to use internet advertising and other advertising channels to support move-in volumes in 2025.
Other direct property costs include administrative expenses specific to each self-storage facility, such as property loss, telephone and data communication lines, business license costs, bank charges related to processing the facilities’ cash receipts, tenant mailings, credit card fees, eviction costs, and the cost of operating each property’s rental office. These costs increased 3.1% in 2024 as compared to 2023 and 8.9% in 2023 as compared to 2022. The increase in 2024 was primarily due to increased property loss and restoration expenses related to fire and flooding events. The increase in 2023 was due primarily to an increase in credit card fees as a result of year-over-year increases in revenues, combined with a long-term trend of more customers paying with credit cards rather than cash, checks, or other methods of payment with lower transaction costs.
Centralized management costs represent administrative and cash compensation expenses for shared general corporate functions to the extent their efforts are devoted to self-storage operations. Such functions include information technology support, hardware, and software, as well as centralized administration of payroll, benefits, training, repairs and maintenance, customer service, pricing and marketing, operational accounting and finance, legal costs, and costs from field management executives. Centralized management costs decreased 8.0% in 2024 as compared to 2023 and decreased 5.3% in 2023 as compared to 2022, primarily driven by achievement of economies of scale from recent acquisitions with centralized management costs allocated over a broader number of self-storage facilities including non-same store facilities.
35Analysis of Market Trends
The following tables set forth selected market trends in our Same Store Facilities:
Same Store Facilities Operating Trends by MarketAs of December 31, 2024Year Ended December 31,Number of Facilities Square Feet (millions) Realized Rent per Occupied Square Foot Average Occupancy Realized Rent per Available Square Foot
2024 2023 Change (a) 2024 2023 Change (a) 2024 2023 Change (a)
Los Angeles 218 15.9 $ 36.09 $ 35.83 0.7 % 94.6 % 95.4 % (0.8) % $ 34.15 $ 34.16 — %
San Francisco 130 8.1 32.69 32.22 1.5 % 94.3 % 94.3 % — % 30.81 30.38 1.4 %
New York 91 6.7 32.26 32.07 0.6 % 93.6 % 93.3 % 0.3 % 30.19 29.93 0.9 %Washington DC 109 7.3 26.92 26.62 1.1 % 92.8 % 91.7 % 1.1 % 24.97 24.40 2.3 %Miami 87 6.3 29.93 30.01 (0.3) % 93.1 % 93.6 % (0.5) % 27.88 28.08 (0.7) %
Dallas-Ft. Worth 130 9.7 18.26 18.18 0.4 % 89.2 % 91.6 % (2.4) % 16.29 16.65 (2.2) %
Seattle-Tacoma 92 6.3 25.61 25.78 (0.7) % 92.9 % 92.5 % 0.4 % 23.78 23.84 (0.3) %
Houston 117 9.2 16.96 16.74 1.3 % 91.7 % 91.8 % (0.1) % 15.55 15.37 1.2 %
Chicago 131 8.3 20.53 20.21 1.6 % 92.9 % 93.0 % (0.1) % 19.08 18.80 1.5 %Atlanta 107 7.1 17.30 17.93 (3.5) % 88.2 % 90.8 % (2.6) % 15.27 16.29 (6.3) %Orlando-Daytona 69 4.4 18.85 19.65 (4.1) % 91.7 % 93.3 % (1.6) % 17.28 18.34 (5.8) %
West Palm Beach 41 3.1 26.11 26.59 (1.8) % 92.3 % 93.4 % (1.1) % 24.09 24.84 (3.0) %
Philadelphia 57 3.6 20.95 21.42 (2.2) % 92.9 % 92.9 % — % 19.45 19.91 (2.3) %
Baltimore 38 2.8 23.33 23.75 (1.8) % 92.4 % 91.1 % 1.3 % 21.56 21.63 (0.3) %
Charlotte 55 4.2 16.00 16.18 (1.1) % 91.3 % 92.9 % (1.6) % 14.60 15.04 (2.9) %
All other markets 1,035 67.0 18.40 18.55 (0.8) % 92.5 % 93.0 % (0.5) % 17.01 17.25 (1.4) %
Totals 2,507 170.0 $ 22.61 $ 22.64 (0.1) % 92.4 % 93.0 % (0.6) % $ 20.89 $ 21.05 (0.8) %(a) Represents the absolute nominal change with respect to square foot occupancy, and the percentage change with respect to all other items.36Same Store Facilities Operating Trends by Market (Continued)
Year Ended December 31,
Revenues ($000's) Direct Expenses ($000's) Indirect Expenses ($000's) Net Operating Income ($000's)2024 2023 Change
2024 2023 Change
2024 2023 Change
2024 2023 Change
Los Angeles $ 555,529 $ 555,989 (0.1) % $ 70,934 $ 73,638 (3.7) % $ 10,437 $ 11,160 (6.5) % $ 474,158 $ 471,191 0.6 %San Francisco 253,191 249,790 1.4 % 39,403 38,835 1.5 % 5,631 5,958 (5.5) % 208,157 204,997 1.5 %New York 208,182 206,118 1.0 % 51,003 49,282 3.5 % 4,409 4,711 (6.4) % 152,770 152,125 0.4 %Washington DC 188,317 184,028 2.3 % 37,760 37,260 1.3 % 5,064 5,065 — % 145,493 141,703 2.7 %Miami 181,575 182,939 (0.7) % 42,621 34,936 22.0 % 3,838 4,087 (6.1) % 135,116 143,916 (6.1) %
Dallas-Ft. Worth 165,396 169,311 (2.3) % 40,153 38,154 5.2 % 5,001 5,514 (9.3) % 120,242 125,643 (4.3) %
Seattle-Tacoma 154,195 154,556 (0.2) % 30,854 28,193 9.4 % 3,974 3,983 (0.2) % 119,367 122,380 (2.5) %
Houston 149,672 148,111 1.1 % 39,829 38,830 2.6 % 4,778 5,062 (5.6) % 105,065 104,219 0.8 %
Chicago 163,809 161,420 1.5 % 61,786 61,071 1.2 % 5,306 5,558 (4.5) % 96,717 94,791 2.0 %Atlanta 114,192 121,446 (6.0) % 27,458 24,661 11.3 % 4,485 4,719 (5.0) % 82,249 92,066 (10.7) %Orlando-Daytona 79,089 83,774 (5.6) % 16,988 16,429 3.4 % 2,945 3,172 (7.2) % 59,156 64,173 (7.8) %
West Palm Beach 76,476 78,831 (3.0) % 16,892 17,020 (0.8) % 1,967 2,121 (7.3) % 57,617 59,690 (3.5) %
Philadelphia 74,063 75,654 (2.1) % 16,587 16,701 (0.7) % 2,391 2,549 (6.2) % 55,085 56,404 (2.3) %
Baltimore 63,971 64,141 (0.3) % 13,010 12,282 5.9 % 1,599 1,678 (4.7) % 49,362 50,181 (1.6) %
Charlotte 63,612 65,385 (2.7) % 12,826 12,193 5.2 % 2,105 2,198 (4.2) % 48,681 50,994 (4.5) %
All other markets 1,185,363 1,201,838 (1.4) % 270,937 261,524 3.6 % 42,312 46,171 (8.4) % 872,114 894,143 (2.5) %
Totals $ 3,676,632 $ 3,703,331 (0.7) % $ 789,041 $ 761,009 3.7 % $ 106,242 $ 113,706 (6.6) % $ 2,781,349 $ 2,828,616 (1.7) %
37
Same Store Facilities Operating Trends by Market (Continued)
As of December 31, 2024
Year Ended December 31,
Number of Facilities Square Feet (millions) Realized Rent per Occupied Square Foot Average Occupancy Realized Rent per Available Square Foot
2023 2022 Change (a)
2023 2022 Change (a)
2023 2022 Change (a)
Los Angeles 218 15.9 $ 35.83 $ 32.33 10.8 % 95.4 % 96.8 % (1.4) % $ 34.16 $ 31.28 9.2 %
San Francisco 130 8.1 32.22 31.06 3.7 % 94.3 % 95.2 % (0.9) % 30.38 29.56 2.8 %
New York 91 6.7 32.07 30.53 5.0 % 93.3 % 94.3 % (1.0) % 29.93 28.80 3.9 %
Washington DC 109 7.3 26.62 25.55 4.2 % 91.7 % 92.6 % (0.9) % 24.40 23.66 3.1 %
Miami 87 6.3 30.01 28.01 7.1 % 93.6 % 95.6 % (2.0) % 28.08 26.77 4.9 %
Dallas-Ft. Worth 130 9.7 18.18 16.71 8.8 % 91.6 % 93.9 % (2.3) % 16.65 15.70 6.1 %
Seattle-Tacoma 92 6.3 25.78 24.81 3.9 % 92.5 % 94.0 % (1.5) % 23.84 23.32 2.2 %
Houston 117 9.2 16.74 15.43 8.5 % 91.8 % 93.2 % (1.4) % 15.37 14.38 6.9 %
Chicago 131 8.3 20.21 19.22 5.2 % 93.0 % 93.6 % (0.6) % 18.80 18.00 4.4 %
Atlanta 107 7.1 17.93 17.17 4.4 % 90.8 % 93.7 % (2.9) % 16.29 16.10 1.2 %
Orlando-Daytona 69 4.4 19.65 17.96 9.4 % 93.3 % 95.9 % (2.6) % 18.34 17.22 6.5 %
West Palm Beach 41 3.1 26.59 25.11 5.9 % 93.4 % 95.7 % (2.3) % 24.84 24.03 3.4 %
Philadelphia 57 3.6 21.42 20.82 2.9 % 92.9 % 94.3 % (1.4) % 19.91 19.64 1.4 %
Baltimore 38 2.8 23.75 22.84 4.0 % 91.1 % 92.4 % (1.3) % 21.63 21.10 2.5 %
Charlotte 55 4.2 16.18 15.04 7.6 % 92.9 % 94.9 % (2.0) % 15.04 14.27 5.4 %
All other markets 1035 67.0 18.55 17.59 5.5 % 93.0 % 94.6 % (1.6) % 17.25 16.64 3.7 %
Totals 2,507 170.0 $ 22.64 $ 21.28 6.4 % 93.0 % 94.6 % (1.6) % $ 21.05 $ 20.12 4.6 %
(a) Represents the absolute nominal change with respect to square foot occupancy, and the percentage change with respect to all other items.38Same Store Facilities Operating Trends by Market (Continued)
Year Ended December 31,
Revenues ($000's) Direct Expenses ($000's) Indirect Expenses ($000's) Net Operating Income ($000's)
2023 2022 Change 2023 2022 Change 2023 2022 Change 2023 2022 Change
Los Angeles $ 555,989 $ 508,366 9.4 % $ 73,638 $ 66,368 11.0 % $ 11,160 $ 12,074 (7.6) % $ 471,191 $ 429,924 9.6 %
San Francisco 249,790 242,866 2.9 % 38,835 35,915 8.1 % 5,958 6,696 (11.0) % 204,997 200,255 2.4 %
New York 206,118 197,367 4.4 % 49,282 46,360 6.3 % 4,711 5,483 (14.1) % 152,125 145,524 4.5 %
Washington DC 184,028 178,001 3.4 % 37,260 35,862 3.9 % 5,065 5,208 (2.7) % 141,703 136,931 3.5 %
Miami 182,939 173,819 5.2 % 34,936 30,999 12.7 % 4,087 4,277 (4.4) % 143,916 138,543 3.9 %
Dallas-Ft. Worth 169,311 159,238 6.3 % 38,154 37,637 1.4 % 5,514 5,854 (5.8) % 125,643 115,747 8.5 %
Seattle-Tacoma 154,556 151,220 2.2 % 28,193 25,664 9.9 % 3,983 4,251 (6.3) % 122,380 121,305 0.9 %
Houston 148,111 138,342 7.1 % 38,830 38,878 (0.1) % 5,062 5,514 (8.2) % 104,219 93,950 10.9 %
Chicago 161,420 154,143 4.7 % 61,071 57,928 5.4 % 5,558 6,007 (7.5) % 94,791 90,208 5.1 %
Atlanta 121,446 119,524 1.6 % 24,661 23,903 3.2 % 4,719 5,071 (6.9) % 92,066 90,550 1.7 %
Orlando-Daytona 83,774 78,622 6.6 % 16,429 14,884 10.4 % 3,172 3,487 (9.0) % 64,173 60,251 6.5 %
West Palm Beach 78,831 76,208 3.4 % 17,020 15,125 12.5 % 2,121 2,163 (1.9) % 59,690 58,920 1.3 %
Philadelphia 75,654 74,493 1.6 % 16,701 16,355 2.1 % 2,549 2,783 (8.4) % 56,404 55,355 1.9 %
Baltimore 64,141 62,266 3.0 % 12,282 10,523 16.7 % 1,678 1,834 (8.5) % 50,181 49,909 0.5 %
Charlotte 65,385 61,850 5.7 % 12,193 10,595 15.1 % 2,198 2,555 (14.0) % 50,994 48,700 4.7 %
All other markets 1,201,838 1,156,824 3.9 % 261,524 245,345 6.6 % 46,171 50,699 (8.9) % 894,143 860,780 3.9 %
Totals $ 3,703,331 $ 3,533,149 4.8 % $ 761,009 $ 712,341 6.8 % $ 113,706 $ 123,956 (8.3) % $ 2,828,616 $ 2,696,852 4.9 %
39Acquired FacilitiesThe Acquired Facilities represent 260 facilities that we acquired in 2022, 2023, and 2024. As a result of the stabilization process and timing of when these facilities were acquired, year-over-year changes can be significant. The following table summarizes operating data with respect to the Acquired Facilities:
ACQUIRED FACILITIES Year Ended December 31,
Year Ended December 31,
2024 2023 Change (a) 2023 2022 Change (a)
($ amounts in thousands, except for per square foot amounts)Revenues (b):2022 Acquisitions
$ 55,390 $ 50,105 $ 5,285 $ 50,105 $ 14,945 $ 35,160
2023 Acquisitions
184,097 55,487 128,610 55,487 — 55,487
2024 Acquisitions
1,827 — 1,827 — — —
Total revenues 241,314 105,592 135,722 105,592 14,945 90,647Cost of operations (b):2022 Acquisitions
20,515 19,911 604 19,911 7,885 12,026
2023 Acquisitions
60,049 19,922 40,127 19,922 — 19,922
2024 Acquisitions
1,019 — 1,019 — — —
Total cost of operations 81,583 39,833 41,750 39,833 7,885 31,948Net operating income:2022 Acquisitions
34,875 30,194 4,681 30,194 7,060 23,134
2023 Acquisitions
124,048 35,565 88,483 35,565 — 35,565
2024 Acquisitions
808 — 808 — — —
Net operating income 159,731 65,759 93,972 65,759 7,060 58,699
Depreciation and amortization expense (237,892) (112,247) (125,645) (112,247) (18,494) (93,753)
Net loss $ (78,161) $ (46,488) $ (31,673) $ (46,488) $ (11,434) $ (35,054)
At December 31:Square foot occupancy:2022 Acquisitions
85.7% 82.2% 3.5% 82.2% 79.4% 2.8%
2023 Acquisitions
86.8% 83.1% 3.7% 83.1% —% —%
2024 Acquisitions
79.0% —% —% —% —% —%
85.8% 82.9% 2.9% 82.9% 79.4% 3.5%
Annual contract rent per occupied square foot:
2022 Acquisitions
$ 13.46 $ 13.06 3.1% $ 13.06 $ 11.48 13.8%
2023 Acquisitions
17.32 16.78 3.2% 16.78 — —%
2024 Acquisitions
13.69 — —% — — —%
$ 16.02 $ 15.75 1.7% $ 15.75 $ 11.48 37.2%Number of facilities:2022 Acquisitions
74 74 — 74 74 —
2023 Acquisitions
164 164 — 164 — 164
2024 Acquisitions
22 — 22 — — —
260 238 22 238 74 164Net rentable square feet (in thousands):2022 Acquisitions
4,740 4,740 — 4,740 4,726 14
2023 Acquisitions
12,067 12,067 — 12,067 — 12,067
2024 Acquisitions
1,666 — 1,666 — — —
18,473 16,807 1,666 16,807 4,726 12,081
40ACQUIRED FACILITIES (Continued)As of
December 31, 2024Costs to acquire (in thousands):2022 Acquisitions
$ 730,957
2023 Acquisitions (c)
2,674,840
2024 Acquisitions
267,473
$ 3,673,270(a) Represents the percentage change with respect to annual contract rent per occupied square foot, and the absolute nominal change with respect to all other items.
(b) Revenues and cost of operations do not include tenant reinsurance and merchandise sale revenues and expenses generated at the facilities. See “Ancillary Operations” below for more information.(c) The amount includes the costs allocated to land, buildings and intangible assets associated with the 127 self-storage facilities from the Simply Acquisition.
We have been active in acquiring facilities in recent years. Since the beginning of 2022, we acquired a total of 260 facilities with 18.5 million net rentable square feet for $3.7 billion. During 2024, these facilities contributed net operating income of $159.7 million.
During 2023, we acquired BREIT Simply Storage LLC (“Simply”), a self-storage company that owned and operated 127 self-storage facilities (9.4 million square feet) and managed 25 self-storage facilities (1.8 million square feet) for third parties, for a purchase price of $2.2 billion in cash. Included in the acquisition results in the table above are the Simply portfolio self-storage revenues of $151.8 million, NOI of $103.9 million (including Direct NOI of $109.2 million), and average square footage occupancy of 87.7% for 2024.
We remain active in seeking to acquire additional self-storage facilities. Future acquisition volume is likely to be impacted by cost of capital and overall macro-economic uncertainties. Subsequent to December 31, 2024, we acquired or were under contract to acquire nine self-storage facilities across six states with 0.7 million net rentable square feet for $140.7 million.
41Newly Developed and Expanded FacilitiesThe Newly Developed and Expanded Facilities include 46 facilities that were developed on new sites since January 1, 2019, and 86 facilities expanded to increase their net rentable square footage. Of these expansions, 64 were completed before 2023, 17 were completed in 2023 or 2024, and five are currently in process at December 31, 2024. The following table summarizes operating data with respect to the Newly Developed and Expanded Facilities:NEWLY DEVELOPED AND EXPANDED FACILITIES
Year Ended December 31, Year Ended December 31,2024 2023 Change (a) 2023 2022 Change (a)
($ amounts in thousands, except for per square foot amounts)Revenues (b):Developed in 2019 $ 18,058 $ 18,081 $ (23) $ 18,081 $ 16,444 $ 1,637
Developed in 2020 7,371 7,621 (250) 7,621 6,838 783
Developed in 2021 11,864 11,134 730 11,134 8,333 2,801
Developed in 2022 10,054 6,893 3,161 6,893 687 6,206
Developed in 2023 6,168 1,032 5,136 1,032 — 1,032
Developed in 2024 874 — 874 — — —
Expansions completed before 2023 139,887 135,290 4,597 135,290 119,805 15,485
Expansions completed in 2023 or 2024 22,666 16,824 5,842 16,824 17,427 (603)
Expansions in process 8,903 11,360 (2,457) 11,360 13,152 (1,792)
Total revenues 225,845 208,235 17,610 208,235 182,686 25,549Cost of operations (b):Developed in 2019 6,281 5,608 673 5,608 5,622 (14)
Developed in 2020 2,037 1,884 153 1,884 1,702 182
Developed in 2021 3,743 3,849 (106) 3,849 3,539 310
Developed in 2022 4,055 3,563 492 3,563 738 2,825
Developed in 2023 4,976 1,638 3,338 1,638 — 1,638
Developed in 2024 879 — 879 — — —
Expansions completed before 2023 41,555 39,905 1,650 39,905 35,571 4,334
Expansions completed in 2023 or 2024 9,252 5,475 3,777 5,475 4,751 724
Expansions in process 1,636 1,901 (265) 1,901 2,488 (587)
Total cost of operations 74,414 63,823 10,591 63,823 54,411 9,412Net operating income (loss):Developed in 2019 11,777 12,473 (696) 12,473 10,822 1,651
Developed in 2020 5,334 5,737 (403) 5,737 5,136 601
Developed in 2021 8,121 7,285 836 7,285 4,794 2,491
Developed in 2022 5,999 3,330 2,669 3,330 (51) 3,381
Developed in 2023 1,192 (606) 1,798 (606) — (606)
Developed in 2024 (5) — (5) — — —
Expansions completed before 2023 98,332 95,385 2,947 95,385 84,234 11,151
Expansions completed in 2023 or 2024 13,414 11,349 2,065 11,349 12,676 (1,327)
Expansions in process 7,267 9,459 (2,192) 9,459 10,664 (1,205)
Net operating income 151,431 144,412 7,019 144,412 128,275 16,137
Depreciation and amortization expense (69,430) (56,163) (13,267) (56,163) (49,102) (7,061)
Net income $ 82,001 $ 88,249 $ (6,248) $ 88,249 $ 79,173 $ 9,076
42NEWLY DEVELOPED AND EXPANDED FACILITIES (Continued)As of December 31,
As of December 31,
2024 2023 Change (a) 2023 2022 Change (a)
($ amounts in thousands, except for per square foot amounts)Square foot occupancy:Developed in 2019 86.0% 84.6% 1.4% 84.6% 87.3% (2.7)%
Developed in 2020 89.3% 89.4% (0.1)% 89.4% 94.3% (4.9)%
Developed in 2021 77.7% 81.5% (3.8)% 81.5% 82.4% (0.9)%
Developed in 2022 86.3% 77.7% 8.6% 77.7% 43.6% 34.1%
Developed in 2023 75.9% 27.9% 48.0% 27.9% —% —%
Developed in 2024 41.0% —% —% —% —% —%
Expansions completed before 2023 86.3% 85.2% 1.1% 85.2% 83.7% 1.5%
Expansions completed in 2023 or 2024 59.6% 60.4% (0.8)% 60.4% 92.0% (31.6)%
Expansions in process 93.6% 93.4% 0.2% 93.4% 92.9% 0.5%
79.9% 78.3% 1.6% 78.3% 83.1% (4.8)%
Annual contract rent per occupied square foot:
Developed in 2019 $ 18.31 $ 18.83 (2.8)% $ 18.83 $ 18.19 3.5%
Developed in 2020 21.77 22.73 (4.2)% 22.73 21.75 4.5%
Developed in 2021 19.62 19.78 (0.8)% 19.78 18.04 9.6%
Developed in 2022 17.74 16.20 9.5% 16.20 13.84 17.1%
Developed in 2023 10.34 9.61 7.6% 9.61 — —%
Developed in 2024 10.17 — —% — — —%
Expansions completed before 2023 18.41 18.29 0.7% 18.29 17.89 2.2%
Expansions completed in 2023 or 2024 20.11 24.25 (17.1)% 24.25 25.80 (6.0)%
Expansions in process 23.68 22.79 3.9% 22.79 25.50 (10.6)%
$ 18.14 $ 18.73 (3.2)% $ 18.73 $ 18.75 (0.1)%Number of facilities:Developed in 2019 11 11 — 11 11 —Developed in 2020 3 3 — 3 3 —
Developed in 2021 6 6 — 6 6 —
Developed in 2022 8 8 — 8 8 —Developed in 2023 11 11 — 11 — 11
Developed in 2024 7 — 7 — — —
Expansions completed before 2023 64 64 — 64 64 —
Expansions completed in 2023 or 2024 17 17 — 17 17 —Expansions in process 5 5 — 5 5 —132 125 7 125 114 11Net rentable square feet (in thousands):Developed in 2019 1,057 1,057 — 1,057 1,057 —Developed in 2020 347 347 — 347 347 —Developed in 2021 (d) 760 681 79 681 681 —Developed in 2022 631 631 — 631 631 —Developed in 2023 1,098 1,098 — 1,098 — 1,098
Developed in 2024 668 — 668 — — —
Expansions completed before 2023 8,504 8,465 39 8,465 8,361 104
Expansions completed in 2023 or 2024 2,217 1,332 885 1,332 797 535
Expansions in process 523 523 — 523 524 (1)
15,805 14,134 1,671 14,134 12,398 1,736
43
As of
December 31, 2024Costs to develop (in thousands):Developed in 2019 $ 150,387
Developed in 2020 42,063Developed in 2021 (d) 128,435
Developed in 2022 100,089Developed in 2023 193,766Developed in 2024 129,669Expansions completed before 2023 (c) 543,636
Expansions completed in 2023 or 2024 (c) 352,042
$ 1,640,087(a) Represents the percentage change with respect to annual contract rent per occupied square foot, and the absolute nominal change with respect to all other items.
(b) Revenues and cost of operations do not include tenant reinsurance and merchandise sales generated at the facilities. See “Ancillary Operations” below for more information.(c) These amounts only include the direct cost incurred to expand and renovate these facilities, and do not include (i) the original cost to develop or acquire the facility or (ii) the lost revenue on space demolished during the construction and fill-up period.(d) We have completed an expansion project on a facility developed in 2021 for $12.8 million, adding 79,000 net rentable square feet of storage space as of December 31, 2024.Our Newly Developed and Expanded Facilities includes a total of 132 self-storage facilities of 15.8 million net rentable square feet. For development and expansions completed by December 31, 2024, we incurred a total cost of $1.6 billion. During 2024, Newly Developed and Expanded Facilities contributed net operating income of $151.4 million.It typically takes at least three to four years for a newly developed or expanded self-storage facility to stabilize with respect to revenues. Physical occupancy can be achieved as early as two to three years following completion of the development or expansion through offering lower rental rates during fill-up. As a result, even after achieving high occupancy, there can still be a period of elevated revenue growth as the tenant base matures and higher rental rates are achieved.
We believe that our development and redevelopment activities generate favorable risk-adjusted returns over the long run. However, in the short run, our earnings are diluted during the construction and stabilization period due to the cost of capital to fund the development cost, the related construction and development overhead expenses included in general and administrative expense, and the net operating loss from newly developed facilities undergoing fill-up.We typically underwrite new developments to stabilize at approximately an 8.0% NOI yield on cost (adjusted for impacts from tenant reinsurance and maintenance capital expenditures). Our developed facilities have thus far leased up as expected and are at various stages of their revenue stabilization periods. The actual annualized yields that we may achieve on these facilities upon stabilization will depend on many factors, including local and current market conditions in the vicinity of each property and the level of new and existing supply.
The facilities under “expansions completed” represent those facilities where the expansions have been completed at December 31, 2024. We incurred a total of $895.7 million in direct cost to expand these facilities, demolished a total of 1.1 million net rentable square feet of storage space, and built a total of 6.8 million net rentable square feet of new storage space.
At December 31, 2024, we had 26 additional facilities in development, which will have a total of 2.5 million net rentable square feet of storage space and have an aggregate development cost totaling approximately $498.9 million. We expect these facilities to open over the next 18 to 24 months.
44
The facilities under “expansion in process” represent those facilities where construction is in process at December 31, 2024, and together with additional future expansion activities primarily related to our Same Store Facilities at December 31, 2024, we expect to add a total of 1.5 million net rentable square feet of storage space by expanding existing self-storage facilities for an aggregate direct development cost of $242.7 million.Other Non-Same Store FacilitiesThe “Other Non-Same Store Facilities” represent facilities which, while not newly acquired, developed, or expanded, are not fully stabilized since January 1, 2022, including facilities undergoing fill-up as well as facilities damaged in casualty events such as hurricanes, floods, and fires.
The Other Non-Same Store Facilities have an aggregate of 17.0 million net rentable square feet at December 31, 2024. During 2024, 2023, and 2022, the average occupancy for these facilities totaled 82.5%, 81.4%, and 81.2%, respectively, and the realized rent per occupied square foot totaled $17.17, $16.64, and $14.85, respectively.Depreciation and amortization expenseDepreciation and amortization expense for Self-Storage Operations increased $159.7 million in 2024 as compared to 2023 and increased $81.9 million in 2023 as compared to 2022, primarily due to newly acquired facilities of $2.7 billion in 2023 and newly developed and expanded facilities.
The following discussion and analysis of the components of net income, including Ancillary Operations and certain items not allocated to segments, present a comparison for the year ended December 31, 2024 to the year ended December 31, 2023. The results of these components for the years ended December 31, 2023 compared to December 31, 2022 was included in our Annual Report on Form 10-K for the year ended December 31, 2023 on page 23, under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which was filed with the SEC on February 20, 2024.Ancillary Operations
Ancillary revenues and expenses include amounts associated with the reinsurance of policies against losses to goods stored by tenants in our self-storage facilities, sale of merchandise at our self-storage facilities, and management of property owned by unrelated third parties. The following table sets forth our ancillary operations:
Year Ended December 31,2024 2023 Change(Amounts in thousands)
Revenues:Tenant reinsurance premiums $ 226,595 $ 203,503 $ 23,092
Merchandise 26,970 27,511 (541)
Third party property management 46,058 27,063 18,995
Total revenues 299,623 258,077 41,546Cost of operations:Tenant reinsurance 56,678 42,366 14,312
Merchandise 17,633 17,137 496
Third party property management 46,970 26,493 20,477
Total cost of operations 121,281 85,996 35,285Net operating income (loss):Tenant reinsurance 169,917 161,137 8,780
Merchandise 9,337 10,374 (1,037)
Third party property management (912) 570 (1,482)
Total net operating income $ 178,342 $ 172,081 $ 6,26145Tenant reinsurance operations: Tenant reinsurance premium revenue increased $23.1 million or 11.3% in 2024 over 2023, as a result of an increase in our tenant base with respect to acquired, newly developed, and expanded facilities and the third party properties we manage, as well as higher insurance participation in our tenant base at our same store facilities. Tenant reinsurance premium revenue generated from tenants at our Same-Store Facilities were $170.0 million and $163.2 million in 2024 and 2023, respectively, representing a 4.2% year over year increase in 2024.
Cost of operations primarily includes claims paid as well as claims adjustment expenses. Claims expenses vary based upon the number of insured tenants and the volume of events that drive covered customer losses, such as burglary, as well as catastrophic weather events affecting multiple properties such as hurricanes and floods. Tenant reinsurance cost of operations increased $14.3 million in 2024, as compared to 2023, primarily due to increased claim volumes and expenses related to flooding, burglary and hurricane events as well as increased access fees we paid to the third-party owners of properties we manage driven by the significant growth of our third-party property management program.
We expect tenant reinsurance operation to grow as we roll out insurance policies with increased coverage and higher premiums in 2025, and as we continue to increase the tenant base at our newly acquired and developed facilities.
Third-party property management: At December 31, 2024, in our third-party property management program, we managed 307 facilities (23.3 million net rentable square feet) for unrelated third parties, and were under contract to manage 95 additional facilities (8.4 million net rentable square feet) including 93 facilities that are currently under construction. During 2024, we added 133 facilities to the program, acquired three facilities from the program, and had 52 facilities exit the program. While we expect this business to increase in scope and size, we do not expect any significant changes in overall profitability of this business in the near term as we seek new properties to manage and are in the earlier stages of fill-up for newly managed properties.Analysis of items not allocated to segmentsEquity in earnings of unconsolidated real estate entity
We account for our equity investment in Shurgard using the equity method and record our pro-rata share of its net income. We recognized equity in earnings of Shurgard of $19.8 million and $27.9 million for 2024 and 2023, respectively. Included in our equity earnings from Shurgard were $44.2 million and $36.8 million of our share of depreciation and amortization expense for 2024 and 2023, respectively.On August 1, 2024, Shurgard acquired Lok’nStore, a self-storage company publicly traded on the London Stock Exchange, for approximately £385 million ($501 million) in cash, including direct acquisition costs.For purposes of recording our equity in earnings from Shurgard, the Euro was translated at exchange rates of approximately 1.039 U.S. Dollars per Euro at December 31, 2024 (1.104 at December 31, 2023), and average exchange rates of 1.082 for 2024 and 1.081 for 2023.
Real estate acquisition and development expense: In 2024 and 2023, we incurred a total of $15.5 million and $26.5 million, respectively, of internal and external expenses related to our acquisition and development of real estate facilities. These amounts are net of $17.2 million and $18.0 million in 2024 and 2023, respectively, in development costs that were capitalized to newly developed and redeveloped self-storage facilities. The year-over-year decrease of real estate acquisition and development expense was primarily due to the write-off of $11.7 million of accumulated development costs for cancelled development and redevelopment projects during 2023.
46General and administrative expense: The following table sets forth our general and administrative expense:
Year Ended December 31,2024 2023 Change(Amounts in thousands)Share-based compensation expense $ 28,708 $ 25,399 $ 3,309
Legal costs 11,690 3,304 8,386
Corporate management costs 30,436 26,284 4,152
Information technology costs 12,110 6,495 5,615
Other costs 23,733 19,150 4,583
Total $ 106,677 $ 80,632 $ 26,045
General and administrative expense increased $26.0 million in 2024, as compared to 2023 due primarily to (i) ) an increase in corporate management costs driven primarily by higher payroll costs and (ii) an increase in license and maintenance support costs related to our recently implemented IT applications. Additionally, in 2024 we incurred a cash and stock hiring bonus for a new senior executive of $3.5 million and recognized loss contingencies related to corporate legal matters of $3.3 million.Interest and other income: The following table sets forth our interest and other income:
Year Ended December 31,2024 2023 Change(Amounts in thousands)Interest earned on cash balances $ 44,659 $ 64,819 $ (20,160)
Commercial operations 8,951 9,531 (580)
Unrealized gain on private equity investments 4,355 2,817 1,538
Other 9,247 8,423 824
Total $ 67,212 $ 85,590 $ (18,378)
Interest earned on cash balances decreased $20.2 million in 2024 over 2023, due primarily to lower average cash balances partially offset by higher interest rates earned in the first half of 2024.
Interest expense: For 2024 and 2023, we incurred $297.9 million and $210.4 million, respectively, of interest on our outstanding notes payable. In determining interest expense, these amounts were offset by capitalized interest of $10.5 million and $9.3 million during 2024 and 2023, respectively, associated with our development activities. The increase of interest expense in 2024 as compared to 2023 is due to the issuance of $2.2 billion of notes payable in July 2023 and the increase of Compounded SOFR on our variable rate unsecured notes. At December 31, 2024, we had $9.4 billion of notes payable outstanding, with a weighted average interest rate of approximately 3.1%.
Foreign currency exchange gain (loss): For 2024, we recorded foreign currency gains of $102.2 million, representing primarily the changes in the U.S. Dollar equivalent of our Euro-denominated unsecured notes due to fluctuations in exchange rates (losses of $51.2 million for 2023). The Euro was translated at exchange rates of approximately 1.039 U.S. Dollars per Euro at December 31, 2024 and 1.104 at December 31, 2023. Future gains and losses on foreign currency will be dependent upon changes in the relative value of the Euro to the U.S. Dollar and the level of Euro-denominated notes payable outstanding.
Gain on sale of real estate: In 2024, we recorded $1.5 million in gains, in connection with the sale of land parcels and the partial sale of real estate facilities pursuant to eminent domain proceedings.47During 2023, we completed a real estate transaction with a third-party, through which we sold an operating self-storage facility with a net book value of $7.1 million for gross proceeds of $40.0 million and acquired a nearby land parcel for $13.5 million. At the close of the transaction, we entered into a leaseback of the self-storage facility until we complete development of the acquired land into a self-storage facility, no later than December 31, 2026. Of the $40.0 million in gross proceeds, $24.3 million was allocated to the sale of the property based on its estimated fair value, resulting a net gain on sale of real estate of $17.1 million after direct transaction costs, and $15.7 million was classified as a reduction of costs to develop the acquired land included in construction in process.
During 2023, we also sold a land parcel for $0.1 million in cash and recorded a related gain on sale of real estate of $0.1 million.
Income tax expense: We operate as a REIT for U.S. federal income tax purposes. As a REIT, we are generally not subject to U.S. federal income taxes on our taxable income distributed to stockholders. In 2024 and 2023, we recorded income tax expense totaling $4.7 million and $10.8 million, respectively, related to our taxable REIT subsidiaries and income taxes incurred in certain state and local jurisdictions in which we operate. The year-over-year changes of income tax expense was primarily driven by changes in state income tax, due to fluctuations of taxable income in certain states where there are differences between federal and state tax laws.
48Liquidity and Capital Resources
Overview and our Sources of CapitalWhile operating as a REIT allows us to minimize the payment of U.S. federal corporate income tax expense, we are required to distribute at least 90% of our taxable income to our shareholders. Notwithstanding this requirement, our annual operating retained cash flow was approximately $480 million in 2023 and $400 million in 2024. Retained operating cash flow represents our expected cash flow provided by operating activities (including property operating costs and interest payments described below), less shareholder distributions and capital expenditures. We expect retained cash flow of approximately $600 million for 2025.
Capital needs in excess of retained cash flow are met with: (i) medium and long-term debt, (ii) preferred equity, (iii) limited partnership interests, and (iv) common equity. We select among these sources of capital based upon relative cost, availability, the desire for leverage, and considering potential constraints caused by certain features of capital sources, such as debt covenants. We view our line of credit, as well as any short-term bank loans, as bridge financing.Because raising capital is important to our growth, we endeavor to maintain a strong financial profile characterized by strong credit metrics, including low leverage relative to our total capitalization and operating cash flows. We are one of the highest rated REITs, as rated by major rating agencies Moody’s and Standard & Poor’s. Our senior notes payable have an “A” credit rating by Standard & Poor’s and “A2” by Moody’s. Our credit ratings on each of our series of preferred shares are “A3” by Moody’s and “BBB+” by Standard & Poor’s. Our credit profile enables us to effectively access both the public and private capital markets to raise capital.Our revolving line of credit has a borrowing limit of $1.5 billion. The revolving line of credit generally serves as a temporary “bridge” financing until we are able to raise longer term capital. As of December 31, 2024 and February 24, 2025, there were no borrowings outstanding on the revolving line of credit; however, we do have approximately $19.6 million of outstanding letters of credit, which limits our borrowing capacity to $1,480.4 million as of February 24, 2025. Our line of credit matures on June 12, 2027.
In 2024, our Board authorized an “at the market” offering program pursuant to which management may issue common shares up to an aggregate gross sales price of $2.0 billion on the open market or in privately negotiated transactions. Through December 31, 2024 and February 24, 2025, we have issued a total of 184,390 common shares on the open market for an aggregate gross sales price of $61.4 million and received net proceeds of approximately $60.3 million after issuance costs.We believe that we have significant financial flexibility to adapt to changing conditions and opportunities, and we have significant access to sources of capital including debt and preferred equity. Based on our strong credit profile and our substantial current liquidity relative to our capital requirements noted below, we would not expect any potential capital market dislocations to have a material impact upon our expected capital and growth plans over the next 12 months. However, if capital market conditions deteriorate significantly for a long period of time, our access to or cost of debt and preferred equity capital could be negatively impacted and potentially affect future investment activities.Our current and expected capital resources include: (i) $447.4 million of cash as of December 31, 2024 and (ii) approximately $600 million of expected retained operating cash flow over the next twelve months. Additionally, we have $1,480.4 million available borrowing capacity on our revolving line of credit, which can be used as temporary “bridge” financing until we are able to raise longer term capital. We believe that our cash provided by our operating activities will continue to be sufficient to enable us to meet our ongoing cash requirements for interest payments on debt, maintenance capital expenditures, and distributions to our shareholders for the foreseeable future.
As described below, our current committed cash requirements consist of (i) $140.7 million in property acquisitions currently under contract, (ii) $433.5 million of remaining spending on our current development pipeline, which will be incurred primarily in the next 18 to 24 months, and (iii) approximately $651 million in scheduled principal repayments on our unsecured notes in the next twelve months. We plan to refinance these unsecured notes as they come due in 2025. Our cash requirements may increase over the next year as we add projects to our development pipeline and acquire additional properties. Additional potential cash requirements could result from various activities including the redemption of outstanding preferred securities, repurchases of common stock, or merger and acquisition activities, as and to the extent we determine to engage in such activities.
49Over the long term, to the extent that our cash requirements exceed our capital resources, we believe we have a variety of possibilities to raise additional capital including issuing common or preferred securities, debt, and limited partnership interests, or entering into joint venture arrangements to acquire or develop facilities.
Cash Requirements
The following summarizes our expected material cash requirements, which comprise (i) contractually obligated expenditures, including payments of principal and interest, (ii) other essential expenditures, including property operating expenses, maintenance capital expenditures and dividends paid in accordance with REIT distribution requirements, and (iii) opportunistic expenditures, including acquisitions and developments and repurchases of our securities. We expect to satisfy these cash requirements through operating cash flow and opportunistic debt and equity financings.Required Debt Repayments: As of December 31, 2024, the principal outstanding on our debt totaled approximately $9.4 billion, consisting of $7.8 billion of U.S. Dollar denominated unsecured notes payable, $1.7 billion of Euro-denominated unsecured notes payable, and $1.7 million of mortgage notes payable. Approximate principal maturities and interest payments (including $111.1 million in estimated interest on our $1.1 billion variable rate unsecured notes based on rates in effect at December 31, 2024) are as follows (amounts in thousands):Principal Interest Total2025 $ 651,516 $ 280,094 $ 931,610
2026 1,150,138 256,595 1,406,733
2027 1,200,146 225,594 1,425,740
2028 1,200,129 185,047 1,385,176
2029 1,000,088 147,034 1,147,122
Thereafter 4,203,350 1,423,255 5,626,605
$ 9,405,367 $ 2,517,619 $ 11,922,986
We have $400 million of our U.S. Dollar denominated unsecured notes that mature on July 25, 2025 and €242 million of our Euro denominated unsecured notes that mature on November 3, 2025. We plan to refinance these unsecured notes as they come due.Capital Expenditure Requirements: Capital expenditures include general maintenance, major repairs, or replacements to elements of our facilities to keep our facilities in good operating condition and maintain their visual appeal. Capital expenditures do not include costs relating to the development of new facilities or redevelopment of existing facilities to increase their available rentable square footage.We spent $240 million of capital expenditures to maintain real estate facilities in 2024 and expect to spend approximately $150 million in 2025. In addition to standard capital repairs of building elements reaching the end of their useful lives, our capital expenditures in recent years have included incremental expenditures to enhance the competitive position of certain of our facilities relative to local competitors pursuant to a multi-year Property of Tomorrow program. Such investments include development of more pronounced, attractive, and clearly identifiable color schemes and signage and upgrades to the configuration and layout of the offices and other customer zones to improve the customer experience. We completed this program in 2024 and spent approximately $127 million in 2024 on this effort. In addition, we have spent $54 million on the installation of solar panels in 2024 and we expect to spend approximately $50 million in 2025.
We believe the capital spent to install solar panels and LED lights will significantly reduce electric utility usage resulting in lower property operating costs.
Requirement to Pay Distributions: For all periods presented herein, we have elected to be treated as a REIT, as defined in the Internal Revenue Code. For each taxable year in which we qualify for taxation as a REIT, we will not be subject to U.S. federal corporate income tax on our “REIT taxable income” (generally, taxable income subject to specified adjustments, including a deduction for dividends paid and excluding our net capital gain) that is distributed to our shareholders. We believe we have met these requirements in all periods presented herein, and we expect to continue to qualify as a REIT.
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On February 21, 2025, our Board declared a regular common quarterly dividend of $3.00 per common share totaling approximately $526 million, which will be paid at the end of March 2025. Our consistent, long-term dividend policy has been to distribute our taxable income. Future quarterly distributions with respect to the common shares will continue to be determined based upon our REIT distribution requirements after taking into consideration distributions to the preferred shareholders and will be funded with cash flows from operating activities.
The annual distribution requirement with respect to our preferred shares outstanding at December 31, 2024 is approximately $194.7 million per year.
Real Estate Investment Activities: We continue to seek to acquire additional self-storage facilities from third parties. Subsequent to December 31, 2024, we acquired or were under contract to acquire nine self-storage facilities for a total purchase price of $140.7 million.
We are actively seeking to acquire additional facilities. However, future acquisition volume will depend upon whether additional owners will be motivated to market their facilities, which will in turn depend upon factors such as economic conditions and the level of seller confidence.
As of December 31, 2024, we had development and expansion projects at a total cost of approximately $741.6 million. Costs incurred through December 31, 2024 were $308.1 million, with the remaining cost to complete of $433.5 million expected to be incurred primarily in the next 18 to 24 months. Some of these projects are subject to contingencies such as entitlement approval. We expect to continue to seek to add projects to maintain and increase our robust pipeline. Our ability to do so continues to be challenged by various constraints such as difficulty in finding projects that meet our risk-adjusted yield expectations and challenges in obtaining building permits for self-storage facilities in certain municipalities.Property Operating Expenses: The direct and indirect cost of our operations impose significant cash requirements. Direct operating costs include property taxes, on-site property manager payroll, repairs and maintenance, utilities, and marketing. Indirect operating costs include supervisory payroll and centralized management costs. The cash requirements from these operating costs will vary year to year based on, among other things, changes in the size of our portfolio and changes in property tax rates and assessed values, wage rates, and marketing costs in our markets.Redemption of Preferred Securities : Historically, we have taken advantage of refinancing higher coupon preferred securities with lower coupon preferred securities. In the future, we may also elect to finance the redemption of preferred securities with proceeds from the issuance of debt. As of February 24, 2025, we have six series of preferred securities that are eligible for redemption, at our option and with 30 days’ notice: our 5.150% Series F Preferred Shares ($280.0 million), 5.050% Series G Preferred Shares ($300.0 million), 5.600% Series H Preferred Shares ($285.0 million), 4.875% Series I Preferred Shares ($316.3 million), 4.700% Series J Preferred Shares ($258.8 million), and 4.750% Series K Preferred Shares ($230.0 million). See Note 9 to our December 31, 2024 consolidated financial statements for the redemption dates of all of our series of preferred shares. Redemption of such preferred shares will depend upon many factors, including the rate at which we could issue replacement preferred securities. None of our preferred securities are redeemable at the option of the holders.
Repurchases of Common Shares : Our Board has authorized a share repurchase program pursuant to which management may purchase up to 35,000,000 of our common shares on the open market or in privately negotiated transactions. During 2024, we repurchased 726,865 of our common shares under the repurchase program on the open market for a total cost of $200.0 million (none in the three months ended December 31, 2024). From the inception of the repurchase program through February 24, 2025, we have repurchased a total of 24,448,781 common shares at an aggregate cost of approximately $879.1 million. All the repurchased shares are constructively retired and returned to an authorized and unissued status. Future levels of common share repurchases will be dependent upon our available capital, investment alternatives and the trading price of our common shares.
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FY 2025-12-31 (later)
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our consolidated financial statements and notes thereto.
Critical Accounting Estimates
The preparation of consolidated financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) requires us to make judgments, assumptions, and estimates that affect the amounts reported. On an ongoing basis, we evaluate our estimates and assumptions. These estimates and assumptions are based on current facts, historical experience, and various other factors that we believe are reasonable under the circumstances to determine reported amounts of assets, liabilities, revenues, and expenses that are not readily apparent from other sources.
We believe the following are our critical accounting estimates, because they are reasonably likely to have a material impact on the portrayal of our financial condition and results, and they require us to make judgments and estimates about matters that involve a significant level of uncertainty.
Impairment of Long-Lived Assets: The analysis of impairment of our long-lived assets, including our real estate facilities, involves identification of indicators of impairment, including unfavorable operational results and significant cost overruns on construction, projections of future operating cash flows, and estimates of fair values, all of which require significant judgment and subjectivity. In particular, these estimates are sensitive to significant assumptions, such as the projections of future rental rates, stabilized occupancy level, future profit margin, discount rates, and capitalization rates, all of which could be affected by our expectations about future market or economic conditions. Others could come to materially different conclusions.Allocating Purchase Price for Acquired Real Estate Facilities : We estimate the fair values of the assets and liabilities of acquired real estate facilities, which consist principally of land, buildings and acquired customers in place, for purposes of allocating the aggregate purchase price of acquired real estate facilities. We estimate the fair value of land based upon price per square foot derived from observable transactions involving comparable land in similar locations as adjusted for location quality, parcel size, and date of sale associated with the acquired facilities. The fair value estimate of land is sensitive to the adjustments made to the land market transactions used in the estimate, particularly when there is a lack of recent comparable land market data. We estimate the fair value of buildings primarily using the income approach by estimating the fair value of hypothetical vacant acquired facilities and adjusting for the estimated fair value of land. The fair value estimate of buildings is sensitive to assumptions, such as lease-up period, future stabilized operating cash flows,23capitalization rate and discount rate. We estimate the fair value of acquired customers in place using the income approach by estimating the foregone rent over the presumed period of time to absorb the occupied spaces as if they were vacant at the time of acquisition. The fair value estimate of the acquired customers in place is sensitive to the assumptions used in the income approach, such as market rent, lease-up period and discount rate. Others could come to materially different conclusions as to the estimated fair values of land, buildings and acquired customers in place, which would result in different depreciation and amortization expense, gains and losses on sale of real estate assets, as well as the level of land and buildings on our consolidated balance sheet.Overview
Our self-storage operations generate most of our net income, and our earnings growth is impacted by the levels of organic growth within our Same Store Facilities (as defined below) as well as within our Acquired Facilities and Newly Developed and Expanded Facilities (both as defined below).During 2025, revenues generated by our Same Store Facilities remained relatively unchanged, as compared to 2024, while Same Store cost of operations increased by 1.8% ($16.6 million). Softness in demand for our storage space has led to lower move-in rental rates for new tenants and lower average occupancy in 2025 as compared to 2024. Existing customers behavior was strong in 2025 with fewer move-outs and lower delinquencies allowing for rental rate increases to tenants over their tenancy.
We have grown and plan to continue to grow through the acquisition and development of new facilities and expansion of our existing self-storage facilities. Since the beginning of 2023, we acquired a total of 273 facilities with 19.9 million net rentable square feet for $3.9 billion. Within our Non-Same Store portfolio (as defined below) as of December 31, 2025, our Newly Developed and Expanded Facilities include a total of 111 self-storage facilities with 13.3 million net rentable square feet. For development and expansions completed by December 31, 2025, we incurred a total cost of $1.7 billion. During 2025, combined net operating income generated by our Acquired Facilities and Newly Developed and Expanded Facilities increased 25.6% ($59.5 million), as compared to 2024.
We have embarked on a solar program under which we plan to install solar panels on over 1,600 of our self-storage facilities. We have completed the installations on 1,191 facilities through December 31, 2025. We spent approximately $71 million on the program in 2025, and expect to spend approximately $60 million in 2026 on this effort.
During 2025, PSOC completed public offerings of $875 million aggregate principal amount of senior notes in various tranches and maturities and €425 million of senior notes due 2034. PSOC also repaid at maturity $400 million aggregate principal amount of floating rate senior notes and €242 million aggregate principal amount of senior notes. We plan to use the remaining proceeds for general corporate purposes, including to make investments in self-storage facilities.24Results of OperationsOperating Results for 2025 and 2024
In 2025, net income allocable to our common shareholders was $1.6 billion or $9.01 per diluted common share, compared to $1.9 billion or $10.64 per diluted common share in 2024, representing a decrease of $287.1 million or $1.63 per diluted common share. The decrease was due primarily to (i) a $317.8 million increase in foreign currency exchange losses, (ii) a $22.1 million increase in depreciation and amortization expense (iii) a $17.1 million increase in interest expense, partially offset by (iv) a $53.1 million increase in self-storage net operating income and (v) a $23.4 million increase in ancillary net operating income.
The $53.1 million increase in self-storage net operating income in 2025 as compared to 2024 was a result of a $68.4 million increase attributable to our Non-Same Store Facilities, partially offset by a $15.3 million decrease attributable to our Same Store Facilities. Revenues for the Same Store Facilities remained relatively unchanged in 2025 as compared to 2024, due primarily to higher realized annual rent per occupied square foot partially offset by a decline in average occupancy. Cost of operations for the Same Store Facilities increased by 1.8% or $16.6 million in 2025 as compared to 2024, due primarily to increased property tax expense and indirect cost of operation partially offset by decreased marketing expenses and on-site property manager payroll expense. The increase in net operating income of $68.4 million for the Non-Same Store Facilities was due primarily to the impact of facilities acquired in 2025 and 2024.Operating Results for 2024 and 2023In 2024, net income allocable to our common shareholders was $1.9 billion or $10.64 per diluted common share, compared to $1.9 billion or $11.06 per diluted common share in 2023, representing a decrease of $76.1 million or $0.42 per diluted common share. The decrease was due primarily to (i) an $159.7 million increase in depreciation and amortization expense, (ii) an $86.3 million increase in interest expense, (iii) a $26.0 million increase in general and administrative expense, (iv) an $18.4 million decrease in interest and other income, partially offset by (v) an $153.4 million increase in foreign currency exchange gains primarily associated with our Euro denominated notes payable and (vi) a $61.6 million increase in self-storage net operating income.
The $61.6 million increase in self-storage net operating income in 2024 as compared to 2023 was a result of a $103.4 million increase attributable to our Non-Same Store Facilities, partially offset by a $41.8 million decrease attributable to our Same Store Facilities. Revenues for the Same Store Facilities decreased 0.6% or $22.7 million in 2024 as compared to 2023, due primarily to a decline in occupancy. Cost of operations for the Same Store Facilities increased by 2.1% or $19.1 million in 2024 as compared to 2023, due primarily to increased property tax expense, marketing expense, and repairs and maintenance expense, partially offset by decreased indirect cost of operations, utility expenses and on-site property manager payroll expense. The increase in net operating income of $103.4 million for the Non-Same Store Facilities was due primarily to the impact of facilities acquired in 2024 and 2023.
25Funds from Operations and Core Funds from Operations
Funds from Operations (“FFO”) and FFO per diluted common share (“FFO per share”) are non-GAAP measures defined by Nareit. We believe that FFO and FFO per share are useful to REIT investors and analysts in measuring our performance because Nareit’s definition of FFO excludes items included in net income that do not relate to or are not indicative of our operating and financial performance. FFO represents net income before real estate-related depreciation and amortization, which is excluded because it is based upon historical costs and assumes that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. FFO also excludes gains or losses on sale of real estate assets and real estate impairment charges, which are also based upon historical costs and are impacted by historical depreciation. FFO and FFO per share are not a substitute for net income or earnings per share. FFO is not a substitute for net cash flow in evaluating our liquidity or ability to pay dividends, because it excludes investing and financing activities presented on our consolidated statements of cash flows. In addition, other REITs may compute these measures differently, so comparisons among REITs may not be helpful.For the year ended December 31, 2025, FFO was $15.81 per diluted common share as compared to $17.19 and $16.60 per diluted common share for the years ended December 31, 2024 and 2023, respectively, representing a decrease in 2025 of 8.0%, or $1.38 per diluted common share, as compared to 2024.
We also present “Core FFO” and “Core FFO per share” non-GAAP measures that represent FFO and FFO per share excluding the impact of (i) foreign currency exchange gains and losses, (ii) charges related to the redemption of preferred securities, and (iii) certain other non-cash and/or nonrecurring income or expense items primarily representing, with respect to the periods presented below, the impact of corporate transformation costs, loss contingencies, due diligence costs incurred in pursuit of strategic transactions, realized or unrealized gain or loss on private equity investments, income tax benefits from the sale of solar tax credits, a cash and stock hiring bonus for a new senior executive and amortization of acquired non real estate-related intangibles. We review Core FFO and Core FFO per share to evaluate our ongoing operating performance and we believe they are used by investors and REIT analysts in a similar manner. However, Core FFO and Core FFO per share are not substitutes for net income and net income per share. Because other REITs may not compute Core FFO or Core FFO per share in the same manner as we do, may not use the same terminology or may not present such measures, Core FFO and Core FFO per share may not be comparable among REITs.26The following table reconciles net income to FFO and Core FFO and reconciles diluted earnings per share to FFO per share and Core FFO per share:
Year Ended December 31, Year Ended December 31,2025 2024 Percentage Change 2024 2023 Percentage Change(Amounts in thousands, except per share data)
Reconciliation of Net Income to FFO and Core FFO:Net income allocable to common shareholders $ 1,585,585 $ 1,872,685 (15.3) % $ 1,872,685 $ 1,948,741 (3.9) %Eliminate items excluded from FFO:Real estate-related depreciation and amortization 1,140,377 1,117,752 1,117,752 962,703
Real estate-related depreciation from unconsolidated real estate investment 59,470 44,181 44,181 36,769
Real estate-related depreciation allocated to noncontrolling interests, restricted share unitholders and unvested LTIP unitholders (8,216) (7,167) (7,167) (6,635)
Impairment write-down of real estate investments 4,348 — — —
Gains on sale of real estate investments, including our equity share from investment (1,113) (1,537) (1,537) (17,290)
FFO allocable to common shares $ 2,780,451 $ 3,025,914 (8.1) % $ 3,025,914 $ 2,924,288 3.5 %
Eliminate items excluded from Core FFO:
Adjustments to G&A Expense:
Contingency reserve 290 3,300 3,300 —
Corporate transformation costs 4,875 — — —
Transaction costs 3,146 — — —
Hiring bonus for a new senior executive — 3,507 3,507 —
Other Non-Core Adjustments:
Foreign currency exchange (gain) loss 215,583 (102,244) (102,244) 51,197
Unrealized (gain) loss on private equity investments (3,859) (4,355) (4,355) (2,817)
Income tax provision (benefit) (15,847) — — —
Other items 850 8,946 8,946 3,264
Core FFO allocable to common shares $ 2,985,489 $ 2,935,068 1.7 % $ 2,935,068 $ 2,975,932 (1.4) %Reconciliation of Diluted Earnings per Share to FFO per Share and Core FFO per Share:Diluted earnings per share $ 9.01 $ 10.64 (15.3) % $ 10.64 $ 11.06 (3.8) %Eliminate amounts per share excluded from FFO:Real estate-related depreciation and amortization 6.78 6.56 6.56 5.64
Impairment write-down of real estate investments 0.03 — — —
Gains on sale of real estate investments, including our equity share from investment (0.01) (0.01) (0.01) (0.10)
FFO per share $ 15.81 $ 17.19 (8.0) % $ 17.19 $ 16.60 3.6 %
Eliminate amounts per share excluded from Core FFO:
Adjustments to G&A Expense:
Contingency reserve — 0.02 0.02 —
Corporate transformation costs 0.03 — — —
Transaction costs 0.02 — — —
Hiring bonus for a new senior executive — 0.02 0.02 —
Other Non-Core Adjustments:
Foreign currency exchange (gain) loss 1.23 (0.58) (0.58) 0.29
Unrealized (gain) loss on private equity investments (0.02) (0.02) (0.02) (0.02)
Income tax provision (benefit) (0.09) — — —
Other items (0.01) 0.04 0.04 0.02
Core FFO per share $ 16.97 $ 16.67 1.8 % $ 16.67 $ 16.89 (1.3) %
Diluted weighted average common shares 175,902 176,038 176,038 176,143
27Analysis of Net Income — Self-Storage OperationsOur self-storage operations are analyzed in four groups: (i) 2,565 facilities that we have owned and operated on a stabilized basis since January 1, 2023 (the “Same Store Facilities”), (ii) 273 facilities we acquired since January 1, 2023 (the “Acquired Facilities”), (iii) 111 facilities that have been newly developed or expanded, or that had commenced expansion by December 31, 2025 (the “Newly Developed and Expanded Facilities”), and (iv) 222 other facilities, which are otherwise not stabilized with respect to occupancies or rental rates since January 1, 2023 (the “Other Non-Same Store Facilities”). The Acquired Facilities, Newly Developed and Expanded Facilities, and Other Non-Same Store Facilities are collectively referred to as the “Non-Same Store Facilities”. See Note 15 to our December 31, 2025 consolidated financial statements “Segment Information,” for a reconciliation of the amounts in the tables below to our total net income.
28Self-Storage Operations
Summary Year Ended December 31, Year Ended December 31,2025 2024 Percentage Change 2024 2023 Percentage Change(Dollar amounts and square footage in thousands)Revenues (b):
Same Store Facilities $ 3,764,833 $ 3,763,553 — % $ 3,763,553 $ 3,786,251 (0.6) %
Acquired Facilities 246,669 185,924 32.7 % 185,924 55,487 235.1 %
Newly Developed and Expanded Facilities 183,022 160,615 14.0 % 160,615 143,989 11.5 %
Other Non-Same Store Facilities 294,889 285,901 3.1 % 285,901 273,886 4.4 %
Total revenues 4,489,413 4,395,993 2.1 % 4,395,993 4,259,613 3.2 %
Cost of operations (b):
Same Store Facilities 935,918 919,334 1.8 % 919,334 900,190 2.1 %
Acquired Facilities 79,167 61,068 29.6 % 61,068 19,922 206.5 %
Newly Developed and Expanded Facilities 58,383 52,810 10.6 % 52,810 43,372 21.8 %
Other Non-Same Store Facilities 103,570 103,508 0.1 % 103,508 98,466 5.1 %
Total cost of operations 1,177,038 1,136,720 3.5 % 1,136,720 1,061,950 7.0 %Net operating income (a):Same Store Facilities 2,828,915 2,844,219 (0.5) % 2,844,219 2,886,061 (1.4) %
Acquired Facilities 167,502 124,856 34.2 % 124,856 35,565 251.1 %
Newly Developed and Expanded Facilities 124,639 107,805 15.6 % 107,805 100,617 7.1 %
Other Non-Same Store Facilities 191,319 182,393 4.9 % 182,393 175,420 4.0 %
Total net operating income 3,312,375 3,259,273 1.6 % 3,259,273 3,197,663 1.9 %Depreciation and amortization expense:Same Store Facilities 705,278 711,978 (0.9) % 711,978 690,644 3.1 %
Acquired Facilities 220,053 206,319 6.7 % 206,319 72,848 183.2 %
Newly Developed and Expanded Facilities 69,482 53,719 29.3 % 53,719 40,458 32.8 %
Other Non-Same Store Facilities 157,027 157,750 (0.5) % 157,750 166,106 (5.0) %
Total depreciation and amortization 1,151,840 1,129,766 2.0 % 1,129,766 970,056 16.5 %Net income (loss):Same Store Facilities 2,123,637 2,132,241 (0.4) % 2,132,241 2,195,417 (2.9) %
Acquired Facilities (52,551) (81,463) (35.5) % (81,463) (37,283) 118.5 %
Newly Developed and Expanded Facilities 55,157 54,086 2.0 % 54,086 60,159 (10.1) %
Other Non-Same Store Facilities 34,292 24,643 39.2 % 24,643 9,314 164.6 %
Total net income $ 2,160,535 $ 2,129,507 1.5 % $ 2,129,507 $ 2,227,607 (4.4) %Number of facilities at period end:Same Store Facilities 2,565 2,565 — % 2,565 2,565 — %
Acquired Facilities 273 186 46.8 % 186 164 13.4 %
Newly Developed and Expanded Facilities 111 99 12.1 % 99 92 7.6 %
Other Non-Same Store Facilities 222 223 (0.4) % 223 223 — %
Total number of facilities at the period end 3,171 3,073 3.2 % 3,073 3,044 1.0 %Net rentable square footage at period end:Same Store Facilities 175,349 175,349 — % 175,349 175,349 — %
Acquired Facilities 19,893 13,733 44.9 % 13,733 12,067 13.8 %
Newly Developed and Expanded Facilities 13,313 11,155 19.3 % 11,155 9,471 17.8 %
Other Non-Same Store Facilities 20,884 21,043 (0.8) % 21,043 21,184 (0.7) %
Total net rentable square footage at period end 229,439 221,280 3.7 % 221,280 218,071 1.5 %
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(a) Net operating income or “NOI” is a non-GAAP financial measure that excludes the impact of depreciation and amortization expense, which is based upon historical real estate costs and assumes that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. We utilize NOI in determining current property values, evaluating property performance, and evaluating property operating trends. We believe that investors and analysts utilize NOI in a similar manner. NOI is not a substitute for net income, operating cash flow, or other related financial measures, in evaluating our operating results. See Note 15 to our December 31, 2025 consolidated financial statements for a reconciliation of NOI to our total net income for all periods presented.
(b) Revenues and cost of operations do not include tenant reinsurance and merchandise sale revenues and expenses generated at the facilities. See “Ancillary Operations” below for more information.Same Store FacilitiesThe Same Store Facilities consist of facilities we have owned and operated on a stabilized level of occupancy, revenues, and cost of operations since January 1, 2023. Our Same Store Facilities increased from 2,507 facilities at December 31, 2024 to 2,565 at December 31, 2025. The composition of our Same Store Facilities allows us more effectively to evaluate the ongoing performance of our self-storage portfolio in 2023, 2024, and 2025 and exclude the impact of fill-up of unstabilized facilities, which can significantly affect operating trends. We believe investors and analysts use Same Store Facilities information in a similar manner. However, because other REITs may not compute Same Store Facilities in the same manner as we do, may not use the same terminology or may not present such a measure, Same Store Facilities may not be comparable among REITs.
The following table summarizes the historical operating results (for all periods presented) of these 2,565 facilities (175.3 million net rentable square feet) that represent approximately 76% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at December 31, 2025. It includes various measures and detail that we do not include in the analysis of the developed, acquired, and other Non-Same Store Facilities, due to the relative magnitude and importance of the Same Store Facilities relative to our other self-storage facilities.
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Selected Operating Data for the Same Store Facilities (2,565 facilities)Year Ended December 31, Year Ended December 31,2025 2024 Change (e) 2024 2023 Change (e)(Dollar amounts in thousands, except for per square foot data)
Revenues (a):Rental income $ 3,636,192 $ 3,633,672 0.1% $ 3,633,672 $ 3,657,303 (0.6)%
Late charges and administrative fees 128,641 129,881 (1.0)% 129,881 128,948 0.7%
Total revenues 3,764,833 3,763,553 —% 3,763,553 3,786,251 (0.6)%Direct cost of operations (a):Property taxes 378,266 359,212 5.3% 359,212 342,821 4.8%
On-site property manager payroll 129,254 136,124 (5.0)% 136,124 140,757 (3.3)%
Repairs and maintenance 78,046 77,000 1.4% 77,000 70,804 8.8%
Utilities 49,633 49,144 1.0% 49,144 51,307 (4.2)%
Marketing 83,285 87,088 (4.4)% 87,088 77,004 13.1%
Other direct property costs 101,889 101,725 0.2% 101,725 100,942 0.8%
Total direct cost of operations 820,373 810,293 1.2% 810,293 783,635 3.4%
Direct net operating income (b) 2,944,460 $ 2,953,260 (0.3)% $ 2,953,260 $ 3,002,616 (1.6)%
Indirect cost of operations (a) (115,545) (109,041) 6.0% (109,041) (116,555) (6.4)%
Net operating income 2,828,915 2,844,219 (0.5)% 2,844,219 2,886,061 (1.4)%
Depreciation and amortization expense (705,278) (711,978) (0.9)% (711,978) (690,644) 3.1%
Net income 2,123,637 $ 2,132,241 (0.4)% $ 2,132,241 $ 2,195,417 (2.9)%
Gross margin (before indirect costs, depreciation and amortization expense) 78.2% 78.5% (0.3)% 78.5% 79.3% (0.8)%
Gross margin (before depreciation and amortization expense) 75.1% 75.6% (0.5)% 75.6% 76.2% (0.6)%Weighted average for the period:Square foot occupancy 92.0% 92.4% (0.4)% 92.4% 92.9% (0.5)%Realized annual rental income per (c):Occupied square foot $ 22.54 $ 22.43 0.5% $ 22.43 $ 22.44 —%
Available square foot $ 20.74 $ 20.72 0.1% $ 20.72 $ 20.85 (0.6)%At December 31:Square foot occupancy 91.0% 90.5% 0.5% 90.5% 91.2% (0.7)%
Annual contract rent per occupied square foot (d) $ 22.55 $ 22.72 (0.7)% $ 22.72 $ 22.61 0.5%
31(a) Revenues and cost of operations do not include tenant reinsurance and merchandise sale revenues and expenses generated at the facilities. See “Ancillary Operations” below for more information.
(b) Direct net operating income (“Direct NOI”), a subtotal within NOI, is a non-GAAP financial measure that excludes the impact of supervisory payroll, centralized management costs, and share-based compensation in addition to depreciation and amortization expense. We utilize direct net operating income in evaluating property performance and in evaluating property operating trends as compared to our competitors.
(c) Realized annual rent per occupied square foot is computed by dividing rental income, before late charges and administrative fees, by the weighted average occupied square feet for the period. Realized annual rent per available square foot (“REVPAF”) is computed by dividing rental income, before late charges and administrative fees, by the total available net rentable square feet for the period. These measures exclude late charges and administrative fees in order to provide a better measure of our ongoing level of revenue. Late charges are dependent upon the level of delinquency, and administrative fees are dependent upon the level of move-ins. In addition, the rates charged for late charges and administrative fees can vary independently from rental rates. These measures take into consideration promotional discounts, which reduce rental income.
(d) Annual contract rent represents the agreed upon monthly rate that is paid by our tenants in place at the time of measurement. Contract rates are initially set in the lease agreement upon move-in, and we adjust them from time to time with notice. Contract rent excludes other fees that are charged on a per-item basis, such as late charges and administrative fees, does not reflect the impact of promotional discounts, and does not reflect the impact of rents that are written off as uncollectible.
(e) Represents the absolute nominal change with respect to gross margin and square foot occupancy, and the percentage change with respect to all other items.
Analysis of Same Store Revenue
We believe a balanced occupancy and rate strategy maximizes our revenues over time. We regularly adjust rental rates and promotional discounts offered (generally, “$1.00 rent for the first month”), as well as our marketing efforts to maximize revenue from new tenants to replace tenants that vacate.We typically increase rental rates to our long-term tenants (generally, those who have been with us for at least five months) every six to twelve months. As a result, the number of long-term tenants we have in our facilities is an important factor in our revenue growth. The level of rate increases to long-term tenants is based upon evaluating the additional revenue from the increase against the negative impact of incremental move-outs, by considering tenants’ in-place rent and prevailing market rents, among other factors.
Comparison of the Year Ended December 31, 2025 to the Year Ended December 31, 2024
Revenues generated by our Same Store Facilities remained relatively unchanged compared to 2024, due primarily to a 0.5% increase in realized annual rent per occupied square foot partially offset by a 0.4% decrease in average occupancy.
The increase in realized annual rent per occupied square foot in 2025 as compared to 2024 was due to cumulative rate increases to existing long-term tenants over the past twelve months partially offset by a decrease in average rates per square foot charged to new tenants moving in over the same period.
The weighted average square foot occupancy for our Same Store Facilities was 92.0% for 2025, representing a decrease of 0.4%, as compared to 2024, due to softening of demand. In response, we lowered move-in rental rates to stimulate move-in activity at our facilities in 2025 as compared to 2024.
Move-out activities from our tenants were lower in 2025 as compared to 2024. More than half of our tenants have rented their space for longer than a year at December 31, 2025, which supported our revenue growth from existing long-term tenants.Comparison of the Year Ended December 31, 2024 to the Year Ended December 31, 2023Revenues generated by our Same Store Facilities decreased 0.6% in 2024 as compared to 2023, due primarily to a 0.5% decrease in average occupancy.
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The weighted average square foot occupancy for our Same Store Facilities was 92.4% for 2024, representing a decrease of 0.5%, as compared to 2023, due to softening customer demand. In response, we lowered move-in rental rates and increased advertising spending to stimulate move-in activity at our facilities in 2024 as compared to 2023.
Move-out activities from our tenants were lower in 2024 as compared to 2023. More than half of our tenants have rented their space for longer than a year at December 31, 2024, which supported our revenue growth from existing long-term tenants.Selected Key Move-in and Move-Out Statistical DataThe following table sets forth average annual contract rent per square foot and total square footage for tenants moving in and moving out during the years ended December 31, 2025, 2024, and 2023. Contract rents gained from move-ins and contracts rents lost from move-outs included in the table assume move-in and move-out activities occur at the beginning of each period presented. The table also includes promotional discounts, which vary based upon the move-in contractual rates, move-in volume, and percentage of tenants moving in who receive the discount.Year Ended December 31, Year Ended December 31,2025 2024 Change 2024 2023 Change(Amounts in thousands, except for per square foot amounts)
Tenants moving in during the period:Average annual contract rent per square foot $ 12.80 $ 13.69 (6.5)% $ 13.69 $ 15.50 (11.7)%
Square footage 124,363 123,937 0.3% 123,937 125,160 (1.0)%
Contract rents gained from move-ins $ 1,591,846 $ 1,696,698 (6.2)% $ 1,696,698 $ 1,939,980 (12.5)%
Promotional discounts given $ 56,868 $ 63,904 (11.0)% $ 63,904 $ 66,031 (3.2)%Tenants moving out during the period:Average annual contract rent per square foot $ 20.30 $ 20.59 (1.4)% $ 20.59 $ 21.06 (2.2)%
Square footage 123,569 125,101 (1.2)% 125,101 126,491 (1.1)%
Contract rents lost from move-outs $ 2,508,451 $ 2,575,830 (2.6)% $ 2,575,830 $ 2,663,900 (3.3)%
We expect industry-wide demand from new tenants in 2026 to be similar to 2025, across a diverse set of markets, subject to potential adverse effects from evolving political and macroeconomic uncertainty, including changes in trade policy and new tariffs, pricing restrictions and microeconomic uncertainty. As a result, we expect Same Store Facilities revenues in 2026 to be modestly below those earned in 2025.Late Charges and Administrative FeesLate charges and administrative fees decreased 1.0% in 2025 and increased 0.7% in 2024, respectively, in each case as compared to the previous year. The decrease in 2025 was due primarily to lower late charges on delinquent accounts due to lower customer delinquency rates. The increase in 2024 was due primarily to higher late charges and lien fees collected on delinquent accounts.Analysis of Same Store Cost of OperationsCost of operations (excluding depreciation and amortization) increased 1.8% and 2.1% in 2025 and 2024, respectively, in each case as compared to the previous year. The increase in 2025 was due primarily to increased property tax expense and indirect cost of operations, partially offset by decreased on-site property manager payroll expense and marketing expense. The increase in 2024 was due primarily to increased property tax expense, repairs and maintenance expense and marketing expense partially offset by decreased on-site property manager payroll expense, utilities expense and indirect cost of operations.
Property tax expense increased 5.3% and 4.8% in 2025 and 2024, respectively, in each case as compared to the previous year, as a result of higher assessed values. We expect property tax expense to grow in 2026 due primarily to higher assessed values.
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On-site property manager payroll expense decreased 5.0% and 3.3% in 2025 and 2024, respectively, in each case as compared to the previous year. The decreases in each year were primarily due to reduction in labor hours driven by the continued implementation of dynamic staffing models based on customer activity levels. We expect on-site property manager payroll expense to decrease in 2026 as compared to 2025 as we continue to enhance operational processes.
Repairs and maintenance expense increased 1.4% and 8.8% in 2025 and 2024, respectively, in each case as compared to the previous year. Repairs and maintenance expense levels are dependent upon many factors such as (i) damage and equipment malfunctions, (ii) short-term local supply and demand factors for material and labor, and (iii) weather conditions, which can impact costs such as snow removal, roof repairs, and HVAC maintenance and repairs.
Our utility expense consists primarily of electricity costs, which are dependent upon energy prices and usage levels. Changes in usage levels are driven primarily by weather and temperature. Utility expense increased 1.0% in 2025 and decreased 4.2% in 2024 as compared to the previous year, due primarily to our investment in energy saving technology such as solar power and LED lights, which generate favorable returns on investment in the form of lower utility usage, partially offset by increased utility rates in 2025. We expect lower electricity consumption in 2026 as a result of our continued investment in solar power.
Marketing expense includes internet advertising we utilize through our online paid search programs and the operating costs of our website and telephone reservation center. Internet advertising expense, comprising keyword search fees assessed on a “per click” basis, varies based upon demand for self-storage space, the quantity of people inquiring about self-storage through online search, occupancy levels, the number and aggressiveness of bidding competitors, and other factors. These factors are volatile; accordingly, internet advertising can increase or decrease significantly in the short-term. Our marketing expense decreased by 4.4% in 2025 and increased by 13.1% in 2024 as compared to the previous year. The decrease in 2025 was primarily due to realized cost efficiencies on our online paid search programs utilized to attract new tenants. The increase in 2024 was primarily due to utilizing a higher volume of online paid search programs to attract new tenants. We plan to continue to use internet advertising and other advertising channels to support move-in volumes in 2026.
Indirect Cost of Operations represents costs related to our supervisory payroll, centralized management costs, and share-based compensation. Indirect Cost of Operations increased 6.0% in 2025 and decreased 6.4% in 2024 as compared to the previous year primarily related to changes in the administrative and cash compensation expenses for shared general corporate functions to the extent their efforts are devoted to self-storage operations. Such functions include information technology support, hardware, and software, as well as centralized administration of payroll, benefits, training, repairs and maintenance, customer service, pricing and marketing, operational accounting and finance, legal costs, and costs from field management executives. The increase in 2025 was primarily driven by increases in personnel-related costs. The decrease in 2024 was primarily driven by achievement of economies of scale from recent acquisitions with centralized management costs allocated over a broader number of self-storage facilities including Non-Same Store Facilities.
34Analysis of Market Trends
The following tables set forth selected market trends in our Same Store Facilities:
Same Store Facilities Operating Trends by MarketAs of December 31, 2025 Year Ended December 31,
Realized Rent per Occupied Square Foot Average Occupancy Realized Rent per Available Square Foot
Number of Facilities Square Feet (millions) 2025 2024 Change (a) 2025 2024 Change (a) 2025 2024 Change (a)
Los Angeles 217 15.8 $ 35.76 $ 36.17 (1.1) % 94.8 % 94.6 % 0.2 % $ 33.91 $ 34.23 (0.9) %
San Francisco 130 8.0 33.66 32.69 3.0 % 94.0 % 94.3 % (0.3) % 31.63 30.81 2.7 %
New York 90 6.6 32.97 32.33 2.0 % 93.2 % 93.6 % (0.4) % 30.72 30.25 1.6 %
Washington DC 109 7.3 27.48 26.92 2.1 % 93.2 % 92.8 % 0.4 % 25.62 24.97 2.6 %
Miami 85 6.3 30.07 29.86 0.7 % 92.6 % 93.3 % (0.7) % 27.84 27.87 (0.1) %
Seattle-Tacoma 95 6.7 26.66 25.76 3.5 % 92.2 % 92.8 % (0.6) % 24.59 23.90 2.9 %
Dallas-Ft. Worth 136 10.2 17.41 18.23 (4.5) % 89.5 % 89.2 % 0.3 % 15.59 16.26 (4.1) %
Houston 128 10.4 16.97 16.76 1.3 % 90.2 % 91.7 % (1.5) % 15.32 15.36 (0.3) %
Chicago 132 8.4 21.13 20.49 3.1 % 92.7 % 92.9 % (0.2) % 19.60 19.03 3.0 %
Atlanta 107 7.1 16.10 17.30 (6.9) % 88.5 % 88.2 % 0.3 % 14.25 15.27 (6.7) %
West Palm Beach 42 3.3 25.80 25.78 0.1 % 91.5 % 92.5 % (1.0) % 23.61 23.83 (0.9) %
Orlando-Daytona 72 4.6 18.66 18.73 (0.4) % 89.9 % 91.6 % (1.7) % 16.78 17.16 (2.2) %
Philadelphia 60 3.9 20.52 20.62 (0.5) % 92.7 % 92.7 % — % 19.02 19.11 (0.5) %
Baltimore 40 2.9 23.40 23.55 (0.6) % 93.0 % 92.4 % 0.6 % 21.77 21.75 0.1 %
San Diego 22 2.1 30.51 29.79 2.4 % 93.9 % 94.3 % (0.4) % 28.64 28.10 1.9 %
Charlotte 57 4.4 15.79 15.99 (1.3) % 89.8 % 91.3 % (1.5) % 14.18 14.60 (2.9) %
Denver 60 4.1 19.27 19.30 (0.2) % 91.6 % 91.8 % (0.2) % 17.66 17.72 (0.3) %
Tampa 56 3.7 19.32 18.78 2.9 % 91.2 % 91.7 % (0.5) % 17.62 17.22 2.3 %
Phoenix 45 3.1 19.34 19.76 (2.1) % 91.8 % 92.2 % (0.4) % 17.75 18.22 (2.6) %
Detroit 43 3.1 18.21 17.96 1.4 % 92.7 % 92.8 % (0.1) % 16.88 16.67 1.3 %
Boston 27 1.9 28.94 28.46 1.7 % 93.7 % 93.8 % (0.1) % 27.12 26.69 1.6 %
Honolulu 11 0.8 55.26 53.21 3.9 % 95.6 % 96.1 % (0.5) % 52.82 51.11 3.3 %
Portland 44 2.3 21.74 21.28 2.2 % 92.3 % 93.0 % (0.7) % 20.06 19.79 1.4 %
Minneapolis/St. Paul 50 3.5 16.84 16.46 2.3 % 93.1 % 92.2 % 0.9 % 15.68 15.17 3.4 %
Sacramento 34 2.0 21.70 21.65 0.2 % 92.8 % 93.6 % (0.8) % 20.13 20.27 (0.7) %
All other markets 673 42.8 16.28 16.22 0.4 % 91.5 % 92.2 % (0.7) % 14.90 14.95 (0.3) %
Totals 2,565 175.3 $ 22.54 $ 22.43 0.5 % 92.0 % 92.4 % (0.4) % $ 20.74 $ 20.72 0.1 %
(a) Represents the absolute nominal change with respect to square foot occupancy, and the percentage change with respect to all other items.
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Same Store Facilities Operating Trends by Market (Continued)Year Ended December 31,Revenues ($000's) Direct Expenses ($000's) Indirect Expenses ($000's) Net Operating Income ($000's)
2025 2024 Change 2025 2024 Change 2025 2024 Change 2025 2024 Change
Los Angeles $ 548,557 $ 553,831 (1.0) % $ 72,586 $ 70,632 2.8 % $ 10,234 $ 10,395 (1.5) % $ 465,737 $ 472,804 (1.5) %
San Francisco 259,617 253,191 2.5 % 39,776 39,403 0.9 % 6,067 5,631 7.7 % 213,774 208,157 2.7 %
New York 210,339 207,047 1.6 % 51,929 50,679 2.5 % 4,900 4,374 12.0 % 153,510 151,994 1.0 %
Washington DC 193,133 188,317 2.6 % 40,138 37,760 6.3 % 5,239 5,064 3.5 % 147,756 145,493 1.6 %
Miami 180,102 180,326 (0.1) % 39,308 41,001 (4.1) % 3,825 3,756 1.8 % 136,969 135,569 1.0 %
Seattle-Tacoma 167,980 163,282 2.9 % 30,324 32,503 (6.7) % 4,511 4,159 8.5 % 133,145 126,620 5.2 %
Dallas-Ft. Worth 165,380 172,947 (4.4) % 43,782 42,253 3.6 % 5,970 5,237 14.0 % 115,628 125,457 (7.8) %
Houston 167,013 167,654 (0.4) % 45,869 45,486 0.8 % 5,854 5,358 9.3 % 115,290 116,810 (1.3) %
Chicago 170,409 165,443 3.0 % 66,834 62,466 7.0 % 5,761 5,355 7.6 % 97,814 97,622 0.2 %
Atlanta 106,706 114,192 (6.6) % 25,377 27,458 (7.6) % 4,863 4,485 8.4 % 76,466 82,249 (7.0) %
West Palm Beach 80,016 80,834 (1.0) % 17,655 17,989 (1.9) % 1,959 2,056 (4.7) % 60,402 60,789 (0.6) %
Orlando-Daytona 79,710 81,508 (2.2) % 17,441 17,472 (0.2) % 3,156 3,062 3.1 % 59,113 60,974 (3.1) %
Philadelphia 77,093 77,485 (0.5) % 19,553 17,709 10.4 % 2,626 2,576 1.9 % 54,914 57,200 (4.0) %
Baltimore 66,939 66,842 0.1 % 13,777 13,495 2.1 % 1,771 1,646 7.6 % 51,391 51,701 (0.6) %
San Diego 60,398 59,325 1.8 % 9,369 9,433 (0.7) % 1,074 1,189 (9.7) % 49,955 48,703 2.6 %
Charlotte 65,692 67,639 (2.9) % 13,541 13,618 (0.6) % 2,445 2,210 10.6 % 49,706 51,811 (4.1) %
Denver 75,994 76,279 (0.4) % 23,813 24,163 (1.4) % 2,589 2,452 5.6 % 49,592 49,664 (0.1) %
Tampa 68,548 67,163 2.1 % 16,674 16,763 (0.5) % 2,384 2,232 6.8 % 49,490 48,168 2.7 %
Phoenix 58,033 59,634 (2.7) % 11,007 11,977 (8.1) % 1,897 1,999 (5.1) % 45,129 45,658 (1.2) %
Detroit 54,940 54,286 1.2 % 11,722 10,397 12.7 % 1,949 1,738 12.1 % 41,269 42,151 (2.1) %
Boston 52,112 51,264 1.7 % 11,583 11,405 1.6 % 1,283 1,264 1.5 % 39,246 38,595 1.7 %
Honolulu 43,398 41,949 3.5 % 5,797 5,674 2.2 % 630 520 21.2 % 36,971 35,755 3.4 %
Portland 48,472 47,881 1.2 % 9,816 9,655 1.7 % 1,779 1,781 (0.1) % 36,877 36,445 1.2 %
Minneapolis/St. Paul 56,238 54,397 3.4 % 17,528 17,255 1.6 % 2,184 1,935 12.9 % 36,526 35,207 3.7 %
Sacramento 40,917 41,240 (0.8) % 7,185 6,612 8.7 % 1,479 1,424 3.9 % 32,253 33,204 (2.9) %
All other markets 667,097 669,597 (0.4) % 157,989 157,035 0.6 % 29,116 27,143 7.3 % 479,992 485,419 (1.1) %
Totals $ 3,764,833 $ 3,763,553 — % $ 820,373 $ 810,293 1.2 % $ 115,545 $ 109,041 6.0 % $ 2,828,915 $ 2,844,219 (0.5) %
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Same Store Facilities Operating Trends by Market (Continued)
As of December 31, 2024 Year Ended December 31,
Realized Rent per Occupied Square Foot Average Occupancy Realized Rent per Available Square Foot
Number of Facilities Square Feet (millions) 2024 2023 Change (a) 2024 2023 Change (a) 2024 2023 Change (a)
Los Angeles 217 15.8 $ 36.17 $ 35.91 0.7 % 94.6 % 95.4 % (0.8) % $ 34.23 $ 34.24 — %
San Francisco 130 8.0 32.69 32.22 1.5 % 94.3 % 94.3 % — % 30.81 30.38 1.4 %
New York 90 6.6 32.33 32.13 0.6 % 93.6 % 93.3 % 0.3 % 30.25 29.98 0.9 %Washington DC 109 7.3 26.92 26.62 1.1 % 92.8 % 91.7 % 1.1 % 24.97 24.40 2.3 %Miami 85 6.3 29.86 29.90 (0.1) % 93.3 % 93.7 % (0.4) % 27.87 28.00 (0.5) %
Seattle-Tacoma 95 6.7 25.76 25.90 (0.5) % 92.8 % 92.4 % 0.4 % 23.90 23.94 (0.2) %
Dallas-Ft. Worth 136 10.2 18.23 18.10 0.7 % 89.2 % 91.6 % (2.4) % 16.26 16.57 (1.9) %
Houston 128 10.4 16.76 16.48 1.7 % 91.7 % 91.9 % (0.2) % 15.36 15.16 1.3 %
Chicago 132 8.4 20.49 20.16 1.6 % 92.9 % 93.0 % (0.1) % 19.03 18.74 1.5 %Atlanta 107 7.1 17.30 17.93 (3.5) % 88.2 % 90.8 % (2.6) % 15.27 16.29 (6.3) %West Palm Beach 42 3.3 25.78 26.25 (1.8) % 92.5 % 93.4 % (0.9) % 23.83 24.53 (2.9) %
Orlando-Daytona 72 4.6 18.73 19.47 (3.8) % 91.6 % 93.2 % (1.6) % 17.16 18.14 (5.4) %
Philadelphia 60 3.9 20.62 20.99 (1.8) % 92.7 % 92.7 % — % 19.11 19.46 (1.8) %
Baltimore 40 2.9 23.55 23.97 (1.8) % 92.4 % 91.0 % 1.4 % 21.75 21.82 (0.3) %
San Diego 22 2.1 29.79 29.30 1.7 % 94.3 % 94.6 % (0.3) % 28.10 27.72 1.4 %
Charlotte 57 4.4 15.99 16.17 (1.1) % 91.3 % 93.0 % (1.7) % 14.60 15.03 (2.9) %
Denver 60 4.1 19.30 19.23 0.4 % 91.8 % 92.5 % (0.7) % 17.72 17.80 (0.4) %
Tampa 56 3.7 18.78 19.87 (5.5) % 91.7 % 91.9 % (0.2) % 17.22 18.27 (5.7) %
Phoenix 45 3.1 19.76 20.73 (4.7) % 92.2 % 92.1 % 0.1 % 18.22 19.09 (4.6) %
Detroit 43 3.1 17.96 17.80 0.9 % 92.8 % 93.0 % (0.2) % 16.67 16.55 0.7 %
Boston 27 1.9 28.46 28.22 0.9 % 93.8 % 94.1 % (0.3) % 26.69 26.55 0.5 %
Honolulu 11 0.8 53.21 51.30 3.7 % 96.1 % 96.3 % (0.2) % 51.11 49.41 3.4 %
Portland 44 2.3 21.28 21.63 (1.6) % 93.0 % 92.7 % 0.3 % 19.79 20.05 (1.3) %
Minneapolis/St. Paul 50 3.5 16.46 16.46 — % 92.2 % 91.9 % 0.3 % 15.17 15.12 0.3 %
Sacramento 34 2.0 21.65 21.98 (1.5) % 93.6 % 94.1 % (0.5) % 20.27 20.69 (2.0) %
All other markets 673 42.8 16.22 16.31 (0.6) % 92.2 % 92.9 % (0.7) % 14.95 15.16 (1.4) %
Totals 2,565 175.3 $ 22.43 $ 22.44 — % 92.4 % 92.9 % (0.5) % $ 20.72 $ 20.85 (0.6) %(a) Represents the absolute nominal change with respect to square foot occupancy, and the percentage change with respect to all other items.37Same Store Facilities Operating Trends by Market (Continued)
Year Ended December 31,
Revenues ($000's) Direct Expenses ($000's) Indirect Expenses ($000's) Net Operating Income ($000's)2024 2023 Change 2024 2023 Change 2024 2023 Change 2024 2023 Change
Los Angeles $ 553,831 $ 554,243 (0.1) % $ 70,632 $ 73,349 (3.7) % $ 10,395 $ 11,111 (6.4) % $ 472,804 $ 469,783 0.6 %San Francisco 253,191 249,790 1.4 % 39,403 38,835 1.5 % 5,631 5,958 (5.5) % 208,157 204,997 1.5 %New York 207,047 204,976 1.0 % 50,679 48,963 3.5 % 4,374 4,670 (6.3) % 151,994 151,343 0.4 %Washington DC 188,317 184,028 2.3 % 37,760 37,260 1.3 % 5,064 5,065 — % 145,493 141,703 2.7 %Miami 180,326 181,188 (0.5) % 41,001 34,815 17.8 % 3,756 4,018 (6.5) % 135,569 142,355 (4.8) %
Seattle-Tacoma 163,282 163,512 (0.1) % 32,503 29,663 9.6 % 4,159 4,139 0.5 % 126,620 129,710 (2.4) %
Dallas-Ft. Worth 172,947 176,536 (2.0) % 42,253 40,314 4.8 % 5,237 5,788 (9.5) % 125,457 130,434 (3.8) %
Houston 167,654 165,526 1.3 % 45,486 44,212 2.9 % 5,358 5,607 (4.4) % 116,810 115,707 1.0 %
Chicago 165,443 162,916 1.6 % 62,466 61,273 1.9 % 5,355 5,607 (4.5) % 97,622 96,036 1.7 %Atlanta 114,192 121,446 (6.0) % 27,458 24,661 11.3 % 4,485 4,719 (5.0) % 82,249 92,066 (10.7) %West Palm Beach 80,834 83,245 (2.9) % 17,989 18,150 (0.9) % 2,056 2,208 (6.9) % 60,789 62,887 (3.3) %
Orlando-Daytona 81,508 86,032 (5.3) % 17,472 16,903 3.4 % 3,062 3,312 (7.5) % 60,974 65,817 (7.4) %
Philadelphia 77,485 78,781 (1.6) % 17,709 17,737 (0.2) % 2,576 2,722 (5.4) % 57,200 58,322 (1.9) %
Baltimore 66,842 67,004 (0.2) % 13,495 12,754 5.8 % 1,646 1,729 (4.8) % 51,701 52,521 (1.6) %
San Diego 59,325 58,553 1.3 % 9,433 8,985 5.0 % 1,189 1,360 (12.6) % 48,703 48,208 1.0 %
Charlotte 67,639 69,501 (2.7) % 13,618 12,874 5.8 % 2,210 2,308 (4.2) % 51,811 54,319 (4.6) %
Denver 76,279 76,605 (0.4) % 24,163 23,994 0.7 % 2,452 2,521 (2.7) % 49,664 50,090 (0.9) %
Tampa 67,163 71,189 (5.7) % 16,763 16,251 3.2 % 2,232 2,488 (10.3) % 48,168 52,450 (8.2) %
Phoenix 59,634 62,473 (4.5) % 11,977 12,226 (2.0) % 1,999 2,055 (2.7) % 45,658 48,192 (5.3) %
Detroit 54,286 53,871 0.8 % 10,397 10,985 (5.4) % 1,738 1,702 2.1 % 42,151 41,184 2.3 %
Boston 51,264 50,955 0.6 % 11,405 10,856 5.1 % 1,264 1,412 (10.5) % 38,595 38,687 (0.2) %
Honolulu 41,949 40,577 3.4 % 5,674 5,503 3.1 % 520 654 (20.5) % 35,755 34,420 3.9 %
Portland 47,881 48,502 (1.3) % 9,655 9,343 3.3 % 1,781 1,917 (7.1) % 36,445 37,242 (2.1) %
Minneapolis/St. Paul 54,397 54,260 0.3 % 17,255 18,231 (5.4) % 1,935 2,020 (4.2) % 35,207 34,009 3.5 %
Sacramento 41,240 42,070 (2.0) % 6,612 6,670 (0.9) % 1,424 1,538 (7.4) % 33,204 33,862 (1.9) %
All other markets 669,597 678,472 (1.3) % 157,035 148,828 5.5 % 27,143 29,927 (9.3) % 485,419 499,717 (2.9) %
Totals $ 3,763,553 $ 3,786,251 (0.6) % $ 810,293 $ 783,635 3.4 % $ 109,041 $ 116,555 (6.4) % $ 2,844,219 $ 2,886,061 (1.4) %38Acquired FacilitiesThe Acquired Facilities represent 273 facilities that we acquired in 2025, 2024, and 2023. As a result of the stabilization process and timing of when these facilities were acquired, year-over-year changes can be significant. The following table summarizes operating data with respect to the Acquired Facilities:
ACQUIRED FACILITIES Year Ended December 31, Year Ended December 31,
2025 2024 Change (a) 2024 2023 Change (a)
(Dollar amounts in thousands, except for per square foot amounts)Revenues (b):2023 Acquisitions $ 192,666 $ 184,097 $ 8,569 $ 184,097 $ 55,487 $ 128,610
2024 Acquisitions 20,581 1,827 18,754 1,827 — 1,827
2025 Acquisitions 33,422 — 33,422 — — —
Total revenues 246,669 185,924 60,745 185,924 55,487 130,437Cost of operations (b):2023 Acquisitions 58,588 60,049 (1,461) 60,049 19,922 40,127
2024 Acquisitions 7,689 1,019 6,670 1,019 — 1,019
2025 Acquisitions 12,890 — 12,890 — — —
Total cost of operations 79,167 61,068 18,099 61,068 19,922 41,146Net operating income:2023 Acquisitions 134,078 124,048 10,030 124,048 35,565 88,483
2024 Acquisitions 12,892 808 12,084 808 — 808
2025 Acquisitions 20,532 — 20,532 — — —
Net operating income 167,502 124,856 42,646 124,856 35,565 89,291
Depreciation and amortization expense (220,053) (206,319) (13,734) (206,319) (72,848) (133,471)
Net loss $ (52,551) $ (81,463) $ 28,912 $ (81,463) $ (37,283) $ (44,180)
As of December 31:Square foot occupancy:2023 Acquisitions 86.9% 86.8% 0.1% 86.8% 83.1% 3.7%
2024 Acquisitions 86.9% 79.0% 7.9% 79.0% —% —%
2025 Acquisitions 80.5% —% —% —% —% —%
85.0% 85.9% (0.9)% 85.9% 83.1% 2.8%
Annual contract rent per occupied square foot (c):
2023 Acquisitions $ 17.43 $ 17.32 0.6% $ 17.32 $ 16.78 3.2%
2024 Acquisitions 14.24 13.69 4.0% 13.69 — —%
2025 Acquisitions 13.63 — —% — — —%
$ 16.06 $ 16.92 (5.1)% $ 16.92 $ 16.78 0.8%Number of facilities:2023 Acquisitions 164 164 — 164 164 —
2024 Acquisitions 22 22 — 22 — 22
2025 Acquisitions 87 — 87 — — —
273 186 87 186 164 22Net rentable square feet (in thousands):2023 Acquisitions (d) 12,112 12,067 45 12,067 12,067 —
2024 Acquisitions 1,666 1,666 — 1,666 — 1,666
2025 Acquisitions 6,115 — 6,115 — — —
19,893 13,733 6,160 13,733 12,067 1,666
39ACQUIRED FACILITIES (Continued)As of December 31 2025Costs to acquire (in thousands):2023 Acquisitions (d)(e) $ 2,674,840
2024 Acquisitions 267,473
2025 Acquisitions 945,586
$ 3,887,899(a) Represents the percentage change with respect to annual contract rent per occupied square foot, and the absolute nominal change with respect to all other items.
(b) Revenues and cost of operations do not include tenant reinsurance and merchandise sale revenues and expenses generated at the facilities. See “Ancillary Operations” below for more information.(c) Annual contract rent represents the agreed upon monthly rate that is paid by our tenants in place at the time of measurement. Contract rates are initially set in the lease agreement upon move-in, and we adjust them from time to time with notice. Contract rent excludes other fees that are charged on a per-item basis, such as late charges and administrative fees, does not reflect the impact of promotional discounts, and does not reflect the impact of rents that are written off as uncollectible.
(d) We have completed the expansion project on a facility acquired in 2023 for $6.9 million, adding 45,000 net rentable square feet of storage space as of December 31, 2025.
(e) The amount includes the costs allocated to land, buildings and intangible assets associated with the 127 self-storage facilities from the Simply (as defined below) acquisition.
We have been active in acquiring facilities in recent years. Since the beginning of 2023, we acquired a total of 273 facilities with 19.9 million net rentable square feet for $3.9 billion. During 2025, these facilities contributed net operating income of $167.5 million.
During 2023, we acquired BREIT Simply Storage LLC (“Simply”), a self-storage company that owned and operated 127 self-storage facilities (9.4 million square feet) and managed 25 self-storage facilities (1.8 million square feet) for third parties, for a purchase price of $2.2 billion in cash.
We remain active in seeking to acquire additional self-storage facilities. Future acquisition volume may be impacted by cost of capital and overall macro-economic uncertainties. During 2025, we acquired 87 self-storage facilities across 21 states with 6.1 million net rentable square feet for $945.6 million. Subsequent to December 31, 2025, we acquired or were under contract to acquire three self-storage facilities across three states with 0.2 million net rentable square feet for $20.7 million. Our total acquisitions planned or completed through December 31, 2025, amount to $966.3 million.
40Newly Developed and Expanded FacilitiesThe Newly Developed and Expanded Facilities include 47 facilities that were developed on new sites since January 1, 2020, and 64 facilities expanded to increase their net rentable square footage. Of these expansions, 45 were completed before 2024, 14 were completed in 2024 or 2025, and five are currently in process at December 31, 2025. The following table summarizes operating data with respect to the Newly Developed and Expanded Facilities:NEWLY DEVELOPED AND EXPANDED FACILITIES
Year Ended December 31, Year Ended December 31,2025 2024 Change (a) 2024 2023 Change (a)
(Dollar amounts in thousands, except for per square foot amounts)Revenues (b):Developed in 2020 $ 7,078 $ 7,371 $ (293) $ 7,371 $ 7,621 $ (250)
Developed in 2021 12,517 11,864 653 11,864 11,134 730
Developed in 2022 11,609 10,054 1,555 10,054 6,893 3,161
Developed in 2023 11,162 6,168 4,994 6,168 1,032 5,136
Developed in 2024 4,852 874 3,978 874 — 874
Developed in 2025 1,183 — 1,183 — — —
Expansions completed before 2024 103,408 96,650 6,758 96,650 86,995 9,655
Expansions completed in 2024 or 2025 20,615 16,250 4,365 16,250 18,874 (2,624)
Expansions in process 10,598 11,384 (786) 11,384 11,440 (56)
Total revenues 183,022 160,615 22,407 160,615 143,989 16,626Cost of operations (b):Developed in 2020 2,056 2,037 19 2,037 1,884 153
Developed in 2021 4,026 3,743 283 3,743 3,849 (106)
Developed in 2022 3,959 4,055 (96) 4,055 3,563 492
Developed in 2023 5,450 4,976 474 4,976 1,638 3,338
Developed in 2024 2,705 879 1,826 879 — 879
Developed in 2025 1,012 — 1,012 — — —
Expansions completed before 2024 27,670 29,006 (1,336) 29,006 25,200 3,806
Expansions completed in 2024 or 2025 9,356 5,614 3,742 5,614 5,106 508
Expansions in process 2,149 2,500 (351) 2,500 2,132 368
Total cost of operations 58,383 52,810 5,573 52,810 43,372 9,438Net operating income (loss):Developed in 2020 5,022 5,334 (312) 5,334 5,737 (403)
Developed in 2021 8,491 8,121 370 8,121 7,285 836
Developed in 2022 7,650 5,999 1,651 5,999 3,330 2,669
Developed in 2023 5,712 1,192 4,520 1,192 (606) 1,798
Developed in 2024 2,147 (5) 2,152 (5) — (5)
Developed in 2025 171 — 171 — — —
Expansions completed before 2024 75,738 67,644 8,094 67,644 61,795 5,849
Expansions completed in 2024 or 2025 11,259 10,636 623 10,636 13,768 (3,132)
Expansions in process 8,449 8,884 (435) 8,884 9,308 (424)
Net operating income 124,639 107,805 16,834 107,805 100,617 7,188
Depreciation and amortization expense (69,482) (53,719) (15,763) (53,719) (40,458) (13,261)
Net income $ 55,157 $ 54,086 $ 1,071 $ 54,086 $ 60,159 $ (6,073)
41NEWLY DEVELOPED AND EXPANDED FACILITIES (Continued)As of December 31, As of December 31,
2025 2024 Change (a) 2024 2023 Change (a)
(Dollar amounts in thousands, except for per square foot amounts)Square foot occupancy:Developed in 2020 89.5% 89.3% 0.2% 89.3% 89.4% (0.1)%
Developed in 2021 83.6% 77.7% 5.9% 77.7% 81.5% (3.8)%
Developed in 2022 92.1% 86.3% 5.8% 86.3% 77.7% 8.6%
Developed in 2023 79.3% 75.9% 3.4% 75.9% 27.9% 48.0%
Developed in 2024 74.9% 41.0% 33.9% 41.0% —% —%
Developed in 2025 21.5% —% —% —% —% —%
Expansions completed before 2024 84.6% 81.8% 2.8% 81.8% 79.2% 2.6%
Expansions completed in 2024 or 2025 61.9% 61.6% 0.3% 61.6% 83.8% (22.2)%
Expansions in process 89.2% 86.7% 2.5% 86.7% 92.4% (5.7)%
76.0% 76.9% (0.9)% 76.9% 74.8% 2.1%
Annual contract rent per occupied square foot (c):
Developed in 2020 $ 21.20 $ 21.77 (2.6)% $ 21.77 $ 22.73 (4.2)%
Developed in 2021 19.44 19.62 (0.9)% 19.62 19.78 (0.8)%
Developed in 2022 18.29 17.74 3.1% 17.74 16.20 9.5%
Developed in 2023 12.42 10.34 20.1% 10.34 9.61 7.6%
Developed in 2024 12.66 10.17 24.5% 10.17 — —%
Developed in 2025 12.42 — —% — — —%
Expansions completed before 2024 20.66 20.33 1.6% 20.33 20.45 (0.6)%
Expansions completed in 2024 or 2025 17.59 19.55 (10.0)% 19.55 21.94 (10.9)%
Expansions in process 26.86 27.41 (2.0)% 27.41 27.39 0.1%
$ 18.89 $ 19.13 (1.3)% $ 19.13 $ 17.37 10.1%Number of facilities:Developed in 2020 3 3 — 3 3 —
Developed in 2021 6 6 — 6 6 —
Developed in 2022 8 8 — 8 8 —Developed in 2023 11 11 — 11 11 —
Developed in 2024 7 7 — 7 — 7
Developed in 2025 12 — 12 — — —
Expansions completed before 2024 45 45 — 45 45 —
Expansions completed in 2024 or 2025 14 14 — 14 14 —Expansions in process 5 5 — 5 5 —111 99 12 99 92 7Net rentable square feet (in thousands):Developed in 2020 347 347 — 347 347 —Developed in 2021 (d) 760 760 — 760 681 79Developed in 2022 631 631 — 631 631 —Developed in 2023 (e) 1,238 1,098 140 1,098 1,098 —
Developed in 2024 668 668 — 668 — 668
Developed in 2025 1,280 — 1,280 — — —
Expansions completed before 2024 5,812 5,834 (22) 5,834 5,481 353
Expansions completed in 2024 or 2025 2,133 1,378 755 1,378 794 584
Expansions in process 444 439 5 439 439 —
13,313 11,155 2,158 11,155 9,471 1,684
42
NEWLY DEVELOPED AND EXPANDED FACILITIES (Continued) As of December 31, 2025Costs to develop (in thousands):Developed in 2020 $ 42,063Developed in 2021 (d) 128,435
Developed in 2022 100,089Developed in 2023 (e) 217,572Developed in 2024 129,669Developed in 2025 244,838
Expansions completed before 2024 (f) 468,750
Expansions completed in 2024 or 2025 (f) 341,113
$ 1,672,529(a) Represents the percentage change with respect to annual contract rent per occupied square foot, and the absolute nominal change with respect to all other items.
(b) Revenues and cost of operations do not include tenant reinsurance and merchandise sales generated at the facilities. See “Ancillary Operations” below for more information.(c) Annual contract rent represents the agreed upon monthly rate that is paid by our tenants in place at the time of measurement. Contract rates are initially set in the lease agreement upon move-in, and we adjust them from time to time with notice. Contract rent excludes other fees that are charged on a per-item basis, such as late charges and administrative fees, does not reflect the impact of promotional discounts, and does not reflect the impact of rents that are written off as uncollectible.(d) We have completed an expansion project on a facility developed in 2021 for $12.8 million, adding 79,000 net rentable square feet of storage space as of December 31, 2024.(e) We have completed an expansion project on a facility developed in 2023 for $23.8 million, adding 140,000 net rentable square feet of storage space as of December 31, 2025.
(f) These amounts only include the direct cost incurred to expand and renovate these facilities, and do not include (i) the original cost to develop or acquire the facility or (ii) the lost revenue on space demolished during the construction and fill-up period.
Our Newly Developed and Expanded Facilities includes a total of 111 self-storage facilities of 13.3 million net rentable square feet. For development and expansions completed by December 31, 2025, we incurred a total cost of $1.7 billion. During 2025, Newly Developed and Expanded Facilities contributed net operating income of $124.6 million.It typically takes at least three to four years for a newly developed or expanded self-storage facility to stabilize with respect to revenues. Physical occupancy can be achieved as early as two to three years following completion of the development or expansion through offering lower rental rates during fill-up. As a result, even after achieving high occupancy, there can still be a period of elevated revenue growth as the tenant base matures and higher rental rates are achieved.
We believe that our development and redevelopment activities generate favorable risk-adjusted returns over the long run. However, in the short run, our earnings are diluted during the construction and stabilization period due to the cost of capital to fund the development cost, the related construction and development overhead expenses included in general and administrative expense, and the net operating loss from newly developed facilities undergoing fill-up.We typically underwrite new developments to stabilize at approximately an 8% yield on cost (adjusted for impacts from tenant reinsurance and maintenance capital expenditures). Our developed facilities have thus far leased up as expected and are at various stages of their revenue stabilization periods. The actual annualized yields that we may achieve on these facilities upon stabilization will depend on many factors, including local and current market conditions in the vicinity of each property and the level of new and existing supply.
The facilities under “expansions completed” represent those facilities where the expansions have been completed at December 31, 2025. We incurred a total of $809.9 million in direct cost to expand these facilities, demolished a total of 0.6 million net rentable square feet of storage space, and built a total of 4.8 million net rentable square feet of new storage space.
43
The facilities under “expansion in process” represent those facilities where construction is in process at December 31, 2025, and together with additional future expansion activities primarily related to our Same Store Facilities at December 31, 2025, we expect to add a total of 0.9 million net rentable square feet of storage space by expanding existing self-storage facilities for an aggregate direct development cost of $130.4 million.
At December 31, 2025, we had 29 additional facilities in development, which will have a total of 2.6 million net rentable square feet of storage space and have an aggregate development cost totaling approximately $479.5 million. We expect these facilities to open over the next 18 to 24 months.
As of December 31, 2025, we have ongoing development and expansion projects at an estimated cost of approximately $609.9 million.Other Non-Same Store FacilitiesThe “Other Non-Same Store Facilities” represent facilities which, while not newly acquired, developed, or expanded, are not fully stabilized since January 1, 2023, including facilities acquired prior to 2023 and facilities developed or expanded prior to 2020 undergoing fill-up as well as facilities damaged in casualty events such as hurricanes, floods, and fires.
The Other Non-Same Store Facilities have an aggregate of 20.9 million net rentable square feet at December 31, 2025. During 2025, 2024, and 2023, the average occupancy for these facilities totaled 85.3%, 81.8%, and 80.8%, respectively, and the realized rent per occupied square foot totaled $15.82, $16.01, and $15.52, respectively.Depreciation and amortization expenseDepreciation and amortization expense for Self-Storage Operations increased $22.1 million and $159.7 million in 2025 and 2024, respectively in each case as compared to the previous year. The increase was primarily due to newly acquired facilities and newly developed and expanded facilities.
44
The following discussion and analysis of the components of net income, including Ancillary Operations and certain items not allocated to segments, present a comparison for the year ended December 31, 2025 to the year ended December 31, 2024. The results of these components for the years ended December 31, 2024 compared to December 31, 2023 was included in our Annual Report on Form 10-K for the year ended December 31, 2024 on page 45, under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which was filed with the SEC on February 24, 2025.Ancillary Operations
Ancillary revenues and expenses include amounts associated with the reinsurance of policies against losses to goods stored by tenants in our self-storage facilities, sale of merchandise at our self-storage facilities, and management of property owned by unrelated third parties. The following table sets forth our ancillary operations:
Year Ended December 31,2025 2024 Change(Amounts in thousands)
Revenues:Tenant reinsurance premiums $ 250,674 $ 226,595 $ 24,079
Merchandise 25,050 26,970 (1,920)
Third party property management 58,976 46,058 12,918
Total revenues 334,700 299,623 35,077Cost of operations:Tenant reinsurance 58,289 56,678 1,611
Merchandise 17,171 17,633 (462)
Third party property management 57,477 46,970 10,507
Total cost of operations 132,937 121,281 11,656Net operating income (loss):Tenant reinsurance 192,385 169,917 22,468
Merchandise 7,879 9,337 (1,458)
Third party property management 1,499 (912) 2,411
Total net operating income $ 201,763 $ 178,342 $ 23,421
Tenant reinsurance operations: Tenant reinsurance premium revenue increased $24.1 million or 10.6% in 2025 over 2024, as a result of an increase in our tenant base with respect to acquired, newly developed, and expanded facilities and the third party properties we manage, as well as higher insurance coverage and premium rates in our tenant base at our same store facilities. Tenant reinsurance premium revenue generated from tenants at our Same Store Facilities were $184.2 million and $175.0 million in 2025 and 2024, respectively, representing a 5.2% year over year increase in 2025.
Cost of operations primarily includes claims paid as well as claims adjustment expenses. Claims expenses vary based upon the number of insured tenants and the volume of events that drive covered losses, such as burglary, as well as catastrophic weather events affecting multiple properties such as hurricanes and floods. Tenant reinsurance cost of operations increased $1.6 million in 2025, as compared to 2024, primarily due to increased claim volumes and expenses related to flooding and burglary as well as increased access fees we paid to the third-party owners of properties we manage driven by the significant growth of our third-party property management program.
We expect tenant reinsurance operations to grow as we roll out insurance policies with increased coverage and higher premiums in 2026, and as we continue to increase the tenant base at our newly acquired and developed facilities.
Third-party property management: At December 31, 2025, in our third-party property management program, we managed 362 facilities (28.2 million net rentable square feet) for unrelated third parties, and were under contract to manage 84 additional facilities (7.1 million net rentable square feet) including 78 facilities that are currently under construction. During 2025, we added 73 facilities to the program and had 18 facilities exit the program. While we expect this business to increase in scope and size, we do not expect any significant changes in overall profitability of this business in the near term as we seek new properties to manage and are in the earlier stages of fill-up for newly managed properties.45Analysis of items not allocated to segmentsEquity in earnings of unconsolidated real estate entity: We account for our equity investment in Shurgard using the equity method and record our pro-rata share of its net income. We recognized equity in earnings of Shurgard of $9.6 million and $19.8 million for 2025 and 2024, respectively. Included in our equity earnings from Shurgard were $59.5 million and $44.2 million of our share of depreciation and amortization expense for 2025 and 2024, respectively.On August 1, 2024, Shurgard acquired Lok’nStore, a self-storage company publicly traded on the London Stock Exchange, for approximately £385 million ($501 million) in cash, including direct acquisition costs.For purposes of recording our equity in earnings from Shurgard, the Euro was translated at exchange rates of approximately 1.174 U.S. Dollars per Euro at December 31, 2025 (1.039 at December 31, 2024), and average exchange rates of 1.130 for 2025 and 1.082 for 2024.
Real estate acquisition and development expense: In 2025 and 2024, we incurred a total of $19.6 million and $15.5 million, respectively, of internal and external expenses related to our acquisition and development of real estate facilities. These amounts are net of $13.6 million and $17.2 million in 2025 and 2024, respectively, in development costs that were capitalized to newly developed and redeveloped self-storage facilities. The year-over-year change of real estate acquisition and development expense was primarily due to the recognition of a $4.3 million impairment write-down of certain land development parcels that were marketed for sale during 2025.General and administrative expense: The following table sets forth our general and administrative expense:
Year Ended December 31,2025 2024 Change(Amounts in thousands)Share-based compensation expense $ 24,963 $ 28,708 $ (3,745)
Legal costs 14,390 11,690 2,700
Corporate management costs 35,848 30,436 5,412
Information technology costs 2,783 12,110 (9,327)
Corporate transformation costs 4,875 — 4,875
Other costs 23,823 23,733 90
Total G&A $ 106,682 $ 106,677 $ 5
General and administrative expense remained relatively unchanged in 2025, as compared to 2024 due primarily to (i) an increase in corporate management costs driven by higher payroll costs, (ii) an increase in corporate transformation costs offset by (iii) a decrease in IT costs as a result of a successful ERP implementation in the prior year.
As part of our operating model transformation, we have launched a corporate transformation initiative focused on modernization and growth. This includes streamlining our processes through technology and expanding our geographic footprint with a stronger corporate presence in offshore locations and relocation of our principal office from California to Texas. The initiative is intended to transform our corporate functions improving efficiency and productivity.
We expect to incur corporate transformation costs of approximately $15 to $20 million as we complete the initiative over the next three years. Beginning in 2026, we believe this restructuring plan will result in future cost savings of approximately $3 to $5 million annually, although the amount and timing of such savings are subject to change depending on a variety of factors.
46Interest and other income: The following table sets forth our interest and other income:
Year Ended December 31,2025 2024 Change(Amounts in thousands)Interest earned on cash balances $ 31,543 $ 44,659 $ (13,116)
Commercial operations 9,120 8,951 169
Interest earned on notes receivable, net 5,074 123 4,951
Unrealized gain on private equity investments 3,859 4,355 (496)
Other 13,503 9,124 4,379
Total $ 63,099 $ 67,212 $ (4,113)
Interest earned on cash balances decreased $13.1 million in 2025 as compared to 2024, due primarily to lower average cash balances and lower interest rates earned in 2025.
Interest expense: In 2025 and 2024, we incurred $311.0 million and $297.9 million, respectively, of interest on our outstanding notes payable. In determining interest expense, these amounts were offset by capitalized interest of $6.5 million and $10.5 million during 2025 and 2024, respectively, associated with our development activities. The increase of interest expense in 2025 as compared to 2024 was due to the issuance of U.S. Dollar and Euro denominated unsecured notes. At December 31, 2025, we had $10.3 billion of notes payable outstanding, with a weighted average interest rate of approximately 3.2%.
Foreign currency exchange gain (loss): In 2025, we recorded foreign currency losses of $215.6 million, representing primarily the changes in the U.S. Dollar equivalent of our Euro-denominated unsecured notes due to fluctuations in exchange rates (gains of $102.2 million for 2024). The Euro was translated at exchange rates of approximately 1.174 U.S. Dollars per Euro at December 31, 2025 and 1.039 at December 31, 2024. Future gains and losses on foreign currency will be dependent upon changes in the relative value of the Euro to the U.S. Dollar and the level of Euro-denominated notes payable outstanding.
Income tax (provision) benefit: We operate as a REIT for U.S. federal income tax purposes. As a REIT, we are generally not subject to U.S. federal income taxes on our taxable income distributed to stockholders. In 2025, we recorded an income tax benefit of $7.2 million and an income tax expense of $4.7 million in 2024, related to our taxable REIT subsidiaries and income taxes incurred in certain state and local jurisdictions in which we operate. The year-over-year change in our income tax (provision) benefit was primarily driven by the income tax benefit we recognized through the sale of solar tax credits as well as changes in state income tax, due to fluctuations of taxable income in certain states where there are differences between federal and state tax laws.47Liquidity and Capital Resources
Overview and our Sources of CapitalWhile operating as a REIT allows us to minimize the payment of U.S. federal corporate income tax expense, we are required to distribute at least 90% of our taxable income to our shareholders. Notwithstanding this requirement, our annual operating retained cash flow was approximately $400 million in 2024 and $566 million in 2025. Retained operating cash flow represents our expected cash flow provided by operating activities (including property operating costs and interest payments described below), less shareholder distributions and capital expenditures. We expect retained cash flow of approximately $605 million for 2026.
Capital needs in excess of retained cash flow are met with: (i) medium and long-term debt, (ii) preferred equity, (iii) limited partnership interests, and (iv) common equity. We select among these sources of capital based upon relative cost, availability, the desire for leverage, and considering potential constraints caused by certain features of capital sources, such as debt covenants.Because raising capital is important to our growth, we endeavor to maintain a strong financial profile characterized by strong credit metrics, including low leverage relative to our total capitalization and operating cash flows. We are one of the highest rated REITs, as rated by major rating agencies Moody’s and Standard & Poor’s. Our senior notes payable have an “A” credit rating by Standard & Poor’s and “A2” by Moody’s. Our credit ratings on each of our series of preferred shares are “A3” by Moody’s and “BBB+” by Standard & Poor’s. Our credit profile enables us to effectively access both the public and private capital markets to raise capital.Our revolving line of credit has a borrowing limit of $1.5 billion. As of December 31, 2025 and February 12, 2026, there were no borrowings outstanding on the revolving line of credit; however we do have approximately $19.4 million of outstanding letters of credit, which limits our borrowing capacity to $1.5 billion as of February 12, 2026. Our line of credit matures on June 12, 2027.
In December 2024, we implemented an “at the market” offering program pursuant to which we may, from time to time, sell common shares through participating agents up to an aggregate gross sales price of $2.0 billion on the open market or in privately negotiated transactions. Since the inception of the program, we have issued a total of 184,390 common shares on the open market for an aggregate gross sales price of $61.4 million and received net proceeds of approximately $60.3 million after issuance costs. We did not issue any common shares under the program in 2025.We believe that we have significant financial flexibility to adapt to changing conditions and opportunities, and we have significant access to sources of capital including debt and preferred equity. Based on our strong credit profile and our substantial current liquidity relative to our capital requirements noted below, we would not expect any potential capital market dislocations to have a material impact upon our expected capital and growth plans over the next 12 months. However, if capital market conditions deteriorate significantly for a long period of time, our access to or cost of debt and preferred equity capital could be negatively impacted and potentially affect future investment activities.Our current and expected capital resources include: (i) $318.1 million of cash as of December 31, 2025, and (ii) approximately $605 million of expected retained operating cash flow over the next twelve months. Additionally, we have $1.5 billion available borrowing capacity on our revolving line of credit. We believe that the cash provided by our operating activities will continue to be sufficient to enable us to meet our ongoing cash requirements for interest payments on debt, maintenance capital expenditures, and distributions to our shareholders for the foreseeable future.
As described below, our current committed cash requirements consist of (i) $20.7 million in property acquisitions currently under contract, (ii) $415.6 million of remaining spending on our current development pipeline, which will be incurred primarily in the next 18 to 24 months, (iii) unfunded loan commitments of $43.9 million under the bridge lending program expected to close in the next twelve months, (iv) approximately $1.2 billion in scheduled principal repayments on our unsecured notes in the next twelve months, and (v) $48.2 million in unfunded capital commitments related to our private equity investments. We plan to refinance these unsecured notes as they come due in 2026 through either cash generated from operations, the issuance of additional debt or borrowings under the Company's Credit Facility. Our cash requirements may increase over the next year as we add projects to our development pipeline and acquire additional properties. Additional potential cash requirements could result from various activities including the redemption of outstanding preferred securities, repurchases of common stock, or merger and acquisition activities, as and to the extent we determine to engage in such activities.
48Over the long term, to the extent that our cash requirements exceed our capital resources, we believe we have a variety of possibilities to raise additional capital including issuing common or preferred securities, debt, and limited partnership interests, or entering into joint venture arrangements to acquire or develop facilities.
Cash Requirements
The following summarizes our expected material cash requirements, which comprise (i) contractually obligated expenditures, including payments of principal and interest, (ii) other essential expenditures, including property operating expenses, maintenance capital expenditures and dividends paid in accordance with REIT distribution requirements, and (iii) opportunistic expenditures, including acquisitions and developments and repurchases of our securities. We expect to satisfy these cash requirements through operating cash flow and opportunistic debt and equity financings.Required Debt Repayments: As of December 31, 2025, the principal outstanding on our debt totaled approximately $10.3 billion, consisting of $8.2 billion of U.S. Dollar denominated unsecured notes payable, $2.1 billion of Euro-denominated unsecured notes payable, and $1.6 million of mortgage notes payable. Approximate principal maturities and interest payments are as follows:Principal Interest Total(Amounts in Thousands)
2026 $ 1,150,138 $ 311,135 $ 1,461,273
2027 1,200,146 282,932 1,483,078
2028 1,200,129 245,183 1,445,312
2029 1,000,088 207,170 1,207,258
2030 1,297,819 175,478 1,473,297
Thereafter 4,462,000 1,449,582 5,911,582
$ 10,310,320 $ 2,671,480 $ 12,981,800
We have $500 million and $650 million of our U.S. Dollar denominated unsecured notes that mature on February 15, 2026 and November 9, 2026, respectively. We plan to repay these notes as they come due through either cash generated from operations or the issuance of additional debt, such as borrowings under the Company's Credit Facility.Capital Expenditure Requirements: Capital expenditures include general maintenance, major repairs, or replacements to elements of our facilities to keep our facilities in good operating condition and maintain their visual appeal. Capital expenditures do not include costs relating to the development of new facilities or redevelopment of existing facilities to increase their available rentable square footage.We spent $218 million of capital expenditures to maintain real estate facilities in 2025 and expect to spend approximately $175 million in 2026. In addition, we have spent $71 million and $54 million on the installation of solar panels in 2025 and 2024, respectively, and expect to spend approximately $60 million in 2026.
We believe the capital spent to install solar panels and LED lights will significantly reduce electricity consumption resulting in lower utility costs.
Requirement to Pay Distributions: For all periods presented herein, we have elected to be treated as a REIT, as defined in the Internal Revenue Code. For each taxable year in which we qualify for taxation as a REIT, we will not be subject to U.S. federal corporate income tax on our “REIT taxable income” (generally, taxable income subject to specified adjustments, including a deduction for dividends paid and excluding our net capital gain) that is distributed to our shareholders. We believe we have met these requirements in all periods presented herein, and we expect to continue to qualify as a REIT. Our consistent, long-term dividend policy has been to distribute our taxable income. Future quarterly distributions with respect to the common shares will continue to be determined based upon our REIT distribution requirements after taking into consideration distributions to the preferred shareholders and will be funded with cash flows from operating activities.
The annual distribution requirement with respect to our preferred shares outstanding at December 31, 2025 is approximately $194.7 million per year.
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Real Estate Investment Activities: We continue to seek to acquire additional self-storage facilities from third parties. Subsequent to December 31, 2025, we acquired or were under contract to acquire three self-storage facilities across three states with 0.2 million net rentable square feet for $20.7 million.
As of December 31, 2025, we had development and expansion projects at a total cost of approximately $609.9 million. Costs incurred through December 31, 2025 were $194.3 million, with the remaining cost to complete of $415.6 million expected to be incurred primarily in the next 18 to 24 months. Some of these projects are subject to contingencies such as entitlement approval. We expect to continue to seek to add projects to maintain and increase our robust pipeline. Our ability to do so continues to be challenged by various constraints such as difficulty in finding projects that meet our risk-adjusted yield expectations and challenges in obtaining building permits for self-storage facilities in certain municipalities.
Bridge loan commitments: We offer bridge loan financing to third-party self-storage owners for operating properties that we manage. As of December 31, 2025, we had unfunded loan commitments of $43.9 million expected to close in the next twelve months, subject to the satisfaction of certain conditions.Property Operating Expenses: The direct and indirect cost of our operations impose significant cash requirements. Direct operating costs include property taxes, on-site property manager payroll, repairs and maintenance, utilities, and marketing. Indirect operating costs include supervisory payroll and centralized management costs. The cash requirements from these operating costs will vary year to year based on, among other things, changes in the size of our portfolio and changes in property tax rates and assessed values, wage rates, and marketing costs in our markets.Redemption of Preferred Securities : Historically, we have taken advantage of refinancing higher coupon preferred securities with lower coupon preferred securities. In the future, we may also elect to finance the redemption of preferred securities with proceeds from the issuance of debt. As of February 12, 2026, our Series F through O of preferred securities are eligible for redemption, at our option and with 30 days’ notice. See Note 10 to our December 31, 2025 consolidated financial statements for the redemption dates of all of our series of preferred shares. Redemption of such preferred shares will depend upon many factors, including the rate at which we could issue replacement preferred securities. None of our preferred securities are redeemable at the option of the holders.
Repurchases of Common Shares : Our Board has authorized a share repurchase program pursuant to which management may purchase up to 35,000,000 of our common shares on the open market or in privately negotiated transactions. From the inception of the repurchase program through February 12, 2026, we have repurchased a total of 24,448,781 common shares at an aggregate cost of approximately $879.1 million. We did not repurchase any common shares in 2025. All the repurchased shares are constructively retired and returned to an authorized and unissued status. Future levels of common share repurchases will be dependent upon our available capital, investment alternatives and the trading price of our common shares.
Recent Tax Legislation
Effective July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. Certain provisions of OBBBA impact us and our shareholders. Among other changes, this legislation (i) permanently extended the 20% deduction for “qualified REIT dividends” for individuals and other non-corporate taxpayers under Section 199A of the Internal Revenue Code (“the Code”), (ii) permanently reinstates 100% bonus depreciation for certain property acquired after January 19, 2025, (iii) increased the percentage limit under the REIT asset test applicable to taxable REIT subsidiaries (“TRSs”) from 20% to 25% for taxable years beginning after December 31, 2025, and (iv) increases the base on which the 30% interest deduction limit under Section 163(j) of the Code applies by excluding depreciation, amortization and depletion from the definition of “adjusted taxable income” (i.e. based on EBITDA rather than EBIT) for taxable years beginning after December 31, 2024.
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