Ladies and gentlemen, thank you for standing by and welcome to the Public Storage third quarter 2021 earnings call. At this time, all participants have been placed in the listen-only mode, and the floor will be open for your questions following the presentation. If you have a question at that time, please press star one on your telephone keypad. If you wish to remove yourself from the queue, please press the pound key. It is now my pleasure to turn the floor over to Ryan Burke, Vice President of Investor Relations. Ryan, you may begin. Thank you, Emma. Hello, everyone. Thank you for joining us for our third quarter of 2021 earnings call. I'm here with Joe Russell, CEO, Tom Boyle, CFO, and Mike McGowan, Senior Vice President of Acquisitions. Before we begin, we wanna remind you that certain matters discussed during this call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. All forward-looking statements speak only as of today, November 2nd, 2021, and we assume no obligation to update, revise or supplement statements that become untrue because of subsequent events. A reconciliation to GAAP of the non-GAAP financial measures we provide on this call is included in our earnings release. You can find our press release, supplement report, SEC reports, and an audio replay of this conference call on our website, publicstorage.com. As usual, we do ask that you keep yourself limited to two questions to begin with. Of course, if you have more, feel free to jump back in queue. With that, I'll turn the call over to Joe. Thanks, Ryan. Good morning, and thank you for joining us. I'd like to begin with the obvious. Overall business is excellent. I do wanna thank the entire team at Public Storage for their efforts. Our team members from our properties to the corporate office and back are focused on driving this level of performance. Across our industry and consistently throughout our markets, more customers than ever before have been drawn to the benefits of using self-storage. We have often characterized additive demand coming from life events, which we refer to as the Four D's, divorce, death, dislocation, and disasters. For the last several quarters, a fifth D has emerged, decluttering. Customers needing more space at home due to the shifts in working and living environments across all markets. Fortunately, the customers that have come to us during the pandemic are now behaving more like traditional customers, meaning they are staying in place as they have come to appreciate the convenience and cost benefit of using self-storage, particularly as residential and commercial spaces become more expensive. With that said, demand remains historically strong. In the third quarter, our revenue, NOI, and cash flow per square foot reached record levels once again. As we wrap up 2021, the outlook for 2022 and beyond is favorable as well. The utilization rate of self-storage continues to climb as it has for decades, which is now at 11% of the U.S. population. Millennials and Gen Z's, two big user groups, are aging into our core customer life stage, driven once again by the Five D's. Public Storage is leading the self-storage industry's transformation towards a customer experience that provides digital as well as traditional options across the entire customer journey. We have a deep-seated commitment to listen to what our customers want, and they are giving us vibrant input that directs our priorities. This has led to some exciting changes in our customer offerings. One example we have spoken to is our industry-leading eRental platform. Today, nearly 50% of our customers are renting with us through the eRental online lease. Year to date, nearly 500,000 customers have chosen eRental to secure a unit. It's fast, intuitive, and self-directed, taking just a few minutes to complete a rental, an option many customers have been anxious to use, and the quality of these customers has been impressive. In early 2021, we also introduced the PS app, which nearly 1 million customers have now downloaded, allowing easy tools to manage your account and navigate our properties digitally and hands-free. These are two great examples of how our investment in technology is transforming our operating model, and it's a win-win for both customers and our operating efficiencies. Daily headlines across multiple industries, however, remind us there are challenging consequences impacting the economy in terms of labor pressure, and self-storage is not immune. We are actively investing in our team through increased wages and new, more specialized positions that are providing even greater upward mobility for our skilled property teammates. On the leadership front, we have also strengthened our ranks and announced yesterday that David Lee has joined Public Storage as Chief Operating Officer. David previously served as Senior Vice President of Operations for The UPS Store, with responsibility for more than 5,200 retail locations in the U.S. and Canada. We are excited to have him on board. Now to another area I'm pleased to share with you, our external growth initiatives. Our four factor external growth platform is centered on acquisitions, development, redevelopment, and third party management. All areas are seeing strong growth. Starting with acquisitions, in 2021, the self-storage industry will likely see approximately $18 billion or more of assets trade. This is a tremendous amount of volume and opportunity. Owners have been motivated to bring assets to market to monetize their investments, while some also plan for potential tax changes. Year to date, we have acquired or under contract on $5.1 billion of acquisitions, or about 30% of the industry volume this year. This is comprised of 233 properties across 21.1 million sq ft, with average occupancy of 56%, which is providing a significant embedded growth opportunity once we place these assets onto the Public Storage platform. The transactions span a wide spectrum of geographies, portfolios, and one-off purchases with both market and off-market deals. We continue to be looked at as a preferred buyer based on our knowledge, transaction efficiency, and ability to easily fund transactions. Of note, 65% of this quarter's volume is tied to the All Storage portfolio, which we are acquiring for $1.5 billion. All Storage is a high-quality portfolio of 56 properties, primarily located in Dallas-Fort Worth. Dallas-Fort Worth has been one of the best self-storage markets over the past 15 years, with population growth nearly 2x that of the national average. Our own portfolio in Dallas-Fort Worth produced annual NOI growth of 150 basis points higher than our national average. The All Storage properties also give us additional exposure to new, higher growth submarkets, particularly in and around Fort Worth. Many of the properties were recently developed, resulting in the current 75% occupancy level, which provides significant upside as we move them onto our industry-leading platform. The transaction is immediately accretive to FFO, and accretion will accelerate through to stabilization at nearly 6% direct NOI yield. Combined with owned and other assets under contract, we are expanding our already significant platform in this vibrant market to approximately 200 assets or by 64%. The remaining 35% or $1.1 billion of the acquisitions closed or under contract will provide significant growth as well. These assets are geographically diversified across the country, comprised of single acquisitions to smaller portfolios ranging in size from $40 million-$200 million, totaling 3.9 million sq ft with average occupancy of 50% at $179 per sq ft. Now to development and redevelopment, where our pipeline has grown by $70 million to $731 million this quarter. We are seeing good opportunity to build new properties from the ground up in addition to expanding our existing assets. Nationally, our development team is underwriting well-located land sites as we continue to leverage our expertise as the largest developer in the self-storage industry. This quarter, we also added 28 properties to our third-party management platform, increasing properties under management to 145. We plan to reach 500 assets by 2025. Of note, we have also acquired 14 assets from our third-party management platform as well. In summary, since the beginning of 2019, we have expanded our portfolio square footage by 22% with a total investment of approximately $7 billion, equaling 36 million sq ft for an average of $193 per sq ft, which has clearly produced strong growth and value creation that we expect will continue. Now I'll turn the call over to Tom. Thanks, Joe. Our financial performance accelerated into the third quarter. Our same-store revenue increased 14% compared to the third quarter of 2020. That performance represented a sequential improvement in growth of 3.2% from the second quarter, driven by rate. Two factors led to the acceleration in realized rent per foot. First, strong demand and limited inventory, which allowed us to achieve move-in rates that were up 24% versus 2020 and 33% versus 2019. Secondly, existing tenant rate increases contributed compared to a period in 2020, and we were significantly impacted by rental rate regulation in many markets. Now on to expenses. The team did a great job executing in this environment once again. Lower expenses were driven by property payroll, utilities, marketing, and a timing benefit on property taxes. On property payroll, as Joe discussed, on October 1st, we increased property manager wages, which will lead to higher expenses going forward, but will be partially offset by efficiencies in labor hours tied to the operating model transformation we discussed at our Investor Day in May. On property tax, we will expense our annual estimate ratably through the year, leading to an approximately $0.13 benefit year-to-date and reversing to a $0.13 headwind in the fourth quarter. This will lead to more stable quarter-over-quarter expenses in the future. In total, net operating income for the same-store pool of stabilized properties was up 21.7% in the quarter. In addition to the same-store, the lease-up and performance of recently acquired and developed facilities was also a standout in the quarter, adding $53 million in NOI in the quarter, or $0.30 in FFO. As we sit here today, coming off the peak part of the leasing season, existing customer behavior is solid, with move-outs down year over year in the quarter and new customer demand remaining robust. With that, let's shift to the outlook. We raised our core FFO guidance by $0.55 at the midpoint or 4.5%. Looking at the drivers, we increased our outlook for same-store revenue to grow 9.5%-10.5% in 2021. That outlook implies a modest deceleration in revenue growth in the fourth quarter against very tough comps. Our current expectations are for occupancy to moderate from here by about 150 basis points to the end of the year. That would land occupancy at the healthy 2020 levels at the end of the year. Big picture, the baton has clearly been passed to rate growth, where we continue to see strength. Our expectations are for 0%-0.5% same-store expense growth. As a reminder, that implies an increase of circa 30% in the fourth quarter, driven by the property tax timing I've discussed. We also increased our guidance for non-same store performance given the acceleration of acquisitions and strong lease up of our own stabilized facilities. Now on the balance sheet. We have one of the industry's leading balance sheets set up well to finance the transaction volumes we've seen this year. We plan on funding the All Storage acquisitions with unsecured debt, and we remain poised to grow with capacity to fund the continued activity that Joe has discussed. With that, I'll turn it back to you, Joe. Thanks, Tom. We are optimistic about our business and for good reason. As always, the commanding capabilities tied to the Public Storage brand, a high quality and well-located portfolio, the industry leading operating platform, and most important of all, our people, have us well positioned for sustainable growth and value creation. Now I'll open the call up for questions. At this time, if you would like to ask a question, please press star one on your touchtone phone. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is star and one to ask a question, and we will take our first question from Jeff Spector with Bank of America. Great. Good afternoon. Thank you and congrats on the quarter. I'm not sure if we're allowed two questions, so I guess my first would be on the new hire, David Lee. Very interesting. I guess if, Joe, you can provide a little bit more details on, you know, David's role and what you see him, you know, bringing to Public Storage, please. Sure, Jeff. First, you know, we're excited about David joining the Executive Leadership Team. We've built, you know, over a number of decades now, a great operations team. Today, the team's comprised of over 5,000 of our, you know, of our associates, who are committed to deliver exceptional customer service while, you know, clearly adapting to the many changes that we've been talking about. David's joining us at an exciting time. His role will be to continue leading what we call the customer journey, where we're unlocking and delivering new tools to our teams and offering different channels and experiences right at the front lines for our customers. With that, his engagement with the team as a whole will be very important as we move the entire team forward through a very dynamic time, not only for the company, but for the industry. Clearly, his skills were attractive based on his 20 years or so with the UPS organization, the UPS Store platform, more particularly. We're very excited about his fresh perspective as we continue the various changes to our overall operating model, and definitely look forward to the contributions he brings to the entire management team. Great. That sounds great. Hopefully, if I have a second, you know, Joe, I always consider you to be conservative with your comments, so it's encouraging to hear the outlook for 2022 and beyond, you know, look favorable. You know, we're getting a lot of questions on supply in 2023, I guess. Can you elaborate? Not looking for guidance, but, you know, what makes you feel comfortable to make that statement and then, I guess, in particular, supply? Yeah, Jeff. The thing that has been a nice window for us over the last year to two is the reduction in national deliveries of new storage product. We've talked about that for some time, where this year there's likely to be about $3.5 billion or so of new deliveries put into the markets nationally, compared to the peak that we saw in 2019 of about $5 billion. We're likely to see that number trend down again in 2022, particularly with some of the hurdles that are out there from a development standpoint that we clearly see day in and day out. That includes the time it takes to get a property entitled. Many of the cities are clearly understaffed, and we're seeing longer processes actually to get something as simple as a permit or a use or occupancy permit for a property come through. To more demanding issues that we're seeing, even from the cost and availability of components of construction and then labor itself. There's some different and, I would say demanding issues that any developer today has to go through to operate in this kind of an environment. That's likely to produce, again, this downdraft that we're predicting for 2022. Now, having said all that, our industry, as you well know, is very fragmented. The development industry as a whole tied to self-storage is so very fragmented, and it's hard to predict what level of activity might resurface in different markets based on, frankly, the continued very strong performance of the sector. We're keeping a very close eye on that. As we've talked about, we've got a deep team across the entire national set of opportunities that we're working on, and we're also seeing, you know, activity that's coming through our third-party management platform as well that is tied to future development. It will be with us. The question is, you know, how much more momentum comes out of the environment we're dealing with as we speak, which is one of the long-term attributes of self-storage. It's great business. We'll see and monitor the impact that's likely to have, but we feel at this point, we continue to have a very good run rate to go out and capture good land sites with the deep development team and the knowledge we've got across all of our markets. Okay, thank you. Thank you. We'll go next to Smedes Rose with Citi. Hi. Thanks. I wanted to ask a little bit more about the decision to load up more in Dallas, and maybe even just talk a little bit about the process, you know, how competitive it was to get this portfolio. Then, you know, correct me if I'm wrong, but I guess I think of Dallas as a fairly low barrier to entry market, and I'm just wondering, you know, are there any risks to meeting these stabilized yields that you're targeting? Yeah, sure, Smedes. First off, I mean, we have a long-standing commitment to Dallas. We've seen, as I mentioned in my opening comments, good growth that's come out of that market. You're right, it has been a market that's been prone to an outsized level of development from time to time. Frankly, the embedded growth that we see that's tied to, you know, a very business-friendly economy, low costs, including, you know, taxes, cost of housing, et cetera, centrally located within the United States, you know, great infrastructure. It's a huge draw for both business and overall population growth. What came with this portfolio was an opportunity to leapfrog our position. It was already a top position in that market where we have had approximately 120 existing assets, as well as a dozen or so third-party management properties, you know, and leapfrogging it by another 52-53 properties. Huge opportunity to grow and actually put additional presence in parts of the Dallas-Fort Worth market, particularly Fort Worth, that we were lighter in. Fort Worth, for instance, like Dallas as a whole or the Dallas-Fort Worth metroplex, is growing dramatically. We're really encouraged by that. Population growth, you know, is very strong, good household income, and we really like the multiple attributes that we will see and continue to see with our industry-leading position in that particular market. Mike McGowan's with us. I'm gonna hand the mic over to him. He can give you a little color on what came through with the process we went through to actually capture the portfolio. Thanks, Joe. It was a competitive process. It was quietly marketed with more or less a few select people that could take down a transaction of this size. In reference to your question about the location, the new supply coming in, this developer really did a great job of putting a footprint of 50 properties in markets that were so far ahead of his time out in areas that are having high barriers for new storage to come in. He built large properties in those marketplaces, kept a lot of competitors out at the same time. Really for us, we're starting to see the same type of issues with zoning of getting new storage in a lot of these newer areas and these high-growth areas, which are the better areas of the Dallas-Fort Worth market. For us, it puts us in a great position to be in new markets we wanna be in and gives us a very strong presence in all those markets to do it that fills big gaps for us at the same time. You know, one other thing, Smedes, from an integration and assimilation standpoint, we have, as we did with ezStorage, a great opportunity to bring in the majority of their operations team. We're excited about, you know, adding those new members to the Public Storage team there in Dallas-Fort Worth. The opportunity for us to integrate these assets and put them under the Public Storage brand will be very efficient. Clearly, we're very skilled at that, coming right off the experience we just had in Washington Metro with ezStorage. We're very confident that in you know a very short period of time, we can transfer the 60,000+ customers that are coming with this portfolio into our own systems and our own opportunity to drive value based on the way that we're gonna be able to run those properties as we do our entire portfolio. Okay, great. Thank you. Appreciate it. We'll go next to Juan Sanabria with BMO. Hi, good morning. Thank you. Just hoping you could talk a little bit about on the acquisition side, the yields going in and target stabilized for the third quarter transactions, as well as what's on the docket, including All Storage. You talked about a little bit about it on the stabilized basis, but I'm curious on the going-in yields just from a modeling perspective. Sure. This is Tom. As Joe mentioned, a lot of the activity in the third quarter into the fourth quarter is unstabilized activity. What if you think about average occupancies in the 50%, I would have that in your mindset. Then from a yield standpoint, we obviously gave you a sense for All Storage, what those yields are, call it 2.6% on their operating platform in the third quarter. That gives you a starting point. I would say across the other properties, probably similar type yields, you know, even with a little bit lower occupancy. I think that gives you a starting point. Clearly, we have confidence in our ability to lease these properties up. You know, one of the things that Joe mentioned earlier around our confidence in our operating platform in Dallas-Fort Worth, similar to Washington, D.C. You know, if you look at our EZ transaction from earlier in the year, where we acquired that at 86% occupied, we got it to 94% through the busy season, and really strong growth in a market where we're out of inventory. To give you a sense, a few of those properties we took over in the 40% occupancies and got them up to 90% by the end of the busy season, which is clearly strong leasing activity. In Dallas, similarly, we're out of inventory. We successfully leased up our facilities that we've built and bought over the last several years and are poised to take over these All Storage properties here over the next several months. Yeah. Juan, I'd add, as again, we've talked to and Mike and his team have been very focused on for the last year and a half, in particular, you know, a lot of great assets have been built over the last five or six years. And we've really had the opportunity to capture very high-quality assets, mostly recently built in this cycle, at what we feel are good values, but good opportunities to grow performance. That's why we haven't been shy about taking on any level of unstabilized occupancy in these assets. As Tom mentioned, we're very confident, particularly in this environment, relative to our lease-up capabilities, as well as, you know, taking in the stabilization in an era where we're seeing very, very good consumer and business demand, frankly. Great. Just hoping you could speak to the latest data points, maybe through October from an occupancy and a rate perspective. You noted the implied guidance for the fourth quarter is a 154 basis point occupancy moderation. Just curious on kind of how we stand to date on that. Yeah, sure. Maybe just to give you a sense as to where October ended, you know, the year-over-year gap in occupancy, you know, we were at 1.2% at the end of September. That has fallen a touch to around a positive 75 basis points gap at this point. You know, we are seeing that modest moderation in occupancy as we move into the fourth quarter here. Continued strength on rate. We continue to see good growth there. You know, some of the markets that we're seeing the most strength, the Southeast, Miami, Atlanta, the Sun Belt in aggregate, continuing to see, you know, greater than 50% move-in rate growth at this time of year compared to 2019. Really strong pricing momentum here despite you know modest declines in year-over-year occupancy. Thank you. Sure. We'll go next to Michael Goldsmith with UBS. Hey, Michael, are you on mute? We will go next to Todd Thomas with KeyBanc Capital. Hi, thanks. Good morning out there. First question, I wanted to circle back to investments for Joe or Tom. You know, with All Storage now, you've disclosed you're taking up leverage to 4.3 x on a pro forma basis. There are a couple of other larger scale portfolios reportedly on the market and a lot more product besides those portfolios that you discussed. You still have room to take leverage up. Obviously, you have a lot of access to capital as well. Your dry powder's decreasing a bit if you're looking to stay in that 4x to 5 x range that you discussed at the Investor Day earlier in the year. You know, I'm curious what the appetite is like for additional larger scale deals. You know, we saw that you're issuing $80 million of units for the deals under contract. Should we assume that PSA is open to issuing more equity or equity today as part of the funding plans going forward? First of all, I'll address the environment holistically, Todd, and then Tom can give you a little bit more color around what I would call the tools in our toolkit. The environment continues to be very vibrant. We're seeing a, you know, a vast, you know, array of different types of sellers coming to market, and we feel well-poised with the capacity of our balance sheet to continue to be a very efficient acquirer, and we wanna maintain that because we think it's highly advantageous, even in a market like this where it's, you know, quite competitive depending on the type of asset and the, you know, the location, et cetera, that might come through. We feel very well poised. Our balance sheet has been and will continue to be, you know, a great, competitive advantage for us, and we'll continue to, as I mentioned, look at many of the tools in our toolkit. Tom can give you a little bit more color on that, but we're very confident we will continue to be able to embrace this environment, with a whole range of different opportunities that may come through. Yeah. Thanks, Joe. As you mentioned, Todd, we do have strong access to capital with our balance sheet position the way it is, and we're confident in our ability to continue to fund acquisition activity with a broad set of tools. We spoke about using unsecured debt, and we've used unsecured debt really over the last several years to fund activity. That doesn't mean that we're not open to other alternatives, including common equity or JV equity, as we discussed on our Investor Day, to the extent that volumes are both high quality, attractive financial return, we would certainly be open and welcome the opportunity to use a broad variety of tools in the toolkit over time. For All Storage in particular, you know, we plan to fund it with unsecured debt, and we feel good about the leverage level where it is today. Okay. If I could ask one more, just about the existing customer rent increases. Tom, you know, when you look at the 14% of revenue growth in the quarter, you know, you talked about, you know, there was, you know, a small portion that was related to occupancy. When you look at the balance of the revenue growth in the period, you know, how should we think about the contribution between, you know, the higher move-in rates that you described and the impact from ECRIs? Yeah, that's a good question. Really on a year-to-date basis, we've seen a pretty balanced contribution between the move-in, move-out dynamics on one side and then the existing tenant rate increases, both contributing meaningfully. I would put them roughly on par with each other in terms of the contribution. I do think going forward, you know, one of the things we disclosed is our move-out activity and the move-out rates. The move-out rates are starting to catch up with move-in rates. They have not caught up yet, but they're starting to catch up, and that will start to be a headwind on the contribution from the move-in and move-out side. We will still have existing tenant rate increases as a tailwind from here, given the market rent increases that we've seen across the country. With the ECRI program, would you expect to see that moderate at all, you know, as the move-out rates catch up a bit there? Or you know, do you have to take your foot off the gas a little bit, you know, as that happens on the existing customer rent increases, or is that not the case? Well, I would say that, you know, existing tenant rate increase is something that's managed very dynamically across the country and really across the tenant base. I think the way to think about that is one of the benefits of the current environment is higher market rents, and that lowers the cost to replace that tenant if they elect to leave. The tenant base continues to be quite sticky, which gives us confidence to continue to send increases out to the tenant base. As we think about, you know, where we're going forward, in fact, one of the contributors to higher move-out rates is actually the fact that we're being successful in increasing rental rates on that existing tenant base. I would say almost the reverse, which is as we're successful on existing tenant rate increases, I'd anticipate that move-out rate will move higher. Move-out rate meaning the rent that people are paying that do elect to leave us. Okay, great. Thank you. Thanks, Todd. We'll go next to Caitlin Burrows with Goldman Sachs. Hi there. Maybe one on development. I get that this can definitely be a great opportunity, but one of the hurdles is that ability to continue getting land in attractive areas. Just wondering if you could go through, kind of how this process is going now and, kind of any, I don't know, difficulties that you're running into to continue it. Well, that goes right down to the knowledge and the focus you have to have, relative to what's transpiring in any given sub-market. As I've, you know, spoken to, we've got a very deep-seated team across the entire, you know, portfolio that we operate today and in markets that, we continue to look for additional growth as well. The opportunity to acquire land, over the last year and a half or so has been, somewhat elevated because we've seen that tapering down of, delivery, so not quite as much as a ground-up development momentum, you know, again, coming from a very fragmented, set of developers out there. Land's still very competitive. There's a lot of knowledge you need to have to find and locate, you know, the exact right location that's complementary to future growth of the particular asset, the kind of dynamics that come from competition as well as population, growth, et cetera. A lot of different factors come into the way that we're able to select land sites very differently than most because of the amount of data that we have day in and day out relative to our presence already, you know, across 39 states and being a top owner in nearly every one of those sub-markets. The business though is very entrepreneurial from a, overall self-storage standpoint, so there's competition that can come through. As I mentioned, in some cases, it may become more elevated than we've seen over the last year and a half. Keeping a very close eye on it, but we feel like we've got very good tools to not only find great land sites, but to actually execute even in an environment where it's tough to get either entitlements and/or justify the costs that are tied, particularly from component costs and labor costs that are playing through to actually develop facilities in an environment where we're seeing a high degree of inflation at the moment. Actually on the inflation point, I was wondering, just given obviously revenues are up a lot, the business is really strong overall. Can you go through what impact do you think inflation is having or will have on your business, both from like a revenue or expense side? Well, you know, you know, one thing that's advantageous to self-storage in general is the fact we have a month-to-month lease business. It's a huge opportunity to actually react to the kinda cost pressures that may play through from inflationary pressures. That's an advantage the product itself affords us to actually monitor and react to any of those inflationary pressures. We're confident that, you know, we can maneuver through those pressures, but it's something we have to keep very close to, and that's why we, in every part of our business, constantly look for efficiencies and the ways that we can, you know, continue to look at operating and running our business as cost effectively as possible. I got it. Thanks. Thank you. We'll go next to Ki Bin Kim, Truist. Thanks, hon. Good morning out there. A simple question on same-store revenue. If market rents don't increase in 2022, how much built-in upside is there already in same-store revenue? Looking for 2022 guidance already, Ki Bin? Not guidance, this is below the, you know, low point. Even if market rents don't grow, like how much is like the starting point, you think? Yeah. Well, I think, you know, there's a few things there. One is we continue to see strength in market rents. I understand the question you're suggesting, but I think, you know, we continue to see strong demand for self-storage across the country, but if you look at the markets with the strongest growth, really driven by macroeconomic, demographic, and population shifts that we think are poised to continue here, which is helpful. You know, clearly, there's been a move in market rent higher and existing tenant rate increases have been moving the current tenant base higher alongside that. Now, over the course of last year and really through a good portion of this year and in some markets continuing today, we have had pricing regulations on us, because of state of emergencies and the impact of the healthcare environment. That's definitely been a headwind as it relates to the existing tenant base and moving them in the same manner that market rents are going. I think that another way to say that is there is some embedded rate growth that's available to the extent that you know we continue to see normalization from a healthcare standpoint and state of emergencies continue to expire. You know, the most notable of which is in Los Angeles County, not related to pandemic, but related to fire several years ago, that we continue to monitor. How impactful was that? I guess said another way, how much money was left on the table as it compares to a portfolio? Just for us to get a sense of how meaningful that could be. Yeah. You know, one of the things that we've that we look at is, you know, what the impact of those pricing restrictions have been on us versus what our models would have otherwise suggested that we send the increases out at. I ran these numbers for last quarter, so I'll give you precisely what it was for last quarter. I don't have it for this quarter. Through the first part of the year, first half of the year, it was about a 300 basis point negative impact to same-store revenue growth in the first half of the year. I anticipate that that's largely remained pretty consistent through the third quarter. That gives you a sense of the magnitude. Got it. All right. Thank you. Sure. We'll go next to Rob Simone with Hedgeye Risk Management. Hey, guys. Thanks for taking the question. Hope all is well. I have a longer term question on third-party management. I guess you guys are somewhat unique in that unlike some of your peers, you know, and it's a credit to you. You actually attribute expenses to that platform specifically, which is really helpful. I guess between now and the 500 stores, what is kinda like the crossover point for you guys? Or could you talk a little bit about the crossover point when you kinda get firmly into the green in that business? Then, like from a margin perspective, what do you think that could potentially scale to? I ask that because we're kinda used to looking at property management fees as a singular line item with a lot of the costs kind of buried in other segments or in G&A. Just kinda trying to pick your brains on how you think about that. Yeah, sure. There's a couple components there. One is obviously we've been ramping the size of that business, and one of the most vibrant areas of demand from our customer base for that business line is from folks that have developed new properties. As we take on those properties, you know, the profitability of a new property is less than one that is stabilized, obviously, given the revenue nature of the fees. As we ramp that program similar to our development business almost, there's a ramping of the profitability of each individual store. Said another way, it's gonna take several years before the volumes that we're anticipating really start to produce the P&L impact that you might anticipate. The second piece of your question relates to what are the margins of that business. You know, there's a couple factors there. One is clearly the geographic mix of the properties themselves, what the operating costs are that tie to them. If you just look at them overall and you say, okay, where can we get to from margin basis versus the fees we're charging? You know, I think a reasonable margin is probably in the 20% to 30%. Again, a lot of variability as we add a significant number of properties to that store base over the next several years. Got it. Would you guys ever consider, I mean, I know obviously you're deploying a lot of capital right now, and there's still some capacity, but would you ever consider kind of like a JV program with maybe, you know, a capital partner? I know Joe mentioned in his remarks that, you know, a lot of folks out there are kind of rethinking about their timing to an exit. Are there opportunities to do like a JV program where you also participate in a third-party management and it just kinda like it grows the pie, so to speak? There will likely be opportunities just like that, Rob. I would tell you that, you know, we're open to a variety of different scenarios as we're engaging in different ownership groups, whether they're currently or anxious to get into self-storage. That's definitely something that we'll continue to evaluate. As those opportunities arise, we'll certainly be able to give you more color on those. Yep, understood. Okay, just kind of thinking about the strategic thinking. All right. Thanks, guys. Appreciate it. Be well. Okay. Thank you. Thank you. We'll go next to Jonathan Hughes with Raymond James. Hey, good morning on the West Coast. This is kind of a continuation from Todd's question earlier on using equity financing for acquisitions. Did those sellers ask for the 80 million of units to avoid triggering tax events, or did you offer those as a sweetener to get a deal done? We just haven't seen, I think shares or units offered since Shurgard like 15 years ago. Yeah, no, it's a good question, and it really is driven by the fact that there are sellers out there that are interested in accepting our shares as currency, and, you know, that's something we're open to. You're right, it's the first time we've done it in a number of years, but we're open to it, and it can be an attractive way to transact with sellers that are interested there. Okay. I mean, as perhaps, you know, the share price moves a little higher, the cost of equity gets a little more attractive. I mean, you would be open to using the shares or units for, you know, large portfolio deals, say like another several billion-dollar acquisition. Is that fair? Sure. You know, I think the way we think about the return profile of our deals is typically on an unlevered basis, and so we're evaluating what the return profile is, either on a leverage neutral basis or unlevered basis. You know, as we look at ultimately the financing of these transactions, we've had the opportunity to continue to use unsecured debt and preferred as the core piece of the capital structure. But as volumes grow, it will make good financial sense to continue to broaden the sources of capital and, you know, the benefits of that growth will continue even with using maybe higher cost equity or JV equity, potentially. Okay. I just have one more, if I may. One of your peers said they expect a greater than inflation level of onsite labor cost increases next year. Is it fair to say, you know, we'll see that maybe even slightly higher level from your portfolio since you did just bump wages, you know, 7.5% a month ago? As I mentioned, Jonathan, yeah, the labor market's highly competitive. It's definitely somewhat unpredictable as well. I'll tell you, it's a difficult time to attract and, you know, retain, personnel at, you know, any level of skill across the entire organization. We're gonna continue to look at the benefits of making either changes to wage rates and/or balancing that with a variety of different efficiencies we're seeing with the transition of our operating model as well. We're gonna continue to monitor that and likely see, you know, again, a very competitive environment going into next year. All right. That's it for me. Thanks for the time. Thank you. Thanks. Once again, that is star one to ask a question, and we'll take the next question from Ronald Kamdem with Morgan Stanley. Hey, thanks so much for the time. When you talk about, I think you made a comment about the expansion of the portfolio, you know, 19% since sort of 2020. You know, clearly you're in a very strong market, strong demand and so forth. Over the next 2,3,4 years, does that lend itself to opportunities to think about what markets you really wanna own long term? Potentially sell some assets. You know, clearly not today, given how strong the markets are, but just how are you thinking about sort of the portfolio long term? Thanks. Yeah. Yeah, Ron, that's definitely something that we have a fluid analytical approach to, meaning that we're always you know, looking to and understanding you know, the impact and value of assets across multiple markets, evaluating you know, the benefit of either continuing owning and/or at whatever point, thinking about recycling any level of capital tied to existing assets. That's an ongoing process that you know, we'll continue to look to, and it's definitely part of the internal process that we use relative to the main way that we're seeing value creation from existing assets and then the opportunity potentially to recycle. Great. My second question was just asking the COO appointment question a different way. I know you mentioned, you know, opportunities maybe introduced new products to the operations team, but should we think about this as sort of incremental change, or is this a revolutionary sort of new ways of sort of doing business and operating? Just trying to get a little bit more color how we should think about the impact of this new COO role. I go back to the things that we described in our Investor Day, where we gave, you know, a fair amount of detail on the variety of ways that we're enhancing our operating model through investments in technology and then different channels and different opportunities we're giving customers to engage with us, you know, across a whole spectrum, as well as the things that we continue to be focused on relative to people development and, you know, the types of opportunities internally that we think are very well suited to continue to grow the quality of our workforce. The role that David's coming into isn't new to the company in the context of our goals and the strategies that we have. It's just an added level of leadership that we think is prudent as we move the business forward, and we're accelerating the pace of change that ties to the amount of investment that we're making in our people directly, as well as the technological platforms, particularly as it relates to the digitization of the business. It's one added layer of leadership that we think is well timed, and we really look forward to continuing to optimize the way that we're running the portfolio as a whole, including the way that we're also engaging and giving a variety of different opportunities to our existing employee base. Really good time for him to come into the business, and as I mentioned, we're excited about the fresh perspective he's gonna have as well. Helpful. Thank you. Thank you. We'll go next to Spenser Allaway, Green Street. Thank you. With the widespread supply chain issues, we've been seeing an increasing number of companies keeping what's being called just in case inventory. Have you guys noted any incremental business related demand in recent months? You mean from just core customers coming to us that differently are trying to use space because of maybe keeping goods at more immediate availability? Yeah. Yeah, exactly. Yeah, I couldn't point to Spenser an exact lift in demand based on that, but it wouldn't surprise me based on the variety of different business customers that do use self-storage in a way that's more spot oriented, where they may have a elevated level of demand that they need to cater to, and by virtue of that, storage can fit that need quite easily. So there's likely some benefit that we're seeing from that in many markets. Okay. Just on the expense side, where would occupancy need to slip to for us to begin to see marketing costs creep back up in a material manner? Spenser, I would say that's a pretty dynamic and local decision that we manage, and I wouldn't necessarily say it's an occupancy-based item. It relates to what we're seeing in the customer funnel. Advertising has a benefit to increase top of funnel, right? The number of people that are, say, searching for Public Storage or finding Public Storage when they go to search for self-storage. That is helpful in markets where we're seeing top of funnel demand erode. We have other tools as we're managing revenue, be it, you know, pricing, promotion, et cetera, that will impact conversion within that funnel. I would say, you know, we're watching the different components of the funnel and what the returns are associated with pulling those different levers. To date, you know, we continue to see strong top of funnel demand across the board. You know, web visits, for instance, in the quarter were up north of 20% across the system. Calls into our call center were roughly flat. Overall, still very solid top of funnel demand, which led to the decision-making around marketing in the quarter. As we've demonstrated in the past, if we start to see those dynamics change, we typically do see pretty good returns on our advertising spend, and we'll pull that lever as well. That's very helpful. Thank you. Thanks. We'll go next to Mike Mueller with JP Morgan. Yeah, hi. I was wondering for All Storage, what did you assume for rate growth through 2025 to get to your 6% stabilized yield expectation? Yeah. One of the things that we looked at within the portfolio is obviously there's a pool of properties that have recently been delivered that we have the opportunity to lease up and then ultimately stabilize on a rate basis. We go through our underwriting process of seeing what our stores in the area and what competition is and ultimately what we think we can squeeze from a revenue standpoint within our own revenue management platform, and we'll underwrite those there. On the stabilized stores, we call them stabilized, but the reality is they're not in our platform. Like we're seeing in acquisitions to date, really through last year, we have an opportunity to put our operating platform and systems in place and drive further improvement. You can see, for instance, where our overall Dallas portfolio rental rates are. Obviously, you know, these properties have their own sub-markets and underwritten rates. Gives you a sense as to the upside in rental rates that we think we can achieve in the portfolio over time. Were you embedding additional rate growth beyond current market, or just kind of pulling them up to current market and assuming that it's capped out there? Yeah, it's a combination of, you know, where we think rates are today, so spot rates and then ultimately the runway we see for rental rate activity, you know, counterbalanced with, you know, one of the questions earlier around, you know, rental rate risk due to new development within that market and those sub-markets, which is a consideration as we think about forward rents as well. A combination of a number of those things. I would point you to the presentation where you can see our same store rents in Dallas, you know, punching at $15 per ft versus the in-place rents there in the third quarter at about $11. There's definitely occupancy and rental rate upside. Okay. That was it. Thank you. Thanks. We'll go next to Smedes Rose, Citi. Hey, it's Michael Bilerman here with Smedes. Joe, I just wanted to go back to the hiring of the new CEO because, you know, I think you've gone down, not you, the company has gone down this path previously, and every time that CEO came on, it never stuck. I'm just curious at the start, you know, as you've now, you know, rehired for the COO position, what's different this go around versus other initiatives in the past on this topic? Well, yeah, part of the history, Michael, I don't know if I agree it never stuck. I mean, we've had, you know, in our history, obviously predating, you know, my tenure here, periods of time where we had, you know, multiple year COO positions in place, and then by virtue of the dynamics of the business, we made different changes. For instance, you know, taking some senior leaders, for instance, on sabbatical to go over to Shurgard for, you know, one or two years at a time, et cetera. You know, it's been somewhat of a, I would agree, somewhat of a fluid position by name, but by responsibility and focus, it's been with us consistently. One of the things that is different relative to the opportunity that we see at this point to bring in, as I've characterized, you know, even more fresh perspective and more additive leadership capability to that overall role is the dramatic growth and change in our business. As I've noted, we've acquired a sizable amount of assets over the last couple of years, literally the size of some of our competitors. It's been, you know, a great opportunity for us to continue to think about how the business is changing, the different tools that we're putting in place, the investments that we're making, and as importantly, the skills and development of our employee base tied to operations. It's a great time for us to put even that much more emphasis on the role, and we're excited about what we can continue to do with David's leadership coming in and the things that we're, you know, very, very focused on relative to the overall effectiveness of our operations team as a whole. What are the sort of top three priorities for him, you know, in the next sort of, call it, you know, 90-180 days? Can you talk about any restructuring underneath him in terms of the team or how you're going about sort of, you know, as you've talked about, the business is changing, right? You didn't have 50% doing online contactless a few years ago. Can you just talk a little bit about what the priorities are and then things like that? Well, his number one priority is just to come in and learn the business. I mean, that's the way we've all come into the business. You know, being as focused on the front lines as possible. That's definitely a top priority. You know, it's not to come in and, you know, make massive change or retool something that's broke. It's an opportunity to enhance and optimize many of the great foundational investments that we've made, that frankly, are statistically in a whole different league than what you're seeing with other operational platforms. As I mentioned, eRental, 50% of our customers use eRental. That's amazing. Where ±40,000-50,000 customers a month are using that channel that did not exist, you know, more than 18 months ago. We're confident that we have a foundation that continues to unlock really good opportunities the way we're running the entire operational team, and we're excited about what we can do with David coming onto the team as well. Can you give us some insights on what David did at UPS in terms of the changes that he initiated, either, you know, at the store level, which, my local UPS Store has gotten a lot better over the years, so hopefully he was a driver of that. But talk a little bit about sort of the characteristics and what drew you to him about, what he's been able to accomplish in his prior role. Well, you know, there's no question that that platform is very transaction-oriented. It's very customer-centric. It's tied to, again, advancement in their own operating model. We really liked many of the skills and the attributes of that kind of a transactional environment and how it relates to what we see in self-storage. A lot of very good things that we can learn from that environment, and then he'll be learning from our environment as well, and we can create the best of both worlds. Great. Just last question on this topic. You know, you don't have a lot of, I think, it's only in the Hawaii asset in terms of having, you know, storefront retail at the self-storage facility. Is that an opportunity that you're thinking about? I think someone mentioned revolutionary. Are you thinking differently about the storefront real estate that you have? Given the fact, you know, you mentioned 50% of people are doing it online, how much is that store differentiation or additive things that you can bring into that real estate to drive incremental cash flow? You know, could you be an Amazon Pickup and delivery service, you know, type of things? Like, is that part of the focus at all for the company? It's a good question, and I will tell you, there's a whole variety of strategic opportunities that we'll be, you know, more than happy to share as they evolve. There's, you know, a lot of creativity that continues to surround the customer-driven demands that we're seeing as customers continue to shift the way they want to interact with any type of business, particularly ours. We think there are very vibrant opportunities going forward. As those arise, we'll be, you know, sharing those with you. Okay. Thanks, Joe. Thank you. We will take our final question from Michael Goldsmith with UBS. Good afternoon, Joe and Tom. Thanks a lot for taking my questions. How do you think about the risks associated with doing several large acquisitions at a time when yields are as low as they've been? Can you talk about how Public Storage can maximize the growth of these acquisitions on your platforms? Yeah, sure, Michael. You know, I mentioned, you know, we've had obviously a fair amount of volume over the last couple of years, but it ties to the scale and the ability on our part to integrate assets, whether on a one-off basis, small or even large portfolios. Even when it's as highly concentrated as what you saw with ezStorage and now again with the All Storage portfolio in two big metropolitan markets. It points to the ability that we have from a structure and a scale and operating prowess standpoint. We're deep in these markets. We've got, you know, very strong teams that run these assets day in and day out. Our systems allow very efficient integration, and we've been doing this for many, many years. With the investment we've made with our technological platform, we certainly can do it in, you know, higher degrees of volume and higher degrees of concentration. The yields that we, you know, will likely see from this integration are, you know, as we've mentioned, compelling. Again, it ties to the fact that we have the inherent skill and benefit from the investments that we've made in to do just this. Our capital structure is well suited to continue to fund the kind of growth that we've seen, and there's no question the team as a whole, as I mentioned in my opening comments, has continued to do a great job with the integration and the ability for us to actually improve pretty dramatically the performance of most of the assets we continue to buy. Just helpful. Now this is the second year in a row where it seems the occupancy moderation from the peak in the summer to the end of the year is less than in the past. Do we think this is the new norm, or is this kind of just kind of unique circumstances surrounding the last couple of years, and we should return to a more, you know, a more seasonal decline in future years? How are you thinking about that? Yeah. Last year was certainly a unique year where we saw different seasonal patterns because of the nature of the healthcare environment last year. We didn't see much of any of an occupancy decline as we moved through the year. This year, we did see a more seasonal pattern and frankly had the benefit of some of the seasonal demand drivers, things like home sales and DIY projects over the summer, for instance, college students, et cetera, that will add to demand in the summer, but then will move out as we move into the fall. There was that additive demand this year, but we are seeing a little bit more moderation. Now, one of the reasons why we're seeing that moderation is the continued stickiness of the tenant base. We've had fewer move-ins this year. Recent move-ins are the most likely to move out, and so we've had a contribution of that benefit and a little bit more seasonality this year. I do think that the seasonal demand drivers that have been driving self-storage demand for years will continue to play out over the next several years. We operate a seasonal business, and it will be going forward. The degree of it, you know, we'll need to see year in and year out. We are seeing a little bit more this year, but still really encouraging overall customer behavior. Just one last one for me. You mentioned the change in tax laws as a, I guess, a catalyst for the elevated transaction volumes this year. Do you expect the transaction volumes to dry up next year, or kind of continue at an elevated pace? Thanks. Well, the amount of motivation seems to be strong, just put it that way, relative to existing owners wanting to bring more product to market. You know, Mike and his team continue to be very busy as we transition into things we're working on going into 2022. Always tough to predict, but at the moment, it looks like 2022 could be a, you know, again, really I'll now hand the call back over to Ryan Burke for any additional or closing remarks. Thanks, Emma. On behalf of the entire team on our side, I wanna thank everybody for joining us today. I look forward to speaking with many of you next week and in the coming weeks. Take care. This does conclude today's program. Thank you for your participation. You may disconnect at any time.