Ladies and gentlemen, thank you for standing by, and welcome to the Public Storage Second Quarter 2022 Earnings Call. At this time, all participants have been placed in a 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, Chelsea. Hello, everyone. Thank you for joining us for our Second Quarter 2022 Earnings Call. I'm here with Joe Russell and Tom Boyle. Before we begin, we want to remind you that certain matters discussed during this call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements speak only as of today, August 5th, 2022, and we assume no obligation to update, revise, or supplement statements 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, supplemental report, SEC reports, and an audio replay of this conference call on our website at publicstorage.com. We do ask that you initially limit yourselves to two questions. Of course, if you have an additional question, feel free to jump back in queue. With that, I'll turn the call over to Joe. Thank you, Ryan. Good morning, and thank you for joining us. Tom and I will cover second quarter highlights as we achieved a number of record performance metrics and milestones. Now that we are past the midpoint of the year, we are happy to share our view of the next six months, which has resulted in our guidance raise. Before I go to those details, I would like to take a brief moment and acknowledge a significant milestone for Public Storage that takes place this month. On August 14th, 1972, Public Storage was launched by two creative and determined entrepreneurs, B. Wayne Hughes and Ken Volk, opening the first Public Storage facility in El Cajon, California. The concept of paying to store stuff was new, but the simple name, a great location, and roll-up doors painted the color of orange created a powerful formula to grow the company, so much so that our brand quickly became synonymous with the self-storage industry. Now, five decades later, the Public Storage team and I are inspired to stay just as focused on entrepreneurial pursuits, expanding the iconic Public Storage brand, and empowering the 5,500+ dedicated employees that cater to our 1.7 million customers on a daily basis. We are appreciative of our shareholders, particularly those that have continued their commitment to Public Storage over our history, while knowing we have the right culture to ensure an equally bright future. Now to Q2 results. Business year-to-date remains quite good, with robust performance in both our same-store and non-same-store portfolios. New customer demand through the typical summer leasing season has been exceptional, as well as growing length of stay with existing customers. This, against the backdrop of muted new property deliveries in most markets. We have good pricing dynamics on both move-ins and with existing customer rate increases, leading to the highest rent levels we have seen historically. Arguably, a number of the pandemic-related drivers to our business are receding, but we are pleased to see elevated levels of demand, new customer adoption, and longevity of use. Customers, consumers, and businesses alike are still in need of more space for a variety of reasons that include decreasing affordability of renting or owning a home, tight inventories of commercial space, hybrid work environments, and the typical movement that takes place nationally this time of year. I would like to highlight a handful of particularly significant milestones or firsts in the quarter. We achieved $1 billion in revenue. Our average length of stay is now 39 months. Operating margins exceeded 80%. Our development pipeline has reached $1 billion, and being named by Forbes as best place to work by our employees. Now to acquisitions. By all accounts, 2021 was a historic year, and we were pleased to capture approximately 30% of the total sector volume. These 230 assets are performing well, in fact, above expectation, with more growth ahead for the entire 525 properties in the non-same-store portfolio that is now over 50 million sq ft. As we anticipated, 2022 acquisition volume has shifted down with fewer large portfolios entering the market. We are also getting more last calls from sellers and brokers with fewer buyers in the market. Cap rates have adjusted up and could move further. It's a different playing field, and we anticipate some interesting opportunities with over $1 billion in cash, a balance sheet primed for growth, and our reputation as a preferred buyer. The self-storage sector and our own history point to resilience in times of economic change, including recessions of varying degrees. We, too, are looking for all ways to interpret any shift in customer demand and behavior. We are well-positioned to compete for customers across all of our markets with the exceptional scale and product offerings in the 39 states we operate in. Our same-store and non-same-store assets are poised to deliver strong results through the second half of 2022, positioning us well for whatever may play through as we enter 2023. Our leadership team is well-equipped to grow and deliver exceptional shareholder returns. Now Tom will share some financial highlights with you as well. Tom? Thanks, Joe. We reported Core FFO of $3.99 for the quarter, representing 26.7% growth over the second quarter of 2021. Our first half results represent a strong start to the year and an acceleration from 2021. Let's look at the contributors for the quarter. In the same-store, our revenue increased 15.9% compared to the second quarter of 2021. Growth was driven by rate once again, with two factors leading to the continued strength. First, strong move-in rates that were up 12% versus 2021. And secondly, existing tenant rate increases contributing with a lengthening customer stay. Los Angeles was a particularly strong contributor, accelerating from 12% same-store revenue growth in the first quarter to 17% in the second quarter, and will continue to accelerate into the third. Moving down the P&L, same-store cost of operations were up 7.6%, driven by growth in property payroll, utilities, and marketing. Our strategic initiatives, including operating model efficiencies and LED and solar investments, helped offset a portion of the wage and utility inflation. In total, net operating income with the same-store pool of stabilized properties was up 18.7% in the quarter. In addition to the same store, the lease-up and performance of recently acquired and developed facilities remained a standout in the quarter. There is significant growth ahead from this pool of properties as well, which is a good segue to our outlook for the remainder of the year. As Joe mentioned, we raised our outlook for the second half. In April, we provided our Core FFO outlook with a $15.20 midpoint. The PSA business outlook improved by $0.37 or 2.4%. The improved outlook is driven by strong performance from our non same-store pool of assets and to a lesser extent, ancillary growth and a reduction in interest expense. On net, our year-to-date performance has been in line with our expectations, but our outlook for the second half is improving. We did reflect the impact of the sale of PS Business Parks and a corresponding $0.22 impact, resulting in a new midpoint of $15.35 per share of Core FFO. Associated with the PSB sale, yesterday, we paid a $13.15 special dividend, returning capital to our shareholders. Overall, our capital and liquidity position remains strong, as Joe mentioned. We have a well-laddered long-term debt profile and $4 billion of preferred stock with perpetual fixed distributions. With $1 billion of cash on hand at quarter end and 3.7 x net debt and preferred to EBITDA, we're well-positioned to finance the growth initiatives ahead. With that, we'd like to open it up for questions. Thank you. At this time, if you would like to ask a question, please press star one on your touch tone phone. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is star one to ask a question. Our first question will come from Jeff Spector with Bank of America. Great. Thank you. Good morning. I guess, my first question, could we maybe discuss a little bit more, flesh out your comment on the outlook for the second half is improving, please? How does that, you know, I guess your thoughts then how heading into 2023, how that impacts, you know, the setup into 2023. Yeah, Jeff, good morning. You know, as Tom and I highlighted, we continue to be encouraged by the health of the business. You start with customer demand, quite good. We're seeing top of funnel demand that continues to encourage us that the adoption of self-storage is quite robust across our markets. Existing customer behavior has been consistent, and if anything, continues to encourage us relative to customers needing and using their space for longer periods of time. Our average length of stay now is 39 months. Compare that to about a year ago, and it was around 34 months. Very encouraging. The things that, you know, I spoke to relative to muted deliveries across, again, the national market as a whole are also quite healthy, meaning that we're not seeing any particular market getting burdened by an unusual or heavy level of new supply. That's always a good thing for the business. We're again measuring the changing dynamics that go with the 1.7 million customer base that we have. We're really not seeing from a cohort standpoint any change in behavior or elevated levels of stress by cohort. That too is very encouraging. With all that said, coupled with the fact our same-store continues to perform quite well, and on an exceptional basis, our non same-store, as I mentioned, is very well poised to continue to deliver good results, not only through this second half of the year, but going into 2023. With all that said, Tom can give you a little bit of perspective on what we're thinking through the end of the year and what that positions us to do going into 2023. Sure. Thanks, Joe. In particular, I'll highlight two elements as we think about where we'll play out through the second half and then go into 2023, and I'll hit on both the same-store as well as the non-same store because I think they're both important. We look at the same store. As you recall, we initiated a strong outlook for same store illustrating or demonstrating acceleration from 2021 at the start of the year, and frankly, we're executing right along that path. The assumptions as we move into the second half on the same store are pretty consistent and quite strong, with modest deceleration into the second half, given the tough comps that we have, particularly on rates, but also the typical seasonal occupancy pattern that we're expecting this year, more so than we've seen in the last couple, so call it a 250 basis point occupancy decline. Strong trends within the same store. If you just look at what the first half performance is and the implied outlook for the second half, it implies an outlook, or an exit level of revenue growth with low double digits on it, which is frankly not too dissimilar to where we started this year. A good outlook through the same store in the second half, and then, I'm expecting your question is leading to the 2023, which also a good setup for 2023. On the non-same store, as we've highlighted now a number of times in our prepared remarks, continues to exceed our expectations. We did lift our outlook for the year in the non-same store by $40 million. Importantly, that wasn't just a pull forward of stabilization activity. We actually raised our outlook of what those assets will stabilize with. There's continues to be a strong outlook for growth in 2023 and beyond from that level of capital that we deployed to date. All encouraging trends as we look forward to 2023. Great. Thanks. Very helpful. My one follow-up. Joe, you commented on, you know, cap rates are up, but we saw you at Nareit. I think there's still somewhat limited information, but I'd say, you know, this earnings season, still a key debate really across all sectors. I guess, you know, can you talk a little bit more about your comment on cap rates, but I guess most important on maybe asset values, like, you know, where do you think storage asset values are today versus, let's say, six months ago? Yeah, Jeff, you know, there's you know a few elements that go into that. As I mentioned, trading volumes definitely at a different place year to date than we were in 2021 at this time. As I mentioned, you know, far fewer, if any of the big jumbo size, you know, hovering $1 billion or more portfolios, have either come to the market or have traded. The level of information that we're tracking relative to cap rate impact goes to you know the segment of the market that is much smaller, whether they're individual assets, smaller portfolios, and there's a range playing through depending on the asset quality, the stabilization of a particular asset, et cetera. You know, there's no question, as you would expect, as interest rates are behaving the way they are, i.e., either increasing and depending on what the Fed continues to do downstream, we'll see what additional impact we have relative to just interest rate levels themselves. Bidding activity plays through, meaning how aggressive or less aggressive a buyer is gonna be for certain types of assets. So we'll see how, you know, cap rates continue to trend, but our view is they've elevated, you know, plus or minus, say, 50 basis points. They could trend a little bit higher, but again, it's gonna be subject to the amount of capital that's still anxious to come into the sector. I mentioned, you know, our team seeing what I would call more last calls. We think that's a good thing, meaning that, at the end of the day, maybe some of the feverish buying activity that was in part of the market in 2021 has softened. That always gives us a different opportunity to engage with certain sellers relative to their need to actually do a transaction. As I mentioned, we are clearly looked upon as a very preferred buyer. We know typically the asset at hand quite well, in many cases, maybe even better than the owner may know either the sub-market or the opportunity that might be tied to an asset. A lot of things that come into the mix that can affect cap rates. As I mentioned, I think that too can be very healthy, and particularly for a well-heeled and deep-seated buyer and knowledgeable buyer like we are, that can be a very compelling time to engage with an owner, and we're seeing activity to that degree. We'll continue to pace and see what change plays through. You know, as you would expect with the change in interest rates alone, there's gonna be some movement in cap rates. Thank you. Thank you. Our next questions will come from Michael Goldsmith with UBS. Good morning. Thanks a lot for taking my question. I wanted to dig into a comment that was made earlier about some of the properties in the non-same store pool that are expecting to stabilize at a higher level. Can you provide a little bit more information on that? Then I guess, related to that, how does that change your process of underwriting or acquiring new portfolios as these properties start to move higher, stabilize at a higher level? Yeah, Michael, I'll start with a few things. First, if you think about the strategy that we've deployed now for the last 2+, we've entered transactions with a Priority around finding additional upside in any asset acquisition that we're either entertaining or bringing into the portfolio. Of the $5.1 billion of asset acquisitions that we did in 2021, average occupancy, you know, hovered around 60%-65%. By design, we've been very focused on finding and taking assets that may be either at a state of fill-up or a state of optimization that clearly hasn't met either the owner's expectation or an optimization level that we feel that we can clearly achieve once we own the asset. That has given us a very compelling opportunity to drive the types of returns that Tom spoke about, that in many cases are even more elevated than we expected when we bought the assets. A couple of very simple examples that's definitely playing through with the two bigger portfolios that we bought in 2021, the ezStorage portfolio that we took down in April of last year. You know, $1.8 billion transaction, seeing very good lift relative to not only the results we expected in the first year, but we're even doing better than expectation. The same thing's playing through with All Storage, the transaction that we did in the fourth quarter, again, another large portfolio. The same type of trajectory is honestly playing through with the one-off and the much smaller portfolios as well. Part of that, again, by strategy and design, we've been very focused on identifying assets that we can bring into the portfolio and drive much further optimization through not only fill-up, but maturation of the existing, revenue base, the customer base, et cetera. Tom, you can give a little bit of color if you'd like to relative to some specifics. Yeah. Thanks, Joe. Michael, I'll give you some of the financial components that we included in guidance that we're providing in order to be able to model this a little bit easier. For the year, as part of our Core FFO outlook, we're providing a non-same store NOI contribution number. In addition to that, there's a line item below Core FFO that is the non-same store NOI to stabilization, which will occur after 2022. You can think about adding those two numbers together to reach our view of stabilized NOI of that pool. If you look back in April, our non-same store NOI contribution for 2022 in our guidance was a midpoint of $450 million. We included at the bottom of the page $180 million of incremental NOI to stabilization. If you add those two numbers together, you're gonna get your $630 million of stabilized NOI. If you compare that to this quarter, we lifted our non-same store outlook by $40 million to the midpoint. You're looking at a $490 million NOI contribution from the non-same store pool in the calendar year 2022. We also retained that line item below at a $172 million of incremental NOI to stabilization. If you add those two numbers together, the $490 and the $172, you get to $662. In effect, we raised our outlook for ultimate stabilization by $32 million to $662. Again, an improving outlook. The performance we're seeing this year is not just a pull forward of stabilization, it's also outperformance versus expectations. You know, Mike, one other thing I'd add, you know, we haven't spoken to the performance of our development assets, and those too not only continue to drive very good returns, but are beating expectations relative to, again, level of lease up, the performance of the asset. We clearly have, you know, a very unique advantage being the only public developer of the product in the space, and by far the largest developer in the sector. The team's doing a very nice job identifying prime land sites, using many of the data elements that we uniquely have to find pockets of opportunities, whether they're markets that are more mature and/or growing markets. Those assets too continue to drive very good returns. As I noted, you know, our development pipeline for the first time hit $1 billion. We're encouraged that we've got a nice window to continue to find compelling opportunities, and we'll continue to allocate capital in that arena as well, which has been very fruitful. Good. That's very helpful. As a follow-up, you know, the non-same store pool outperformed expectations. The same store pool has been in line with your expectations. As we look ahead, how much of the non-same store portfolio is poised to enter the same store pool in 2023 as we think of kind of the maturation of these stabilized assets? Yeah. Thanks, Michael. The first thing I'd highlight is, as we think about adding properties to our same store pool, we're focused on adding them when they're stabilized. As I just walked through, there's meaningful NOI contribution to come from those assets before they reach stabilization in the coming years. We won't add those into the same store pool until they've reached that stabilized level. There will be some properties added, but as we just demonstrated, there's significant growth ahead that will sit in the non-same store versus the same store pool as we move into 2023. We'll continue to provide the level of disclosure that we do today by acquisition and development vintage so that you can see and track that performance over time. Thank you very much. Good luck in the back half. Thanks, Michael. Thanks, Michael. Our next questions will come from Ki Bin Kim with Truist. Thanks, good afternoon. Just going back to your comments about any kind of consumer trends that you might be seeing. Are there any discernible trends between maybe weaker demographic type of customers when they get a rent increase letter versus higher income customers, or are they all kind of responding in a similar fashion? Sure. Specifically around rent increases, I'll hit that, and then maybe I'll take a step back as well and talk about overall customer trends as I think that may be instructive. You know, the existing tenant rate increase program is something that obviously has been running for a very long time, but is an area we continue to make investments in, and it's really driven by extensive testing. You know, Joe mentioned we have over 1.7 million customers today. We send over 1 million rent increases a year, and that gives us the ability to dynamically manage that program and frankly, use data science today, in a way that we couldn't use in years past. That program continues to improve and ultimately we continue to see the benefit of that program in our realized rents. In terms of customer reaction, that's a really important part of the program, is to understand what we predict the customer behavior to be, and we're constantly tuning and understanding if there's any shifts in ultimate behavior. I'd say year to date, in fact, customers are behaving as good or better, frankly, than what our models have been predicting for them as we move through the year. Continue to see good behavior from our customers. As Joe mentioned, length of stay continues to extend, which is a really favorable trend for that program as there are more customers to send increases to. That all played out well. Then I think your second question around or the second component that I wanna focus on is around demographics and are we seeing any shifts in customer behavior by demographics, even away from that data-driven existing tenant approach. The short answer is we're not really seeing anything across the customer base and continue to see broad-based strength. There are a few operating metrics that if you look at them versus last year, they're deteriorating. Things like move-outs, right? That move-outs are higher for us and I think across the sector, but they're off incredibly low bases and still well below pre-pandemic levels. You could say the same thing around delinquency, et cetera. As you slice and dice that by demography or other customer segments, nothing there that's percolating that we'd highlight as being concerning, frankly. Overall, continued broad-based strength around the customer base. On that same topic, on ECRI, can you just describe high level, you know, what types of increases you're pushing out there and, maybe the frequency? Sure. What we've highlighted in the past is, you know, the magnitude and frequency of our increases are really driven by two components. One is what do we anticipate the reaction to be to the increase? As I just spoke to, that performance has been as good or better than our expectations and frankly, better than history. The second component is an optimization based on, if the customer moves out, what's the cost to replace that tenant? In both instances versus pre-pandemic levels, they're both pointing to higher magnitude and frequency of increase. If in the past we were sending 8%-10% increases to our longer term tenants, we're sending higher increases today, and higher frequency. Okay. Thank you. Thanks. Thank you. Our next questions will come from Ronald Kamdem with Morgan Stanley. Ronald, your line is now open. Ronald, are you by chance muted? Why don't we go to the next question, and we can let Ron jump back in queue. All right. Next, we'll take Steve Sakwa with Evercore ISI. Yeah. Thanks. Good morning. Tom, I guess I just wanted to circle up. You know, your first half results were obviously very strong, up 19.5%. I know you didn't change guidance, but I guess to hit the low end of the range on NOI, you'd need to be like at 7% in the back half of the year. Just given all the commentary that you've talked about, seems highly unlikely even with tough comps. I guess, what are we missing at the low end? Or, you know, is it just pretty clear that, you know, you're sort of at the midpoint to high end at this point, but you're still sort of in that range and just sort of the low end just seems very unreasonable. Well, thanks, Steve. I appreciate the question. I guess what I'd characterize is obviously we're not gonna change the outlook here on the call, but what I'd say is when we set the outlook at the beginning of the year and we continue to reaffirm it, is we wanted to set a wider range to encapsulate a broader range of outcomes. That's both on the high end as well as the low end, given the uncertainty of a month-to-month lease business and frankly, how dynamic the industry has performed over the last several years. We did set a broad range. You know, as we move through the second half, there's still a reasonable range of outcomes that could play out in the environment. We didn't touch the range. To your point, the first half has been strong and frankly, right on our expectations. You know, and to all the points around, you know, customer demand trends and the like, things are We're set up well as we head into the second half, but we do face some pretty tough comps, both on rents as well as occupancies moving into the second half. I'd say similarly on expenses, right? I mean, we saw expense growth accelerate into the second quarter. We left our same store expense positioned at the same level as the start of the year, and we aren't seeing inflationary pressures. We have multiple initiatives to mitigate the impact of some of the inflationary pressure, but there's no question the labor market is tight. You don't have to look any further than the jobs number that came out this morning to indicate how tight the labor market is in this environment. We wanna make sure we're encapsulating the outcomes there on expenses as well. Great. Then a follow-up. Joe, you know, you guys left the acquisition guidance unchanged at $1 billion. If you include, you know, sort of things you closed or are gonna close going to quarter end, you're about half a billion. Maybe just talk a little bit about the pipeline. I know you're certainly seeing more opportunities and given your balance sheet. I'm just wondering, you know, given that you can be an all-cash buyer, do you actually expect, you know, volumes to actually accelerate even if there's less product on the market? Yeah, that's gonna be subject, Steve, on a number of factors. You know, as far as the billion-dollar target or guidance for 2022, to your point, you know, we're tracking well to that level of volume. What's typical is this time of year, you're gonna see, you know, even an unpredictable amount of potential volume coming into the market, knowing that the market's different from a predictability standpoint this year than last year because of the range of big portfolio opportunities being quite limited, if, in fact, at all. Very, very different outlook as I mentioned. We're gonna continue to look for a whole range of opportunities. As I mentioned, we're very confident. We're very well set to engage and unlock anything that would be particularly compelling. It'll just depend on, again, what's going to play through, particularly in the next, say, three-four months. With that, we'll see what kind of opportunities arise. The things that we continue to look for, as I mentioned, are assets that we are clearly seeing upside opportunity from a value creation standpoint. That's clearly part of the set of asset acquisitions that have been completed or that are pending as we guided to, and we'll continue to look for those and other types of opportunities as well. As Tom mentioned, you know, there's some shifting things out there relative to different pressure points that could play through with different owners, and that could be an interesting opportunity for us as well. Very excited about that. You know, the team's working hard. We're highly engaged, across multiple markets, and we'll continue to see what additional volumes play through by virtue of that. Great. Thanks. Thanks, Steve. As a reminder, that is star one to ask a question. We'll go back now to Ronald Kamdem with Morgan Stanley. All right. We'll move on to Michael Mueller with JP Morgan. Can you talk a little bit about the potential for a dividend increase? Looks like it hasn't been raised since about the fourth quarter of 2016. The growth has been good. It looks like you're looking at fewer big deals where you can accelerate expenses, and now you have the PSB dilution on it. Just feels like you have to be getting pretty darn close to being forced to raise it. Thanks, Mike. The first thing I'd highlight is we did just send a big distribution out to our shareholders yesterday, $13.15. As it relates to the regular dividend, to your point, the dividend has been relatively consistent for some time, or has been consistent since the fourth quarter of 2016. One of the drivers of that, and we've talked about this in the past, is some tax law changes in 2017 that introduced bonus depreciation, in effect lowering our taxable income for that intervening period. To your point, cash flow growth and taxable income growth has been strong, which has been increasing taxable income. As we move into 2023, though, the notable element is that bonus depreciation will begin to phase out, and that benefit that we've received over the last several years in terms of lowering our taxable income will go away, and that will allow us to increase our dividend, and ultimately return more capital to shareholders in the coming years as we go, while at the same time retaining a significant amount of retained cash flow to reinvest in the business. To your point around, you know, it's been some time and growth has been strong, it's that as well as taxable income increasing that is likely to increase our dividend over time here as we move forward. You know, that's something that we highlighted at Investor Day as well. As taxable income increases, we'll be poised to increase the current return to our shareholders. That is, as we move forward into 2023, something that will begin to be more of a topic. Got it. Appreciate it. Just a quick follow-up. With the development pipeline now at $1 billion, what's your average annual development spend run rate at that level? Well, right now, obviously, we're increasing the level of the development pipeline, so that's gonna come with it increased annual spend. As you think about, like, the cadence this year, for instance, we're gonna deliver about $250 million of developments this year, but we probably spend $400 or so, which implies increased deliveries for next year, and that's gonna continue to move higher. The spend next year is probably $450-$500, which will lead to increased deliveries then as we get into 2024, all on pace to reach the objective that we outlined at Investor Day of $700 million in annual deliveries, in annual spend by 2026. Got it. Okay, thank you. Thanks. Our next question will come from Spenser Allaway with Green Street. Yeah, thank you. Maybe just stepping back from operations, I just had a question on the CapEx front. I understand as a commodity-like sector, CapEx, you know, isn't as crucial as in other sectors, but just wanted to get your thoughts on how important it is to reinvest in the properties just to preserve competitive positioning, you know, given the inevitability of supply waves in the space. Yeah. Sure, Spenser. You know, clearly that's one of the compelling parts of the whole self-storage model is, frankly if you design an asset and locate it well, the enduring and lack of obsolescence tied to the product is, you know, quite significant. We have assets, you know, now in our 50 years of history in many markets that were developed, you know, 40+ years ago that are just as functional and desirable to users today as they were when they were initially built and have not required much, you know, annual and/or consistent level of additional capital. You know, it ties to the simplicity of the product. One of the things that, you know, we've been speaking to strategically over the last couple of years is holistically, we are stepping back and putting many of the attributes of our latest generation development products into our existing assets. That's called the Property of Tomorrow program. This year, we will spend about $300 million or so into that program. We're about halfway through the portfolio. We've got another 3+ years to finish that up. The thing that that's resetting is lifting, again, not only brand, but by necessity property, any additional functionality or attributes that we feel are even that much more compelling to add to a particular asset. That too is something that we're intentionally doing and getting a nice set of reactions from existing new customers or employees, et cetera. That continues to be an ongoing investment that you'll see us make again in the coming years. Another component that we're early into is our adoption of solar across hundreds of properties as we speak. The goal is to at least put solar on half of the portfolio or more in the next two to three years. That too is a very intentional and efficiency-related, environmentally-related investment that is playing well. We're just finishing up LED lighting. That's a project that started actually 5+ years ago. As you can imagine, you know, a lot of real estate to touch, but we've now relit to LED the entire exterior of all of our assets and are just finishing up interior LED as well. Good efficiency, energy conservation, and again, another nice attribute adding to the properties themselves. It's more akin to that, and again, if you step back and think about great location, functional design, and the enduring value of the asset itself, it can play through very effectively with little, you know, again, traditional CapEx spend compared to any type of other sector. That's really helpful, color. Thank you. Thank you. Our next question will come from Juan Sanabria with BMO Capital Markets. Hi, good morning. Just wanted to ask about California and New Jersey, the two markets that have had rent restrictions that have fairly recently come off and how you are in those two markets relative to the current market with your existing portfolio. Like, how much have you been able to drive rate and close that gap to the current market rate? And if you could just remind us on the contributions to same-store revenue growth as a result of those restrictions lifting. Sure. The first thing I'd say is I'd segment the two markets you just spoke to. I'm gonna go into a little bit more detail around California. New Jersey does have pricing restrictions upon state of emergency similar to California and a similar price cap. That state of emergency was in place for a much shorter duration time period, so it was in place for a little over a year or so, which certainly has an impact on revenues, but nowhere near the multi-year impact that we experienced in Los Angeles County in particular. The overall impact to our properties in New Jersey was more modest. Shifting gears to Los Angeles County in particular, 'cause the same story is in place as it relates to the difference between San Francisco and Los Angeles. San Francisco had some states of emergency that were declared, particularly around COVID, that again, were in place for a little over a year, but nowhere near the impact to Los Angeles County. Getting to Los Angeles, the state of emergency was in place from the fall of 2018 through the very beginning of this year. That 10% price limitation was more significant to our overall revenues, and it will take a little bit longer to recoup that. As I noted earlier, we are seeing strong acceleration within Los Angeles. If you look at the differential, for instance, between how Los Angeles County has performed compared to Orange County or San Bernardino or Riverside Counties, all in the same, obviously, metropolitan area, I'd say we're just getting to a point where Los Angeles County is on par on a revenue growth basis with those markets, which indicates that we have still a good bit of revenue growth to go and recapture. Obviously the team's executing on that to date. This year we compartmentalized the Los Angeles County contribution to same-store revenue growth as being an incremental 1.5%-2% of same-store revenue growth. I'd say as we get into 2023, you're gonna hear us talk about this again because there will be incremental benefit still as we move into 2023 given the accelerating performance there. Great. Could you just talk a little bit about, given your history and how much data you have, about how you would expect the portfolio to perform maybe on a same-store revenue or NOI perspective if we do get, in fact, a recession, assuming it's not as bad as the financial crisis, but more of a, in quotes, run-of-the-mill recession, what would you expect the business to be able to do in the face of that kind of external pressure? Well, I think one of the key clarification points, one is, you know, no recession is the same as another. I'm not sure we can categorize what, you know, what a typical recession would look like. Just looking back over time, what we've seen is same-store revenues that dip into negative growth territory and same-store NOIs that dip into the kind of the mid to high single digits, depending on the severity of the recession. Ultimately, it's gonna depend on the nature and what the drivers are of that recession. You know, certainly we're going into what could be a recession here. There's lots of headlines around potential recessions, but we haven't seen any impact to our business to date that would indicate that there's been a sharp move or otherwise as we've spoken to. You know, hypothesizing what could play out, I think looking back at previous recessions and those kind of low- to mid-single-digit same-store revenue impacts and kind of mid- to high-single-digit NOI impacts is probably the best guide. But again, we'll see as we get there. Yeah. I think, you know, just to, you know, put a little bit more color on some of the dynamics and the multi-dimensions, which frankly make storage that much more compelling, even in a recessionary environment, you know, there's definitely history that points to storage continues to be an extension of home. As I mentioned, you know, home affordability is a pressure point, storage benefits by that. Supply has been very muted. If there were recessionary pressures out there, but we're not dealing with the same level of supply that may have come and gone in certain other recessionary environments, that could be a very different dynamic. You know, the employment picture is very fluid as we speak, as Tom mentioned. You know, very strong numbers came out today, so even with some commentary that, you know, how could we be going into a recession with such strong employment data? A lot of different crosscurrents. We have a month-to-month business. We have a very nimble business. We can calibrate around demand and pricing factors that will serve us well. You know, we're continuing to operate the business at, you know, very high efficiency from a cost standpoint. As I mentioned, our margins are now over 80%. Again, very good components for us to continue to maneuver whatever can play through recessionary or otherwise. Thank you, guys. Thanks, Juan. Thanks, Juan. Our next question will come from Keegan Carl with Berenberg. Hey, guys. Thanks for the time. Just a little bit more color on your third-party management platform maybe. You know, how is demand shaping up? Regarding a potential slowdown in construction and new supply, I mean, how do you kind of think of the long-term growth prospects? Yeah, sure. Third-party management pipeline continues to build. You know, we added 12 assets to the platform this last quarter. Our backlog continues to build as it has and, you know, and as the, you know, third-party management as a whole is grown through additional development. You know, some of this is time-oriented. We'll continue to build the size of the platform as some of these newer assets are actually delivered. You know, we're building, you know, also on top of that, some, you know, different and new relationships. It has been and will continue to be an opportunity for us to source likely acquisitions through those relationships. You know, we're pleased by the trajectory and the growth that continues to come through our third-party management platform. Getting very good feedback from existing customers, many of whom are actually bringing us additional properties as we speak. As far as supply, you know, again, there's a number of factors that have been, I would call it, beneficial and have put somewhat of a lid on supply accelerating. That includes more complications tied to just approvals themselves. I've talked about this, you know, for the last A few quarters. You know, we're nationally building in many markets, and I can't name one that is easier and more efficient today than it was either pre-pandemic or even historically, so very complicated sets of hurdles that you go through, unexpected time delays, et cetera. On top of that, clearly in an inflationary timeframe, we're looking at more pressure on that front. Many of the developers that are out in the market may not have the financial wherewithal to actually absorb some of those type of cost increases that may either delay or actually decide not to build. On top of it, interest rate levels. Construction loans are more expensive, access to lending may be more complicated. All those things are actually putting through more discipline and keeping somewhat of a lid on the amount of additional development coming through. We see that, as I mentioned, as a very healthy thing, and it's a good window for us to come in and compete very differently. More often than not, we're not seeing as many bids on certain land sites, and we're also seeing some landowners come to us that have either taken a site through a percentage of its entitlement process or maybe holistically and still wanna actually do a land trade instead of actually doing the development themselves. Got it. Apologies if I missed this earlier, but do you guys disclose what percentage of your portfolio is currently below street rate? Keegan, that's not something that we disclose. We do disclose a healthy amount of information around move-in and move-out trends as well as the rates compared to in-place levels. What I would characterize, and I think what you're getting to is, you know, what could be the rent roll-up opportunity or otherwise. Maybe take a step back. Self-storage is a little bit different than other property types in terms of how we manage revenue and how leases operate. As you think about managing revenue across the tenant base, one of the great aspects of self-storage is month-to-month leases. The team is focused not only on moving and signing new leases, but also managing the revenue on the entire existing population as well. What you see historically, and you saw it again in this quarter, is that you get to see a rent roll-down, which may sound a little bit odd for other property types, but to reiterate for self-storage, that's a sign that we're successfully managing the existing tenants that are in-house. As we spoke earlier, length of stays have been growing, which gives us more ability to do that, and to send increases to our existing customers, and ultimately tune that based on a data-driven approach. You know, again, this quarter and as we sit here today, our in-place rents are a good bit above where our move-in rents are, and our move-out rents are also above where our move-in rents are. That's healthy, and we anticipate that to continue through the rest of the year. That's it for me. Thanks for the time, guys. Great. Thanks. Thank you. Right next we have Ronald Kamdem with Morgan Stanley. Hey. Hopefully you can hear me. Third time's a charm. Yeah. Third time's the charm. Sorry, Ron. Two quick ones. It was definitely user error. Two quick ones on my end. One is just, when you're taking a step back, sort of big picture, you know, the portfolio, the record rents, sort of record pricing power, just this cycle operationally, is there anything you've sort of tried to do differently to try to measure the customer's pricing power, whether it's look at rent-to-income ratios or, you know, other than just move-out activity which you monitor, is there any sort of different way to leverage all the data that you have to get at sort of the pricing power at these sort of unprecedented levels? Sure. I think there's a couple things here. One is, if you think about, rent-to-income levels or otherwise, those are kind of macro trends that we do look at periodically. We look and see what housing affordability is by different markets as we look forward. Frankly, that's not how we manage the business on a day-to-day basis. The way we manage it day to day is much more driven on testing, and we have the ability to segment our customers and conduct continuous price testing, both for new customers as well as existing customers in terms of what we expect that elasticity to be. Overall, as we were just speaking about with Keegan, price elasticity is more acute for new tenants than it is for existing tenants, which is ultimately why existing tenants will pay a higher price than new tenants moving in. That's continuous testing across the platform for both sets of tenants to understand that elasticity by market, by you know, unit type, and that's managed dynamically. In terms of what we're seeing today compared to what we've seen in the past is a continuation of that, which is, yeah, there's no question there's price sensitivity for new customers today, and that's built in how we price our units on a day-to-day basis. That said, our move-in rents in the quarter were up 12%, and so we continue to have an ability to increase rent in the face of that elasticity. In July, move-in rents were up 8%. We are seeing moderation, but continued strength in move-in rents. You know, nothing that I'd highlight that is overly concerning from the micro. I think from the macro standpoint, you know, the one of the key elements of self-storage is it's a nominal spend versus a consumer's income, and I think that continues to benefit the sector as we see rents resetting at all-time highs. Great. Then just following up on the questions on sort of the second half growth, you know, the implied guidance on same store revenue is 11.1%, and if we think about that as sort of a good run rate for the end of this year going into next year, is there anything when we're trying to figure out what the potential deceleration's going to be, is there anything in terms of comp, customer behavior, as we're rolling into next year to think about, sort of that growth function? Yeah. I think we'll give you a view on how 2023 is gonna play out as we move into next year. You know, I think you hit it right, which is a strong second half setting us up well for 2023. In terms of the cadence of 2023, we'll maybe say that in terms of when we have more visibility. Yeah. That's it for me. Thanks so much. Thanks, Ron. Thank you. I'd now like to turn the call back over to Ryan Burke for any additional or closing remarks. Thanks, Chelsea, and thanks to all of you for joining us today. Have a great weekend. Thank you, ladies and gentlemen. This does conclude today's conference, and we appreciate your participation. You may disconnect at any time.