Public Storage (PSA)

• Momentum Building in the Transaction Market for Acquisitions: After nearly two years of low transaction volumes, the company is seeing increased activity with more assets coming to market, both small and large, indicating potential growth opportunities through acquisitions. -
• Improving Demand Trends and Strong Online Engagement: Industry-wide demand is improving, reaching parity in September and October. The company is experiencing positive year-over-year web visits and good conversion rates, supporting stabilizing operating fundamentals. -
• Investment in Technology and Operational Optimization: The company is investing in technology and analytics to optimize operations, including hiring a new Chief Operating Officer with significant experience in technology and infrastructure. They are using advanced analytics to optimize staffing levels and have created specialized roles within property management, enhancing efficiency and customer service. - -

• Delayed Acquisition Activity May Impede Growth: The company has reduced its acquisition guidance for the year, with some deals slipping into 2025 rather than closing in 2024. This delay suggests that growth through acquisitions may be slower than anticipated. "Some of it will slip into '25." -
• Continued Pressure on Move-In Rents and Declining Occupancy: Despite some markets showing stabilization, overall move-in rents remain under pressure, and occupancy is declining. In October, move-in rents were down 5% year-over-year, and occupancy was down about 90 basis points. This indicates ongoing challenges in improving revenue through pricing and occupancy gains. "Move-in rents again, down 5% for the month... Occupancy is down about 90 basis points." -
• Weakness in Key Markets Due to Supply and Storm Impacts: Certain markets, particularly in Florida, are underperforming due to normalization, new supply, and the impact of recent hurricanes. Orlando's revenue was down 6.1% in the quarter, and the company anticipates a financial impact of about $7 million from storm-related expenses. This could continue to pressure performance in these markets. "Revenue was down 6.1%... Likely to have about a $7 million impact financially." - , -

1. 2025 Outlook Improvement
   Q: Do you expect improvement into 2025 regardless of housing?
   A: Yes, we have confidence that 2024 is a year of stabilization - , leading to improvement in 2025. - We've seen better market improvement across more of the portfolio than at the beginning of the year. - Factors like an improved housing market, interest rates, and economic growth could add positively. - Overall, we're in a better position going into 2025 than we were going into 2024. -

2. Demand Stabilization and Growth
   Q: Does steady demand tie into your thoughts on improvement?
   A: Yes, we've seen stabilization of demand throughout this year. - Markets like Seattle show consistent improvement - , though overall growth isn't significant yet. - Our outlook still calls for same-store revenue growth to be down just over 1% for the year. - Stabilization is the first step, observed across many markets. -

3. Acquisition Timing and Guidance
   Q: Is reduced acquisition guidance due to timing of deals?
   A: Yes, it's a timing issue. - The transaction market improved notably in the last 60 to 90 days. - Much activity is expected to close in early 2025 rather than 2024. - We have increased acquisition volumes under contract, with some deals slipping into 2025. -

4. Move-in Rent Trajectory
   Q: How will move-in rates trend ahead?
   A: We're seeking demand stabilization to stabilize move-in rents. - We anticipated move-in rents down mid-single digits by year-end - , and October performance aligns with this. - After a seasonal trough, we expect improvement in spring. -

5. Acquisition Cap Rates
   Q: What's your expectation for cap rates in acquisitions?
   A: We're targeting stabilized yields around 6% - , acquiring assets typically in the 5% range. - This has been consistent over the past year. -

6. Labor Savings via Digital Platform
   Q: Is payroll down due to e-rentals? Further savings ahead?
   A: Yes, with 70–75% of customers using our digital leasing platform - , we're optimizing staffing. - This benefits customer interaction and employee engagement - , leading to ongoing optimization. -

7. Demand Drivers
   Q: What factors are driving demand improvement?
   A: Demand shifted with softer home sales but strong apartment renter activity. - Record usage from customers running out of space at home. - Overall demand levels are consistent year-over-year. - Length of stays remain longer than pre-pandemic. -

8. Market Performance
   Q: Which markets are performing best or struggling?
   A: Seattle, DC, and San Francisco are accelerating. - Atlanta is normalizing with new supply. - Some markets are improving even if they had strong performance in prior years. - In Florida, increased move-ins relate to storm rebuilding. -

9. Existing Customer Rent Increases
   Q: Is ECRI contribution higher this quarter? Year-end outlook?
   A: Yes, third-quarter ECRI was better year-over-year. - Driven by newer customers from the past 12–18 months contributing more. - We expect strong trends to continue. -

10. Promotional Discounts
    Q: What's driving higher promotions, and future impact?
    A: Promotions were used more in Q3, with about 60% of customers receiving them. - Still modest compared to 85–90% in 2019. - Used tactically to optimize customer acquisition. - October promotions were consistent year-over-year. -

11. Digital Adoption and Savings
    Q: Is there more room for digital growth and cost savings?
    A: Yes, 75% of customers now use digital channels. - We're optimistic usage will grow, leading to further optimization. - Our PS app has 2 million users - , enhancing customer interaction.

12. Development Outlook
    Q: How do development deliveries in '24 compare to '25/'26?
    A: 2024 will be a record with $430 million in deliveries. - We'll see a slight drop in 2025 due to development challenges - , but aim to increase in 2026. -

13. Transaction Landscape
    Q: Seeing single assets or portfolios marketed?
    A: Both. - Individual and small assets remain, with larger portfolios starting to surface. -

14. Demand Elasticity and Pricing
    Q: Is demand less elastic when adjusting pricing?
    A: We continually test price elasticity. - Customers are price-sensitive when moving in but value units highly after. - We optimize revenue based on inventory and demand. -

15. Balancing Labor Savings
    Q: How do you balance labor savings with service risk?
    A: We use analytics to optimize staffing per property. - Tools help us ensure effective customer service. - Specialized roles and vibrant care centers enhance service. -

16. Occupancy Clarification
    Q: Is October occupancy down 90 bps year-over-year?
    A: Yes, down 90 basis points year-over-year. - We anticipated this seasonal decline. - Average occupancy expected to be down about 70 basis points for the year. -

17. Hurricane Impact
    Q: What's the financial impact from hurricanes?
    A: We anticipate about a $7 million financial impact. - Increased move-ins due to storm rebuilding - , but too early to quantify NOI impact. -

18. Accounting for Promotions
    Q: How are promotional dollars accounted for?
    A: Promotions like the dollar special are contra revenue in the first month. - A customer pays $1 for the first month's rent. -

19. Land for Development
    Q: How many years of development starts do you control?
    A: We own about $60 million in land , providing visibility over the next couple of years. We often use contractual options until ready to build.

20. COO Hiring Strategy
    Q: What's behind the new COO hiring?
    A: We're excited to have Chris Sambar join as COO - , bringing over 20 years of AT&T experience - in technology and infrastructure. -

21. Rent Trends Clarification
    Q: Do sequential rent trends show improvement?
    A: Yes, October rents are compared apples-to-apples. - We're on track for move-in rents down single digits by year-end. -

22. Website Data Confirmation
    Q: Does website data confirm stabilization?
    A: Yes, industry-wide demand reached parity in September/October. - Web visits are up year-over-year with good conversion rates. -

23. ECRI Trends
    Q: Are rent bumps higher this quarter?
    A: Yes, third-quarter contribution was better year-over-year. - Driven by newer customers' contributions. -

24. Hurricane-Related Move-ins
    Q: How much NOI benefit from hurricane move-ins?
    A: Too early to tell. - We have associated financial costs. -

25. Promotional Accounting
    Q: How are promotions treated in accounting?
    A: Promotions are contra revenue in the first month. - Customer pays $1 under the dollar special. -

Annual guidance for FY 2024:

• Core FFO per share: $16.50 to $16.85 - (no change from $16.50 to $16.85 - )
• Same-store revenue: Expectation for nominal same-store revenue growth to begin improving - (raised from prior outlook emphasizing move-in rents down 12% - )
• Incremental NOI from non-same-store pool: $120 million in total through stabilization - (raised from $110 million - )