Public Storage (PSA) Q2 FY26 earnings call: guidance and Q&A

How quickly can revenue be recaptured from the expiration of LA County pricing restrictions, and what is the math for this year and next?

Management expects to start recapturing revenue as of July 1, taking a measured and phased approach. The improved guidance for 2026 includes a 30 bps improvement from LA, reducing the headwind to -50 bps. The company lost 70 bps in 2025 and 50 bps net in 2026 due to these restrictions, indicating significant future recapture potential.

“As a reminder, we lost about 70 basis points of same-store revenue growth in '25, another 50 net this year. So that gives you an idea of the demand and supply environment out there, which remains really robust, kind of what we left on the table from the state of emergency and may be able to recapture in the future.”

asked by Samir Khanal · answered by Joseph Fisher

Can you elaborate on the expansion opportunities identified for NSA and if any incremental revenue or cost synergies have been found beyond original underwriting?

Management identified expansion opportunities on existing NSA assets, with the development team already greenlighting projects. Additionally, 14,000 units can be brought back online by spending R&M dollars. Confidence in synergy achievement has grown, particularly for top-line, bottom-line, and ancillary revenue, as systems were integrated overnight, providing immediate visibility and tools for the unified team.

“The second is more tactical. And this is driven by an ability to spend some R&M dollars and get more units online. So we found about 14,000 units and the NS 18 pointed those out to us that we can bring back online and which will drive incremental inventory opportunity as we move through the second half year of 2026.”

asked by Samir Khanal · answered by H. Boyle

Can you provide an update on July trends and how they are reflected in the guidance for accelerating revenue growth through the back half of the year?

July trends continued the positive momentum from June, with occupancy up ~30 bps YoY, churn remaining lower, and move-in rents positive. The company expects Q2 to be the low point for YoY revenue growth, with improvement in Q3 and positive revenue growth in Q4. This trajectory is driven by steady demand, slowing new supply, and customer experience initiatives.

“As it relates to July, trends continued, occupancy up about 30 basis points year-over-year. Churn continues to be lower, which was a bright spot in the second quarter and moving rents again positive, maintaining the momentum from June.”

asked by Michael Goldsmith · answered by H. Boyle

What are the key indicators for top-of-funnel demand, and what are you seeing in the portfolio by market, specifically regarding the slope of improvement?

Demand is steady, with consistent use cases like existing home sales and customers needing more space at home. About half the portfolio (coastal/Midwest markets like Minneapolis, Chicago, San Francisco, Boston, D.C.) shows strong 3-5% same-store revenue growth. Sunbelt markets are sequentially improving, absorbing new supply, but still face declines from difficult comps in 2021-2022.

“I would rattle markets off as I have in the past, like Minneapolis, Chicago, San Francisco, Boston, D.C., they're all growing 3% to 5% same-store revenue growth and seeing good trends there.”

asked by Ronald Kamdem · answered by H. Boyle

Given ample leverage capacity and free cash flow, why did the company decide to raise equity now?

Management views ATM as another tool to keep the growth flywheel going. The cost of capital (around 5% combined with leverage) is attractive relative to the returns from deploying into lease-up assets (high 6s, low 7s stabilized yields). This strategy creates over 100 bps of incremental spread, compounding EPS growth, and supports acquisition momentum, increased development, and lending.

“If you look at where we plow we're deploying into more lease-up assets, which have a yield below that and are slightly dilutive near term, we're going to grow those up to the high 6s, low 7s over time as they stabilize. And as you think about that relative to a cost of equity, we're putting on the board over 100 basis points of incremental spread and therefore, compounding that earnings per share profile.”

asked by Ravi Vaidya · answered by Joseph Fisher

To what extent did the lack of ECRIs in LA distort the market, potentially leading to elevated turnover now that restrictions are off?

Being able to charge market rents is a net positive for revenue. While there might be a slight shift with more rate growth and a little less occupancy growth, occupancy remains healthy. Management expects a more balanced growth profile between rate and occupancy, similar to what has been observed when prior state of emergencies rolled off.

“I would say on net, being able to charge market rents is a positive to overall revenue. but you are going to see a little bit of a shift as you'd anticipate, with a little bit more rate growth and a little bit less occupancy growth.”

asked by Brad Heffern · answered by H. Boyle

How does the company view expansion and acquisition opportunities internationally versus domestically, especially after the Canada deal?

The U.S. market remains the deepest pool of opportunity and the bread and butter for capital allocation. However, attractive international markets like Canada and Australia (Sydney, Melbourne, Brisbane) are viewed as expanding the pie for capital allocation. The strategy involves acquiring existing portfolios and driving operating performance, as well as expanding development opportunities in these new markets.

“So we're adding Toronto and Vancouver and other Canadian markets to markets that we can think about acquiring and building in over time. And you note in Australia, we feel similarly around Sydney and Melbourne and Brisbane down in Australia.”

asked by Michael Griffin · answered by H. Boyle