Public Storage

Ladies and gentlemen, thank you for standing by and welcome to the public storage third 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 star two. It is now my pleasure to turn the floor over to Ryan Burke. Vice President of Investor Relations, Ryan, you may begin.

Thank you, Katie. Hello, everyone. Thank you for joining us for a third quarter 2022 earnings call. I'm here with Joe Roswell 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 meeting of 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, 2022, and we assume no obligation to update, revise, or supplement statements to 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. We do ask that you initially limit yourself to two questions. Of course, after that, feel free to jump in with further questions or follow-ups. With that, I'll turn the call over to Joe.

Thank you, Ryan. Good morning and thank you for joining us. I will highlight our view of 2022 as we head into the last two months of the year, and then Tom will cover more specifics in the quarter. At the beginning of this year, our expectation was we were poised for exceptional earnings growth, which has clearly played through. With that, we raised our outlook on strong NOI performance in same-store and non-same-store assets along with continued improvement in ancillary revenue. In total, core FFO is set to grow by over 20% for the second consecutive year. Looking back on both 2021 and now 2022, we have been particularly advantaged by a number of enduring demand factors that continue to drive historic performance. Customers are drawn to use self-storage even in an environment where some top-line drivers are decelerating, such as home sales and market-to-market migration levels. The appeal and rationale to use storage is still tied to a sensible financial and need-based decision where the cost of shelter, whether you own or rent, has increased dramatically. In addition, our customer survey data points to needing more space at home as the second and elevated driver to use storage. Hybrid work environments, for instance, are proving to be a sustainable reason for additional need for storage. For our business customers, renting a storage unit is a compelling alternative to taking down more expensive, less flexible industrial space. As demand has remained very good, existing customers, too, are staying longer. giving us the ability to optimize rate increases and occupancy. On a macro basis, new supply of competitive product has been flat to down from peak deliveries in 2019. Nationally, markets have been able to absorb the more subdued pace of new development. Our view is that new development will also be static for the near term, as risk levels tied to development have increased. particularly due to city approval timeframes, higher component costs, and the dramatic increases in the cost of construction lending. With this said, it has become harder to predict the economic environment we are heading into with record inflation and consensus that a recession is imminent. We are, however, highly confident we have excellent tools to maneuver changing macro conditions. These include The industry-leading 200 million square foot portfolio of well-located assets in every large-scale market nationally. The most recognized brand in the self-storage industry. Cost-efficient online marketing prowess to guide new customers to our platform. A broad and growing base of digital channels to source new customers while improving customer and employee satisfaction. Historically high operating margins, now above 80%, and operational efficiency. A massive non-same-store portfolio, which continues to grow through acquisitions and development, that is now 50 million square feet, with excellent earnings power, with over $150 million of additional NOI to come. A well-primed, low leverage, and low-risk balance sheet with $900 million of cash and no debt expirations through 2023. And finally, the most experienced team in the self-storage sector. Now I'll hand the call over to Tom.