Public Storage

Greetings and welcome to the Public Storage fourth quarter 2023 earnings call. At this time, all participants are on a listen-only mode. A brief question and answer session will follow the formal presentation. If you'd like to ask a question at that time, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Ryan Burke, Vice President of Investor Relations and Strategic Partnership for Public Storage. Thank you, Mr. Burke. You may begin.

Thanks, Rob. Hi, everyone. Thank you for joining us for our fourth quarter 2023 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 meeting 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, February 21st, 2024, and we assume no obligation to update, revise, or supplement statements that become untrue because of subsequent events. A reconciliation two gap 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 yourselves to two questions. Of course, if you have more, please feel free to jump back and queue. With that, I'll turn it over to Joe.

Thank you, Ryan, and thank you for joining us today. Tom and I will walk you through our fourth quarter and full year 2023 performance, industry views, and 2024 outlook. Then we'll open it up for Q&A. 2023 was a year of significant achievement for public storage amidst a competitive industry environment. The team elevated our customer experience and financial profile through digital and operating model transformation. enhanced existing properties with over 500 solar installations and the Property of Tomorrow program, advanced complementary business lines, including tenant reinsurance and third-party management, and grew the portfolio through acquisitions, development, and redevelopment. We did so while maintaining one of the real estate industry's best balance sheets, which is poised to fund growth moving forward in conjunction with significant retained cash flow. Just a few of our collective accomplishments include exceeding 3,000 owned properties and serving nearly 2 million in-place customers, achieving an approximately 80% stabilized direct NOI margin through revenue generation and expense efficiency that only public storage is capable of, acquiring and quickly integrating the $2.2 billion Simply Self Storage portfolio with approximately 90,000 customers across nearly 130 properties. This was the largest private acquisition in company history, increasing the size of our high growth non-same store pool to 705 properties and 63 million square feet, now comprising nearly 30% of our overall portfolio. Generating record revenues, net operating income, and core funds from operations. Accelerating growth and third-party property management, adding 132 properties and reaching 324 properties in total. And receiving several accolades tied to sustainability, including NAE REIT's Leader in the Light Award, a second consecutive Great Place to Work Award, and achieving top-scoring benchmarks among U.S. self-storage REITs. The strength of our team, platform, and brand was evident with move-in volumes up an impressive 9% in 2023, despite a backdrop of weaker customer demand during the year. The new customer environment remains challenging, but we have seen a degree of improvement in move-in rent trends recently. and our in-place customer base continues to perform well, with average lengths of stay that are longer than the historic norm. We expect demand from new customers to stabilize during 2024, and the behavior of existing customers, including our recent move-ins, to remain strong due to clearer macro conditions, including the potential for a soft landing, the potential for easing interest rates, resilient consumers, leveling home sales, and strong home renter behavior. We also anticipate fewer completions of new self-storage facilities nationally, reducing the competitive impact of new supply in our local markets. All in, the industry is in a better position entering 2024 than it was entering 2023. The full public storage team is focused on exercising our competitive advantages, which include advancing our digital and operating model transformation, expanding complementary businesses, and creating partnerships across the broader industry, growing the portfolio through acquisitions, development, redevelopment, and third-party management, and funding innovation and growth today and into the future with the industry's best balance sheet. All of this adds to the growth of our business over the near, medium, and long term. And it comes at a time with the potential for further stabilization in the movement environment, existing customers exhibiting strong behavior, and an outlook for new competitive supply that is clearly in our favor. With good trends in customer demand, less pressure from new supply, and our numerous competitive advantages, we are well positioned for 2024 and beyond. Now I'll turn the call over to Tom. Thanks, Joe. On to financial performance.