Public Storage

04/27/2026 | Press release | Distributed by Public on 04/27/2026 14:03

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements relating to our 2026 outlook and all underlying assumptions, our expected acquisition, disposition, development, and redevelopment activity, supply and demand for our self-storage facilities, information relating to operating trends in our markets, expectations regarding operating expenses, including property tax changes, expectations regarding the impacts from inflation and changes in macroeconomic conditions, our strategic priorities, expectations with respect to financing activities, rental rates, cap rates, and yields, leasing expectations, our credit ratings, and all other statements other than statements of historical fact. Such statements are based on management's beliefs and assumptions made based on information currently available to management and may be identified by the use of the words "outlook," "guidance," "expects," "believes," "anticipates," "should," "estimates," and similar expressions.
These forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results and performance to be materially different from those expressed or implied in the forward-looking statements. Risks and uncertainties that may impact future results and performance include, but are not limited to those risks and uncertainties described in Part 1, Item 1A, "Risk Factors" in our most recent Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (the "SEC") on February 12, 2026 and in our other filings with the SEC. These include changes in demand for our facilities, changes in macroeconomic conditions, risks associated with our ability to consummate the Merger with NSA and the timing and closing of the Merger including, among other things, NSA's ability to obtain NSA shareholder approval required to consummate the Merger, the satisfaction or waiver of other conditions to closing in the Merger Agreement, unanticipated difficulties or expenditures relating to the Merger, potential difficulties in employee retention as a result of the Merger, the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger and the outcome of legal proceedings instituted against us, our trustees and others related to the Merger, changes in national self-storage facility development activity, impacts from our strategic corporate transformation initiative, impacts of natural disasters, adverse changes in laws and regulations including governing property tax, evictions, rental rates, minimum wage levels, and insurance, adverse economic effects from public health emergencies, international military conflicts, international trade disputes (including threatened or implemented tariffs imposed by the U.S. and threatened or implemented tariffs imposed by foreign countries in retaliation), or similar events impacting public health and/or economic activity, increases in the costs of our primary customer acquisition channels, adverse impacts to us and our customers from high interest rates, inflation, unfavorable foreign currency rate fluctuations, or changes in federal or state tax laws related to the taxation of REITs, security breaches, including ransomware, or a failure of our networks, systems, or technology.
These forward-looking statements speak only as of the date of this report or as of the dates indicated in the statements. All of our forward-looking statements, including those in this report, are qualified in their entirety by this cautionary statement. We expressly disclaim any obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, new estimates, or other factors, events or circumstances after the date of these forward-looking statements, except when expressly required by law. Given these risks and uncertainties, you should not rely on any forward-looking statements in this report, or which management may make orally or in writing from time to time, neither as predictions of future events nor guarantees of future performance.
Critical Accounting Estimates
The preparation of consolidated financial statements and related disclosures in conformity with U.S. generally accepted accounting principles ("GAAP") requires us to make judgments, assumptions, and estimates that affect the amounts reported. On an ongoing basis, we evaluate our estimates and assumptions. These estimates and assumptions are based on current facts, historical experience, and various other factors that we believe are reasonable under the circumstances to determine reported amounts of assets, liabilities, revenues, and expenses that are not readily apparent from other sources.
During the three months ended March 31, 2026, there were no material changes to our critical accounting estimates as compared to the critical accounting estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025.
Overview
Our self-storage operations generate most of our net income, and our earnings growth is impacted by the levels of organic growth within our Same Store Facilities (as defined below) as well as within our Acquired Facilities and Newly Developed and Expanded Facilities (both as defined below).
Revenues generated by our Same Store Facilities remained relatively unchanged for three months ended March 31, 2026 as compared to the same period in 2025. Cost of operations for Same Store Facilities decreased by 1.1% for the three months ended March 31, 2026 as compared to the same period in 2025. For the three months ended March 31, 2026, realized annual rent per occupied square foot for our Same Store Facilities decreased by 0.3%, while average occupancy increased by 0.4%, as compared to the same period in 2025.
We have grown and plan to continue to grow through the acquisition and development of new facilities and expansion of our existing self-storage facilities. Since the beginning of 2024, including the ongoing integration of unstabilized properties acquired prior to 2024, we have expanded our portfolio by a total of 286 facilities with 22.9 million net rentable square feet for a cost of $4.3 billion. Within our non-same store portfolio as of March 31, 2026, our Newly Developed and Expanded Facilities include a total of 120 self-storage facilities with 13.7 million net rentable square feet. For development and expansions completed by March 31, 2026, we incurred a total cost of $1.8 billion. During the three months ended March 31, 2026, combined net operating income generated by our Acquired Facilities and Newly Developed and Expanded Facilities increased 29.5% ($18.5 million) as compared to the same period in 2025.
On March 16, 2026, the Company announced that it had entered into a merger agreement (the "Merger") to acquire National Storage Affiliates Trust ("NSA"), a Maryland real estate investment trust ("NSA"), listed on the New York Stock Exchange, in an all-stock transaction. NSA's portfolio includes more than 1,000 properties, 69 million rentable square feet, and 550,000 units across 37 states and Puerto Rico. In connection with the Merger, Public Storage and limited partners in NSA's operating partnership will form a joint venture consisting of certain properties on NSA's operating platform. The NSA operating partnership unitholders are expected to own approximately 80% of the joint venture at inception, with Public Storage holding the remaining interest. Public Storage will exclusively manage the joint venture portfolio and will earn customary property management, asset management and tenant reinsurance income. The transaction is currently expected to close in the third quarter of 2026, subject to the approval of NSA equity holders and the satisfaction of other customary closing conditions.
Results of Operations
Operating Results for the Three Months Ended March 31, 2026 and 2025
For the three months ended March 31, 2026, net income allocable to our common shareholders was $476.8 million or $2.71 per diluted common share, compared to $358.2 million or $2.04 per diluted common share for the same period in 2025, representing an increase of $118.6 million or $0.67 per diluted common share. The increase is due primarily to (i) a $110.4 million increase in foreign currency gain primarily associated with our Euro denominated notes payable and (ii) a $20.6 million increase in self-storage net operating income, partially offset by (iii) an $8.0 million increase in depreciation expense and (iv) an $8.0 million increase in interest expense.
The $20.6 million increase in self-storage net operating income for the three months ended March 31, 2026 as compared to the same period in 2025 is a result of a $17.9 million increase attributable to our Non-Same Store Facilities (as defined below) reflecting the impact of newly acquired facilities and the lease-up of development/expansion properties.
Funds from Operations and Core Funds from Operations
Funds from Operations ("FFO") and FFO per diluted common share ("FFO per share") are non-GAAP measures defined by Nareit. We believe that FFO and FFO per share are useful to REIT investors and analysts in measuring our performance because Nareit's definition of FFO excludes items included in net income that do not relate to or are not indicative of our operating and financial performance. FFO represents net income before real estate-related depreciation and amortization, which is excluded because it is based upon historical costs and assumes that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. FFO also excludes gains or losses on sale of real estate assets and real estate impairment charges, which are also based upon historical costs and are impacted by historical depreciation. FFO and FFO per share are not a substitute for net income or earnings per share. FFO is not a substitute for net cash flow in evaluating our liquidity or ability to pay dividends, because it excludes investing and financing activities presented on our consolidated statements of cash flows. In addition, other REITs may compute these measures differently, so comparisons among REITs may not be helpful.
For the three months ended March 31, 2026, FFO was $4.39 per diluted common share as compared to $3.71 per diluted common share for the same period in 2025, representing an increase of 18.3%, or $0.68 per diluted common share.
We also present "Core FFO" and "Core FFO per share" non-GAAP measures that represent FFO and FFO per share excluding the impact of (i) foreign currency exchange gains and losses, (ii) charges related to the redemption of preferred securities, and (iii) certain other non-cash and/or nonrecurring income or expense items primarily representing, with respect to the periods presented below, the impact of corporate transformation costs, loss contingencies, due diligence costs incurred in pursuit of strategic transactions, realized or unrealized gain or loss on private equity investments and non-hedge designated derivative transactions, certain CEO transition-related costs, and amortization of acquired non real estate-related intangibles. We review Core FFO and Core FFO per share to evaluate our ongoing operating performance and we believe they are used by investors and REIT analysts in a similar manner. However, Core FFO and Core FFO per share are not substitutes for net income and net income per share. Because other REITs may not compute Core FFO or Core FFO per share in the same manner as we do, may not use the same terminology or may not present such measures, Core FFO and Core FFO per share may not be comparable among REITs.
The following table reconciles net income to FFO and Core FFO and reconciles diluted earnings per share to FFO per share and Core FFO per share:
Three Months Ended March 31,
2026 2025 Percentage Change
(Amounts in thousands, except per share data)
Reconciliation of Net Income to FFO and Core FFO:
Net income allocable to common shareholders $ 476,788 $ 358,230 33.1 %
Eliminate items excluded from FFO:
Real estate-related depreciation and amortization 287,766 280,009
Real estate-related depreciation from unconsolidated real estate investment 11,277 13,275
Real estate-related depreciation allocated to noncontrolling interests, restricted share unitholders and unvested LTIP unitholders (2,726) (2,114)
Impairment write-down of real estate investments - 3,827
Gains on sale of real estate investments, including our equity share from investment (379) (45)
FFO allocable to common shares $ 772,726 $ 653,182 18.3 %
Eliminate items excluded from Core FFO:
Adjustments to G&A Expense:
Corporate transformation costs 2,694 789
CEO transition costs 2,567 -
Contingency reserve - 545
Transaction costs - 400
Other Non-Core Adjustments:
Foreign currency exchange (gain) loss (41,673) 68,695
Unrealized (gain) loss on private equity investments 474 873
Unrealized (gain) loss on interest rate derivatives 5,251 -
Other items 200 113
Core FFO allocable to common shares $ 742,239 $ 724,597 2.4 %
Reconciliation of Diluted Earnings per Share to FFO per Share and Core FFO per Share:
Diluted earnings per share $ 2.71 $ 2.04 32.8 %
Eliminate amounts per share excluded from FFO:
Real estate-related depreciation and amortization 1.68 1.65
Gains on sale of real estate investments, including our equity share from investment - 0.02
FFO per share $ 4.39 $ 3.71 18.3 %
Eliminate amounts per share excluded from Core FFO:
Adjustments to G&A Expense:
Corporate transformation costs 0.02 -
CEO transition costs 0.02 -
Other Non-Core Adjustments:
Foreign currency exchange (gain) loss (0.24) 0.39
Unrealized (gain) loss on private equity investments - 0.01
Unrealized (gain) loss on interest rate derivatives 0.03 -
Other items - 0.01
Core FFO per share $ 4.22 $ 4.12 2.4 %
Diluted weighted average common shares 175,928 175,942
Analysis of Net Income - Self-Storage Operations
Our self-storage operations are analyzed in four groups: (i) 2,755 facilities that we have owned and operated on a stabilized basis since January 1, 2024 (the "Same Store Facilities"), (ii) 286 facilities we acquired since January 1, 2024 or that were acquired prior to 2024 that remain unstabilized since January 1, 2024 (the "Acquired Facilities"), (iii) 120 facilities that have been developed or expanded since January 1, 2021 including those developed or expanded earlier that remain unstabilized since January 1, 2024, or properties that will commence expansion by December 31, 2026 (the "Newly Developed and Expanded Facilities"), and (iv) 15 other facilities, which are otherwise not stabilized with respect to occupancies or rental rates since January 1, 2024 (the "Other Non-Same Store Facilities"). The Acquired Facilities, Newly Developed and Expanded Facilities, and Other Non-Same Store Facilities are collectively referred to as the "Non-Same Store Facilities". See Note 14 to our March 31, 2026 consolidated financial statements "Segment Information," for a reconciliation of the amounts in the tables below to our total net income.
Self-Storage Operations
Summary Three Months Ended March 31,
2026 2025 Percentage Change (a)
(Dollar amounts and square footage in thousands)
Revenues (c):
Same Store Facilities $ 1,000,833 $ 1,001,021 - %
Acquired Facilities 75,004 55,405 35.4 %
Newly Developed and Expanded Facilities 48,883 42,429 15.2 %
Other Non-Same Store Facilities 3,405 4,143 (17.8) %
Total revenues 1,128,125 1,102,998 2.3 %
Cost of operations (c):
Same Store Facilities 261,433 264,324 (1.1) %
Acquired Facilities 25,788 20,533 25.6 %
Newly Developed and Expanded Facilities 17,102 14,771 15.8 %
Other Non-Same Store Facilities 1,356 1,526 (11.1) %
Total cost of operations 305,679 301,154 1.5 %
Net operating income (b):
Same Store Facilities 739,400 736,697 0.4 %
Acquired Facilities 49,216 34,872 41.1 %
Newly Developed and Expanded Facilities 31,781 27,658 14.9 %
Other Non-Same Store Facilities 2,049 2,617 (21.7) %
Total net operating income 822,446 801,844 2.6 %
Depreciation and amortization expense:
Same Store Facilities 210,600 219,668 (4.1) %
Acquired Facilities 57,322 43,208 32.7 %
Newly Developed and Expanded Facilities 19,973 17,019 17.4 %
Other Non-Same Store Facilities 2,828 2,820 0.3 %
Total depreciation and amortization 290,723 282,715 2.8 %
Net income (loss):
Same Store Facilities 528,800 517,029 2.3 %
Acquired Facilities (8,106) (8,336) (2.8) %
Newly Developed and Expanded Facilities 11,808 10,639 11.0 %
Other Non-Same Store Facilities (779) (203) 283.7 %
Total net income $ 531,723 $ 519,129 2.4 %
Self-Storage Operations (Continued)
Summary Three Months Ended March 31,
2026 2025 Percentage Change (a)
(Dollar amounts and square footage in thousands)
Number of facilities at period end:
Same Store Facilities 2,755 2,755 - %
Acquired Facilities 286 205 39.5 %
Newly Developed and Expanded Facilities 120 108 11.1 %
Other Non-Same Store Facilities 15 17 (11.8) %
Total number of facilities at the period end 3,176 3,085 2.9 %
Net rentable square footage at period end:
Same Store Facilities 192,126 192,126 - %
Acquired Facilities 22,944 17,388 32.0 %
Newly Developed and Expanded Facilities 13,740 11,938 15.1 %
Other Non-Same Store Facilities 998 1,257 (20.6) %
Total net rentable square footage at period end 229,808 222,709 3.2 %
Square foot occupancy at period end:
Same Store Facilities 91.3 % 91.1 % 0.2 %
Acquired Facilities 85.5 % 82.9 % 2.6 %
Newly Developed and Expanded Facilities 76.6 % 76.1 % 0.5 %
Other Non-Same Store Facilities 83.4 % 76.9 % 6.5 %
Total square foot occupancy at period end 89.9 % 89.6 % 0.3 %
Annual contract rent per occupied square foot at period end (d):
Same Store Facilities $ 22.05 $ 22.16 (0.5) %
Acquired Facilities 14.90 15.16 (1.7) %
Newly Developed and Expanded Facilities 18.45 18.50 (0.3) %
Other Non-Same Store Facilities 15.80 19.01 (16.9) %
Total annual contract rent per occupied square foot at period end $ 21.16 $ 21.48 (1.5) %
(a)Represents the absolute nominal change with respect to square foot occupancy, and the percentage change with respect to all other items.
(b)Net operating income or "NOI" is a non-GAAP financial measure that excludes the impact of depreciation and amortization expense, which is based upon historical real estate costs and assumes that building values diminish ratably over time, while we believe that real estate values fluctuate due to market conditions. We utilize NOI in determining current property values, evaluating property performance, and evaluating property operating trends. We believe that investors and analysts utilize NOI in a similar manner. NOI is not a substitute for net income, operating cash flow, or other related financial measures, in evaluating our operating results. See Note 14 to our March 31, 2026 consolidated financial statements for a reconciliation of NOI to our total net income for all periods presented.
(c)Revenues and cost of operations do not include tenant reinsurance and merchandise sale revenues and expenses generated at the facilities. See "Ancillary Operations" below for more information.
(d)Annual contract rent: Represents the agreed upon monthly rate that is paid by our customers in place at the time of
measurement. Contract rates are initially set in the lease agreement upon move-in, and we adjust them from time to time with notice. Contract rent excludes other fees that are charged on a per-item basis, such as late charges and administrative fees, does not reflect the impact of promotional discounts, and does not reflect the impact of rents that are written off as uncollectible.
Same Store Facilities
The Same Store Facilities consist of facilities we have owned and operated on a stabilized level of occupancy, revenues, and cost of operations since January 1, 2024. Our Same Store Facilities increased from 2,565 facilities at December 31, 2025 to 2,755 at March 31, 2026. The composition of our Same Store Facilities allows us more effectively to evaluate the ongoing performance of our self-storage portfolio in 2024, 2025, and 2026 and exclude the impact of fill-up of unstabilized facilities, which can significantly affect operating trends. We believe investors and analysts use Same Store Facilities information in a similar manner. However, because other REITs may not compute Same Store Facilities in the same manner as we do, may not use the same terminology or may not present such a measure, Same Store Facilities may not be comparable among REITs.
The following table summarizes the historical operating results (for all periods presented) of these 2,755 facilities (192.1 million net rentable square feet) that represent approximately 84% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at March 31, 2026. It includes various measures and detail that we do not include in the analysis of the developed, acquired, and other Non-Same Store Facilities, due to the relative magnitude and importance of the Same Store Facilities relative to our other self-storage facilities.
Selected Operating Data for the Same Store Facilities (2,755 facilities)
Three Months Ended March 31,
2026 2025 Change (e)
(Dollar amounts in thousands, except for per square foot data)
Revenues (a):
Rental income $ 966,713 $ 965,525 0.1%
Late charges and administrative fees 34,120 35,496 (3.9)%
Total revenues 1,000,833 1,001,021 -%
Direct cost of operations (a):
Property taxes 106,123 107,225 (1.0)%
On-site property manager payroll 34,362 34,582 (0.6)%
Repairs and maintenance 22,607 24,010 (5.8)%
Utilities 15,456 15,963 (3.2)%
Marketing 22,596 23,650 (4.5)%
Other direct property costs 28,144 27,509 2.3%
Total direct cost of operations 229,288 232,939 (1.6)%
Direct net operating income (b) 771,545 768,082 0.5%
Indirect cost of operations (a) (32,145) (31,385) 2.4%
Net operating income 739,400 736,697 0.4%
Depreciation and amortization expense (210,600) (219,668) (4.1)%
Net income $ 528,800 $ 517,029 2.3%
Gross margin (before indirect costs, depreciation and amortization expense) 77.1% 76.7% 0.4%
Gross margin (before depreciation and amortization expense) 73.9% 73.6% 0.3%
Weighted average for the period:
Square foot occupancy 91.5% 91.1% 0.4%
Realized annual rental income per (c):
Occupied square foot $ 22.00 $ 22.06 (0.3)%
Available square foot $ 20.12 $ 20.10 0.1%
At March 31:
Square foot occupancy 91.3% 91.1% 0.2%
Annual contract rent per occupied square foot (d) $ 22.05 $ 22.16 (0.5)%
(a)Revenues and cost of operations do not include tenant reinsurance and merchandise sale revenues and expenses generated at the facilities. See "Ancillary Operations" below for more information.
(b)Direct net operating income ("Direct NOI"), a subtotal within NOI, is a non-GAAP financial measure that excludes the impact of supervisory payroll, centralized management costs, and share-based compensation in addition to depreciation and amortization expense. We utilize direct net operating income in evaluating property performance and in evaluating property operating trends as compared to our competitors.
(c)Realized annual rent per occupied square foot is computed by dividing rental income, before late charges and administrative fees, by the weighted average occupied square feet for the period. Realized annual rent per available square foot ("REVPAF") is computed by dividing rental income, before late charges and administrative fees, by the total available net rentable square feet for the period. These measures exclude late charges and administrative fees in order to provide a better measure of our ongoing level of revenue. Late charges are dependent upon the level of delinquency, and administrative fees are dependent upon the level of move-ins. In addition, the rates charged for late charges and administrative fees can vary independently from rental rates. These measures take into consideration promotional discounts, which reduce rental income.
(d)Annual contract rent represents the agreed upon monthly rate that is paid by our customers in place at the time of measurement. Contract rates are initially set in the lease agreement upon move-in, and we adjust them from time to time with notice. Contract rent excludes other fees that are charged on a per-item basis, such as late charges and administrative fees, does not reflect the impact of promotional discounts, and does not reflect the impact of rents that are written off as uncollectible.
(e)Represents the absolute nominal change with respect to gross margin and square foot occupancy, and the percentage change with respect to all other items.
Analysis of Same Store Revenue
We believe a balanced occupancy and rate strategy maximizes our revenues over time. We regularly adjust rental rates and promotional discounts offered (generally, "$1.00 rent for the first month"), as well as our marketing efforts to maximize revenue from new customers to replace customers that vacate. We evaluate the market place and over time increase rents for our existing customers. As a result, the number of long-term customers we have in our facilities is an important factor in our revenue growth.
Revenues generated by our Same Store Facilities were relatively unchanged for the three months ended March 31, 2026 as compared to the same period in 2025, due primarily to a 0.4% increase in average occupancy, offset by a 0.3% decrease in realized annual rent per occupied square foot and a 3.9% decrease in Late Charges and Administrative Fees, as compared to the same period in 2025.
The 0.3% decrease in realized annual rent per occupied square foot for the three months ended March 31, 2026 as compared to the same period in 2025, was due to lower average rates per square foot charged to new customers moving in as compared to average rates per square foot previously charged to customers moving out over the past twelve months partially mitigated by rental rate increases to existing long-term customers.
The weighted average square foot occupancy for our Same Store Facilities was 91.5% for the three months ended March 31, 2026 representing an increase of 0.4% as compared to the same period in 2025 due primarily to move-in volume exceeding move-out volume over the past twelve months.
Move-out activities from our customers decreased for the three months ended March 31, 2026 as compared to the same period in 2025. Move-out average annual contract rent per square foot decreased for the three months ended March 31, 2026 as compared to the same period in 2025.
Selected Key Move-in and Move-Out Statistical Data
The following table sets forth average annual contract rent per square foot and total square footage for customers moving in and moving out during the three months ended March 31, 2026 and 2025. Contract rents gained from move-ins and contracts rents lost from move-outs included in the table assume move-in and move-out activities occur at the beginning of each period presented. The table also includes promotional discounts, which vary based upon the move-in contractual rates, move-in volume, and percentage of customers moving in who receive the discount.
Three Months Ended March 31,
2026 2025 Change
(Amounts in thousands, except for per square foot amounts)
Customers moving in during the period:
Average annual contract rent per square foot $ 12.05 $ 12.35 (2.4)%
Square footage 31,680 34,135 (7.2)%
Contract rents gained from move-ins $ 95,436 $ 105,392 (9.4)%
Promotional discounts given $ 14,818 $ 17,206 (13.9)%
Customers moving out during the period:
Average annual contract rent per square foot $ 19.49 $ 20.01 (2.6)%
Square footage 30,019 32,244 (6.9)%
Contract rents lost from move-outs $ 146,268 $ 161,301 (9.3)%
We expect industry-wide demand from new customers in 2026 to be similar to 2025, across a diverse set of markets, subject to potential adverse effects from evolving political and macroeconomic uncertainty, including changes in trade policy and new tariffs, pricing restrictions and microeconomic uncertainty. As a result, we expect Same Store Facilities revenues in 2026 to be modestly below those earned in 2025.
Late Charges and Administrative Fees
Late charges and administrative fees decreased 3.9% for the three months ended March 31, 2026, as compared to the same period in 2025, as a result of lower late charges collected on delinquent accounts due to lower customer delinquency rates.
Analysis of Same Store Cost of Operations
Cost of operations (excluding depreciation and amortization) decreased 1.1% for the three months ended March 31, 2026 as compared to the same period in 2025 due primarily to decreased property tax expense, repairs and maintenance, and marketing partially offset by increased indirect costs of operation.
Property tax expense decreased 1.0% for the three months ended March 31, 2026, as compared to the same period in 2025 due to the timing of property tax appeals and refunds. We expect property tax expense to grow in 2026 due primarily to higher assessed values.
Repairs and maintenance expense decreased 5.8% for the three months ended March 31, 2026 as compared to the same period in 2025. Repairs and maintenance expense levels are dependent upon many factors such as (i) damage and equipment malfunctions, (ii) short-term local supply and demand factors for material and labor, and (iii) weather conditions, which can impact costs such as snow removal, roof repairs, and HVAC maintenance and repairs.
Marketing expense includes internet advertising we utilize through our online paid search programs and the operating costs of our website and telephone reservation center. Internet advertising expense, comprising keyword search fees assessed on a "per click" basis, varies based upon demand for self-storage space, the quantity of people inquiring about self-storage through online search, occupancy levels, the number and aggressiveness of bidding competitors, and other factors. These factors are volatile; accordingly, Internet advertising can increase or decrease significantly in the short-term. Our marketing expense decreased by 4.5% for the three months ended March 31, 2026 as compared to the same period in 2025. The decrease was primarily due to realized cost efficiencies on our online paid search programs utilized to attract new customers.
Indirect Cost of Operations represents costs related to our supervisory payroll, centralized management costs, and share-based compensation. Indirect Cost of Operations increased 2.4% for the three months ended March 31, 2026 as compared to the same period in 2025, primarily related to changes in the administrative and compensation expenses for shared general corporate functions to the extent their efforts are devoted to self-storage operations. Such functions include information technology support, hardware, and software, as well as centralized administration of payroll, benefits, training, repairs and maintenance, customer service, pricing and marketing, operational accounting and finance, legal costs, and costs from field management executives.
Acquired Facilities
The Acquired Facilities represent 112 facilities that we acquired in 2026, 2025, and 2024, and 174 facilities that we acquired before 2024 that have not fully stabilized. As a result of the stabilization process and timing of when these facilities were acquired, year-over-year changes can be significant. The following table summarizes the acquisition costs with respect to the Acquired Facilities:
As of March 31 2026
Costs to acquire (in thousands):
Acquisitions before 2024 $ 3,083,399
2024 Acquisitions 267,473
2025 Acquisitions 945,586
2026 Acquisitions 20,778
$ 4,317,236
We have been active in acquiring facilities in recent years. Our acquired facilities includes a total of 286 facilities with 22.9 million net rentable square feet for a total cost of $4.3 billion. During the three months ended March 31, 2026, these facilities contributed net operating income of $49.2 million.
We remain active in seeking to acquire additional self-storage facilities. Future acquisition volume may be impacted by cost of capital and overall macro-economic uncertainties. During the three months ended March 31, 2026, we acquired three self-storage facilities across three states with 0.2 million net rentable square feet for $20.8 million. Subsequent to March 31, 2026, we acquired or were under contract to acquire 15 self-storage facilities across four states with 1.2 million net rentable square feet for $165.5 million. Our total acquisitions planned or completed through March 31, 2026, amount to $186.3 million. Additionally, we recently announced our pending acquisition of NSA, refer to Note 3 for further details.
Newly Developed and Expanded Facilities
The Newly Developed and Expanded Facilities include 110 facilities that were developed on new sites or expanded to increase their net rentable square footage that are not fully stabilized. 10 expansion projects are currently in process at March 31, 2026. The following table summarizes the development costs with respect to the Newly Developed and Expanded Facilities:
As of March 31, 2026
Costs to develop (in thousands):
Developed and Expanded before 2024 $ 1,007,794
Developed and Expanded in 2024 325,295
Developed and Expanded in 2025 390,326
Developed and Expanded in 2026 45,411
$ 1,768,826
Our Newly Developed and Expanded Facilities includes a total of 120 self-storage facilities with 13.7 million net rentable square feet. For development and expansions completed by March 31, 2026, we incurred a total cost of $1.8 billion. During the three months ended March 31, 2026, Newly Developed and Expanded Facilities contributed net operating income of $31.8 million.
It typically takes at least three to four years for a newly developed or expanded self-storage facility to stabilize with respect to revenues. Physical occupancy can be achieved as early as two to three years following completion of the development or expansion through offering lower rental rates during fill-up. As a result, even after achieving high occupancy, there can still be a period of elevated revenue growth as the customer base matures and higher rental rates are achieved.
We believe that our development and redevelopment activities generate favorable risk-adjusted returns over the long run. However, in the short run, our earnings are diluted during the construction and stabilization period due to the cost of capital to fund the development cost, the related construction and development overhead expenses included in general and administrative expense, and the net operating loss from newly developed facilities undergoing fill-up.
We typically underwrite new developments to stabilize at approximately an 8% yield on cost (adjusted for impacts from tenant reinsurance and maintenance capital expenditures). Our developed facilities have thus far leased up as expected and are at various stages of their revenue stabilization periods. The actual annualized yields that we may achieve on these facilities upon stabilization will depend on many factors, including local and current market conditions in the vicinity of each property and the level of new and existing supply.
We expect to add a total of 1.0 million net rentable square feet of storage space by expanding existing self-storage facilities for an aggregate development cost of approximately $168.6 million. At March 31, 2026, we had 27 additional facilities in development, which we expect will have a total of 2.5 million net rentable square feet of storage space and have an aggregate development cost of approximately $449.8 million. We expect these facilities to open over the next 18 to 24 months.
As of March 31, 2026, we have ongoing development and expansion projects that we estimate will have an aggregate development cost of approximately $618.4 million.
Other Non-Same Store Facilities
The "Other Non-Same Store Facilities" represent facilities damaged in casualty events such as hurricanes, floods, and fires.
The Other Non-Same Store Facilities have an aggregate of 1.0 million net rentable square feet at March 31, 2026. As of March 31, 2026 and 2025, the average occupancy for these facilities totaled 83.4% and 76.9%, respectively, and the annual contract rent per occupied square foot totaled $15.80 and $19.01 as of March 31, 2026 and 2025, respectively.
Depreciation and amortization expense
Depreciation and amortization expense for Self-Storage Operations increased $8.0 million for the three months ended March 31, 2026, as compared to the same period in 2025, primarily due to acquired facilities and newly developed and expanded facilities.
Ancillary Operations
Ancillary revenues and expenses include amounts associated with the reinsurance of policies against losses to goods stored by customers in our self-storage facilities, sale of merchandise at our self-storage facilities, and management of property owned by unrelated third parties. The following table sets forth our ancillary operations:
Three Months Ended March 31,
2026 2025 Change
(Amounts in thousands)
Revenues:
Tenant reinsurance premiums $ 66,503 $ 59,731 $ 6,772
Merchandise 6,262 6,393 (131)
Third party property management 16,851 14,062 2,789
Total revenues 89,616 80,186 9,430
Cost of operations:
Tenant reinsurance 13,562 12,362 1,200
Merchandise 4,453 4,172 281
Third party property management 16,249 14,159 2,090
Total cost of operations 34,264 30,693 3,571
Net operating income (loss):
Tenant reinsurance 52,941 47,369 5,572
Merchandise 1,809 2,221 (412)
Third party property management 602 (97) 699
Total net operating income $ 55,352 $ 49,493 $ 5,859
Tenant reinsurance operations: Tenant reinsurance premium revenue increased $6.8 million or 11.3% in the three months ended March 31, 2026 over the same period in 2025, as a result of an increase in our customer base with respect to acquired, newly developed, and expanded facilities and the third party properties we manage, as well as higher insurance coverage and premium rates in our customers base at our same store facilities. Tenant reinsurance premium revenue generated from customers at our Same Store Facilities were $51.8 million and $48.9 million in the three months ended March 31, 2026 and 2025, respectively, representing a 6.1% increase.
Cost of operations primarily includes claims paid as well as claims adjustment expenses. Claims expenses vary based upon the number of insured customers and the volume of events that drive covered losses, such as burglary, as well as catastrophic weather events affecting multiple properties such as hurricanes and floods. Tenant reinsurance cost of operations increased $1.2 million in the three months ended March 31, 2026 as compared the same period in 2025, primarily due to increased claim volumes and expenses related to flooding and burglary as well as increased access fees we paid to the third-party owners of properties we manage driven by the significant growth of our third-party property management program.
We expect tenant reinsurance operations to grow as we roll out insurance policies with increased coverage and higher premiums in 2026, and as we continue to increase the customers base at our newly acquired and developed facilities.
Third-party property management: At March 31, 2026, in our third-party property management program, we managed 370 facilities (29.0 million net rentable square feet) for unrelated third parties, and were under contract to manage 71 additional facilities (6.1 million net rentable square feet) including 68 facilities that are currently under construction. During the three months ended March 31, 2026, we added 20 facilities to the program and had 12 facilities exit the program. While we expect this business to increase in scope and size, we do not expect any significant changes in overall profitability of this business in the near term as we seek new properties to manage and are in the earlier stages of fill-up for newly managed properties.
Analysis of items not allocated to segments
Equity in earnings (loss) of unconsolidated real estate entity: We account for the equity investments in Shurgard using the equity method and record our pro-rata share of the net income of these entities. For the three months ended March 31, 2026 and 2025, we recognized equity in earnings of Shurgard of $6.8 million and $3.6 million, respectively. Included in our equity earnings from Shurgard were $11.3 million and $13.3 million of our share of depreciation and amortization expense for the three months ended March 31, 2026 and 2025, respectively.
For purposes of recording our equity in earnings from Shurgard, the Euro was translated at exchange rates of approximately 1.174 U.S. Dollars per Euro at March 31, 2026 (1.174 at December 31, 2025), and average exchange rates of 1.163 and 1.051 for the three months ended March 31, 2026 and 2025, respectively.
Real estate acquisition and development expense: In the three months ended March 31, 2026 and 2025, we incurred a total of $2.4 million and $7.4 million, respectively, of internal and external expenses related to our acquisition and development of real estate facilities. These amounts are net of $3.0 million and $3.5 million in the three months ended March 31, 2026 and 2025, respectively, in development costs that were capitalized to newly developed and redeveloped self-storage facilities. The year-over-year change of real estate acquisition and development expense was primarily due to the recognition of a $3.8 million impairment write-down of certain land development parcels that were marketed for sale during the three months ended March 31, 2025.
General and administrative expense: General and administrative expense increased $5.2 million for the three months ended March 31, 2026 as compared to the same period in 2025 due primarily to (i) a $1.9 million increase in corporate transformation costs, (ii) an $2.6 million increase in CEO Transition costs and (iii) a $1.9 million increase in executive labor costs, partially offset by a $1.1 million reduction in legal fees.
As part of our operating model transformation, we have launched a corporate transformation initiative focused on modernization and growth. This includes streamlining our processes through technology and expanding our geographic footprint with a stronger corporate presence in offshore locations and relocation of our principal office from California to Texas. The initiative is intended to transform our corporate functions improving efficiency and productivity.
We expect to incur corporate transformation costs of approximately $15 to $20 million as we complete the initiative over the next three years. Beginning in 2026, we believe this restructuring plan will result in future cost savings of approximately $3 to $5 million annually, although the amount and timing of such savings are subject to change depending on a variety of factors.
Interest and other income (expense): The following table sets forth our interest and other income (expense):
Three Months Ended March 31,
2026 2025 Change
(Amounts in thousands)
Interest earned on cash balances $ 4,429 $ 7,907 $ (3,478)
Commercial operations 2,588 3,015 (427)
Interest earned on notes receivable, net 2,881 284 2,597
Unrealized gain (loss) on private equity investments (474) (873) 399
Unrealized gain (loss) on interest rate derivatives (5,251) - (5,251)
Other 3,605 2,901 704
Total $ 7,778 $ 13,234 $ (5,456)
Interest earned on cash balances decreased $3.5 million during the three months ended March 31, 2026 as compared to 2025, due primarily to lower average cash balances and lower interest rates earned in 2025. As described in Note 8, during the three months ended March 31, 2026, we incurred a $5.3 million unrealized loss on swaps that did not qualify for hedge accounting.
Interest expense: For the three months ended March 31, 2026 and 2025, we incurred $81.2 million and $73.6 million, respectively, of interest on our outstanding notes payable and credit facility. In determining interest expense, these amounts were offset by capitalized interest of $1.2 million and $1.6 million during the three months ended March 31, 2026 and 2025, respectively, associated with our development activities. The increase of interest expense for the three months ended March 31, 2026 as compared to the same period in 2025 is due to the issuance of U.S. Dollar and Euro Denominated unsecured notes in 2025 and the utilization of our Credit Facility in 2026. At March 31, 2026, we had $10.1 billion of debt outstanding (inclusive of our line of credit), with a weighted average interest rate of approximately 3.3%
Foreign currency exchange gain (loss): For the three months ended March 31, 2026 and 2025, we recorded foreign currency gains of $41.7 million and losses of $68.7 million, respectively, representing primarily the changes in the U.S. Dollar equivalent of our Euro-denominated unsecured notes due to fluctuations in exchange rates. The Euro was translated at exchange rates of approximately 1.150 U.S. Dollars per Euro at March 31, 2026, 1.174 at December 31, 2025, 1.082 at March 31, 2025, and 1.039 at December 31, 2024. Future gains and losses on foreign currency will be dependent upon changes in the relative value of the Euro to the U.S. Dollar and the level of Euro-denominated notes payable outstanding
Income tax (provision) benefit: We operate as a REIT for U.S. federal income tax purposes. As a REIT, we are generally not subject to U.S. federal income taxes on our taxable income distributed to shareholders. For the three months ended March 31, 2026 and 2025, we recorded income tax expense totaling $1.6 million and $1.4 million, respectively, related to income taxes incurred in certain state and local jurisdictions in which we operate.
Liquidity and Capital Resources
Overview and our Sources of Capital
While operating as a REIT allows us to minimize the payment of U.S. federal corporate income tax expense, we are required to distribute at least 90% of our taxable income to our shareholders. Notwithstanding this requirement, our annual operating retained cash flow was approximately $566 million in 2025 and $400 million in 2024. Retained operating cash flow represents our expected cash flow provided by operating activities (including property operating costs and interest payments described below), less shareholder distributions and capital expenditures. We expect retained cash flow to be favorable or at least consistent with those attained in the prior year.
Capital needs in excess of retained cash flow are met with: (i) medium and long-term debt, (ii) preferred equity, (iii) limited partnership interests, and (iv) common equity. We select among these sources of capital based upon relative cost, availability, the desire for leverage, and considering potential constraints caused by certain features of capital sources, such as debt covenants.
Because raising capital is important to our growth, we endeavor to maintain a strong financial profile characterized by strong credit metrics, including low leverage relative to our total capitalization and operating cash flows. We are one of the highest rated REITs, as rated by major rating agencies Moody's and Standard & Poor's. Our senior notes payable have an "A" credit rating by Standard & Poor's and "A2" by Moody's. Our credit ratings on each of our series of preferred shares are "A3" by Moody's and "BBB+" by Standard & Poor's. Our credit profile enables us to effectively access both the public and private capital markets to raise capital.
Our revolving line of credit has a borrowing limit of $1.5 billion. As of March 31, 2026, there were $325.0 million in borrowings outstanding on the revolving line of credit. Subsequent to quarter end, we repaid the $325.0 million line of credit in full and there were no borrowings outstanding on the revolving line of credit as of April 27, 2026; however we do have approximately $19.4 million of outstanding letters of credit, which limits our borrowing capacity to $1.5 billion as of April 27, 2026. Our line of credit matures on June 12, 2027.
In December 2024, we implemented an "at the market" offering program pursuant to which we may, from time to time, sell common shares through participating agents up to an aggregate gross sales price of $2.0 billion on the open market or in privately negotiated transactions. Since the inception of the program, we have issued a total of 184,390 common shares on the open market for an aggregate gross sales price of $61.4 million and received net proceeds of approximately $60.3 million after issuance costs. We did not issue any common shares under the program in during the three months ended March 31, 2026.
We believe that we have significant financial flexibility to adapt to changing conditions and opportunities, and we have significant access to sources of capital including debt and preferred equity. Based on our strong credit profile and our substantial current liquidity relative to our capital requirements noted below, we would not expect any potential capital market dislocations to have a material impact upon our expected capital and growth plans over the next 12 months. However, if capital market conditions deteriorate significantly for a long period of time, our access to or cost of debt and preferred equity capital could be negatively impacted and potentially affect future investment activities.
Our current and expected capital resources include: (i) $134.6 million of cash as of March 31, 2026, and (ii) at least $566 million of expected retained operating cash flow over the next twelve months based on 2025 operating results which are expected to continue or improve in 2026 and (iii) $493.7 million of cash proceeds from the issuance of senior notes in April 2026. Additionally, we had $1.2 billion of available borrowing capacity on our revolving line of credit at March 31, 2026. We believe that the cash provided by our operating activities will continue to be sufficient to enable us to meet our ongoing cash requirements for interest payments on debt, maintenance capital expenditures, and distributions to our shareholders for the foreseeable future.
As described below, as of March 31, 2026, our current committed cash requirements consist of (i) $165.5 million in property acquisitions currently under contract, (ii) $415.7 million of remaining spending on our current development pipeline, which will be incurred primarily in the next 18 to 24 months, (iii) unfunded loan commitments of $43.9 million under the lending program expected to close in the next twelve months, (iv) approximately $650.0 million in scheduled principal repayments on our unsecured notes in the next twelve months, (v) $325.0 million under our credit facility, and (vi) $45.2 million in unfunded capital commitments related to our private equity investments. We plan to refinance these unsecured notes as they come due in 2026 through either cash generated from operations, the issuance of additional debt or borrowings under the Company's Credit Facility. For our proposed acquisition of NSA, if consummated, we plan to fund the transaction through the issuance of OP Units, Common Shares and debt. Our cash requirements may increase over the next year as we add projects to our development pipeline and acquire additional properties. Additional potential cash requirements could result from various activities including the redemption of outstanding preferred securities, repurchases of common shares, or merger and acquisition activities, as and to the extent we determine to engage in such activities.
Over the long term, to the extent that our cash requirements exceed our capital resources, we believe we have a variety of possibilities to raise additional capital including issuing common or preferred securities, debt, and limited partnership interests, or entering into joint venture arrangements to acquire or develop facilities.
Cash Requirements
The following summarizes our expected material cash requirements, which comprise (i) contractually obligated expenditures, including payments of principal and interest, (ii) other essential expenditures, including property operating expenses, maintenance capital expenditures and dividends paid in accordance with REIT distribution requirements, and (iii) opportunistic expenditures, including acquisitions and developments and repurchases of our securities. We expect to satisfy these cash requirements through operating cash flow and opportunistic debt and equity financings.
Required Debt Repayments: As of March 31, 2026, the principal outstanding on our debt totaled approximately $9.8 billion, consisting of $7.7 billion of U.S. Dollar denominated unsecured notes payable, $2.0 billion of Euro-denominated unsecured notes payable and $1.5 million of mortgage notes payable. Approximate principal maturities and interest payments are as follows:
Principal Interest Total
(Amounts in Thousands)
Remainder of 2026 $ 650,105 $ 214,047 $ 864,152
2027 1,200,146 281,280 1,481,426
2028 1,200,129 244,502 1,444,631
2029 1,000,088 206,489 1,206,577
2030 1,281,313 174,797 1,456,110
Thereafter 4,436,650 1,462,754 5,899,404
$ 9,768,431 $ 2,583,869 $ 12,352,300
We have $650.0 million of our U.S. Dollar denominated unsecured notes that mature on November 9, 2026. We plan to repay these notes as they come due through either cash generated from operations or the issuance of additional debt, such as borrowings under the Company's Credit Facility.
Capital Expenditure Requirements: Capital expenditures include general maintenance, major repairs, or replacements to elements of our facilities to keep our facilities in good operating condition and maintain their visual appeal. Capital expenditures do not include costs relating to the development of new facilities or redevelopment of existing facilities to increase their available rentable square footage.
We spent $44 million of capital expenditures to maintain real estate facilities in the three months ended March 31, 2026, and expect to spend approximately $175 million in 2026. In addition to standard capital repairs of building elements reaching the end of their useful lives, our capital expenditures include property enhancements such as acquisition rebrandings and commercial conversions. We spent approximately $9 million on this effort in the three months ended March 31, 2026. Lastly, we have spent $16 million on energy efficient upgrades through the installation of solar panels, LED lights and heat pumps, in the three months ended March 31, 2026, and expect to spend approximately $60 million in 2026.
We believe the capital spent to install solar panels, LED lights and heat pumps will significantly reduce electricity consumption resulting in lower utility costs.
Requirement to Pay Distributions: For all periods presented herein, we have elected to be treated as a REIT, as defined in the Internal Revenue Code. For each taxable year in which we qualify for taxation as a REIT, we will not be subject to U.S. federal corporate income tax on our "REIT taxable income" (generally, taxable income subject to specified adjustments, including a deduction for dividends paid and excluding our net capital gain) that is distributed to our shareholders. We believe we have met these requirements in all periods presented herein, and we expect to continue to qualify as a REIT. Our consistent, long-term dividend policy has been to distribute our taxable income. Future quarterly distributions with respect to the common shares will continue to be determined based upon our REIT distribution requirements after taking into consideration distributions to the preferred shareholders and will be funded with cash flows from operating activities.
The annual distribution requirement with respect to our preferred shares outstanding at March 31, 2026 is approximately $194.7 million per year.
Real Estate Investment Activities: We continue to seek to acquire additional self-storage facilities from third parties. Subsequent to March 31, 2026, we acquired or were under contract to acquire 15 self-storage facilities across four states with 1.2 million net rentable square feet for $165.5 million.
For our proposed acquisition of NSA, if consummated, we plan to fund the transaction through the issuance of OP Units, Common Shares and debt.
As of March 31, 2026, we had development and expansion projects at a total cost of approximately $618.4 million. Costs incurred through March 31, 2026 were $202.7 million, with the remaining cost to complete of $415.7 million expected to be incurred primarily in the next 18 to 24 months. Some of these projects are subject to contingencies such as entitlement approval. We expect to continue to seek to add projects to maintain and increase our robust pipeline. Our ability to do so continues to be challenged by various constraints such as difficulty in finding projects that meet our risk-adjusted yield expectations and challenges in obtaining building permits for self-storage facilities in certain municipalities.
Financing and Capital Commitments: We offer loan financing, primarily through bridge loans, to third-party self-storage owners for operating properties that we manage. As of March 31, 2026, we had unfunded loan commitments of $43.9 million expected to close in the next twelve months, subject to the satisfaction of certain conditions. Additionally, we have unfunded capital commitments related to our private equity investments totaling $45.2 million at March 31, 2026, which may be called at any time during the prescribed time periods.
Property Operating Expenses: The direct and indirect cost of our operations impose significant cash requirements. Direct operating costs include property taxes, on-site property manager payroll, repairs and maintenance, utilities, and marketing. Indirect operating costs include supervisory payroll and centralized management costs. The cash requirements from these operating costs will vary year to year based on, among other things, changes in the size of our portfolio and changes in property tax rates and assessed values, wage rates, and marketing costs in our markets.
Public Storage published this content on April 27, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on April 27, 2026 at 20:03 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]