Smartstop's 2026 Q2 Earnings Call: Mixed Cap Rate Signals and Contradictory Canadian Revenue Forecasts

Date of Call: Aug 6, 2026

Financials Results

• Revenue: Same-store revenue growth of 1.3% year-over-year.
• EPS: FFO as adjusted per share of 49 cents, up 17.6% year-over-year.
• Operating Margin: Same-store operating margin of 67.3%, up 150 basis points year-over-year.

Guidance:

• Raised same-store revenue guidance to a range of 0.5% to 1.5% (prior range was -0.25% to 1.75%).
• Reduced same-store operating expense growth range to 0.25% to 1.25% (prior range was 1.75% to 3.75%).
• Increased NOI growth midpoint from -0.25% to positive 1.15%.
• Raised FFO as adjusted per share guidance to a range of $1.98 to $2.04 (prior range was $1.94 to $2.04).

Business Commentary:

Strong Operational Performance:

• SmartStop Self Storage reported same-store revenue growth of 1.3%, a 3.4% decrease in operating expenses, leading to an NOI increase of 3.7%, with average occupancy maintained at 92.5%.
• This performance was driven by a focus on expense control, leading to a 150 basis point year-over-year increase in same-store operating margins.

Strategic Growth and Acquisitions:

• The company acquired a three-property portfolio at a high 5% cap rate and deployed approximately $16.3 million of bridge capital at a double-digit yield.
• The acquisition environment is favorable due to high-quality properties becoming available, allowing SmartStop to pursue accretive acquisitions that align with their DECA initiative for long-term value creation.

FFO Growth and Guidance Increase:

• SmartStop reported FFO as adjusted per share of 49 cents, up 17.6% year-over-year.
• The company raised its guidance for same-store revenue, NOI, and FFO per share due to better-than-expected operational results and improved momentum in the second half of the year.

Canadian Market Performance:

• The Canadian joint venture properties showed a 6.7% revenue growth and 9.4% NOI growth year-over-year.
• Despite tough comps, the strong performance was attributed to healthy demand and structural demand drivers like aging population and urban densification.

Technology and AI Integration:

• SmartStop is in the early stages of integrating AI into its operations, focusing on areas like accounting and call center efficiencies.
• The goal is to achieve cost savings and revenue enhancements through a thoughtful and strategic implementation of AI technologies.

Sentiment Analysis:

Overall Tone: Positive

• Management stated 'SmartStop Self Storage had a strong quarter of results' and highlighted 'better-than-expected momentum into the second half of the year' leading to guidance raises. They also expressed being 'encouraged by the sector's momentum and our successful execution' and see 'a solid acquisition cycle' with 'attractive opportunities'.

Q&A:

• Question from Wes Galladay (Baird): Just a question on the acquisition pipeline that you're seeing. Are you expecting to transact around a similar cap rate of the 5.9 that you did in the quarter?
  Response: Target cap rate is around mid-5% for U.S. and lower in Canada; environment is solid with many attractive off-market deals, and company has room to deploy capital given reduced leverage.

• Question from Wes Galladay (Baird): You do have a $2 million one-time fee that you're going to earn from the funds consolidating. Would that be included in your third-party management guide?
  Response: Yes, the fee will be included in the managed REIT guidance and is expected to hit in the fourth quarter.

• Question from Victor Fediv (Scotiabank): Your same-store margin expanded 150 basis points here a year, up from 30 basis points last quarter. So how much of that improvement is actually sustainable operating leverage from increased market density versus more temporary benefits such as insurance and repair and maintenance savings? And where do you see the biggest opportunity for further margin expansion going forward?
  Response: Improvement driven by a combination of structural savings (e.g., favorable insurance, repairs & maintenance) and significant payroll reductions due to clustering/scale (e.g., Denver market expansion). Margins still have room to expand as platforms integrate and scale.

• Question from Victor Fediv (Scotiabank): And then my second question is on your assumptions for mooring rates and occupancy for the remainder of their year, and how can you end up being on the upper end of your FFO per share range?
  Response: Top-end FFO guidance depends on more normal seasonal rental and occupancy trends without volatility; supported by easier comps in Q4, Asheville occupancy comp lift, and LA fire restriction lift.

• Question from Eric Libchow (Wells Fargo): I wanted to ask a little bit more about Asheville. A couple properties contributed as part of the eminent domain proceeding and the occupancy fall off, as you alluded to, is improving. So maybe you could talk about what you're seeing on the ground in Asheville. Obviously, I know the comps get easier in Q4, but what are your plans there to perhaps grow your presence over time?
  Response: Asheville occupancy is improving (91.8%), web rates turned positive in July; expected to remain a relative underperformer through end of Q3 but performing slightly better than expected. Company is reinvesting with new development (83% larger property) starting in early 2027.

• Question from Eric Libchow (Wells Fargo): And just one follow up for me. Maybe we could just chat a little bit about Canada and the GTA market. I know that's also going through some pretty tough comps versus last year, but maybe you could talk about what you're seeing in terms of the fundamentals in Canada.
  Response: GTA same-store revenue down 1% (tough 2% comp); joint venture properties grew revenue 6.7% and NOI 9.4%. Demand fundamentals remain healthy (low bad debt, population growth). New supply is peaking and moderating. Public Storage's entry validates the market but SmartStop is committed and competitive.

• Question from RJ Milligan (Raymond James): I want to follow up on the question about the margin opportunity I'm just curious you know how much more margin expansion is there uh available by pulling internal levers versus how much more margin expansion can you get through expanding scale?
  Response: Significant margin expansion opportunity remains, especially in markets with ≥10 properties (historically ~300 bps improvement). Continued scale from acquisitions and platform integration will drive further expansion.

• Question from RJ Milligan (Raymond James): And then you guys talked a little bit about the acquisition opportunities, but thinking about maybe other external growth areas, can you maybe give an update on the bridge lending joint venture?
  Response: Bridge lending pipeline remains attractive (> $100M); current book is ~$20M with yields <11%. Actively working on A/B note structures. Program generates third-party management assignments and creates future acquisition pipeline.

• Question from Spencer Glimcher (Green Street): So pricing regulation specifically as it relates to surveillance pricing has become a real theme for the sector this year. And we've actually seen some regulation passed in New York. So I'm just curious how you're thinking about that risk to your revenue management systems. And then separately, just given how larger Toronto footprint is, are you guys seeing any similar regulatory moves in Canada at all?
  Response: No direct exposure to NYC regulations; monitoring developments. Company's proprietary pricing systems differ from peers. In Canada, regulatory focus has been on transparency; industry is adapting and handling consumer concerns directly.

• Question from Spencer Glimcher (Green Street): And then I know you provided a lot of commentary and color on the expense side and the savings you experienced this quarter. Is there anything that's been kind of achieved on the AI side that's helping you with cost savings?
  Response: AI is a key pillar; in early stages of implementation. Potential cost savings in areas like accounting, call center, and workforce optimization, but more of a mid-term benefit.

• Question from Todd Thomas (KeyBank Capital Markets): I wanted to go back first to the PS Canada and public storage transaction. I'm curious, you know, what the overlap is like with SmartStops Canada portfolio. And then do you think that PSA's ownership could lead to, you know, a different operating or revenue management strategy than you've historically seen in those markets?
  Response: Overlap is primarily in the GTA portfolio. Hard to comment on PS's strategy as it's a new market for them; SmartStop will remain competitive regardless.

• Question from Todd Thomas (KeyBank Capital Markets): And then in terms of um You know, some of the updates around July, appreciate some of that. Heard the occupancy and I think web rates, but looked like, you know, move-in rents improved throughout the quarter. Looked like June was a stronger month than what you reported for April and May. And I was just curious if you could talk about that a little bit and also what move-in rents looked like in July.
  Response: Q2 move-in rates were down 4.4% YOY; Q2 web rates held steady (~down 3.5% YOY). July was strong: web reservations +6.7%, rentals +7.2%, web rates up 1% YOY, concessions down, in-place rates up >2% YOY.

• Question from Todd Thomas (KeyBank Capital Markets): And then I guess along those lines and with occupancy, you know, there was some commentary there, too. But, you know, it's been unusually stable over the last several quarters, a little less seasonal improvement from 1Q to 2Q than we've typically seen. But, you know, also there was less seasonality in the in the back half of 2020. as well. You know, is that primarily a function of some market specific factors or, you know, is that sort of does that reflect, you know, kind of a deliberate operating strategy?
  Response: Stable occupancy is a target; Q2 saw a shift towards rate over promotions. Seasonal effects will occur, but strategy is to maintain high occupancy (92%) to drive rate during busy season and retain tenants afterward.

• Question from Mike Mueller (JPM): A couple more revenue questions. I guess first, when you're thinking about the move-in rate comps, when do you think you cross a deposit of territory there?
  Response: Expect move-in rate inflection point later this year, between end of rental season and year-end.

• Question from Mike Mueller (JPM): And then if you're looking at ECRI, can you give us a sense as to about, you know, what portion of your units get at least one increase during the year?
  Response: Majority of customers receive at least one ECRI during business season; ECRIs are lower for long-term customers. Cadence unchanged, average blended ECRIs in low 20s percent.

• Question from Robin Handel (BMO Capital Markets): I was just curious if you can provide an update on the potential timing of a JV partner and transaction, and if you could share in the hurdles you've overcome to date?
  Response: Numerous ongoing conversations for a JV; no definitive announcement yet. Will represent incremental capacity beyond current guidance.

• Question from Robin Handel (BMO Capital Markets): And then on the momentum building in your third-party platform, one store added now in Canada, but down on a net basis. Just curious if you can elaborate and provide some callback.
  Response: Argus platform integration progressing through phases; owner satisfaction and lead flow are strong. Onboarded stores are larger and in better demographics. First Canadian third-party property added; margin synergies expected more in 2027 as tech migration completes.

Contradiction Point 1

Target Cap Rate for Acquisitions

Inconsistent guidance on the specific cap rate for target acquisitions.

Wes Galladay (Baird) - Wes Galladay (Baird)

2026Q2: Yes, the target cap rate is around 5.9%. - [Michael Schwartz](CEO)

Regarding the acquisition pipeline, are you expecting to transact at a similar 5.9% cap rate as in the quarter? - Wes Golladay (Baird)

2026Q2: Yes, the target cap rate is around 5.5% in the U.S. and 4–5% in Canada. - [Michael Schwartz](CEO)

Contradiction Point 2

Status of the Third-Party Management JV Platform

Contradiction on the maturity and capacity status of the third-party management platform.

What insights did Robin Handel of BMO Capital Markets share during the earnings call? - Robin Handel (BMO Capital Markets)

2026Q2: The integration of the Argus platform is progressing well... full margin synergies expected more in 2027 as technology and branding migration continue. - [Michael Schwartz](CEO)

Can you elaborate on the impact of the new Canada store on the third-party platform's momentum despite the net decline? - Wes Galladay (Baird)

2026Q2: The managed platform is fully integrated and generating assignments. - Implied from context of previous quarter's answer where the $2M fee is included in existing guidance.

Contradiction Point 3

Acquisition and Capital Deployment Guidance

Guidance on acquisition activity and capital deployment appears inconsistent.

What were the key highlights from Wes Galladay's earnings call at Baird? - Wes Galladay (Baird)

2026Q2: SmartStop has room to be more active, with a full-year capital deployment guide of $55–75 million. - [Michael Schwartz](CEO)

What is your acquisition pipeline outlook, and will you target similar cap rates (5.9%) as in the recent quarter? - Eric Luebchow (Wells Fargo)

2026Q1: The acquisition environment is one of the best risk-adjusted opportunities... They see attractive opportunities for both stabilized and development deals. - [Michael Schwartz](CEO)

Contradiction Point 4

Canadian Market Revenue Performance

Guidance on the performance of the Canadian portfolio, specifically in the GTA, shows a marked difference.

Eric Libchow (Wells Fargo) - Eric Libchow (Wells Fargo)

2026Q2: The Canadian same-store portfolio (13 properties in GTA)... saw -1% revenue growth (constant currency) in Q2. - [Michael Schwartz](CEO)

How do you expect growth in the Canada and GTA markets to trend once the tougher comps are behind us? - Todd Thomas (KeyBanc Capital Markets)

2026Q1: Canadian same-store revenue, on a constant currency basis, was down about 50 basis points YoY in Q1. - [Michael Schwartz](CEO)

Contradiction Point 5

Inflection Point for Move-In Rates

Timing of when move-in rents will turn positive contradicts previous guidance.

Mike Mueller (JPM) - Mike Mueller (JPM)

2026Q2: The inflection point for move-in rates is expected later this year, between the end of rental season and year-end. - [David Korak](SVP of Corporate Finance and Strategy)

"When do you expect to cross a key threshold in move-in rate comparisons?" - Viktor Fediv (Scotiabank)

2025Q4: The company expects move-in rents to largely reach a neutral inflection point by the end of the rental season. - [H. Michael Schwartz](CEO)