Item 2. 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. Such forward-looking statements include statements relating to our 2023 outlook and all underlying assumptions, our expected acquisition, disposition, development, and redevelopment activity, our planned reorganization into an UPREIT structure, 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 a potential future recession, 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. Factors and risks that may impact future results and performance include, but are not limited to those factors and risks described in Part 1, Item 1A, “Risk Factors” in our most recent Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on February 21, 2023 and in our other filings with the SEC. These include changes in demand for our facilities, 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 the COVID-19 Pandemic, international military conflicts, 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 inflation, unfavorable foreign currency rate fluctuations, 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 because 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 six months ended June 30, 2023, 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, 2022.

Overview

Our self-storage operations generate most of our net income, and our earnings growth is impacted by the levels of 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). Accordingly, a significant portion of management’s time is devoted to maximizing cash flows from our existing self-storage facility portfolio.

During the three and six months ended June 30, 2023, revenues generated by our Same Store Facilities increased by 6.3% ($51.1 million) and 8.0% ($126.5 million), respectively, as compared to the same periods in 2022, while Same Store cost of operations increased by 5.2% ($9.7 million) and 5.4% ($20.7 million), respectively. Demand and operating trends softened in the second half of 2022 continuing through the first half of 2023 and returned to historical seasonal patterns as compared to what we experienced in 2020 and 2021. We expect these trends to lead to moderating levels of income growth through 2023.

In addition to managing our existing facilities for organic growth, 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 2021, we acquired a total of 322 facilities with 28.0 million net rentable square feet for $6.0 billion. In our non-same store portfolio, we also have developed and expanded self-storage facilities of 15.8 million net rentable square feet for a total cost of $1.4 billion. During the three and six months ended June 30, 2023, net operating income generated by our Acquired Facilities and Newly Developed and Expanded Facilities increased 24.1% ($21.8 million) and 27.7% ($47.1 million), respectively, as compared to the same periods in 2022.

We have experienced recent inflationary impacts on our cost of operations including labor, utilities, and repairs and maintenance, and costs of development and expansion activities, and we may continue to experience such impacts in the future. We have implemented various initiatives to manage the adverse impacts, such as enhancements in operational processes and investments in technology to reduce payroll hours, achievement of economies of scale from recent acquisitions with supervisory payroll allocated over a broader number of self-storage facilities, and investments in solar power and LED lights to lower utility usage.

In order to enhance the competitive position of certain of our facilities relative to local competitors (including newly developed facilities), we have embarked on our multi-year Property of Tomorrow program to (i) rebrand our properties with more pronounced, attractive, and clearly identifiable color schemes and signage, (ii) enhance the energy efficiency of our properties, and (iii) upgrade the configuration and layout of the offices and other customer zones to improve the customer experience. We expect to complete the program in 2025. We spent approximately $67 million on the program in the six months ended June 30, 2023 and expect to spend approximately $160 million over 2023 on this effort.

On July 24, 2023, we entered into a definitive agreement with Blackstone Real Estate Income Trust, Inc. (“BREIT”) to acquire BREIT Simply Storage LLC, a self-storage company that owns and operates 127 self-storage facilities (9.4 million square feet) and manages 25 self-storage facilities (1.8 million square feet) for third parties, for a cash acquisition price of $2.2 billion (the “Simply Acquisition”). The 127 wholly-owned facilities are geographically diversified across 18 states and located in markets with population growth that has been approximately double the national average since 2018. Approximately 65% of the facilities are located in high-growth Sunbelt markets. The acquisition, which is subject to the satisfaction of customary closing conditions, is currently expected to close in the third quarter of 2023.

In connection with the Simply Acquisition, on July 24, 2023, we completed a public offering of $400 million, $500 million, $700 million, and $600 million aggregate principal amount of unsecured senior notes bearing interest at an annual rate of Compounded SOFR + 0.60% (reset quarterly), 5.125%, 5.100%, and 5.350%, respectively, and maturing on July 25, 2025, January 15, 2029, August 1, 2033, and August 1, 2053, respectively.

On August 2, 2023, the Company filed a Form 8-K to announce its intention to implement a corporate reorganization into an umbrella partnership real estate investment trust (UPREIT) structure. As part of the reorganization, New PSA, a Maryland real estate investment trust that currently is a wholly-owned subsidiary, will become the parent company of the Company and its subsidiaries. New PSA will change its name to “Public Storage”. All outstanding shares of the Company will be automatically exchanged for an equivalent number of identical shares of New PSA and such shares will continue to trade on an uninterrupted basis on the NYSE under the same ticker symbols and with the same CUSIPs. The Company will continue to be the issuer of its unsecured notes, and there will be no change to the CUSIPs of such notes. New PSA is expected to qualify as a REIT for federal income tax purposes. Upon the consummation of the reorganization, which is expected to occur on August 14, 2023, the Company’s current trustees and officers will become trustees and officers of New PSA. There will be no change in the Company’s assets, liabilities or operations as a result of the reorganization. The Company’s shareholders will not recognize gain or loss for federal income tax purposes as a result of this tax free reorganization.

Results of Operations

Operating Results for the Three Months Ended June 30, 2023 and 2022

For the three months ended June 30, 2023, net income allocable to our common shareholders was $528.3 million or $3.00 per diluted common share, compared to $603.4 million or $3.42 per diluted common share for the same period in 2022, representing a decrease of $75.1 million or $0.42 per diluted common share. The decrease is due primarily to (i) a $102.8 million decrease in foreign currency exchange gains primarily associated with our Euro denominated notes payable and (ii) a $39.0 million decrease in equity in earnings of unconsolidated real estate entities due to the sale of our equity investment in PSB in July 2022, partially offset by (iii) a $63.1 million increase in self-storage net operating income.

The $63.1 million increase in self-storage net operating income in the three months ended June 30, 2023 as compared to the same period in 2022 is a result of a $41.4 million increase attributable to our Same Store Facilities and a $21.7 million increase attributable to our non-same store facilities. Revenues for the Same Store Facilities increased 6.3% or $51.1 million in the three months ended June 30, 2023 as compared to the same period in 2022, due primarily to higher realized annual rent per occupied square foot, partially offset by a decline in occupancy. Cost of operations for the Same Store Facilities increased by 5.2% or $9.7 million in the three months ended June 30, 2023 as compared to the same period in 2022, due primarily to increased property tax expense and marketing expense. The increase in net operating income of $21.7 million for the non-same store facilities is due primarily to the impact of facilities acquired in 2021 and 2022 and the fill-up of recently developed and expanded facilities.

Operating Results for the Six Months Ended June 30, 2023 and 2022

For the six months ended June 30, 2023, net income allocable to our common shareholders was $995.8 million or $5.65 per diluted common share, compared to $1,067.5 million or $6.05 per diluted common share for the same period in 2022, representing a decrease of $71.7 million or $0.40 per diluted common share. The decrease is due primarily to (i) a $165.1 million decrease in foreign currency exchange gains primarily associated with our Euro denominated notes payable and (ii) a $76.4 million decrease in equity in earnings of unconsolidated real estate entities due to our sale of PSB in July 2022, partially offset by (iii) a $155.2 million increase in self-storage net operating income and (iv) a $23.4 million increase in interest and other income.

The $155.2 million increase in self-storage net operating income in the six months ended June 30, 2023 as compared to the same period in 2022 is a result of a $105.7 million increase attributable to our Same Store Facilities and a $49.5 million increase attributable to our non-same store facilities. Revenues for the Same Store Facilities increased 8.0% or $126.5 million in the six months ended June 30, 2023 as compared to the same period in 2022, due primarily to higher realized annual rent per occupied square foot, partially offset by a decline in occupancy. Cost of operations for the Same Store Facilities increased by 5.4% or $20.7 million in the six months ended June 30, 2023 as compared to the same period in 2022, due primarily to increased property tax expense, repairs and maintenance expenses, marketing expense, and other direct property costs. The increase in net operating income of $49.5 million for the non-same store facilities is due primarily to the impact of facilities acquired in 2021 and 2022 and the fill-up of recently developed and expanded facilities.

Funds from Operations and Core Funds from Operations

Funds from Operations (“FFO”) and 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 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 June 30, 2023, FFO was $4.29 per diluted common share as compared to $4.58 per diluted common share for the same period in 2022, representing a decrease of 6.3%, or $0.29 per diluted common share.

For the six months ended June 30, 2023, FFO was $8.24 per diluted common share as compared to $8.41 per diluted common share for the same period in 2022, representing a decrease of 2.0%, or $0.17 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 contingency resolution, due diligence costs incurred in pursuit of strategic transactions, unrealized gain on private equity investments, and our equity share of deferred tax benefits of a change in tax status and severance of a senior executive from our equity investees. 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 June 30,																		Six Months Ended June 30,
			2023						2022						Percentage Change						2023						2022						Percentage Change
			(Amounts in thousands, except per share data)
Reconciliation of Net Income to FFO and Core FFO:
Net income allocable to common shareholders			$	528,259					$	603,381					(12.5)		%				$	995,847					$	1,067,505					(6.7)		%
Eliminate items excluded from FFO:
Depreciation and amortization			220,971						217,373												440,758						438,168
Depreciation from unconsolidated real estate investments			9,155						17,566												17,684						34,386
Depreciation allocated to noncontrolling interests and restricted share unitholders			(1,732)						(1,533)												(3,205)						(3,190)
Gains on sale of real estate investments, including our equity share from investments			(72)						(29,306)												(72)						(53,184)
FFO allocable to common shares			$	756,581					$	807,481					(6.3)		%				$	1,451,012					$	1,483,685					(2.2)		%
Eliminate the impact of items excluded from Core FFO, including our equity share from investments:
Foreign currency exchange loss (gain)			1,096						(101,723)												27,956						(137,100)
Other items			(4,093)						(1,781)												(6,226)						766
Core FFO allocable to common shares			$	753,584					$	703,977					7.0		%				$	1,472,742					$	1,347,351					9.3		%
Reconciliation of Diluted Earnings per Share to FFO per Share and Core FFO per Share:
Diluted earnings per share			$	3.00					$	3.42					(12.3)		%				$	5.65					$	6.05					(6.6)		%
Eliminate amounts per share excluded from FFO:
Depreciation and amortization			1.29						1.32												2.59						2.66
Gains on sale of real estate investments, including our equity share from investments			—						(0.16)												—						(0.30)
FFO per share			$	4.29					$	4.58					(6.3)		%				$	8.24					$	8.41					(2.0)		%
Eliminate the per share impact of items excluded from Core FFO, including our equity share from investments:
Foreign currency exchange loss (gain)			0.01						(0.58)												0.16						(0.78)
Other items			(0.02)						(0.01)												(0.04)						0.01
Core FFO per share			$	4.28					$	3.99					7.3		%				$	8.36					$	7.64					9.4		%
Diluted weighted average common shares			176,212						176,312												176,181						176,325

Analysis of Net Income — Self-Storage Operations

Our self-storage operations are analyzed in four groups: (i) the 2,344 facilities that we have owned and operated on a stabilized basis since January 1, 2021 (the “Same Store Facilities”), (ii) 322 facilities we acquired since January 1, 2021 (the “Acquired Facilities”), (iii) 136 facilities that have been newly developed or expanded, or that will commence expansion by December 31, 2023 (the “Newly Developed and Expanded Facilities”), and (iv) 86 other facilities, which are otherwise not stabilized with respect to occupancies or rental rates since January 1, 2021 (the “Other Non-same Store Facilities”). See Note 13 to our June 30, 2023 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 June 30,																		Six Months Ended June 30,
			2023						2022						Percentage Change						2023						2022						Percentage Change
			(Dollar amounts and square footage in thousands)
Revenues:
Same Store Facilities			$	864,505					$	813,422					6.3		%				$	1,711,673					$	1,585,210					8.0		%
Acquired Facilities			98,575						77,085						27.9		%				193,797						146,388						32.4		%
Newly Developed and Expanded Facilities			64,705						56,177						15.2		%				126,736						107,261						18.2		%
Other Non-Same Store Facilities			28,335						26,602						6.5		%				56,098						51,442						9.1		%
			1,056,120						973,286						8.5		%				2,088,304						1,890,301						10.5		%
Cost of operations:
Same Store Facilities			196,443						186,745						5.2		%				403,245						382,527						5.4		%
Acquired Facilities			31,836						26,597						19.7		%				64,715						50,814						27.4		%
Newly Developed and Expanded Facilities			19,235						16,230						18.5		%				38,588						32,680						18.1		%
Other Non-Same Store Facilities			10,164						8,417						20.8		%				19,745						17,462						13.1		%
			257,678						237,989						8.3		%				526,293						483,483						8.9		%
Net operating income (a):
Same Store Facilities			668,062						626,677						6.6		%				1,308,428						1,202,683						8.8		%
Acquired Facilities			66,739						50,488						32.2		%				129,082						95,574						35.1		%
Newly Developed and Expanded Facilities			45,470						39,947						13.8		%				88,148						74,581						18.2		%
Other Non-Same Store Facilities			18,171						18,185						(0.1)		%				36,353						33,980						7.0		%
Total net operating income			798,442						735,297						8.6		%				1,562,011						1,406,818						11.0		%
Depreciation and amortization expense:
Same Store Facilities			130,064						124,242						4.7		%				256,707						244,986						4.8		%
Acquired Facilities			64,461						69,123						(6.7)		%				131,710						146,262						(9.9)		%
Newly Developed and Expanded Facilities			14,873						12,428						19.7		%				29,273						24,739						18.3		%
Other Non-Same Store Facilities			12,735						12,915						(1.4)		%				26,093						24,849						5.0		%
Total depreciation and amortization expense			222,133						218,708						1.6		%				443,783						440,836						0.7		%
Net income (loss):
Same Store Facilities			537,998						502,435						7.1		%				1,051,721						957,697						9.8		%
Acquired Facilities			2,278						(18,635)						(112.2)		%				(2,628)						(50,688)						(94.8)		%
Newly Developed and Expanded Facilities			30,597						27,519						11.2		%				58,875						49,842						18.1		%
Other Non-Same Store Facilities			5,436						5,270						3.1		%				10,260						9,131						12.4		%
Total net income			$	576,309					$	516,589					11.6		%				$	1,118,228					$	965,982					15.8		%
Number of facilities at period end:
Same Store Facilities																					2,344						2,344						—		%
Acquired Facilities																					322						252						27.8		%
Newly Developed and Expanded Facilities																					136						125						8.8		%
Other Non-Same Store Facilities																					86						86						—		%
																					2,888						2,807						2.9		%
Net rentable square footage at period end:
Same Store Facilities																					155,160						155,160						—		%
Acquired Facilities																					27,954						23,325						19.8		%
Newly Developed and Expanded Facilities																					15,793						14,523						8.7		%
Other Non-Same Store Facilities																					7,081						7,075						0.1		%
																					205,988						200,083						3.0		%

(a)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 13 to our June 30, 2023 consolidated financial statements for a reconciliation of NOI to our total net income for all periods presented.

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, 2021. The composition of our Same Store Facilities allows us more effectively to evaluate the ongoing performance of our self-storage portfolio in 2021, 2022, and 2023 and exclude the impact of fill-up of unstabilized facilities, which can significantly affect operating trends. We believe investors and analysts use Same Store 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 2,344 facilities (155.2 million net rentable square feet) that represent approximately 75% of the aggregate net rentable square feet of our U.S. consolidated self-storage portfolio at June 30, 2023. 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 (2,344 facilities)

			Three Months Ended June 30,																		Six Months Ended June 30,
			2023						2022						Percentage Change						2023						2022						Percentage Change
			(Dollar amounts in thousands, except for per square foot data)
Revenues (a):
Rental income			$	836,124					$	788,684					6.0%						$	1,655,058					$	1,535,817					7.8%
Late charges and administrative fees			28,381						24,738						14.7%						56,615						49,393						14.6%
Total revenues			864,505						813,422						6.3%						1,711,673						1,585,210						8.0%
Direct cost of operations (a):
Property taxes			77,211						74,504						3.6%						153,895						147,562						4.3%
On-site property manager payroll			31,514						30,575						3.1%						64,044						62,320						2.8%
Repairs and maintenance			14,665						13,679						7.2%						32,676						29,588						10.4%
Utilities			10,067						10,611						(5.1)%						22,633						22,561						0.3%
Marketing			14,469						9,086						59.2%						30,022						20,805						44.3%
Other direct property costs			22,073						20,911						5.6%						45,297						41,641						8.8%
Total direct cost of operations			169,999						159,366						6.7%						348,567						324,477						7.4%
Direct net operating income (b)			694,506						654,056						6.2%						1,363,106						1,260,733						8.1%
Indirect cost of operations (a):
Supervisory payroll			(8,502)						(9,059)						(6.1)%						(17,700)						(18,979)						(6.7)%
Centralized management costs			(15,211)						(14,440)						5.3%						(31,108)						(31,203)						(0.3)%
Share-based compensation			(2,731)						(3,880)						(29.6)%						(5,870)						(7,868)						(25.4)%
Net operating income			668,062						626,677						6.6%						1,308,428						1,202,683						8.8%
Depreciation and amortization expense			(130,064)						(124,242)						4.7%						(256,707)						(244,986)						4.8%
Net income			$	537,998					$	502,435					7.1%						$	1,051,721					$	957,697					9.8%
Gross margin (before indirect costs, depreciation and amortization expense)			80.3%						80.4%						(0.1)%						79.6%						79.5%						0.1%
Gross margin (before depreciation and amortization expense)			77.3%						77.0%						0.4%						76.4%						75.9%						0.7%
Weighted average for the period:
Square foot occupancy			93.7%						95.7%						(2.1)%						93.5%						95.6%						(2.2)%
Realized annual rental income per (c):
Occupied square foot			$	22.99					$	21.23					8.3%						$	22.82					$	20.69					10.3%
Available square foot			$	21.54					$	20.32					6.0%						$	21.33					$	19.79					7.8%
At June 30:
Square foot occupancy																					93.2%						94.8%						(1.7)%
Annual contract rent per occupied square foot (d)																					$	23.34					$	21.80					7.1%

(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 tenants 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.

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 tenants to replace tenants that vacate.

We typically increase rental rates to our long-term tenants (generally, those who have been with us for at least a year) every six to twelve months. As a result, the number of long-term tenants we have in our facilities is an important factor in our revenue growth. The level of rate increases to long-term tenants is based upon evaluating the additional revenue from the increase against the negative impact of incremental move-outs, by considering customers’ in-place rent and prevailing market rents, among other factors.

Revenues generated by our Same Store Facilities increased 6.3% and 8.0% in the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022. The increase is due primarily to (i) an 8.3% and 10.3% increase in realized annual rent per occupied square foot for the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022, partially offset by (ii) a 2.1% and 2.2% decrease in average occupancy for the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022.

The increase in realized annual rent per occupied square foot in the three and six months ended June 30, 2023 as compared to the same periods in 2022 was due to rate increases to existing long-term tenants, partially offset by a 14.4% and 11.1% decrease in average rates per square foot charged to new tenants moving in who replaced tenants moving out with higher rental rates during the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022. The growth rate in realized annual rent per occupied square foot has decelerated since the second half of 2022 as a result of increases in moving-out activity that drove us to lower move-in rates and increase promotion discounts to replace tenants that vacate. At June 30, 2023, annual contract rent per occupied square foot was 7.1% higher as compared to June 30, 2022.

Occupancy levels, although strong, have gradually declined since the second half of 2022 as move-out activity increased and customer demand softened. The weighted average square foot occupancy for our same store facilities was 93.7% and 93.5% for the three and six months ended June 30, 2023, respectively, representing a decrease of 2.1% and 2.2% as compared to the same periods in 2022. We lowered move-in rental rates and increased promotional activity and advertising spending to increase move-in activity at our facilities, which led to a year-over-year 13.6% and 13.1% increase in move-in volumes that more than offset the year-over-year 9.6% and 10.5% increase in move-out volumes for the three and six months ended June 30, 2023, respectively. Move-in volumes net of move-out volumes were higher in the six months ended June 30, 2023 as compared to the same period in 2022, which reduced the year-over-year decline in occupancy levels between December 31, 2022 and June 30, 2023.

Move-out volumes were partially impacted by rental rate increases to our existing tenants in the three and six months ended June 30, 2023 as compared to the same periods in 2022. However, move-out activity from tenants not receiving increases was also higher in the three and six months ended June 30, 2023 as compared to the same periods in 2022, returning to pre-2020 levels. Average length of stay of our tenants remained at similar high levels in the three and six months ended June 30, 2023 as compared to the same periods in 2022, which supported our revenue growth by contributing to the number of tenants eligible for rental rate increases.

Demand historically has been higher in the summer months than in the winter months and, as a result, rental rates charged to new tenants have typically been higher in the summer months than in the winter months. More typical seasonal patterns of demand with lower demand in the winter months returned in 2022. Demand fluctuates due to various local and regional factors, including the overall economy. Demand for our facilities is also impacted by new supply of self-storage space and alternatives to self-storage.

We expect weaker industry-wide demand in the remainder of 2023 as compared to 2022 driven by a weaker macroeconomic outlook and more limited moving activities, with move-out activities and occupancy levels returning to pre-2020 levels. To mitigate the negative impact of macroeconomic challenges, we will continue to support demand levels for our self-storage facilities with increased marketing expense, lowering rental rates to new customers, and increased promotional discounting. As a result, we expect revenue growth to decline significantly through the course of 2023 as compared to high levels of growth in 2022 and 2021. With a wide range of potential macroeconomic pathways for the remainder of 2023, the range of potential revenue growth rates is wide including the potential for year-over-year declines in revenue in the second half of 2023.

Late Charges and Administrative Fees

Late charges and administrative fees increased 14.7% and 14.6% for the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022, due to (i) higher late charges collected on delinquent accounts driven by more delinquent accounts and to a lesser extent (ii) higher administrative fees resulting from higher move-in volumes. Delinquency levels at our same store properties remain below pre-2020 levels.

Selected Key Statistical Data

The following table sets forth average annual contract rent per square foot and total square footage for tenants moving in and moving out during the three and six months ended June 30, 2023 and 2022. It also includes promotional discounts, which vary based upon the move-in contractual rates, move-in volume, and percentage of tenants moving in who receive the discount.

			Three Months Ended June 30,																		Six Months Ended June 30,
			2023						2022						Change						2023						2022						Change
			(Amounts in thousands, except for per square foot amounts)
Tenants moving in during the period:
Average annual contract rent per square foot			$	16.77					$	19.58					(14.4)%						$	16.34					$	18.39					(11.1)%
Square footage			28,426						25,016						13.6%						55,810						49,361						13.1%
Contract rents gained from move-ins			$	119,176					$	122,453					(2.7)%						$	455,968					$	453,874					0.5%
Promotional discounts given			$	14,874					$	11,763					26.4%						$	30,643					$	22,942					33.6%
Tenants moving out during the period:
Average annual contract rent per square foot			$	21.38					$	20.28					5.4%						$	21.26					$	19.83					7.2%
Square footage			27,771						25,337						9.6%						54,362						49,201						10.5%
Contract rents lost from move-outs			$	148,436					$	128,459					15.6%						$	577,868					$	487,828					18.5%

Analysis of Same Store Cost of Operations

Cost of operations (excluding depreciation and amortization) increased 5.2% and 5.4% in the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022. The increase during the three-month period is due primarily to increased property tax expense and marketing expense, while the increase during the six-month period is due primarily to increased property tax expense, repairs and maintenance expense, marketing expense, and other direct property costs.

Property tax expense increased 3.6% and 4.3% in the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022, as a result of higher assessed values. We expect property tax expense to grow 5.3% in 2023 due primarily to higher assessed values.

On-site property manager payroll expense increased 3.1% and 2.8% in the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022, due primarily to increases in wage rates as a result of competitive labor conditions experienced in most geographical markets. We expect an inflationary increase in on-site property manager payroll expense in 2023 driven by increased wage rates, partially offset by expected reduction in labor hours driven by revisions in operational processes.

Repairs and maintenance expense increased 7.2% and 10.4% in the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022. 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 and the operating costs of our 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. We increased marketing expense by 59.2% and 44.3% in the three and six months ended June 30, 2023, respectively, by utilizing a higher volume of online paid search programs to attract new tenants, as compared to the same periods in 2022 when we refrained from advertising due to strong demand and high occupancy levels in many of our same store properties.

Other direct property costs include administrative expenses specific to each self-storage facility, such as property loss, telephone and data communication lines, business license costs, bank charges related to processing the facilities’ cash receipts, tenant mailings, credit card fees, eviction costs, and the cost of operating each property’s rental office. These costs increased 5.6% and 8.8% in the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022. These increases were due primarily to an increase in credit card fees as a result of year-over-year increases in revenues, and to a lesser extent, a long-term trend of more customers paying with credit cards rather than cash, checks, or other methods of payment with lower transaction costs. We expect a moderate increase in other direct property costs in the remainder of 2023 primarily driven by an increase in credit card fees.

Analysis of Market Trends

The following tables set forth selected market trends in our Same Store Facilities:

Same Store Facilities Operating Trends by Market

			As of June 30, 2023						Three Months Ended June 30,
			Number of Facilities			Square Feet (millions)			Realized Rent per Occupied Square Foot									Average Occupancy									Realized Rent per Available Square Foot
			2023			2022			Change			2023			2022			Change			2023			2022			Change
Los Angeles			215			15.6			$	36.07		$	31.72		13.7		%	95.4		%	97.1		%	(1.8)		%	$	34.43		$	30.80		11.8		%
San Francisco			129			7.9			32.62			31.07			5.0		%	94.3		%	95.8		%	(1.6)		%	30.77			29.75			3.4		%
New York			92			6.8			32.19			29.87			7.8		%	93.1		%	95.2		%	(2.2)		%	29.97			28.42			5.5		%
Miami			87			6.2			30.29			27.68			9.4		%	93.4		%	96.5		%	(3.2)		%	28.30			26.72			5.9		%
Seattle-Tacoma			89			6.0			26.30			24.68			6.6		%	92.5		%	95.2		%	(2.8)		%	24.33			23.49			3.6		%
Washington DC			90			5.5			26.52			25.09			5.7		%	93.2		%	94.3		%	(1.2)		%	24.71			23.67			4.4		%
Dallas-Ft. Worth			111			7.6			18.48			16.86			9.6		%	93.0		%	95.4		%	(2.5)		%	17.19			16.08			6.9		%
Atlanta			103			6.8			18.02			17.07			5.6		%	91.9		%	95.2		%	(3.5)		%	16.57			16.25			2.0		%
Chicago			130			8.2			20.06			18.87			6.3		%	93.9		%	95.3		%	(1.5)		%	18.84			17.97			4.8		%
Houston			101			7.5			16.99			15.47			9.8		%	92.1		%	94.5		%	(2.5)		%	15.64			14.62			7.0		%
Orlando-Daytona			69			4.4			19.89			17.50			13.7		%	93.9		%	96.8		%	(3.0)		%	18.68			16.93			10.3		%
Philadelphia			56			3.5			21.50			20.60			4.4		%	93.6		%	95.8		%	(2.3)		%	20.14			19.72			2.1		%
West Palm Beach			39			2.8			26.56			24.63			7.8		%	94.1		%	96.6		%	(2.6)		%	24.99			23.79			5.0		%
Tampa			53			3.5			20.17			18.54			8.8		%	92.5		%	95.5		%	(3.1)		%	18.66			17.71			5.4		%
Charlotte			52			3.9			16.18			14.70			10.1		%	93.7		%	95.7		%	(2.1)		%	15.17			14.07			7.8		%
All other markets			928			59.0			18.77			17.55			7.0		%	93.9		%	95.8		%	(2.0)		%	17.63			16.81			4.9		%
Totals			2,344			155.2			$	22.99		$	21.23		8.3		%	93.7		%	95.7		%	(2.1)		%	$	21.54		$	20.32		6.0		%

Same Store Facilities Operating Trends by Market (Continued)

			Three Months Ended June 30,
			Revenues ($000's)									Direct Expenses ($000's)									Indirect Expenses ($000's)									Net Operating Income ($000's)
			2023			2022			Change			2023			2022			Change			2023			2022			Change			2023			2022			Change
Los Angeles			$	137,156		$	122,502		12.0		%	$	16,923		$	15,553		8.8		%	$	2,672		$	2,054		30.1		%	$	117,561		$	104,895		12.1		%
San Francisco			62,073			59,931			3.6		%	9,662			8,443			14.4		%	1,431			1,730			(17.3)		%	50,980			49,758			2.5		%
New York			52,094			49,411			5.4		%	11,610			11,718			(0.9)		%	1,188			1,393			(14.7)		%	39,296			36,300			8.3		%
Miami			45,523			42,811			6.3		%	8,108			7,403			9.5		%	1,043			1,067			(2.2)		%	36,372			34,341			5.9		%
Seattle-Tacoma			37,655			36,355			3.6		%	6,501			5,944			9.4		%	984			984			—		%	30,170			29,427			2.5		%
Washington DC			35,301			33,725			4.7		%	6,808			6,744			0.9		%	1,003			1,037			(3.3)		%	27,490			25,944			6.0		%
Dallas-Ft. Worth			34,125			31,808			7.3		%	7,279			7,097			2.6		%	1,165			1,201			(3.0)		%	25,681			23,510			9.2		%
Atlanta			29,501			28,787			2.5		%	5,991			5,788			3.5		%	1,136			1,192			(4.7)		%	22,374			21,807			2.6		%
Chicago			39,986			37,996			5.2		%	15,555			14,168			9.8		%	1,382			1,445			(4.4)		%	23,049			22,383			3.0		%
Houston			30,512			28,420			7.4		%	8,401			8,150			3.1		%	1,067			1,088			(1.9)		%	21,044			19,182			9.7		%
Orlando-Daytona			21,307			19,282			10.5		%	3,942			3,601			9.5		%	803			846			(5.1)		%	16,562			14,835			11.6		%
Philadelphia			18,506			18,072			2.4		%	3,748			3,836			(2.3)		%	646			675			(4.3)		%	14,112			13,561			4.1		%
West Palm Beach			18,019			17,135			5.2		%	3,744			3,308			13.2		%	509			499			2.0		%	13,766			13,328			3.3		%
Tampa			17,013			16,105			5.6		%	3,596			3,249			10.7		%	579			615			(5.9)		%	12,838			12,241			4.9		%
Charlotte			15,575			14,401			8.2		%	2,808			2,358			19.1		%	496			566			(12.4)		%	12,271			11,477			6.9		%
All other markets			270,159			256,681			5.3		%	55,323			52,006			6.4		%	10,340			10,987			(5.9)		%	204,496			193,688			5.6		%
Totals			$	864,505		$	813,422		6.3		%	$	169,999		$	159,366		6.7		%	$	26,444		$	27,379		(3.4)		%	$	668,062		$	626,677		6.6		%

Same Store Facilities Operating Trends by Market (Continued)

			As of June 30, 2023						Six Months Ended June 30,
			Number of Facilities			Square Feet (millions)			Realized Rent per Occupied Square Foot									Average Occupancy									Realized Rent per Available Square Foot
			2023			2022			Change			2023			2022			Change			2023			2022			Change
Los Angeles			215			15.6			$	35.53		$	30.51		16.5		%	95.7		%	97.4		%	(1.7)		%	$	33.99		$	29.72		14.4		%
San Francisco			129			7.9			32.37			30.40			6.5		%	94.3		%	95.9		%	(1.7)		%	30.52			29.15			4.7		%
New York			92			6.8			31.99			29.34			9.0		%	93.0		%	95.2		%	(2.3)		%	29.74			27.94			6.4		%
Miami			87			6.2			29.98			26.76			12.0		%	93.5		%	96.7		%	(3.3)		%	28.04			25.89			8.3		%
Seattle-Tacoma			89			6.0			26.11			24.11			8.3		%	92.4		%	95.0		%	(2.7)		%	24.14			22.91			5.4		%
Washington DC			90			5.5			26.33			24.61			7.0		%	92.5		%	94.2		%	(1.8)		%	24.35			23.18			5.0		%
Dallas-Ft. Worth			111			7.6			18.31			16.45			11.3		%	92.9		%	95.2		%	(2.4)		%	17.01			15.65			8.7		%
Atlanta			103			6.8			18.06			16.60			8.8		%	91.4		%	95.0		%	(3.8)		%	16.51			15.78			4.6		%
Chicago			130			8.2			20.09			18.43			9.0		%	92.7		%	94.9		%	(2.3)		%	18.62			17.50			6.4		%
Houston			101			7.5			16.86			15.10			11.7		%	92.0		%	94.3		%	(2.4)		%	15.52			14.24			9.0		%
Orlando-Daytona			69			4.4			19.65			17.00			15.6		%	94.4		%	96.5		%	(2.2)		%	18.55			16.40			13.1		%
Philadelphia			56			3.5			21.54			20.21			6.6		%	93.0		%	95.9		%	(3.0)		%	20.04			19.38			3.4		%
West Palm Beach			39			2.8			26.34			23.96			9.9		%	94.0		%	96.8		%	(2.9)		%	24.75			23.19			6.7		%
Tampa			53			3.5			20.01			18.08			10.7		%	92.8		%	95.7		%	(3.0)		%	18.57			17.29			7.4		%
Charlotte			52			3.9			16.04			14.29			12.2		%	93.5		%	95.6		%	(2.2)		%	14.99			13.67			9.7		%
All other markets			928			59.0			18.63			17.14			8.7		%	93.6		%	95.5		%	(2.0)		%	17.43			16.38			6.4		%
Totals			2,344			155.2			$	22.82		$	20.69		10.3		%	93.5		%	95.6		%	(2.2)		%	$	21.33		$	19.79		7.8		%

Same Store Facilities Operating Trends by Market (Continued)

			Six Months Ended June 30,
			Revenues ($000's)									Direct Expenses ($000's)									Indirect Expenses ($000's)									Net Operating Income ($000's)
			2023			2022			Change			2023			2022			Change			2023			2022			Change			2023			2022			Change
Los Angeles			$	270,767		$	236,449		14.5		%	$	34,609		$	31,651		9.3		%	$	5,521		$	5,756		(4.1)		%	$	230,637		$	199,042		15.9		%
San Francisco			123,115			117,441			4.8		%	19,447			17,347			12.1		%	3,050			3,468			(12.1)		%	100,618			96,626			4.1		%
New York			103,267			97,053			6.4		%	24,995			24,418			2.4		%	2,526			2,828			(10.7)		%	75,746			69,807			8.5		%
Miami			90,215			82,956			8.8		%	15,973			14,808			7.9		%	2,125			2,191			(3.0)		%	72,117			65,957			9.3		%
Seattle-Tacoma			74,704			70,920			5.3		%	13,394			12,238			9.4		%	2,005			2,048			(2.1)		%	59,305			56,634			4.7		%
Washington DC			69,594			66,102			5.3		%	14,067			13,960			0.8		%	2,046			2,077			(1.5)		%	53,481			50,065			6.8		%
Dallas-Ft. Worth			67,568			61,949			9.1		%	15,110			14,169			6.6		%	2,365			2,439			(3.0)		%	50,093			45,341			10.5		%
Atlanta			58,869			56,032			5.1		%	12,143			10,978			10.6		%	2,361			2,475			(4.6)		%	44,365			42,579			4.2		%
Chicago			79,024			74,004			6.8		%	31,942			29,237			9.3		%	2,807			3,042			(7.7)		%	44,275			41,725			6.1		%
Houston			60,563			55,377			9.4		%	16,628			15,715			5.8		%	2,178			2,299			(5.3)		%	41,757			37,363			11.8		%
Orlando-Daytona			42,354			37,440			13.1		%	8,012			7,246			10.6		%	1,665			1,751			(4.9)		%	32,677			28,443			14.9		%
Philadelphia			36,876			35,572			3.7		%	7,848			8,019			(2.1)		%	1,332			1,365			(2.4)		%	27,696			26,188			5.8		%
West Palm Beach			35,725			33,433			6.9		%	7,552			6,583			14.7		%	1,037			1,016			2.1		%	27,136			25,834			5.0		%
Tampa			33,896			31,478			7.7		%	7,200			6,514			10.5		%	1,202			1,263			(4.8)		%	25,494			23,701			7.6		%
Charlotte			30,797			27,995			10.0		%	5,580			4,814			15.9		%	1,092			1,203			(9.2)		%	24,125			21,978			9.8		%
All other markets			534,339			501,009			6.7		%	114,067			106,780			6.8		%	21,366			22,829			(6.4)		%	398,906			371,400			7.4		%
Totals			$	1,711,673		$	1,585,210		8.0		%	$	348,567		$	324,477		7.4		%	$	54,678		$	58,050		(5.8)		%	$	1,308,428		$	1,202,683		8.8		%

Acquired Facilities

The Acquired Facilities represent 322 facilities that we acquired in 2021, 2022, and 2023. 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 operating data with respect to the Acquired Facilities:

ACQUIRED FACILITIES			Three Months Ended June 30,																		Six Months Ended June 30,
			2023						2022						Change (a)						2023						2022						Change (a)
			($ amounts in thousands, except for per square foot amounts)
Revenues (b):
2021 Acquisitions			$	85,344					$	75,350					$	9,994					$	168,585					$	144,175					$	24,410
2022 Acquisitions			12,195						1,735						10,460						23,796						2,213						21,583
2023 Acquisitions			1,036						—						1,036						1,416						—						1,416
Total revenues			98,575						77,085						21,490						193,797						146,388						47,409
Cost of operations (b):
2021 Acquisitions			26,162						25,359						803						53,288						49,257						4,031
2022 Acquisitions			5,280						1,238						4,042						10,862						1,557						9,305
2023 Acquisitions			394						—						394						565						—						565
Total cost of operations			31,836						26,597						5,239						64,715						50,814						13,901
Net operating income:
2021 Acquisitions			59,182						49,991						9,191						115,297						94,918						20,379
2022 Acquisitions			6,915						497						6,418						12,934						656						12,278
2023 Acquisitions			642						—						642						851						—						851
Net operating income			66,739						50,488						16,251						129,082						95,574						33,508
Depreciation and amortization expense			(64,461)						(69,123)						4,662						(131,710)						(146,262)						14,552
Net loss			$	2,278					$	(18,635)					$	20,913					$	(2,628)					$	(50,688)					$	48,060
At June 30:
Square foot occupancy:
2021 Acquisitions																					85.2%						86.0%						(0.9)%
2022 Acquisitions																					85.5%						68.0%						25.7%
2023 Acquisitions																					56.8%						—%						—%
																					84.0%						85.0%						(1.2)%
Annual contract rent per occupied square foot:
2021 Acquisitions																					$	18.21					$	16.67					9.2%
2022 Acquisitions																					12.22						11.74						4.1%
2023 Acquisitions																					13.74						—						—%
																					$	17.04					$	16.44					3.6%
Number of facilities:
2021 Acquisitions																					232						232						—
2022 Acquisitions																					74						20						54
2023 Acquisitions																					16						—						16
																					322						252						70
Net rentable square feet (in thousands) (c):
2021 Acquisitions (d)																					22,009						21,830						179
2022 Acquisitions																					4,740						1,495						3,245
2023 Acquisitions																					1,205						—						1,205
																					27,954						23,325						4,629

ACQUIRED FACILITIES (Continued)

			As of June 30, 2023
Costs to acquire (in thousands):
2021 Acquisitions (d)			$	5,115,276
2022 Acquisitions			730,957
2023 Acquisitions			190,778
			$	6,037,011

(a)Represents the percentage change with respect to square foot occupancy and annual contract rent per occupied square foot, and the absolute nominal change with respect to all other items.

(b)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.

(c)The Acquired Facilities have an aggregate of approximately 28.0 million net rentable square feet, including 10.9 million in Texas, 3.9 million in Maryland, 1.6 million in Florida, 1.2 million in each of South Carolina and Virginia, 1.1 million in Oklahoma, 1.0 million in North Carolina, 0.7 million in Idaho, 0.6 million in each of Arizona and Colorado, 0.5 million in Nebraska, 0.4 million in each of Georgia, Indiana, and Oregon, 0.3 million in each of California, Minnesota, Nevada, Ohio, Tennessee, and Washington, and 1.7 million in other states.

(d)We have completed the expansion projects on facilities acquired in 2021 for $26.8 million, adding 179,000 net rentable square feet of storage space as of June 30, 2023.

We have been active in acquiring facilities in recent years. Since the beginning of 2021, we acquired a total of 322 facilities with 28.0 million net rentable square feet for $6.0 billion. During the three and six months ended June 30, 2023, these facilities contributed net operating income of $66.7 million and $129.1 million, respectively, consistent with our original underwritten expectations.

During 2021, we acquired the ezStorage portfolio, consisting of 48 properties (4.1 million net rentable square feet) for acquisition cost of $1.8 billion. As of June 30, 2023, we have completed the expansion projects on four properties of this portfolio for $26.4 million, adding 169,000 net rentable square feet of storage space. Included in the Acquisition results in the table above are ezStorage portfolio revenues of $51.7 million, NOI of $40.4 million (including Direct NOI of $41.7 million), and average square footage occupancy of 85.7% for the six months ended June 30, 2023.

During 2021, we acquired the All Storage portfolio, consisting of 56 properties (7.5 million net rentable square feet) for $1.5 billion. Included in the Acquisition results in the table above are All Storage portfolio revenues of $43.1 million, NOI of $27.4 million (including Direct NOI of $28.9 million), and average square footage occupancy of 78.6% for the six months ended June 30, 2023.

We remain active in seeking to acquire additional self-storage facilities. Subsequent to June 30, 2023, we acquired or were under contract to acquire eleven self-storage facilities across six states with 0.8 million net rentable square feet, for $118.2 million. In addition, as part of the Simply Acquisition announced on July 24, 2023, we will add 127 wholly-owned self-storage facilities (9.4 million net rentable square fees) to our portfolio. Future acquisition volume is likely to be impacted by increasing cost of capital requirements and overall macro-economic uncertainties.

Developed and Expanded Facilities

The developed and expanded facilities include 49 facilities that were developed on new sites since January 1, 2018, and 87 facilities expanded to increase their net rentable square footage. Of these expansions, 61 were completed before 2022, 14 were completed in 2022 or 2023, and 12 are currently in process at June 30, 2023. The following table summarizes operating data with respect to the Developed and Expanded Facilities:

DEVELOPED AND EXPANDED FACILITIES
			Three Months Ended June 30,																		Six Months Ended June 30,
			2023						2022						Change (a)						2023						2022						Change (a)
			($ amounts in thousands, except for per square foot amounts)
Revenues (b):
Developed in 2018			$	10,028					$	8,990					$	1,038					$	19,808					$	17,283					$	2,525
Developed in 2019			4,541						3,997						544						8,916						7,623						1,293
Developed in 2020			1,930						1,676						254						3,831						3,158						673
Developed in 2021			2,757						1,931						826						5,366						3,360						2,006
Developed in 2022			1,597						—						1,597						2,683						—						2,683
Developed in 2023			138						—						138						163						—						163
Expansions completed before 2022			34,631						31,267						3,364						68,375						59,615						8,760
Expansions completed in 2022 or 2023			5,108						3,403						1,705						9,722						6,514						3,208
Expansions in process			3,975						4,913						(938)						7,872						9,708						(1,836)
Total revenues			64,705						56,177						8,528						126,736						107,261						19,475
Cost of operations (b):
Developed in 2018			2,835						2,432						403						5,668						4,987						681
Developed in 2019			1,454						1,504						(50)						2,961						2,872						89
Developed in 2020			450						427						23						874						855						19
Developed in 2021			925						832						93						1,842						1,687						155
Developed in 2022			962						—						962						1,945						—						1,945
Developed in 2023			266						—						266						495						—						495
Expansions completed before 2022			9,806						9,163						643						19,900						18,548						1,352
Expansions completed in 2022 or 2023			1,744						950						794						3,273						1,818						1,455
Expansions in process			793						922						(129)						1,630						1,913						(283)
Total cost of operations			19,235						16,230						3,005						38,588						32,680						5,908
Net operating income (loss):
Developed in 2018			7,193						6,558						635						14,140						12,296						1,844
Developed in 2019			3,087						2,493						594						5,955						4,751						1,204
Developed in 2020			1,480						1,249						231						2,957						2,303						654
Developed in 2021			1,832						1,099						733						3,524						1,673						1,851
Developed in 2022			635						—						635						738						—						738
Developed in 2023			(128)						—						(128)						(332)						—						(332)
Expansions completed before 2022			24,825						22,104						2,721						48,475						41,067						7,408
Expansions completed in 2022 or 2023			3,364						2,453						911						6,449						4,696						1,753
Expansions in process			3,182						3,991						(809)						6,242						7,795						(1,553)
Net operating income			45,470						39,947						5,523						88,148						74,581						13,567
Depreciation and amortization expense			(14,873)						(12,428)						(2,445)						(29,273)						(24,739)						(4,534)
Net income			$	30,597					$	27,519					$	3,078					$	58,875					$	49,842					$	9,033

DEVELOPED AND EXPANDED FACILITIES (Continued)
																					As of June 30,
																					2023						2022						Change (a)
																					($ amounts in thousands, except for per square foot amounts)
Square foot occupancy:
Developed in 2018																					90.4%						91.2%						(0.9)%
Developed in 2019																					89.1%						88.9%						0.2%
Developed in 2020																					92.9%						92.6%						0.3%
Developed in 2021																					87.7%						80.7%						8.7%
Developed in 2022																					75.7%						—%						—%
Developed in 2023																					37.8%						—%						—%
Expansions completed before 2022																					89.2%						90.0%						(0.9)%
Expansions completed in 2022 or 2023																					77.0%						70.0%						10.0%
Expansions in process																					86.9%						92.9%						(6.5)%
																					86.5%						88.2%						(1.9)%
Annual contract rent per occupied square foot:
Developed in 2018																					$	21.35					$	19.48					9.6%
Developed in 2019																					19.01						17.45						8.9%
Developed in 2020																					22.78						20.44						11.4%
Developed in 2021																					18.77						16.52						13.6%
Developed in 2022																					14.58						—						—%
Developed in 2023																					9.03						—						—%
Expansions completed before 2022																					18.25						16.95						7.7%
Expansions completed in 2022 or 2023																					17.57						18.25						(3.7)%
Expansions in process																					28.02						26.95						4.0%
																					$	18.65					$	17.54					6.3%
Number of facilities:
Developed in 2018																					18						18						—
Developed in 2019																					11						11						—
Developed in 2020																					3						3						—
Developed in 2021																					6						6						—
Developed in 2022																					8						—						8
Developed in 2023																					3						—						3
Expansions completed before 2022																					61						61						—
Expansions completed in 2022 or 2023																					14						14						—
Expansions in process																					12						12						—
																					136						125						11
Net rentable square feet (in thousands) (c):
Developed in 2018																					2,069						2,069						—
Developed in 2019																					1,057						1,057						—
Developed in 2020																					347						347						—
Developed in 2021																					681						681						—
Developed in 2022																					631						—						631
Developed in 2023																					268						—						268
Expansions completed before 2022																					8,420						8,382						38
Expansions completed in 2022 or 2023																					1,643						1,199						444
Expansions in process																					677						788						(111)
																					15,793						14,523						1,270

			As of June 30, 2023
Costs to develop (in thousands):
Developed in 2018			$	262,187
Developed in 2019			150,387
Developed in 2020			42,063
Developed in 2021			115,632
Developed in 2022			100,089
Developed in 2023			47,255
Expansions completed before 2022 (d)			506,594
Expansions completed in 2022 or 2023 (d)			137,486
			$	1,361,693

(a)Represents the percentage change with respect to square foot occupancy and annual contract rent per occupied square foot, and the absolute nominal change with respect to all other items.

(b)Revenues and cost of operations do not include tenant reinsurance and merchandise sales generated at the facilities. See “Ancillary Operations” below for more information.

(c)The facilities included above have an aggregate of approximately 15.8 million net rentable square feet at June 30, 2023, including 3.7 million in Texas, 3.1 million in Florida, 2.3 million in California, 1.4 million in each of Colorado and Minnesota, 0.8 million in North Carolina, 0.7 million in Michigan, 0.4 million in Missouri, 0.3 million in each of New Jersey, South Carolina, Virginia, and Washington, and 0.8 million in other states.

(d)These amounts only include the direct cost incurred to expand and renovate these facilities, and do not include (i) the original cost to develop or acquire the facility or (ii) the lost revenue on space demolished during the construction and fill-up period.

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 tenant 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, as well as the related construction and development overhead expenses included in general and administrative expense.

We typically underwrite new developments to stabilize at approximately an 8.0% NOI yield on cost. 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.

The facilities under “expansions completed” represent those facilities where the expansions have been completed at June 30, 2023. We incurred a total of $644.1 million in direct cost to expand these facilities, demolished a total of 1.1 million net rentable square feet of storage space, and built a total of 6.2 million net rentable square feet of new storage space.

At June 30, 2023, we had 25 additional facilities in development, which will have a total of 2.5 million net rentable square feet of storage space and have an aggregate development cost totaling approximately $554.0 million. We expect these facilities to open over the next 18 to 24 months.

The facilities under “expansion in process” represent those facilities where construction is in process at June 30, 2023, and together with additional future expansion activities primarily related to our Same Store Facilities at June 30, 2023, we expect to add a total of 2.3 million net rentable square feet of storage space by expanding existing self-storage facilities for an aggregate direct development cost of $473.0 million.

Other Non-Same Store Facilities

The “Other Non-Same Store Facilities” represent facilities which, while not newly acquired, developed, or expanded, are not fully stabilized since January 1, 2021, including facilities undergoing fill-up as well as facilities damaged in casualty events such as hurricanes, floods, and fires.

The Other Non-Same Store Facilities have an aggregate of 7.1 million net rentable square feet, including 1.2 million in Texas, 0.5 million in Pennsylvania, 0.4 million in each of California, Illinois, Michigan, Minnesota, Ohio, and Washington, 0.3 million in each of Arizona, Florida, and South Carolina, 0.2 million in each of Alabama, Colorado, Georgia, Missouri, and Virginia, and 1.1 million in other states.

During the three and six months ended June 30, 2023 and 2022, the average occupancy for these facilities totaled 88.4% and 87.4%, respectively, as compared to 91.5% and 90.4% for the same periods in 2022, and the realized rent per occupied square foot totaled $18.17 and $18.11, respectively, as compared to $16.25 and $15.87 for the same periods in 2022.

Depreciation and amortization expense

Depreciation and amortization expense for Self-Storage Operations increased $3.4 million and $2.9 million in the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022, due to elevated levels of capital expenditures and new facilities that are recently developed.

Ancillary Operations

Ancillary revenues and expenses include amounts associated with the reinsurance of policies against losses to goods stored by tenants 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 June 30,																		Six Months Ended June 30,
			2023						2022						Change						2023						2022						Change
			(Amounts in thousands)
Revenues:
Tenant reinsurance premiums			$	50,372					$	46,687					$	3,685					$	99,670					$	91,882					$	7,788
Merchandise			7,295						7,534						(239)						14,115						14,405						(290)
Third party property management			5,983						4,538						1,445						11,913						8,902						3,011
Total revenues			63,650						58,759						4,891						125,698						115,189						10,509
Cost of operations:
Tenant reinsurance			11,899						8,198						3,701						21,471						15,475						5,996
Merchandise			4,487						4,527						(40)						8,700						8,431						269
Third party property management			5,816						4,485						1,331						11,707						8,819						2,888
Total cost of operations			22,202						17,210						4,992						41,878						32,725						9,153
Net operating income:
Tenant reinsurance			38,473						38,489						(16)						78,199						76,407						1,792
Merchandise			2,808						3,007						(199)						5,415						5,974						(559)
Third party property management			167						53						114						206						83						123
Total net operating income			$	41,448					$	41,549					$	(101)					$	83,820					$	82,464					$	1,356

Tenant reinsurance operations: Tenant reinsurance premium revenue increased $3.7 million or 7.9% for the three months ended June 30, 2023, and increased $7.8 million or 8.5% for the six months ended June 30, 2023, in each case as compared to the same period in 2022, as a result of an increase in our tenant base with respect to acquired, newly developed, and expanded facilities and the third party properties we manage. Tenant reinsurance premium revenue generated from tenants at our Same-Store Facilities were $37.5 million and $74.5 million for the three and six months ended June 30, 2023, respectively, as compared to $36.1 million and $71.8 million for the same periods in 2022, representing an increase of 3.9% and 3.8%, respectively.

We expect future growth will come primarily from customers of newly acquired and developed facilities, as well as additional tenants at our existing unstabilized self-storage facilities.

Cost of operations primarily includes claims paid as well as claims adjustment expenses. Claims expenses vary based upon the number of insured tenants and the volume of events that drive covered customer losses, such as burglary, as well as catastrophic weather events affecting multiple properties such as hurricanes and floods. Tenant reinsurance cost of operations increased $3.7 million and $6.0 million for the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022, primarily due to increased claim expenses related to fire and flooding events.

Merchandise sales: Sales of locks, boxes, and packing supplies at our self-storage facilities are primarily impacted by the level of move-ins and other customer traffic at our self-storage facilities. We do not expect any significant changes in revenues or profitability from our merchandise sales in the remainder of 2023.

Third-party property management: At June 30, 2023, in our third-party property management program, we managed 132 facilities for unrelated third parties, and were under contract to manage 83 additional facilities including 79 facilities that are currently under construction. During the six months ended June 30, 2023, we added 30 facilities to the program and had seven properties exit the program due to sales to other buyers. As part of the Simply Acquisition announced on July 24, 2023, we will integrate an additional 25 facilities into our third-party management platform. 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 of unconsolidated real estate entities

We account for the equity investments in PSB (prior to the sale of our investment in PSB) and Shurgard using the equity method and record our pro-rata share of the net income of these entities. The following table, and the discussion below, sets forth our equity in earnings of unconsolidated real estate entities:

			Three Months Ended June 30,																		Six Months Ended June 30,
			2023						2022						Change						2023						2022						Change
			(Amounts in thousands)
Equity in earnings:
PSB			$	—					$	40,124					$	(40,124)					$	—					$	77,010					$	(77,010)
Shurgard			9,565						8,401						1,164						15,560						14,939						621
Total equity in earnings			$	9,565					$	48,525					$	(38,960)					$	15,560					$	91,949					$	(76,389)

Investment in PSB: On July 20, 2022, in connection with the closing of the merger of PSB with Blackstone, we completed the sale of our 41% common equity interest in PSB in its entirety. At the close of the merger transaction, we received a total of $2.7 billion of cash proceeds and recognized a gain of $2.1 billion during the third quarter of 2022.

Included in our equity earnings from PSB for the three and six months ended June 30, 2022 is our equity share of gains on sale of real estate totaling $25.5 million and $49.1 million, respectively. Our equity share of earnings from PSB contributed $26.6 million and $52.1 million, respectively, to Core FFO in the three and six months ended June 30, 2022. Since the sale of PSB in July 2022, we no longer recognize equity in earnings from PSB.

Investment in Shurgard: For purposes of recording our equity in earnings from Shurgard, the Euro was translated at exchange rates of approximately 1.089 U.S. Dollars per Euro at June 30, 2023 (1.070 at December 31, 2022), and average exchange rates of 1.088 and 1.065 for the three months ended June 30, 2023 and 2022, respectively, and average exchange rates of 1.081 and 1.093 for the six months ended June 30, 2023 and 2022, respectively.

Included in our equity earnings from Shurgard for each of the three and six months ended June 30, 2022 is our equity share of gains on sale of real estate totaling $3.5 million (none for the same periods in 2023). Included in our equity in earnings from Shurgard were $9.2 million and $17.7 million of our share of depreciation and amortization expense for the three and six months ended June 30, 2023, respectively, as compared to $8.0 million and $15.0 million for the same periods in 2022.

General and administrative expense: The following table sets forth our general and administrative expense:

			Three Months Ended June 30,																		Six Months Ended June 30,
			2023						2022						Change						2023						2022						Change
			(Amounts in thousands)
Share-based compensation expense			$	8,198					$	12,034					$	(3,836)					$	13,802					$	20,832					$	(7,030)
Development and acquisition costs			2,889						3,674						(785)						8,046						6,514						1,532
Federal and State tax expense and related compliance costs			3,061						3,381						(320)						6,377						6,115						262
Legal costs			1,194						980						214						1,775						1,220						555
Corporate management costs			5,815						4,848						967						12,552						10,694						1,858
Other costs			4,277						3,914						363						8,426						6,525						1,901
Total			$	25,434					$	28,831					$	(3,397)					$	50,978					$	51,900					$	(922)

Share-based compensation expense includes the amortization of restricted share units and stock options granted to certain corporate employees and trustees.

Share-based compensation expense for management personnel who directly and indirectly supervise the on-site property managers, as well as those employees responsible for providing shared general corporate functions to the extent their efforts are devoted to self-storage operations, are included as self-storage cost of operations. Share-based compensation expense varies based upon the level of grants and their related vesting and amortization periods, forfeitures, as well as the Company’s common share price on the date of each grant.

Share-based compensation expense classified as general and administrative expense decreased $3.8 million and $7.0 million in the three and six months ended June 30, 2023, respectively, as compared to the same period in 2022 due primarily to the absence of comparable accelerated compensation expense recognized for awards granted to corporate management personnel who are eligible for immediate vesting of their outstanding awards upon retirement.

Interest and other income: The following table sets forth our interest and other income:

			Three Months Ended June 30,																		Six Months Ended June 30,
			2023						2022						Change						2023						2022						Change
			(Amounts in thousands)
Interest earned on cash balances			$	13,245					$	2,023					$	11,222					$	25,104					$	2,158					$	22,946
Commercial operations			2,584						2,166						418						4,967						4,248						719
Unrealized gain on private equity investments			275						4,297						(4,022)						2,493						4,297						(1,804)
Other			2,348						1,793						555						4,522						2,955						1,567
Total			$	18,452					$	10,279					$	8,173					$	37,086					$	13,658					$	23,428

Interest expense: For the three and six months ended June 30, 2023, we incurred $40.1 million and $77.9 million, respectively, of interest on our outstanding notes payable, as compared to $34.3 million and $68.6 million for the same periods in 2022. In determining interest expense, these amounts were offset by capitalized interest of $2.0 million and $3.8 million during the three and six months ended June 30, 2023, respectively, associated with our development activities, as compared to $1.4 million and $2.6 million for the same periods in 2022. The increase of interest expense in the three and six months ended June 30, 2023 as compared to the same periods in 2022 is due to the increase of Compounded SOFR on our $700.0 million variable rate unsecured notes, partially offset by the interest savings on the $500.0 million unsecured notes redeemed in August 2022. At June 30, 2023, we had $6.9 billion of notes payable outstanding, with a weighted average interest rate of approximately 2.3%.

Foreign Currency Exchange (Loss) Gain: For the three and six months ended June 30, 2023, we recorded foreign currency losses of $1.1 million and $28.0 million, respectively, representing primarily the changes in the U.S. Dollar equivalent of our Euro-denominated unsecured notes due to fluctuations in exchange rates. For the three and six months ended June 30, 2022, we recorded foreign currency gains of $101.7 million and $137.1 million, respectively. The Euro was translated at exchange rates of approximately 1.089 U.S. Dollars per Euro at June 30, 2023, 1.070 at December 31, 2022, 1.045 at June 30, 2022 and 1.134 at December 31, 2021. 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.

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 increased from $200 million to $300 million per year in recent years to approximately $700 million in 2021 and $1 billion in 2022. 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 of approximately $400 million for 2023.

Capital needs in excess of retained cash flow are met with: (i) medium and long-term debt, (ii) preferred equity, and (iii) 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. We view our line of credit, as well as any short-term bank loans, as bridge financing.

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.

On June 12, 2023, we amended our revolving line of credit, increasing the borrowing limit from $500 million to $1.5 billion. We increased the size of the revolving line of credit and its associated lender base given our increased levels of debt maturities in coming years and to serve as temporary “bridge” financing until we are able to raise longer term capital. As of June 30, 2023 and August 2, 2023, there were no borrowings outstanding on the revolving line of credit; however, we do have approximately $16.7 million of outstanding letters of credit, which limits our borrowing capacity to $1,483.3 million as of August 2, 2023. Our line of credit matures on June 12, 2027.

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. While the costs of financing have increased recently, 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 deteriorated 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) $651.7 million of cash as of June 30, 2023, (ii) approximately $400 million of expected retained operating cash flow over the next twelve months, and (iii) $2.2 billion of proceeds from the U.S. Dollar denominated unsecured senior notes issued on July 24, 2023 in connection with the Simply Acquisition. We believe that our 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, our current committed cash requirements consist of (i) $2.2 billion of acquisition price of the Simply Acquisition announced on July 24, 2023, (ii) $118.2 million in property acquisitions currently under contract, (iii) $577.0 million of remaining spending on our current development pipeline, which will be incurred primarily in the next 18 to 24 months, and (iv) $809 million in scheduled principal repayments on our unsecured and mortgage notes in the next twelve months, including $700 million of our U.S. Dollar denominated unsecured notes that mature on April 23, 2024 and €100 million of our Euro denominated unsecured notes that mature on April 12, 2024. We plan to refinance these unsecured notes as they come due in April 2024. 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 stock, 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, issuing debt, 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 June 30, 2023, the principal outstanding on our debt totaled approximately $6.9 billion, consisting of $5.3 billion of U.S. Dollar denominated unsecured notes payable, $1.7 billion of Euro-denominated unsecured notes payable, and $1.9 million of mortgage notes payable. Approximate principal maturities and interest payments (including $38.6 million in estimated interest on our $700 million variable rate unsecured notes) are as follows (amounts in thousands):

			Principal						Interest						Total
Remainder of 2023			$	60					$	75,647					$	75,707
2024			808,977						130,506						939,483
2025			263,571						108,584						372,155
2026			1,150,138						101,406						1,251,544
2027			500,146						87,644						587,790
Thereafter			4,207,532						163,883						4,371,415
			$	6,930,424					$	667,670					$	7,598,094

In connection with the Simply Acquisition, on July 24, 2023, we completed a public offering of $400 million, $500 million, $700 million, and $600 million aggregate principal amount of unsecured senior notes bearing interest at an annual rate of Compounded SOFR + 0.60% (reset quarterly), 5.125%, 5.100%, and 5.350%, respectively, and maturing on July 25, 2025, January 15, 2029, August 1, 2033, and August 1, 2053, respectively.

We have $700 million of our U.S. Dollar denominated unsecured notes that mature on April 23, 2024 and €100 million of our Euro denominated unsecured notes that mature on April 12, 2024. We plan to refinance these unsecured notes as they come due in April 2024.

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 $105 million of capital expenditures to maintain real estate facilities in the first six months of 2023 and expect to spend approximately $173 million in 2023. In addition to standard capital repairs of building elements reaching the end of their useful lives, our capital expenditures in recent years have included incremental expenditures to enhance the competitive position of certain of our facilities relative to local competitors pursuant to a multi-year program. Such investments include development of more pronounced, attractive, and clearly identifiable color schemes and signage and upgrades to the configuration and layout of the offices and other customer zones to improve the customer experience. We spent approximately $67 million in the first six months of 2023 and expect to spend $160 million in 2023 on this effort. In addition, we have spent $26 million in LED lighting and the installation of solar panels in the six months ended June 30, 2023 and we expect to spend $117 million in 2023.

We believe that these incremental investments improve customer satisfaction, the attractiveness and competitiveness of our facilities to new and existing customers and, in the case of LED lighting and solar panels, reduce operating costs.

Requirement to Pay Distributions: For all periods presented herein, we have elected to be treated as a REIT, as defined in the 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.

On August 2, 2023, our Board declared a regular common quarterly dividend of $3.00 per common share totaling approximately $526 million, which will be paid at the end of September 2023. This represented a 50% increase in the $2.00 per common share quarterly dividend paid during 2022. 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 June 30, 2023 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 June 30, 2023, we acquired or were under contract to acquire eleven self-storage facilities for a total purchase price of $118.2 million. In addition, on July 24, 2023, we entered into a definitive agreement to acquire BREIT Simply Storage LLC, a self-storage company that owns and operates 127 self-storage facilities (9.4 million square feet) and manages 25 self-storage facilities (1.8 million square feet) for third parties, for a cash acquisition price of $2.2 billion.

We are actively seeking to acquire additional facilities. However, future acquisition volume will depend upon whether additional owners will be motivated to market their facilities, which will in turn depend upon factors such as economic conditions and the level of seller confidence.

As of June 30, 2023, we had development and expansion projects at a total cost of approximately $1.0 billion. Costs incurred through June 30, 2023 were $449.9 million, with the remaining cost to complete of $577.0 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.

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.

Redemption of Preferred Securities: Historically, we have taken advantage of refinancing higher coupon preferred securities with lower coupon preferred securities. In the future, we may also elect to finance the redemption of preferred securities with proceeds from the issuance of debt. As of August 2, 2023, we have two series of preferred securities that are eligible for redemption, at our option and with 30 days’ notice: our 5.150% Series F Preferred Shares ($280.0 million) and our 5.050% Series G Preferred Shares ($300.0 million). See Note 9 to our June 30, 2023 consolidated financial statements for the redemption dates of all of our series of preferred shares. Redemption of such preferred shares will depend upon many factors, including the rate at which we could issue replacement preferred securities. None of our preferred securities are redeemable at the option of the holders.

Repurchases of Common Shares: Our Board has authorized management to repurchase up to 35,000,000 of our common shares on the open market or in privately negotiated transactions. During six months ended June 30, 2023, we did not repurchase any of our common shares. From the inception of the repurchase program through August 2, 2023, we have repurchased a total of 23,721,916 common shares at an aggregate cost of approximately $679.1 million. Future levels of common share repurchases will be dependent upon our available capital, investment alternatives and the trading price of our common shares.