Smartstop Self Storage REIT (NYSE:SMA) raised its full-year 2026 outlook after reporting higher third-quarter same-store revenue and lower operating expenses, as the company used pricing and reduced concessions to maintain occupancy.
Same-store revenue rose 2% from a year earlier, while operating expenses fell 3.8%, producing a 4.9% increase in net operating income, or NOI. Adjusted funds from operations, or FFO, per diluted share and unit rose to $0.51 from $0.47 a year earlier.
Founder, Chairman and CEO H. Michael Schwartz said the company achieved a 68% same-store operating margin, up 190 basis points year over year. It was the third consecutive quarter of margin improvement and SmartStop’s highest third-quarter margin since 2023, he said.
Higher guidance follows operating gains
SmartStop raised its full-year same-store revenue growth forecast to a range of 1.25% to 1.75%, from 0.75% to 1.75%. It also narrowed its expected operating expense change to between a decrease of 0.25% and an increase of 0.25%, from a prior forecast of 0% to 1% growth.
CFO James Barry said the changes lifted the midpoint of expected same-store NOI growth to 2.25% from 1.65%. The company increased its adjusted FFO guidance to $2.01 to $2.05 per share from $1.99 to $2.05, primarily reflecting stronger same-store performance.
SmartStop now expects capital deployment of $200 million to $220 million for the year, up from its previous range of $190 million to $210 million and its initial forecast of $45 million to $65 million.
Barry said some expense benefits were cyclical, including favorable property insurance renewals and property tax benefits. He described payroll efficiencies and the advantages of operating clusters of properties as more durable. Markets including Miami, Denver and Chicago had seen year-to-date margin expansion of 250 to 300 basis points, he said.
Occupancy strategy and Canadian performance
Quarter-ending occupancy was 92.1%, while in-place rent per occupied square foot rose 2.6% from a year earlier. Average move-in rates per square foot fell 5.7% during the quarter as the company prioritized occupancy, Barry said. Move-ins increased 5.6% year over year.
Occupancy rose to 92.2% at the end of October. David Corak, senior vice president of corporate finance and strategy, said SmartStop was using fewer concessions and had shifted its pricing strategy in certain markets, including Toronto, where current web rates were up by a mid-single-digit percentage from a year earlier.
In Canada, Schwartz said same-store revenue for the company’s 13-property pool was slightly positive on a constant-currency basis in the third quarter, improving from a 1% decline in the second quarter. He said the company’s Alberta portfolio had exceeded expectations, with occupancy up approximately 1,700 basis points since its acquisition in August of the prior year and third-quarter revenue up about 9.2% year over year.
Barry said customer stays were lengthening in both the United States and Canada, with no material change in attrition related to increases in existing customers’ rental rates.
Investment and disposition plans
SmartStop announced an estimated $53 million investment in Strategic Storage Canada LP, a Canadian acquisition joint venture that Schwartz said expands the company’s operating presence in the country by more than 30% to 70 stores. The company also said it was under contract to acquire two properties in core markets for approximately $37 million.
Schwartz said SmartStop had entered a programmatic investment partnership with a U.S. developer. Its preferred and mezzanine investments carry blended in-place yields in the mid-teens, alongside property management rights and potential future investment opportunities.
The company also plans to sell an initial $75 million to $125 million of properties in non-core markets, with closings expected in the first half of 2027. Schwartz said proceeds would be recycled into markets where SmartStop can build larger clusters of properties.
Corak said expected capitalization rates on acquisitions and sales were fairly similar, and that potential operating efficiencies could make the program accretive in the short to medium term. He added that SmartStop hoped to retain management of some properties it sells.
About Smartstop Self Storage REIT (NYSE:SMA)
SmartStop Self Storage REIT, Inc (NYSE: SMA) is a self-managed real estate investment trust focused on owning, operating and acquiring self-storage properties. Its facilities provide individuals and businesses with storage units in a range of sizes, along with related services such as online reservations, electronic access and tenant protection offerings.
The company serves customers primarily in the United States and also has exposure to the Canadian self-storage market. Its portfolio includes conventional self-storage facilities and properties offering vehicle, commercial and other specialized storage options.
