Dear Partners, Friends and Colleagues,

‍
I hope this letter finds you and your families well. The thought and preparation that go into our annual letter remain one of the most enjoyable parts of my year. It is an opportunity to reflect on lessons learned, acknowledge progress made, and thoughtfully position our companies for what lies ahead.

Last year, our letter used words like change, challenge, and volatility. Notably, 2025 marked a meaningful return to stability for Endurance Capital and its portfolio companies after several years defined by external disruption. While some headwinds certainly persisted, we saw fundamentals stabilize, pricing power begin its recovery, and operating discipline translate into results. Rather than pursuing growth for its own sake, we focused on strengthening our foundation: tightening operations, allocating capital selectively, and positioning our businesses to benefit from a more rational capital environment. The result was a year of steady, disciplined progress—the kind that compounds quietly over time.

At our core, we remain a private investment firm focused on acquiring and managing well-positioned self-storage facilities and operating businesses for the long term. In doing so, we must invest deeply in the principles of endurance and in our company values to ensure alignment between our strategy, our people, and our capital. These efforts and the rewards that follow are not always immediately visible, but they are essential to building a platform designed to perform across multiple cycles.

At Endurance Capital, we take time to celebrate wins, learn quickly from mistakes, and continue to refine a patient capital approach that prioritizes sustainability over short-term optics. While our environment continues to evolve, our goal remains
unchanged: to position our businesses to generate value for our partners, employees, and communities for decades—not just a few quarters.

Most importantly, thank you for your continued trust, patience, partnership, and belief in our vision to create enduring value for years to come. I hope you enjoy this year’s Endurance Capital annual investor letter.
‍

Self-Storage Operations: Steady as She Goes, But Headwinds Remain

The self-storage industry entered 2025 on the heels of one of the most challenging operating environments in recent memory—if not ever. Elevated interest rates, declining street rates, declining occupancy, and new supply pressure weighed heavily on performance across the sector throughout 2023 and 2024. As 2025 progressed, operating fundamentals showed measurable signs of stabilization, particularly within Five Star Storage’s portfolio. While conditions varied by market, occupancy trends stabilized, rental rate declines flattened or flipped to increases, and new supply deliveries continued to slow.

During this time, Five Star Storage continued to execute at a high level. While our portfolio generated the highest amount of aggregate revenue in our company’s history, our team skillfully maintained operational discipline and expense control, which led to improved Net Operating Income (NOI) growth compared to 2024. We believe our efficient, hands-on operating model and customer-experience-driven culture will continue to differentiate us by creating value for our customers and earning their business as industry conditions evolve.

Further, our focus on the Midwest and Rocky Mountain West should help create continued stability across the portfolio. While declining home sales volumes certainly stagnate self-storage demand, affordability remains higher than in other parts of the country, leading to more transactions. In our Midwestern markets, migration seems to be more regional than interstate, which helps create baseline demand in even slower real estate cycles.

Five Star Storage Portfolio Performance

Against this backdrop, Five Star Storage materially outperformed both peers and national REIT benchmarks:

Year-Over-Year Revenue

• FSS Same Store Revenue Growth: 6.4%, compared to 4.1% in 2024
  • National REIT Same Store Revenue Growth: - 0.3%
• FSS Overall Revenue Growth: 20.8%* Year-Over-Year NOI
• FSS Same Store NOI Growth: 5.3%, compared to 3.5% in 2024
  • National REIT Same Store NOI Growth: - 0.8%
• FSS Overall NOI Growth: 20.6%*

_{* the “same store” data excludes revenue and NOI generated by newly acquired or expanded facilities, while the “overall” data includes such facilities and same store facilities}

Year-Over-Year Occupancy Trends

• Five Star Same Store Occupancy Growth: 1.1%
  
  • Peer Group Occupancy Growth: - 0.83%
  • National REIT Occupancy Growth: - 0.32%

Year-Over-Year Rental Rate Trends

• Five Star Portfolio Street Rental Rate Growth: 21%**
  
  • Peer Group Street Rate Growth: approximately 12%
  • National REIT Street Rate Growth: approximately -3.9%
• Five Star Portfolio Achieved Rental Rate Growth: 11%**
  
  • National REIT Achieved Rate Growth: approximately -2.5%

_{**includes both newly acquired or expanded facilities and same store facilities}

‍

Self-Storage Industry Trends

New Supply Cooling

New development began ramping up in 2015, largely in part to self-storage becoming an institutional asset class which spurred greater interest by developers. That trend has finally started to fade, fueled predominantly by rising costs, weakening fundamentals, and more stringent financing requirements. Slowing development has historically correlated with improved self-storage operations metrics, which should provide operations tailwinds into 2026 and beyond.
‍

Self-Storage Construction Value Put-In-Place

Capital Markets Stabilizing

Similarly, while still a far cry from the nearly “free money” period following COVID, capital markets seem to have stabilized since the interest rate spike in 2023. Last year, we highlighted that the 10-Year Treasury, a primary indicator of long-term commercial real estate interest rates, was hovering at around 4.745%. In the last twelve months, the 10-Year Treasury has ridden a fairly consistent downward trend, and now sits around 4%.

As a result, we continue to obtain competitive financing from community banks and credit unions and are now able to finance acquisitions at interest rates consistently below 6%, which is meaningful savings from what was originally assumed when we launched our self-storage fund last year.
‍

Select 2025 Company Highlights

As mentioned above, 2025 was, for the most part, relatively uneventful.  No new self-storage funds, no new business lines, and instead, we focused on strengthening our existing organizations and allocated capital where we found the best long-term value.  We welcomed new investors and key employees into the Endurance Capital family and created new long-term strategic partnerships.  A few of those key additions are highlighted below:

• Five Star Storage announced a new partnership with Self Storage Manager/StorAlly for its facilities management software (FMS), ending a lengthy search for a new long-term FMS partner. This new partnership will bring a much-improved customer experience, better back-end reporting, and notably, control and security of our self-storage related systems and data.
• Five Star Storage’s COO, Jan Johnson, announced her retirement to be effective April 30, 2026.  Last fall, we hired industry veteran, Joe Dinius, to assume the full-time COO role following Jan’s departure.  Jan has been an integral part of the Five Star Storage family for over 8 years, starting as the company’s controller, then rising to CFO, and eventually settling into her COO role in the last few years. While Jan’s value to the entire organization will never truly be replaced, we are confident that Joe has the skills and experience to lead Five Star Storage into another decade-plus of continued success.

Strategic Capital Allocation: Where the Rubber Hits the Road

Value-Add Self-Storage Acquisitions Remain a Focal Point of Endurance Capital’s Strategy

Over the past decade, self-storage has proven itself resilient to volatility, which has, in part, led to its rapid inclusion within institutional investment portfolios.  But self-storage has also provided outsized returns relative to other real estate asset classes, primarily driven by consistent NOI growth over time:

We believe that current market conditions have created an opportunistic entry point into self-storage assets.  Values are down from the peak in 2022, new construction has slowed, and increased usage trends should provide tailwinds moving forward.  Further, the industry remains incredibly fragmented, with many facilities owned by small owners (particularly in the Midwestern and Rocky Mountain West markets we generally target), the operations of which can be improved through implementation of Five Star Storage’s management platform.

In 2025, we acquired several new facilities that meet these criteria and should create value for years to come.

• Sioux Falls, SD—approximately 72,375 rentable square feet of storage and parking across 401 units, and 7,230 rentable square feet of commercial space.
• St. Michael, MN—new development consisting of approximately 63,652 rentable square feet of storage across 378 units.
• Omaha, NE—approximately 56,570 rentable square feet of storage and parking across 454 units.
• Lincoln, NE—approximately 71,025 rentable square feet of storage and parking across 665 units, and 1,800 rentable square feet of commercial space.
• Lincoln, NE—approximately 87,980 rentable square feet of storage and parking across 496 units.

We have been fortunate to acquire existing facilities at attractive capitalization rates (the Omaha/Lincoln portfolio was acquired at just above a 7% going in cap rate) using conservative leverage (less than 70% LTV) with fixed-rate debt at or below 6%.  We have very limited near-term loan maturities portfolio-wide, which serves to strengthen our balance sheet position and long-term investment strategy.

Expansion of Utility and Telecommunications Infrastructure Platform

Beyond self-storage, the demand for utility and telecommunications infrastructure continues to grow and evolve at a rapid pace.  Electrical utilities and telecommunications companies alike continue to upgrade aging facilities and expand the grid to accommodate surging demand for electricity and fiber optic networks.  Much of this activity was spurred by the meteoric rise of artificial intelligence and the hyperscale data center development that is necessary to support it.  Additionally, the race to expand the rural broadband network continues in full swing, as telecommunications providers look to capitalize on government broadband programs and increase their customer base.  

As a result, Eagle River Utility Solutions (ERUS), our utility and telecommunications infrastructure business, has continued to thrive. In early-2025, ERUS made the strategic decision to acquire T Ray Construction Co., Inc. (T-Ray), a well-established utility contractor based in Blaine, Minnesota.  Founded more than 40 years ago, T Ray brings a long-standing reputation for safety, quality execution, and customer service to the ERUS platform.  The addition of T Ray meaningfully expands Eagle River’s professional capabilities, customer and geographic reach, and capacity to serve customers who have asked us to take on larger and more complex utility and telecommunications projects. While still early, we believe this combination strengthens the platform and positions the business for durable, long-term growth for decades to come.

We are very proud of the growth and success at ERUS over the past five years.  What started as a fledgling business with a few employees and pieces of equipment is now a scaled regional infrastructure platform with around 100 employees.  But beyond the growth in numbers, we are most proud of the fact that our employee and customer retention rates remain impeccable.  People and customers want to work with us at ERUS.  We believe this underscores that our preference for partnering with proven operators who buy into our culture, share our values and who care deeply about employees, customers, and long-term stewardship will translate to enduring success.
‍

The Past Will Guide Us, But Our Eyes Are On The Horizon

We are proud of the progress our team has made and the successes we have experienced, particularly in an environment that continues to test patience and discipline. While improved fundamentals are encouraging, we remain mindful that political tension, capital markets, and consumer trends are outside our control.  We must focus on what we can control—our values, our culture, and our unwavering strategy to invest in people and systems we trust will succeed, no matter what the circumstance.

We have also learned some hard lessons along the way. For the long-term investor, alignment of values and vision between management and shareholders is not just helpful, but mission critical. Indeed, where we have deviated from that thesis, we have quickly found failure.  But where there is failure, we also recognize a unique opportunity to learn and improve. As Charlie Munger often said, “spend each day trying to be a little wiser than you were when you woke up” – a mantra we truly take to heart in everything we do here at Endurance Capital as we continue to build enduring value over time.  

Thank you again for your partnership, confidence, and trust. We look forward to continuing this journey together in 2026 and beyond.

Sincerely,

Jacob C. Hendricks, CEO

‍