Here’s Why Baron Real Estate Fund Sold Extra Space Storage (EXR) in Q2

Baron Funds, an investment management company, released its “Baron Real Estate Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund rose 3.61% (Institutional Shares) in the quarter compared to a 1.46% decline for the MSCI US REIT Index (the REIT Index) and a 6.13% gain for the MSCI USA IMI Extended Real Estate Index (the MSCI Real Estate Index). In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, Baron Real Estate Fund highlighted stocks such as Extra Space Storage Inc. (NYSE:EXR). Extra Space Storage Inc. (NYSE:EXR) is a self-administered and self-managed REIT. The one-month return of Extra Space Storage Inc. (NYSE:EXR) was -8.88%, and its shares lost 15.55% of their value over the last 52 weeks. On August 1, 2025, Extra Space Storage Inc. (NYSE:EXR) stock closed at $139.30 per share, with a market capitalization of $30.87 billion.

Baron Real Estate Fund stated the following regarding Extra Space Storage Inc. (NYSE:EXR) in its second quarter 2025 investor letter:

“We also sold our position in Extra Space Storage Inc. (NYSE:EXR) during the quarter. While we are long-term bullish on the prospects for self storage real estate (excellent real estate businesses with less cyclical demand, pricing power, low capital intensity, scale advantages), we are concerned that lackluster existing home sales caused by the well-known “lock in effect” may weigh on self-storage demand and market rents for longer than is widely believed. We view current share price valuations as fair, not overly cheap. As such, for now we opted to reallocate capital to other investments with superior return potential. We may revisit Extra Space Storage, a best-in-class company, in the future.”

Is Extra Space Storage Inc. (EXR) the Best REIT Stock to Buy According to Billionaires?

An aerial view of a self-storage facility, its parking lot full with cars and RV’s.

Extra Space Storage Inc. (NYSE:EXR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 40 hedge fund portfolios held Extra Space Storage Inc. (NYSE:EXR) at the end of the first quarter which was 36 in the previous quarter. While we acknowledge the risk and potential of Extra Space Storage Inc. (NYSE:EXR) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Extra Space Storage Inc. (NYSE:EXR) and that has 10,000% upside potential, check out our report about this cheapest AI stock.

In another article, we covered Extra Space Storage Inc. (NYSE:EXR) and shared the list of best REIT stocks to buy according to billionaires. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.