SALT
LAKE CITY, Aug. 3, 2023 /PRNewswire/ -- Extra Space
Storage Inc. (NYSE: EXR) (the "Company"), a leading owner and
operator of self-storage facilities in the United States and a constituent of the
S&P 500, announced operating results for the three and six
months ended June 30, 2023.
Highlights for the three months ended June 30, 2023:
- Achieved net income attributable to common stockholders of
$1.50 per diluted share, representing
a 13.3% decrease compared to the same period in the prior year,
which included a one-time gain of $14.2
million.
- Achieved funds from operations attributable to common
stockholders and unit holders ("FFO") of $2.06 per diluted share. FFO, excluding
adjustments ("Core FFO"), was also $2.06 per diluted share, representing a 3.3%
decrease compared to the same period in the prior year.
- Increased same-store revenue by 2.7% and same-store net
operating income ("NOI") by 2.6% compared to the same period in the
prior year.
- Reported ending same-store occupancy of 94.5% as of
June 30, 2023, compared to 95.8% as
of June 30, 2022.
- Acquired one operating store and two stores at completion of
construction (a "Certificate of Occupancy store" or "C of O store")
for a total cost of approximately $32.8
million.
- Originated $68.6 million in
mortgage and mezzanine bridge loans and sold $24.1 million in mortgage bridge loans.
- Completed a public bond offering issuing $450.0 million of 5.5% senior unsecured notes due
2030.
- Completed a convertible preferred equity investment in
Strategic Storage Trust VI, Inc., an affiliate of SmartStop Self
Storage REIT, Inc. of $150.0 million
with dividend rate of 8.35%.
- Added 54 stores (47 stores net) to the Company's third-party
management platform. As of June 30,
2023, the Company managed 978 stores for third parties and
323 stores in unconsolidated joint ventures, for a total of 1,301
managed stores.
- Paid a quarterly dividend of $1.62 per share.
Highlights for the six months ended June 30, 2023:
- Achieved net income attributable to common stockholders of
$2.95 per diluted share, representing
a 9.0% decrease compared to the same period in the prior year,
which included a one-time gain of $14.2
million.
- Achieved FFO of $4.08 per diluted
share, and Core FFO was also $4.08
per diluted share, representing a 1.4% decrease compared to the
same period in the prior year.
- Increased same-store revenue by 5.0% and same-store NOI by 5.5%
compared to the same period in the prior year.
- Acquired one operating store and three C of O stores for a
total cost of approximately $45.9
million.
- In conjunction with joint venture partners, acquired five
operating stores for a total cost of approximately $101.2 million, of which the Company invested
$20.2 million.
- Originated $121.6 million in
mortgage and mezzanine bridge loans and sold $58.3 million in mortgage bridge loans.
- Added 102 stores (91 stores net) to the Company's third-party
management platform.
Joe Margolis, CEO of Extra Space
Storage Inc., commented: "We maintained strong occupancy of 94.5%,
driving same-store revenue growth of 2.7% in the quarter, despite
exceptionally difficult year over year comparables from pandemic
highs. While property net operating income and Core FFO were both
on budget in the quarter, we have revised our outlook for the back
half of the year due to lower than expected new customer rates in
June and July.
We remain confident in the durable nature of self-storage, and
the strength of the Extra Space platform, which was enhanced
through our recent merger with Life Storage. The strategic
combination increases the diversification and scale of our
portfolio and our balance sheet as recognized in our recent upgrade
to BBB+ by S&P. We expect to create at least $100 million in synergies through the
transaction, and to enhance our future internal and external growth
through our increased scale."
FFO Per Share:
The following table (unaudited) outlines the Company's FFO and
Core FFO for the three and six months ended June 30, 2023 and 2022. The table also
provides a reconciliation to GAAP net income attributable to common
stockholders and earnings per diluted share for each period
presented (amounts shown in thousands, except share and per share
data):
|
For the Three Months
Ended June 30,
|
|
For the Six Months
Ended June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
(per
share)1
|
|
|
|
(per
share)1
|
|
|
|
(per
share)1
|
|
|
|
(per
share)1
|
Net income
attributable to
common stockholders
|
$
202,410
|
|
$ 1.50
|
|
$
232,130
|
|
$ 1.73
|
|
$
398,714
|
|
$ 2.95
|
|
$
435,709
|
|
$ 3.24
|
Impact of the
difference in
weighted average number of shares
– diluted2
|
|
|
(0.09)
|
|
|
|
(0.12)
|
|
|
|
(0.17)
|
|
|
|
(0.20)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
depreciation
|
72,385
|
|
0.50
|
|
63,765
|
|
0.45
|
|
143,633
|
|
1.00
|
|
126,457
|
|
0.89
|
Amortization of
intangibles
|
3,609
|
|
0.03
|
|
2,696
|
|
0.02
|
|
7,779
|
|
0.05
|
|
5,462
|
|
0.04
|
Gain on real estate
transactions
|
—
|
|
—
|
|
(14,249)
|
|
(0.10)
|
|
—
|
|
—
|
|
(14,249)
|
|
(0.10)
|
Unconsolidated joint
venture real
estate depreciation and
amortization
|
4,722
|
|
0.03
|
|
4,115
|
|
0.03
|
|
9,661
|
|
0.07
|
|
7,968
|
|
0.06
|
Distributions paid on
Series A
Preferred Operating Partnership
units
|
—
|
|
—
|
|
(572)
|
|
—
|
|
(159)
|
|
—
|
|
(1,144)
|
|
(0.01)
|
Income allocated to
Operating
Partnership and other
noncontrolling interests
|
12,902
|
|
0.09
|
|
15,704
|
|
0.11
|
|
25,476
|
|
0.18
|
|
29,842
|
|
0.21
|
FFO
|
$
296,028
|
|
$ 2.06
|
|
$
303,589
|
|
$ 2.12
|
|
$
585,104
|
|
$ 4.08
|
|
$
590,045
|
|
$ 4.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction related
costs
|
—
|
|
—
|
|
1,465
|
|
0.01
|
|
—
|
|
—
|
|
1,465
|
|
0.01
|
CORE
FFO
|
$
296,028
|
|
$ 2.06
|
|
$
305,054
|
|
$ 2.13
|
|
$
585,104
|
|
$ 4.08
|
|
$
591,510
|
|
$ 4.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of
shares – diluted3
|
143,752,935
|
|
|
|
142,921,716
|
|
|
|
143,555,781
|
|
|
|
142,858,481
|
|
|
|
|
(1)
|
Per share amounts may
not recalculate due to rounding.
|
|
|
(2)
|
Adjustment to account
for the difference between the number of shares used to calculate
earnings per share and the number of shares used to
calculate FFO per share. Earnings per share is calculated
using the two-class method, which uses a lower number of shares
than the calculation for FFO per share and Core FFO per share,
which are calculated assuming full redemption of all OP units as
described in note (3).
|
|
|
(3)
|
Extra Space Storage LP
(the "Operating Partnership") has outstanding preferred and common
Operating Partnership units ("OP units"). These OP units can be
redeemed for cash or, at the Company's election, shares of the
Company's common stock. Redemption of all OP units for common stock
has been assumed for purposes of calculating the weighted average
number of shares — diluted, as presented above. The computation of
weighted average number of shares — diluted, for FFO per share
and Core FFO per share also includes the effect of share-based
compensation plans.
|
Operating Results and Same-Store Performance:
The following table (unaudited) outlines the Company's
same-store performance for the three and six months ended
June 30, 2023 and 2022 (amounts shown
in thousands, except store count data)1:
|
For the Three
Months
Ended June 30,
|
|
Percent
|
|
For the Six
Months
Ended June 30,
|
|
Percent
|
|
2023
|
|
2022
|
|
Change
|
|
2023
|
|
2022
|
|
Change
|
Same-store property
revenues2
|
|
|
|
|
|
|
|
|
|
|
|
Net rental
income
|
$
374,845
|
|
$
366,195
|
|
2.4 %
|
|
$
745,474
|
|
$
712,070
|
|
4.7 %
|
Other income
|
14,609
|
|
13,204
|
|
10.6 %
|
|
28,071
|
|
24,952
|
|
12.5 %
|
Total same-store
revenues
|
$
389,454
|
|
$
379,399
|
|
2.7 %
|
|
$
773,545
|
|
$
737,022
|
|
5.0 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-store operating
expenses2
|
|
|
|
|
|
|
|
|
|
|
|
Payroll and
benefits
|
$ 20,785
|
|
$ 20,657
|
|
0.6 %
|
|
$ 41,628
|
|
$ 40,717
|
|
2.2 %
|
Marketing
|
6,698
|
|
6,128
|
|
9.3 %
|
|
12,870
|
|
11,688
|
|
10.1 %
|
Office
expense3
|
11,969
|
|
11,233
|
|
6.6 %
|
|
23,947
|
|
21,914
|
|
9.3 %
|
Property operating
expense4
|
7,914
|
|
8,028
|
|
(1.4) %
|
|
17,777
|
|
16,856
|
|
5.5 %
|
Repairs and
maintenance
|
5,774
|
|
6,254
|
|
(7.7) %
|
|
12,191
|
|
13,740
|
|
(11.3) %
|
Property
taxes
|
34,269
|
|
33,576
|
|
2.1 %
|
|
68,615
|
|
68,366
|
|
0.4 %
|
Insurance
|
3,966
|
|
2,867
|
|
38.3 %
|
|
7,588
|
|
5,580
|
|
36.0 %
|
Total same-store
operating expenses
|
$ 91,375
|
|
$ 88,743
|
|
3.0 %
|
|
$
184,616
|
|
$
178,861
|
|
3.2 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-store net
operating income2
|
$
298,079
|
|
$
290,656
|
|
2.6 %
|
|
$
588,929
|
|
$
558,161
|
|
5.5 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-store square foot
occupancy as of quarter end
|
94.5 %
|
|
95.8 %
|
|
|
|
94.5 %
|
|
95.8 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average same-store
square foot occupancy
|
94.2 %
|
|
95.2 %
|
|
|
|
93.9 %
|
|
94.7 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Properties included in
same-store
|
914
|
|
914
|
|
|
|
914
|
|
914
|
|
|
|
|
(1)
|
A reconciliation of net
income to same-store net operating income is provided later in this
release, entitled "Reconciliation of GAAP Net Income to Total
Same-Store Net Operating Income."
|
(2)
|
Same-store revenues,
operating expenses and net operating income do not include tenant
reinsurance revenue or expense.
|
(3)
|
Includes general office
expenses, computer, bank fees, and credit card merchant
fees.
|
(4)
|
Includes utilities and
miscellaneous other store expenses.
|
Same-store revenues for the three and six months ended
June 30, 2023 increased compared to
the same periods in 2022 due to higher average rates to existing
customers and higher other operating income partially offset by
lower occupancy.
Details related to the same-store performance of stores by
metropolitan statistical area ("MSA") for the three and six months
ended June 30, 2023 are provided in
the supplemental financial information published on the Company's
Investor Relations website at https://ir.extraspace.com/.
Investment and Property Management Activity:
Life Storage Merger:
On July 20, 2023, the Company
closed its merger with Life Storage, Inc. ("Life Storage" or "LSI")
in an all-stock transaction (the "Life Storage Merger").
Under the terms of the Life Storage Merger, Life Storage
stockholders received 0.895 of a share of common stock of the
Company for each issued and outstanding share of Life Storage they
owned for an estimated total consideration of $11.6 billion, based on the Company's closing
share price on July 19, 2023. With
completion of the Life Storage Merger, Extra Space currently has a
portfolio of over 3,500 locations and over 270.0 million net
rentable square feet operating under the Extra Space, Life Storage
and Storage Express brands.
At closing, the Company retired $1.16
billion in balances on Life Storage's line of credit which
included $375.0 million which Life
Storage used to pay off its private placement notes in connection
with the closing. The Company also paid off and/or defeased
$32.0 million in secured loans.
On July 25, 2023, the Company
completed an obligor exchange offers and consent solicitations
(together, the "Exchange Offers") related to Life Storage's 3.5%
Senior Notes due 2026, its 3.9% Senior Notes due 2027, its 4.0%
Senior Notes due 2029, its 2.2% Senior Notes due 2030 and its 2.4%
Senior Notes due 2031. Upon the closing of the Exchange
Offers, a total of $2.35 billion of
Life Storage's senior notes were exchanged for senior notes of the
same tenor of Extra Space Storage L.P. Remaining Life Storage
senior note balances which were not exchanged total $48.9 million and no longer have any financial
reporting requirements or covenants. Additional details of the
Exchange Offers, including participation by senior note tranche,
can be found in the Company's press release and Current Report on
Form 8-K filed with the U.S. Securities and Exchange Commission on
July 25, 2023.
Additional information related to Life Storage's second quarter
2023 performance, including details related to the same-store pool,
can be found in supplemental financial information published on the
Company's Investor Relations website at
https://ir.extraspace.com/.
Other Acquisitions:
The following table (unaudited) outlines the Company's other
acquisitions and developments that are closed, completed or under
agreement (dollars in thousands). Totals in the table do not
include the stores or values associated with the Life Storage
Merger.
|
|
Closed/Completed
through
June 30, 2023
|
|
Closed/Completed
Subsequent to
June 30, 2023
|
|
Scheduled to
Still
Close/Complete
in 2023
|
|
Total
2023
|
|
To
Close/Complete
in 2024
|
Wholly-Owned
Investment
|
|
Stores
|
|
Price
|
|
Stores
|
|
Price
|
|
Stores
|
|
Price
|
|
Stores
|
|
Price
|
|
Stores
|
|
Price
|
Operating
Stores
|
|
1
|
|
$
4,650
|
|
1
|
|
$
5,300
|
|
2
|
|
$ 13,200
|
|
4
|
|
$
23,150
|
|
—
|
|
$
—
|
C of O and
Development
Stores1
|
|
3
|
|
41,234
|
|
—
|
|
—
|
|
2
|
|
29,731
|
|
5
|
|
70,965
|
|
7
|
|
86,214
|
EXR Investment in
Wholly-
Owned Stores
|
|
4
|
|
45,884
|
|
1
|
|
5,300
|
|
4
|
|
42,931
|
|
9
|
|
94,115
|
|
7
|
|
86,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint Venture
Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXR Investment in
JV
Acquisition of Operating
Stores1
|
|
5
|
|
20,243
|
|
—
|
|
—
|
|
2
|
|
4,189
|
|
7
|
|
24,432
|
|
—
|
|
—
|
EXR Investment in
JV
Development and C of O1
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4
|
|
41,710
|
|
4
|
|
41,710
|
|
8
|
|
107,502
|
EXR Investment in
Joint
Ventures
|
|
5
|
|
20,243
|
|
—
|
|
—
|
|
6
|
|
45,899
|
|
11
|
|
66,142
|
|
8
|
|
107,502
|
Total EXR
Investment
|
|
9
|
|
$ 66,127
|
|
1
|
|
$
5,300
|
|
10
|
|
$
88,830
|
|
20
|
|
$
160,257
|
|
15
|
|
$
193,716
|
|
|
(1)
|
The locations of C
of O and development stores and joint venture ownership interest
details are included in the supplemental financial information
published on the Company's Investor Relations website at
https://ir.extraspace.com/.
|
The projected developments and acquisitions under agreement
described above are subject to customary closing conditions and no
assurance can be provided that these developments and acquisitions
will be completed on the terms described, or at all.
Preferred Stock Investment:
As previously announced, during the three months ended
June 30, 2023, the Company invested
$150.0 million in shares of newly
issued convertible preferred stock of Strategic Storage Trust VI,
Inc., an affiliate of SmartStop Self Storage REIT, Inc. The
dividend rate for the preferred shares is 8.35% per annum, subject
to increase after five years. The preferred shares are
generally not redeemable for three years, except in the case of a
change of control, initial listing or certain other events, and are
redeemable thereafter subject to a redemption premium.
Bridge Loans:
During the three months ended June 30,
2023, the Company originated $68.6
million in bridge loans and sold $24.1 million in bridge loans, resulting in
outstanding balances of approximately $540.4
million at quarter end. The Company has an additional
$144.2 million in bridge loans that
closed subsequent to quarter end or are under agreement to close in
2023 and an additional $119.6 million
under agreement to close in 2024. Additional details related
to the Company's loan activity and balances held are included in
the supplemental financial information published on the Company's
Investor Relations website at https://ir.extraspace.com/.
Property Management:
As of June 30, 2023, the Company managed 978 stores for
third-party owners and 323 stores owned in unconsolidated joint
ventures, for a total of 1,301 stores under management. The
Company is the largest self-storage management company in
the United States.
Balance Sheet:
During the three months ended June 30,
2023, the Company completed a public bond offering issuing
$450.0 million of 5.5% senior
unsecured notes due 2030. The Company also amended and
restated its credit facility, increasing revolving capacity to
$1.94 billion (from $1.25 billion) and extending the maturity of the
revolving commitment to June 2027. As
part of the amendment, the Company also paid off a term loan within
the credit facility of $425.0 million
and added a term loan within the credit facility of $1.0 billion. The new term loan was not
drawn at June 30, 2023, but was drawn
in full on July 20, 2023 in
conjunction with the closing of the Life Storage Merger.
During the three months ended June 30,
2023, the Company did not issue any shares on its ATM
program, and it currently has $800.0
million available for issuance. The Company did not
repurchase any shares of common stock using its stock repurchase
program during the quarter, and as of June
30, 2023, the Company had authorization to purchase up to an
additional $337.0 million under the
plan.
As of June 30, 2023, the Company's percentage of fixed-rate
debt to total debt was 73.4%. Net of the impact of variable rate
receivables, the effective fixed-rate debt to total debt was
80.6%. The weighted average interest rates of the Company's
fixed and variable-rate debt were 3.8% and 6.4%, respectively. The
combined weighted average interest rate was 4.5% with a weighted
average maturity of approximately 5.1 years. Full details
related to the Company's debt schedule are included in the
supplemental financial information published on the Company's
Investor Relations website at https://ir.extraspace.com/.
On July 25, 2023, S&P Global
upgraded all of its ratings on the Company to BBB+ stable.
Dividends:
On June 30, 2023, the Company paid
a second quarter common stock dividend of $1.62 per share to stockholders of record at the
close of business on June 15,
2023.
On July 19, 2023, the Company paid
a dividend of $1.01 per share to
stockholders of record at the close of business on July 13, 2023, in conjunction with the Life
Storage Merger. It is anticipated that Extra Space will pay
an additional dividend for the third quarter, keeping with the
Company's customary quarterly dividend timing. The
pre-closing dividend will be attributed to the total amount paid
for the third quarter, so that between the pre-closing dividend and
the additional quarterly dividend to be paid, an Extra Space
stockholder will receive a total dividend consistent with the
amount that the Company's board of directors would have otherwise
declared for the whole third quarter but for the Life Storage
Merger closing.
Outlook:
Due to the proximity of the July 20,
2023 Life Storage merger closing to this earnings release,
the following table outlines the Company's initial and revised Core
FFO estimates and annual assumptions for the year ending
December 31, 20231,
excluding any impact from the Life Storage Merger.
|
Ranges for
2023
Annual
Assumptions
|
|
Prior Ranges for
2023
Annual
Assumptions
|
|
Notes
|
|
(August 3,
2023)
|
|
(May 2,
2023)
|
|
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
|
Core FFO
|
$8.15
|
|
$8.35
|
|
$8.30
|
|
$8.60
|
|
Excluding impact of
LSI
|
Dilution per share from
C of O and
value add acquisitions
|
$0.23
|
|
$0.23
|
|
$0.23
|
|
$0.23
|
|
|
Same-store revenue
growth
|
2.50 %
|
|
3.50 %
|
|
3.75 %
|
|
5.25 %
|
|
Same-store pool of
914
stores
|
Same-store expense
growth
|
3.50 %
|
|
4.50 %
|
|
5.00 %
|
|
6.00 %
|
|
Same-store pool of
914
stores
|
Same-store NOI
growth
|
2.00 %
|
|
3.50 %
|
|
3.00 %
|
|
5.50 %
|
|
Same-store pool of
914
stores
|
Weighted average
one-month SOFR
|
5.05 %
|
|
5.05 %
|
|
4.57 %
|
|
4.57 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tenant reinsurance
income
|
$158,500,000
|
|
$159,500,000
|
|
$160,000,000
|
|
$161,000,000
|
|
|
Management fees and
other income
|
$89,000,000
|
|
$90,000,000
|
|
$86,000,000
|
|
$87,000,000
|
|
|
Interest
income
|
$83,000,000
|
|
$84,000,000
|
|
$82,000,000
|
|
$83,000,000
|
|
Includes interest
from
bridge loans and dividends
from NexPoint preferred
investment
|
General and
administrative expenses
|
$138,500,000
|
|
$139,500,000
|
|
$139,000,000
|
|
$140,000,000
|
|
Includes non-cash
compensation
|
Average monthly cash
balance
|
$50,000,000
|
|
$50,000,000
|
|
$25,000,000
|
|
$25,000,000
|
|
|
Equity in earnings of
real estate
ventures
|
$53,000,000
|
|
$54,000,000
|
|
$53,000,000
|
|
$54,000,000
|
|
Includes dividends
from
SmartStop preferred
investments
|
Interest
expense
|
$339,500,000
|
|
$342,500,000
|
|
$335,000,000
|
|
$338,000,000
|
|
|
Income Tax
Expense
|
$23,000,000
|
|
$24,000,000
|
|
$23,500,000
|
|
$24,500,000
|
|
Taxes associated with
the
Company's taxable REIT
subsidiary
|
Acquisitions
|
$200,000,000
|
|
$200,000,000
|
|
$250,000,000
|
|
$250,000,000
|
|
Represents the
Company's
investment and excludes
Life Storage Merger
|
Bridge loans
outstanding
|
$600,000,000
|
|
$600,000,000
|
|
$600,000,000
|
|
$600,000,000
|
|
Represents the
Company's
average retained loan
balances for 2023
|
Weighted average share
count
|
144,000,000
|
|
144,000,000
|
|
144,000,000
|
|
144,000,000
|
|
Assumes redemption of
all
OP units for common stock
|
|
(1) A
reconciliation of net income outlook to same-store net operating
income outlook is provided later in this release entitled
"Reconciliation of Estimated GAAP Net Income to Estimated
Same-Store Net Operating Income." The reconciliation includes
details related to same-store revenue and same-store expense
outlooks. A reconciliation of net income per share outlook to
funds from operations per share outlook is provided later in this
release entitled "Reconciliation of the Range of Estimated GAAP
Fully Diluted Earnings Per Share to Estimated Fully Diluted FFO Per
Share."
|
FFO estimates for the year are fully diluted for an estimated
average number of shares and OP units outstanding during the year.
The Company's estimates are forward-looking and based on
management's view of current and future market conditions. The
Company's actual results may differ materially from these
estimates.
In addition to the Company's estimates and assumptions excluding
the Life Storage Merger, the Company presents the net anticipated
dilution to Core FFO from the merger in the year ending
December 31, 2023, and other
information related to the merger. Full estimates and
assumptions for the combined company will be provided at a later
date.
|
Assumptions and
Information Related to the
Life Storage Merger
|
|
Notes
|
|
(July 20,
2023)
|
|
|
|
Low
|
|
High
|
|
|
Anticipated dilution to
Core FFO per share from
Life Storage Merger in 2023
|
$0.10
|
|
$0.15
|
|
|
Revised Core FFO
including anticipated
dilution from Life Storage Merger
|
$8.00
|
|
$8.25
|
|
Assumes dilutive impact
of merger in 2023 until
synergies are realized
|
|
|
|
|
|
|
Closing Costs of Life
Storage Merger
|
$225,000,000
|
|
$235,000,000
|
|
Includes costs paid by
EXR and LSI. All costs to be
excluded from Core FFO
|
Transitional Costs of
Life Storage Merger
|
$12,000,000
|
|
$14,000,000
|
|
To be added back to
2023 Core FFO
|
Rebranding
Costs
|
$20,000,000
|
|
$21,000,000
|
|
Assumes rebranding of
142 stores
|
Term Loan to pay off
Life Storage LOC/
Private Placement Debt
|
$1,000,000,000
|
|
$1,000,000,000
|
|
SOFR + 0.85% (pricing
after BBB+ upgrade)
|
LOC Draws for closing
costs and to pay off
Life Storage Term Loans
|
$161,000,000
|
|
$161,000,000
|
|
SOFR + 0.875% (pricing
after BBB+ upgrade)
|
Life Storage Debt
Remaining in Place
|
$2,400,000,000
|
|
$2,400,000,000
|
|
Existing interest rates
and maturities remain in place
|
EXR Shares Issued with
Life Storage Merger
|
77,900,000
|
|
77,900,000
|
|
Includes Operating
Partnership Units
|
Supplemental Financial Information:
Supplemental unaudited financial information regarding the
Company's performance can be found on the Company's website at
www.extraspace.com. Under the "Company Info" navigation menu on the
home page, click on "Investor Relations," then under the
"Financials & Stock Information" navigation menu click on
"Quarterly Earnings." This supplemental information provides
additional detail on items that include store occupancy and
financial performance by portfolio and market, debt maturity
schedules and performance of lease-up assets.
Conference Call:
The Company will host a conference call at 1:00 p.m.
Eastern Time on Friday, August 4,
2023, to discuss its financial results. Telephone
participants may avoid any delays in joining the conference call by
pre-registering for the call using the following link to receive a
special dial-in number and PIN:
https://register.vevent.com/register/BI3eb70db729a8472a9aa8005624bf6983.
A live webcast of the call will also be available on the
Company's investor relations website at https://ir.extraspace.com.
To listen to the live webcast, go to the site at least 15 minutes
prior to the scheduled start time in order to register, download
and install any necessary audio software.
A replay of the call will be available for 30 days on the
investor relations section of the Company's website beginning at
5:00 p.m. Eastern Time on August
4, 2023.
Forward-Looking Statements:
Certain information set forth in this release contains
"forward-looking statements" within the meaning of the federal
securities laws. Forward-looking statements include statements
concerning the benefits of store acquisitions, developments,
favorable market conditions, our outlook and estimates for the
year, statements concerning the recently completed Life Storage
Merger and other statements concerning our plans, objectives,
goals, strategies, future events, future revenues or performance,
capital expenditures, financing needs, the competitive landscape,
plans or intentions relating to acquisitions and developments,
estimated hurricane-related insurance claims and other information
that is not historical information. In some cases, forward-looking
statements can be identified by terminology such as "believes,"
"estimates," "expects," "may," "will," "should," "anticipates," or
"intends," or the negative of such terms or other comparable
terminology, or by discussions of strategy. We may also make
additional forward-looking statements from time to time. All such
subsequent forward-looking statements, whether written or oral, by
us or on our behalf, are also expressly qualified by these
cautionary statements. There are a number of risks and
uncertainties that could cause our actual results to differ
materially from the forward-looking statements contained in or
contemplated by this release. Any forward-looking statements should
be considered in light of the risks referenced in the "Risk
Factors" section included in our most recent Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q. Such
factors include, but are not limited to:
- adverse changes in general economic conditions, the real estate
industry and the markets in which we operate;
- failure to realize the expected benefits of the Life Storage
Merger;
- the risk that Life Storage's business will not be integrated
successfully or that such integration may be more difficult,
time-consuming or costly than expected, including our ability to
retain and hire key personnel;
- the uncertainty of expected future financial performance and
results of the combined company following completion of the Life
Storage merger;
- failure to close pending acquisitions and developments on
expected terms, or at all;
- the effect of competition from new and existing stores or other
storage alternatives, including increased or unanticipated
competition for our or Life Storage's properties, which could cause
rents and occupancy rates to decline;
- potential liability for uninsured losses and environmental
contamination;
- the impact of the regulatory environment as well as national,
state and local laws and regulations, including, without
limitation, those governing real estate investment trusts
("REITs"), tenant reinsurance and other aspects of our business,
which could adversely affect our results;
- our ability to recover losses under our insurance
policies;
- disruptions in credit and financial markets and resulting
difficulties in raising capital or obtaining credit at reasonable
rates or at all, which could impede our ability to grow;
- our reliance on information technologies, which are vulnerable
to, among other things, attack from computer viruses and malware,
hacking, cyberattacks and other unauthorized access or misuse, any
of which could adversely affect our business and results;
- increases in interest rates;
- reductions in asset valuations and related impairment
charges;
- our lack of sole decision-making authority with respect to our
joint venture investments;
- the effect of recent or future changes to U.S. tax laws;
- the failure to maintain our REIT status for U.S. federal income
tax purposes;
- impacts from any outbreak of highly infectious or contagious
diseases, including reduced demand for self-storage space and
ancillary products, and potential decreases in occupancy and rental
rates and staffing levels, which could adversely affect our
results; and
- economic uncertainty due to the impact of natural disasters,
war or terrorism, which could adversely affect our business
plan.
All forward-looking statements are based upon our current
expectations and various assumptions. Our expectations, beliefs and
projections are expressed in good faith and we believe there is a
reasonable basis for them, but there can be no assurance that
management's expectations, beliefs and projections will result or
be achieved. All forward-looking statements apply only as of the
date made. We undertake no obligation to publicly update or revise
forward-looking statements which may be made to reflect events or
circumstances after the date made or to reflect the occurrence of
unanticipated events.
Definition of FFO:
FFO provides relevant and meaningful information about the
Company's operating performance that is necessary, along with net
income and cash flows, for an understanding of the Company's
operating results. The Company believes FFO is a meaningful
disclosure as a supplement to net income. Net income assumes that
the values of real estate assets diminish predictably over time as
reflected through depreciation and amortization expenses. The
values of real estate assets fluctuate due to market conditions and
the Company believes FFO more accurately reflects the value of the
Company's real estate assets. FFO is defined by the National
Association of Real Estate Investment Trusts, Inc. ("NAREIT")
as net income computed in accordance with U.S. generally accepted
accounting principles ("GAAP"), excluding gains or losses on sales
of operating stores and impairment write downs of depreciable real
estate assets, plus depreciation and amortization related to real
estate and after adjustments to record unconsolidated partnerships
and joint ventures on the same basis. The Company believes that to
further understand the Company's performance, FFO should be
considered along with the reported net income and cash flows in
accordance with GAAP, as presented in the Company's consolidated
financial statements. FFO should not be considered a replacement of
net income computed in accordance with GAAP.
For informational purposes, the Company also presents Core
FFO. Core FFO excludes revenues and expenses not core to our
operations and non-cash interest. Although the Company's
calculation of Core FFO differs from NAREIT's definition of FFO and
may not be comparable to that of other REITs and real estate
companies, the Company believes it provides a meaningful
supplemental measure of operating performance. The Company
believes that by excluding revenues and expenses not core to our
operations and non-cash interest charges, stockholders and
potential investors are presented with an indicator of our
operating performance that more closely achieves the objectives of
the real estate industry in presenting FFO. Core FFO by the
Company should not be considered a replacement of the NAREIT
definition of FFO. The computation of FFO may not be comparable to
FFO reported by other REITs or real estate companies that do not
define the term in accordance with the current NAREIT definition or
that interpret the current NAREIT definition differently. FFO does
not represent cash generated from operating activities determined
in accordance with GAAP, and should not be considered as an
alternative to net income as an indication of the Company's
performance, as an alternative to net cash flow from operating
activities as a measure of liquidity, or as an indicator of the
Company's ability to make cash distributions.
Definition of Same-Store:
The Company's same-store pool for the periods presented consists
of 914 stores that are wholly-owned and operated and that were
stabilized by the first day of the earliest calendar year
presented. The Company considers a store to be stabilized
once it has been open for three years or has sustained average
square foot occupancy of 80.0% or more for one calendar year. The
Company believes that by providing same-store results from a
stabilized pool of stores, with accompanying operating metrics
including, but not limited to occupancy, rental revenue (growth),
operating expenses (growth), net operating income (growth), etc.,
stockholders and potential investors are able to evaluate operating
performance without the effects of non-stabilized occupancy levels,
rent levels, expense levels, acquisitions or completed
developments. Same-store results should not be used as
a basis for future same-store performance or for the
performance of the Company's stores as a whole. No modification has
been made to the same-store pool to include any assets acquired
from Life Storage.
About Extra Space Storage Inc.:
Extra Space Storage Inc., headquartered in Salt Lake City, Utah, is
a self-administered and self-managed REIT and a member of the
S&P 500. As of June 30, 2023, the Company owned and/or
operated 2,438 self-storage stores in 41 states and Washington, D.C. The Company's stores comprise
approximately 1.7 million units and approximately 184.0
million square feet of rentable space.
With the completed Life Storage Merger on July 20, 2023, Extra Space currently has over
3,500 locations under the Extra Space, Life Storage and Storage
Express brands, and it is the largest operator of self-storage
properties in the United States. The Company offers customers
a wide selection of conveniently located and secure storage units
across the country, including boat storage, RV storage and business
storage.
###
Extra Space Storage
Inc.
Condensed
Consolidated Balance Sheets
(In thousands,
except share data)
|
|
|
June 30,
2023
|
|
December 31,
2022
|
|
(Unaudited)
|
|
|
Assets:
|
|
|
|
Real estate assets,
net
|
$
10,017,351
|
|
$
9,997,978
|
Real estate assets -
operating lease right-of-use assets
|
220,090
|
|
221,725
|
Investments in
unconsolidated real estate entities
|
747,775
|
|
582,412
|
Investments in debt
securities and notes receivable
|
891,190
|
|
858,049
|
Cash and cash
equivalents
|
50,644
|
|
92,868
|
Other assets,
net
|
438,403
|
|
414,426
|
Total
assets
|
$
12,365,453
|
|
$
12,167,458
|
Liabilities,
Noncontrolling Interests and Equity:
|
|
|
|
Notes payable,
net
|
$
1,273,448
|
|
$
1,288,555
|
Unsecured term loans,
net
|
2,248,840
|
|
2,340,116
|
Unsecured senior
notes, net
|
3,695,200
|
|
2,757,791
|
Revolving lines of
credit
|
275,250
|
|
945,000
|
Operating lease
liabilities
|
228,343
|
|
229,035
|
Cash distributions in
unconsolidated real estate ventures
|
69,183
|
|
67,352
|
Accounts payable and
accrued expenses
|
212,416
|
|
171,680
|
Other
liabilities
|
327,366
|
|
289,655
|
Total
liabilities
|
8,330,046
|
|
8,089,184
|
Commitments and
contingencies
|
|
|
|
Noncontrolling
Interests and Equity:
|
|
|
|
Extra Space Storage
Inc. stockholders' equity:
|
|
|
|
Preferred stock, $0.01
par value, 50,000,000 shares authorized, no shares issued
or outstanding
|
—
|
|
—
|
Common stock, $0.01
par value, 500,000,000 shares authorized, 135,058,897
and 133,921,020 shares issued and outstanding at June 30, 2023 and
December
31, 2022, respectively
|
1,351
|
|
1,339
|
Additional paid-in
capital
|
3,383,303
|
|
3,345,332
|
Accumulated other
comprehensive income
|
47,065
|
|
48,798
|
Accumulated
deficit
|
(175,941)
|
|
(135,872)
|
Total Extra Space
Storage Inc. stockholders' equity
|
3,255,778
|
|
3,259,597
|
Noncontrolling
interest represented by Preferred Operating Partnership units,
net
|
222,940
|
|
261,502
|
Noncontrolling
interests in Operating Partnership, net and other
noncontrolling
interests
|
556,689
|
|
557,175
|
Total noncontrolling
interests and equity
|
4,035,407
|
|
4,078,274
|
Total liabilities,
noncontrolling interests and equity
|
$
12,365,453
|
|
$
12,167,458
|
Consolidated
Statement of Operations for the Three and Six Months Ended
June 30, 2023 and 2022
(In thousands,
except share and per share data) - Unaudited
|
|
|
For the Three Months
Ended
June 30,
|
|
For the Six Months
Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Revenues:
|
|
|
|
|
|
|
|
Property
rental
|
$
440,747
|
|
$ 408,044
|
|
$
874,709
|
|
$
787,852
|
Tenant
reinsurance
|
48,433
|
|
46,427
|
|
96,137
|
|
90,224
|
Management fees and
other income
|
22,206
|
|
20,517
|
|
43,590
|
|
40,474
|
Total
revenues
|
511,386
|
|
474,988
|
|
1,014,436
|
|
918,550
|
Expenses:
|
|
|
|
|
|
|
|
Property
operations
|
114,637
|
|
104,252
|
|
231,803
|
|
207,794
|
Tenant
reinsurance
|
9,482
|
|
7,537
|
|
18,571
|
|
14,579
|
Transaction related
costs
|
—
|
|
1,465
|
|
—
|
|
1,465
|
General and
administrative
|
34,842
|
|
31,251
|
|
69,605
|
|
61,013
|
Depreciation and
amortization
|
79,086
|
|
69,067
|
|
157,576
|
|
136,973
|
Total
expenses
|
238,047
|
|
213,572
|
|
477,555
|
|
421,824
|
Gain on real estate
transactions
|
—
|
|
14,249
|
|
—
|
|
14,249
|
Income from
operations
|
273,339
|
|
275,665
|
|
536,881
|
|
510,975
|
Interest
expense
|
(86,372)
|
|
(47,466)
|
|
(166,471)
|
|
(90,004)
|
Interest
income
|
21,077
|
|
15,060
|
|
40,515
|
|
34,049
|
Income before equity
in earnings and dividend income from unconsolidated real estate
entities and income tax expense
|
208,044
|
|
243,259
|
|
410,925
|
|
455,020
|
Equity in earnings and
dividend income from unconsolidated real estate entities
|
13,254
|
|
10,190
|
|
23,559
|
|
19,287
|
Income tax
expense
|
(5,986)
|
|
(5,615)
|
|
(10,294)
|
|
(8,756)
|
Net income
|
215,312
|
|
247,834
|
|
424,190
|
|
465,551
|
Net income allocated
to Preferred Operating Partnership noncontrolling
interests
|
(2,254)
|
|
(4,491)
|
|
(4,508)
|
|
(8,824)
|
Net income allocated
to Operating Partnership and other noncontrolling
interests
|
(10,648)
|
|
(11,213)
|
|
(20,968)
|
|
(21,018)
|
Net income attributable
to common stockholders
|
$
202,410
|
|
$ 232,130
|
|
$
398,714
|
|
$
435,709
|
Earnings per common
share
|
|
|
|
|
|
|
|
Basic
|
$
1.50
|
|
$
1.73
|
|
$
2.96
|
|
$
3.24
|
Diluted
|
$
1.50
|
|
$
1.73
|
|
$
2.95
|
|
$
3.24
|
Weighted average number
of shares
|
|
|
|
|
|
|
|
Basic
|
134,832,232
|
|
134,192,540
|
|
134,672,672
|
|
134,186,426
|
Diluted
|
143,529,817
|
|
142,737,909
|
|
143,337,522
|
|
141,600,206
|
Cash dividends paid per
common share
|
$
1.62
|
|
$
1.50
|
|
$
3.24
|
|
$
3.00
|
Reconciliation of
GAAP Net Income to Total Same-Store Net Operating Income — for the
Three and Six Months Ended
June 30, 2023 and 2022 (In thousands) -
Unaudited
|
|
|
For the Three Months
Ended
June 30,
|
|
For the Six Months
Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net
Income
|
$
215,312
|
|
$
247,834
|
|
$
424,190
|
|
$
465,551
|
Adjusted to
exclude:
|
|
|
|
|
|
|
|
Gain on real estate
transactions
|
—
|
|
(14,249)
|
|
—
|
|
(14,249)
|
Equity in earnings and
dividend income from unconsolidated real
estate entities
|
(13,254)
|
|
(10,190)
|
|
(23,559)
|
|
(19,287)
|
Interest
expense
|
86,372
|
|
47,466
|
|
166,471
|
|
90,004
|
Depreciation and
amortization
|
79,086
|
|
69,067
|
|
157,576
|
|
136,973
|
Income tax
expense
|
5,986
|
|
5,615
|
|
10,294
|
|
8,756
|
Transaction related
costs
|
—
|
|
1,465
|
|
—
|
|
1,465
|
General and
administrative
|
34,842
|
|
31,251
|
|
69,605
|
|
61,013
|
Management fees, other
income and interest income
|
(43,283)
|
|
(35,577)
|
|
(84,105)
|
|
(74,523)
|
Net tenant
insurance
|
(38,951)
|
|
(38,890)
|
|
(77,566)
|
|
(75,645)
|
Non same-store rental
revenue
|
(51,293)
|
|
(28,645)
|
|
(101,164)
|
|
(50,830)
|
Non same-store
operating expense
|
23,262
|
|
15,509
|
|
47,187
|
|
28,933
|
Total same-store net
operating income
|
$
298,079
|
|
$
290,656
|
|
$
588,929
|
|
$
558,161
|
|
|
|
|
|
|
|
|
Same-store rental
revenues
|
389,454
|
|
379,399
|
|
773,545
|
|
737,022
|
Same-store operating
expenses
|
91,375
|
|
88,743
|
|
184,616
|
|
178,861
|
Same-store net
operating income
|
$
298,079
|
|
$
290,656
|
|
$
588,929
|
|
$
558,161
|
Reconciliation of
the Range of Estimated GAAP Fully Diluted Earnings Per Share to
Estimated Fully Diluted FFO Per
Share (excluding impact of Life Storage Merger) — for the Year
Ending December 31, 2023 - Unaudited
|
|
|
|
For the Year Ending
December 31, 2023
|
|
|
Low
End
|
|
High
End
|
Net income
attributable to common stockholders per diluted
share
|
|
$
5.54
|
|
$
5.74
|
Income allocated to
noncontrolling interest - Preferred Operating
Partnership and Operating Partnership
|
|
0.37
|
|
0.37
|
Net income attributable
to common stockholders for diluted computations
|
|
5.91
|
|
6.11
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Real estate
depreciation
|
|
2.01
|
|
2.01
|
Amortization of
intangibles
|
|
0.10
|
|
0.10
|
Unconsolidated joint
venture real estate depreciation and amortization
|
|
0.13
|
|
0.13
|
Funds from
operations attributable to common stockholders
|
|
8.15
|
|
8.35
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Core funds from
operations attributable to common stockholders
|
|
$
8.15
|
|
$
8.35
|
Reconciliation of
Estimated GAAP Net Income to Estimated Same-Store Net Operating
Income
(excluding impact of Life Storage Merger) — for the Year Ending
December 31, 2023 (In thousands) - Unaudited
|
|
|
For the Year Ending
December 31, 2023
|
|
Low
|
|
High
|
|
|
|
|
Net
Income
|
$
854,200
|
|
$
885,800
|
Adjusted to
exclude:
|
|
|
|
Equity in earnings of
unconsolidated joint ventures
|
(53,000)
|
|
(54,000)
|
Interest
expense
|
342,500
|
|
339,500
|
Depreciation and
amortization
|
316,000
|
|
316,000
|
Income tax
expense
|
24,000
|
|
23,000
|
General and
administrative
|
139,500
|
|
138,500
|
Management fees and
other income
|
(89,000)
|
|
(90,000)
|
Interest
income
|
(83,000)
|
|
(84,000)
|
Net tenant reinsurance
income
|
(158,500)
|
|
(159,500)
|
Non same-store rental
revenues
|
(209,000)
|
|
(209,000)
|
Non same-store
operating expenses
|
93,000
|
|
93,000
|
Total same-store net
operating income1
|
$
1,176,700
|
|
$
1,199,300
|
|
|
|
|
Same-store rental
revenues1
|
1,555,000
|
|
1,574,000
|
Same-store operating
expenses1
|
378,300
|
|
374,700
|
Total same-store net
operating income1
|
$
1,176,700
|
|
$
1,199,300
|
|
|
(1)
|
Estimated same-store
rental revenues, operating expenses and net operating income are
for the Company's 2023 same-store pool of 914 stores.
|
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SOURCE Extra Space Storage Inc.