SALT
LAKE CITY, Nov. 7, 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 nine
months ended September 30, 2023.
Highlights for the three months ended September 30, 2023:
- Achieved net income attributable to common stockholders of
$0.96 per diluted share, representing
a 41.8% decrease compared to the same period in the prior year,
primarily due to $54.2 million in
transition costs related to the Life Storage Merger (as defined
below).
- Achieved funds from operations attributable to common
stockholders and unit holders ("FFO") of $1.69 per diluted share. FFO, excluding
adjustments ("Core FFO"), was $2.02
per diluted share, representing an 8.6% decrease compared to the
same period in the prior year.
- Increased same-store revenue by 1.9% and same-store net
operating income ("NOI") by 0.7% compared to the same period in the
prior year.
- Reported ending same-store occupancy of 94.1% as of
September 30, 2023, compared to 95.1%
as of September 30, 2022.
- On July 20, 2023, the Company
closed its merger with Life Storage, Inc. ("Life Storage" or "LSI")
in an $11.6 billion all-stock
transaction (the "Life Storage Merger"), adding over 1,200 stores
to the Extra Space Storage platform.
- Completed five obligor exchange offers and consent
solicitations (together, the "Exchange Offers") through which 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.
- S&P Global upgraded all of its ratings on the Company to
BBB+ stable.
- In addition to the stores acquired through the Life Storage
Merger, the Company also acquired three operating stores for a
total cost of approximately $18.5
million.
- In conjunction with joint venture partners, acquired two
operating stores and one store at completion of construction (a
"Certificate of Occupancy store" or "C of O store") for a total
cost of approximately $44.3 million,
of which the Company invested $10.0
million.
- Originated $78.8 million in
mortgage and mezzanine bridge loans and also sold $78.8 million in mortgage bridge loans.
- Added 49 stores (43 stores net) to the Company's third-party
management platform, in addition to the stores added through the
Life Storage Merger. As of September 30,
2023, the Company managed 1,282 stores for third parties and
471 stores in unconsolidated joint ventures, for a total of 1,753
managed stores.
- Paid two dividends totaling $1.62
per share.
Highlights for the nine months ended September 30, 2023:
- Achieved net income attributable to common stockholders of
$3.78 per diluted share, representing
a 22.7% decrease compared to the same period in the prior year,
primarily due to $54.2 million in
transition costs related to the Life Storage Merger.
- Achieved FFO of $5.67 per diluted
share, and Core FFO of $6.08 per
diluted share, representing a 4.3% decrease compared to the same
period in the prior year.
- Increased same-store revenue by 3.9% and same-store NOI by 3.8%
compared to the same period in the prior year.
- Acquired four operating stores and three C of O stores for a
total cost of approximately $64.4
million.
- In conjunction with joint venture partners, acquired seven
operating stores and one C of O store for a total cost of
approximately $145.5 million, of
which the Company invested $30.3
million.
- Originated $200.4 million in
mortgage and mezzanine bridge loans and sold $137.1 million in mortgage bridge loans.
- Added 151 stores (134 stores net) to the Company's third-party
management platform, in addition to the stores added through the
Life Storage Merger.
Joe Margolis, CEO of Extra Space
Storage Inc., commented: "We successfully completed our
transformative merger with Life Storage in the quarter, and we have
smoothly integrated its stores, team and systems onto the Extra
Space Storage platform. We have reached our anticipated
G&A expense savings run rate from the merger. We have
also started optimizing pricing and marketing at the Life Storage
properties, and we are on pace to reach our total synergies run
rate during the first quarter of 2024.
Operationally, we maintained strong same-store occupancy in the
quarter, averaging 94.4%, and increased same-store revenue
1.9%. We remain confident in the durable nature of
self-storage and the strength of the Extra Space portfolio, which
was enhanced through our recent merger with Life Storage."
FFO Per Share:
The following table (unaudited) outlines the Company's FFO and
Core FFO for the three and nine months ended September 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
September
30,
|
|
For the Nine Months
Ended
September
30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
(per
share)1
|
|
|
|
(per
share)1
|
|
|
|
(per
share)1
|
|
|
|
(per
share)1
|
Net income
attributable to common stockholders
|
$
188,350
|
|
$ 0.96
|
|
$
220,719
|
|
$ 1.65
|
|
$
587,064
|
|
$ 3.78
|
|
$
656,428
|
|
$ 4.89
|
Impact of the
difference in weighted average number of shares –
diluted2
|
|
|
(0.04)
|
|
|
|
(0.11)
|
|
|
|
(0.22)
|
|
|
|
(0.30)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
depreciation
|
121,635
|
|
0.59
|
|
65,483
|
|
0.46
|
|
265,268
|
|
1.61
|
|
191,940
|
|
1.34
|
Amortization of
intangibles
|
21,270
|
|
0.10
|
|
3,279
|
|
0.02
|
|
29,049
|
|
0.18
|
|
8,741
|
|
0.06
|
Gain on real estate
transactions
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(14,249)
|
|
(0.10)
|
Unconsolidated joint
venture real estate depreciation and amortization
|
6,698
|
|
0.03
|
|
4,381
|
|
0.03
|
|
16,359
|
|
0.10
|
|
12,349
|
|
0.09
|
Distributions paid on
Series A Preferred Operating Partnership units
|
—
|
|
—
|
|
(572)
|
|
—
|
|
(159)
|
|
—
|
|
(1,716)
|
|
(0.01)
|
Income allocated to
Operating Partnership and other noncontrolling interests
|
10,506
|
|
0.05
|
|
15,407
|
|
0.11
|
|
35,982
|
|
0.22
|
|
45,249
|
|
0.32
|
FFO
|
$
348,459
|
|
$ 1.69
|
|
$
308,697
|
|
$ 2.16
|
|
$
933,563
|
|
$ 5.67
|
|
$
898,742
|
|
$ 6.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life Storage Merger
transition costs
|
54,174
|
|
0.26
|
|
—
|
|
—
|
|
54,174
|
|
0.33
|
|
—
|
|
—
|
Non-cash interest
expense related to amortization of discount on Life Storage
unsecured senior notes
|
8,228
|
|
0.04
|
|
—
|
|
—
|
|
8,228
|
|
0.05
|
|
—
|
|
—
|
Amortization of other
intangibles related to the Life Storage merger, net of tax
benefit
|
4,960
|
|
0.03
|
|
—
|
|
—
|
|
4,960
|
|
0.03
|
|
—
|
|
—
|
Transaction costs -
Bargold
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,465
|
|
0.01
|
Property losses and
tenant reinsurance claims due to hurricanes, net
|
—
|
|
—
|
|
6,200
|
|
0.05
|
|
—
|
|
—
|
|
6,200
|
|
0.05
|
CORE
FFO
|
$
415,821
|
|
$ 2.02
|
|
$
314,897
|
|
$ 2.21
|
|
$ 1,000,925
|
|
$ 6.08
|
|
$
906,407
|
|
$ 6.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of shares – diluted3
|
205,740,209
|
|
|
|
142,799,777
|
|
|
|
164,505,514
|
|
|
|
142,838,642
|
|
|
|
|
(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 nine months ended
September 30, 2023 and 2022 (amounts
shown in thousands, except store count data)1:
|
For the Three
Months
Ended September
30,
|
|
Percent
|
|
For the Nine
Months
Ended September
30,
|
|
Percent
|
|
2023
|
|
2022
|
|
Change
|
|
2023
|
|
2022
|
|
Change
|
Same-store property
revenues2
|
|
|
|
|
|
|
|
|
|
|
|
Net rental
income
|
$
382,006
|
|
$
376,268
|
|
1.5 %
|
|
$ 1,127,481
|
|
$ 1,088,337
|
|
3.6 %
|
Other income
|
15,940
|
|
14,370
|
|
10.9 %
|
|
44,012
|
|
39,322
|
|
11.9 %
|
Total same-store
revenues
|
$
397,946
|
|
$
390,638
|
|
1.9 %
|
|
$ 1,171,493
|
|
$ 1,127,659
|
|
3.9 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-store operating
expenses2
|
|
|
|
|
|
|
|
|
|
|
|
Payroll and
benefits
|
$ 21,605
|
|
$ 21,239
|
|
1.7 %
|
|
$ 63,233
|
|
$ 61,955
|
|
2.1 %
|
Marketing
|
6,971
|
|
5,793
|
|
20.3 %
|
|
19,841
|
|
17,481
|
|
13.5 %
|
Office
expense3
|
12,171
|
|
11,393
|
|
6.8 %
|
|
36,120
|
|
33,307
|
|
8.4 %
|
Property operating
expense4
|
8,935
|
|
8,786
|
|
1.7 %
|
|
26,712
|
|
25,643
|
|
4.2 %
|
Repairs and
maintenance
|
5,739
|
|
5,863
|
|
(2.1) %
|
|
17,930
|
|
19,603
|
|
(8.5) %
|
Property
taxes
|
38,018
|
|
36,229
|
|
4.9 %
|
|
106,633
|
|
104,594
|
|
1.9 %
|
Insurance
|
4,874
|
|
3,731
|
|
30.6 %
|
|
12,462
|
|
9,311
|
|
33.8 %
|
Total same-store
operating expenses
|
$ 98,313
|
|
$ 93,034
|
|
5.7 %
|
|
$
282,931
|
|
$
271,894
|
|
4.1 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-store net
operating income2
|
$
299,633
|
|
$
297,604
|
|
0.7 %
|
|
$
888,562
|
|
$
855,765
|
|
3.8 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-store square foot
occupancy as of quarter end
|
94.1 %
|
|
95.1 %
|
|
|
|
94.1 %
|
|
95.1 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average same-store
square foot occupancy
|
94.4 %
|
|
95.4 %
|
|
|
|
94.0 %
|
|
94.9 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
Details related to the same-store performance of stores by
metropolitan statistical area ("MSA") for the three and nine months
ended September 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 previously announced merger with Life Storage.
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.
Details related to Life Storage's same-store pool performance in
the third quarter 2023, 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
September 30, 2023
|
|
Closed/Completed
Subsequent to
September 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
|
|
4
|
|
$23,150
|
|
1
|
|
$12,000
|
|
3
|
|
$19,325
|
|
8
|
|
$54,475
|
|
—
|
|
$ —
|
C of O and Development
Stores1
|
|
3
|
|
41,234
|
|
—
|
|
—
|
|
3
|
|
41,331
|
|
6
|
|
82,565
|
|
6
|
|
74,236
|
EXR Investment in Wholly-Owned
Stores
|
|
7
|
|
64,384
|
|
1
|
|
12,000
|
|
6
|
|
60,656
|
|
14
|
|
137,040
|
|
6
|
|
74,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint Venture Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXR Investment in JV
Acquisition of Operating Stores1
|
|
7
|
|
23,268
|
|
—
|
|
—
|
|
—
|
|
—
|
|
7
|
|
23,268
|
|
—
|
|
—
|
EXR Investment in JV
Development and C of O1
|
|
1
|
|
7,015
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
7,015
|
|
10
|
|
126,303
|
EXR Investment in Joint
Ventures
|
|
8
|
|
30,283
|
|
—
|
|
—
|
|
—
|
|
—
|
|
8
|
|
30,283
|
|
10
|
|
126,303
|
Total EXR Investment
|
|
15
|
|
$94,667
|
|
1
|
|
$12,000
|
|
6
|
|
$60,656
|
|
22
|
|
$167,323
|
|
16
|
|
$200,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
Bridge Loans:
During the three months ended September
30, 2023, the Company originated $78.8 million in bridge loans and also sold
$78.8 million in bridge loans,
resulting in outstanding balances of approximately $534.8 million at quarter end. The Company has an
additional $110.2 million in bridge
loans that closed subsequent to quarter end or are under agreement
to close in 2023 and an additional $171.9
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 September 30, 2023, the Company managed 1,282 stores
for third-party owners and 471 stores owned in unconsolidated joint
ventures, for a total of 1,753 stores under management. The
Company is the largest self-storage management company in
the United States.
Balance Sheet:
During the three months ended September
30, 2023, the Company completed multiple capital
transactions in conjunction with the Life Storage Merger. The
Company retired $1.2 billion in
balances on Life Storage's line of credit which included
$375.0 million that 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.
These transactions were funded by draws on the Company's revolving
credit facility and on an undrawn term loan within the credit
facility of $1.0 billion, which was
added to the credit facility in the second quarter of 2023.
On July 25, 2023, the Company
completed 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.
Upon completion of the Exchange Offers, on July 25, 2023, S&P Global upgraded all of its
ratings on the Company to BBB+ stable. The upgrade resulted in
reductions of the interest rate spreads of the various tranches of
debt in the Company's credit facility. Revised terms of the credit
facility, as well as terms of the exchanged senior notes are
included in the detailed debt schedule in the Company's
supplemental financial information published on the Company's
Investor Relations website at https://ir.extraspace.com/.
During the three months ended September
30, 2023, the Company did not issue any shares on its ATM
program, and it currently has $800.0
million available for issuance. Likewise, the Company did
not repurchase any shares of common stock using its stock
repurchase program during the quarter, and as of September 30, 2023, the Company had authorization
to purchase up to an additional $337.0
million under the program.
As of September 30, 2023, the Company's percentage of
fixed-rate debt to total debt was 70.3%. Net of the impact of
variable rate receivables, the effective fixed-rate debt to total
debt was 75.1%. The weighted average interest rates of the
Company's fixed and variable-rate debt were 3.6% and 6.4%,
respectively. The combined weighted average interest rate was 4.4%
with a weighted average maturity of approximately 4.7 years.
Dividends:
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.
On September 29, 2023, the Company
paid a third quarter common stock dividend of $0.61 per share to stockholders of record at the
close of business on September 15,
2023.
The pre-closing merger dividend was attributed to the total
amount paid for the third quarter, so that between the pre-closing
merger dividend and the September 29,
2023 quarterly dividend, Extra Space stockholders received a
total dividend of $1.62 per share,
consistent with the amount that the Company's board of directors
declared for the previous quarter and would have otherwise declared
for the entire third quarter but for the Life Storage Merger
closing.
Outlook:
The following table outlines the Company's prior period and
revised Core FFO estimates and annual assumptions for the year
ending December 31, 20231,
INCLUDING THE IMPACT OF THE LIFE STORAGE MERGER.
|
Ranges for
2023
Annual
Assumptions
|
|
Prior Ranges for
2023
Annual
Assumptions
|
|
Notes
|
|
(November 7,
2023)
|
|
(August 3,
2023)
|
|
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
|
Core FFO
|
$8.05
|
|
$8.20
|
|
$8.00
|
|
$8.25
|
|
Includes dilutive
impact of Life Storage Merger
|
Dilution per share from
C of O and value add acquisitions
|
$0.23
|
|
$0.23
|
|
$0.23
|
|
$0.23
|
|
|
Same-store revenue
growth
|
2.75 %
|
|
3.50 %
|
|
2.50 %
|
|
3.50 %
|
|
Same-store pool of 914
stores
|
Same-store expense
growth
|
4.00 %
|
|
5.00 %
|
|
3.50 %
|
|
4.50 %
|
|
Same-store pool of 914
stores
|
Same-store NOI
growth
|
2.25 %
|
|
3.25 %
|
|
2.00 %
|
|
3.50 %
|
|
Same-store pool of 914
stores
|
Weighted average
one-month SOFR
|
5.02 %
|
|
5.02 %
|
|
5.05 %
|
|
5.05 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tenant reinsurance
income
|
$178,000,000
|
|
$180,000,000
|
|
$158,500,000
|
|
$159,500,000
|
|
|
Management fees and
other income
|
$102,000,000
|
|
$103,000,000
|
|
$89,000,000
|
|
$90,000,000
|
|
|
Interest
income
|
$84,000,000
|
|
$85,000,000
|
|
$83,000,000
|
|
$84,000,000
|
|
Includes interest from
bridge loans and dividends from NexPoint preferred
investment
|
General and
administrative expenses
|
$149,500,000
|
|
$151,000,000
|
|
$138,500,000
|
|
$139,500,000
|
|
Includes non-cash
compensation
|
Average monthly cash
balance
|
$118,000,000
|
|
$118,000,000
|
|
$50,000,000
|
|
$50,000,000
|
|
|
Equity in earnings of
real estate ventures
|
$54,500,000
|
|
$55,500,000
|
|
$53,000,000
|
|
$54,000,000
|
|
Includes dividends from
SmartStop preferred investments
|
Interest
expense
|
$418,500,000
|
|
$421,000,000
|
|
$339,500,000
|
|
$342,500,000
|
|
Excludes non-cash
interest expense shown below
|
Non-cash interest
expense related to amortization of discount on Life Storage
unsecured senior notes
|
$18,500,000
|
|
$19,000,000
|
|
N/A
|
|
N/A
|
|
Amortization of LSI
debt mark-to-market; excluded from Core FFO
|
Income Tax
Expense
|
$21,500,000
|
|
$22,500,000
|
|
$23,000,000
|
|
$24,000,000
|
|
Taxes associated with
the Company's taxable REIT subsidiary
|
Acquisitions
|
$185,000,000
|
|
$185,000,000
|
|
$200,000,000
|
|
$200,000,000
|
|
Represents the
Company's investment and excludes Life Storage Merger
|
Bridge loans
outstanding
|
$550,000,000
|
|
$550,000,000
|
|
$600,000,000
|
|
$600,000,000
|
|
Represents the
Company's average retained loan balances for 2023
|
Weighted average share
count
|
179,000,000
|
|
179,000,000
|
|
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.
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
Wednesday, November 8, 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/BI89a07bf824bc43fbb3c4b4ac570a6b43.
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 November
8, 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 impact of the 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 fully
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 transaction costs. It also includes certain
costs associated with the Life Storage Merger including transition
costs, non-cash interest related to the fair value of debt and
amortization of other intangibles, net of tax benefit.
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 September 30, 2023, the Company owned
and/or operated 3,651 self-storage stores in 42 states and
Washington, D.C. The Company's
stores comprise approximately 2.5 million units and approximately
279.0 million square feet of rentable space operating under
the Extra Space, Life Storage and Storage Express brands. 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. It is the largest
operator of self-storage properties in the United States.
Extra Space Storage
Inc.
Condensed
Consolidated Balance Sheets
(In thousands,
except share data)
|
|
|
September 30,
2023
|
|
December 31,
2022
|
|
(Unaudited)
|
|
|
Assets:
|
|
|
|
Real estate assets,
net
|
$
24,556,678
|
|
$
9,997,978
|
Real estate assets -
operating lease right-of-use assets
|
248,483
|
|
221,725
|
Investments in
unconsolidated real estate entities
|
1,077,548
|
|
582,412
|
Investments in debt
securities and notes receivable
|
891,311
|
|
858,049
|
Cash and cash
equivalents
|
216,121
|
|
92,868
|
Other assets,
net
|
635,677
|
|
414,426
|
Total
assets
|
$
27,625,818
|
|
$
12,167,458
|
Liabilities,
Noncontrolling Interests and Equity:
|
|
|
|
Notes payable,
net
|
$
1,276,555
|
|
$
1,288,555
|
Unsecured term loans,
net
|
3,247,076
|
|
2,340,116
|
Unsecured senior
notes, net
|
5,805,448
|
|
2,757,791
|
Revolving lines of
credit
|
623,000
|
|
945,000
|
Operating lease
liabilities
|
242,441
|
|
229,035
|
Cash distributions in
unconsolidated real estate ventures
|
69,445
|
|
67,352
|
Accounts payable and
accrued expenses
|
430,124
|
|
171,680
|
Other
liabilities
|
365,028
|
|
289,655
|
Total
liabilities
|
12,059,117
|
|
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, 211,276,086
and 133,921,020 shares
issued and outstanding at September 30, 2023 and
December 31, 2022,
respectively
|
2,113
|
|
1,339
|
Additional paid-in
capital
|
14,742,973
|
|
3,345,332
|
Accumulated other
comprehensive income
|
44,912
|
|
48,798
|
Accumulated
deficit
|
(252,877)
|
|
(135,872)
|
Total Extra Space
Storage Inc. stockholders' equity
|
14,537,121
|
|
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
|
806,640
|
|
557,175
|
Total noncontrolling
interests and equity
|
15,566,701
|
|
4,078,274
|
Total liabilities,
noncontrolling interests and equity
|
$
27,625,818
|
|
$
12,167,458
|
Consolidated
Statement of Operations for the Three and Nine Months Ended
September 30, 2023 and 2022
(In thousands,
except share and per share data) - Unaudited
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Revenues:
|
|
|
|
|
|
|
|
Property
rental
|
$
650,887
|
|
$ 428,787
|
|
$ 1,525,596
|
|
$
1,216,639
|
Tenant
reinsurance
|
69,128
|
|
47,869
|
|
165,265
|
|
138,093
|
Management fees and
other income
|
28,019
|
|
22,246
|
|
71,609
|
|
62,720
|
Total
revenues
|
748,034
|
|
498,902
|
|
1,762,470
|
|
1,417,452
|
Expenses:
|
|
|
|
|
|
|
|
Property
operations
|
185,194
|
|
114,577
|
|
416,997
|
|
322,371
|
Tenant
reinsurance
|
19,130
|
|
10,770
|
|
37,701
|
|
25,349
|
Transaction
costs
|
—
|
|
—
|
|
—
|
|
1,465
|
Life Storage Merger
transition costs
|
54,174
|
|
—
|
|
54,174
|
|
—
|
General and
administrative
|
37,406
|
|
32,275
|
|
107,011
|
|
93,288
|
Depreciation and
amortization
|
152,338
|
|
71,423
|
|
309,914
|
|
208,396
|
Total
expenses
|
448,242
|
|
229,045
|
|
925,797
|
|
650,869
|
Gain on real estate
transactions
|
—
|
|
—
|
|
—
|
|
14,249
|
Income from
operations
|
299,792
|
|
269,857
|
|
836,673
|
|
780,832
|
Interest
expense
|
(122,899)
|
|
(56,245)
|
|
(289,370)
|
|
(146,249)
|
Non-cash interest
expense related to amortization of discount on Life Storage
unsecured senior notes
|
(8,228)
|
|
—
|
|
(8,228)
|
|
—
|
Interest
income
|
22,092
|
|
18,125
|
|
62,607
|
|
52,174
|
Income before equity
in earnings and dividend income from unconsolidated real estate
entities and income tax expense
|
190,757
|
|
231,737
|
|
601,682
|
|
686,757
|
Equity in earnings and
dividend income from unconsolidated real estate entities
|
15,043
|
|
11,149
|
|
38,602
|
|
30,436
|
Income tax
expense
|
(6,944)
|
|
(6,760)
|
|
(17,238)
|
|
(15,516)
|
Net income
|
198,856
|
|
236,126
|
|
623,046
|
|
701,677
|
Net income allocated
to Preferred Operating Partnership noncontrolling
interests
|
(2,253)
|
|
(4,454)
|
|
(6,761)
|
|
(13,278)
|
Net income allocated
to Operating Partnership and other noncontrolling
interests
|
(8,253)
|
|
(10,953)
|
|
(29,221)
|
|
(31,971)
|
Net income attributable
to common stockholders
|
$
188,350
|
|
$ 220,719
|
|
$
587,064
|
|
$
656,428
|
Earnings per common
share
|
|
|
|
|
|
|
|
Basic
|
$
0.96
|
|
$
1.65
|
|
$
3.78
|
|
$
4.89
|
Diluted
|
$
0.96
|
|
$
1.65
|
|
$
3.78
|
|
$
4.89
|
Weighted average number
of shares
|
|
|
|
|
|
|
|
Basic
|
195,324,444
|
|
133,913,652
|
|
155,112,071
|
|
134,094,490
|
Diluted
|
195,328,020
|
|
141,504,215
|
|
155,116,149
|
|
141,567,845
|
Cash dividends paid per
common share
|
$
1.62
|
|
$
1.50
|
|
$
4.86
|
|
$
4.50
|
Reconciliation of
GAAP Net Income to Total Same-Store Net Operating Income — for the
Three and Nine Months Ended September 30, 2023 and 2022
(In thousands) - Unaudited
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net
Income
|
$
198,856
|
|
$
236,126
|
|
$
623,046
|
|
$
701,677
|
Adjusted to
exclude:
|
|
|
|
|
|
|
|
Gain on real estate
transactions
|
—
|
|
—
|
|
—
|
|
(14,249)
|
Equity in earnings and
dividend income from unconsolidated real estate entities
|
(15,043)
|
|
(11,149)
|
|
(38,602)
|
|
(30,436)
|
Interest
expense
|
122,899
|
|
56,245
|
|
289,370
|
|
146,249
|
Non-cash interest
expense related to amortization of discount on Life Storage
unsecured senior notes
|
8,228
|
|
—
|
|
8,228
|
|
—
|
Depreciation and
amortization
|
152,338
|
|
71,423
|
|
309,914
|
|
208,396
|
Income tax
expense
|
6,944
|
|
6,760
|
|
17,238
|
|
15,516
|
Transaction
costs
|
—
|
|
—
|
|
—
|
|
1,465
|
Life Storage Merger
transition costs
|
54,174
|
|
—
|
|
54,174
|
|
—
|
General and
administrative
|
37,406
|
|
32,275
|
|
107,011
|
|
93,288
|
Management fees, other
income and interest income
|
(50,111)
|
|
(40,371)
|
|
(134,216)
|
|
(114,894)
|
Net tenant
insurance
|
(49,998)
|
|
(37,099)
|
|
(127,564)
|
|
(112,744)
|
Non same-store rental
revenue
|
(252,941)
|
|
(38,149)
|
|
(354,103)
|
|
(88,980)
|
Non same-store
operating expense
|
86,881
|
|
21,543
|
|
134,066
|
|
50,477
|
Total same-store net
operating income
|
$
299,633
|
|
$
297,604
|
|
$
888,562
|
|
$
855,765
|
|
|
|
|
|
|
|
|
Same-store rental
revenues
|
397,946
|
|
390,638
|
|
1,171,493
|
|
1,127,659
|
Same-store operating
expenses
|
98,313
|
|
93,034
|
|
282,931
|
|
271,894
|
Same-store net
operating income
|
$
299,633
|
|
$
297,604
|
|
$
888,562
|
|
$
855,765
|
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
|
|
$
4.64
|
|
$
4.80
|
Income allocated to
noncontrolling interest - Preferred Operating Partnership and
Operating Partnership
|
|
0.28
|
|
0.28
|
Net income attributable
to common stockholders for diluted computations
|
|
4.92
|
|
5.08
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Real estate
depreciation
|
|
2.21
|
|
2.21
|
Amortization of
intangibles
|
|
0.29
|
|
0.29
|
Unconsolidated joint
venture real estate depreciation and amortization
|
|
0.13
|
|
0.13
|
Funds from
operations attributable to common stockholders
|
|
7.55
|
|
7.70
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Life Storage Merger
transition costs
|
|
0.33
|
|
0.33
|
Non-cash interest
expense related to amortization of discount on Life Storage
unsecured senior notes
|
|
0.11
|
|
0.11
|
Amortization of other
intangibles related to the Life Storage merger, net of tax
benefit
|
|
0.07
|
|
0.07
|
Core funds from
operations attributable to common stockholders
|
|
$
8.05
|
|
$
8.20
|
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
|
$
892,567
|
|
$
919,067
|
Adjusted to
exclude:
|
|
|
|
Equity in earnings of
unconsolidated joint ventures
|
(54,500)
|
|
(55,500)
|
Interest
expense
|
421,000
|
|
418,500
|
Non-cash interest
expense related to amortization of discount on Life Storage
unsecured senior notes
|
19,000
|
|
18,500
|
Depreciation and
amortization
|
470,858
|
|
470,858
|
Income tax
expense
|
22,500
|
|
21,500
|
General and
administrative
|
151,000
|
|
149,500
|
Management fees and
other income
|
(102,000)
|
|
(103,000)
|
Interest
income
|
(84,000)
|
|
(85,000)
|
Net tenant reinsurance
income
|
(178,000)
|
|
(180,000)
|
Non same-store rental
revenues
|
(609,059)
|
|
(609,059)
|
Non same-store
operating expenses
|
228,634
|
|
228,634
|
Total same-store net
operating income1
|
$
1,178,000
|
|
$
1,194,000
|
|
|
|
|
Same-store rental
revenues1
|
1,558,000
|
|
1,570,000
|
Same-store operating
expenses1
|
380,000
|
|
376,000
|
Total same-store net
operating income1
|
$
1,178,000
|
|
$
1,194,000
|
|
|
(1)
|
Estimated same-store
rental revenues, operating expenses and net operating income are
for the Company's 2023 same-store pool of 914 stores.
|
View original
content:https://www.prnewswire.com/news-releases/extra-space-storage-inc-reports-2023-third-quarter-results-301980609.html
SOURCE Extra Space Storage Inc.