SALT
LAKE CITY, Feb. 27, 2024 /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 months and
year ended December 31, 2023.
Highlights for the three months ended December 31, 2023:
- Achieved net income attributable to common stockholders of
$1.02 per diluted share, representing
a 32.9% decrease compared to the same period in the prior year,
primarily due to $30.6 million in
transition costs, non-cash interest and amortization of intangibles
related to the Life Storage Merger (as defined below).
- Achieved funds from operations attributable to common
stockholders and unit holders ("FFO") of $1.89 per diluted share. FFO, excluding
adjustments ("Core FFO"), was $2.02
per diluted share, representing a 3.3% decrease compared to the
same period in the prior year.
- Increased same-store revenue by 0.8% and same-store net
operating income ("NOI") decreased by (0.1)% compared to the same
period in the prior year.
- Reported ending same-store occupancy of 93.0% as of
December 31, 2023, compared to 94.1%
as of December 31, 2022.
- The Company acquired three operating stores and four stores at
completion of construction ("Certificate of Occupancy stores" or "C
of O stores") for a total cost of approximately $82.7 million.
- In conjunction with a joint venture partner, acquired one
operating store for a total cost of approximately $25.0 million, of which the Company invested
$1.0 million.
- Originated $129.2 million in
mortgage and mezzanine bridge loans and sold $43.9 million in mortgage bridge loans.
- Added 74 stores (55 stores net) to the Company's third-party
management platform. As of December 31,
2023, the Company managed 1,337 stores for third parties and
472 stores in unconsolidated joint ventures, for a total of 1,809
managed stores.
- Paid a quarterly dividend of $1.62 per share.
Highlights for the year ended December
31, 2023:
- Achieved net income attributable to common stockholders of
$4.74 per diluted share, representing
a 26.1% decrease compared to the same period in the prior year,
primarily due to $97.9 million in
transition costs, non-cash interest and amortization of intangibles
related to the Life Storage Merger.
- Achieved FFO of $7.56 per diluted
share, and Core FFO of $8.10 per
diluted share, representing a 4.0% decrease compared to the same
period in the prior year.
- Increased same-store revenue by 3.1% and same-store NOI by 2.8%
compared to the same period in the prior year.
- 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.
- In addition to the stores acquired through the Life Storage
Merger, the Company acquired seven operating stores and seven C of
O stores for a total cost of approximately $147.1 million.
- In conjunction with joint venture partners, acquired eight
operating stores and one C of O store for a total cost of
approximately $170.5 million, of
which the Company invested $31.3
million.
- Originated $329.6 million in
mortgage and mezzanine bridge loans and sold $181.0 million in mortgage bridge loans.
- Added 225 stores (189 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 had a solid quarter, focusing on
optimizing the performance of the recently added Life Storage
assets, while maximizing the performance of the legacy Extra Space
Storage locations. We maintained healthy in-place rents and strong
same-store occupancy in the quarter, averaging 93.4%, which drove
positive same-store revenue growth.
Turning to 2024, we anticipate stronger revenue growth from the
Life Storage assets, which are benefiting from the sophistication
of the Extra Space platform. While we expect a headwind from lower
new customer rates, we are confident in the durability of
self-storage, our highly diversified portfolio and our platform's
ability to capture customer volume when sector demand
accelerates."
FFO Per Share:
The following table (unaudited) outlines the Company's FFO and
Core FFO for the three months and year ended December 31, 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 December
31,
|
|
For the Year
Ended December
31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
(per
share)1
|
|
|
|
(per
share)1
|
|
|
|
(per
share)1
|
|
|
|
(per
share)1
|
Net income
attributable to
common stockholders
|
$
216,134
|
|
$ 1.02
|
|
$
204,260
|
|
$ 1.52
|
|
$
803,198
|
|
$ 4.74
|
|
$
860,688
|
|
$ 6.41
|
Impact of the
difference in
weighted average number of
shares – diluted2
|
|
|
(0.05)
|
|
|
|
(0.10)
|
|
|
|
(0.25)
|
|
|
|
(0.40)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
depreciation
|
152,881
|
|
0.69
|
|
71,983
|
|
0.50
|
|
418,149
|
|
2.34
|
|
263,923
|
|
1.85
|
Amortization of
intangibles
|
30,246
|
|
0.14
|
|
4,882
|
|
0.03
|
|
59,295
|
|
0.33
|
|
13,623
|
|
0.10
|
Gain on real estate
transactions
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(14,249)
|
|
(0.10)
|
Unconsolidated joint
venture real
estate depreciation and
amortization
|
8,041
|
|
0.04
|
|
4,295
|
|
0.03
|
|
24,400
|
|
0.14
|
|
16,644
|
|
0.12
|
Distributions paid on
Series A
Preferred Operating Partnership
units
|
—
|
|
—
|
|
(572)
|
|
—
|
|
(159)
|
|
—
|
|
(2,288)
|
|
(0.02)
|
Income allocated to
Operating
Partnership and other
noncontrolling interests
|
11,273
|
|
0.05
|
|
15,219
|
|
0.11
|
|
47,255
|
|
0.26
|
|
60,468
|
|
0.42
|
FFO
|
$
418,575
|
|
$ 1.89
|
|
$
300,067
|
|
$ 2.09
|
|
$ 1,352,138
|
|
$ 7.56
|
|
$ 1,198,809
|
|
$ 8.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life Storage Merger
transition
costs
|
12,558
|
|
0.05
|
|
—
|
|
—
|
|
66,732
|
|
0.37
|
|
—
|
|
—
|
Non-cash interest
expense related
to amortization of discount on
Life Storage unsecured senior
notes
|
10,558
|
|
0.05
|
|
—
|
|
—
|
|
18,786
|
|
0.10
|
|
—
|
|
—
|
Amortization of other
intangibles
related to the Life Storage
Merger, net of tax benefit
|
7,440
|
|
0.03
|
|
—
|
|
—
|
|
12,400
|
|
0.07
|
|
—
|
|
—
|
Transaction costs -
Bargold
|
—
|
|
—
|
|
83
|
|
—
|
|
—
|
|
—
|
|
1,548
|
|
0.01
|
Property losses and
tenant
reinsurance claims due to
hurricanes, net
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,200
|
|
0.05
|
CORE
FFO
|
$
449,131
|
|
$ 2.02
|
|
$
300,150
|
|
$ 2.09
|
|
$ 1,450,056
|
|
$ 8.10
|
|
$ 1,206,557
|
|
$ 8.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of
shares – diluted3
|
221,916,681
|
|
|
|
143,551,135
|
|
|
|
178,969,993
|
|
|
|
143,009,565
|
|
|
|
|
(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 months and year ended
December 31, 2023 and 2022 (amounts
shown in thousands, except store count data)1:
|
For the Three
Months
Ended December 31,
|
|
Percent
|
|
For the Year
Ended
December 31,
|
|
Percent
|
|
2023
|
|
2022
|
|
Change
|
|
2023
|
|
2022
|
|
Change
|
Same-store property
revenues2
|
|
|
|
|
|
|
|
|
|
|
|
Net rental
income
|
$
376,862
|
|
$
374,061
|
|
0.7 %
|
|
$ 1,503,441
|
|
$ 1,461,509
|
|
2.9 %
|
Other income
|
14,891
|
|
14,568
|
|
2.2 %
|
|
58,845
|
|
53,856
|
|
9.3 %
|
Total same-store
revenues
|
$
391,753
|
|
$
388,629
|
|
0.8 %
|
|
$ 1,562,286
|
|
$ 1,515,365
|
|
3.1 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-store operating
expenses2
|
|
|
|
|
|
|
|
|
|
|
|
Payroll and
benefits
|
$ 21,910
|
|
$ 21,392
|
|
2.4 %
|
|
$ 85,090
|
|
$ 83,286
|
|
2.2 %
|
Marketing
|
7,056
|
|
5,721
|
|
23.3 %
|
|
26,885
|
|
23,191
|
|
15.9 %
|
Office
expense3
|
11,928
|
|
11,166
|
|
6.8 %
|
|
48,025
|
|
44,450
|
|
8.0 %
|
Property operating
expense4
|
7,829
|
|
8,472
|
|
(7.6) %
|
|
34,514
|
|
34,090
|
|
1.2 %
|
Repairs and
maintenance
|
6,182
|
|
5,410
|
|
14.3 %
|
|
24,095
|
|
24,999
|
|
(3.6) %
|
Property
taxes
|
33,700
|
|
34,025
|
|
(1.0) %
|
|
140,306
|
|
138,594
|
|
1.2 %
|
Insurance
|
4,794
|
|
3,653
|
|
31.2 %
|
|
17,251
|
|
12,960
|
|
33.1 %
|
Total same-store
operating expenses
|
$ 93,399
|
|
$ 89,839
|
|
4.0 %
|
|
$
376,166
|
|
$
361,570
|
|
4.0 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-store net
operating income2
|
$
298,354
|
|
$
298,790
|
|
(0.1) %
|
|
$ 1,186,120
|
|
$ 1,153,795
|
|
2.8 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-store square foot
occupancy as of quarter end
|
93.0 %
|
|
94.1 %
|
|
|
|
93.0 %
|
|
94.1 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average same-store
square foot occupancy
|
93.4 %
|
|
94.6 %
|
|
|
|
93.9 %
|
|
94.8 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Properties included in
same-store5
|
913
|
|
913
|
|
|
|
913
|
|
913
|
|
|
|
|
(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.
|
(5)
|
The Company removed one
store from the same-store pool due to a fire, reducing the property
count of the same-store pool from 914 to 913.
|
Details related to the same-store performance of stores by
metropolitan statistical area ("MSA") for the three months and
years ended December 31, 2023 and
2022 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:
The following table (unaudited) outlines the Company's
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
December 31, 2023
|
|
Closed/Completed
Subsequent to
December 31, 2023
|
|
Scheduled to
Still
Close/Complete
in 2024
|
|
Total
2024
|
|
To
Close/Complete
in 2025
|
Wholly-Owned
Investment
|
|
Stores
|
|
Price
|
|
Stores
|
|
Price
|
|
Stores
|
|
Price
|
|
Stores
|
|
Price
|
|
Stores
|
|
Price
|
Operating
Stores
|
|
7
|
|
$ 48,550
|
|
3
|
|
$
15,575
|
|
3
|
|
$ 18,300
|
|
6
|
|
$
33,875
|
|
—
|
|
$
—
|
C of O and
Development
Stores1
|
|
7
|
|
98,565
|
|
—
|
|
—
|
|
4
|
|
47,536
|
|
4
|
|
47,536
|
|
—
|
|
—
|
EXR Investment in
Wholly-
Owned Stores
|
|
14
|
|
147,115
|
|
3
|
|
15,575
|
|
7
|
|
65,836
|
|
10
|
|
81,411
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint Venture
Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXR Investment in
JV
Acquisition of Operating
Stores1
|
|
8
|
|
24,258
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
EXR Investment in
JV
Development and C of O1
|
|
1
|
|
7,015
|
|
1
|
|
19,395
|
|
8
|
|
92,941
|
|
9
|
|
112,336
|
|
1
|
|
13,968
|
EXR Investment in
Joint
Ventures
|
|
9
|
|
31,273
|
|
1
|
|
19,395
|
|
8
|
|
92,941
|
|
9
|
|
112,336
|
|
1
|
|
13,968
|
Total EXR
Investment
|
|
23
|
|
$
178,388
|
|
4
|
|
$
34,970
|
|
15
|
|
$
158,777
|
|
19
|
|
$
193,747
|
|
1
|
|
$
13,968
|
|
|
(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 December
31, 2023, the Company originated $129.2 million in bridge loans and sold
$43.9 million in bridge loans,
resulting in outstanding balances of approximately $594.7 million at quarter end. The Company has an
additional $288.3 million in bridge
loans that closed subsequent to quarter end or are 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 December 31, 2023, the
Company managed 1,337 stores for third-party owners and 472 stores
owned in unconsolidated joint ventures, for a total of 1,809 stores
under management. The Company is the largest self-storage
management company in the United
States.
Balance Sheet:
During the three months ended December
31, 2023, the Company completed a public bond offering
issuing $600.0 million of 5.9% senior
unsecured notes due 2031. Subsequent to quarter end, the Company
completed another public bond offering issuing $600.0 million of 5.4% senior unsecured notes due
2034.
During the three months ended December
31, 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 December 31, 2023, the Company had authorization
to purchase up to an additional $500.0
million under the program.
As of December 31, 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 78.6%. The weighted average interest rates of the
Company's fixed and variable-rate debt were 3.9% and 6.6%,
respectively. The combined weighted average interest rate was 4.6%
with a weighted average maturity of approximately 4.8 years.
Dividends:
On December 29, 2023, the Company
paid a fourth quarter common stock dividend of $1.62 per share to stockholders of record at the
close of business on December 15,
2023.
Outlook:
The following table outlines the Company's Core FFO estimates
and annual assumptions for the year ending December 31, 20241.
|
Ranges for
2024 Annual
Assumptions
|
|
Notes
|
|
(February 27,
2024)
|
|
|
|
Low
|
|
High
|
|
|
Core FFO
|
$7.85
|
|
$8.15
|
|
|
Dilution per share from
C of O and value add acquisitions
|
$0.20
|
|
$0.20
|
|
|
EXR Same-store revenue
growth
|
(2.00) %
|
|
0.50 %
|
|
Same-store pool of
1,078 stores
|
EXR Same-store expense
growth
|
4.00 %
|
|
5.50 %
|
|
Same-store pool of
1,078 stores
|
EXR Same-store NOI
growth
|
(4.25) %
|
|
(0.50) %
|
|
Same-store pool of
1,078 stores
|
|
|
|
|
|
|
Legacy LSI Same-store
revenue growth
|
2.00 %
|
|
4.50 %
|
|
Same-store pool of 664
stores
|
Legacy LSI Same-store
expense growth
|
6.25 %
|
|
7.75 %
|
|
Same-store pool of 664
stores
|
Legacy LSI Same-store
NOI growth
|
(0.25) %
|
|
4.00 %
|
|
Same-store pool of 664
stores
|
|
|
|
|
|
|
Weighted average
one-month SOFR
|
4.75 %
|
|
4.75 %
|
|
|
|
|
|
|
|
|
Net tenant reinsurance
income
|
$248,000,000
|
|
$251,000,000
|
|
|
Management fees and
other income
|
$116,500,000
|
|
$117,500,000
|
|
|
Interest
income
|
$95,000,000
|
|
$96,000,000
|
|
Includes interest from
bridge loans and
dividends from NexPoint preferred
investment
|
General and
administrative expenses
|
$180,500,000
|
|
$182,500,000
|
|
Includes non-cash
compensation
|
Average monthly cash
balance
|
$65,000,000
|
|
$65,000,000
|
|
|
Equity in earnings of
real estate ventures
|
$66,000,000
|
|
$67,000,000
|
|
Includes dividends from
SmartStop
preferred investments
|
Interest
expense
|
$521,000,000
|
|
$525,000,000
|
|
Excludes non-cash
interest expense
shown below
|
Non-cash interest
expense related to amortization of discount
on Life Storage unsecured senior notes
|
$43,000,000
|
|
$44,000,000
|
|
Amortization of LSI
debt mark-to-
market; excluded from Core FFO
|
Income Tax
Expense
|
$31,000,000
|
|
$32,000,000
|
|
Taxes associated with
the Company's
taxable REIT subsidiary
|
Acquisitions
|
$250,000,000
|
|
$250,000,000
|
|
Represents the
Company's investment
|
Bridge loans
outstanding
|
$750,000,000
|
|
$750,000,000
|
|
Represents the
Company's average
retained loan balances for 2024
|
Weighted average share
count
|
221,800,000
|
|
221,800,000
|
|
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, February 28,
2024, 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/BI4f9ef07b182b4586b2cd3b568dcf5801.
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 February
28, 2024.
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;
- changes in global financial markets and increases in interest
rates;
- availability of financing and capital, the levels of debt that
we maintain and our credit ratings;
- risks associated with acquisitions, dispositions and
development of properties, including increased development costs
due to additional regulatory requirements related to climate change
and other factors;
- 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 services such as tenant reinsurance, 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 amortization of discount on
unsecured senior notes 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 913 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 December 31, 2023, the Company owned and/or
operated 3,714 self-storage stores in 42 states and Washington, D.C. The Company's stores comprise
approximately 2.6 million units and approximately 283.0
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)
|
|
|
December 31,
2023
|
|
December 31,
2022
|
|
(Unaudited)
|
|
|
Assets:
|
|
|
|
Real estate assets,
net
|
$
24,555,873
|
|
$
9,997,978
|
Real estate assets -
operating lease right-of-use assets
|
227,241
|
|
221,725
|
Investments in
unconsolidated real estate entities
|
1,071,617
|
|
582,412
|
Investments in debt
securities and notes receivable
|
904,769
|
|
858,049
|
Cash and cash
equivalents
|
99,062
|
|
92,868
|
Other assets,
net
|
597,700
|
|
414,426
|
Total
assets
|
$
27,456,262
|
|
$
12,167,458
|
Liabilities,
Noncontrolling Interests and Equity:
|
|
|
|
Notes payable,
net
|
$
1,273,549
|
|
$
1,288,555
|
Unsecured term loans,
net
|
2,650,581
|
|
2,340,116
|
Unsecured senior
notes, net
|
6,410,618
|
|
2,757,791
|
Revolving lines of
credit
|
682,000
|
|
945,000
|
Operating lease
liabilities
|
236,515
|
|
229,035
|
Cash distributions in
unconsolidated real estate ventures
|
71,069
|
|
67,352
|
Accounts payable and
accrued expenses
|
334,518
|
|
171,680
|
Other
liabilities
|
383,463
|
|
289,655
|
Total
liabilities
|
12,042,313
|
|
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, 211,278,803
and 133,921,020 shares issued and outstanding at December 31, 2023
and
December 31, 2022, respectively
|
2,113
|
|
1,339
|
Additional paid-in
capital
|
14,750,388
|
|
3,345,332
|
Accumulated other
comprehensive income
|
17,435
|
|
48,798
|
Accumulated
deficit
|
(379,015)
|
|
(135,872)
|
Total Extra Space
Storage Inc. stockholders' equity
|
14,390,921
|
|
3,259,597
|
Noncontrolling
interest represented by Preferred Operating Partnership units,
net
|
222,360
|
|
261,502
|
Noncontrolling
interests in Operating Partnership, net and other
noncontrolling
interests
|
800,668
|
|
557,175
|
Total noncontrolling
interests and equity
|
15,413,949
|
|
4,078,274
|
Total liabilities,
noncontrolling interests and equity
|
$
27,456,262
|
|
$
12,167,458
|
Consolidated
Statement of Operations for the Three Months and Year-Ended
December 31, 2023 and 2022 (In thousands, except
share and per share data) - Unaudited
|
|
|
For the Three Months
Ended
December 31,
|
|
For the Year
Ended
December 31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Revenues:
|
|
|
|
|
|
|
|
Property
rental
|
$
696,982
|
|
$ 438,096
|
|
$ 2,222,578
|
|
$
1,654,735
|
Tenant
reinsurance
|
70,415
|
|
47,438
|
|
235,680
|
|
185,531
|
Management fees and
other income
|
30,377
|
|
21,184
|
|
101,986
|
|
83,904
|
Total
revenues
|
797,774
|
|
506,718
|
|
2,560,244
|
|
1,924,170
|
Expenses:
|
|
|
|
|
|
|
|
Property
operations
|
195,039
|
|
112,971
|
|
612,036
|
|
435,342
|
Tenant
reinsurance
|
21,173
|
|
8,211
|
|
58,874
|
|
33,560
|
Transaction
costs
|
—
|
|
83
|
|
—
|
|
1,548
|
Life Storage Merger
transition costs
|
12,558
|
|
—
|
|
66,732
|
|
—
|
General and
administrative
|
39,397
|
|
35,963
|
|
146,408
|
|
129,251
|
Depreciation and
amortization
|
196,139
|
|
79,920
|
|
506,053
|
|
288,316
|
Total
expenses
|
464,306
|
|
237,148
|
|
1,390,103
|
|
888,017
|
Gain on real estate
transactions
|
—
|
|
—
|
|
—
|
|
14,249
|
Income from
operations
|
333,468
|
|
269,570
|
|
1,170,141
|
|
1,050,402
|
Interest
expense
|
(129,665)
|
|
(72,922)
|
|
(419,035)
|
|
(219,171)
|
Non-cash interest
expense related to amortization of discount on Life Storage
unsecured senior notes
|
(10,558)
|
|
—
|
|
(18,786)
|
|
—
|
Interest
income
|
22,250
|
|
17,248
|
|
84,857
|
|
69,422
|
Income before equity
in earnings and dividend income from unconsolidated real estate
entities and income tax expense
|
215,495
|
|
213,896
|
|
817,177
|
|
900,653
|
Equity in earnings and
dividend income from unconsolidated real estate entities
|
16,233
|
|
10,992
|
|
54,835
|
|
41,428
|
Income tax
expense
|
(4,321)
|
|
(5,409)
|
|
(21,559)
|
|
(20,925)
|
Net income
|
227,407
|
|
219,479
|
|
850,453
|
|
921,156
|
Net income allocated
to Preferred Operating Partnership noncontrolling
interests
|
(2,250)
|
|
(4,345)
|
|
(9,011)
|
|
(17,623)
|
Net income allocated
to Operating Partnership and other noncontrolling
interests
|
(9,023)
|
|
(10,874)
|
|
(38,244)
|
|
(42,845)
|
Net income attributable
to common stockholders
|
$
216,134
|
|
$ 204,260
|
|
$
803,198
|
|
$
860,688
|
Earnings per common
share
|
|
|
|
|
|
|
|
Basic
|
$
1.02
|
|
$
1.52
|
|
$
4.74
|
|
$
6.41
|
Diluted
|
$
1.02
|
|
$
1.52
|
|
$
4.74
|
|
$
6.41
|
Weighted average number
of shares
|
|
|
|
|
|
|
|
Basic
|
211,071,794
|
|
133,921,234
|
|
169,216,989
|
|
134,050,815
|
Diluted
|
219,961,282
|
|
143,341,111
|
|
169,220,882
|
|
141,681,388
|
Reconciliation of
GAAP Net Income to Total Same-Store Net Operating Income — for the
Three Months and Year Ended
December 31, 2023 and 2022 (In thousands) -
Unaudited
|
|
|
For the Three Months
Ended
December 31,
|
|
For the Year Ended
December
31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net
Income
|
$
227,407
|
|
$
219,479
|
|
$
850,453
|
|
$
921,156
|
Adjusted to
exclude:
|
|
|
|
|
|
|
|
Gain on real estate
transactions
|
—
|
|
—
|
|
—
|
|
(14,249)
|
Equity in earnings and
dividend income from unconsolidated real
estate entities
|
(16,233)
|
|
(10,992)
|
|
(54,835)
|
|
(41,428)
|
Interest
expense
|
129,665
|
|
72,922
|
|
419,035
|
|
219,171
|
Non-cash interest
expense related to amortization of discount on
Life Storage unsecured senior notes
|
10,558
|
|
—
|
|
18,786
|
|
—
|
Depreciation and
amortization
|
196,139
|
|
79,920
|
|
506,053
|
|
288,316
|
Income tax
expense
|
4,321
|
|
5,409
|
|
21,559
|
|
20,925
|
Transaction
costs
|
—
|
|
83
|
|
—
|
|
1,548
|
Life Storage Merger
transition costs
|
12,558
|
|
—
|
|
66,732
|
|
—
|
General and
administrative
|
39,397
|
|
35,963
|
|
146,408
|
|
129,251
|
Management fees, other
income and interest income
|
(52,627)
|
|
(38,432)
|
|
(186,843)
|
|
(153,326)
|
Net tenant
insurance
|
(49,242)
|
|
(39,227)
|
|
(176,806)
|
|
(151,971)
|
Non same-store rental
revenue
|
(305,229)
|
|
(49,467)
|
|
(660,292)
|
|
(139,370)
|
Non same-store
operating expense
|
101,640
|
|
23,132
|
|
235,870
|
|
73,772
|
Total same-store net
operating income
|
$
298,354
|
|
$
298,790
|
|
$ 1,186,120
|
|
$ 1,153,795
|
|
|
|
|
|
|
|
|
Same-store rental
revenues
|
391,753
|
|
388,629
|
|
1,562,286
|
|
1,515,365
|
Same-store operating
expenses
|
93,399
|
|
89,839
|
|
376,166
|
|
361,570
|
Same-store net
operating income
|
$
298,354
|
|
$
298,790
|
|
$ 1,186,120
|
|
$ 1,153,795
|
Reconciliation of
the Range of Estimated GAAP Fully Diluted Earnings Per Share to
Estimated Fully Diluted FFO Per
Share — for the Year Ending December 31, 2024 -
Unaudited
|
|
|
|
For the Year Ending
December 31, 2024
|
|
|
Low
End
|
|
High
End
|
Net income
attributable to common stockholders per diluted
share
|
|
$
3.84
|
|
$
4.14
|
Income allocated to
noncontrolling interest - Preferred Operating
Partnership and Operating Partnership
|
|
0.21
|
|
0.21
|
Net income attributable
to common stockholders for diluted computations
|
|
4.05
|
|
4.35
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Real estate
depreciation
|
|
2.77
|
|
2.77
|
Amortization of
intangibles
|
|
0.55
|
|
0.55
|
Unconsolidated joint
venture real estate depreciation and amortization
|
|
0.14
|
|
0.14
|
Funds from
operations attributable to common stockholders
|
|
7.51
|
|
7.81
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Non-cash interest
expense related to amortization of discount on Life
Storage unsecured senior notes
|
|
0.20
|
|
0.20
|
Amortization of other
intangibles related to the Life Storage Merger, net of
tax benefit
|
|
0.14
|
|
0.14
|
Core funds from
operations attributable to common stockholders
|
|
$
7.85
|
|
$
8.15
|
Reconciliation of
Estimated GAAP Net Income to Estimated Same-Store Net Operating
Income — for the Year Ending
December 31, 2024 (In thousands) - Unaudited
|
|
|
For the Year Ending
December 31, 2024
|
|
Low
|
|
High
|
|
|
|
|
Net
Income
|
$
896,000
|
|
$
958,000
|
Adjusted to
exclude:
|
|
|
|
Equity in earnings of
unconsolidated joint ventures
|
(66,000)
|
|
(67,000)
|
Interest
expense
|
525,000
|
|
521,000
|
Non-cash interest
expense related to amortization of discount on Life
Storage unsecured senior notes
|
44,000
|
|
43,000
|
Depreciation and
amortization
|
788,000
|
|
788,500
|
Income tax
expense
|
32,000
|
|
31,000
|
General and
administrative
|
182,500
|
|
180,500
|
Management fees and
other income
|
(116,500)
|
|
(117,500)
|
Interest
income
|
(95,000)
|
|
(96,000)
|
Net tenant reinsurance
income
|
(248,000)
|
|
(251,000)
|
Non same-store rental
revenues
|
(1,134,000)
|
|
(1,134,000)
|
Non same-store
operating expenses
|
398,000
|
|
398,000
|
Total same-store net
operating income1
|
$
1,206,000
|
|
$
1,254,500
|
|
|
|
|
Same-store rental
revenues1
|
1,640,500
|
|
1,683,000
|
Same-store operating
expenses1
|
434,500
|
|
428,500
|
Total same-store net
operating income1
|
$
1,206,000
|
|
$
1,254,500
|
|
|
(1)
|
Estimated same-store
rental revenues, operating expenses and net operating income are
for the Company's 2024 same-store pool of 1,078 stores.
|
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SOURCE Extra Space Storage Inc.