SALT
LAKE CITY, May 2, 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 months ended
March 31, 2023.
Highlights for the three months ended March 31, 2023:
- Achieved net income attributable to common stockholders of
$1.46 per diluted share, representing
a 3.3% decrease compared to the same period in the prior year.
- Achieved funds from operations attributable to common
stockholders and unit holders ("FFO") of $2.02 per diluted share. FFO, excluding
adjustments ("Core FFO"), was also $2.02 per diluted share, representing a 0.5%
increase compared to the same period in the prior year.
- Increased same-store revenue by 7.4% and same-store net
operating income ("NOI") by 8.7% compared to the same period in the
prior year.
- Reported same-store occupancy of 93.5% as of March 31, 2023, compared to 94.3% as of
March 31, 2022.
- Acquired one store at completion of construction (a
"Certificate of Occupancy store" or "C of O store") for a total
cost of approximately $13.1
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 $53.0 million in
mortgage and mezzanine bridge loans and sold $34.2 million in mortgage bridge loans.
- Completed a public bond offering issuing $500.0 million of 5.7% senior unsecured notes due
2028.
- Added 48 stores (44 stores net) to the Company's third-party
management platform. As of March 31,
2023, the Company managed 931 stores for third parties and
323 stores in unconsolidated joint ventures, for a total of 1,254
managed stores.
- Paid a quarterly dividend of $1.62 per share.
Joe Margolis, CEO of Extra Space
Storage Inc., commented: "We maintained strong first quarter
occupancy, driving first quarter same-store net operating income
growth of 8.7%, despite exceptionally difficult year over year
comparables. We are excited about our announcement subsequent to
quarter end of our strategic combination with Life Storage, Inc. in
a leverage neutral, all-stock transaction. The pending merger will
create a preeminent storage platform, which we expect to create
significant synergies and unlock additional value for both
companies' stockholders."
FFO Per Share:
The following table (unaudited) outlines the Company's FFO and
Core FFO for the three months ended March
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 March 31,
|
|
2023
|
|
2022
|
|
|
|
(per
share)1
|
|
|
|
(per
share)1
|
Net income
attributable to common stockholders
|
$
196,304
|
|
$ 1.46
|
|
$ 203,579
|
|
$ 1.51
|
Impact of the
difference in weighted average number of shares –
diluted2
|
|
|
(0.09)
|
|
|
|
(0.08)
|
Adjustments:
|
|
|
|
|
|
|
|
Real estate
depreciation
|
71,248
|
|
0.50
|
|
62,692
|
|
0.43
|
Amortization of
intangibles
|
4,170
|
|
0.03
|
|
2,766
|
|
0.02
|
Unconsolidated joint
venture real estate depreciation and amortization
|
4,939
|
|
0.03
|
|
3,853
|
|
0.03
|
Distributions paid on
Series A Preferred Operating Partnership units
|
(159)
|
|
—
|
|
(572)
|
|
—
|
Income allocated to
Operating Partnership and other noncontrolling interests
|
12,574
|
|
0.09
|
|
14,138
|
|
0.10
|
FFO
|
$
289,076
|
|
$ 2.02
|
|
$ 286,456
|
|
$ 2.01
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CORE
FFO
|
$
289,076
|
|
$ 2.02
|
|
$ 286,456
|
|
$ 2.01
|
|
|
|
|
|
|
|
|
Weighted average number
of shares – diluted3
|
143,357,961
|
|
|
|
142,798,058
|
|
|
|
|
(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 ended March 31, 2023 and 2022 (amounts shown in
thousands, except store count data)1:
|
For the Three
Months
Ended March 31,
|
|
Percent
|
|
2023
|
|
2022
|
|
Change
|
Same-store property
revenues2
|
|
|
|
|
|
Net rental
income
|
$
370,630
|
|
$
345,875
|
|
7.2 %
|
Other income
|
13,462
|
|
11,748
|
|
14.6 %
|
Total same-store
revenues
|
$
384,092
|
|
$
357,623
|
|
7.4 %
|
|
|
|
|
|
|
Same-store operating
expenses2
|
|
|
|
|
|
Payroll and
benefits
|
$ 20,842
|
|
$ 20,060
|
|
3.9 %
|
Marketing
|
6,172
|
|
5,560
|
|
11.0 %
|
Office
expense3
|
11,979
|
|
10,679
|
|
12.2 %
|
Property operating
expense4
|
9,863
|
|
8,828
|
|
11.7 %
|
Repairs and
maintenance
|
6,417
|
|
7,486
|
|
(14.3) %
|
Property
taxes
|
34,346
|
|
34,790
|
|
(1.3) %
|
Insurance
|
3,622
|
|
2,713
|
|
33.5 %
|
Total same-store
operating expenses
|
$ 93,241
|
|
$ 90,116
|
|
3.5 %
|
|
|
|
|
|
|
Same-store net
operating income2
|
$
290,851
|
|
$
267,507
|
|
8.7 %
|
|
|
|
|
|
|
Same-store square foot
occupancy as of quarter end
|
93.5 %
|
|
94.3 %
|
|
|
|
|
|
|
|
|
Properties included in
same-store
|
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 months ended March 31, 2023 increased compared to the same
period in 2022 due to higher average rates to existing customers
and higher other operating income partially offset by lower
occupancy.
Same-store expenses increased for the three months ended
March 31, 2023 compared to the same
period in 2022 due to increases in payroll, marketing, credit card
processing fees, utilities and insurance, partially offset by
savings in repairs and maintenance and property taxes.
Details related to the same-store performance of stores by
metropolitan statistical area ("MSA") for the three months ended
March 31, 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:
The following table (unaudited) outlines the Company's
acquisitions and developments that are closed, completed or under
agreement (dollars in thousands):
|
|
Closed/Completed
through
March 31, 2023
|
|
Closed/Completed
Subsequent to
March 31,
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
Stores1
|
|
—
|
|
$
—
|
|
—
|
|
$
—
|
|
1
|
|
$
4,650
|
|
1
|
|
$ 4,650
|
|
—
|
|
$
—
|
C of O and Development
Stores2
|
|
1
|
|
13,073
|
|
—
|
|
—
|
|
5
|
|
69,492
|
|
6
|
|
82,565
|
|
6
|
|
74,614
|
EXR Investment in
Wholly-Owned Stores
|
|
1
|
|
13,073
|
|
—
|
|
—
|
|
6
|
|
74,142
|
|
7
|
|
87,215
|
|
6
|
|
74,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint Venture
Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXR Investment in JV
Acquisition of Operating Stores2
|
|
5
|
|
20,243
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5
|
|
20,243
|
|
—
|
|
—
|
EXR Investment in JV
Development and C of O2
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3
|
|
28,095
|
|
3
|
|
28,095
|
|
4
|
|
57,025
|
EXR Investment in
Joint Ventures
|
|
5
|
|
20,243
|
|
—
|
|
—
|
|
3
|
|
28,095
|
|
8
|
|
48,338
|
|
4
|
|
57,025
|
Total EXR
Investment
|
|
6
|
|
$ 33,316
|
|
—
|
|
$
—
|
|
9
|
|
$
102,237
|
|
15
|
|
$
135,553
|
|
10
|
|
$
131,639
|
|
|
(1)
|
Totals do not include
the store totals or values associated with the proposed merger with
Life Storage.
|
(2)
|
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.
Life Storage Merger:
On April 3, 2023, the Company
announced that it entered a definitive merger agreement (the
"Agreement") with Life Storage, Inc. (NYSE: LSI) ("Life Storage")
in an all-stock transaction. Under the terms of the
Agreement, Life Storage stockholders will receive 0.895 of a share
of common stock of the Company for each issued and outstanding
share of Life Storage they own for estimated total consideration of
$12.7 billion, based on Life
Storage's closing share price on March 31,
2023. Following the merger, the combined company will have a
portfolio of over 3,500 locations and over 264.0 million net
rentable square feet. The transaction is currently expected to
close in the second half of 2023, subject to the approval of the
Company's and Life Storage's stockholders and satisfaction of other
customary closing conditions.
Preferred Stock Investment:
On May 1, 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 March 31,
2023, the Company originated $53.0
million in bridge loans and sold $34.2 million in bridge loans. The Company has an
additional $229.8 million in bridge
loans that closed subsequent to quarter end or are under agreement
to close in 2023 and an additional $50.0
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 March 31, 2023, the Company managed 931 stores for
third-party owners and 323 stores owned in unconsolidated joint
ventures, for a total of 1,254 stores under management. The
Company is the largest self-storage management company in
the United States.
Balance Sheet:
During the three months ended March 31,
2023, the Company completed a public bond offering issuing
$500.0 million of 5.7% senior
unsecured notes due 2028. 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/.
During the three months ended March 31,
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 March
31, 2023, the Company had authorization to purchase up to an
additional $337.0 million under the
plan.
As of March 31, 2023, the Company's percentage of
fixed-rate debt to total debt was 70.7%. Net of the impact of
variable rate receivables, the effective fixed-rate debt to total
debt was 77.6%. The weighted average interest rates of the
Company's fixed and variable-rate debt were 3.6% and 6.0%,
respectively. The combined weighted average interest rate was 4.3%
with a weighted average maturity of approximately 5.0 years.
Subsequent to quarter end, on April 4,
2023, S&P Global placed all of its ratings on the
Company, including its BBB issuer rating, to CreditWatch with
positive implications, stating that the CreditWatch placement
reflects S&P Global's view that the pending merger with Life
Storage will enhance the Company's credit profile, given the
expected increase in scale and synergy opportunities following the
merger.
Dividends:
On March 31, 2023, the Company
paid a first quarter common stock dividend of $1.62 per share to stockholders of record at the
close of business on March 15, 2023,
an 8.0% increase over the prior quarter's dividend.
Outlook:
The following table outlines the Company's initial Core FFO
estimates and annual assumptions for the year ending December 31, 20231:
|
Ranges for
2023
Annual
Assumptions
|
|
Initial Ranges for
2023
Annual
Assumptions
|
|
Notes
|
|
(May 2,
2023)
|
|
(February 22,
2023)
|
|
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
|
Core FFO
|
$8.30
|
|
$8.60
|
|
$8.30
|
|
$8.60
|
|
|
Dilution per share from
C of O and
value add acquisitions
|
$0.23
|
|
$0.23
|
|
$0.25
|
|
$0.25
|
|
|
Same-store revenue
growth
|
3.75 %
|
|
5.25 %
|
|
3.75 %
|
|
5.25 %
|
|
Same-store pool of
914
stores
|
Same-store expense
growth
|
5.00 %
|
|
6.00 %
|
|
5.00 %
|
|
6.00 %
|
|
Same-store pool of
914
stores
|
Same-store NOI
growth
|
3.00 %
|
|
5.50 %
|
|
3.00 %
|
|
5.50 %
|
|
Same-store pool of
914
stores
|
Weighted average
one-month
LIBOR/SOFR
|
4.69% /
4.57%
|
|
4.69% /
4.57%
|
|
4.77% /
4.68%
|
|
4.77% /
4.68%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tenant reinsurance
income
|
$160,000,000
|
|
$161,000,000
|
|
$158,500,000
|
|
$159,500,000
|
|
|
Management fees and
other income
|
$86,000,000
|
|
$87,000,000
|
|
$86,000,000
|
|
$87,000,000
|
|
|
Interest
income
|
$82,000,000
|
|
$83,000,000
|
|
$87,000,000
|
|
$88,000,000
|
|
Includes interest
from
bridge loans and dividends
from NexPoint preferred investment
|
General and
administrative expenses
|
$139,000,000
|
|
$140,000,000
|
|
$140,500,000
|
|
$141,500,000
|
|
Includes non-cash
compensation
|
Average monthly cash
balance
|
$25,000,000
|
|
$25,000,000
|
|
$25,000,000
|
|
$25,000,000
|
|
|
Equity in earnings of
real estate
ventures
|
$53,000,000
|
|
$54,000,000
|
|
$48,500,000
|
|
$49,500,000
|
|
Includes dividends
from
SmartStop preferred investments
|
Interest
expense
|
$335,000,000
|
|
$338,000,000
|
|
$333,000,000
|
|
$336,000,000
|
|
|
Income Tax
Expense
|
$23,500,000
|
|
$24,500,000
|
|
$23,500,000
|
|
$24,500,000
|
|
Taxes associated with
the Company's
taxable REIT subsidiary
|
Acquisitions
|
$250,000,000
|
|
$250,000,000
|
|
$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
|
|
$
650,000,000
|
|
$
650,000,000
|
|
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.
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, May 3,
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/BIbd661983adb44bc19de7d41dba16595e.
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 May 3,
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 our pending merger with Life Storage
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:
- our and Life Storage's ability to complete the proposed
transaction on the proposed terms or on the anticipated timeline,
or at all, including risks and uncertainties related to securing
the necessary stockholder approvals and satisfaction of other
closing conditions to consummate the proposed transaction;
- the occurrence of any event, change or other circumstance that
could give rise to the termination of the Agreement relating to the
proposed transaction;
- risks related to diverting the attention of our management and
Life Storage's management from ongoing business operations;
- failure to realize the expected benefits of the proposed
transaction;
- significant transaction costs and/or unknown or inestimable
liabilities;
- the risk of shareholder litigation in connection with the
proposed transaction, including resulting expense or delay;
- 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;
- risks related to future opportunities and plans for the
combined company following the merger, including the uncertainty of
expected future financial performance and results of the combined
company following completion of the proposed transaction;
- the effect of the prior announcement of the proposed
transaction on our ability and the ability of Life Storage to
operate their respective businesses and retain and hire key
personnel and to maintain favorable business relationships;
- risks related to the market value of our common stock to be
issued in the proposed transaction;
- other risks related to the completion of the proposed
transaction and actions related thereto;
- adverse changes in general economic conditions, the real estate
industry and the markets in which we operate;
- 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 such as COVID-19, 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.
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 March 31, 2023, the Company owned and/or
operated 2,388 self-storage stores in 41 states and Washington, D.C. The Company's stores comprise
approximately 1.7 million units and approximately 180.0
million square feet of rentable space. 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. The Company is the second largest
owner and/or operator of self-storage stores in the United States and is the largest
self-storage management company in the
United States.
Additional Information about the Proposed Transaction and
Where to Find It
In connection with the proposed transaction, we intend to file
with the Securities and Exchange Commission (the "SEC") a
registration statement on Form S-4, which will include a document
that serves as a prospectus of the Company and a joint proxy
statement of the Company and Life Storage (the "joint proxy
statement/prospectus"). Each party also plans to file other
relevant documents with the SEC regarding the proposed transaction.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE
SEC WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. A definitive joint
proxy statement/prospectus will be sent to the Company's
stockholders and Life Storage's stockholders. Investors and
securityholders may obtain a free copy of the joint proxy
statement/prospectus (if and when it becomes available) and other
relevant documents filed by the Company and Life Storage with the
SEC at the SEC's website at www.sec.gov. Copies of the documents
filed by the Company with the SEC will be available free of charge
on the Company's website at www.extraspace.com or by contacting the
Company's Investor Relations at info@extraspace.com. Copies of the
documents filed by Life Storage with the SEC will be available free
of charge on Life Storage's website at www.lifestorage.com or by
contacting Brent Maedl with Life
Storage's Investor Relations department at bmaedl@lifestorage.com
or by calling (716) 328-9756.
Participants in the Solicitation
The Company and Life Storage and their respective directors,
executive officers and other members of management and employees
may be deemed to be participants in the solicitation of proxies in
respect of the proposed transaction. Information about directors
and executive officers of the Company is available in the Company's
proxy statement for its 2023 Annual Meeting, which was filed with
the SEC on April 4, 2023. Information
about directors and executive officers of Life Storage is available
in the Life Storage proxy statement for its 2023 Annual Meeting,
which was filed with the SEC on April 13,
2023. Other information regarding the participants in the
proxy solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in
the joint proxy statement/prospectus and other relevant materials
filed with the SEC regarding the proposed transaction when they
become available. Investors should read the joint proxy
statement/prospectus carefully when it becomes available before
making any voting or investment decisions. Investors may obtain
free copies of these documents from the Company and Life Storage as
indicated above.
No Offer or Sale
This communication and the information contained herein shall
not constitute an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offering of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
Extra Space Storage
Inc. Condensed Consolidated Balance
Sheets (In thousands, except share
data)
|
|
|
March 31,
2023
|
|
December 31,
2022
|
|
(Unaudited)
|
|
|
Assets:
|
|
|
|
Real estate assets,
net
|
$
9,991,446
|
|
$
9,997,978
|
Real estate assets -
operating lease right-of-use assets
|
226,483
|
|
221,725
|
Investments in
unconsolidated real estate entities
|
600,617
|
|
582,412
|
Investments in debt
securities and notes receivable
|
863,913
|
|
858,049
|
Cash and cash
equivalents
|
47,951
|
|
92,868
|
Other assets,
net
|
402,259
|
|
414,426
|
Total
assets
|
$
12,132,669
|
|
$
12,167,458
|
Liabilities,
Noncontrolling Interests and Equity:
|
|
|
|
Notes payable,
net
|
$
1,306,301
|
|
$
1,288,555
|
Unsecured term loans,
net
|
2,672,668
|
|
2,340,116
|
Unsecured senior
notes, net
|
3,258,329
|
|
2,757,791
|
Revolving lines of
credit
|
94,500
|
|
945,000
|
Operating lease
liabilities
|
234,255
|
|
229,035
|
Cash distributions in
unconsolidated real estate ventures
|
68,284
|
|
67,352
|
Accounts payable and
accrued expenses
|
178,156
|
|
171,680
|
Other
liabilities
|
287,475
|
|
289,655
|
Total
liabilities
|
8,099,968
|
|
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, 135,007,280
and 133,921,020 shares issued and outstanding at March 31, 2023
and
December 31, 2022, respectively
|
1,350
|
|
1,339
|
Additional paid-in
capital
|
3,376,458
|
|
3,345,332
|
Accumulated other
comprehensive income
|
35,081
|
|
48,798
|
Accumulated
deficit
|
(159,556)
|
|
(135,872)
|
Total Extra Space
Storage Inc. stockholders' equity
|
3,253,333
|
|
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
|
556,428
|
|
557,175
|
Total noncontrolling
interests and equity
|
4,032,701
|
|
4,078,274
|
Total liabilities,
noncontrolling interests and equity
|
$
12,132,669
|
|
$
12,167,458
|
Consolidated
Statement of Operations for the Three Months Ended March 31,
2023 and 2022 (In thousands, except share and per share
data) - Unaudited
|
|
|
For the Three Months
Ended
March 31,
|
|
2023
|
|
2022
|
Revenues:
|
|
|
|
Property
rental
|
$
433,962
|
|
$ 379,808
|
Tenant
reinsurance
|
47,704
|
|
43,797
|
Management fees and
other income
|
21,384
|
|
19,957
|
Total
revenues
|
503,050
|
|
443,562
|
Expenses:
|
|
|
|
Property
operations
|
117,166
|
|
103,542
|
Tenant
reinsurance
|
9,089
|
|
7,042
|
General and
administrative
|
34,763
|
|
29,762
|
Depreciation and
amortization
|
78,490
|
|
67,906
|
Total
expenses
|
239,508
|
|
208,252
|
Income from
operations
|
263,542
|
|
235,310
|
Interest
expense
|
(80,099)
|
|
(42,538)
|
Interest
income
|
19,438
|
|
18,989
|
Income before equity
in earnings and dividend income from unconsolidated real estate
entities and income tax expense
|
202,881
|
|
211,761
|
Equity in earnings and
dividend income from unconsolidated real estate entities
|
10,305
|
|
9,097
|
Income tax
expense
|
(4,308)
|
|
(3,141)
|
Net income
|
208,878
|
|
217,717
|
Net income allocated
to Preferred Operating Partnership noncontrolling
interests
|
(2,254)
|
|
(4,333)
|
Net income allocated
to Operating Partnership and other noncontrolling
interests
|
(10,320)
|
|
(9,805)
|
Net income attributable
to common stockholders
|
$
196,304
|
|
$ 203,579
|
Earnings per common
share
|
|
|
|
Basic
|
$
1.46
|
|
$
1.52
|
Diluted
|
$
1.46
|
|
$
1.51
|
Weighted average number
of shares
|
|
|
|
Basic
|
134,511,273
|
|
134,180,175
|
Diluted
|
142,940,384
|
|
141,581,862
|
Cash dividends paid per
common share
|
$
1.62
|
|
$
1.50
|
Reconciliation of
GAAP Net Income to Total Same-Store Net Operating Income — for the
Three Months
Ended March 31, 2023 and 2022 (In thousands) -
Unaudited
|
|
|
For the Three Months
Ended
March 31,
|
|
2023
|
|
2022
|
Net
Income
|
$
208,878
|
|
$
217,717
|
Adjusted to
exclude:
|
|
|
|
Equity in earnings and
dividend income from unconsolidated real estate entities
|
(10,305)
|
|
(9,097)
|
Interest
expense
|
80,099
|
|
42,538
|
Depreciation and
amortization
|
78,490
|
|
67,906
|
Income tax
expense
|
4,308
|
|
3,141
|
General and
administrative
|
34,763
|
|
29,762
|
Management fees, other
income and interest income
|
(40,822)
|
|
(38,946)
|
Net tenant
insurance
|
(38,615)
|
|
(36,755)
|
Non same-store rental
revenue
|
(49,870)
|
|
(22,185)
|
Non same-store
operating expense
|
23,925
|
|
13,426
|
Total same-store net
operating income
|
$
290,851
|
|
$
267,507
|
|
|
|
|
Same-store rental
revenues
|
384,092
|
|
357,623
|
Same-store operating
expenses
|
93,241
|
|
90,116
|
Same-store net
operating income
|
$
290,851
|
|
$
267,507
|
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, 2023 -
Unaudited
|
|
|
|
For the Year Ending
December 31, 2023
|
|
|
Low
End
|
|
High
End
|
Net income
attributable to common stockholders per diluted
share
|
|
$
5.66
|
|
$
5.96
|
Income allocated to
noncontrolling interest - Preferred Operating
Partnership and Operating Partnership
|
|
0.40
|
|
0.40
|
Net income attributable
to common stockholders for diluted computations
|
|
6.06
|
|
6.36
|
|
|
|
|
|
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
|
|
8.30
|
|
8.60
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Core funds from
operations attributable to common stockholders
|
|
$
8.30
|
|
$
8.60
|
Reconciliation of
Estimated GAAP Net Income to Estimated Same-Store Net Operating
Income — for the Year Ending December 31,
2023 (In thousands) - Unaudited
|
|
|
For the Year Ending
December 31, 2023
|
|
Low
|
|
High
|
|
|
|
|
Net
Income
|
$
870,750
|
|
$
906,100
|
Adjusted to
exclude:
|
|
|
|
Equity in earnings of
unconsolidated joint ventures
|
(53,000)
|
|
(54,000)
|
Interest
expense
|
338,000
|
|
335,000
|
Depreciation and
amortization
|
316,000
|
|
316,000
|
Income tax
expense
|
24,500
|
|
23,500
|
General and
administrative
|
140,000
|
|
139,000
|
Management fees and
other income
|
(86,000)
|
|
(87,000)
|
Interest
income
|
(82,000)
|
|
(83,000)
|
Net tenant reinsurance
income
|
(160,000)
|
|
(161,000)
|
Non same-store rental
revenues
|
(210,000)
|
|
(210,000)
|
Non same-store
operating expenses
|
92,000
|
|
92,000
|
Total same-store net
operating income1
|
$
1,190,250
|
|
$
1,216,600
|
|
|
|
|
Same-store rental
revenues1
|
1,574,000
|
|
1,596,600
|
Same-store operating
expenses1
|
383,750
|
|
380,000
|
Total same-store net
operating income1
|
$
1,190,250
|
|
$
1,216,600
|
|
|
(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.