Extra Space Storage Inc. (EXR) Reports Third Quarter 2023 Results Amidst Life Storage Merger
EXR reports a 41.8% decrease in net income per diluted share, primarily due to Life Storage Merger transition costs.
Same-store revenue and NOI increased by 1.9% and 0.7% respectively, compared to the same period last year.
Life Storage Merger adds over 1,200 stores to the EXR platform, with significant G&A expense savings anticipated.
EXR maintains strong same-store occupancy averaging 94.4% during the quarter.
On November 7, 2023, Extra Space Storage Inc. (NYSE:EXR), a leading owner and operator of self-storage facilities, announced its financial results for the third quarter of 2023. The company faced a significant decrease in net income attributable to common stockholders, which came in at $0.96 per diluted share, a 41.8% decrease compared to the same period in the prior year. This decline was primarily due to $54.2 million in transition costs related to the Life Storage Merger. Despite this, the company saw an increase in 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.
Financial Highlights and Performance Metrics
EXR's Core FFO per diluted share was $2.02, marking an 8.6% decrease from the prior year's comparable period. The company also reported a slight decrease in same-store occupancy, ending at 94.1% as of September 30, 2023, compared to 95.1% as of September 30, 2022. The Life Storage Merger, closed on July 20, 2023, has been a transformative event for EXR, adding over 1,200 stores to its platform and is expected to bring significant G&A expense savings and synergies.
Operational Insights
EXR's CEO Joe Margolis commented on the merger, stating,
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."
Margolis also expressed confidence in the durable nature of self-storage and the strength of the EXR portfolio, which has been enhanced through the merger.
Investment and Property Management Activity
EXR has been active in acquisitions and property management, acquiring three operating stores for approximately $18.5 million and, in conjunction with joint venture partners, two operating stores and one Certificate of Occupancy store for a total cost of approximately $44.3 million. The company also originated $78.8 million in mortgage and mezzanine bridge loans and sold an equal amount in mortgage bridge loans.
Balance Sheet and Dividends
The company completed multiple capital transactions in conjunction with the Life Storage Merger, including retiring $1.2 billion in balances on Life Storage's line of credit. S&P Global upgraded all of its ratings on the company to BBB+ stable. EXR paid two dividends totaling $1.62 per share during the quarter.
Outlook and Forward-Looking Statements
EXR provided revised Core FFO estimates for the year ending December 31, 2023, reflecting the impact of the Life Storage Merger. The company anticipates Core FFO to be between $8.05 and $8.20 per share, including the dilutive impact of the merger. The outlook also includes assumptions for same-store revenue growth, expense growth, and NOI growth.
Extra Space Storage Inc. (NYSE:EXR) is navigating a period of significant change following the Life Storage Merger. While the integration has led to a short-term decrease in net income, the company is positioning itself for future growth and operational efficiencies. Investors and stakeholders will be watching closely as EXR works to realize the full benefits of the merger in the coming quarters.
For more detailed financial information and to access the full earnings release, please visit EXR's Investor Relations website.
Explore the complete 8-K earnings release (here) from Extra Space Storage Inc for further details.
This article first appeared on GuruFocus.
