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Extra Space Storage Inc. Reports 2022 Second Quarter Results

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SALT LAKE CITY, Aug. 2, 2022 /PRNewswire/ -- Extra Space Storage Inc. (NYSE: EXR) (the "Company"), a leading owner and operator of self-storage facilities in the United States and a member of the S&P 500, announced operating results for the three and six months ended June 30, 2022.

Extra Space Storage. You deserve some extra space! (PRNewsFoto/Extra Space Storage Inc.)
Extra Space Storage. You deserve some extra space! (PRNewsFoto/Extra Space Storage Inc.)

Highlights for the three months ended June 30, 2022:

  • Achieved net income attributable to common stockholders of $1.73 per diluted share, representing a 38.4% increase compared to the same period in the prior year.

  • Achieved funds from operations attributable to common stockholders and unit holders ("FFO") of $2.12 per diluted share. FFO, excluding adjustments for transaction related costs ("Core FFO"), was $2.13 per diluted share, representing a 29.9% increase compared to the same period in the prior year.

  • Increased same-store revenue by 21.7% and same-store net operating income ("NOI") by 26.0% compared to the same period in the prior year.

  • Reported same-store occupancy of 95.9% as of June 30, 2022, compared to 96.9% as of June 30, 2021.

  • Acquired 12 operating stores and three stores at completion of construction (a "Certificate of Occupancy store" or "C of O store") and completed one development for a total cost of approximately $231.4 million.

  • In conjunction with joint venture partners, acquired 16 operating stores for a total cost of approximately $332.1 million, of which the Company invested $57.6 million.

  • Originated $70.3 million in mortgage and mezzanine bridge loans and sold $44.7 million in mortgage bridge loans.

  • Added 40 stores (gross) to the Company's third-party management platform. As of June 30, 2022, the Company managed 864 stores for third parties and 304 stores in joint ventures, for a total of 1,168 managed stores.

  • Paid a quarterly dividend of $1.50 per share.

 

Highlights for the six months ended June 30, 2022:

  • Achieved net income attributable to common stockholders of $3.24 per diluted share, representing a 16.1% increase compared to the same period in the prior year.

  • Achieved FFO of $4.13 per diluted share. Core FFO was $4.14 per diluted share, representing a 31.8% increase compared to the same period in the prior year.

  • Increased same-store revenue by 21.7% and same-store net NOI by 26.7% compared to the same period in the prior year.

  • Acquired 23 operating stores and six C of O stores and completed one development for a total cost of approximately $456.4 million.

  • In conjunction with joint venture partners, acquired 18 operating stores for a total cost of approximately $374.6 million, of which the Company invested $61.9 million.

  • Originated $208.0 million in mortgage and mezzanine bridge loans and sold $85.7 million in mortgage bridge loans.

  • Added 77 stores (gross) to the Company's third-party management platform.

 

Joe Margolis, CEO of Extra Space Storage Inc., commented: "We had another strong quarter, matching last quarter's record same-store revenue growth of 21.7% and achieving same-store NOI growth of 26.0%.  We were active in all of our external growth channels. We continue to find accretive investments through our deep industry relationships, and expand our diversified portfolio. We achieved FFO growth of 29.9%, allowing us to increase our annual FFO guidance for the second time this year."

FFO Per Share:
The following table (unaudited) outlines the Company's FFO and Core FFO for the three and six months ended June 30, 2022 and 2021.  The table also provides a reconciliation to GAAP net income attributable to common stockholders and earnings per diluted share for each period presented (amounts shown in thousands, except share and per share data):


For the Three Months Ended June 30,


For the Six Months Ended June 30,


2022


2021


2022


2021




(per
share)1




(per
share)1




(per
share)1




(per
share)1

Net income attributable to
common stockholders

$     232,130


$       1.73


$     167,948


$       1.25


$     435,709


$       3.24


$     370,946


$      2.79

Impact of the difference in
weighted average number of
shares – diluted2



(0.12)




(0.07)




(0.20)




(0.16)

Adjustments:
















Real estate depreciation

63,765


0.45


56,470


0.40


126,457


0.89


112,285


0.80

Amortization of intangibles

2,696


0.02


1,008



5,462


0.04


1,701


0.01

Gain on real estate
transactions

(14,249)


(0.10)




(14,249)


(0.10)


(63,883)


(0.45)

Unconsolidated joint venture
real estate depreciation and
amortization

4,115


0.03


3,079


0.02


7,968


0.06


5,584


0.04

Unconsolidated joint venture
gain on sale of real estate
assets and purchase of
partner's interest



(6,251)


(0.04)




(6,251)


(0.04)

Distributions paid on Series
A Preferred Operating
Partnership units

(572)



(572)



(1,144)


(0.01)


(1,144)


(0.01)

Income allocated to
Operating Partnership and
other noncontrolling interests

15,704


0.11


10,631


0.08


29,842


0.21


23,134


0.16

FFO

$     303,589


$       2.12


$     232,313


$       1.64


$     590,045


$       4.13


$     442,372


$      3.14

















Adjustments:
















Transaction related costs

1,465


0.01




1,465


0.01



CORE FFO

$     305,054


$       2.13


$     232,313


$       1.64


$     591,510


$       4.14


$     442,372


$      3.14

















Weighted average number of
shares – diluted3

142,921,716




141,463,628




142,858,481




140,730,041





(1)

Per share amounts may not recalculate due to rounding.



(2)

Adjustment to account for the difference between the number of shares used to calculate earnings per share and the number of shares used to calculate FFO per share. Earnings per share is calculated using the two-class method, which uses a lower number of shares than the calculation for FFO per share and Core FFO per share, which are calculated assuming full redemption of all OP units as described in note (3).



(3)

Extra Space Storage LP (the "Operating Partnership") has outstanding preferred and common Operating Partnership units ("OP units"). These OP units can be redeemed for cash or, at the Company's election, shares of the Company's common stock. Redemption of all OP units for common stock has been assumed for purposes of calculating the weighted average number of shares — diluted, as presented above. The computation of weighted average number of shares — diluted, for FFO per share and Core FFO per share also includes the effect of share-based compensation plans.

 

 

Operating Results and Same-Store Performance:

The following table (unaudited) outlines the Company's same-store performance for the three and six months ended June 30, 2022 and 2021 (amounts shown in thousands, except store count data)1:


For the Three Months
Ended June 30,


Percent


For the Six Months
Ended June 30,


Percent


2022


2021


Change


2022


2021


Change

Same-store rental revenues2

$   362,192


$   297,601


21.7 %


$   704,081


$   578,591


21.7 %

Same-store operating expenses2

83,471


76,346


9.3 %


168,328


155,825


8.0 %

Same-store net operating income2

$   278,721


$   221,255


26.0 %


$   535,753


$   422,766


26.7 %













Same-store square foot occupancy as of quarter end

95.9 %


96.9 %




95.9 %


96.9 %















Properties included in same-store

870


870




870


870





(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.

 

Same-store revenues for the three and six months ended June 30, 2022 increased compared to the same periods in 2021 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 and six months ended June 30, 2022 compared to the same periods in 2021 due to increases in payroll, credit card processing fees, repairs and maintenance, utilities and insurance, partially offset by lower property taxes due to successful appeals of prior period taxes.

Details related to the same-store performance of stores by metropolitan statistical area ("MSA") for the three and six months ended June 30, 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):



Closed through
June 30, 2022


Closed/Completed
Subsequent to
June 30, 2022


Scheduled to Still
Close/Complete in
2022


Total 2022


To Close/Complete
in 2023/2024

Wholly-Owned Investment


Stores


Price


Stores


Price


Stores


Price


Stores


Price


Stores


Price

Operating Stores


23


$  384,602


4


$ 69,700


7


$  118,365


34


$  572,667



$        —

C of O and Development Stores1


7


71,789




1


15,400


8


87,189


9


132,628

EXR Investment in Wholly-
Owned Stores


30


456,391


4


69,700


8


133,765


42


659,856


9


132,628






















Joint Venture Investment





















EXR Investment in JV Acquisition
     of Operating Stores1


18


61,898


9


22,308


3


8,320


30


92,526


1


6,031

EXR Investment in JV
     Development and C of O1






2


11,180


2


11,180


2


26,395

EXR Investment in Joint
Ventures


18


61,898


9


22,308


5


19,500


32


103,706


3


$  32,426

Total EXR Investment


48


$  518,289


13


$ 92,008


13


$  153,265


74


$  763,562


12


$  165,054



(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 June 30, 2022, the Company originated $70.3 million in bridge loans. The Company has an additional $402.9 million in bridge loans that closed subsequent to quarter end or are under agreement to close in 2022.  During the three months ended June 30, 2022, the Company sold $44.7 million in bridge loans.  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/.

Other Investments:
On June 1, 2022 the Company completed the acquisition of Bargold Storage Systems, LLC ("Bargold") for a purchase price of approximately $180.0 million.  Bargold leases space in apartment buildings, primarily in New York City and its boroughs, builds out the space as storage units, and subleases the units to resident tenants.  As of June 1, 2022, Bargold had approximately 17,000 storage units.

Dispositions:
The Company disposed of two properties during the three months ended June 30, 2022 for approximately $41.0 million, resulting in a gain of approximately $14.2 million.

Property Management:
As of June 30, 2022, the Company managed 864 stores for third-party owners and 304 stores owned in joint ventures, for a total of 1,168 stores under management.  The Company is the largest self-storage management company in the United States.

Balance Sheet:
In conjunction with the Bargold acquisition,  the Company issued 91,743 common OP units at an average price of $174.40 per share (a total value of $16.0 million) and 240,000 preferred OP units at a stated value of $25.00 per share (a total value of $6.0 million).

During the three months ended June 30, 2022, the Company repurchased 381,786 shares of common stock using its stock repurchase program at an average price of $165.01 per share for a total cost of $63.0 million including transaction costs.  As of June 30, 2022, the Company had authorization to purchase up to an additional $337.0 million under the plan.

As of June 30, 2022, the Company's percentage of fixed-rate debt to total debt was 74.8%. The weighted average interest rates of the Company's fixed and variable-rate debt were 3.1% and 2.9%, respectively. The combined weighted average interest rate was 3.1% with a weighted average maturity of approximately 5.5 years.

Subsequent to quarter end, on July 29, 2022, the Company completed an accordion transaction in its credit facility, and added a $175.0 million unsecured debt tranche maturing January 2028 and a $425.0 million unsecured debt tranche maturing July 2029.  The current interest rates for the tranches are Adjusted Term SOFR/Adjusted Daily Simple SOFR ("SOFR") + 0.95% and SOFR + 1.25%, respectively.

Dividends:
On June 30, 2022, the Company paid a second quarter common stock dividend of $1.50 per share to stockholders of record at the close of business on June 15, 2022.

Outlook:

The following table outlines the Company's current and initial FFO estimates and annual assumptions for the year ending December 31, 20221:


Current Ranges for 2022              

Annual Assumptions


1st Quarter Ranges for
2022  Annual Assumptions


Notes






(May 3, 2022)




Low


High


Low


High



Core FFO

$8.30


$8.50


$8.05


$8.30



Dilution per share from C of O
and value add acquisitions

$0.20


$0.20


$0.20


$0.20



Same-store revenue growth

16.00 %


18.00 %


13.00 %


15.00 %


Same-store pool of 870 stores

Same-store expense growth

7.50 %


9.00 %


6.50 %


8.00 %


Same-store pool of 870 stores

Same-store NOI growth

18.50 %


21.50 %


15.00 %


18.00 %


Same-store pool of 870 stores

Weighted average one-month
LIBOR/SOFR

1.89% / 1.66%


1.89% / 1.66%


1.37% / 1.24%


1.37% / 1.24%













Net tenant reinsurance income

$153,500,000


$155,500,000


$152,500,000


$154,500,000



Management fees and other
income

$82,500,000


$83,500,000


$80,500,000


$81,500,000



Interest income

$60,500,000


$61,500,000


$57,500,000


$58,500,000


Includes dividends from JCAP
preferred investment

General and administrative
expenses

$124,500,000


$125,500,000


$121,500,000


$123,000,000


Includes non-cash compensation

Average monthly cash balance

$70,000,000


$70,000,000


$40,000,000


$40,000,000



Equity in earnings of real estate
ventures

$43,000,000


$44,000,000


$41,500,000


$42,500,000


Includes dividends from
SmartStop preferred investment

Interest expense

$210,000,000


$212,000,000


$  196,500,000


$ 198,500,000



Income Tax Expense

$22,000,000


$23,000,000


$22,000,000


$23,000,000


Taxes associated with the
Company's Taxable REIT
subsidiary

Acquisitions

$1,200,000,000


$1,200,000,000


$  800,000,000


$ 800,000,000