Extra Space Storage Inc. EXR has earned a solid recognition in the self-storage industry. The company focuses on expansion of its geographical footprint through accretive acquisitions and third-party management platforms. It enjoys solid presence in key cities and opts for strategic joint ventures to boost long-term profitability.
In recent years, the company has significantly expanded its business, growing the branded store count from 766 in 2009 to 1,817 in fourth-quarter 2019. Also, total stores managed for third-party owners increased from 124 in 2009 to 646 during the same time frame.
In addition, Extra Space Storage has spent $6.8 billion in acquisitions in the past 10 years. The company has gained an increased scale in several core markets on the back of these acquisitions as well as fortified its presence in a number of new markets.
These efforts have helped this Salt Lake City, UT-based self-storage real estate investment trust (REIT) emerge as the second-largest self-storage operator and the largest self-storage management company in the United States. Majority of this REIT’s stores are situated around large population centres which enjoy above-average population and income demographics for stores.
Also, the self-storage asset category is basically need-based and recession-resilient in nature. This asset class has low capital-expenditure requirements and generates high operating margins. Additionally, the self-storage industry is likely to keep witnessing solid demand, backed by favorable demographic changes.
The company also remains focused on fortifying its balance sheet. The company exited fourth-quarter 2019 with $65.7 million of cash and cash equivalents. As of Dec 31, 2019, the company's percentage of fixed-rate debt to total debt was 78.7%. Finally, as of Dec 31, 2019, Extra Space Storage had $298.6 million available for issuance under its ATM program.
However, the company operates in a highly fragmented market in the United States, with intense competition from numerous private, regional and local operators. In addition, there is a development boom of self-storage units in many markets. This high supply is likely to fuel competition, curb its power to raise rents and turn on more discounting.
Moreover, escalation in property tax and marketing expense is a concern, as property taxes and marketing expenses are projected to be high.
This Zacks Rank #3 (Hold) company has outperformed its industry since the start of the year. Shares of Extra Space Storage have depreciated 8.7%, while the industry has lost 8.9% during this period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks to Consider
SBA Communications Corporation’s SBAC funds from operations (FFO) per share estimate for the ongoing year moved 1.41% north to $9.37 over the past two months. The stock currently carries a Zacks Rank #2 (Buy).
Gladstone Land Corp’s LAND FFO per share estimate for the current year moved 3.33% upward to 62 cents in the past month. The stock currently carries a Zacks Rank #2.
Plymouth Industrial REIT’s PLYM Zacks Consensus Estimate for 2020 FFO per share moved up about 2% to $2.08 over the past two months. The stock currently holds a Zacks Rank of 2.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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