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Life Storage, Inc. Reports Second Quarter 2022 Results

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BUFFALO, N.Y., August 03, 2022--(BUSINESS WIRE)--Life Storage, Inc. (NYSE:LSI), a leading national owner and operator of self-storage properties, reported operating results for the quarter ended June 30, 2022.

Highlights for the Second Quarter Included:

  • Generated net income attributable to common shareholders of $92.3 million, or $1.09 per fully diluted common share.

  • Achieved adjusted funds from operations ("FFO")(1) per fully diluted common share of $1.65, a 37.5% increase over the same period in 2021.

  • Increased same store revenue by 18.9% and same store net operating income ("NOI")(2) by 25.4%, year-over-year. Both same store revenue and same store net operating income accelerated from the growth reported in the first quarter of 2022.

  • Acquired 13 stores for $262.6 million, including five stores from the Company’s third-party management platform.

  • Added 17 stores (gross) to the Company’s third-party management platform.

Joe Saffire, the Company’s Chief Executive Officer, stated, "We continue to be on track and well positioned for another strong year. I cannot be more pleased with how our team has performed during this past year with occupancy and strong pricing power supporting 21 straight months of positive rent roll up. Our focus to continually optimize revenue resulted in same store achieved rate growth of 20% when compared to last year, supporting same store revenue growth of 18.9% and same store NOI growth of 25.4% year over year. We achieved significant FFO growth, allowing us to increase our dividend paid in July by 46% from one year ago. We also added scale to key existing markets with the addition of 13 wholly owned stores and 17 stores to our third-party management platform. Our second quarter performance, together with continuing strong fundamentals and our ability to execute on our strategic initiatives, positions us well to continue to grow shareholder value."

FINANCIAL RESULTS:

In the second quarter of 2022, the Company generated net income attributable to common shareholders of $92.3 million or $1.09 per fully diluted common share, compared to net income attributable to common shareholders of $57.5 million, or $0.74 per fully diluted common share, in the second quarter of 2021.

Funds from operations for the quarter were $1.68 per fully diluted common share compared to $1.22 for the same period last year. Adjusted FFO per fully diluted common share for the quarter was $1.65, after adjusting primarily for a $1.9 million gain on the sale of non-real estate assets, compared to $1.20 for the quarter ended June 30, 2021.

OPERATIONS:

Revenues for the 580 stabilized stores wholly owned by the Company since December 31, 2020 increased 18.9% in the second quarter of 2022 compared to the same quarter of 2021. The increase largely resulted from the impact of a 20.0% increase in realized rental rates with occupancy for the second quarter of 2022 averaging 94.0%.

Same store operating expenses increased 4.3% for the second quarter of 2022 compared to the prior year period, the result of increased office and other expenses, repairs and maintenance, and utilities expenses with payroll and benefits remaining flat. Same store NOI increased 25.4% in the second quarter of 2022 as compared to the second quarter of 2021.

During the second quarter of 2022, the Company achieved double digit same store revenue growth in 32 of its 33 major markets. Overall, the markets with the strongest positive revenue impact were various markets in Florida; Los Angeles, CA; Atlanta, GA; Phoenix, AZ; Buffalo-Upstate, NY; Austin, TX; and Las Vegas, NV.

PORTFOLIO TRANSACTIONS:

Wholly Owned Portfolio

During the quarter, the Company acquired 13 stores in Florida (6), New York (3), California (1), Texas (1), Georgia (1), and Massachusetts (1) for a total purchase price of $262.6 million. One of the New York stores was acquired as a result of the Company’s acquisition of the remaining 14.2% ownership interest in one of its unconsolidated joint ventures. The purchase price of such acquisition included the Company’s net investment to acquire the remaining equity in this joint venture of $5.6 million and the carrying value of the Company’s total equity investment in the joint venture of $30.2 million.

At June 30, 2022, the Company was under contract to acquire seven self-storage facilities in California (4), North Carolina (1), Florida (1), and Nevada (1) for an aggregate purchase price of $137.4 million. Subsequent to June 30, 2022, the Company completed the acquisition of one of these self-storage facilities in North Carolina for a purchase price of $20.0 million. Also subsequent to June 30, 2022, the Company entered into contracts to acquire seven self-storage facilities in Missouri (5), Arizona (1), and Massachusetts (1) for an aggregate purchase price of $140.1 million. The purchases of the remaining facilities are subject to customary conditions to closing, and there is no assurance that any of these facilities will be acquired.

As of the date of this press release, the Company has acquired 32 stores for $634.1 million since January 1, 2022 and is under contract for 13 stores with an aggregate purchase price of $257.5 million of which $60 million is expected to close during 2023.

THIRD-PARTY MANAGEMENT:

The Company continues to aggressively and profitably grow its third-party management platform. During the quarter, the Company added 17 stores (gross). As of quarter end, the Company managed 385 facilities in total, including those in which it owns a noncontrolling interest.

FINANCIAL POSITION:

At June 30, 2022, the Company had approximately $32.6 million of cash on hand, and approximately $197 million available on its line of credit.

Subsequent to June 30, 2022, the Company closed on the refinancing of its existing bank credit facility that was scheduled to mature on March 10, 2023. Through the refinancing, the new facility was increased from $500 million to $1.25 billion through a syndicate of ten banks providing committed liquidity to the Company to January 2027 on terms comparable to or improved from the terms of the existing facility.

Below are key financial ratios at June 30, 2022:

• Debt to Enterprise Value (at $111.66/share)

24.4%

• Debt to Book Cost of Storage Facilities

40.3%

• Debt to Recurring Annualized EBITDA

4.6x

• Debt Service Coverage

5.7x

COMMON STOCK DIVIDEND:

Subsequent to quarter end, the Company’s Board of Directors approved an 8% increase in the quarterly dividend to $1.08 per share, or $4.32 annualized. The dividend was paid on July 26, 2022 to shareholders of record on July 15, 2022.

YEAR 2022 EARNINGS GUIDANCE:

The following assumptions covering operations have been utilized in formulating guidance for 2022:

Current Guidance

Range

Prior Guidance
Range

(May 4, 2022)

Same Store Revenue

13.25%

-

14.25%

10.50%

-

11.50%

Same Store Operating Costs (excluding property taxes)

4.50%

-

5.50%

4.50%

-

5.50%

Same Store Property Taxes

6.25%

-

7.25%

6.25%

-

7.25%

Total Same Store Operating Expenses

5.00%

-

6.00%

5.00%

-

6.00%

Same Store Net Operating Income

16.5%

-

17.5%

13.0%

-

14.0%

General & Administrative

$71M

-

$73M

$69M

-

$71M

Expansions & Enhancements

$65M

-

$75M

$65M

-

$75M

Capital Expenditures

$30M

-

$35M

$30M

-

$35M

Wholly Owned Acquisitions

$800M

-

$1,000M

$700M

-

$900M

Joint Venture Investments

$75M

-

$125M

$50M

-

$100M

Adjusted Funds from Operations per Share

$6.27

-

$6.33

$6.04

-

$6.14

Reconciliation of Guidance

3Q 2022

Range or Value

FY 2022

Range or Value

Earnings per share attributable to common shareholders - diluted

$1.03 - $1.07

$3.98 - $4.04

Plus: real estate depreciation and amortization

0.59 - 0.59

2.29 - 2.29

FFO per share

$1.62 - $1.66

$6.27 - $6.33

The Company’s 2022 same store pool consists of the 580 stabilized stores wholly owned since December 31, 2020. Forty-five of the stores purchased through June 30, 2022, at certificate of occupancy or that were in the early stages of lease-up are not included, regardless of their current occupancies. The Company believes that occupancy levels achieved during the lease-up period, using discounted rates, are not truly indicative of a new store’s performance, and therefore do not result in a meaningful year-over-year comparison in future years. The Company will include such stores in its same store pool in the second year after the stores achieve 80% sustained occupancy using market rates and incentives.

FORWARD LOOKING STATEMENTS:

When used herein, the words "intends," "believes," "expects," "anticipates," and similar expressions are intended to identify "forward-looking statements" within the meaning of that term in Section 27A of the Securities Act of 1933 and in Section 21E of the Securities Exchange Act of 1934.

All forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements. 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. 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.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained herein. 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 in the markets in which we operate;

  • the effect of competition from new self-storage facilities or other storage alternatives, which would cause rents and occupancy rates to decline;

  • impacts from the COVID-19 pandemic or the future outbreak of other highly infectious or contagious diseases on the U.S., regional and global economies and our financial condition and results of operations;

  • 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;

  • loss of key personnel;

  • the Company’s ability to evaluate, finance and integrate acquired self-storage facilities on expected terms into the Company’s existing business and operations;

  • the Company’s ability to effectively compete in the industry in which it does business;

  • 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;

  • the Company’s existing indebtedness may mature in an unfavorable credit environment, preventing refinancing or forcing refinancing of the indebtedness on terms that are not as favorable as the existing terms;

  • interest rates may increase, impacting costs associated with the Company’s outstanding floating rate debt, if any, and impacting the Company’s ability to comply with debt covenants;

  • exposure to litigation or other claims;

  • risks associated with breaches of our data security;

  • the regional concentration of the Company's business may subject the Company to economic downturns in the states of Florida and Texas;

  • the Company’s cash flow may be insufficient to meet required payments of operating expenses, principal, interest and dividends; and

  • failure to maintain our REIT status for U.S. federal income purposes, including tax law changes that may change the taxability of future income.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. You should carefully consider these risks before you make an investment decision with respect to our securities.

CONFERENCE CALL:

Life Storage will hold its Second Quarter Earnings Release Conference Call at 9:00 a.m. Eastern Time on Thursday, August 4, 2022. To help avoid connection delays, participants are encouraged to pre-register using this link. Anyone unable to pre-register may access the conference call at 888.506.0062 (domestic) or 973.528.0011 (international); passcode 561992 or request to be joined into the Life Storage call. Management will accept questions from registered financial analysts after prepared remarks; all others are encouraged to listen to the call via webcast by accessing the investor relations tab at lifestorage.com. The webcast will be archived for a period of 90 days; a telephone replay will also be available for 14 days by calling 877.481.4010 and entering passcode 46127.

ABOUT LIFE STORAGE, INC:

Life Storage, Inc. is a self-administered and self-managed equity REIT that is in the business of acquiring and managing self-storage facilities. Located in Buffalo, New York, the Company operates more than 1,100 storage facilities in 36 states. The Company serves both residential and commercial storage customers with storage units rented by month. Life Storage consistently provides responsive service to approximately 675,000 customers, making it a leader in the industry. For more information visit http://invest.lifestorage.com.

Life Storage, Inc.

Balance Sheet Data

(unaudited)

June 30,

December 31,

(dollars in thousands)

2022

2021

Assets

Investment in storage facilities:

Land

$

1,266,040

$

1,185,976

Building, equipment and construction in progress

6,468,230

5,904,481

7,734,270

7,090,457

Less: accumulated depreciation

(1,088,128

)

(1,007,650

)

Investment in storage facilities, net

6,646,142

6,082,807

Cash and cash equivalents

32,639

171,865

Accounts receivable

21,136

17,784

Receivable from joint ventures

625

333

Investment in joint ventures

202,026

213,003

Prepaid expenses

11,728

9,918

Intangible asset - in-place customer leases

9,152

13,966

Trade name

16,500

16,500

Other assets

27,236

30,421

Total Assets

$

6,967,184

$

6,556,597

Liabilities

Line of credit

$

303,000

$

-

Term notes, net

2,749,735

2,747,838

Accounts payable and accrued liabilities

119,962

131,778

Deferred revenue

32,583

27,277

Mortgages payable

36,646

37,030

Total Liabilities

3,241,926

2,943,923

Noncontrolling redeemable Preferred Operating Partnership Units at redemption value

90,772

90,783

Noncontrolling redeemable Common Operating Partnership Units at redemption value

114,125

142,892

Equity

Common stock

844

836

Additional paid-in capital

3,801,203

3,697,000

Accumulated deficit

(278,020

)

(314,713

)

Accumulated other comprehensive loss

(3,666

)

(4,124

)

Total Shareholders' Equity

3,520,361

3,378,999

Total Liabilities and Shareholders' Equity

$

6,967,184

$

6,556,597

Life Storage, Inc.

Consolidated Statements of Operations

(unaudited)

April 1, 2022

April 1, 2021

January 1, 2022

January 1, 2021

to

to

to

to

(dollars in thousands, except share data)

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Revenues

Rental income

$

227,239

$

163,096

$

432,748

$

313,379

Tenant reinsurance

18,257

13,705

35,525

26,324

Other operating income

5,210

4,321

10,068

8,716

Management and acquisition fee income

6,340

6,140

12,196

10,730

Total operating revenues

257,046

187,262

490,537

359,149

Expenses

Property operations and maintenance

42,458

33,369

84,827

67,109

Tenant reinsurance

6,481

5,425

13,328

10,206

Real estate taxes

25,356

20,510

49,879

40,397

General and administrative

18,636

15,083

34,502

29,266

Depreciation and amortization

42,631

33,118

83,426

64,406

Amortization of in-place customer leases

5,445

2,653

11,050

4,724

Total operating expenses

141,007

110,158

277,012

216,108

Gain on sale of non-real estate assets

1,925

-

1,965

-

Income from operations

117,964

77,104

215,490

143,041

Other income (expense)

Interest expense (A)

(25,505

)

(20,774

)

(49,745

)

(41,119

)

Interest and dividend income

4

7

18

786

Equity in income of joint ventures

1,914

1,428

4,032

2,649

Net income

94,377

57,765

169,795

105,357

Net income attributable to noncontrolling preferred interests in the Operating Partnership

(1,007

)

-

(2,003

)

-

Net income attributable to noncontrolling common interests in the Operating Partnership

(1,106

)

(249

)

(1,953

)

(459

)

Net income attributable to common shareholders

$

92,264

$

57,516

$

165,839

$

104,898

Earnings per common share attributable to common shareholders - basic

$

1.09

$

0.75

$

1.98

$

1.38

Earnings per common share attributable to common shareholders - diluted

$

1.09

$

0.74

$

1.97

$

1.37

Common shares used in basic earnings per share calculation

84,270,378

77,057,520

83,957,402

76,222,426

Common shares used in diluted earnings per share calculation

84,428,182

77,219,999

84,132,978

76,365,100

Dividends declared per common share

$

1.0000

$

0.7400

$

2.0000

$

1.4800

(A) Interest expense for the period ending June 30 consists of the following

Interest expense

$

24,775

$

20,171

$

48,284

$

39,914

Amortization of debt issuance costs

730

603

1,461

1,205

Total interest expense

$

25,505

$

20,774

$

49,745

$

41,119

Life Storage, Inc.

Computation of Funds From Operations (FFO) (1)

(unaudited)

April 1, 2022

April 1, 2021

January 1, 2022

January 1, 2021

to

to

to

to

(dollars in thousands, except share data)

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Net income attributable to common shareholders

$

92,264

$

57,516

$

165,839

$

104,898

Noncontrolling common interests in the Operating Partnership

1,106

249

1,953

459

Depreciation of real estate and amortization of intangible

assets exclusive of debt issuance costs

47,540

35,257

93,406

68,076

Depreciation and amortization from unconsolidated joint ventures

2,340

1,241

4,143

2,443

Funds from operations allocable to noncontrolling

interest in Operating Partnership

(1,697

)

(407

)

(3,087

)

(766

)

Funds from operations available to common shareholders

141,553

93,856

262,254

175,110

FFO per share - diluted

$

1.68

$

1.22

$

3.11

$

2.29

Adjustments to FFO

Gain on sale of non-real estate assets

(1,925

)

-

(1,965

)

-

Acquisition fee

(132