Extra Space Storage Inc. Reports 2014 First Quarter Results ~ Grows FFO as Adjusted by 23.9% for the Quarter ~~ Increases Same-Store Revenue by 7.9% for the Quarter ~~ Increases Same-Store NOI by 9.4% for the Quarter ~~ Increases Same-Store Occupancy by 200 basis points to 90.4% PR Newswire SALT LAKE CITY, April 28, 2014 SALT LAKE CITY, April28, 2014 /PRNewswire/ -- Extra Space Storage Inc. (NYSE: EXR) (the "Company"), a leading owner and operator of self-storage properties in the United States, announced operating results for the three months ended March31, 2014. Extra Space Storage. You deserve some extra space! Highlights for the three months ended March31, 2014: oAchieved funds from operations ("FFO") of $0.55 per diluted share. Excluding costs associated with acquisitions and non-cash interest expense, FFO as adjusted was $0.57 per diluted share, representing a 23.9% increase compared to the same period in 2013. oIncreased same-store revenue and net operating income ("NOI") by 7.9% and 9.4%, respectively, compared to the same period in 2013. oIncreased same-store occupancy by 200 basis points to 90.4% as of March 31, 2014, compared to 88.4% as of March 31, 2013. oAcquired 21 properties for approximately $249.7 million. oPaid a quarterly dividend of $0.40 per share. Spencer F. Kirk, CEO of Extra Space Storage Inc., commented: "We had a strong first quarter and 2014 is shaping up to be another great year for us. We are seeing solid rental activity in most markets and we're entering peak rental season with pricing momentum. Our acquisitions year to date have placed us on track for another robust year of acquisition activity despite a competitive market." FFO Per Share: The following table outlines the Company's FFO and FFO as adjusted for the three months ended March31, 2014 and 2013. 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 data - unaudited): FortheThreeMonthsEndedMarch31, 2014 2013 (pershare) (pershare) Net income attributable to $ 37,340 $ 0.32 $ 31,425 $ 0.28 common stockholders Impact of the difference in weighted average number (0.02) — of shares – diluted(1) Adjustments: Real estate depreciation 23,240 0.19 18,921 0.16 Amortization of 3,726 0.03 2,869 0.02 intangibles Unconsolidated joint venture real estate 1,106 0.01 1,494 0.01 depreciation and amortization Unconsolidated joint venture gain on sale of properties — — (2,556) (0.02) and purchase of partners' interests Distributions paid on SeriesA Preferred (1,438) (0.01) (1,438) (0.01) Operating Partnership units Income allocated to Operating Partnership 3,869 0.03 2,494 0.02 noncontrolling interests Funds from operations $ 67,843 $ 0.55 $ 53,209 $ 0.46 Adjustments: Non-cash interest expense related to amortization of discount on equity portion 662 0.01 — — of exchangeable senior notes Non-cash interest benefit related to out of market (895) (0.01) (565) — debt Acquisition related costs 2,056 0.02 452 — Funds from operations as $ 69,666 $ 0.57 $ 53,096 $ 0.46 adjusted Weighted average number of 122,517,516 114,967,087 shares — diluted(2) (1) Adjustment to account for the difference between the number of shares used to calculate earnings per share using the two class method, which is lower than the number of shares used to compute FFO per share and FFO as adjusted per share, which are calculated assuming full redemption of all OP units as described in note (2). (2) Extra Space Storage L.P. (the "Operating Partnership") has outstanding preferred and common operating partnership units ("OP units"). These OP units can be redeemed for 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 shares — diluted for FFO per share and FFO as adjusted per share also includes the effect of share-based compensation plans using the treasury stock method. Operating Results and Same-Store Property Performance: The following table outlines the Company's same-store property performance for the three months ended March31, 2014 and 2013 (amounts shown in thousands, except property count data - unaudited): FortheThreeMonthsEnded Percent March31, 2014 2013 Change Same-store rental and tenant reinsurance $ 115,005 $ 106,604 7.9% revenues Same-store operating and tenant 36,042 34,416 4.7% reinsurance expenses Same-store net operating income $ 78,963 $ 72,188 9.4% Non same-store rental and tenant $ 30,459 $ 6,540 365.7% reinsurance revenues Non same-store operating and tenant $ 10,007 $ 1,931 418.2% reinsurance expenses Total rental and tenant reinsurance $ 145,464 $ 113,144 28.6% revenues Total operating and tenant reinsurance $ 46,049 $ 36,347 26.7% expenses Same-store square foot occupancy as of 90.4% % 88.4% quarter end Properties included in same-store 443 443 Same-store revenues for the three months ended March31, 2014 increased due to gains in occupancy, lower discounts to new customers and higher rental rates for both new and existing customers. Expenses were higher for the same period due to increases in snow removal and utility expenses, which relate primarily to the severe weather experienced in the Midwest and Eastern United States during the period. Major markets with revenue growth above the Company's portfolio average for the three months ended March31, 2014 included Chicago, Denver, Houston and Miami. Major markets performing below the Company's portfolio average included Detroit, Indianapolis, Las Vegas and Seattle. Acquisition and Third-Party Management Activity: During the quarter, the Company acquired 21 properties for approximately $249.7 million. Seventeen of the 21 properties acquired were from a single portfolio located in Virginia. The remaining four properties are located in Alabama, California, Connecticut and Texas. Subsequent to the end of the quarter, the Company acquired five additional properties located in California, Florida and Georgia for approximately $60.5 million. The Company has four additional properties under contract for a total purchase price of approximately $39.3 million. The purchase of these properties is expected to occur by the end of the second quarter of 2014. These acquisitions are subject to due diligence and other customary closing conditions and no assurance can be provided that these acquisitions will be completed on the terms described, or at all. As of March31, 2014, the Company managed 252 properties for third-party owners. With an additional 273 properties owned and operated in joint ventures, the Company had a total of 525 properties under management. The Company continues to be the largest self-storage management company in the United States. Balance Sheet: As of March31, 2014, the Company's percentage of fixed-rate debt to total debt was 74.2%. The weighted average interest rates of the Company's fixed and variable rate debt were 4.1% and 2.0%, respectively. The combined weighted average interest rate was 3.6% with a weighted average maturity of approximately 5.2 years. Dividends: On March28, 2014, the Company paid a first quarter common stock dividend of $0.40 per share to stockholders of record at the close of business on March14, 2014. Outlook: The following table outlines the Company's FFO estimates and annual assumptions for the year ending December31, 2014: Rangesfor2014 Notes Funds from operations $ 2.41 $ 2.49 Funds from operations as $ 2.45 $ 2.53 adjusted Same-store property 6.0% 7.0% Includes tenant revenue growth reinsurance Same-store property 3.0% 4.0% Includes tenant expense growth reinsurance Same-store property NOI 7.0% 9.0% Includes tenant growth reinsurance Weighted average LIBOR 0.2% 0.2% Net tenant reinsurance $ 44,000,000 $ 45,000,000 income General& administrative $ 51,000,000 $ 52,500,000 expenses Non-cash compensation $ 5,000,000 $ 5,000,000 expense Average monthly cash $ 32,000,000 $ 32,000,000 balance Equity in earnings of real $ 10,000,000 $ 11,000,000 estate ventures Acquisition activity $ 500,000,000 $ 500,000,000 Interest expense $ 83,000,000 $ 85,000,000 Non-cash interest expense Excluded from FFO as related to exchangeable $ 2,700,000 $ 2,700,000 adjusted senior notes Non-cash interest benefit Excluded from FFO as related to out of market $ 2,700,000 $ 2,700,000 adjusted debt Taxes associated with the Includes solar tax company's taxable REIT $ 12,500,000 $ 13,500,000 credits subsidiary Solar tax credits $ 4,500,000 $ 4,500,000 Acquisition related costs $ 4,500,000 $ 4,500,000 Excluded from FFO as adjusted Weighted average share Assumes redemption count 123,000,000 123,000,000 of all OP units for common stock 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. Click on the "Investor Relations" link on the home page, then on "Financial& Stock Info," then on "Quarterly Earnings" in the navigation menu. This supplemental information provides additional detail on items that include property 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 12:00p.m. Eastern Time on Tuesday, April29, 2014, to discuss its financial results. To participate in the conference call, please dial 800-510-9691 or 617-614-3453 for international participants, conference ID: 19951039. The conference call will also be available on the Company's website at www.extraspace.com. To listen to a live broadcast, 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 Company's website in the Investor Relations section. A replay of the call will also be available by telephone, from 4:00p.m. Eastern Time on April29, 2014, until midnight Eastern Time on May 4, 2014. The replay dial-in numbers are 888-286-8010 or 617-801-6888 for international callers, conference ID: 91966208. 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 our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions 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 Form10-K and Quarterly Reports on Form10-Q. Such factors include, but are not limited to: oadverse changes in general economic conditions, the real estate industry and the markets in which we operate; ofailure to close pending acquisitions on expected terms, or at all; othe effect of competition from new and existing self-storage facilities or other storage alternatives, which could cause rents and occupancy rates to decline; odifficulties in our ability to evaluate, finance, complete and integrate acquisitions and developments successfully and to lease up those properties, which could adversely affect our profitability; opotential liability for uninsured losses and environmental contamination; othe 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; odisruptions 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; oincreased interest rates and operating costs; oreductions in asset valuations and related impairment charges; othe failure of our joint venture partners to fulfill their obligations to us or their pursuit of actions that are inconsistent with our objectives; othe failure to maintain our REIT status for federal income tax purposes; oeconomic uncertainty due to the impact of war or terrorism, which could adversely affect our business plan; and odifficulties in our ability to attract and retain qualified personnel and management members. 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 earnings. Net earnings assume 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 properties and impairment write downs of depreciable real estate assets, plus depreciation and amortization 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. For informational purposes, the Company provides FFO as adjusted for the exclusion of non-recurring revenues and expenses, acquisition related costs and non-cash interest charges. Although the Company's calculation of FFO as adjusted 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 non-recurring revenues and expenses, the costs related to acquiring properties and non-cash interest charges, stockholders and potential investors are presented with an indicator of its operating performance that more closely achieves the objectives of the real estate industry in presenting FFO. FFO as adjusted 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 Properties: The Company's same-store properties for the periods presented consist of 443 properties that are wholly-owned and operated and that were stabilized by the first day of the earliest calendar year presented. The Company considers a property 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. Same-store results provide information relating to property operations without the effects of acquisitions or completed developments and should not be used as a basis for future same-store performance or for the performance of the Company's properties as a whole. About Extra Space Storage Inc.: Extra Space Storage Inc., headquartered in Salt Lake City, Utah, is aself-administered and self-managed REIT. As of March31, 2014, the Company owned and/or operated 1,052 self-storage properties in 35 states, Washington, D.C. and Puerto Rico. The Company's properties comprise approximately 700,000 units and approximately 78.0 million square feet of rentable space. The Company offers customers a wide selection of conveniently located and secure storage solutions across the country, including boat storage, RV storage and business storage. The Company is the second largest owner and/or operator of self-storage properties in the United States and is the largest self-storage management company in the United States. Extra Space Storage Inc. Consolidated Balance Sheets (In thousands, except share data) March31,2014 December31,2013 (Unaudited) Assets: Real estate assets, net $ 3,864,904 $ 3,636,544 Investments in unconsolidated real estate 87,101 88,125 ventures Cash and cash equivalents 47,015 126,723 Restricted cash 20,026 21,451 Receivables from related parties and 8,966 7,542 affiliated real estate joint ventures Other assets, net 95,480 96,755 Total assets $ 4,123,492 $ 3,977,140 Liabilities, Noncontrolling Interests and Equity: Notes payable $ 1,664,872 $ 1,588,596 Premium on notes payable 4,053 4,948 Exchangeable senior notes 250,000 250,000 Discount on exchangeable senior notes (15,637) (16,487) Notes payable to trusts 119,590 119,590 Lines of credit 87,000 — Accounts payable and accrued expenses 52,886 60,601 Other liabilities 37,543 37,997 Total liabilities 2,200,307 2,045,245 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, 300,000,000 shares authorized, 115,869,909 and115,755,527 shares issued and 1,158 1,157 outstanding at March31, 2014 andDecember31, 2013, respectively Paid-in capital 1,976,597 1,973,159 Accumulated other comprehensive income 7,528 10,156 Accumulated deficit (235,009) (226,002) Total Extra Space Storage Inc. 1,750,274 1,758,470 stockholders' equity Noncontrolling interest represented by Preferred Operating Partnership units, 80,843 80,947 netof $100,000 note receivable Noncontrolling interests in Operating 91,042 91,453 Partnership Other noncontrolling interests 1,026 1,025 Total noncontrolling interests and equity 1,923,185 1,931,895 Total liabilities, noncontrolling interests $ 4,123,492 $ 3,977,140 and equity Consolidated Statement of Operations for the Three Months Ended March 31, 2014 and 2013 — Unaudited (In thousands, except share and per share data) FortheThreeMonthsEndedMarch31, 2014 2013 Revenues: Property rental $ 132,001 $ 102,923 Tenant reinsurance 13,463 10,221 Management fees 6,716 6,178 Total revenues 152,180 119,322 Expenses: Property operations 43,482 34,437 Tenant reinsurance 2,567 1,910 Acquisition related costs 2,056 452 General and administrative 15,302 12,769 Depreciation and amortization 28,375 23,025 Total expenses 91,782 72,593 Income from operations 60,398 46,729 Interest expense (19,598) (17,366) Non-cash interest expense related to amortization of discount on (662) — equitycomponent of exchangeable senior notes Interest income 269 184 Interest income on note receivable from Preferred Operating Partnershipunit 1,213 1,213 holder Income before equity in earnings of unconsolidated real estate ventures 41,620 30,760 andincome tax expense Equity in earnings of unconsolidated 2,419 2,623 real estate ventures Equity in earnings of unconsolidated real estate ventures - gain on sale — 2,556 ofreal estate assets and purchase of joint venture partners' interests Income tax expense (2,830) (2,008) Net income 41,209 33,931 Net income allocated to Preferred Operating Partnership (2,492) (1,717) noncontrollinginterests Net income allocated to Operating Partnership and other (1,377) (789) noncontrollinginterests Net income attributable to common $ 37,340 $ 31,425 stockholders Earnings per common share Basic $ 0.32 $ 0.28 Diluted $ 0.32 $ 0.28 Weighted average number of shares Basic 115,438,325 110,314,668 Diluted 121,062,845 114,967,087 Cash dividends paid per common share $ 0.40 $ 0.25 Reconciliation of the Range of Estimated Fully Diluted Earnings Per Share to Estimated Fully Diluted FFO Per Share — for the Three Months Ending June 30, 2014 and the Year Ending December 31, 2014 — Unaudited FortheThreeMonthsEnding FortheYearEnding June30,2014 December31,2014 LowEnd HighEnd LowEnd HighEnd Net income attributable to common stockholders per $ 0.32 $ 0.35 $ 1.37 $ 1.45 diluted share Income allocated to noncontrolling interest - Preferred 0.04 0.04 0.14 0.14 Operating Partnership and OperatingPartnership Fixed component of income allocated to non-controllinginterest - (0.01) (0.01) (0.05) (0.05) Preferred Operating Partnership Net income attributable to common stockholders for 0.35 0.38 1.46 1.54 dilutedcomputations Adjustments: Real estate depreciation 0.20 0.20 0.80 0.80 Amortization of intangibles 0.03 0.03 0.11 0.11 Joint venture real estate depreciation 0.01 0.01 0.04 0.04 and amortization Funds from operations $ 0.59 $ 0.62 $ 2.41 $ 2.49 Adjustments: Non-cash interest related to out of (0.01) (0.01) (0.02) (0.02) market debt Non-cash interest expense related to amortization of 0.01 0.01 0.02 0.02 discount on exchangeable senior notes Acquisition related costs 0.01 0.01 0.04 0.04 Funds from operations as $ 0.60 $ 0.63 $ 2.45 $ 2.53 adjusted Logo - http://photos.prnewswire.com/prnh/20120730/LA48662LOGO SOURCE Extra Space Storage Inc. Website: http://www.extraspace.com Contact: Clint Halverson, Extra Space Storage Inc., (801) 365-1759
Extra Space Storage Inc. Reports 2014 First Quarter Results
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