Extra Space Storage Inc. Reports 2014 First Quarter Results

         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
 
Press spacebar to pause and continue. Press esc to stop.