10-QPeriod: Q1 FY2005

Extra Space Storage Inc. Quarterly Report for Q1 Ended Mar 31, 2005

Filed May 10, 2005For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported its first quarter 2005 financial results, highlighting significant growth in real estate assets and overall revenues compared to the prior year period. The company's balance sheet shows a substantial increase in real estate assets, reaching $755.4 million as of March 31, 2005, up from $696.9 million at the end of 2004, reflecting strategic acquisitions and development. Total assets grew to $797.2 million. The company experienced a net loss of $0.6 million for the quarter, an improvement from the $6.0 million net loss in the first quarter of 2004, with basic and diluted loss per share at $(0.02) for the current period. Financially, EXR's total revenues more than doubled year-over-year, primarily driven by a significant increase in property rental revenues due to acquisitions and buyouts of joint venture interests. While expenses also rose, largely due to increased property operations and depreciation from expanded operations, the company achieved positive Funds from Operations (FFO) of $5.1 million, or $0.15 per share, indicating operational profitability before the impact of real estate depreciation and gains/losses on sales. The company also made substantial progress in its expansion strategy, acquiring eight new properties in the first quarter of 2005 and detailing plans for a major acquisition that was agreed upon after the quarter's close.

Key Highlights

  • 1Total revenues more than doubled to $22.9 million in Q1 2005 from $10.9 million in Q1 2004, driven by property rental revenue growth.
  • 2Net loss improved significantly to $0.6 million from $6.0 million year-over-year, with EPS improving to $(0.02) from $(2.66).
  • 3Real estate assets increased by approximately $58.5 million to $755.4 million in Q1 2005, reflecting ongoing acquisition and development activities.
  • 4Funds from Operations (FFO) turned positive at $5.1 million ($0.15 per share), indicating core operational profitability.
  • 5The company completed several strategic acquisitions, adding eight self-storage facilities in the first quarter of 2005.
  • 6Subsequent to the quarter, Extra Space Storage agreed to acquire Storage USA for $2.3 billion, a transformative deal expected to significantly expand its market presence.
  • 7Debt levels remain substantial, with total debt of $529 million, resulting in a debt-to-capitalization ratio of approximately 53.6%.

Frequently Asked Questions

Extra Space Storage Inc. reported a net loss of $0.64 million for the first quarter of 2005, an improvement from a net loss of $6.03 million in the same period of 2004. Revenue more than doubled year-over-year to $22.9 million. The company also reported positive Funds from Operations (FFO) of $5.1 million ($0.15 per share) for the quarter.

The company's real estate assets grew substantially to $755.4 million as of March 31, 2005, up from $696.9 million at the end of 2004, reflecting strategic acquisitions. In Q1 2005, Extra Space Storage acquired eight new self-storage facilities and has outlined plans for continued aggressive acquisition of both single properties and portfolios. A significant development post-quarter was the agreement to acquire Storage USA for $2.3 billion.

As of March 31, 2005, Extra Space Storage had approximately $529 million in debt, with a debt-to-capitalization ratio of about 53.6%. The company has a $100 million revolving line of credit, of which $48.5 million was drawn. While the company expects to meet short-term liquidity needs through operating cash flow and its credit facility, long-term needs, including acquisitions and capital expenditures, are expected to be funded through additional borrowings, joint ventures, and equity/debt offerings. REITs are required to distribute at least 90% of taxable income annually, limiting retained cash for liquidity.

Revenue growth is primarily driven by property rental revenues, significantly boosted by new acquisitions and the buyout of joint venture interests. Expenses have increased due to expanded property operations and higher depreciation and amortization resulting from portfolio growth. Same-store rental revenues showed a modest 3.2% increase, while same-store operating expenses rose by 7.4%, partly due to higher snow removal and property tax costs in certain regions. The company utilizes its proprietary 'STORE' software for real-time pricing and yield management to maximize revenue.