10-QPeriod: Q2 FY2005

Extra Space Storage Inc. Quarterly Report for Q2 Ended Jun 30, 2005

Filed August 15, 2005For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) filed its Form 10-Q for the period ending June 30, 2005, showcasing significant growth and strategic expansion. The company's total assets grew substantially to $901.9 million from $748.5 million at the end of the previous year, driven by a substantial increase in real estate assets. This growth is largely attributed to strategic acquisitions, including eight properties in the first half of 2005, and the monumental Storage USA acquisition that closed shortly after the quarter. The company reported an increase in total revenues to $24.6 million for the quarter and $47.5 million for the six-month period, up from $13.9 million and $24.9 million in the prior year, respectively. While the company reported a net loss of $1.2 million for the quarter, this represents an improvement from the prior year's loss of $7.0 million. The company is actively managing its growth through strategic acquisitions and operational improvements, positioning itself as a major player in the self-storage industry.

Key Highlights

  • 1Total assets increased significantly to $901.9 million as of June 30, 2005, up from $748.5 million at December 31, 2004, primarily due to an increase in real estate assets.
  • 2Total revenues for the three months ended June 30, 2005, were $24.6 million, a substantial increase from $13.9 million in the same period of the prior year.
  • 3The company acquired eight self-storage properties in the first six months of 2005, demonstrating a proactive acquisition strategy.
  • 4Net loss for the three months ended June 30, 2005, was $1.2 million, an improvement compared to a net loss of $7.0 million for the same period in 2004.
  • 5The company secured a $100 million revolving line of credit, with $69.0 million available as of June 30, 2005, to support corporate purposes and acquisitions.
  • 6Post-quarter end, on July 14, 2005, Extra Space Storage completed a significant acquisition of the Storage USA business for $2.3 billion, making it the second-largest operator of self-storage properties in the U.S.
  • 7Funds from Operations (FFO) were $4.8 million for the quarter and $9.9 million for the six-month period, indicating positive operational cash flow before considering non-cash items and property sales.

Frequently Asked Questions

Extra Space Storage Inc. is demonstrating strong growth in its asset base and revenues, driven by strategic acquisitions. While the company reported a net loss for the quarter, this is an improvement over the prior year, and the company is showing positive Funds from Operations (FFO). The significant Storage USA acquisition, which closed shortly after the quarter, is expected to further enhance its market position and future growth prospects.

The company is utilizing a combination of debt and equity financing. As of June 30, 2005, they had available capacity on a $100 million revolving credit facility. Additionally, a private placement of common stock in June 2005 raised $81.3 million in net proceeds. The large Storage USA acquisition was financed through a combination of debt, including a $100 million bridge loan, and equity. The company also utilizes mortgage debt for its properties.

The acquisition of Storage USA, completed on July 14, 2005, shortly after the reporting period, was a transformative event. It significantly expanded Extra Space Storage's portfolio, making it the second-largest self-storage operator in the U.S. This acquisition is expected to drive substantial revenue growth and operational synergies due to increased scale and market presence. The integration process is underway and is expected to continue over several quarters.

The company faces competition in all its markets, which could impact its ability to control discounts, especially for properties in the lease-up phase. Additionally, the self-storage business is subject to seasonal fluctuations. The report also notes increased operating expenses, particularly due to higher snow removal costs in the current period and an increase in property taxes. The company's substantial debt load and its need to distribute 90% of its net taxable income as dividends also influence its liquidity.