10-QPeriod: Q3 FY2005

Extra Space Storage Inc. Quarterly Report for Q3 Ended Sep 30, 2005

Filed November 14, 2005For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) filed its quarterly report on Form 10-Q for the period ended September 30, 2005. The report highlights significant growth driven by the substantial acquisition of Storage USA (SUSA) in July 2005, which dramatically expanded the company's property portfolio. This acquisition led to a significant increase in revenues, property rental income, and operational scale. Despite the revenue growth, the company reported a net loss attributable to common stockholders for the nine months ended September 30, 2005, primarily due to increased interest expenses and general administrative costs associated with the SUSA integration. Financially, the company saw a considerable rise in total assets, driven by real estate assets and a significant increase in debt to finance acquisitions. The company's liquidity appears managed through a revolving credit facility and expectations of future equity and debt offerings. While same-store revenues showed positive growth, indicating operational strength in existing properties, the overall financial performance is heavily influenced by the ongoing integration of the large SUSA acquisition and associated debt.

Key Highlights

  • 1Revenue more than doubled year-over-year for the nine months ended September 30, 2005, reaching $90.7 million, largely due to the acquisition of Storage USA (SUSA) in July 2005.
  • 2The SUSA acquisition significantly expanded the company's real estate assets, with total assets growing from $748.5 million at the end of 2004 to $1.43 billion by September 30, 2005.
  • 3Total debt increased substantially to $1.09 billion, reflecting significant borrowings to fund acquisitions, leading to a debt-to-capitalization ratio of approximately 62.2% as of September 30, 2005.
  • 4Despite revenue growth, the company reported a net loss attributable to common stockholders of $4.7 million for the nine months ended September 30, 2005, compared to a loss of $25.4 million in the prior year's period.
  • 5Same-store rental revenues increased by 3.5% for the nine months ended September 30, 2005, indicating healthy performance in the established portfolio.
  • 6The company is actively managing its lease-up properties, with an average occupancy of 76.2% for these properties as of September 30, 2005, showing improvement from the previous year.
  • 7Funds From Operations (FFO) was $17.1 million for the nine months ended September 30, 2005, representing $0.47 per share, demonstrating operational cash flow generation beyond net income.

Frequently Asked Questions

The primary driver of revenue growth was the acquisition of Storage USA (SUSA) in July 2005. This acquisition significantly increased the company's property rental revenues and overall operational scale, leading to a more than doubling of total revenues compared to the same period in the prior year.

The SUSA acquisition led to a substantial increase in real estate assets and total assets. To finance this acquisition, the company significantly increased its debt, with total liabilities rising to $1.09 billion by September 30, 2005. This resulted in a debt-to-capitalization ratio of approximately 62.2%.

No, the company reported a net loss attributable to common stockholders of $4.7 million for the nine months ended September 30, 2005. While this is an improvement from the prior year's loss of $25.4 million, the company is not yet profitable on a GAAP net income basis, largely due to increased interest expenses and integration costs related to the SUSA acquisition.

The company reported positive same-store rental revenue growth of 3.5% for the nine months ended September 30, 2005, indicating strong performance in its established portfolio. The company utilizes yield management software and active pricing/discount strategies to maximize revenue, aiming for the highest sustainable revenue rather than just the highest occupancy. The outlook suggests continued focus on these strategies and leveraging the scale from the SUSA acquisition.