10-QPeriod: Q2 FY2007

Extra Space Storage Inc. Quarterly Report for Q2 Ended Jun 30, 2007

Filed August 8, 2007For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported its second-quarter results for 2007, demonstrating solid revenue growth driven by acquisitions and rate increases. Total revenues increased by 16.5% for the six months ended June 30, 2007, compared to the same period in 2006, primarily fueled by a 16.5% rise in property rental income. This growth was supported by strategic acquisitions, adding 22 properties during the first half of the year, and effective rate management at existing stabilized properties, which saw a 4.3% revenue increase on a same-store basis for the quarter. The company's financial position strengthened with total assets growing to $1.98 billion. Notably, the acquisition of ten self-storage facilities in California and Hawaii through Preferred Operating Partnership units marked a significant event in the quarter. EXR also secured a $250 million exchangeable senior notes offering, bolstering its liquidity. While general and administrative expenses remained stable, property operations and tenant insurance expenses saw increases, largely due to acquisitions and the implementation of a new captive insurance program. The company maintains a strategic focus on maximizing property performance, pursuing acquisitions, developing new properties, and expanding its management business.

Key Highlights

  • 1Total revenues increased by 16.5% to $110.3 million for the six months ended June 30, 2007, compared to $93.9 million in the prior year.
  • 2Property rental revenue grew by 15.2% to $48.4 million for the quarter and 16.5% to $94.6 million for the six months, driven by acquisitions and rate increases.
  • 3Same-store rental revenues increased by 4.3% for the quarter and 5.1% for the six months, indicating effective rental rate management.
  • 4The company acquired 22 operating properties in the first half of 2007, significantly expanding its portfolio.
  • 5A $250 million issuance of 3.625% Exchangeable Senior Notes was completed on March 27, 2007, strengthening liquidity.
  • 6Total assets grew to $1.98 billion as of June 30, 2007, up from $1.67 billion at the end of 2006, reflecting property expansion.
  • 7Net income for the quarter rose significantly to $8.7 million from $3.1 million in the prior year, with diluted EPS at $0.13 compared to $0.06.

Frequently Asked Questions

The primary driver of revenue growth was the increase in property rental revenue, which rose by 15.2% for the quarter and 16.5% for the six months ended June 30, 2007. This growth was fueled by strategic acquisitions of new properties and effective rental rate increases at existing stabilized properties.

Extra Space Storage significantly strengthened its financial position through several key actions. Total assets grew to $1.98 billion. The company also successfully completed a $250 million offering of exchangeable senior notes, which boosted its liquidity. Additionally, the acquisition of ten self-storage facilities through Preferred Operating Partnership units contributed to portfolio expansion.

The same-store revenue growth of 4.3% for the quarter indicates that the company's core, established properties are performing well. This metric excludes the impact of new acquisitions or developments, showing that Extra Space Storage is effectively managing rental rates and occupancy in its existing portfolio, demonstrating operational strength beyond just growth through acquisition.

Extra Space Storage's growth strategies include maximizing the performance of its existing properties through efficient management and technology, actively pursuing acquisitions of self-storage properties from strategic partners and third parties, developing new self-storage properties, and expanding its property management business by forming strategic relationships that can lead to future acquisitions.