10-QPeriod: Q1 FY2008

Extra Space Storage Inc. Quarterly Report for Q1 Ended Mar 31, 2008

Filed May 7, 2008For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported its first quarter 2008 financial results, ending March 31, 2008. Total revenues increased by 22.2% year-over-year to $65.7 million, driven primarily by a 23.3% rise in property rental revenue, largely due to acquisitions and increased rental rates. Net income remained relatively stable at $6.7 million, or $0.10 per diluted share, compared to $6.47 million in the prior year. The company's balance sheet shows total assets of $2.05 billion, with significant holdings in real estate assets. Debt levels remain substantial, with total liabilities around $1.37 billion. The company continues to execute its growth strategy, focusing on property acquisitions, development, and expansion of its management business. Despite a generally positive climate for self-storage, the company anticipates continued competition and rising property taxes as a key expense driver. Liquidity appears adequate, supported by operating cash flow and an undrawn $100 million credit line, though the company relies on external capital sources for significant growth initiatives and to maintain its REIT status.

Key Highlights

  • 1Total revenues grew by 22.2% to $65.7 million in Q1 2008, driven by a 23.3% increase in property rental revenue, reflecting successful acquisitions and rate increases.
  • 2Net income was $6.7 million ($0.10 per diluted share), largely in line with the prior year's $6.47 million, indicating stable profitability despite revenue growth.
  • 3The company's real estate portfolio expanded, with 607 owned or co-owned facilities and 47 managed properties by March 31, 2008.
  • 4Funds From Operations (FFO) increased by 9.5% to $17.86 million, highlighting operational performance beyond GAAP net income.
  • 5Same-store rental revenues increased by 2.5% year-over-year, demonstrating healthy performance in established properties.
  • 6The company has a $100 million revolving credit line, with no amounts outstanding as of March 31, 2008, providing financial flexibility.
  • 7There was a loss of $1.415 million recognized from the sale of investments available for sale (auction rate securities).

Frequently Asked Questions

Total revenues increased by 22.2% to $65.7 million for the three months ended March 31, 2008, compared to $53.78 million for the same period in 2007. This growth was primarily driven by a 23.3% increase in property rental revenue, attributed to acquisitions, higher rental rates at stabilized properties, and improved performance at lease-up properties.

Net income for the first quarter of 2008 was $6.7 million, resulting in basic and diluted earnings per share of $0.10. This was slightly up from $6.47 million in the first quarter of 2007.

As of March 31, 2008, Extra Space Storage had total liabilities of approximately $1.37 billion and total debt of $1.32 billion, resulting in a debt-to-capitalization ratio of 53.3%. The company had $21.01 million in cash and cash equivalents and an undrawn $100 million revolving credit line, indicating adequate liquidity for its short-term needs and strategic initiatives.

The company owned or had ownership interests in 607 self-storage properties as of March 31, 2008, with an additional 47 properties managed for third parties. Management's strategy includes maximizing property performance, acquiring new properties, developing new facilities (with 24 projects in the pipeline), and expanding its management business.