10-QPeriod: Q3 FY2008

Extra Space Storage Inc. Quarterly Report for Q3 Ended Sep 30, 2008

Filed November 5, 2008For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported its third-quarter 2008 results, showcasing continued revenue growth driven by acquisitions and rental rate increases. Total revenues increased by 9.4% for the quarter and 16.7% for the nine-month period, primarily from property rentals, with a significant contribution from tenant reinsurance. Despite revenue growth, the company faced increased expenses, particularly in property operations and general & administrative costs, largely due to recent acquisitions and developments. Net income attributable to common stockholders saw an increase, but the company's overall financial position reflects the challenging economic environment and credit market disruptions of 2008. The company maintained a strong liquidity position, bolstered by recent equity offerings, and remains focused on strategic property acquisitions and development to drive future growth.

Key Highlights

  • 1Total revenues increased by 9.4% to $69.8 million for the third quarter of 2008 compared to the prior year, and by 16.7% for the nine-month period to $202.9 million.
  • 2Property rental revenue saw an increase of 8.7% for the quarter and 16.7% for the nine-month period, driven by acquisitions and rental rate increases.
  • 3Tenant reinsurance revenue and expense both increased significantly, indicating growing participation in the program.
  • 4Depreciation and amortization expenses rose by 16.6% for the quarter and 25.0% for the nine-month period, reflecting increased property acquisitions and development.
  • 5The company's liquidity was strengthened by a May 2008 public offering of common stock, raising $232.7 million, and a subsequent registered direct placement in October 2008.
  • 6Despite challenges in the broader economic and credit markets, the company maintained a debt-to-total capitalization ratio of 49.2% as of September 30, 2008.
  • 7Same-store rental revenues increased by 1.9% for the first nine months of 2008, demonstrating stable performance in existing properties.

Frequently Asked Questions

Extra Space Storage reported increased total revenues, driven primarily by property rentals and acquisitions. However, expenses also rose due to recent property additions and development, impacting profitability. The company benefited from increased liquidity due to equity offerings, while managing its debt levels within a challenging economic environment.

The company's stabilized properties demonstrated stable performance, with same-store rental revenues increasing by 1.9% for the nine months ended September 30, 2008. Occupancy rates for stabilized properties remained strong at approximately 86%. Lease-up properties, however, showed lower occupancy rates, particularly those recently acquired or developed.

The company anticipates generally stable self-storage fundamentals to continue in its core markets and believes it can increase revenues in the remainder of 2008 through effective revenue management and pricing strategies. They expect continued competition but are confident in their portfolio's quality and management systems. However, they acknowledge that continued turbulence in the credit markets could adversely affect their liquidity, financial condition, and ability to access capital.

The company maintained a debt-to-total capitalization ratio of 49.2% as of September 30, 2008. Liquidity was significantly bolstered by a public offering of common stock in May 2008. While they have a $100 million revolving line of credit, no amounts were outstanding as of the reporting date. The company expects to fund its liquidity needs through operating cash flow, existing cash, and potentially additional external financing, though market conditions present challenges.