10-QPeriod: Q2 FY2011

Extra Space Storage Inc. Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 8, 2011For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported solid financial performance for the second quarter and first half of 2011, demonstrating growth in rental revenue, management fees, and tenant reinsurance. Total revenues for the quarter increased by 13.5% to $78.04 million, and for the six-month period by 11.8% to $152.52 million, driven by acquisitions and increased occupancy and rental rates at stabilized properties. The company's property portfolio expanded, with 680 operating self-storage properties owned or held in joint ventures, and an additional 180 managed for third parties. This growth was supported by strategic acquisitions, including 24 properties purchased in the first six months of 2011. Despite increased operating expenses and depreciation due to this expansion, the company managed to improve its Net Operating Income (NOI) from same-store stabilized properties by 7.8% for the quarter and 6.8% for the half-year, indicating operational efficiency. Financially, EXR maintained a healthy balance sheet with total assets of $2.31 billion. The company successfully raised capital through a public stock offering in May 2011, generating net proceeds of $112.5 million, which, along with operating cash flow and other financing activities, provided sufficient liquidity to manage its obligations. EXR's financial health is further underscored by its strong FFO (Funds from Operations) growth, which increased significantly year-over-year, reflecting the company's ability to generate value from its real estate assets.

Financial Highlights

33 data points
Beta

Net Income

$10.61M

EPS (Diluted)

$0.12

Total Assets

$2.31B

Cash & Equivalents

$35.19M

Free Cash Flow

$35.19M

Financial Statements
Beta
Cost of Revenue$22.71M
Operating Expenses$52.19M
Operating Income$25.85M
Interest Expense$16.26M
Net Income$10.61M
EPS (Basic)$0.12
EPS (Diluted)$0.12
Shares Outstanding (Basic)91.44M
Shares Outstanding (Diluted)96.01M

Key Highlights

  • 1Total revenues grew by 13.5% year-over-year to $78.04 million for the three months ended June 30, 2011, and by 11.8% to $152.52 million for the six months ended June 30, 2011.
  • 2Property rental revenue increased by 13.2% and 11.4% for the respective periods, driven by acquisitions and improved occupancy/rental rates at stabilized properties.
  • 3The company's portfolio expanded to 680 owned or joint venture properties and 180 managed properties, with 24 properties acquired in the first six months of 2011.
  • 4Same-store stabilized property Net Operating Income (NOI) increased by 7.8% for the quarter and 6.8% for the six-month period, demonstrating operational efficiency.
  • 5Funds From Operations (FFO) increased significantly, up 27.1% for the quarter to $25.86 million and 30.9% for the six months to $49.35 million, indicating strong performance of real estate assets.
  • 6Extra Space Storage successfully raised $112.5 million in net proceeds from a public stock offering in May 2011, bolstering its liquidity and capital resources.
  • 7The company maintained a debt-to-total capitalization ratio of 36.5% as of June 30, 2011, indicating a manageable leverage level.

Frequently Asked Questions

Extra Space Storage's growth strategy focuses on maximizing property performance through efficient management, acquiring self-storage properties from strategic partners and third parties, and expanding its management business to generate fees and develop acquisition pipelines. They leverage technology for revenue management and utilize their scale for national marketing programs.

The company experienced robust revenue growth. Property rental revenue increased significantly due to acquisitions and improved performance at existing properties. Management and franchise fees also rose, driven by an increase in third-party managed properties. Tenant reinsurance revenue saw a notable increase due to higher customer participation and an expanded property base.

As of June 30, 2011, Extra Space Storage had approximately $1.19 billion in total debt, with a debt-to-total capitalization ratio of 36.5%, considered manageable. The company had $35.19 million in cash and cash equivalents and accessed lines of credit to fund its operations. A public stock offering in May 2011 raised $112.5 million, enhancing liquidity.

Key risks include changes in general economic conditions, competition from new and existing storage facilities, difficulties in integrating acquisitions, potential uninsured losses, regulatory changes, disruptions in credit markets affecting capital raising, increased interest rates and operating costs, and the risk of losing REIT status. The company also faces risks related to interest rate fluctuations and potential impairments of asset valuations.