10-QPeriod: Q3 FY2012

Extra Space Storage Inc. Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 5, 2012For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported strong third-quarter and year-to-date results for 2012, showcasing significant revenue growth and improved profitability. The company's strategic focus on property acquisition and management expansion has driven a substantial increase in total revenues, primarily from property rentals, reflecting both organic growth and contributions from new acquisitions. Operating expenses also rose, largely due to the increased property base, but were managed effectively to ensure profitability gains. Financially, EXR demonstrated robust operational cash flow generation, bolstered by strong net income and adjustments for non-cash items like depreciation. The company actively managed its balance sheet, increasing its real estate assets and managing its debt levels. Significant investments in property acquisitions were financed through a combination of debt and equity, including a successful public stock offering. The company's commitment to shareholder value is also evident in its dividend payouts and strategic capital allocation. Overall, the filing indicates a healthy and growing business with a clear strategy for continued expansion and profitability in the self-storage market.

Financial Highlights

32 data points
Beta

Net Income

$38.61M

EPS (Diluted)

$0.37

Total Assets

$3.01B

Cash & Equivalents

$43.61M

Free Cash Flow

$60.34M

Financial Statements
Beta
Cost of Revenue$30.11M
Operating Expenses$66.31M
Operating Income$43.48M
Interest Expense$18.42M
Net Income$38.61M
EPS (Basic)$0.37
EPS (Diluted)$0.37
Shares Outstanding (Basic)104.25M
Shares Outstanding (Diluted)108.76M

Key Highlights

  • 1Total revenues increased by 30.6% for the three months ended September 30, 2012, and 25.0% for the nine months ended September 30, 2012, compared to the same periods in 2011, driven primarily by property rental revenue.
  • 2Property rental revenue saw significant growth of 35.4% for the quarter and 27.6% for the nine months, attributed to property acquisitions and increased occupancy and rental rates at stabilized properties.
  • 3Net income attributable to common stockholders grew substantially, more than doubling for both the three-month and nine-month periods compared to 2011, indicating improved profitability.
  • 4The company completed 59 property acquisitions during the first nine months of 2012, significantly expanding its real estate asset base.
  • 5Operating expenses increased, largely in line with property acquisitions and management growth, but Net Operating Income (NOI) for same-store properties increased by 11.4% for the quarter and 10.8% for the nine months.
  • 6Extra Space Storage Inc. successfully raised net proceeds of $226,692 from a public offering of common stock in April 2012 to fund growth initiatives.
  • 7Funds From Operations (FFO) increased significantly, demonstrating the company's ability to generate cash flow from its real estate operations, with FFO per common share rising to $0.37 for the quarter and $0.80 for the nine months.

Frequently Asked Questions

The primary driver of revenue growth was property rental income, which increased by 35.4% for the three months ended September 30, 2012, compared to the same period in the prior year. This growth was fueled by a significant number of property acquisitions completed in 2011 and 2012, as well as increases in occupancy and rental rates at existing stabilized properties.

While total expenses increased due to the expansion of the property portfolio and management operations, the company focused on efficiency. Property operations expenses grew, but at a slower rate than revenue for the nine-month period. The company also highlighted effective management of same-store operating expenses, which decreased by 2.8% for the quarter and 1.6% for the nine months, contributing to a significant increase in same-store Net Operating Income (NOI).

As of September 30, 2012, Extra Space Storage Inc. had approximately $1.6 billion in total debt and a debt-to-total capitalization ratio of 30.6%. The company also successfully raised significant capital through a public offering of common stock in April 2012, netting $226.7 million, which was used for general corporate purposes, acquisitions, and debt repayment. The company maintained compliance with its debt covenants.

Yes, the company recognized a significant gain of $13,499 on July 2, 2012, related to the acquisition of Prudential Real Estate Investors' 94.9% interest in the ESS PRISA III LLC joint venture. This gain represented the increase in the fair value of the company's previously held 5.1% interest in the venture. Additionally, a joint venture in which the company held a 40% interest sold its property, resulting in a gain of $5,550 for the company.