10-QPeriod: Q3 FY2013

Extra Space Storage Inc. Quarterly Report for Q3 Ended Sep 30, 2013

Filed November 4, 2013For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) reported strong performance for the nine months ended September 30, 2013, demonstrating robust revenue growth and a significant increase in total assets. Property rental revenue saw a substantial jump of 30.1% year-over-year, driven by strategic acquisitions and improved occupancy and rental rates at existing stabilized properties. The company also experienced growth in its tenant reinsurance and management fee segments. Despite increased operating expenses and interest expense, largely due to strategic acquisitions and the issuance of new debt, EXR managed to grow its net income attributable to common stockholders by 17.1% for the nine-month period. The company's balance sheet reflects substantial growth in real estate assets, up 7.6% from year-end 2012, alongside a significant increase in cash and cash equivalents. Financing activities show strategic debt management, including the issuance of exchangeable senior notes and principal payments on existing debt. EXR maintained its REIT status, emphasizing its commitment to shareholder value through a combination of operational efficiency, strategic acquisitions, and potential future share repurchases.

Financial Highlights

33 data points
Beta

Net Income

$29.25M

EPS (Diluted)

$0.26

Total Assets

$3.52B

Cash & Equivalents

$81.70M

Free Cash Flow

$72.03M

Financial Statements
Beta
Cost of Revenue$34.38M
Operating Expenses$77.05M
Operating Income$56.06M
Interest Expense$16.26M
Net Income$29.25M
EPS (Basic)$0.26
EPS (Diluted)$0.26
Shares Outstanding (Basic)110.83M
Shares Outstanding (Diluted)115.48M

Key Highlights

  • 1Total revenues increased by 21.2% to $133.1 million for the three months ended September 30, 2013, and by 28.0% to $378.7 million for the nine months ended September 30, 2013.
  • 2Property rental revenue grew significantly, up 21.1% to $113.9 million for the quarter and 30.1% to $324.1 million for the nine months, driven by acquisitions and improved same-store performance.
  • 3Net income attributable to common stockholders decreased to $29.2 million ($0.26 per diluted share) for the three months ended September 30, 2013, compared to $38.6 million ($0.37 per diluted share) in the prior year period, but increased for the nine-month period to $95.1 million ($0.84 per diluted share) from $81.2 million ($0.80 per diluted share) in 2012.
  • 4Total assets grew to $3.52 billion as of September 30, 2013, from $3.22 billion at December 31, 2012, with real estate assets as the largest component.
  • 5Cash and cash equivalents significantly increased to $81.7 million as of September 30, 2013, from $30.8 million at the end of 2012.
  • 6The company completed 28 property acquisitions during the nine months ended September 30, 2013.
  • 7Issued $250 million of 2.375% Exchangeable Senior Notes due 2033 in June 2013, impacting the debt structure and interest expense.

Frequently Asked Questions

The primary driver of the increase in property rental revenue was a combination of strategic property acquisitions completed in 2013 and 2012, and improved performance at existing stabilized properties, which saw increases in occupancy and rental rates.

The company issued $250 million in Exchangeable Senior Notes in June 2013. While this increased overall debt, it also resulted in a decrease in interest expense for the three and nine months ended September 30, 2013, due to a one-time benefit from debt modification and a lower weighted average interest rate on its debt portfolio.

The company plans to continue maximizing property performance through strategic management, acquiring self-storage properties from strategic partners and third parties, and expanding its management business. They view their management business as a potential future acquisition pipeline and remain disciplined buyers focused on acquisitions that strengthen their portfolio and increase shareholder value.

Acquisitions led to increased expenses, particularly in property operations, tenant reinsurance, and depreciation and amortization, reflecting the costs associated with managing a larger portfolio of properties. General and administrative expenses also increased due to the overall cost of managing additional properties.