8-KFinancial Events

Extra Space Storage Inc. 8-K Report, Financial Obligation (Oct 8, 2004)

Filed October 8, 2004For Securities:EXR

Summary

This 8-K filing from Extra Space Storage Inc. (EXR), dated October 8, 2004, reports on a significant financial transaction initiated on October 4, 2004. The company's indirect subsidiary, Extra Space Storage LLC, entered into a reverse interest rate swap agreement with U.S. Bank National Association. This agreement is directly tied to the company's existing $61,770,000 senior fixed-rate mortgage due 2009. The primary purpose of this swap is to manage interest rate risk. Under the agreement, Extra Space Storage LLC will receive fixed interest payments at a rate of 4.30% and, in turn, pay variable interest payments tied to the one-month LIBOR plus 65.5 basis points. This transaction effectively allows the company to convert a portion of its variable-rate debt exposure, which was previously described in its S-11/A filing, into a fixed-rate obligation, providing greater predictability in its future interest expenses.

Key Highlights

  • 1Extra Space Storage LLC entered into a reverse interest rate swap agreement on October 4, 2004.
  • 2The swap is linked to the company's existing $61,770,000 senior fixed-rate mortgage due 2009.
  • 3Under the swap, the subsidiary will receive fixed payments of 4.30%.
  • 4The subsidiary will pay variable interest based on 1-month LIBOR plus 65.5 basis points.
  • 5The notional amount of the swap is $61,770,000.
  • 6The company has effectively hedged against potential increases in variable interest rates related to its mortgage.
  • 7No origination fees or significant upfront costs were incurred for this swap agreement.

Frequently Asked Questions

The main purpose of the reverse interest rate swap agreement is to manage interest rate risk. By entering into this agreement, Extra Space Storage LLC is effectively converting its exposure to variable interest rates on its mortgage into a more predictable fixed-rate obligation, helping to hedge against potential increases in borrowing costs.

The notional amount of the swap agreement is $61,770,000. This swap relates to the company's existing $61,770,000 senior fixed-rate mortgage due 2009.

Under the swap agreement, Extra Space Storage LLC will receive fixed interest payments at a rate of 4.30% and pay variable interest payments based on the one-month London Interbank Offered Rate (LIBOR) plus 65.5 basis points.

No, the filing states that there were no origination fees or other significant up-front costs incurred by the company or its subsidiaries in connection with the Swap Agreement.