8-KMaterial AgreementsFinancial Events

Extra Space Storage Inc. 8-K Report, Material Agreement (May 31, 2005)

Filed May 31, 2005For Securities:EXR

Summary

This Form 8-K filing by Extra Space Storage Inc. (EXR) on May 31, 2005, details a significant financing event that occurred on May 24, 2005. The company's operating subsidiary, Extra Space Storage LP, completed the private placement issuance and sale of $41 million in fixed/floating rate preferred securities through a newly formed Delaware statutory trust, ESS Statutory Trust II. These preferred securities, maturing in 2035, carry an initial fixed interest rate of 6.67% until June 30, 2010, after which they transition to a variable rate (LIBOR + 2.40%). The proceeds from this issuance, along with the sale of common securities in the Trust to the Company, were used by the Trust to purchase $42.269 million of unsecured fixed/floating rate junior subordinated notes issued by Extra Space Storage Inc. The net proceeds for the Company from these notes will be allocated for general corporate purposes, including the repayment of approximately $22.5 million of its outstanding line of credit. This transaction structure effectively provides the Company with substantial long-term financing and strengthens its liquidity position.

Key Highlights

  • 1Extra Space Storage Inc. (EXR) completed a private placement of $41 million in fixed/floating rate preferred securities through a special purpose trust (ESS Statutory Trust II) on May 24, 2005.
  • 2The preferred securities mature on June 30, 2035, offering long-term capital for the company.
  • 3Initial interest rate on preferred securities is fixed at 6.67% per annum until June 30, 2010.
  • 4After June 30, 2010, the interest rate becomes variable, pegged to LIBOR plus 2.40%.
  • 5Proceeds were used to purchase $42.269 million of junior subordinated notes issued by EXR.
  • 6Net proceeds for EXR will be used for general corporate purposes, including repaying $22.5 million of its existing line of credit.
  • 7The structure involves a trust issuing preferred securities, with proceeds used to buy subordinated notes from the parent company, a common method for enhancing capital structure.

Frequently Asked Questions

The primary purpose of this Form 8-K filing was to report a material definitive agreement related to a significant financing transaction: the private placement issuance and sale of $41 million in preferred securities by a subsidiary trust, which in turn purchased subordinated notes from Extra Space Storage Inc. The net proceeds are intended for general corporate purposes and to reduce existing debt.

The Trust Preferred Securities mature on June 30, 2035. They carry a fixed interest rate of 6.67% per annum until June 30, 2010. Thereafter, the interest rate will be variable, set at the London Interbank Offered Rate (LIBOR) plus 2.40% per annum.

The net proceeds from the issuance of the junior subordinated notes to the Trust will be used by Extra Space Storage Inc. for general corporate purposes. This specifically includes the repayment of approximately $22.5 million of the company's outstanding line of credit, thereby improving its liquidity and reducing short-term debt obligations.

The Company has the option to redeem the Junior Subordinated Notes (and consequently, a like amount of the Trust Preferred Securities) on or after June 30, 2010. If the Company exercises this option, the Trust is obligated to redeem a corresponding amount of the Trust Preferred Securities.