8-KMaterial AgreementsRegulation FDExhibits & Filings

Extra Space Storage Inc. 8-K Report, Material Agreement (Jun 18, 2007)

Filed June 18, 2007For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) announced a significant strategic shift in its acquisition strategy on June 18, 2007, through an 8-K filing. The company, via its operating partnership, has entered into a contribution agreement to acquire 13 self-storage facilities from entities affiliated with AAAAA Rent-A-Space. This transaction replaces a previously planned cash purchase, indicating a preference for a property-for-equity exchange. The acquired portfolio comprises approximately 1.04 million square feet across 14,700 units, primarily located in the Bay Area of Northern California and Hawaii. The total value of the acquisition is approximately $150.2 million, structured as the issuance of $130 million in newly created Series A Participating Redeemable Preferred Units of the Operating Partnership and the assumption of $20 million in debt. A portion of the Series A Preferred Units ($115 million) will feature a fixed 5% priority return and liquidation preference, with the remainder participating in distributions and liquidation similar to common units. This structure allows for continued participation by the sellers while providing Extra Space Storage with a strategic expansion, though investors should note the new preferred unit structure and redemption options.

Key Highlights

  • 1Acquisition of 13 self-storage facilities for approximately $150.2 million.
  • 2Transaction structured as a contribution of properties in exchange for Series A Participating Redeemable Preferred Units of the Operating Partnership, replacing a prior cash purchase agreement.
  • 3Acquired properties include ~1.04 million sq ft across 14,700 units, located in Northern California (Bay Area) and Hawaii.
  • 4Consideration includes $130 million in Series A Preferred Units and assumption of $20 million in debt.
  • 5Series A Preferred Units have a fixed priority return of 5% on $115 million and participation features on the remainder, with redemption options for the holders.
  • 6Operating Partnership will provide Contributor Loans totaling $100 million to the sellers, secured by the Series A Preferred Units.
  • 7The acquisition is expected to close by the end of Q2 2007, subject to customary conditions.

Frequently Asked Questions

Extra Space Storage, through its operating partnership, is acquiring 13 self-storage facilities from entities affiliated with AAAAA Rent-A-Space. The deal values the properties at approximately $150.2 million and is structured as a contribution of properties in exchange for newly issued Series A Participating Redeemable Preferred Units of the Operating Partnership, along with the assumption of existing debt.

This transaction replaces a previously announced cash purchase agreement dated December 8, 2006. Instead of paying cash, Extra Space Storage is using a combination of newly issued preferred equity in its operating partnership and assuming debt, signaling a shift in its financing strategy for this acquisition.

The Series A Preferred Units have a complex structure. Approximately $115 million of these units will have a fixed 5% priority return and a fixed liquidation value. The remaining portion of the Series A Preferred Units will participate in distributions and have a liquidation value similar to common units. Importantly, these units are redeemable by the contributors on or after September 1, 2008, at the company's option, which can be satisfied with cash or EXR common stock.

The acquired portfolio includes 13 self-storage facilities, with eleven located in the Bay Area of Northern California and two in Hawaii. This expands Extra Space Storage's presence in these key markets.