8-KAcquisitions & DispositionsMaterial AgreementsSecurities & Listing+2

Extra Space Storage Inc. 8-K Report, Material Agreement (Jun 26, 2007)

Filed June 26, 2007For Securities:EXR

Summary

Extra Space Storage Inc. (EXR) has announced the significant acquisition of 12 out of 13 self-storage facilities from entities affiliated with AAAAA Rent-A-Space, valued at approximately $150.2 million. This transaction was primarily settled through the issuance of approximately $130 million in Series A Participating Redeemable Preferred Units of its operating partnership subsidiary, with the remaining balance covered by the assumption of roughly $20 million in third-party debt. The acquisition expands EXR's physical footprint and is a key growth initiative. Investors should note the structure of the deal, including the issuance of preferred units which carry redemption rights and are backed by contributor loans secured by these preferred units.

Key Highlights

  • 1Acquisition of 12 self-storage facilities valued at approximately $150.2 million, with the 13th property expected to close mid-July.
  • 2Transaction consideration includes approximately $130 million in Series A Participating Redeemable Preferred Units of Extra Space Storage LP.
  • 3Assumption of approximately $20 million in third-party debt related to the acquired properties.
  • 4Issuance of Series A Preferred Units which have priority on distributions and liquidation, and are redeemable by the contributors starting September 1, 2008.
  • 5Company has the option to satisfy redemption obligations with cash or shares of common stock, with share redemption based on market price.
  • 6Operating Partnership provided approximately $100 million in loans to the primary owners of the contributors, secured by the Series A Preferred Units.
  • 7Registration rights agreements were entered into, requiring EXR to file a shelf registration statement for common stock issuable upon exchange of preferred units by September 2008.

Frequently Asked Questions

The main purpose of this filing was to report the entry into a material definitive agreement for the acquisition of self-storage facilities and to announce the completion of the acquisition of 12 of those facilities. It also details the financing structure and the issuance of preferred units in the operating partnership.

The acquisition was financed through the issuance of approximately $130 million in Series A Participating Redeemable Preferred Units of Extra Space Storage LP and the assumption of approximately $20 million in third-party debt from the acquired properties. The company also provided approximately $100 million in loans to the sellers.

The Series A Preferred Units have a preferential claim on distributions and liquidation proceeds. Crucially, they are redeemable by the holders starting September 1, 2008, at the company's option, either in cash or common stock. If redeemed with stock, the number of shares issued will depend on the company's common stock price at the time. This could lead to future dilution if redeemed with stock.

The company has agreed to use commercially reasonable efforts to file a shelf registration statement for the common stock issuable upon the exchange of these preferred units by the end of September 2008. This indicates a potential future conversion event that could impact the outstanding share count.