8-KMaterial AgreementsRegulation FDExhibits & Filings

Extra Space Storage Inc. 8-K Report, Material Agreement (Jun 29, 2009)

Filed June 29, 2009For Securities:EXR

Summary

This 8-K filing by Extra Space Storage Inc. (EXR), dated June 29, 2009, announces a significant joint venture (JV) transaction. The Company is contributing 42 of its wholly-owned properties to a newly formed JV with an affiliate of Harrison Street Real Estate Capital, LLC. This strategic move involves the partner contributing $62.4 million for an 80% stake in the JV, while EXR retains a 20% interest and approximately $62.4 million in cash. The JV will also assume approximately $213 million in debt secured by the contributed properties. This transaction allows EXR to deleverage its balance sheet by shedding significant debt and receiving immediate cash, while still retaining a significant ownership stake and operational control of the contributed assets through a management fee structure. The deal is expected to close in late Q3 or early Q4 2009, subject to customary closing conditions. Investors should note the formation of a non-competition agreement and a right of first opportunity for future projects between the parties.

Key Highlights

  • 1Extra Space Storage Inc. (EXR) formed a joint venture (JV) with an affiliate of Harrison Street Real Estate Capital, LLC.
  • 2EXR is contributing 42 wholly-owned properties to the JV.
  • 3The JV partner is contributing $62.4 million for an 80% ownership interest.
  • 4EXR will receive $62.4 million in cash and a 20% ownership interest in the JV.
  • 5The JV will assume approximately $213 million in debt secured by the contributed properties.
  • 6EXR will continue to manage the properties for a 6% management fee on revenues.
  • 7The transaction is anticipated to close in late Q3 or early Q4 2009.

Frequently Asked Questions

The primary purpose for Extra Space Storage is to deleverage its balance sheet by contributing a portion of its properties to the JV, which assumes associated debt. It also provides the company with immediate cash proceeds and allows it to retain an economic interest in these properties while continuing to manage them.

Extra Space Storage will continue to manage the day-to-day operations of the properties contributed to the JV. For these services, the company will receive a management fee equal to 6% of the revenues generated by those properties. Additionally, EXR retains a 20% ownership stake in the JV, entitling it to a share of profits or distributions from the JV.

The joint venture transaction is subject to customary due diligence and closing conditions. The Company anticipates that the transaction will close in late the third quarter or early in the fourth quarter of 2009.

Yes, in connection with the closing, EXR and the JV partner will enter into a non-competition and right of first opportunity agreement. This agreement prohibits both parties from developing new self-storage projects within a specified distance of any self-storage project owned by the JV. EXR will also provide the partner with a right of first opportunity for potential acquisition or development joint venture projects for up to five years, subject to certain exceptions.