Extra Space Storage Inc. Reports 2020 Fourth Quarter and Year-End Results
February 22, 2021 at 16:05 PM EST
SALT LAKE CITY, Feb. 22, 2021 /PRNewswire/ -- Extra Space Storage Inc. (NYSE: EXR) (the "Company"), a leading owner and operator of self-storage facilities in the United States and a member of the S&P 500, announced operating results for the three months and year ended December 31, 2020.
Highlights for the three months ended December 31, 2020:
Highlights for the year ended December 31, 2020:
Joe Margolis, CEO of Extra Space Storage Inc., commented: "Extra Space delivered another strong quarter with Core FFO growth of 16.5%. Steady demand and muted vacates continue to result in all-time high occupancy levels, leading to solid rental rate growth across our diversified portfolio. Our people, portfolio and platform demonstrated resiliency and durability, in spite of the turbulence that came with 2020. We also found innovative avenues to grow, adding 165 stores to our management platform and investing almost $1 billion in capital in the storage sector. While future risks and uncertainties related to the pandemic and general macro-economic conditions may still impact future performance, we believe we are well positioned for another great year of FFO growth in 2021."
FFO Per Share:
The following table (unaudited) outlines the Company's FFO and Core FFO for the three months and year ended December 31, 2020 and 2019. The table also provides a reconciliation to GAAP net income attributable to common stockholders and earnings per diluted share for each period presented (amounts shown in thousands, except share and per share data):
Operating Results and Same-Store Performance:
The following table (unaudited) outlines the Company's same-store performance for the three months and year ended December 31, 2020 and 2019 (amounts shown in thousands, except store count data)1:
Same-store revenues for the three months ended December 31, 2020 increased due to higher average occupancy and higher average rates to existing customers for the quarter, partially offset by lower late fees. Same-store revenues for the year ended December 31, 2020 were essentially flat, due to higher average occupancy, partially offset by lower average rental rates to existing customers for the full year, lower late fees and higher bad debt expense related to non-paying tenants.
Same-store expenses were lower for the three months ended December 31, 2020 due to decreases in most expense categories, partially offset by increases in property taxes. Same-store expenses were higher for the year ended December 31, 2020 primarily due to increases in payroll, marketing expenses and property taxes, partially offset by reduced utilities expense and repairs and maintenance.
Details related to the same-store performance of stores by metropolitan statistical area ("MSA") for the three months and year ended December 31, 2020 are provided in the supplemental financial information published on the Company's Investor Relations website at https://ir.extraspace.com/.
Investment and Property Management Activity:
The following table (unaudited) outlines the Company's acquisitions and developments that are closed, completed or under agreement (dollars in thousands):
The projected developments and acquisitions under agreement described above are subject to customary closing conditions and no assurance can be provided that these developments and acquisitions will be completed on the terms described, or at all.
During the year ended December 31, 2020 the Company closed $220.4 million in bridge loans, with an additional $196.2 million under agreement to close in 2021 and 2022. The Company sold $63.1 million in loans during 2020.
Subsequent to December 31, 2020, the Company sold an additional $76.2 million in loans. Additional details related to the Company's loan activity and balances held are included in the supplemental financial information published on the Company's Investor Relations website at https://ir.extraspace.com/.
Other Investment Activity:
On October 26, 2020 the Company purchased $50.0 million in shares of convertible preferred stock of SmartStop Self Storage REIT, Inc. ("SmartStop"), which the Company had previously committed to purchase at SmartStop's option. Accordingly, the Company has invested a total of $200.0 million in SmartStop's convertible preferred stock. The dividend rate for the preferred stock is 6.25% per annum, and is subject to increase in 2024.
On November 6, 2020 the Company invested $300 million in preferred stock of Jernigan Capital, Inc. ("JCAP") in connection with the acquisition of JCAP by affiliates of NexPoint Advisors, L.P. ("NexPoint Investment"). The NexPoint Investment consists of a $200.0 million tranche, which will yield 10% per annum and a $100.0 million tranche which will yield 12% per annum, for a blended yield of 10.7% per annum. If the NexPoint Investment is not retired after five years, the preferred dividends increase annually.
On December 18, 2020, the Company disposed of four stores in Florida for a gross sales price of $46.6 million, and retained management. The Company also has 16 additional stores under agreement to sell into a joint venture, which are expected to close on or before March 1, 2021 for a total sales price of $169.0 million.
As of December 31, 2020, the Company managed 724 stores for third-party owners and 253 stores owned in joint ventures, for a total of 977 stores under management. The Company is the largest self-storage management company in the United States.
During the three months ended December 31, 2020, the Company settled its $575.0 million of 3.125% Exchangeable Senior Notes due 2035 with $575.0 million in cash and the issuance of 1,323,781 shares of common stock.
During the three months ended December 31, 2020, the Company sold 899,048 shares of common stock using its ATM program at an average sales price of $116.42 per share resulting in net proceeds of $103.5 million. As of December 31, 2020, the Company had $194.0 million available for issuance under its ATM program. Subsequent to December 31, 2020, the Company sold an additional 585,685 shares at an average sales price of $115.90 per share resulting in net proceeds of $67.2 million. As of February 22, 2021, the Company had $126.1 million available for issuance under its ATM program.
As of December 31, 2020, the Company's percentage of fixed-rate debt to total debt was 63.1%. The weighted average interest rates of the Company's fixed and variable-rate debt were 3.4% and 1.6%, respectively. The combined weighted average interest rate was 2.7% with a weighted average maturity of approximately 4.3 years.
Subsequent to December 31, 2020, Moody's Investors Service assigned a Baa2 issuer credit rating with a stable outlook to Extra Space Storage LP, the Company's operating partnership subsidiary.
On December 31, 2020, the Company paid a fourth quarter common stock dividend of $0.90 per share to stockholders of record at the close of business on December 15, 2020. Subsequent to December 31, 2020, the Company announced a 2021 first quarter common stock dividend of $1.00 per share, which represents an 11.1% increase over the previous quarter, to stockholders of record at the close of business on March 15, 2021 to be paid March 31, 2021.
The following table outlines the Company's FFO estimates and annual assumptions for the year ending December 31, 20211:
FFO estimates for the year are fully diluted for an estimated average number of shares and OP units outstanding during the year. The Company's estimates are forward-looking and based on management's view of current and future market conditions. The Company's actual results may differ materially from these estimates.
Supplemental Financial Information:
Supplemental unaudited financial information regarding the Company's performance can be found on the Company's website at www.extraspace.com. Under the "Company Info" navigation menu on the home page, click on "Investor Relations," then under the "Financials & Stock Info" navigation menu click on "Quarterly Earnings." This supplemental information provides additional detail on items that include store occupancy and financial performance by portfolio and market, debt maturity schedules and performance of lease-up assets.
The Company will host a conference call at 1:00 p.m. Eastern Time on Tuesday, February 23, 2021, to discuss its financial results. To participate in the conference call, please dial 855-791-2026 or 631-485-4899 for international participants; audience passcode: 3191147. The conference call will also be available on the Company's investor relations website at https://ir.extraspace.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. A replay of the call will be available for 30 days on the Company's website in the Investor Relations section.
A replay of the call will also be available by telephone, from 4:30 p.m. Eastern Time on February 23, 2021, until 4:30 p.m. Eastern Time on February 28, 2021. The replay dial-in numbers are 855-859-2056 or 404-537-3406 for international callers; passcode: 3191147.
Certain information set forth in this release contains "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements include statements concerning the benefits of store acquisitions, developments, favorable market conditions, our outlook and estimates for the year and other statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, the competitive landscape, plans or intentions relating to acquisitions and developments and other information that is not historical information. In some cases, forward-looking statements can be identified by terminology such as "believes," "estimates," "expects," "may," "will," "should," "anticipates," or "intends," or the negative of such terms or other comparable terminology, or by discussions of strategy. We may also make additional forward-looking statements from time to time. All such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary statements. There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this release. Any forward-looking statements should be considered in light of the risks referenced in the "Risk Factors" section included in our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Such factors include, but are not limited to:
All forward-looking statements are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them, but there can be no assurance that management's expectations, beliefs and projections will result or be achieved. All forward-looking statements apply only as of the date made. We undertake no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.
Definition of FFO:
FFO provides relevant and meaningful information about the Company's operating performance that is necessary, along with net income and cash flows, for an understanding of the Company's operating results. The Company believes FFO is a meaningful disclosure as a supplement to net income. Net income assumes that the values of real estate assets diminish predictably over time as reflected through depreciation and amortization expenses. The values of real estate assets fluctuate due to market conditions and the Company believes FFO more accurately reflects the value of the Company's real estate assets. FFO is defined by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT") as net income computed in accordance with U.S. generally accepted accounting principles ("GAAP"), excluding gains or losses on sales of operating stores and impairment write downs of depreciable real estate assets, plus depreciation and amortization related to real estate and after adjustments to record unconsolidated partnerships and joint ventures on the same basis. The Company believes that to further understand the Company's performance, FFO should be considered along with the reported net income and cash flows in accordance with GAAP, as presented in the Company's consolidated financial statements. FFO should not be considered a replacement of net income computed in accordance with GAAP.
For informational purposes, the Company also presents Core FFO. Core FFO excludes revenues and expenses not core to our operations and non-cash interest. Although the Company's calculation of Core FFO differs from NAREIT's definition of FFO and may not be comparable to that of other REITs and real estate companies, the Company believes it provides a meaningful supplemental measure of operating performance. The Company believes that by excluding revenues and expenses not core to our operations and non-cash interest charges, stockholders and potential investors are presented with an indicator of our operating performance that more closely achieves the objectives of the real estate industry in presenting FFO. Core FFO by the Company should not be considered a replacement of the NAREIT definition of FFO. The computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to net income as an indication of the Company's performance, as an alternative to net cash flow from operating activities as a measure of liquidity, or as an indicator of the Company's ability to make cash distributions.
Definition of Same-Store:
The Company's same-store pool for the periods presented consists of 859 stores that are wholly-owned and operated and that were stabilized by the first day of the earliest calendar year presented. The Company considers a store to be stabilized once it has been open for three years or has sustained average square foot occupancy of 80.0% or more for one calendar year. The Company believes that by providing same-store results from a stabilized pool of stores, with accompanying operating metrics including, but not limited to occupancy, rental revenue (growth), operating expenses (growth), net operating income (growth), etc., stockholders and potential investors are able to evaluate operating performance without the effects of non-stabilized occupancy levels, rent levels, expense levels, acquisitions or completed developments. Same-store results should not be used as a basis for future same-store performance or for the performance of the Company's stores as a whole.
About Extra Space Storage Inc.:
Extra Space Storage Inc., headquartered in Salt Lake City, Utah, is a self-administered and self-managed REIT and a member of the S&P 500. As of December 31, 2020, the Company owned and/or operated 1,921 self-storage stores in 40 states, Washington, D.C. and Puerto Rico. The Company's stores comprise approximately 1.4 million units and approximately 149.2 million square feet of rentable space. The Company offers customers a wide selection of conveniently located and secure storage units across the country, including boat storage, RV storage and business storage. The Company is the second largest owner and/or operator of self-storage stores in the United States and is the largest self-storage management company in the United States.
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