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Extra Space Storage Inc. Reports 2017 Fourth Quarter and Year-End Results

SALT LAKE CITY, Feb. 20, 2018 /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, 2017.

Extra Space Storage. You deserve some extra space! (PRNewsFoto/Extra Space Storage Inc.)

Highlights for the three months ended December 31, 2017:

  • Achieved net income attributable to common stockholders of $1.69 per diluted share, representing a 160.0% increase compared to the same period in 2016.
  • Achieved funds from operations attributable to common stockholders and unit holders ("FFO") of $1.17 per diluted share. Excluding adjustments for non-cash interest and to remove the benefit from tax reform, FFO as adjusted ("Core FFO") was $1.12 per diluted share, representing an 8.7% increase compared to the same period in 2016.
  • Increased same-store revenue by 4.9% and same-store net operating income ("NOI") by 5.7% compared to the same period in 2016.
  • Reported same-store occupancy of 91.9% as of December 31, 2017, compared to 91.5% as of December 31, 2016.
  • Acquired 24 operating stores, eight stores at completion of construction (a "Certificate of Occupancy store" or "C of O store") and purchased our joint venture partners' interest in six stores for a total investment of approximately $500.5 million.
  • Acquired three Certificate of Occupancy stores with joint venture partners for a total purchase price of approximately $46.6 million, of which the Company invested $11.8 million.
  • Paid a quarterly dividend of $0.78 per share.

Highlights for the year ended December 31, 2017:

  • Achieved net income attributable to common stockholders of $3.76 per diluted share, representing a 29.2% increase compared to the same period in 2016.
  • Achieved FFO of $4.37 per diluted share. Excluding adjustments to remove the benefit from tax reform, property losses and tenant reinsurance claims due to hurricanes and non-cash interest, Core FFO was $4.38 per diluted share, representing a 13.8% increase compared to the same period in 2016.
  • Increased same-store revenue by 5.1% and same-store NOI by 6.9% compared to the same period in 2016.
  • Acquired 30 operating stores, nine Certificate of Occupancy stores and purchased our joint venture partners' interest in six stores for a total investment of approximately $576.1 million.
  • Acquired seven Certificate of Occupancy stores with joint venture partners for a total purchase price of approximately $87.4 million, of which the Company invested $26.7 million.

Joe Margolis, CEO of Extra Space Storage Inc., commented: "It was another solid year for Extra Space.  Our geographically diversified portfolio and best-in-class platform continue to produce consistent results despite the operational challenges that new supply presented in certain markets.  For the year, same-store revenue increased 5.1%, NOI increased 6.9% and Core FFO per share increased 13.8%."

FFO Per Share:

The following table outlines the Company's FFO and Core FFO for the three months and year ended December 31, 2017 and 2016. 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 data1 — unaudited):


For the Three Months Ended December 31,


For the Year Ended December 31,


2017


2016


2017


2016




(per share)




(per share)




(per share)




(per share)

Net income attributable to common stockholders

$

215,983



$

1.69



$

82,403



$

0.65



$

479,013



$

3.76



$

366,127



$

2.91


Impact of the difference in weighted average number of shares – diluted2



(0.09)





(0.04)





(0.21)





(0.17)


Adjustments:
















Real estate depreciation

44,931



0.33



41,563



0.31



172,660



1.28



155,358



1.16


Amortization of intangibles

2,427



0.02



6,042



0.05



13,591



0.10



20,467



0.15


Loss (gain) on real estate transactions, earnout from prior acquisition and impairment of real estate

(118,808)



(0.88)



1,349



0.01



(112,789)



(0.84)



(8,465)



(0.06)


Unconsolidated joint venture real estate depreciation and amortization

1,222



0.01



1,024



0.01



5,489



0.04



4,505



0.03


Unconsolidated joint venture gain on sale of properties and purchase of partners' interests





(4,767)



(0.04)







(69,199)



(0.51)


Distributions paid on Series A Preferred Operating Partnership units

(572)



(0.01)



(1,271)



(0.01)



(3,119)



(0.02)



(5,085)



(0.04)


Income allocated to Operating Partnership noncontrolling interests

13,377



0.10



8,013



0.06



35,306



0.26



30,962



0.23


FFO attributable to common stockholders and unit holders

$

158,560



$

1.17



$

134,356



$

1.00



$

590,151



$

4.37



$

494,670



$

3.70


Adjustments:
















Revaluation of deferred tax related to tax reform

(8,106)



(0.06)







(8,106)



(0.06)






Property losses and tenant re-insurance claims due to hurricanes, net









4,360



0.03






Non-cash interest expense related to amortization of discount on equity portion of exchangeable senior notes

1,276



0.01



1,264



0.01



5,103



0.04



4,980



0.04


Non-cash interest benefit related to out of market debt





(44)









(872)



(0.01)


 Loss related to settlement of legal action













4,000



0.03


Acquisition related costs and other3





2,987



0.02







12,111



0.09


Core FFO attributable to common stockholders and unit holders

$

151,730



$

1.12



$

138,563



$

1.03



$

591,508



$

4.38



$

514,889



$

3.85


Weighted average number of shares – diluted4

135,028,104





134,831,414





135,066,080





133,798,946






(1)

Per share amounts may not recalculate due to rounding.

(2)

Adjustment to account for the difference between the number of shares used to calculate earnings per share and the number of shares used to calculate FFO per share. Earnings per share is calculated using the two-class method, which uses a lower number of shares than the calculation for FFO per share and Core FFO per share, which are calculated assuming full redemption of all OP units as described in note (4).

(3)

Beginning January 1, 2017, acquisition related costs have been capitalized due to the adoption of ASU 2017-01"Business Combinations (Topic 805): Clarifying the Definition of a Business", thus eliminating the need for an adjustment to Core FFO attributable to common stockholders and unit holders.

(4)

Extra Space Storage LP (the "Operating Partnership") has outstanding preferred and common Operating Partnership units ("OP units"). These OP units can be redeemed for cash or, at the Company's election, shares of the Company's common stock. Redemption of all OP units for common stock has been assumed for purposes of calculating the weighted average number of shares — diluted as presented above. The computation of weighted average number of shares — diluted for FFO per share and Core FFO per share also includes the effect of share-based compensation plans and shares related to the exchangeable senior notes using the treasury stock method.

Operating Results and Same-Store Performance:

The following table outlines the Company's same-store performance for the three months and year ended December 31, 2017 and 2016 (amounts shown in thousands, except store count data—unaudited)1:


For the Three Months
Ended December 31,


Percent


For the Year Ended
December 31,


Percent


2017


2016


Change


2017


2016


Change

Same-store rental revenues2

$

210,803



$

200,882



4.9%


$

831,453



$

790,864



5.1%

Same-store operating expenses2

55,909



54,355



2.9%


224,353



223,173



0.5%

Same-store net operating income2

$

154,894



$

146,527



5.7%


$

607,100



$

567,691



6.9%













Same-store square foot occupancy as of quarter end

91.9%


91.5%




91.9%


91.5%















Properties included in same-store3

701


701




701


701





(1)

A reconciliation of net income to same-store net operating income is provided later in this release, entitled "Reconciliation of GAAP Net Income to Total Same-Store Net Operating Income."

(2)

Same-store revenues, same-store operating expenses and same-store net operating income do not include tenant reinsurance revenue or expense.

(3)

The properties included in the same-store pool were reduced from 732 stores as of September 30, 2017 to 701 as of December 31, 2017 due to 30 properties in which a majority interest was sold during the quarter, as well as one property which experienced a fire.

Same-store revenues for the three months and year ended December 31, 2017 increased due to gains in occupancy and higher rental rates for both new and existing customers. Expenses were higher for the three months ended December 31, 2017, primarily due to increases in property taxes, payroll and benefits and marketing, which were partially offset by decreases in repairs and maintenance and insurance.  Expenses for the year ended December 31, 2017 were moderately higher primarily due to increases in property taxes and marketing expense offset by decreases in repairs and maintenance and insurance. 

Major markets with revenue growth above the Company's portfolio average for the year ended December 31, 2017 included Hawaii, Las Vegas, Los Angeles, Phoenix and Sacramento. Major markets performing below the Company's portfolio average included Boston, Dallas, Denver and Houston.

Investment and Third-Party Management Activity:

The following table outlines the Company's acquisitions and developments that are closed, completed or under agreement (dollars in thousands – unaudited):



Closed through
December 31, 2017


Closed Subsequent to
December 31, 2017


Scheduled to
Close/Complete in
2018


Total to
Close/Complete in
2018


To Close/Complete
in 2019-2020



Stores


Price


Stores


Price


Stores


Price


Stores


Price


Stores


Price

Operating Stores


30


$

407,050



4


$

50,311



2


$

25,550



6


$

75,861




$


C of O and Development Stores1


9


105,412






5


77,233



5


77,233



4


48,928


Buyout of JV Partners' Interest In Operating Stores2


6


58,869














Buyout of JV Partners' Interest in C of O Stores2,3



4,806














Total Wholly-Owned and Buyout of JV Partners' Interest


45


576,137



4


50,311



7


102,783



11


153,094



4


48,928























JV C of O and Development Stores (total purchase price)1


7


87,410



1


8,800



16


339,414



17


348,214



4


67,643


(Less) Joint Venture Partner Investment




(60,745)





(7,920)





(235,568)





(243,488)





(35,297)


Total EXR Investment in JV C of O and Development Stores

7


26,665



1


880



16


103,846



17


104,726



4


32,346


     Total EXR Investment

52


$

602,802



5


$

51,191



23


$

206,629



28


$

257,820



8


$

81,274























(1)

The locations of development and Certificate of Occupancy stores and joint venture ownership interest details are included in the supplemental financial information published on the Company's website at www.extraspace.com.

(2)

The buyout of JV partners' interest in stores is reported at the value paid for the partners' remaining ownership interest.

(3)

A joint venture, in which the Company had a majority interest, purchased a Certificate of Occupancy store on April 11, 2017.  The Company purchased the JV partner's interest in the same property for $4,806 prior to year-end.  The buyout is not counted in the store count totals since it was already considered in the "Closed through December 31, 2017" store count, but the buyout amount is considered.

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.

Dispositions:

On November 30, 2017, the Company sold 36 stores, 30 of which were in the same store pool, for a total sales price of $295.0 million into a joint venture.  The Company now owns a 10% interest in the joint venture and TIAA, through an account advised by TH Real Estate, ultimately owns the remaining 90%.  Proceeds from the transaction were reinvested in a series of acquisitions through 1031 exchanges.  All 36 properties sold to the joint venture continue to be managed by the Company.

Property Management:

As of December 31, 2017, the Company managed 422 stores for third-party owners.  With an additional 215 stores owned and operated in joint ventures, the Company had a total of 637 stores under management.  The Company continues to be the largest self-storage management company in the United States.

Balance Sheet:

During the three months ended December 31, 2017, the Company did not sell any shares of common stock using its "at the market" ("ATM") equity program.  At December 31, 2017, the Company had $349.4 million available for issuance under the ATM program.

As of December 31, 2017, the Company's percentage of fixed-rate debt to total debt was 74.7%. The weighted average interest rates of the Company's fixed and variable-rate debt were 3.3% and 3.1%, respectively. The combined weighted average interest rate was 3.3% with a weighted average maturity of approximately 4.7 years. 

Dividends:

On December 29, 2017, the Company paid a fourth quarter common stock dividend of $0.78 per share to stockholders of record at the close of business on December 15, 2017.

Outlook:

The following table outlines the Company's FFO estimates and annual assumptions for the year ending December 31, 20181:


Ranges for 2018
Annual Assumptions


Notes


Low


High



Funds from operations attributable to common stockholders and unit holders

$

4.52



$

4.62




Core funds from operations attributable to common stockholders

$

4.55



$

4.65




Dilution per share from C of O and value add acquisitions

$

0.21



$

0.21




Same-store property revenue growth

3.25

%


4.25

%


Assumes a same-store pool of 787 stores and excludes tenant reinsurance

Same-store property expense growth

3.25

%


4.25

%


Assumes a same-store pool of 787 stores and excludes tenant reinsurance

Same-store property NOI growth

3.00

%


4.50

%


Assumes a same-store pool of 787 stores and excludes tenant reinsurance

Weighted average one-month LIBOR

1.91

%


1.91

%









Net tenant reinsurance income

$

90,500,000



$

91,500,000




Management fees, other income and interest income

$

46,000,000



$

47,000,000




General and administrative expenses

$

82,000,000



$

83,000,000



Includes non-cash compensation expense

Average monthly cash balance

$

50,000,000



$

50,000,000




Equity in earnings of real estate ventures

$

16,500,000



$

16,500,000




Acquisition of operating stores (wholly-owned)

$

175,000,000



$

175,000,000




Development and C of O stores (wholly-owned)

$

120,000,000



$

120,000,000




Investment in Development and C of O stores in joint venture

$

105,000,000



$

105,000,000



Represents the Company's investment

Interest expense

$

171,000,000



$

173,000,000




Non-cash interest expense related to exchangeable senior notes

$

5,000,000



$

5,000,000



Excluded from Core FFO

Taxes associated with the Company's taxable REIT subsidiary

$

9,500,000



$

9,500,000




Weighted average share count

135,200,000



135,200,000



Assumes redemption of all OP units for common stock



(1)

A reconciliation of net income outlook to same-store net operating income outlook is provided later in this release entitled "Reconciliation of Estimated GAAP Net Income to Estimated Same-Store Net Operating Income."  The reconciliation includes details related to same-store revenue and same-store expense outlooks.  A reconciliation of net income per share outlook to funds from operations per share outlook is provided later in this release entitled "Reconciliation of the Range of Estimated GAAP Fully Diluted Earnings Per Share to Estimated Fully Diluted FFO Per Share." 

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 Results". 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.

Conference Call:

The Company will host a conference call at 1:00 p.m. Eastern Time on Wednesday, February 21, 2018, to discuss its financial results. To participate in the conference call, please dial 855-791-2026 or 631-485-4899 for international participants; conference ID: 4986137. The conference call will also be available on the Company's website at www.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 4:00 p.m. Eastern Time on February 21, 2018, until 4:00 p.m. Eastern Time on February 26, 2018. The replay dial-in numbers are 855-859-2056 or 404-537-3406 for international callers; conference ID: 4986137.

Forward-Looking Statements:

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, 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:

  • adverse changes in general economic conditions, the real estate industry and the markets in which we operate;
  • failure to close pending acquisitions and developments on expected terms, or at all;
  • the effect of competition from new and existing stores or other storage alternatives, which could cause rents and occupancy rates to decline;
  • potential liability for uninsured losses and environmental contamination;
  • the impact of the regulatory environment as well as national, state and local laws and regulations, including, without limitation, those governing real estate investment trusts ("REITs"), tenant reinsurance and other aspects of our business, which could adversely affect our results;
  • disruptions in credit and financial markets and resulting difficulties in raising capital or obtaining credit at reasonable rates or at all, which could impede our ability to grow;
  • increases in interest rates;
  • reductions in asset valuations and related impairment charges;
  • our lack of sole decision-making authority with respect to our joint venture investments;
  • the effect of recent changes to U.S. tax laws;
  • the failure to maintain our REIT status for U.S. federal income tax purposes; and
  • economic uncertainty due to the impact of natural disasters, war or terrorism, which could adversely affect our business plan.

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, which in previous quarters was referred to as FFO as adjusted.  There have been no definitional changes between FFO as adjusted and Core FFO.  Core FFO excludes revenues and expenses not core to our operations, acquisition related costs (prior to 2017) 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, the costs related to acquiring stores and non-cash interest charges, stockholders and potential investors are presented with an indicator of its 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 701 stores that are wholly-owned and operated and that were stabilized by the first day of the earliest calendar year presented.  The same-store pool store count decreased from 732 stores as of September 30, 2017 due to a sale of the majority interest in 30 stores, as well as damage to a store from a fire, requiring removal from the pool.  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, 2017, the Company owned and/or operated 1,483 self-storage stores in 39 states, Washington, D.C. and Puerto Rico. The Company's stores comprise approximately 1,020,000 units and approximately 112 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.

Extra Space Storage Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share data)



December 31, 2017


December 31, 2016


(Unaudited)



Assets:




Real estate assets, net

$

7,132,431



$

6,770,447


Investments in unconsolidated real estate ventures

70,091



79,570


Cash and cash equivalents

55,683



43,858


Restricted cash

30,361



13,884


Receivables from related parties and affiliated real estate joint ventures

2,847



16,611


Other assets, net

163,724



167,076


Total assets

$

7,455,137



$

7,091,446


Liabilities, Noncontrolling Interests and Equity:




Notes payable, net

$

3,738,497



$

3,213,588


Exchangeable senior notes, net

604,276



610,314


Notes payable to trusts, net

117,444



117,321


Revolving lines of credit

94,000



365,000


Accounts payable and accrued expenses

96,087



101,388


Other liabilities

81,026



87,669


Total liabilities

4,731,330



4,495,280






Commitments and contingencies








Noncontrolling Interests and Equity:




Extra Space Storage Inc. stockholders' equity:




Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued or outstanding




Common stock, $0.01 par value, 500,000,000 shares authorized, 126,007,091 and 125,881,460 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively

1,260



1,259


Additional paid-in capital

2,569,485



2,566,120


Accumulated other comprehensive income

33,290



16,770


Accumulated deficit

(253,284)



(339,257)


Total Extra Space Storage Inc. stockholders' equity

2,350,751



2,244,892


Noncontrolling interest represented by Preferred Operating Partnership units, net of $120,230 notes receivable

159,636



147,920


Noncontrolling interests in Operating Partnership

213,301



203,354


Other noncontrolling interests

119




Total noncontrolling interests and equity

2,723,807



2,596,166


Total liabilities, noncontrolling interests and equity

$

7,455,137



$

7,091,446



 

Consolidated Statement of Operations for the three months and year ended December 31, 2017 and 2016

(In thousands, except share and per share data) - Unaudited



For the Three Months Ended
December 31,


For the Year Ended
December 31,


2017


2016


2017


2016

Revenues:








Property rental

$

246,351



$

229,012



$

967,229



$

864,742


Tenant reinsurance

25,351



22,355



98,401



87,291


Management fees and other income

10,140



9,649



39,379



39,842


Total revenues

281,842



261,016



1,105,009



991,875


Expenses:








Property operations

67,604



64,122



271,974



250,005


Tenant reinsurance

5,177



3,210



19,173



15,555


Acquisition related costs and other1



2,987





12,111


General and administrative

18,790



18,355



78,961



81,806


Depreciation and amortization

49,157



49,158



193,296



182,560


Total expenses

140,728



137,832



563,404



542,037


Income from operations

141,114



123,184



541,605



449,838


Gain (loss) on real estate transactions, earnout from prior acquisition and impairment of real estate

118,808



(1,349)



112,789



8,465


Interest expense

(40,319)



(35,824)



(153,511)



(133,479)


Non-cash interest expense related to amortization of discount on equity component of exchangeable senior notes

(1,276)



(1,264)



(5,103)



(4,980)


Interest income

1,004



1,451



3,801



6,148


Interest income on note receivable from Preferred Operating Partnership unit holder

531



1,212



2,935



4,850


Income before equity in earnings of unconsolidated real estate ventures and income tax expense

219,862



87,410



502,516



330,842


Equity in earnings of unconsolidated real estate ventures

3,924



3,082



15,331



12,895


Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partners' interests2



4,767





69,199


Income tax benefit (expense)

5,529



(4,843)



(3,625)



(15,847)


Net income

229,315



90,416



514,222



397,089


Net income allocated to Preferred Operating Partnership noncontrolling interests

(4,214)



(3,942)



(14,989)



(14,700)


Net income allocated to Operating Partnership and other noncontrolling interests

(9,118)



(4,071)



(20,220)



(16,262)


Net income attributable to common stockholders

$

215,983



$

82,403



$

479,013



$

366,127


Earnings per common share








Basic

$

1.71



$

0.65



$

3.79



$

2.92


Diluted

$

1.69



$

0.65



$

3.76



$

2.91


Weighted average number of shares








Basic

126,007,129



125,525,954



125,967,831



125,087,554


Diluted

134,676,639



126,065,539



134,155,771



125,948,076




(1)

Beginning January 1, 2017, the disposition of properties are not considered the disposal of a business due to the adoption of ASU 2017-01"Business Combinations (Topic 805): Clarifying the Definition of a Business."

(2)

Beginning January 1, 2017, acquisition related costs have been capitalized due to the adoption of ASU 2017-01"Business Combinations (Topic 805): Clarifying the Definition of a Business."

 

Reconciliation of GAAP Net Income to Total Same-Store Net Operating Income — for the three months and year ended December 31, 2017 and 2016  (In thousands) — Unaudited  



For the Three Months Ended
December 31,


For the Year Ended
December 31,


2017


2016


2017


2016

Net income

$

229,315



$

90,416



$

514,222



$

397,089


Adjusted to exclude:








  Loss (gain) on real estate transactions, earnout from prior acquisition and impairment of real estate

(118,808)



1,349



(112,789)



(8,465)


  Equity in earnings of unconsolidated real estate joint ventures

(3,924)



(3,082)



(15,331)



(12,895)


  Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partners interests1



(4,767)





(69,199)


  Acquisition related costs and other2



2,987





12,111


  Interest expense

41,595



37,088



158,614



138,459


  Depreciation and amortization

49,157



49,158



193,296



182,560


  Income tax expense

(5,529)



4,843



3,625



15,847


  General and administrative (includes stock compensation)

18,790



18,355



78,961



81,806


  Management fees, other income and interest income

(11,675)



(12,312)



(46,115)



(50,840)


  Net tenant reinsurance

(20,174)



(19,145)



(79,228)



(71,736)


  Non same-store revenue

(35,548)



(28,130)



(135,776)



(73,878)


  Non same-store expenses

11,695



9,767



47,621



26,832


Total same-store NOI

$

154,894



$

146,527



$

607,100



$

567,691










Same-store rental revenues

210,803



200,882



831,453



790,864


Same-store operating expenses

55,909



54,355



224,353



223,173


Total same-store NOI

$

154,894



$

146,527



$

607,100



$

567,691




(1)

Beginning January 1, 2017, the disposition of properties are not considered the disposal of a business due to the adoption of ASU 2017-01"Business Combinations (Topic 805): Clarifying the Definition of a Business."

(2)

Beginning January 1, 2017, acquisition related costs have been capitalized due to the adoption of ASU 2017-01"Business Combinations (Topic 805): Clarifying the Definition of a Business."


 

Reconciliation of the Range of Estimated GAAP Fully Diluted Earnings Per Share to Estimated Fully Diluted FFO Per Share — for the three months ending March 31, 2018 and year ending December 31, 2018 — Unaudited



For the Three Months Ending
March 31, 2018


For the Year Ending
December 31, 2018


Low End


High End


Low End


High End

Net income attributable to common stockholders per diluted share

$

0.63



$

0.65



$

2.84



$

2.94


Income allocated to noncontrolling interest - Preferred Operating Partnership and Operating Partnership

0.06



0.06



0.25



0.25


Fixed component of income allocated to non-controlling interest - Preferred Operating Partnership





(0.02)



(0.02)


Net income attributable to common stockholders for diluted computations

0.69



0.71



3.07



3.17










Adjustments:








Real estate depreciation

0.33



0.33



1.33



1.33


Amortization of intangibles

0.02



0.02



0.07



0.07


Unconsolidated joint venture real estate depreciation and amortization

0.01



0.01



0.05



0.05


Funds from operations attributable to common stockholders

$

1.05



$

1.07



$

4.52



$

4.62










Adjustments:








Non-cash interest expense related to amortization of discount on equity portion of exchangeable senior notes

0.01



$

0.01



0.03



0.03


Core funds from operations attributable to common stockholders

$

1.06



$

1.08



$

4.55



$

4.65



 

Reconciliation of Estimated GAAP Net Income to Estimated Same-Store Net Operating Income — for the year ending December 31, 2018 (In thousands) — Unaudited




For the Year Ending December 31, 2018


 Low


 High

Net Income

$

418,500



$

435,500


Adjusted to exclude:




  Equity in earnings of unconsolidated joint ventures

(16,500)



(16,500)


  Interest expense (includes non-cash)

178,000



176,000


  Depreciation and amortization

197,000



197,000


  Income tax expense

9,500



9,500


  General and administrative (includes stock compensation)

83,000



82,000


  Management fees, other income and interest income

(46,000)



(47,000)


  Net tenant insurance

(90,500)



(91,500)


  Non Same Store Revenue

(67,000)



(67,000)


  Non Same Store Expense

25,000



25,000


Total Same Store NOI

$

691,000



$

703,000






Same Store Revenue

$

955,000



$

964,000


Same Store Expense

(264,000)



(261,000)


Total Same Store NOI

$

691,000



$

703,000


 

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SOURCE Extra Space Storage Inc.

Jeff Norman, Extra Space Storage Inc., (801) 365-1759