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Extra Space Storage Inc. Reports Operating Results for the Three and Nine Months Ended September 30, 2008
SALT LAKE CITY, UT, Oct 28, 2008 (MARKET WIRE via COMTEX News Network) -- Extra Space Storage Inc. (the "Company") (NYSE: EXR) announced today operating results for the three and nine months ended September 30, 2008. "In the third quarter, despite softer economic conditions, customer demand was relatively stable. Our pricing strategies were effective and we once again increased same-store revenue and net operating income. At the same time we successfully controlled expenses at the site level. Our balance sheet is in good position with the ability to satisfy our near-term debt maturities," said Kenneth M. Woolley, Chairman and CEO of Extra Space Storage Inc.

Highlights for the Three Months Ended September 30, 2008:

  • Achieved funds from operations ("FFO") of $0.30 per diluted share before approximately $0.01 of lease-up dilution from recently opened development properties. After deducting the lease-up dilution, the Company achieved funds from operations of $0.29 per diluted share.
  • Increased revenue and net operating income ("NOI") in our portfolio of 211 same-stores by 2.2% and 3.4%, respectively, when compared to the three months ended September 30, 2007. Excluding tenant reinsurance income, same- store revenue and NOI increased by 1.7% and 2.7%, respectively.
  • Acquired one self-storage property located in Maryland for approximately $5.0 million and acquired an additional 40.0% interest in an existing joint venture with Prudential for approximately $44.1 million.
  • Completed the development of six self-storage properties located in California, Florida, Illinois and New Jersey for approximately $53.2 million.
  • Entered into a purchase agreement to sell 3.0 million common shares in a registered direct placement. The offering closed on October 3, 2008 and raised approximately $44.1 million in gross proceeds.
  • Declared and paid a quarterly dividend of $0.25 per common share.

At September 30, 2008 the Company operated or had ownership interests in 684 properties, 269 of which were wholly-owned and consolidated, three of which were held in joint ventures and consolidated, 345 of which were held in joint ventures and accounted for using the equity method, and 67 of which were managed and in which the Company held no ownership interest. This compares to September 30, 2007, at which time the Company operated or had ownership interests in 644 properties, 251 of which were wholly-owned and consolidated, one of which was held in joint venture and consolidated, 333 of which were held in joint ventures and accounted for using the equity method, and 59 of which were managed and in which the Company held no ownership interest. Results for both periods include equity in earnings of real estate joint ventures, management fees and other income.

FFO Per Share for the Three and Nine Months Ended September 30, 2008:

FFO per diluted share for the three months ended September 30, 2008 was $0.29 compared to $0.29 for the three months ended September 30, 2007. For the three months ended September 30, 2008, FFO per diluted share was reduced by approximately $0.01 related to carrying costs associated with the Company's development program and by $0.02 related to dilution from the Company's public sale of common stock in May 2008. FFO available to common stockholders was $25.0 million for the three months ended September 30, 2008, as compared to $20.8 million for the three months ended September 30, 2007.

FFO per diluted share for the nine months ended September 30, 2008 was $0.80 compared to $0.80 for the nine months ended September 30, 2007. FFO per diluted share for the nine months ended September 30, 2008 was reduced by approximately $0.02 from unrecovered acquisition costs and by approximately $0.03 related to carrying costs associated with the Company's development program and by $0.02 due to a loss on the sale of the Company's investments in Auction Rate Securities. FFO for the nine months ended September 30, 2008 also included approximately $0.03 in dilution from the Company's sale of common stock in May 2008. FFO available to common stockholders was $63.2 million for the nine months ended September 30, 2008, as compared to $56.0 million for the nine months ended September 30, 2007.

The following table sets forth the calculation of FFO for the three and nine months ended September 30, 2008 and 2007 (in thousands, except share and per share data):

                              Three months ended      Nine months ended
                                September 30,           September 30,
                            ----------------------------------------------
                               2008        2007        2008        2007
                            ----------  ----------  ----------  ----------
Net income attributable to
 common stockholders        $   12,327  $    9,828  $   27,928  $   24,993
Adjustments:
  Real estate depreciation      10,791       8,874      30,526      24,290
  Amortization of
   intangibles                   1,066       1,263       3,503       2,877
  Joint venture real
   estate depreciation and
   amortization                  1,534       1,004       3,644       3,091
  Joint venture loss on
   sale of properties                -          15           -          20
  Fair value adjustment of
   obligation associated
   with Preferred
   Operating Partnership
   units                             -      (1,054)          -      (1,054)
  Distributions paid on
   Preferred Operating
   Partnership units            (1,438)          -      (4,313)          -
  Income allocated to
   Operating Partnership
   minority interest               766         869       1,893       1,768
                            ----------  ----------  ----------  ----------
Funds from operations       $   25,046  $   20,799  $   63,181  $   55,985
                            ==========  ==========  ==========  ==========
Weighted average number of
 shares - diluted           87,263,018  70,567,078  79,226,236  69,702,837
Diluted funds from
 operations per share       $     0.29  $     0.29  $     0.80  $     0.80
                            ==========  ==========  ==========  ==========

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 earnings. Net earnings assume 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 accounting principles generally accepted in the United States ("GAAP"), excluding gains or losses on sales of operating properties, plus depreciation and amortization 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.

The Company's 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.

The following table sets forth a reconciliation of the Company's calculation of FFO per diluted share to GAAP net income per diluted share for the three and nine months ended September 30, 2008 and 2007:

                                             Three months     Nine months
                                                ended           ended
                                            September 30,   September 30,
                                            ------------------------------
                                             2008    2007    2008    2007
                                            ------  ------  ------  ------
Net income                                  $ 0.14  $ 0.14  $ 0.35  $ 0.35
Income allocated to Operating Partnership
 minority interest                            0.01    0.01    0.03    0.03
                                            ------  ------  ------  ------
Net income per diluted share                  0.15    0.15    0.38    0.38
Real estate depreciation                      0.13    0.13    0.38    0.35
Amortization of intangibles                   0.01    0.02    0.04    0.04
Joint venture real estate depreciation and
 amortization                                 0.02    0.01    0.05    0.04
Joint venture loss on sale of properties         -       -       -    0.01
Fair value adjustment of obligation
 associated with Preferred Operating
 Partnership units                               -   (0.02)      -       -
Distributions paid on Preferred Operating
 Partnership units                           (0.02)      -   (0.05)  (0.02)
                                            ------  ------  ------  ------
Diluted funds from operations per share     $ 0.29  $ 0.29  $ 0.80  $ 0.80
                                            ======  ======  ======  ======

Operating Results for the Three and Nine Months Ended September 30, 2008:

Total revenues for the three and nine months ended September 30, 2008 were $69.8 million and $202.9 million, respectively, compared to $63.8 and $174.2 million, respectively, for the three and nine months ended September 30, 2007. Total expenses for the three and nine months ended September 30, 2008 were $45.5 million and $134.7 million, respectively, compared to $41.1 million and $114.1 million, respectively, for the three and nine months ended September 30, 2007. Interest expense for the three and nine months ended September 30, 2008 was $15.9 million and $48.2 million, respectively, compared to $16.1 million and $44.9 million, respectively, for the three and nine months ended September 30, 2007. Net income for the three and nine months ended September 30, 2008 was $12.3 million and $27.9 million, respectively, compared to $11.3 million and $26.5 million, respectively, for the three and nine months ended September 30, 2007.

Same-Store Property Performance:

The Company's same-store stabilized properties for the three and nine months ended September 30, 2008, consisted of 211 properties that were wholly-owned and operated and that were stabilized by the first day of each period. The Company considers a property to be stabilized once it has been open three years or has sustained average square foot occupancy of 80.0% or more for one calendar year. These results provide information relating to property operations without the effects of acquisitions or completed developments. The results shown should not be used as a basis for future same-store performance or for the performance of the Company's properties as a whole.

The following table sets forth the performance of the Company's same-store properties for the three and nine months ended September 30, 2008 and 2007 (in thousands, except occupancy and property counts, revenues do not include tenant reinsurance income):

            Three months ended               Nine months ended
                 Sep. 30,                         Sep. 30,
            ------------------    Percent  --------------------    Percent
              2008      2007      Change     2008       2007       Change
            --------  --------  ---------  ---------  ---------  ---------
Same-store
 rental
 revenues   $ 47,488  $ 46,683        1.7% $ 139,569  $ 137,012        1.9%
Same-store
 operating
 expenses     16,292    16,313       -0.1%    48,564     48,266        0.6%
Same-store
 net
 operating
 income       31,196    30,370        2.7%    91,005     88,746        2.5%
Non
 same-store
 rental
 revenues     12,509     8,526       46.7%    35,337     12,820      175.6%
Non
 same-store
 operating
 expenses      5,075     3,294       54.1%    14,307      5,589      156.0%
Total
 rental
 revenues   $ 59,997  $ 55,209        8.7% $ 174,906  $ 149,832       16.7%
Total
 operating
 expenses   $ 21,367  $ 19,607        9.0% $  62,871  $  53,855       16.7%
Same-store
 square
 foot
 occupancy
 as of
 quarter
 end            86.0%     86.8%                 86.0%      86.8%
Properties
 included
 in
 same-store      211       211                   211        211

The increase in same-store rental revenue for the three and nine months ended September 30, 2008 as compared to the three and nine months ended September 30, 2007 was due to the Company's success in increasing rental rates to existing customers which offset a slight reduction in occupancy.

Property Acquisitions:

During the three months ended September 30, 2008, the Company acquired one property located in Maryland for approximately $5.0 million. The Company also acquired an additional 40.0% interest in an existing joint venture with Prudential for approximately $44.1 million, increasing the Company's pro-rata equity share from 5.0% to 45.0%. During the nine months ended September 30, 2008, the Company has acquired three properties on a wholly-owned basis for approximately $23.1 million.

Subsequent to the end of the quarter, the Company has acquired six properties located in Indiana and New York for approximately $45.8 million.

Property Development:

During the three months ended September 30, 2008, the Company completed the development of six self-storage properties located in California, Florida, Illinois and New Jersey for approximately $53.2 million. During the nine months ended September 30, 2008, the Company has completed the development of eight properties for approximately $67.9 million.

Subsequent to the end of the quarter, the Company completed the development of one property located in Maryland for approximately $7.6 million.

Quarterly Dividend Declared and Paid:

On August 29, 2008, the Company announced its third quarter common stock dividend of $0.25 per share. The dividend was paid on September 30, 2008 to stockholders of record as of September 15, 2008. The dividend payment was calculated based on an annual dividend of $1.00 per share.

Direct Offering of Common Stock:

On September 29, 2008, the Company entered into a purchase agreement to sell 3.0 million shares of its common stock in a registered direct placement to certain clients of RREEF America L.L.C. The offering closed on October 3, 2008. The Company received gross proceeds from the offering of approximately $44.1 million.

Balance Sheet:

As of September 30, 2008, the Company's total debt, including trust preferred notes and exchangeable senior notes, was $1.3 billion, compared to $1.3 billion at December 31, 2007. Total cash as of September 30, 2008 was $112.1 million. The Company's percentage of total fixed rate debt to total debt was 91.5%. The weighted average interest rate was 5.0% for fixed rate loans and 5.1% for variable rate loans. The weighted average interest rate of all fixed and variable rate loans was 5.0%.

"Our balance sheet is in a stable position at this time. Our cash, combined with our in-place credit line, term loans and construction loans gives us the capacity to satisfy our near-term debt maturities. In the current environment we want to take advantage of our ability to continue to access the credit markets, and to that end, we are in active discussions with several financial institutions," said Kent Christensen, CFO of Extra Space Storage.

Subsequent to the end of the quarter, the Company repurchased approximately $40.3 million of its exchangeable senior notes on the open market. The repurchase will increase the Company's FFO for the three months and year ending December 31, 2008 as a result of a gain on early extinguishment of debt of approximately $8.0 million.

Market Performance:

For the three months ended September 30, 2008, Chicago, Dallas, Houston, Sacramento and San Francisco/Oakland were the top performing markets for stabilized properties. Markets performing below the Company's portfolio average in revenue growth included Las Vegas, Miami/Fort Lauderdale, Philadelphia and Phoenix. Florida continues to underperform despite recent occupancy gains in Tampa/St. Petersburg and West Palm Beach.

"Despite the downturn in economic conditions during the quarter, our properties posted positive operating performance when compared to the same quarter last year. Our revenue management team is being proactive with rates and promotions utilizing real-time intelligence from our centralized database. This has meant we have been able to increase revenue and maintain occupancy similar to last year's levels. We are closely monitoring customer delinquency and it continues to track lower than in previous years. We are taking a conservative approach to our balance sheet at this time, and our near-term debt maturities are covered by our in-place cash and loan availability. Most importantly, our team, our top quality properties and our best-in-class systems are in the best shape they have ever been in, and are getting better still. We will press harder for excellence, knowing we are well positioned at this time for the environment ahead," concluded Mr. Woolley.

Outlook:

For the year ending December 31, 2008, the Company currently estimates that fully diluted FFO per share will be between $1.11 and $1.12 per share before $0.04 in development dilution and before a $0.10 one-time gain from early extinguishment of debt resulting from the Company's repurchase of its exchangeable senior notes. After considering the impact of carrying costs associated with the Company's development program and the one-time gain, the Company expects fully diluted FFO per share for the year ending December 31, 2008 will be between $1.17 and $1.18 per share. FFO estimates are fully diluted for an estimated average number of shares and Operating Partnership units ("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, which include the following annual assumptions:

--  Same-store property revenue growth, including tenant reinsurance
    income, between 2.0% and 3.0%.
--  Same-store property expense growth between 1.0% and 2.0%.
--  Same-store property NOI growth, including tenant reinsurance income,
    between 2.5% and 3.5%.
--  Net tenant reinsurance income between $9.0 million and $10.0 million.
    The same-store portion of the net tenant reinsurance income included in
    these amounts is also included in the same-store property revenue and
    NOI growth noted above.
--  General and administrative expenses (net of development fees) between
    $39.0 million and $40.0 million, including non-cash compensation
    expense of approximately $3.6 million.
--  Dilution impact from May and October 2008 stock offerings of between
    $0.04 and $0.05 per share.
--  Interest expense between $63.0 million and $65.0 million.
--  Weighted average LIBOR of 3.0%.
--  Weighted average number of outstanding shares, including OP units, of
    approximately 82.1 million. Included in this amount are an estimated
    1.3 million contingent conversion shares and contingent conversion
    units converting to common shares and OP units throughout the year.
--  Net losses associated with the Company's development program of
    between $3.0 million and $4.0 million.
--  Taxes associated with the Company's management company of approximately
    $1.0 million.
--  One-time gain from early extinguishment of debt resulting from the
    Company's repurchase of its exchangeable senior notes of approximately
    $8.0 million.

Following is a GAAP reconciliation of the range of estimated fully diluted net income per share to estimated fully diluted FFO per share for the year ending December 31, 2008:

                                                              Year Ending
                                                             December 31,
                                                                 2008
                                                            --------------
                                                              Low    High
                                                              End     End
                                                            ------  ------
Net income                                                  $ 0.59  $ 0.60
Income allocated to Operating Partnership minority interest   0.03    0.03
                                                            ------  ------
Net income per diluted share                                  0.62    0.63
Real estate depreciation                                      0.50    0.50
Amortization of intangibles                                   0.06    0.06
Joint venture real estate depreciation and amortization       0.06    0.06
Distributions paid on Preferred Operating Partnership units  (0.07)  (0.07)
                                                            ------  ------
Diluted funds from operations per share                     $ 1.17  $ 1.18
                                                            ======  ======

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 our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions 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.

All forward-looking statements, including without limitation, management's examination of historical operating trends and estimates of future earnings, 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.

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:

--  changes in general economic conditions and in the markets in which we
    operate;
--  the effect of competition from new self-storage facilities or other
    storage alternatives, which could cause rents and occupancy rates to
    decline;
--  potential liability for uninsured losses and environmental
    contamination;
--  difficulties in our ability to evaluate, finance and integrate acquired
    and developed properties into our existing operations and to lease up
    those properties, which could adversely affect our profitability;
--  the impact of the regulatory environment as well as national, state,
    and local laws and regulations including, without limitation, those
    governing REITs, which could increase our expenses and reduce our cash
    available for distribution;
--  recent disruptions in credit and financial markets and resulting
    difficulties in raising capital at reasonable rates, which could impede
    our ability to grow;
--  delays in the development and construction process, which could
    adversely affect our profitability; and
--  economic uncertainty due to the impact of war or terrorism, which could
    adversely affect our business plan.

Supplemental Financial Information

Supplemental unaudited financial information regarding the Company's performance can be found on the Company's web site at www.extraspace.com. Click on the "investor relations" link at the bottom of the home page, then on "Financial Reports," then on the tab "Quarterly and Other Reports" in the middle of the page and the document entitled "Q3 2008 Supplemental Financial Information." This supplemental information provides investors additional detail on items that include property occupancy and financial performance by geographic area, debt maturity schedules, and performance and progress of property development.

Conference Call

Extra Space Storage Inc. will host a conference call at 1:00 p.m. Eastern Time on Wednesday, October 29, 2008 to discuss its financial results for the three and nine months ended September 30, 2008. The conference call will be broadcast live over the Internet and can be accessed by all interested parties through the Company's website at www.extraspace.com and then by clicking on the "Investor Relations" link at the bottom of the home page. To listen to the live call, please go to the website at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. A digital replay will be available on Wednesday, October 29, 2008 at 3:00 p.m. Eastern Time through Wednesday, November 12, 2008 at midnight Eastern Time. To access the replay, dial 888-286-8010 and enter passcode 51574166. International callers should dial 617-801-6888 and enter the same passcode.

About Extra Space Storage Inc.

Extra Space Storage Inc., headquartered in Salt Lake City, Utah, is a fully integrated, self-administered and self-managed real estate investment trust that owns and/or operates 684 self-storage properties in 33 states and Washington, D.C. The Company's properties comprise approximately 468,000 units and over 50 million square feet of rentable space. The Company is the second largest owner and/or operator of self-storage properties in the United States.

Financial Tables Follow

Extra Space Storage Inc.
Consolidated Balance Sheets
(In thousands, except share data)
                                                 September 30, December 31,
                                                     2008         2007
                                                  -----------  -----------
                                                  (unaudited)
Assets:
Real estate assets:
  Net operating real estate assets                $ 1,856,809  $ 1,791,377
  Real estate under development                        48,447       49,945
                                                  -----------  -----------
    Net real estate assets                          1,905,256    1,841,322
Investments in real estate ventures                   139,345       95,169
Cash and cash equivalents                             112,076       17,377
Investments available for sale                              -       21,812
Restricted cash                                        38,265       34,449
Receivables from related parties and affiliated
 real estate joint ventures                            11,591        7,386
Other assets, net                                      37,153       36,560
                                                  -----------  -----------
      Total assets                                $ 2,243,686  $ 2,054,075
                                                  ===========  ===========
Liabilities, Minority Interests, and
 Stockholders' Equity:
Notes payable                                     $   930,088  $   950,181
Notes payable to trusts                               119,590      119,590
Exchangeable senior notes                             250,000      250,000
Line of credit                                              -            -
Accounts payable and accrued expenses                  36,484       31,346
Other liabilities                                      18,857       18,055
                                                  -----------  -----------
      Total liabilities                             1,355,019    1,369,172
                                                  -----------  -----------
Minority interest represented by Preferred
 Operating Partnership units, net of $100,000
 note receivable                                       28,828       30,041
Minority interest in Operating Partnership and
 other minority interests                              30,696       34,941
Commitments and contingencies
Stockholders' equity:
  Preferred stock, $0.01 par value, 50,000,000
   shares authorized, no shares issued or
   outstanding                                              -            -
  Common stock, $0.01 par value, 300,000,000
   shares authorized, 82,370,640 and 65,784,274
   shares issued and outstanding at September 30,
   2008 and December 31, 2007, respectively               824          658
  Paid-in capital                                   1,063,411      826,026
  Other comprehensive deficit                               -       (1,415)
  Accumulated deficit                                (235,092)    (205,348)
                                                  -----------  -----------
      Total stockholders' equity                      829,143      619,921
                                                  -----------  -----------
      Total liabilities, minority interests, and
       stockholders' equity                       $ 2,243,686  $ 2,054,075
                                                  ===========  ===========

Extra Space Storage Inc.
Consolidated Statement of Operations - Unaudited
(In thousands, except share and per share data)
                                                      Three months ended
                                                        September 30,
                                                    ----------------------
                                                       2008        2007
                                                    ----------  ----------
Revenues:
  Property rental                                   $   59,997  $   55,209
  Management and franchise fees                          5,417       5,169
  Tenant reinsurance                                     4,265       3,027
  Other income                                             169         421
                                                    ----------  ----------
    Total revenues                                      69,848      63,826
                                                    ----------  ----------
Expenses:
  Property operations                                   21,367      19,607
  Tenant reinsurance                                     1,426       1,397
  Unrecovered development and acquisition costs             39         184
  General and administrative                            10,319       9,326
  Depreciation and amortization                         12,355      10,598
                                                    ----------  ----------
    Total expenses                                      45,506      41,112
                                                    ----------  ----------
Income before interest, equity in earnings of real
 estate ventures, loss on investments available for
 sale, Preferred Operating Partnership and minority
 interests                                              24,342      22,714
Interest expense                                       (15,904)    (16,079)
Interest income                                          1,280       1,821
Interest income on note receivable from Preferred
 Unit holder                                             1,213       1,280
Equity in earnings of real estate ventures               2,015       1,304
Loss on sale of investments available for sale               -           -
Fair value adjustment of obligation associated with
 Preferred Operating Partnership units                       -       1,054
Minority interest - Operating Partnership                 (766)       (869)
Minority interests - other                                 147         113
                                                    ----------  ----------
Net income                                          $   12,327  $   11,338
                                                    ----------  ----------
Fixed distribution paid to Preferred Operating
 Partnership unit holder                                     -      (1,510)
                                                    ----------  ----------
Net income attributable to common stockholders      $   12,327  $    9,828
                                                    ==========  ==========
Net income per common share
  Basic                                             $     0.15  $     0.15
  Diluted                                           $     0.15  $     0.15
Weighted average number of shares
  Basic                                             81,736,986  64,901,249
  Diluted                                           87,263,018  70,567,078
Cash dividends paid per common share                $     0.25  $     0.23

Extra Space Storage Inc.
Consolidated Statement of Operations - Unaudited
(In thousands, except share and per share data)
                                                      Nine months ended
                                                        September 30,
                                                    ----------------------
                                                       2008        2007
                                                    ----------  ----------
Revenues:
  Property rental                                   $  174,906  $  149,832
  Management and franchise fees                         15,837      15,520
  Tenant reinsurance                                    11,723       7,858
  Other income                                             425         942
                                                    ----------  ----------
    Total revenues                                     202,891     174,152
                                                    ----------  ----------
Expenses:
  Property operations                                   62,871      53,855
  Tenant reinsurance                                     3,958       3,587
  Unrecovered development and acquisition costs          1,631         593
  General and administrative                            30,568      27,534
  Depreciation and amortization                         35,633      28,517
                                                    ----------  ----------
    Total expenses                                     134,661     114,086
                                                    ----------  ----------
Income before interest, equity in earnings of real
 estate ventures, loss on investments available for
 sale, Preferred Operating Partnership and minority
 interests                                              68,230      60,066
Interest expense                                       (48,220)    (44,912)
Interest income                                          2,575       6,937
Interest income on note receivable from Preferred
 Unit holder                                             3,638       1,280
Equity in earnings of real estate ventures               4,610       3,693
Loss on sale of investments available for sale          (1,415)          -
Fair value adjustment of obligation associated with
 Preferred Operating Partnership units                       -       1,054
Minority interest - Operating Partnership               (1,893)     (1,768)
Minority interests - other                                 403         153
                                                    ----------  ----------
Net income                                          $   27,928  $   26,503
                                                    ----------  ----------
Fixed distribution paid to Preferred Operating
 Partnership unit holder                                     -      (1,510)
                                                    ----------  ----------
Net income attributable to common stockholders      $   27,928  $   24,993
                                                    ==========  ==========
Net income per common share
  Basic                                             $     0.38  $     0.39
  Diluted                                           $     0.38  $     0.38
Weighted average number of shares
  Basic                                             73,668,700  64,461,353
  Diluted                                           79,226,236  69,702,837
Cash dividends paid per common share                $     0.75  $     0.68

For Information:

James Overturf
Extra Space Storage Inc.
(801) 365-4501

Mark Collinson
CCG Investor Relations
(310) 477-9800

SOURCE: Extra Space Storage Inc.