Document


SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
February 20, 2019
(Date of Report (Date of Earliest Event Reported))
 
EXTRA SPACE STORAGE INC.
(Exact Name of Registrant as Specified in Its Charter)
 
 
Maryland
 
001-32269
 
20-1076777
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification Number)
2795 East Cottonwood Parkway, Suite 300
Salt Lake City, Utah 84121
(Address of Principal Executive Offices)
(801) 365-4600
(Registrant’s Telephone Number, Including Area Code)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  ☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐





ITEM 2.02
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On February 20, 2019, Extra Space Storage Inc. (the “Company”) issued a press release announcing its financial results for the three months and year ended December 31, 2018. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated by reference herein.
The information contained in this Current Report, including the exhibit referenced herein, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Such information shall not be incorporated by reference into any filing of Extra Space Storage Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.
ITEM 9.01        
FINANCIAL STATEMENTS AND EXHIBITS
(d) The following exhibit is furnished herewith: 
Exhibit
Number
  
Description of Exhibit
  
Press Release dated February 20, 2019.






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
EXTRA SPACE STORAGE INC.
 
 
 
 
 
Date:
February 20, 2019
By
/s/ P. Scott Stubbs
 
 
 
Name:
P. Scott Stubbs
 
 
 
Title:
Executive Vice President and Chief Financial Officer



Exhibit


Exhibit 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12722914&doc=3
 
Extra Space Storage Inc.
 
PHONE (801) 365-4600
 
2795 East Cottonwood Parkway, Suite 300
 
Salt Lake City, Utah 84121
 
www.extraspace.com
FOR IMMEDIATE RELEASE
 
 


Extra Space Storage Inc. Reports 2018 Fourth Quarter and Year-End Results
SALT LAKE CITY, February 20, 2019 — 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, 2018.
Highlights for the three months ended December 31, 2018:
 
Achieved net income attributable to common stockholders of $0.80 per diluted share.

Achieved funds from operations attributable to common stockholders and unit holders (“FFO”) of $1.20 per diluted share. FFO, excluding adjustments for deferred financing costs related to redemption of notes payable to trusts, non-cash interest, revaluation of deferred tax related to tax reform and tenant reinsurance claims related to hurricanes ("Core FFO"), was $1.22 per diluted share, representing an 8.9% increase compared to the same period in 2017.

Increased same-store revenue by 3.8% and same-store net operating income (“NOI”) by 4.4% compared to the same period in 2017.

Reported same-store occupancy of 91.8% as of December 31, 2018, compared to 91.9% as of December 31, 2017.

Acquired three operating stores and three stores at completion of construction (a "Certificate of Occupancy store" or "C of O store") for a total investment of approximately $74.3 million.

In conjunction with joint venture partners, acquired two operating stores and four Certificate of Occupancy stores for a total cost of approximately $69.8 million, of which the Company invested $15.7 million.

Added 33 stores (gross) to the Company's third-party management platform. As of December 31, 2018, we managed 536 stores for third parties and 233 stores in joint ventures, for a total of 769 managed stores.

Paid a quarterly dividend of $0.86 per share.
Highlights for the year ended December 31, 2018:
 
Achieved net income attributable to common stockholders of $3.27 per diluted share.

Achieved FFO of $4.62 per diluted share. Core FFO was $4.67 per diluted share, representing a 6.6% increase compared to the same period in 2017.

Increased same-store revenue by 4.1% and same-store NOI by 4.0% compared to the same period in 2017.

Acquired 14 operating stores, five Certificate of Occupancy stores and purchased our joint venture partner's interest in 15 stores for a total investment of approximately $457.1 million.






In conjunction with joint venture partners, acquired 15 operating stores, 15 Certificate of Occupancy stores and completed three developments for a total cost of approximately $420.8 million, of which the Company invested $123.2 million.

Added 153 stores (gross) to the Company's third-party management platform.
Joe Margolis, CEO of Extra Space Storage Inc., commented: “2018 played out as expected, and it was another solid year for Extra Space Storage. Our diversified portfolio continues to produce steady results, with same-store revenue and NOI growth both over 4.0% for the year despite the increasing impact from development. Our same-store NOI was enhanced by our strong external growth, together driving Core FFO growth of 6.6%. We expect additional pressure from new supply in 2019, but believe that our diversified portfolio and best in class platform are well positioned to navigate the competitive landscape."





FFO Per Share:
The following table outlines the Company’s FFO and Core FFO for the three months and year ended December 31, 2018 and 2017. 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 — unaudited)1:
 
For the Three Months Ended December 31,
 
For the Year Ended December 31,
 
2018
 
2017
 
2018
 
2017
 
 
 
(per share)
 
 
 
(per share)
 
 
 
(per share)
 
 
 
(per share)

Net income attributable to common stockholders
$
101,462

 
$
0.80

 
$
215,983

 
$
1.69

 
$
415,289

 
$
3.27

 
$
479,013

 
$
3.76

Impact of the difference in weighted average number of shares – diluted2
 
 
(0.05
)
 
 
 
(0.09
)
 
 
 
(0.19
)
 
 
 
(0.21
)
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate depreciation
49,569

 
0.36

 
44,931

 
0.33

 
193,587

 
1.43

 
172,660

 
1.28

Amortization of intangibles
1,913

 
0.01

 
2,427

 
0.02

 
8,340

 
0.06

 
13,591

 
0.10

Gain on real estate transactions and impairment of real estate assets

 

 
(118,808
)
 
(0.88
)
 
(30,807
)
 
(0.22
)
 
(112,789
)
 
(0.84
)
Unconsolidated joint venture real estate depreciation and amortization
2,133

 
0.02

 
1,222

 
0.01

 
7,064

 
0.05

 
5,489

 
0.04

Distributions paid on Series A Preferred Operating Partnership units
(572
)
 

 
(572
)
 
(0.01
)
 
(2,288
)
 
(0.02
)
 
(3,119
)
 
(0.02
)
Income allocated to Operating Partnership noncontrolling interests
7,788

 
0.06

 
13,377

 
0.10

 
31,791

 
0.24

 
35,306

 
0.26

FFO
$
162,293

 
$
1.20

 
$
158,560

 
$
1.17

 
$
622,976

 
$
4.62

 
$
590,151

 
$
4.37

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred financing costs related to redemption of notes payable to trusts
2,033

 
0.02

 

 

 
2,033

 
0.02

 

 

Non-cash interest expense related to amortization of discount on equity portion of exchangeable senior notes
1,162

 

 
1,276

 
0.01

 
4,687

 
0.03

 
5,103

 
0.04

Revaluation of deferred tax related to tax reform

 

 
(8,106
)
 
(0.06
)
 

 

 
(8,106
)
 
(0.06
)
Property losses and tenant reinsurance claims due to hurricanes

 

 

 

 

 

 
4,360

 
0.03

CORE FFO
$
165,488

 
$
1.22

 
$
151,730

 
$
1.12

 
$
629,696

 
$
4.67

 
$
591,508

 
$
4.38

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of shares – diluted3
135,320,052

 
 
 
135,028,104

 
 
 
134,954,665

 
 
 
135,066,080

 
 

(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 (3).

(3)
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 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, 2018 and 2017 (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
 
2018
 
2017
 
Change
 
2018
 
2017
 
Change
Same-store rental revenues2
$
242,828

 
$
233,853

 
3.8%
 
$
958,797

 
$
921,270

 
4.1%
Same-store operating expenses2
64,403

 
62,966

 
2.3%
 
262,604

 
251,853

 
4.3%
Same-store net operating income2
$
178,425

 
$
170,887

 
4.4%
 
$
696,193

 
$
669,417

 
4.0%
 
 
 
 
 
 
 
 
 
 
 
 
Same-store square foot occupancy as of quarter end
91.8%
 
91.9%
 
 
 
91.8%
 
91.9%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Properties included in same-store
783
 
783
 
 
 
783
 
783
 
 

(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.


Same-store revenues for the three months and year ended December 31, 2018 increased due to higher rental rates for both new and existing customers. Expenses were higher for the three months ended December 31, 2018, primarily due to increases in property taxes, marketing and insurance. Expenses were higher for the year ended December 31, 2018, primarily due to increases in property taxes, payroll and benefits, and marketing.
Major markets with revenue growth above the Company’s portfolio average for the three months and year ended December 31, 2018 included Atlanta, Hawaii, Indianapolis, Las Vegas, Los Angeles and Philadelphia. Major markets performing below the Company’s portfolio average included Charleston, Dallas, Miami, Washington D.C. and West Palm Beach/Boca Raton.






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):
 
 
Total Closed/Completed 2018
 
Closed/Completed 2019 Year to Date
 
Scheduled to Still Close/Complete in 2019
 
Total 2019
 
To Close/Complete in 2020
Wholly-Owned Investment
 
Stores
 
Price
 
Stores
 
Price
 
Stores
 
Price
 
Stores
 
Price
 
Stores
 
Price
Operating Stores
 
14
 
$
175,350

 
 
$

 
 
$

 
 
$

 
 
$

C of O and Development Stores1
 
5
 
68,499

 
1
 
17,100

 
4
 
49,680

 
5
 
66,780

 
3
 
35,428

Buyout of JV Partners' Interest in Operating Stores2
 
15
 
213,211

 
12
 
192,518

 
 

 
12
 
192,518

 
 

EXR Investment in Wholly-owned stores
 
34
 
457,060

 
13
 
209,618

 
4
 
49,680

 
17
 
259,298

 
3
 
35,428

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Joint Venture Investment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EXR Investment in JV Acquisition of Operating Stores1
 
15
 
45,906

 
 

 
1
 
1,950

 
1
 
$
1,950

 
 

EXR Investment in JV C of O and Development Stores
 
18
 
77,293

 
4
 
30,584

 
8
 
47,910

 
12
 
78,494

 
2
 
11,996

EXR Investment in Joint Ventures
 
33
 
123,199

 
4
 
30,584

 
9
 
49,860

 
13
 
80,444

 
2
 
11,996

Total EXR Investment
 
67
 
$
580,259

 
17
 
$
240,202

 
13
 
$
99,540

 
30
 
$
339,742

 
5
 
$
47,424


(1)
The locations of C of O and development 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' ownership interest.
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.
Property Management:
As of December 31, 2018, the Company managed 536 stores for third-party owners. With an additional 233 stores owned and operated in joint ventures, the Company had a total of 769 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, 2018, the Company sold 590,538 shares of common stock under its ATM equity program at an average sales price of $96.87 per share resulting in net proceeds of $56.6 million after deducting offering costs. As of December 31, 2018, the Company had $257.9 million available for issuance under its ATM equity program.

On December 17, 2018, the Company amended and restated its senior unsecured credit facility, increasing capacity by $200.0 million to a total of $1.4 billion. The facility consists of a senior unsecured revolving credit facility of $650.0 million due January 2023, a senior unsecured term loan of $480.0 million due January 2024, and a senior unsecured term loan of $220.0 million due October 2023. Other details related to the unsecured bank financing are described in a Current Report on Form 8-K filed by the Company on December 11, 2018.
As of December 31, 2018, the Company’s percentage of fixed-rate debt to total debt was 74.1%. The weighted average interest rates of the Company’s fixed and variable-rate debt were 3.4% and 3.9%, respectively. The combined weighted average interest rate was 3.5% with a weighted average maturity of approximately 5.0 years.







Dividends:
On December 31, 2018, the Company paid a fourth quarter common stock dividend of $0.86 per share to stockholders of record at the close of business on December 14, 2018.

Outlook:
The following table outlines the Company’s FFO estimates and annual assumptions for the year ending December 31, 20191:
 
Ranges for 2019 Annual Assumptions
 
Notes
 
Low
 
High
 
 
FFO
$
4.70

 
$
4.80

 

Core FFO
$
4.73

 
$
4.83

 

Dilution per share from C of O and value add acquisitions
$
0.23

 
$
0.23

 
 
Same-store revenue growth
2.00
%
 
3.00
%
 
Assumes a same-store pool of 821 stores and excludes tenant reinsurance
Same-store expense growth
3.75
%
 
4.75
%
 
Assumes a same-store pool of 821 stores and excludes tenant reinsurance
Same-store NOI growth
1.25
%
 
2.75
%
 
Assumes a same-store pool of 821 stores and excludes tenant reinsurance
Weighted average one-month LIBOR
2.51
%
 
2.51
%
 
 
 
 
 
 
 
 
Net tenant reinsurance income
$
94,000,000

 
$
95,000,000

 
 
Management fees, other income and interest income
$
51,500,000

 
$
52,500,000

 
 
General and administrative expenses
$
91,000,000

 
$
92,000,000

 
Includes non-cash compensation expense
Average monthly cash balance
$
15,000,000

 
$
15,000,000

 
 
Equity in earnings of real estate ventures
$
12,500,000

 
$
13,500,000

 
 
Acquisition of operating stores (wholly-owned)
$
300,000,000

 
$
300,000,000

 

Development and C of O stores (wholly-owned)
$
75,000,000

 
$
75,000,000

 

Acquisition of operating stores (joint venture)
$
50,000,000

 
$
50,000,000

 
Represents the Company's investment
Development and C of O stores (joint venture)
$
75,000,000

 
$
75,000,000

 
Represents the Company's investment
Interest expense
$
190,500,000

 
$
192,500,000

 
 
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
$
11,000,000

 
$
12,000,000

 
 
Weighted average share count
136,000,000

 
136,000,000

 
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 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.
Conference Call:
The Company will host a conference call at 1:00 p.m. Eastern Time on Thursday, February 21, 2019, 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: 7881278. 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, 2019, until 4:00 p.m. Eastern Time on February 26, 2019. The replay dial-in numbers are 855-859-2056 or 404-537-3406 for international callers; conference ID: 7881278.
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, 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:
 
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. 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 783 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, 2018, the Company owned and/or operated 1,647 self-storage stores in 39 states, Washington, D.C. and Puerto Rico. The Company’s stores comprise approximately 1.2 million units and approximately 125.7 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.
###








For Information:
Jeff Norman
Extra Space Storage Inc.
(801) 365-1759





Extra Space Storage Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
 
December 31, 2018
 
December 31, 2017
 
(Unaudited)
 
 
Assets:
 
 
 
Real estate assets, net
$
7,491,831

 
$
7,132,431

Investments in unconsolidated real estate ventures
125,326

 
75,907

Cash and cash equivalents
57,496

 
55,683

Restricted cash
15,194

 
30,361

Other assets, net
158,131

 
166,571

Total assets
$
7,847,978

 
$
7,460,953

Liabilities, Noncontrolling Interests and Equity:
 
 
 
Notes payable, net
$
4,137,213

 
$
3,738,497

Exchangeable senior notes, net
562,374

 
604,276

Notes payable to trusts, net
30,928

 
117,444

Revolving lines of credit
81,000

 
94,000

Cash distributions in unconsolidated real estate ventures
45,197

 
5,816

Accounts payable and accrued expenses
101,461

 
96,087

Other liabilities
104,383

 
81,026

Total liabilities
5,062,556

 
4,737,146

 
 
 
 
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, 127,103,750 and 126,007,091 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively
1,271

 
1,260

Additional paid-in capital
2,640,705

 
2,569,485

Accumulated other comprehensive income
34,650

 
33,290

Accumulated deficit
(262,902
)
 
(253,284
)
Total Extra Space Storage Inc. stockholders' equity
2,413,724

 
2,350,751

Noncontrolling interest represented by Preferred Operating Partnership units, net
153,096

 
159,636

Noncontrolling interests in Operating Partnership, net and other noncontrolling interests
218,602

 
213,420

Total noncontrolling interests and equity
2,785,422

 
2,723,807

Total liabilities, noncontrolling interests and equity
$
7,847,978

 
$
7,460,953






Consolidated Statement of Operations for the Three Months and Year Ended December 31, 2018 and 2017
(In thousands, except share and per share data) - Unaudited
 
For the Three Months Ended December 31,
 
For the Year Ended December 31,
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Property rental
$
266,598

 
$
246,351

 
$
1,039,340

 
$
967,229

Tenant reinsurance
29,847

 
25,351

 
115,507

 
98,401

Management fees and other income
10,908

 
10,140

 
41,757

 
39,379

Total revenues
307,353

 
281,842

 
1,196,604

 
1,105,009

Expenses:
 
 
 
 
 
 
 
Property operations
72,207

 
67,604

 
291,695

 
271,974

Tenant reinsurance
6,909

 
5,177

 
25,707

 
19,173

General and administrative
18,434

 
18,790

 
81,256

 
78,961

Depreciation and amortization
53,126

 
49,157

 
209,050

 
193,296

Total expenses
150,676

 
140,728

 
607,708

 
563,404

Gain on real estate transactions and impairment of real estate

 
118,808

 
30,807

 
112,789

Income from operations
156,677

 
259,922

 
619,703

 
654,394

Interest expense
(48,197
)
 
(40,319
)
 
(178,436
)
 
(153,511
)
Non-cash interest expense related to amortization of discount on equity component of exchangeable senior notes
(1,162
)
 
(1,276
)
 
(4,687
)
 
(5,103
)
Interest income
1,295

 
1,535

 
5,292

 
6,736

Income before equity in earnings of unconsolidated real estate ventures and income tax expense
108,613

 
219,862

 
441,872

 
502,516

Equity in earnings of unconsolidated real estate ventures
3,804

 
3,924

 
14,452

 
15,331

Income tax expense
(3,167
)
 
5,529

 
(9,244
)
 
(3,625
)
Net income
109,250

 
229,315

 
447,080

 
514,222

Net income allocated to Preferred Operating Partnership noncontrolling interests
(3,390
)
 
(4,214
)
 
(13,995
)
 
(14,989
)
Net income allocated to Operating Partnership and other noncontrolling interests
(4,398
)
 
(9,118
)
 
(17,796
)
 
(20,220
)
Net income attributable to common stockholders
$
101,462

 
$
215,983

 
$
415,289

 
$
479,013

Earnings per common share
 
 
 
 
 
 
 
Basic
$
0.80

 
$
1.71

 
$
3.29

 
$
3.79

Diluted
$
0.80

 
$
1.69

 
$
3.27

 
$
3.76

Weighted average number of shares
 
 
 
 
 
 
 
Basic
126,466,028

 
126,007,129

 
126,087,487

 
125,967,831

Diluted
133,584,084

 
134,676,639

 
133,159,033

 
134,155,771







Reconciliation of GAAP Net Income to Total Same-Store Net Operating Income — for the Three Months and Year Ended December 31, 2018 and 2017 (In thousands) — Unaudited
 
For the Three Months Ended December 31,
 
For the Year Ended December 31,
 
2018
 
2017
 
2018
 
2017
Net Income
$
109,250

 
$
229,315

 
$
447,080

 
$
514,222

Adjusted to exclude:
 
 
 
 
 
 
 
Gain on real estate transactions and impairment of real estate

 
(118,808
)
 
(30,807
)
 
(112,789
)
Equity in earnings of unconsolidated joint ventures
(3,804
)
 
(3,924
)
 
(14,452
)
 
(15,331
)
Interest expense
49,359

 
41,595

 
183,123

 
158,614

Depreciation and amortization
53,126

 
49,157

 
209,050

 
193,296

Income tax expense
3,167

 
(5,529
)
 
9,244

 
3,625

General and administrative (includes stock compensation)
18,434

 
18,790

 
81,256

 
78,961

Management fees, other income and interest income
(12,203
)
 
(11,675
)
 
(47,049
)
 
(46,115
)
Net tenant insurance
(22,938
)
 
(20,174
)
 
(89,800
)
 
(79,228
)
Non same-store revenue
(23,770
)
 
(12,498
)
 
(80,543
)
 
(45,959
)
Non same-store expense
7,804

 
4,638

 
29,091

 
20,121

Total same-store net operating income
$
178,425

 
$
170,887

 
$
696,193

 
$
669,417

 
 
 
 
 
 
 
 
Same-store revenues
242,828

 
233,853

 
958,797

 
921,270

Same-store operating expenses
64,403

 
62,966

 
262,604

 
251,853

Same-store net operating income
$
178,425

 
$
170,887

 
$
696,193

 
$
669,417


































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, 2019 and Year Ending December 31, 2019 — Unaudited
 
For the Three Months Ending March 31, 2019
 
For the Year Ending December 31, 2019
 
Low End
 
High End
 
Low End
 
High End
Net income attributable to common stockholders per diluted share
$
0.67

 
$
0.69

 
$
2.91

 
$
3.01

Income allocated to noncontrolling interest - Preferred Operating Partnership and Operating Partnership
0.05

 
0.05

 
0.23

 
0.23

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
0.72

 
0.74

 
3.12

 
3.22

 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
Real estate depreciation
0.37

 
0.37

 
1.48

 
1.48

Amortization of intangibles
0.01

 
0.01

 
0.04

 
0.04

Unconsolidated joint venture real estate depreciation and amortization
0.01

 
0.01

 
0.06

 
0.06

Funds from operations attributable to common stockholders
$
1.11

 
$
1.13

 
$
4.70

 
$
4.80

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
$
1.12

 
$
1.14

 
$
4.73

 
$
4.83


































Reconciliation of Estimated GAAP Net Income to Estimated Same-store Net Operating Income —
for the Year Ending December 31, 2019 (In thousands) — Unaudited

 
For the Year Ending December 31, 2019
 
 Low
 
 High
Net Income
$
422,500

 
$
441,500

Adjusted to exclude:
 
 
 
Equity in earnings of unconsolidated joint ventures
(12,500
)
 
(13,500
)
Interest expense (includes non-cash)
197,500

 
195,500

Depreciation and amortization
215,000

 
215,000

Income tax expense
12,000

 
11,000

General and administrative
92,000

 
91,000

Management fees, other income and interest income
(51,500
)
 
(52,500
)
Net tenant insurance
(94,000
)
 
(95,000
)
Non same-store revenue
(83,000
)
 
(83,000
)
Non same-store expense
30,000

 
30,000

Total same-store net operating income
$
728,000

 
$
740,000

 
 
 
 
Same-store revenue
$
1,017,000

 
$
1,027,000

Same-store expense
(289,000
)
 
(287,000
)
Total same-store net operating income
$
728,000

 
$
740,000