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|Extra Space Storage Inc. Reports Results for the Quarter Ended March 31, 2005|
SALT LAKE CITY, May 10, 2005 /PRNewswire-FirstCall via COMTEX/ -- Extra Space Storage Inc. (the "Company") (NYSE: EXR) announced today operating results for the quarter ended March 31, 2005. The reported statements of operations and cash flows for the quarter ended March 31, 2004 are the operating results of the Company's predecessor (the "Predecessor") prior to the consummation of the Company's IPO and various formation transactions.
Kenneth M. Woolley, chairman and chief executive officer, stated, "We maintained our consistent property performance in the first quarter with continued year-on-year increases in revenue and net operating income. We also closed on several acquisitions and have grown our publicly held portfolio to 148 properties."
The results for the quarter ended March 31, 2005 include the operations of 148 properties, 130 of which were consolidated and 18 of which were held in joint ventures accounted for using the equity method, compared to the results for the quarter and year ended March 31, 2004, which included the operations of 108 properties, 70 of which were consolidated and 38 of which were in joint ventures accounted for using the equity method. Results for the quarter ended March 31, 2004 include the results of six properties in which the Company did not own any interest and one where the Company sold its joint venture interest in 2004. The properties were consolidated as a result of guarantees and/or puts for which the Company was liable. Five of the six properties were deconsolidated on August 16, 2004 upon the release of all guarantees and puts, and the other property was deconsolidated on December 31, 2004. Results for both periods also include equity in earnings of real estate joint ventures, third-party management fees, acquisition fees and development fees.
Operating Results for the Quarter Ended March 31, 2005:
Revenues for the quarter ended March 31, 2005 were $22.9 million compared to $10.9 million for the quarter ended March 31, 2004. Contributing to the increase in revenues for the first quarter was the acquisition of 52 stabilized properties during 2004 and the first quarter of 2005, the buy-out of various joint venture partners in 2004 and continued occupancy gains from the Company's and the Predecessor's lease-up properties and increased rental revenues from existing customers.
The net loss for the quarter ended March 31, 2005 was $640,000 compared to a net loss for the quarter ended March 31, 2004 of $6.0 million. The decrease in net loss was due to the acquisition of 52 stabilized properties, the buy-out of various joint venture partners, as well as continued occupancy gains in lease-up properties and rental increases from existing customers. These increases were partially offset by additional depreciation and amortization and an increase in repairs and maintenance due to snow removal expenses in New England.
Same store portfolio: Our same-store stabilized portfolio consists of 38 properties wholly owned by the Predecessor or the Company at the beginning and at the end of the applicable periods presented and that had achieved stabilization as of the first day of such period. These results provide information relating to property-level operating changes without the effects of acquisitions or completed developments. The results shown should not be used as a basis for future same-store performance.
Company Predecessor Three Months Ending March 31, Percent 2005 2004 Change Same-store rental revenues $6,737 $6,525 3.2% Same-store operating expenses 2,365 2,203 7.4% Non same-store rental revenues 15,485 3,471 346.1% Non same-store operating expenses 6,513 2,207 195.1% Total rental revenues 22,222 9,996 122.3% Total operating expenses 8,878 4,410 101.3% Properties included in same-store 38 38
Same-store stabilized revenues for the quarter ended March 31, 2005, reflecting a portfolio of 38 wholly-owned properties, increased 3.2% compared to the first quarter of 2004. Expenses rose 7.4% in the quarter primarily due to a significant increase in repairs and maintenance, which was caused by abnormally high snow removal costs in New England.
Kenneth M. Woolley stated: "We are pleased with the revenue performance of our same-store properties for the first quarter even though we had an increase in snow removal costs that suppressed our same-store NOI gains. Our stores saw a continuation of the revenue growth from 2004 and we look forward to an active second quarter. I think our internal initiatives continue to position us well."
Common Contingent Share ("CCS") and Common Contingent Unit ("CCU") Property Performance: As described in the Company's Prospectus for its IPO, upon the achievement of certain levels of net operating income with respect to 14 of the Company's pre-stabilized properties, the Company's CCSs and the Company's operating partnership's CCUs will convert into additional shares of common stock and operating partnership units, respectively, beginning, with the quarter ending March 31, 2006. The average occupancy of these 14 properties as of March 31, 2005 was 58.4% compared to 57.5% at December 31, 2004. The table below outlines the performance of these properties for the quarter ended March 31, 2005 and 2004, respectively.
Company Predecessor Three Months Ended March 31, Percent 2005 2004 Change CCS/CCU rental revenues $1,852 $1,188 55.9% CCS/CCU operating expenses 1,308 1,088 20.2% Non CCS/CCU rental revenues 20,370 8,808 131.3% Non CCS/CCU operating expenses 7,570 3,322 127.9% Total rental revenues 22,222 9,996 122.3% Total operating expenses 8,878 4,410 101.3% Properties included in CCS/CCU 14 14
Revenues for the quarter ended March 31, 2005 increased 56.0% as compared to the quarter ended March 31, 2004. This increase was due to the continued occupancy gains of the facilities. Expenses for the quarter ended March 31, 2005 increased 20.2%. The increase was primarily due to an increase in repairs and maintenance and property taxes.
Funds from Operations:
Funds from operations ("FFO") provides relevant and meaningful information about the Company's operating performance that is necessary, along with net loss and cash flows, for an understanding of the Company's operating results. FFO is defined by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT") as net income (loss) computed in accordance with accounting principles generally accepted in the United States ("GAAP"), excluding gains or losses on sales of 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 its performance, FFO should be considered along with the reported net loss and cash flows in accordance with GAAP, as presented in the consolidated financial statements.
The computation of FFO may not be compared 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 (loss) as an indication of the Company's performance, as an alternative to net cash flow from operating activates as a measure of its liquidity, or as an indicator of the Company's ability to make cash distributions.
Funds from operations per share continued to grow from $0.13 for the quarter ending December 31, 2004 to $0.15 for the quarter ending March 31, 2005. FFO per share was slightly lower than expected due to increased snow removal costs in New England, acquisitions occurring later in the quarter than expected and lower than expected development fees recognized in the first quarter of 2005. The Company expects to recognize additional development fees during the second and third quarters that will help recover some of the shortfall experienced in the first quarter. The following table sets forth the calculation of FFO per share:
Three months ended March 31, 2005 (in thousands) Net Loss $(640) Plus: Real estate depreciation 3,764 Amortization of intangibles 1,927 Joint venture real estate depreciation 101 Less: Gain on sale of real estate assets -- Loss allocated to operating partnership (56) Funds from operations $5,096 Funds from operations per share $0.15 First Quarter Property Acquisitions:
The Company acquired eight properties during the quarter ending March 31, 2005. The properties are located in the Company's core markets of California, Florida, Georgia and New Jersey and were purchased for an aggregate of $62.4 million.
Commenting on these acquisitions, Mr. Woolley noted: "We are pleased to complete the purchase of these properties. They complement our existing portfolio of properties located in high-income, high-density population centers."
First Quarter Dividend Declared
On February 22, 2005, the Company announced its first quarter common stock dividend of $0.2275 per share. The dividend was paid on March 31, 2005 to shareholders of record as of March 15, 2005. The dividend payment was calculated based on an annual dividend of $0.91 per share.
Appointment of New Board Member
On February 23, 2005, the Company appointed Joseph D. Margolis to the Company's Board of Directors, increasing the size of the Board to seven members. Mr. Margolis is a co-founding partner of Arsenal Real Estate Funds, a private real estate investment manager. Prior to forming Arsenal, Mr. Margolis held senior positions for twelve years at Prudential Real Estate Investors in portfolio management, capital markets and as General Counsel, and also served on the management and investment committees. Mr. Margolis will serve on the Company's Compensation, Nominating and Governance Committee.
Storage USA Acquisition
On May 5, 2005, the Company and joint venture partner Prudential Real Estate Investors ("PREI"), the real estate investment and advisory business of Prudential Financial, Inc., executed a definitive agreement to acquire Storage USA from General Electric Corp. ("GE") for $2.29 billion in cash. The purchase is subject to customary conditions to closing. Company management expects the acquisition to be completed in July 2005. When completed the transaction will be the largest to date in the self-storage industry.
Ken Woolley added: "The most exciting news at this time for Extra Space Storage is the recent announcement that we, along with our joint venture partner Prudential Real Estate Investors, have signed an agreement to acquire Storage USA from GE. This transaction is what Extra Space Storage is all about. We're acquiring well-located, quality properties, with the majority of them located in our current core markets. Through this transaction, we will become the second largest operator of self-storage properties in the U.S., and positions us as a major player in the industry. We believe that, with our scalable technology systems and operational processes, we will be able to add value throughout this expanded portfolio. The transaction will provide value to our shareholders and is consistent with our strategy to become a major force in the U.S. self storage industry."
Storage USA, based in Memphis, Tennessee, is currently the fourth largest operator of self-storage facilities in the United States, operating 458 self-storage properties in 31 states and Washington, D.C. Storage USA manages over 31 million net rentable square feet, with nearly 250,000 tenants.
The Company will own one hundred percent of 61 Storage USA facilities, and through the PREI joint venture, will have an ownership interest in an additional 259 Storage USA facilities. The Company will also acquire Storage USA's equity interest in 54 joint venture properties, and assume Storage USA's franchise and management business consisting of 84 properties.
As of March 31, 2005, total fixed rate debt to total debt is approximately 62.2%. The weighted average interest rate was 4.82% for fixed rate loans and 4.64% for variable rate loans. The total weighted average interest rate of all fixed and variable rate loans was 4.76%. The Company had $68.5 million available on its line of credit of which $48.5 million is drawn as of March 31, 2005.
Kent Christensen, senior vice president and chief financial officer noted: "As in previous quarters, we continue to feel that our financing structure positions us well and gives us the flexibility and buying power to execute on our plans for growth."
For the quarter ended March 31, 2005, the Company continued to experience year-on-year revenue growth and a consistent level of occupancy at its stabilized properties. California and Florida remained top performing markets, while Pennsylvania and New Jersey lagged. Conditions in most of the Company's markets continued to improve. Because of these conditions, the Company expects year-on-year same store revenue for its current stabilized portfolio to increase during 2005 over the levels achieved in 2004.
With respect to the 25 lease up properties, including the 14 CCS and CCU properties, the Company expects continued growth in revenues and occupancy with a number of these properties achieving full stabilization during 2005. The CCS and CCU properties as a whole are slightly below budgeted performance with six of the properties continuing to under-perform. These six properties are expected to continue this trend. Consequently, the Company still believes it is unlikely that any CCS or CCU's will be converted into common shares or operating partnership units until at a minimum June 30, 2006, or possibly as late as September 30, 2006.
Mr. Woolley stated: "We are pleased with the performance of our lease-up properties, especially with the increases in revenue. We have seen modest growth, and we look forward to executing on several initiatives that will give us greater revenue growth during the remainder of the year."
The following table sets forth additional information regarding the occupancy of stabilized properties by state as of March 31, 2005.
Stabilized Property Data Based on Location Company Pro forma Company Pro forma Net Net rentable rentable Number of Number of square square Number units at units at feet at feet at of March 31, December 31, March 31, December 31, Location Properties 2005(1) 2004 2005(2) 2004 Wholly- Owned Properties Arizona 1 481 480 57,830 57,630 California 20 12,359 12,362 1,327,392 1,328,215 Colorado 4 1,809 1,809 233,166 233,130 Florida 18 11,935 11,942 1,258,914 1,258,929 Georgia 6 3,147 3,470 434,318 433,141 Louisiana 2 1,411 1,411 147,900 147,900 Maryland 1 923 923 138,230 138,230 Massachusetts 20 10,173 10,178 1,103,466 1,105,275 Missouri 2 811 811 97,817 97,817 Nevada 1 463 463 57,100 57,100 New Hampshire 1 623 623 72,600 72,600 New Jersey 13 10,232 10,233 1,011,671 1,011,691 New York 1 1,270 1,270 59,000 59,000 Pennsylvania 7 4,230 4,234 497,228 495,628 South Carolina 4 2,088 2,088 246,969 246,969 Texas 7 4,289 4,289 465,269 464,606 Utah 1 551 551 72,720 72,750 Virginia 1 551 551 73,350 73,310 Total Wholly- Owned Properties 110 67,346 67,688 7,354,940 7,353,921 Properties Held in Joint Ventures California 7 3,853 3,850 400,064 400,064 New Hampshire 2 801 801 83,675 83,675 New Jersey 2 1,726 1,726 166,805 166,805 New York 2 1,519 1,519 137,574 137,574 Total Properties Held in Joint Ventures 13 7,899 7,896 788,118 788,118 Total Stabilized Properties 123 75,245 75,584 8,143,058 8,142,039 Company Pro forma Square foot Square foot occupancy % occupancy % Location March 31, 2005 December 31,2004 Wholly-Owned Properties Arizona 90.9% 95.7% California 86.7% 86.4% Colorado 83.0% 81.1% Florida 91.4% 92.3% Georgia 87.1% 82.2% Louisiana 83.2% 85.8% Maryland 74.0% 78.2% Massachusetts 79.3% 79.5% Missouri 84.7% 83.7% Nevada 91.0% 89.1% New Hampshire 86.4% 86.9% New Jersey 83.7% 86.3% New York 76.1% 77.9% Pennsylvania 79.0% 81.2% South Carolina 89.4% 86.9% Texas 82.2% 82.0% Utah 82.0% 77.7% Virginia 93.3% 92.8% Total Wholly-Owned Properties 84.9% 85.1% Properties Held in Joint Ventures California 90.2% 88.4% New Hampshire 85.3% 86.9% New Jersey 78.3% 81.3% New York 86.7% 88.4% Total Properties Held in Joint Ventures 86.5% 86.7% Total Stabilized Properties 85.0% 85.3% (1) Represents unit count as of March 31, 2005 which may differ from December 31, 2004 unit count due to unit conversions or expansions. (2) Represents net rentable square feet as of March 31, 2005 which may differ from December 31, 2004 net rentable square feet due to unit conversions or expansions.
The following table sets forth additional information regarding the occupancy of our lease-up properties by state as of March 31, 2005.
Lease-up Property Data Based on Location Company Pro forma Company Pro forma Net Net rentable rentable Number of Number of square square Number units at units at feet at feet at of March 31, December 31, March 31, December 31, Location Properties 2005(1) 2004 2005(2) 2004 Wholly-Owned Properties California 3 1,737 1,737 202,027 202,027 Connecticut 2 1,366 1,360 123,715 123,390 Florida 1 388 388 38,005 38,005 Illinois 2 1,139 1,133 144,690 144,515 Massachusetts 5 3,024 2,969 322,255 322,255 New Jersey 4 3,334 3,335 275,298 275,298 New York 3 2,522 2,522 198,110 198,110 Total Wholly -Owned Properties 20 13,510 13,444 1,304,100 1,303,600 Properties Held in Joint Ventures California 2 1,511 1,412 149,060 151,295 New Jersey 1 664 664 58,650 58,650 New York 1 656 656 60,020 60,020 Pennsylvania 1 916 916 73,125 73,125 Total Properties Held in Joint Ventures 5 3,747 3,648 340,855 343,090 Total Lease-up Properties 25 17,257 17,092 1,644,955 1,646,690 Company Pro forma Square foot Square foot occupancy % occupancy % Location March 31, 2005 December 31,2004 Wholly-Owned Properties California 69.2% 69.2% Connecticut 59.4% 60.9% Florida 63.9% 69.1% Illinois 57.9% 56.0% Massachusetts 52.2% 49.7% New Jersey 71.7% 72.1% New York 75.7% 76.1% Total Wholly-Owned Properties 62.3% 61.8% Properties Held in Joint Ventures California 85.6% 86.0% New Jersey 88.4% 87.1% New York 74.4% 78.9% Pennsylvania 73.6% 76.4% Total Properties Held in Joint Ventures 81.6% 82.9% Total Lease-up Properties 66.3% 66.2% (1) Represents unit count as of March 31, 2005 which may differ from December 31, 2004 unit count due to unit conversions or expansions. (2) Represents net rentable square feet as of March 31, 2005 which may differ from December 31, 2004 net rentable square feet due to unit conversions or expansions. The following table sets forth pro forma revenue per occupied net rentable square foot. This table includes all acquisition properties as if they were purchased January 1, 2004. Quarter ended Year ended March 31, 2004 December 31, 2004 (1) Pro forma Total Revenue Per Occupied Square Foot Stabilized Properties $13.05 $13.06 Lease Up Properties $13.48 $12.32 (1) Numbers differ from those reported in 12/31/04 year end press release due to the classification of certain properties as lease-up, rather than stabilized.
Forward Looking Statements:
When used within this document, the words "believes," "anticipates," "projects," "should," "estimates," "expects," and similar expressions are intended to identify "forward-looking statements" within the meaning of Section 27-A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied in the forward-looking statements. Such factors include, but are not limited to, changes in general economic conditions and in the markets in which the Company operates:
The Company disclaims any obligation to publicly release the results of any revisions to these forward-looking statements reflecting new estimates, events or circumstances after the date of this report.
Extra Space Storage Inc. will host a conference call at 11:00 a.m. Mountain Time (1:00 p.m. Eastern Time) on Tuesday, May 10, 2005 to discuss first quarter 2005 results.
This conference call will be broadcast live over the Internet and can be accessed by all interested parties Extra Space Storage's website at www.extraspace.com (then click on "Investor Info" tab.) To listen to the live call, please go to either website at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available shortly after the call on the website. In addition, a replay of the call will be available via telephone for 14 business days, beginning two hours after the call. To listen to the call, in the U.S., please dial 888-286-8010 and international the number is 617-801-6888. Enter access code 81717930.
About Extra Space Storage Inc.
Extra Space Storage Inc., headquartered in Salt Lake City, Utah, is a real estate investment trust that owns and operates 148 self-storage properties in 20 states. The Company's properties comprise more than 92,500 units, 9.8 million square feet rented by over 75,000 tenants. Additional Extra Space Storage information is available at www.extraspace.com.
Extra Space Storage Inc. Condensed Consolidated Balance Sheets (Dollars in thousands, except per share data) March 31, 2005 December 31, 2004 (unaudited) Assets: Real estate assets $755,427 $696,899 Investments in real estate ventures 6,121 6,182 Cash and cash equivalents 12,286 24,329 Restricted cash 5,510 4,430 Receivables from related parties 2,254 2,501 Other assets, net 15,555 14,143 Total assets $797,153 $748,484 Liabilities, Minority Interests, and Stockholders' Equity: Lines of credit $48,499 $39,000 Notes payable 480,584 433,977 Accounts payable and accrued expenses 1,619 3,444 Other liabilities 9,799 7,003 Total liabilities 540,501 483,424 Minority interest in Operating Partnership 20,776 21,453 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, 200,000,000 shares authorized, 31,169,950 shares issued and outstanding at March 31, 2005 and December 31, 2004 312 312 Paid-in capital 347,883 347,883 Accumulated deficit (112,319) (104,588) Total stockholders' equity 235,876 243,607 Total liabilities, minority interests, and stockholders' equity $797,153 $748,484 Extra Space Storage Inc. Condensed Consolidated Statements of Operations (Dollars in thousands, except per share data) Company Predecessor Three months ended March 31, 2005 2004 Revenues: Property rental $22,222 $9,996 Management fees 368 548 Acquisition and development fees 267 265 Other income 61 117 Total Revenues 22,918 10,926 Expenses: Property operations 8,878 4,410 Unrecovered development/acquisition costs and support payments 107 498 General and administrative 2,957 2,970 Depreciation and amortization 5,730 2,677 Other 20 -- Total Expenses 17,692 10,555 Income before interest expense, minority interests, equity in earnings of real estate ventures and loss on sale of real estate assets 5,226 371 Interest expense ( 6,239) (6,367) Minority interest - Fidelity preferred return -- (1,096) Minority interest - Operating Partnership 56 -- Loss allocated to other minority interests -- 970 Equity in earnings of real estate ventures 317 261 Loss before loss on sale of real estate assets (640) (5,861) Loss on sale of real estate assets -- (171) Net loss $(640) $(6,032) Net loss per share: Basic (1) $(0.02) $(2.66) Diluted (1) $(0.02) $(2.66) Weighted average number of shares: Basic 31,169,950 2,268,169 Diluted 31,169,950 2,268,169 Cash dividends paid per common share $0.2275 $-- (1) The basic and diluted loss per share does not include the potential effects of the CCSs and CCUs as such securities would not have participated in earnings for any of the periods presented. These securities will not participate in distributions until they are converted, which cannot occur prior to March 31, 2006. Extra Space Storage Inc. Condensed Consolidated Statements of Cash Flows (Dollars in thousands, except per share data) Company Predecessor Three months ended March 31, 2005 2004 Cash flows from operating activities: Net loss $(640) $(6,032) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 5,730 2,677 Amortization of discount on putable preferred interests in consolidated joint ventures -- 538 Minority interest - Fidelity preferred return -- 1,096 Income (loss) allocated to other minority interests (56) (970) (Gain) loss on sale of real estate assets -- 171 Distributions of cumulative earnings from real estate ventures 69 194 Increase (decrease) in cash due to changes in: Receivables from related parties 247 41 Other assets (716) (710) Accounts payable (1,825) 233 Payables to related parties -- (83) Other liabilities 447 68 Net cash provided by (used in) operating activities 3,256 (2,777) Cash flows from investing activities: Acquisition of real estate assets (55,327) (79,250) Development and construction of real estate assets (1,067) (6,535) Proceeds from sale of real estate assets -- 6,406 Investments in real estate ventures (8) (89) Advances to Centershift and Extra Space Development -- (2,884) Purchase of equipment (197) (456) Increase in cash resulting from de-consolidation of real estate assets and distribution of equity ownership in Extra Space Development and other properties -- 471 Change in restricted cash (1,080) (2,722) Net cash used in investing activities (57,679) (85,059) Cash flows from financing activities: Proceeds from line of credit and notes payable 53,257 188,512 Payments on line of credit and notes payable (2,765) (123,143) Deferred financing costs (400) (5,009) Payments on other liabilities -- (7) Net payments to related parties and putable preferred interests in consolidated joint ventures -- (1,283) Member contributions -- 19,480 Return paid on Class B, C and E member units -- (727) Redemption of units -- (155) Minority interest investments -- 2,962 Minority interest distributions -- (608) Distributions to Operating Partnership unit holders (621) -- Dividends paid on common stock (7,091) -- Preferred return paid to Fidelity -- (350) Net cash provided by financing activities 42,380 79,672 Net decrease in cash and cash equivalents (12,043) (8,164) Cash and cash equivalents, beginning of the period 24,329 11,746 Cash and cash equivalents, end of the period $12,286 $3,582
SOURCE Extra Space Storage Inc.
James Overturf of Extra Space Storage Inc., +1-801-365-4501; or William Coffin of CC Investor Relations, +1-818-789-0100, for Extra Space Storage Inc.