Extra Space Storage Inc. Reports 2011 Fourth Quarter and Year End
Results
Results
SALT LAKE CITY, UT, Feb 21, 2012 (MARKETWIRE via COMTEX) --Extra Space Storage Inc. (NYSE: EXR) (the "Company"), a leading owner and operator of self-storage properties in the United States, announced operating results for the three months and year ended December 31, 2011.
Highlights for the Three Months Ended December 31, 2011:
-- Achieved funds from operations ("FFO") of $0.35 per diluted share
including lease up dilution of $0.01 per share, resulting in 34.6%
quarter-over-quarter growth compared to 2010.
-- Increased same-store revenue and net operating income ("NOI") by 5.8%
and 9.3%, respectively, as compared to the same period in 2010.
-- Grew same-store occupancy by 310 basis points to 87.8% at December 31,
2011, compared to 84.7% as of December 31, 2010.
-- Acquired 28 properties for a purchase price of $189.9 million.
-- Increased the Company's third-party management program to 185
properties.
-- Paid a quarterly dividend of $0.14 per share.
Spencer F. Kirk, Chairman and CEO of Extra Space Storage Inc., commented: "With strong property performance and robust acquisition activity we produced 32% annual growth in our FFO per share over 2010 and delivered an excellent return to our stockholders. We are intensely focused on the fundamentals that drive our business. Strong execution on the basics and continued innovation will drive our success and allow us to capitalize on an environment marked by higher occupancy, stronger pricing and limited supply."
FFO Per Share:
The following table outlines the Company's FFO and FFO as adjusted for the three months and years ended December 31, 2011 and 2010. The tables also provide a reconciliation to GAAP net income per diluted share for each period presented (amounts shown in thousands, except share data - unaudited):
For the Three Months Ended December 31,
--------------------------------------------
2011 2010
--------------------- ---------------------
(per (per
share) share)
Net income attributable to
common stockholders $ 16,278 $ 0.17 $ 8,916 $ 0.10
Adjustments:
Real estate depreciation 14,647 0.14 12,195 0.13
Amortization of intangibles 1,004 0.01 251 -
Joint venture real estate
depreciation and
amortization 1,820 0.02 2,088 0.02
Joint venture loss on sale
of properties 3 - - -
Distributions paid on
Preferred Operating
Partnership units (1,437) (0.01) (1,437) (0.01)
Income allocated to
Operating Partnership
noncontrolling interests 2,132 0.02 1,879 0.02
----------- -------- ----------- --------
Funds from operations $ 34,447 $ 0.35 $ 23,892 $ 0.26
=========== ======== =========== ========
Adjustments:
Non-cash interest expense
related to amortization of
discount on exchangeable
senior notes 453 - 428 -
Unrecovered development and
acquisition costs 731 0.01 812 0.01
Loss on sublease - - - -
Net effect of prior periods
asset management fee from
joint venture (3,319) (0.03) - -
Severance costs 2,137 0.02 - -
----------- -------- ----------- --------
Funds from operations -
adjusted $ 34,449 $ 0.35 $ 25,132 $ 0.27
=========== ======== =========== ========
Weighted average number of
shares - diluted 99,085,766 92,348,254
For the Year Ended December 31,
--------------------------------------------
2011 2010
--------------------- ---------------------
(per (per
share) share)
Net income attributable to
common stockholders $ 50,449 $ 0.54 $ 26,331 0.30
Adjustments:
Real estate depreciation 52,647 0.54 47,063 0.50
Amortization of intangibles 2,375 0.02 650 -
Joint venture real estate
depreciation and
amortization 7,931 0.08 8,269 0.09
Joint venture loss on sale
of properties 185 - 65 -
Distributions paid on
Preferred Operating
Partnership units (5,750) (0.06) (5,750) (0.06)
Income allocated to
Operating Partnership
noncontrolling interests 7,978 0.08 7,096 0.08
----------- -------- ----------- --------
Funds from operations $ 115,815 $ 1.20 $ 83,724 $ 0.91
=========== ======== =========== ========
Adjustments:
Non-cash interest expense
related to amortization of
discount on exchangeable
senior notes 1,761 0.01 1,664 0.02
Unrecovered development and
acquisition costs 2,896 0.03 1,235 0.01
Loss on sublease - - 2,000 0.02
Net effect of prior periods
asset management fee from
joint venture (3,319) (0.03) - -
Severance costs 2,137 0.02 - -
----------- -------- ----------- --------
Funds from operations -
adjusted $ 119,290 $ 1.23 $ 88,623 $ 0.96
=========== ======== =========== ========
Weighted average number of
shares - diluted 96,683,508 92,050,453
FFO and FFO as adjusted include the dilutive impact from lease-up properties of $0.01 and $0.07 per diluted share, respectively, for the three months and year ended December 31, 2011, compared to $0.03 and $0.12 for the same periods in 2010.
Included in operating results for the three months and year ended December 31, 2011, is a severance charge of $0.02 per diluted share related to the departure of Kent W. Christensen, Chief Financial Officer, in December 2011. Included in the general and administrative expenses for the three months and year ended December 31, 2011, is a non-recurring expense of $0.02 per diluted share related to litigation matters. Included in management and franchise fees is joint-venture asset management fee income of $0.04 per diluted share related to prior periods.
Operating results for the three months and year ended December 31, 2010, included a one-time charge of $0.02 per diluted share related to the bankruptcy of a tenant sub-leasing office space in Memphis, TN from the Company under a long-term lease assumed in the 2005 Storage USA acquisition.
Operating Results and Same-Store Property Performance:
The following table outlines the Company's same-store property performance for the three months and years ended December 31, 2011 and 2010 (amounts shown in thousands, except property count data - unaudited):
For the Three Months
Ended December 31,
--------------------
Percent
2011 2010 Change
--------- --------- --------
Same-store rental and tenant reinsurance
revenues $ 61,395 $ 58,026 5.8%
Same-store operating and tenant reinsurance
expenses 19,387 19,593 (1.1%)
--------- --------- --------
Same-store net operating income $ 42,008 $ 38,433 9.3%
Non same-store rental and tenant
reinsurance revenues $ 20,357 $ 9,062 124.6%
Non same-store operating and tenant
reinsurance expenses $ 7,318 $ 4,430 65.2%
Total rental and tenant reinsurance
revenues $ 81,752 $ 67,088 21.9%
Total operating and tenant reinsurance
expenses $ 26,705 $ 24,023 11.2%
Same-store square foot occupancy as of
quarter end 87.8% 84.7%
Properties included in same-store 253 253
For the Year Ended
December 31,
--------------------
Percent
2011 2010 Change
--------- --------- --------
Same-store rental and tenant reinsurance
revenues $ 241,001 $ 229,785 4.9%
Same-store operating and tenant reinsurance
expenses 78,892 79,098 (0.3%)
--------- --------- --------
Same-store net operating income 162,109 150,687 7.6%
Non same-store rental and tenant
reinsurance revenues 58,905 28,590 106.0%
Non same-store operating and tenant
reinsurance expenses 22,732 13,572 67.5%
Total rental and tenant reinsurance
revenues 299,906 258,375 16.1%
Total operating and tenant reinsurance
expenses 101,624 92,670 9.7%
Same-store square foot occupancy as of
quarter end 87.8% 84.7%
Properties included in same-store 253 253
Occupancy increased 310 basis points over the prior year. Street rates to new tenants increased by approximately 4.5% while discounts decreased 1.0% during the quarter. Expenses for the three months ended December 31, 2011, were lower primarily due to lower utility costs, a decrease in advertising and lower snow removal expenses.
The Company's major markets with revenue growth above the portfolio average for the three months ended December 31, 2011, were Boston, New Jersey, New York, Philadelphia, San Francisco and Washington, D.C. Markets performing below the Company's portfolio average included Houston, Las Vegas and San Diego.
Acquisition and Third-Party Management Activity:
During the quarter, the Company purchased 28 properties for approximately $189.9 million. The properties are located in California, Florida, Illinois, Massachusetts, New Jersey, New York and Rhode Island. Of the 28 properties purchased, 19 came from a previously announced portfolio acquisition located in California. An additional six properties were added as the Company purchased its partner's 90% equity interest in an existing joint venture.
During the quarter, the Company increased its third-party management program by seven properties. As of December 31, 2011, the Company managed a total of 185 properties for third-party owners. Including 341 properties owned in joint ventures, the Company has a total of 526 properties under management. The Company continues to be the largest self-storage management company in the United States.
Balance Sheet:
As of December 31, 2011, the Company's percentage of fixed-rate debt to total debt was 75.5%. The weighted average interest rate on the Company's debt was 5.3% for fixed-rate debt and 2.7% for variable-rate debt. The combined weighted average interest rate was 4.7% with a weighted average maturity of approximately 5.5 years.
Dividends:
The Company paid a fourth quarter dividend of $0.14 per share on the common stock of the Company on December 31, 2011, to stockholders of record at the close of business on December 9, 2011.
On February 16, 2012, the Company's Board of Directors declared a first quarter 2012 dividend of $0.20 per share on the common stock of the Company, an increase of 42.9% over the fourth quarter of 2011. The dividend will be paid on March 30, 2012 to stockholders of record at the close of business on March 15, 2012.
Outlook:
The Company currently estimates that FFO per diluted share for the quarter ending March 31, 2012, will be between $0.31 and $0.33 and will be between $1.37 and $1.45 for the full year ending December 31, 2012. FFO estimates for the year 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,
between 3.5% and 5.0%.
-- Same-store property expense increase, including tenant reinsurance,
between 3.0% and 4.0%.
-- Same-store property NOI growth, including tenant reinsurance, between
3.0% and 6.0%.
-- Net tenant reinsurance income between $25.0 million and $26.0
million.
-- General and administrative expenses between $51.0 million and $53.0
million, including non-cash compensation expense of approximately $5.5
million.
-- Average monthly cash balance of approximately $15.0 million.
-- Equity in earnings of real estate ventures between $9.0 million and
$10.0 million.
-- Acquisition activity of approximately $100.0 million.
-- Interest expense between $70.0 million and $72.0 million.
-- Weighted average LIBOR of 0.5%.
-- Weighted average number of outstanding shares, including OP units, of
approximately 99.8 million.
-- Dilution associated with the Company's lease-up properties of
approximately $2.0 million.
-- Taxes associated with the Company's taxable Real Estate Investment
Trust ("REIT") subsidiary between $2.5 million and $3.5 million,
inclusive of approximately $6.0 million in solar tax credits.
-- Unrecovered development and acquisition costs of approximately $1.2
million.
-- Non-cash interest charges associated with exchangeable senior notes of
approximately $0.5 million.
Supplemental Financial Information:
Supplemental unaudited financial information regarding the Company's performance can be found on the Company's website at www.extraspace.com. Click on the "Investor Relations" link at the bottom of the home page, then on "Financial & Stock Info," then on "Quarterly Earnings" on the left of the page. This supplemental information provides additional detail on items that include property occupancy and financial performance by portfolio and market, debt maturity schedules and performance and progress of property development.
Conference Call:
The Company will host a conference call at 1:00 p.m. Eastern Time on Wednesday, February 22, 2012, to discuss its financial results. To participate in the conference call, please dial 866-700-6979 or 617-213-8836 for international participants, conference ID: 11461378. 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 3:00 p.m. Eastern Time on February 22, 2012, until midnight Eastern Time on March 22, 2012. The replay dial-in numbers are 888-286-8010 or 617-801-6888 for international callers, conference ID: 84857761.
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. 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, the real estate industry and
the markets in which we operate;
-- the effect of competition from new and existing self-storage
facilities or other storage alternatives, which could cause rents and
occupancy rates to decline;
-- difficulties in our ability to evaluate, finance, complete and
integrate acquisitions and developments successfully and to lease up
those properties, which could adversely affect our profitability;
-- 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 REITs, which could increase our expenses and reduce our cash
available for distribution;
-- 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;
-- increased interest rates and operating costs;
-- reductions in asset valuations and related impairment charges;
-- the failure to maintain our REIT status for federal income tax
purposes;
-- economic uncertainty due to the impact of war or terrorism, which
could adversely affect our business plan; and
-- our ability to attract and retain qualified personnel and management
members.
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.
Notes to Financial Information:
The Company operates as a self-managed and self-administered REIT. Readers are encouraged to find further detail regarding Extra Space Storage's organizational structure in its most recent Annual Report on Form 10-K as filed with the SEC.
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 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 U.S. generally accepted accounting principles ("GAAP"), excluding gains or losses on sales of operating properties and impairment write downs of depreciable real estate assets, 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.
For informational purposes, the Company provides FFO as adjusted for the exclusion of gains from early extinguishment of debt, non-recurring revenues and expenses, unrecovered acquisition and development costs and non-cash interest charges related to ASC 470-20. Although the Company's calculation of FFO as adjusted 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 gains from early extinguishment of debt, non-recurring revenues and expenses, the costs related to acquiring properties and non-cash charges related to ASC 470-20, stockholders and potential investors are presented with an indicator of its operating performance that more closely achieves the objectives of the real estate industry in presenting FFO. FFO as adjusted by the Company should not be considered a replacement of the NAREIT definition of FFO and 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 Properties:
The Company's same-store properties for the three months and year ended December 31, 2011, consisted of 253 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. Same-store results provide information relating to property operations without the effects of acquisitions or completed developments and should not be used as a basis for future same-store performance or for the performance of the Company's properties 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 that owns and/or operates 882 self-storage properties in 34 states and Washington, D.C. The Company's properties comprise approximately 585,000 units and approximately 64 million square feet of rentable space, offering customers a wide selection of conveniently located and secure storage solutions across the country, including boat storage, RV storage and business storage. The Company is the second largest owner and/or operator of self-storage properties in the United States and is the largest self-storage management company in the United States.
Extra Space Storage Inc.
Consolidated Balance Sheets
(In thousands, except share data)
December 31, December 31,
2011 2010
------------ ------------
Assets:
Real estate assets:
Net operating real estate assets $ 2,254,429 $ 1,935,319
Real estate under development 9,366 37,083
------------ ------------
Net real estate assets 2,263,795 1,972,402
Investments in real estate ventures 130,410 140,560
Cash and cash equivalents 26,484 46,750
Restricted cash 25,768 30,498
Receivables from related parties and affiliated
real estate joint ventures 18,517 10,061
Other assets, net 51,276 49,549
------------ ------------
Total assets $ 2,516,250 $ 2,249,820
============ ============
Liabilities, Noncontrolling Interests and
Equity:
Notes payable $ 937,001 $ 871,403
Notes payable to trusts 119,590 119,590
Exchangeable senior notes 87,663 87,663
Premium (discount) on notes payable 4,402 (2,205)
Lines of credit 215,000 170,467
Accounts payable and accrued expenses 45,079 35,242
Other liabilities 33,754 28,589
------------ ------------
Total liabilities 1,442,489 1,310,749
------------ ------------
Commitments and contingencies
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, 300,000,000
shares authorized, 94,783,590 and 87,587,322
shares issued and outstanding at December 31,
2011 and December 31, 2010, respectively 948 876
Paid-in capital 1,290,021 1,148,820
Accumulated other comprehensive deficit (7,936) (5,787)
Accumulated deficit (264,086) (262,508)
------------ ------------
Total Extra Space Storage Inc. stockholders'
equity 1,018,947 881,401
Noncontrolling interest represented by
Preferred Operating Partnership units, net of
$100,000 note receivable 29,695 29,733
Noncontrolling interests in Operating
Partnership 24,018 26,803
Other noncontrolling interests 1,101 1,134
------------ ------------
Total noncontrolling interests and equity 1,073,761 939,071
------------ ------------
Total liabilities, noncontrolling
interests and equity $ 2,516,250 $ 2,249,820
============ ============
Consolidated Statement of Operations for the Three Months Ended December
31, 2011 and 2010 -- Unaudited
(In thousands, except share data)
Three Months Ended
December 31,
--------------------------
2011 2010
------------ ------------
Revenues:
Property rental $ 73,460 $ 60,186
Management and franchise fees 11,460 6,066
Tenant reinsurance 8,292 6,902
------------ ------------
Total revenues 93,212 73,154
------------ ------------
Expenses:
Property operations 25,155 21,934
Tenant reinsurance 1,550 2,089
Unrecovered development and acquisition costs 731 812
Severance costs 2,137 --
General and administrative 13,287 11,525
Depreciation and amortization 15,973 13,209
------------ ------------
Total expenses 58,833 49,569
------------ ------------
Income from operations 34,379 23,585
Interest expense (17,870) (14,907)
Non-cash interest expense related to
amortization of discount on exchangeable senior
notes (453) (428)
Interest income 471 184
Interest income on note receivable from
Preferred Operating Partnership unit holder 1,212 1,212
------------ ------------
Income before equity in earnings of real estate
ventures and income tax expense 17,739 9,646
Equity in earnings of real estate ventures 1,227 1,957
Income tax expense (552) (815)
------------ ------------
Net income 18,414 10,788
Net income allocated to Preferred Operating
Partnership noncontrolling interests (1,607) (1,538)
Net income allocated to Operating Partnership
and other noncontrolling interests (529) (334)
------------ ------------
Net income attributable to common stockholders $ 16,278 $ 8,916
============ ============
Net income per common share
Basic $ 0.17 $ 0.10
Diluted $ 0.17 $ 0.10
Weighted average number of shares
Basic 94,530,814 87,565,487
Diluted 99,085,766 92,348,254
Cash dividends paid per common share $ 0.14 $ 0.10
Consolidated Statement of Operations for the Years Ended December 31, 2011
and 2010
(In thousands, except share data)
For the Year Ended
December 31,
--------------------------
2011 2010
------------ ------------
Revenues:
Property rental $ 268,725 $ 232,447
Management and franchise fees 29,924 23,122
Tenant reinsurance 31,181 25,928
------------ ------------
Total revenues 329,830 281,497
Expenses:
Property operations 95,481 86,165
Tenant reinsurance 6,143 6,505
Unrecovered development and acquisition costs 2,896 1,235
Loss on sublease -- 2,000
Severance costs 2,137 --
General and administrative 49,683 44,428
Depreciation and amortization 58,014 50,349
------------ ------------
Total expenses 214,354 190,682
Income from operations 115,476 90,815
Interest expense (67,301) (64,116)
Non-cash interest expense related to
amortization of discount on exchangeable senior
notes (1,761) (1,664)
Interest income 1,027 898
Interest income on note receivable from
Preferred Operating Partnership unit holder 4,850 4,850
------------ ------------
Income before equity in earnings of real estate
ventures and income tax expense 52,291 30,783
Equity in earnings of real estate ventures 7,287 6,753
Income tax expense (1,155) (4,162)
------------ ------------
Net income 58,423 33,374
Net income allocated to Preferred Operating
Partnership noncontrolling interests (6,289) (6,048)
Net income allocated to Operating Partnership
and other noncontrolling interests (1,685) (995)
------------ ------------
Net income attributable to common stockholders $ 50,449 $ 26,331
============ ============
Net income per common share
Basic $ 0.55 $ 0.30
Diluted $ 0.54 $ 0.30
Weighted average number of shares
Basic 92,097,008 87,324,104
Diluted 96,683,508 92,050,453
Cash dividends paid per common share $ 0.56 $ 0.40
Reconciliation of the Range of Estimated Fully Diluted Net Income Per Share
to Estimated Fully Diluted FFO Per Share -- for the Three Months Ending
March 31, 2012 and the Year Ending December 31, 2012 -- Unaudited
For the Three Months
Ending For the Year Ending
March 31, 2012 December 31, 2012
-------------------- --------------------
Low End High End Low End High End
--------- --------- --------- ---------
Net income attributable to
common stockholders per diluted
share $ 0.13 $ 0.15 $ 0.63 $ 0.71
Income allocated to
noncontrolling interest -
Preferred Operating
Partnership and Operating
Partnership 0.02 0.02 0.10 0.10
Fixed component of income
allocated to non-controlling
interest - Preferred
Operating Partnership (0.01) (0.01) (0.06) (0.06)
--------- --------- --------- ---------
Net income for diluted
computations 0.14 0.16 0.67 0.75
Adjustments:
Real estate depreciation 0.14 0.14 0.59 0.59
Amortization of intangibles 0.01 0.01 0.03 0.03
Joint venture real estate
depreciation and amortization 0.02 0.02 0.08 0.08
--------- --------- --------- ---------
Diluted funds from operations
per share $ 0.31 $ 0.33 $ 1.37 $ 1.45
========= ========= ========= =========
SOURCE: Extra Space Storage Inc.