Extra Space Storage Inc. Reports 2013 Third Quarter Results
(Logo: http://photos.prnewswire.com/prnh/20120730/LA48662LOGO)
Highlights for the three months ended September 30, 2013:
- Achieved funds from operations ("FFO") of
$0.46 per diluted share, including an$0.08 expense related to extinguishment of debt on a portfolio acquisition and a$0.02 benefit related to the modification of existing debt. Excluding these one-time events, FFO was$0.52 per diluted share representing a 20.9% increase compared to the same period in 2012. - Achieved FFO as adjusted of
$0.57 per diluted share, including a$0.02 benefit related to the modification of existing debt. Excluding this one-time event, FFO as adjusted was$0.55 per diluted share. - Increased same-store revenue and net operating income ("NOI") by 7.8% and 9.7%, respectively, compared to the same period in 2012.
- Increased same-store occupancy by 170 basis points to 90.6% at
September 30, 2013 , compared to 88.9% as ofSeptember 30, 2012 . - Acquired 22 properties for approximately
$214.5 million . - Paid a quarterly dividend of
$0.40 per share.
FFO Per Share:
The following table outlines the Company's FFO and FFO as adjusted for the three and nine months ended September 30, 2013 and 2012. The table also provides 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 September 30, |
For the Nine Months Ended September 30, |
||||||||||||||||||||||||
2013 |
2012 |
2013 |
2012 |
||||||||||||||||||||||
(per share) |
(per share) |
(per share) |
(per share) |
||||||||||||||||||||||
Net income attributable to common stockholders |
$ |
29,245 |
$ |
0.26 |
$ |
38,606 |
$ |
0.37 |
$ |
95,136 |
$ |
0.84 |
$ |
81,233 |
$ |
0.80 |
|||||||||
Adjustments: |
|||||||||||||||||||||||||
Real estate depreciation |
19,539 |
0.16 |
16,886 |
0.15 |
57,616 |
0.49 |
46,380 |
0.43 |
|||||||||||||||||
Amortization of intangibles |
2,776 |
0.02 |
2,090 |
0.02 |
8,198 |
0.06 |
4,130 |
0.03 |
|||||||||||||||||
Gain on sale of real estate assets |
— |
— |
— |
— |
(800) |
(0.01) |
— |
— |
|||||||||||||||||
Joint venture real estate depreciation and amortization |
1,455 |
0.01 |
1,741 |
0.01 |
4,440 |
0.04 |
5,343 |
0.05 |
|||||||||||||||||
Joint venture gain on sale of properties and purchase of partners' interest |
— |
— |
(13,620) |
(0.13) |
(2,556) |
(0.03) |
(19,049) |
(0.18) |
|||||||||||||||||
Distributions paid on Preferred Operating Partnership units |
(1,438) |
(0.02) |
(1,438) |
(0.01) |
(4,313) |
(0.05) |
(4,313) |
(0.04) |
|||||||||||||||||
Income allocated to Operating Partnership noncontrolling interests |
3,092 |
0.03 |
2,938 |
0.02 |
8,210 |
0.07 |
7,563 |
0.07 |
|||||||||||||||||
Funds from operations |
$ |
54,669 |
$ |
0.46 |
$ |
47,203 |
$ |
0.43 |
$ |
165,931 |
$ |
1.41 |
$ |
121,287 |
$ |
1.16 |
|||||||||
Adjustments: |
|||||||||||||||||||||||||
Loss on extinguishment of debt related to portfolio acquisition |
9,153 |
0.08 |
— |
— |
9,153 |
0.08 |
— |
— |
|||||||||||||||||
Non-cash interest expense related to amortization of discount on exchangeable senior notes |
834 |
0.01 |
— |
— |
947 |
0.01 |
444 |
— |
|||||||||||||||||
Acquisition related costs |
2,427 |
0.02 |
2,486 |
0.03 |
3,562 |
0.03 |
3,564 |
0.03 |
|||||||||||||||||
Funds from operations as adjusted |
$ |
67,083 |
$ |
0.57 |
$ |
49,689 |
$ |
0.46 |
$ |
179,593 |
$ |
1.53 |
$ |
125,295 |
$ |
1.19 |
|||||||||
Weighted average number of shares - diluted |
117,604,515 |
108,755,316 |
117,483,010 |
104,981,176 |
Nonrecurring Items Incurred in the Quarter:
During the quarter ended September 30, 2013, the Company incurred a loss of approximately
During the same period, the Company realized a
Operating Results and Same-Store Property Performance:
The following table outlines the Company's same-store property performance for the three and nine months ended September 30, 2013 and 2012 (amounts shown in thousands, except property count data - unaudited):
For the Three Months Ended September 30, |
Percent |
For the Nine Months Ended September 30, |
Percent |
||||||||||||||
2013 |
2012 |
Change |
2013 |
2012 |
Change |
||||||||||||
Same-store rental and tenant reinsurance revenues |
$ |
89,145 |
$ |
82,713 |
7.8% |
$ |
257,769 |
$ |
239,359 |
7.7% |
|||||||
Same-store operating and tenant reinsurance expenses |
26,169 |
25,290 |
3.5% |
78,306 |
76,675 |
2.1% |
|||||||||||
Same-store net operating income |
$ |
62,976 |
$ |
57,423 |
9.7% |
$ |
179,463 |
$ |
162,684 |
10.3% |
|||||||
Non same-store rental and tenant reinsurance revenues |
$ |
37,030 |
$ |
20,847 |
77.6% |
$ |
101,000 |
$ |
36,894 |
173.8% |
|||||||
Non same-store operating and tenant reinsurance expenses |
$ |
11,080 |
$ |
6,204 |
78.6% |
$ |
30,954 |
$ |
10,699 |
189.3% |
|||||||
Total rental and tenant reinsurance revenues |
$ |
126,175 |
$ |
103,560 |
21.8% |
$ |
358,769 |
$ |
276,253 |
29.9% |
|||||||
Total operating and tenant reinsurance expenses |
$ |
37,249 |
$ |
31,494 |
18.3% |
$ |
109,260 |
$ |
87,374 |
25.0% |
|||||||
Same-store square foot occupancy as of quarter end |
90.6 |
% |
88.9 |
% |
90.6 |
% |
88.9 |
% |
|||||||||
Properties included in same-store |
344 |
344 |
344 |
344 |
Revenues for the three and nine months ended September 30, 2013, were up primarily due to increases in occupancy and rental rates for both new and existing customers and lower discounts to new customers. Expenses were higher for the same periods due to increases in payroll, insurance and repair and maintenance expenses.
The Company's major markets with revenue growth above the portfolio average for the three months ended September 30, 2013, included
Acquisition and Third-Party Management Activity:
During the quarter, the Company acquired 22 properties for approximately
The Company has 40 additional properties under contract for a total purchase price of approximately
During the quarter, the Company added 11 properties to its management program. As of September 30, 2013, the Company managed 253 properties for third-party owners. With an additional 279 properties owned and operated in joint ventures, the Company had a total of 532 properties under management. The Company is the largest self-storage management company in
Balance Sheet:
As of September 30, 2013, the Company's percentage of fixed-rate debt to total debt was 85.7%. The weighted average interest rate of the Company's fixed and variable rate debt was 4.0% and 2.2%, respectively. The combined weighted average interest rate was 3.8% with a weighted average maturity of approximately 5.8 years.
Dividends:
On September 30, 2013, the Company paid a third quarter common stock dividend of
Outlook:
The following table outlines the Company's FFO estimates and annual assumptions for the year ending December 31, 2013:
Ranges for 2013 Annual Assumptions |
Notes |
||||||||
Funds from operations |
$ |
1.95 |
$ |
1.97 |
|||||
Funds from operations as adjusted |
$ |
2.09 |
$ |
2.11 |
|||||
Same-store property revenue growth |
7.0 |
% |
7.5 |
% |
Includes tenant reinsurance |
||||
Same-store property expense growth |
2.0 |
% |
2.5 |
% |
Includes tenant reinsurance |
||||
Same-store property NOI growth |
9.5 |
% |
10.0 |
% |
Includes tenant reinsurance |
||||
Weighted average LIBOR |
0.2 |
% |
0.2 |
% |
|||||
Net tenant reinsurance income |
$ |
37,500,000 |
$ |
38,000,000 |
|||||
General & administrative expenses |
$ |
53,500,000 |
$ |
54,000,000 |
|||||
Non-cash compensation expense |
$ |
5,000,000 |
$ |
5,000,000 |
|||||
Average monthly cash balance |
$ |
75,000,000 |
$ |
75,000,000 |
|||||
Equity in earnings of real estate ventures |
$ |
11,500,000 |
$ |
12,000,000 |
|||||
Acquisition activity |
$ |
535,000,000 |
$ |
535,000,000 |
Currently closed or under contract |
||||
Interest expense |
$ |
71,500,000 |
$ |
72,500,000 |
|||||
Non-cash interest expense |
$ |
1,800,000 |
$ |
1,800,000 |
Excluded from FFO as adjusted |
||||
Taxes associated with the company's REIT subsidiary |
$ |
9,500,000 |
$ |
10,000,000 |
|||||
Solar tax credits |
$ |
5,400,000 |
$ |
5,400,000 |
|||||
Acquisition related costs |
$ |
5,350,000 |
$ |
5,350,000 |
Excluded from FFO as adjusted |
||||
Weighted average share count |
116,500,000 |
116,500,000 |
FFO estimates for the year are fully diluted for an estimated average number of shares and
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 on 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 of lease-up assets.
Conference Call:
The Company will host a conference call at 2:00 p.m. Eastern Time on
A replay of the call will also be available by telephone, from 4:00 p.m. Eastern Time on
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;
- failure to close pending acquisitions on expected terms, or at all;
- 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 those governing 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;
- increased interest rates and operating costs;
- reductions in asset valuations and related impairment charges;
- the failure of our joint venture partners to fulfill their obligations to us or their pursuit of actions that are inconsistent with our objectives;
- 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
- difficulties in 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.
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
For informational purposes, the Company provides FFO as adjusted for the exclusion of non-recurring revenues and expenses, acquisition related costs and non-cash interest charges related to the
Definition of
The Company's same-store properties for the periods presented consist of 344 properties that are wholly-owned and operated and that were stabilized by the first day of the earliest calendar year presented. 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. Consolidated Balance Sheets (In thousands, except share data) |
|||||||
September 30, 2013 |
December 31, 2012 |
||||||
(Unaudited) |
|||||||
Assets: |
|||||||
Real estate assets, net |
$ |
3,223,672 |
$ |
2,991,722 |
|||
Investments in unconsolidated real estate ventures |
100,455 |
106,313 |
|||||
Cash and cash equivalents |
81,699 |
30,785 |
|||||
Restricted cash |
22,803 |
16,976 |
|||||
Receivables from related parties and affiliated real estate joint ventures |
7,928 |
11,078 |
|||||
Other assets, net |
81,682 |
66,603 |
|||||
Total assets |
$ |
3,518,239 |
$ |
3,223,477 |
|||
Liabilities, Noncontrolling Interests and Equity: |
|||||||
Notes payable |
$ |
1,402,432 |
$ |
1,369,690 |
|||
Premium on notes payable |
2,336 |
3,319 |
|||||
Exchangeable senior notes |
250,000 |
— |
|||||
Discount on exchangeable senior notes |
(17,299) |
— |
|||||
Notes payable to trusts |
119,590 |
119,590 |
|||||
Lines of credit |
— |
85,000 |
|||||
Accounts payable and accrued expenses |
58,248 |
52,299 |
|||||
Other liabilities |
34,052 |
48,248 |
|||||
Total liabilities |
1,849,359 |
1,678,146 |
|||||
Commitments and contingencies |
|||||||
Noncontrolling interest represented by Preferred Operating Partnership units |
33,713 |
— |
|||||
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, 300,000,000 shares authorized, 111,236,044 and 110,737,205 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively |
1,112 |
1,107 |
|||||
Paid-in capital |
1,766,691 |
1,740,037 |
|||||
Accumulated other comprehensive income (deficit) |
3,146 |
(14,273) |
|||||
Accumulated deficit |
(256,640) |
(235,064) |
|||||
Total Extra Space Storage Inc. stockholders' equity |
1,514,309 |
1,491,807 |
|||||
Noncontrolling interest represented by Preferred Operating Partnership units, net of $100,000 note receivable |
29,880 |
29,918 |
|||||
Noncontrolling interests in Operating Partnership |
90,504 |
22,492 |
|||||
Other noncontrolling interests |
474 |
1,114 |
|||||
Total noncontrolling interests and equity |
1,635,167 |
1,545,331 |
|||||
Total liabilities, noncontrolling interests and equity |
$ |
3,518,239 |
$ |
3,223,477 |
Consolidated Statement of Operations for the Three and Nine months ended September 30, 2013 and 2012 (In thousands, except share and per share data) — Unaudited |
|||||||||||||
For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
||||||||||||
2013 |
2012 |
2013 |
2012 |
||||||||||
Revenues: |
|||||||||||||
Property rental |
$ |
113,881 |
$ |
94,065 |
$ |
324,144 |
$ |
249,193 |
|||||
Tenant reinsurance |
12,294 |
9,495 |
34,625 |
27,060 |
|||||||||
Management fees |
6,936 |
6,231 |
19,910 |
19,476 |
|||||||||
Total revenues |
133,111 |
109,791 |
378,679 |
295,729 |
|||||||||
Expenses: |
|||||||||||||
Property operations |
34,376 |
30,115 |
102,275 |
82,723 |
|||||||||
Tenant reinsurance |
2,873 |
1,379 |
6,985 |
4,651 |
|||||||||
Acquisition related costs |
2,427 |
2,486 |
3,562 |
3,564 |
|||||||||
General and administrative |
13,943 |
12,559 |
40,451 |
37,744 |
|||||||||
Depreciation and amortization |
23,428 |
19,768 |
69,238 |
52,918 |
|||||||||
Total expenses |
77,047 |
66,307 |
222,511 |
181,600 |
|||||||||
Income from operations |
56,064 |
43,484 |
156,168 |
114,129 |
|||||||||
Gain on sale of real estate assets |
— |
— |
800 |
— |
|||||||||
Loss on extinguishment of debt related to portfolio acquisition |
(9,153) |
— |
(9,153) |
— |
|||||||||
Interest expense |
(16,264) |
(18,423) |
(51,992) |
(52,348) |
|||||||||
Non-cash interest expense related to amortization of discount on equity component of exchangeable senior notes |
(834) |
— |
(947) |
(444) |
|||||||||
Interest income |
202 |
461 |
519 |
1,184 |
|||||||||
Interest income on note receivable from Preferred Operating Partnership unit holder |
1,213 |
1,213 |
3,638 |
3,638 |
|||||||||
Income before equity in earnings of unconsolidated real estate ventures and income tax expense |
31,228 |
26,735 |
99,033 |
66,159 |
|||||||||
Equity in earnings of unconsolidated real estate ventures |
3,405 |
2,854 |
8,942 |
7,848 |
|||||||||
Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partners' interests |
— |
13,620 |
2,556 |
19,049 |
|||||||||
Income tax expense |
(2,281) |
(1,656) |
(7,147) |
(4,240) |
|||||||||
Net income |
32,352 |
41,553 |
103,384 |
88,816 |
|||||||||
Net income allocated to Preferred Operating Partnership noncontrolling interests |
(2,033) |
(1,805) |
(5,495) |
(5,108) |
|||||||||
Net income allocated to Operating Partnership and other noncontrolling interests |
(1,074) |
(1,142) |
(2,753) |
(2,475) |
|||||||||
Net income attributable to common stockholders |
$ |
29,245 |
$ |
38,606 |
$ |
95,136 |
$ |
81,233 |
|||||
Net income per common share |
|||||||||||||
Basic |
$ |
0.26 |
$ |
0.37 |
$ |
0.86 |
$ |
0.81 |
|||||
Diluted |
$ |
0.26 |
$ |
0.37 |
$ |
0.84 |
$ |
0.80 |
|||||
Weighted average number of shares |
|||||||||||||
Basic |
111,231,452 |
104,252,227 |
111,060,997 |
100,429,840 |
|||||||||
Diluted |
117,604,515 |
108,755,316 |
117,483,010 |
104,981,176 |
|||||||||
Cash dividends paid per common share |
$ |
0.40 |
$ |
0.20 |
$ |
0.65 |
$ |
0.60 |
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, 2013 — Unaudited |
|||||||
For the Year Ending December 31, 2013 |
|||||||
Low End |
High End |
||||||
Net income attributable to common stockholders per diluted share |
$ |
1.12 |
$ |
1.14 |
|||
Income allocated to noncontrolling interest - Preferred Operating Partnership and Operating Partnership |
0.10 |
0.10 |
|||||
Fixed component of income allocated to non-controlling interest - Preferred Operating Partnership |
(0.05) |
(0.05) |
|||||
Net income attributable to common stockholders for diluted computations |
1.17 |
1.19 |
|||||
Adjustments: |
|||||||
Real estate depreciation |
0.68 |
0.68 |
|||||
Amortization of intangibles |
0.08 |
0.08 |
|||||
Joint venture real estate depreciation and amortization |
0.05 |
0.05 |
|||||
Joint venture gain on sale of properties |
(0.03) |
(0.03) |
|||||
Funds from operations |
$ |
1.95 |
$ |
1.97 |
|||
Adjustments: |
|||||||
Loss on extinguishment of debt related to portfolio acquisition |
0.08 |
0.08 |
|||||
Non-cash interest expense related to amortization of discount on exchangeable senior notes |
0.01 |
0.01 |
|||||
Acquisition related costs |
0.05 |
0.05 |
|||||
Funds from operations as adjusted |
$ |
2.09 |
$ |
2.11 |
SOURCE
Clint Halverson, Extra Space Storage Inc., (801) 365-4597