Maryland | 001-32269 | 20-1076777 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification Number) |
¨ | 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)) |
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 |
ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS |
Exhibit Number | Description of Exhibit | |
99.1 | Press Release dated April 26, 2017. |
EXTRA SPACE STORAGE INC. | |||
Date: April 26, 2017 | By | /s/ P. Scott Stubbs | |
Name: | P. Scott Stubbs | ||
Title: | Executive Vice President and Chief Financial Officer |
Extra Space Storage Inc. | ||
PHONE (801) 365-4600 | ||
FAX (801) 365-4855 | ||
2795 East Cottonwood Parkway, Suite 300 | ||
Salt Lake City, Utah 84121 | ||
www.extraspace.com | ||
FOR IMMEDIATE RELEASE |
• | Achieved net income attributable to common stockholders of $0.64 per diluted share, representing a 3.0% decrease compared to the same period in 2016, which included a gain related to the buyout of a joint venture partner's interest. |
• | Achieved funds from operations attributable to common stockholders and unit holders (“FFO”) of $1.02 per diluted share. Excluding non-cash interest, FFO as adjusted was $1.03 per diluted share, representing a 19.8% increase compared to the same period in 2016. |
• | Increased same-store revenue by 5.8% and same-store net operating income (“NOI”) by 9.2% compared to the same period in 2016. |
• | Reported same-store occupancy of 92.2% as of March 31, 2017, compared to 91.4% as of March 31, 2016. |
• | Acquired two wholly-owned operating stores for a total purchase price of approximately $25.5 million. |
• | Acquired two stores at completion of construction ("Certificate of Occupancy stores") with joint venture partners for a total purchase price of approximately $16.2 million. |
• | Paid a quarterly dividend of $0.78 per share. |
For the Three Months Ended March 31, | |||||||||||||||
2017 | 2016 | ||||||||||||||
(per share) | (per share) | ||||||||||||||
Net income attributable to common stockholders | $ | 82,282 | $ | 0.64 | $ | 82,592 | $ | 0.66 | |||||||
Impact of the difference in weighted average number of shares – diluted2 | (0.03 | ) | (0.04 | ) | |||||||||||
Adjustments: | |||||||||||||||
Real estate depreciation | 41,913 | 0.30 | 36,436 | 0.27 | |||||||||||
Amortization of intangibles | 6,161 | 0.05 | 4,736 | 0.04 | |||||||||||
Loss on earnout from prior acquisition | — | — | 1,544 | 0.01 | |||||||||||
Unconsolidated joint venture real estate depreciation and amortization | 1,363 | 0.01 | 1,015 | 0.01 | |||||||||||
Unconsolidated joint venture gain on sale of properties and purchase of partner's interest | — | — | (26,923 | ) | (0.20 | ) | |||||||||
Distributions paid on Series A Preferred Operating Partnership Units | (1,271 | ) | (0.01 | ) | (1,271 | ) | (0.01 | ) | |||||||
Income allocated to Operating Partnership noncontrolling interests | 7,453 | 0.06 | 6,816 | 0.05 | |||||||||||
FFO attributable to common stockholders and unit holders | 137,901 | 1.02 | 104,945 | 0.79 | |||||||||||
Adjustments: | |||||||||||||||
Non-cash interest expense related to amortization of discount on equity portion of exchangeable senior notes | 1,269 | 0.01 | 1,233 | 0.01 | |||||||||||
Non-cash interest benefit related to out of market debt | — | — | (354 | ) | — | ||||||||||
Loss related to settlement of legal action | — | — | 4,000 | 0.03 | |||||||||||
Acquisition related costs and other3 | — | — | 4,053 | 0.03 | |||||||||||
FFO as adjusted attributable to common stockholders and unit holders | $ | 139,170 | $ | 1.03 | $ | 113,877 | $ | 0.86 | |||||||
Weighted average number of shares – diluted4 | 134,930,050 | 132,937,006 |
(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 FFO as adjusted per share, which are calculated assuming full redemption of all OP units as described in note (4). |
(3) | Beginning January 1, 2017, acquisition related costs have been capitalized due to a change in accounting literature, thus eliminating the need for an adjustment to FFO as adjusted attributable to common stockholders and unit holders. |
(4) | 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 FFO as adjusted per share also includes the effect of share-based compensation plans and shares related to the exchangeable senior notes using the treasury stock method. |
For the Three Months Ended March 31, | Percent | ||||||||
2017 | 2016 | Change | |||||||
Same-store rental revenues2 | $ | 206,569 | $ | 195,220 | 5.8% | ||||
Same-store operating expenses2 | 57,625 | 58,789 | (2.0)% | ||||||
Same-store net operating income2 | $ | 148,944 | $ | 136,431 | 9.2% | ||||
Same-store square foot occupancy as of quarter end | 92.2% | 91.4% | |||||||
Properties included in same-store | 732 | 732 |
(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 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. |
Closed through March 31, 2017 | Closed Subsequent to March 31, 2017 | To Close/Complete in 2017 | Total to Close/Complete in 2017 | To Close/Complete in 2018-2019 | ||||||||||||||||||||||||||
Stores | Price | Stores | Price | Stores | Price | Stores | Price | Stores | Price | |||||||||||||||||||||
Operating Stores | 2 | $ | 25,500 | — | $ | — | 2 | $ | 31,550 | 4 | $ | 57,050 | — | $ | — | |||||||||||||||
Certificate of Occupancy and Development Stores1 | — | — | 1 | 7,300 | 1 | 8,970 | 2 | 16,270 | 14 | 182,361 | ||||||||||||||||||||
Wholly Owned Total | 2 | 25,500 | 1 | 7,300 | 3 | 40,520 | 6 | 73,320 | 14 | 182,361 | ||||||||||||||||||||
JV Certificate of Occupancy and Development Stores1 | 2 | 16,205 | 1 | 15,850 | 11 | 157,995 | 14 | 190,050 | 13 | 341,311 | ||||||||||||||||||||
Total | 4 | $ | 41,705 | 2 | $ | 23,150 | 14 | $ | 198,515 | 20 | $ | 263,370 | 27 | $ | 523,672 | |||||||||||||||
(1) | The locations of development and Certificate of Occupancy stores and joint venture ownership interest details are included in the supplemental financial information published on the Company’s website at www.extraspace.com. |
Ranges for 2017 Annual Assumptions | Notes | ||||||||
Low | High | ||||||||
Funds from operations attributable to common stockholders and unit holders | $ | 4.17 | $ | 4.25 | |||||
Funds from operations as adjusted attributable to common stockholders | $ | 4.21 | $ | 4.29 | |||||
Same-store property revenue growth | 4.00 | % | 5.00 | % | Assumes a same-store pool of 732 stores and excludes tenant reinsurance | ||||
Same-store property expense growth | 2.25 | % | 3.25 | % | Assumes a same-store pool of 732 stores and excludes tenant reinsurance | ||||
Same-store property NOI growth | 4.25 | % | 5.75 | % | Assumes a same-store pool of 732 stores and excludes tenant reinsurance | ||||
Weighted average one-month LIBOR | 1.13 | % | 1.13 | % | |||||
Net tenant reinsurance income | $ | 78,000,000 | $ | 79,000,000 | |||||
General and administrative expenses | $ | 78,000,000 | $ | 79,000,000 | Includes non-cash compensation expense | ||||
Average monthly cash balance | $ | 35,000,000 | $ | 35,000,000 | |||||
Equity in earnings of real estate ventures | $ | 13,500,000 | $ | 14,500,000 | |||||
Acquisition of operating stores | $ | 305,000,000 | $ | 305,000,000 | Wholly-owned | ||||
Development and Certificate of Occupancy stores - wholly-owned | $ | 20,000,000 | $ | 20,000,000 | Wholly-owned | ||||
Development and Certificate of Occupancy stores - joint ventures | $ | 190,000,000 | $ | 190,000,000 | Company investment totals approximately $75.0 million | ||||
Interest expense | $ | 151,500,000 | $ | 152,500,000 | |||||
Non-cash interest expense related to exchangeable senior notes | $ | 5,000,000 | $ | 5,000,000 | Excluded from FFO as adjusted | ||||
Taxes associated with the Company's taxable REIT subsidiary | $ | 13,500,000 | $ | 14,500,000 | |||||
Weighted average share count | 135,500,000 | 135,500,000 | 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. |
• | adverse 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 stores 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 stores, 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 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; |
• | the failure to effectively manage our growth and expansion into new markets or to successfully operate acquired stores and operations; |
• | 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 U.S. 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. |
March 31, 2017 | December 31, 2016 | ||||||
(Unaudited) | |||||||
Assets: | |||||||
Real estate assets, net | $ | 6,770,593 | $ | 6,770,447 | |||
Investments in unconsolidated real estate ventures | 79,385 | 79,570 | |||||
Cash and cash equivalents | 29,311 | 43,858 | |||||
Restricted cash | 12,231 | 13,884 | |||||
Receivables from related parties and affiliated real estate joint ventures | 6,251 | 16,611 | |||||
Other assets, net | 136,586 | 167,076 | |||||
Total assets | $ | 7,034,357 | $ | 7,091,446 | |||
Liabilities, Noncontrolling Interests and Equity: | |||||||
Notes payable, net | $ | 3,198,870 | $ | 3,213,588 | |||
Exchangeable senior notes, net | 612,233 | 610,314 | |||||
Notes payable to trusts, net | 117,352 | 117,321 | |||||
Revolving lines of credit | 363,000 | 365,000 | |||||
Accounts payable and accrued expenses | 77,106 | 101,388 | |||||
Other liabilities | 79,981 | 87,669 | |||||
Total liabilities | 4,448,542 | 4,495,280 | |||||
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, 125,912,164 and 125,881,460 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively | 1,259 | 1,259 | |||||
Additional paid-in capital | 2,567,228 | 2,566,120 | |||||
Accumulated other comprehensive income | 22,816 | 16,770 | |||||
Accumulated deficit | (355,187 | ) | (339,257 | ) | |||
Total Extra Space Storage Inc. stockholders' equity | 2,236,116 | 2,244,892 | |||||
Noncontrolling interest represented by Preferred Operating Partnership units, net of $120,230 notes receivable | 147,823 | 147,920 | |||||
Noncontrolling interests in Operating Partnership | 201,876 | 203,354 | |||||
Total noncontrolling interests and equity | 2,585,815 | 2,596,166 | |||||
Total liabilities, noncontrolling interests and equity | $ | 7,034,357 | $ | 7,091,446 |
For the Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Revenues: | (Unaudited) | (Unaudited) | |||||
Property rental | $ | 231,493 | $ | 199,488 | |||
Tenant reinsurance | 22,855 | 20,555 | |||||
Management fees and other income | 8,660 | 9,360 | |||||
Total revenues | 263,008 | 229,403 | |||||
Expenses: | |||||||
Property operations | 66,645 | 61,112 | |||||
Tenant reinsurance | 3,920 | 4,311 | |||||
Acquisition related costs and other1 | — | 4,053 | |||||
General and administrative | 18,808 | 23,402 | |||||
Depreciation and amortization | 49,432 | 42,897 | |||||
Total expenses | 138,805 | 135,775 | |||||
Income from operations | 124,203 | 93,628 | |||||
Loss on earnout from prior acquisition | — | (1,544 | ) | ||||
Interest expense | (35,970 | ) | (31,359 | ) | |||
Non-cash interest expense related to amortization of discount on equity component of exchangeable senior notes | (1,269 | ) | (1,233 | ) | |||
Interest income | 1,102 | 1,714 | |||||
Interest income on note receivable from Preferred Operating Partnership unit holder | 1,213 | 1,213 | |||||
Income before equity in earnings of unconsolidated real estate ventures and income tax expense | 89,279 | 62,419 | |||||
Equity in earnings of unconsolidated real estate ventures | 3,579 | 2,830 | |||||
Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partner's interest | — | 26,923 | |||||
Income tax expense | (3,124 | ) | (2,765 | ) | |||
Net income | 89,734 | 89,407 | |||||
Net income allocated to Preferred Operating Partnership noncontrolling interests | (3,951 | ) | (3,180 | ) | |||
Net income allocated to Operating Partnership and other noncontrolling interests | (3,501 | ) | (3,635 | ) | |||
Net income attributable to common stockholders | $ | 82,282 | $ | 82,592 | |||
Earnings per common share | |||||||
Basic | $ | 0.65 | $ | 0.66 | |||
Diluted | $ | 0.64 | $ | 0.66 | |||
Weighted average number of shares | |||||||
Basic | 125,605,403 | 124,754,174 | |||||
Diluted | 132,618,644 | 131,956,094 | |||||
Cash dividends paid per common share | $ | 0.78 | $ | 0.59 |
(1) | Beginning January 1, 2017, acquisition related costs have been capitalized due to a change in accounting literature. |
For the Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Net income | $ | 89,734 | $ | 89,407 | |||
Adjusted to exclude: | |||||||
Loss on earnout from prior acquisition | — | 1,544 | |||||
Equity in earnings of unconsolidated joint ventures | (3,579 | ) | (2,830 | ) | |||
Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partners' interests | — | (26,923 | ) | ||||
Acquisition related costs and other | — | 4,053 | |||||
Interest expense | 37,239 | 32,592 | |||||
Depreciation and amortization | 49,432 | 42,897 | |||||
Income tax expense | 3,124 | 2,765 | |||||
General and administrative (includes stock compensation) | 18,808 | 23,402 | |||||
Management fees, other income and interest income | (10,975 | ) | (12,287 | ) | |||
Net tenant reinsurance | (18,935 | ) | (16,244 | ) | |||
Non same-store revenue | (24,924 | ) | (4,268 | ) | |||
Non same-store expenses | 9,020 | 2,323 | |||||
Total same-store NOI | $ | 148,944 | $ | 136,431 | |||
Same-store rental revenues | 206,569 | 195,220 | |||||
Same-store operating expenses | 57,625 | 58,789 | |||||
Total same-store NOI | $ | 148,944 | $ | 136,431 |
For the Three Months Ending June 30, 2017 | For the Year Ending December 31, 2017 | ||||||||||||||
Low End | High End | Low End | High End | ||||||||||||
Net income attributable to common stockholders per diluted share | $ | 0.61 | $ | 0.63 | $ | 2.45 | $ | 2.53 | |||||||
Income allocated to noncontrolling interest - Preferred Operating Partnership and Operating Partnership | 0.06 | 0.06 | 0.23 | 0.23 | |||||||||||
Fixed component of income allocated to non-controlling interest - Preferred Operating Partnership | (0.01 | ) | (0.01 | ) | (0.03 | ) | (0.03 | ) | |||||||
Net income attributable to common stockholders and unit holders for diluted computations | 0.66 | 0.68 | 2.65 | 2.73 | |||||||||||
Adjustments: | |||||||||||||||
Real estate depreciation | 0.32 | 0.32 | 1.29 | 1.29 | |||||||||||
Amortization of intangibles | 0.04 | 0.04 | 0.18 | 0.18 | |||||||||||
Unconsolidated joint venture real estate depreciation and amortization | 0.01 | 0.01 | 0.05 | 0.05 | |||||||||||
Funds from operations attributable to common stockholders | 1.03 | 1.05 | 4.17 | 4.25 | |||||||||||
Adjustments: | |||||||||||||||
Non-cash interest expense related to amortization of discount on equity portion of exchangeable senior notes | 0.01 | 0.01 | 0.04 | 0.04 | |||||||||||
Funds from operations as adjusted attributable to common stockholders and unit holders | $ | 1.04 | $ | 1.06 | $ | 4.21 | $ | 4.29 | |||||||
For the Year Ending December 31, 2017 | |||||||
Low | High | ||||||
Net Income | $ | 363,500 | $ | 378,800 | |||
Adjusted to exclude: | |||||||
Equity in earnings of unconsolidated joint ventures | (13,500 | ) | (14,500 | ) | |||
Interest expense (includes non-cash) | 157,500 | 156,500 | |||||
Depreciation and amortization | 205,000 | 205,000 | |||||
Income tax expense | 14,500 | 13,500 | |||||
General and Administrative (includes stock compensation) | 79,000 | 78,000 | |||||
Management fees, other income and interest income | (43,000 | ) | (43,000 | ) | |||
Net Tenant Insurance | (78,000 | ) | (79,000 | ) | |||
Non Same Store Revenue | (112,000 | ) | (112,000 | ) | |||
Non Same Store Expense | 37,000 | 37,000 | |||||
Total Same Store NOI | $ | 610,000 | $ | 620,300 | |||
Same Store Revenue | $ | 848,500 | $ | 856,500 | |||
Same Store Expense | (238,500 | ) | (236,200 | ) | |||
Total Same Store NOI | $ | 610,000 | $ | 620,300 |