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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
August 1, 2017
(Date of Report (Date of Earliest Event Reported))
 
EXTRA SPACE STORAGE INC.
(Exact Name of Registrant as Specified in Its Charter)
 
 
Maryland
 
001-32269
 
20-1076777
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification Number)
2795 East Cottonwood Parkway, Suite 300
Salt Lake City, Utah 84121
(Address of Principal Executive Offices)
(801) 365-4600
(Registrant’s Telephone Number, Including Area Code)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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




ITEM 2.02
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On August 1, 2017, Extra Space Storage Inc. (the “Company”) issued a press release announcing its financial results for the three and six months ended June 30, 2017. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated by reference herein.
The information contained in this Current Report, including the exhibit referenced herein, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Such information shall not be incorporated by reference into any filing of Extra Space Storage Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.
ITEM 9.01        
FINANCIAL STATEMENTS AND EXHIBITS
(d) The following exhibit is furnished herewith: 
Exhibit
Number
  
Description of Exhibit
99.1
  
Press Release dated August 1, 2017.





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
EXTRA SPACE STORAGE INC.
 
 
 
 
Date: August 1, 2017
By
/s/ P. Scott Stubbs
 
 
Name:
P. Scott Stubbs
 
 
Title:
Executive Vice President and Chief Financial Officer



Exhibit


Exhibit 99.1
https://cdn.kscope.io/b8d974eb32fd4306ae52875e957fdc11-logoa02.jpg
 
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
 
 


Extra Space Storage Inc. Reports 2017 Second Quarter Results
SALT LAKE CITY, August 1, 2017 — Extra Space Storage Inc. (NYSE: EXR) (the “Company”), a leading owner and operator of self-storage facilities in the United States, announced operating results for the three and six months ended June 30, 2017.
Highlights for the three months ended June 30, 2017:
 
•
Achieved net income attributable to common stockholders of $0.69 per diluted share, representing a 4.5% increase compared to the same period in 2016.

•
Achieved funds from operations attributable to common stockholders and unit holders (“FFO”) of $1.08 per diluted share. Excluding non-cash interest, FFO as adjusted was $1.09 per diluted share, representing a 16.0% increase compared to the same period in 2016.

•
Increased same-store revenue by 5.2% and same-store net operating income (“NOI”) by 7.7% compared to the same period in 2016.

•
Reported same-store occupancy of 94.4% as of June 30, 2017, compared to 93.7% as of June 30, 2016.

•
Acquired one operating store and one store at completion of construction ("Certificate of Occupancy store") for a total purchase price of approximately $18.3 million.

•
Acquired one Certificate of Occupancy store with a joint venture partner for a total purchase price of approximately $15.9 million.

•
Paid a quarterly dividend of $0.78 per share.
Highlights for the six months ended June 30, 2017:
 
•
Achieved net income attributable to common stockholders of $1.33 per diluted share, representing a 0.8% increase compared to the same period in 2016.

•
Achieved FFO of $2.10 per diluted share. Excluding non-cash interest, FFO as adjusted was $2.12 per diluted share, representing a 18.4% increase compared to the same period in 2016.

•
Increased same-store revenue by 5.5% and same-store NOI by 8.4% compared to the same period in 2016.

•
Acquired three operating stores and one Certificate of Occupancy store for a total purchase price of approximately $43.8 million.

•
Acquired three Certificate of Occupancy stores with joint venture partners for a total purchase price of approximately $32.1 million.





Joseph D. Margolis, CEO of Extra Space Storage Inc., commented: “We had another solid quarter despite headwinds from new supply and tough year-over-year comparables. We increased rates and gained occupancy, leading to same-store revenue growth of 5.2% and NOI growth of 7.7%. Our acquisitions and third-party management platforms enhanced the growth of our FFO as adjusted, which was up 16.0% year-over-year."




FFO Per Share:
The following table outlines the Company’s FFO and FFO as adjusted for the three and six months ended June 30, 2017 and 2016. The table also provides a reconciliation to GAAP net income attributable to common stockholders and earnings per diluted share for each period presented (amounts shown in thousands, except share and per share data1 — unaudited):
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
(per share)

 
 
 
(per share)

 
 
 
(per share)

 
 
 
(per share)

Net income attributable to common stockholders
$
87,006

 
$
0.69

 
$
83,044

 
$
0.66

 
$
169,288

 
$
1.33

 
$
165,636

 
$
1.32

Impact of the difference in weighted average number of shares – diluted2
 
 
(0.05
)
 
 
 
(0.04
)
 
 
 
(0.08
)
 
 
 
(0.08
)
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate depreciation
42,513

 
0.32

 
37,388

 
0.28

 
84,426

 
0.63

 
73,824

 
0.56

Amortization of intangibles
2,687

 
0.02

 
4,836

 
0.04

 
8,848

 
0.06

 
9,572

 
0.07

Loss (gain) on real estate transactions, earnout from prior acquisition and impairment of real estate
6,019

 
0.05

 
(11,358
)
 
(0.08
)
 
6,019

 
0.04

 
(9,814
)
 
(0.07
)
Unconsolidated joint venture real estate depreciation and amortization
1,475

 
0.01

 
1,239

 
0.01

 
2,838

 
0.02

 
2,254

 
0.02

Unconsolidated joint venture gain on sale of properties and purchase of partners' interests
—

 
—

 
—

 
—

 
—

 
—

 
(26,923
)
 
(0.20
)
Distributions paid on Series A Preferred Operating Partnership units
(704
)
 
(0.01
)
 
(1,271
)
 
(0.01
)
 
(1,975
)
 
(0.01
)
 
(2,542
)
 
(0.02
)
Income allocated to Operating Partnership noncontrolling interests
7,112

 
0.05

 
6,996

 
0.05

 
14,565

 
0.11

 
13,812

 
0.10

FFO attributable to common stockholders and unit holders
$
146,108

 
$
1.08

 
$
120,874

 
$
0.91

 
$
284,009

 
$
2.10

 
$
225,819

 
$
1.70

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-cash interest expense related to amortization of discount on equity portion of exchangeable senior notes
1,290

 
0.01

 
1,240

 
0.01

 
2,559

 
0.02

 
2,473

 
0.02

Non-cash interest benefit related to out of market debt
—

 
—

 
(342
)
 
—

 
—

 
—

 
(696
)
 
(0.01
)
 Loss related to settlement of legal action
—

 
—

 
—

 
—

 
—

 
—

 
4,000

 
0.03

Acquisition related costs and other3
—

 
—

 
3,138

 
0.02

 
—

 
—

 
7,191

 
0.05

FFO as adjusted attributable to common stockholders and unit holders
$
147,398

 
$
1.09

 
$
124,910

 
$
0.94

 
$
286,568

 
$
2.12

 
$
238,787

 
$
1.79

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of shares – diluted4
135,084,645

 
 
 
133,418,353

 
 
 
135,065,554

 
 
 
133,185,812

 
 
 
(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.




Operating Results and Same-Store Performance:
The following table outlines the Company’s same-store performance for the three and six months ended June 30, 2017 and 2016 (amounts shown in thousands, except store count data—unaudited)1:
 
For the Three Months Ended June 30,
 
Percent
 
For the Six Months Ended June 30,
 
Percent
 
2017
 
2016
 
Change
 
2017
 
2016
 
Change
Same-store rental revenues2
$
213,631

 
$
203,167

 
5.2%
 
$
420,199

 
$
398,387

 
5.5%
Same-store operating expenses2
57,852

 
58,525

 
(1.1)%
 
115,478

 
117,312

 
(1.6)%
Same-store net operating income2
$
155,779

 
$
144,642

 
7.7%
 
$
304,721

 
$
281,075

 
8.4%
 
 
 
 
 
 
 
 
 
 
 
 
Same-store square foot occupancy as of quarter end
94.4%
 
93.7%
 
 
 
94.4%
 
93.7%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Properties included in same-store
732
 
732
 
 
 
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.


Same-store revenues for the three and six months ended June 30, 2017 increased due to gains in occupancy and higher rental rates for both new and existing customers. Expenses were lower for the three and six months ended June 30, 2017 primarily due to decreases in repairs and maintenance, payroll and insurance. Decreases in expenses were partially offset by increases in property taxes.
Major markets with revenue growth above the Company’s portfolio average for the three and six months ended June 30, 2017 included Las Vegas, Los Angeles, Orlando, Phoenix and Sacramento. Major markets performing below the Company’s portfolio average included Boston, Dallas, Denver and Houston.
Acquisition, Development, Disposition, Joint Venture and Third-Party Management Activity:
The following table outlines the Company’s acquisitions and developments that are closed, completed or under agreement (dollars in thousands – unaudited):
 
 
Closed through June 30, 2017
 
Closed Subsequent to June 30, 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
 
3
 
$
36,500

 
2
 
$
18,600

 
3
 
$
36,300

 
8
 
$
91,400

 
—
 
$
—

Certificate of Occupancy and Development Stores1
 
1
 
7,343

 
—
 
—

 
2
 
16,470

 
3
 
23,813

 
11
 
125,661

Wholly Owned Total
 
4
 
43,843

 
2
 
18,600

 
5
 
52,770

 
11
 
115,213

 
11
 
125,661

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
JV Certificate of Occupancy and Development Stores1
 
3
 
32,055

 
1
 
8,800

 
11
 
161,295

 
15
 
202,150

 
14
 
349,561

Total
 
7
 
$
75,898

 
3
 
$
27,400

 
16
 
$
214,065

 
26
 
$
317,363

 
25
 
$
475,222

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(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.

The projected developments and acquisitions under agreement described above are subject to customary closing conditions and no assurance can be provided that these developments and acquisitions will be completed on the terms described, or at all.





Property Management:
As of June 30, 2017, the Company managed 447 stores for third-party owners. With an additional 183 stores owned and operated in joint ventures, the Company had a total of 630 stores under management. The Company continues to be the largest self-storage management company in the United States.
Balance Sheet:
During the three months ended June 30, 2017, the Company did not sell any shares of common stock using its "at the market" ("ATM") equity program. At June 30, 2017, the Company had $349.4 million available for issuance under the ATM program.
On June 29, 2017 the Company's Operating Partnership entered an agreement for the private placement of $300.0 million of 10-year 3.95% senior notes. The notes are expected to be issued on August 24, 2017, subject to customary closing conditions. The net proceeds will be used to refinance existing indebtedness and for general corporate purposes.
As of June 30, 2017, the Company’s percentage of fixed-rate debt to total debt was 76.1%. The weighted average interest rates of the Company’s fixed and variable-rate debt were 3.3% and 2.9%, respectively. The combined weighted average interest rate was 3.2% with a weighted average maturity of approximately 4.4 years.
Dividends:
On June 30, 2017, the Company paid a second quarter common stock dividend of $0.78 per share to stockholders of record at the close of business on June 15, 2017.




Outlook:
The following table outlines the Company’s FFO estimates and annual assumptions for the year ending December 31, 20171:
 
Ranges for 2017
Annual Assumptions
 
Notes
 
Low
 
High
 
 
Funds from operations attributable to common stockholders and unit holders
$
4.21

 
$
4.28

 
 
Funds from operations as adjusted attributable to common stockholders
$
4.25

 
$
4.32

 
 
 
 
 
 
 
 
Same-store property revenue growth
4.25
%
 
5.00
%
 
Assumes a same-store pool of 732 stores and excludes tenant reinsurance
Same-store property expense growth
1.75
%
 
2.50
%
 
Assumes a same-store pool of 732 stores and excludes tenant reinsurance
Same-store property NOI growth
4.75
%
 
6.00
%
 
Assumes a same-store pool of 732 stores and excludes tenant reinsurance
Weighted average one-month LIBOR
1.12
%
 
1.12
%
 
 
 
 
 
 
 
 
Net tenant reinsurance income
$
78,500,000

 
$
79,500,000

 
 
General and administrative expenses
$
78,500,000

 
$
79,500,000

 
Includes non-cash compensation expense
Average monthly cash balance
$
80,000,000

 
$
80,000,000

 
 
Equity in earnings of real estate ventures
$
14,000,000

 
$
15,000,000

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

 
$
300,000,000

 

Development and Certificate of Occupancy stores (wholly-owned)
$
25,000,000

 
$
25,000,000

 

Development and Certificate of Occupancy stores (joint ventures)
$
200,000,000

 
$
200,000,000

 
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
135,200,000

 
135,200,000

 
Assumes redemption of all OP units for common stock

(1)
A reconciliation of net income outlook to same-store net operating income outlook is provided later in this release entitled "Reconciliation of Estimated GAAP Net Income to Estimated Same-Store Net Operating Income." The reconciliation includes details related to same-store revenue and same-store expense outlooks. A reconciliation of net income per share outlook to funds from operations per share outlook is provide later in this release entitled "Reconciliation of the Range of Estimated GAAP Fully Diluted Earnings Per Share to Estimated Fully Diluted FFO Per Share."
FFO estimates for the year are fully diluted for an estimated average number of shares and OP units outstanding during the year. The Company’s estimates are forward-looking and based on management’s view of current and future market conditions. The Company’s actual results may differ materially from these estimates.







Supplemental Financial Information:
Supplemental unaudited financial information regarding the Company’s performance can be found on the Company’s website at www.extraspace.com. Click on the “Investor Relations” link on the home page, then on “Financials & Stock Info,” then on “Quarterly Earnings” in the navigation menu. This supplemental information provides additional detail on items that include store occupancy and financial performance by portfolio and market, debt maturity schedules and performance of lease-up assets.
Conference Call:
The Company will host a conference call at 11:00 a.m. Eastern Time on Wednesday, August 2, 2017, to discuss its financial results. To participate in the conference call, please dial 855-791-2026 or 631-485-4899 for international participants; conference ID: 53182182. 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 2:00 p.m. Eastern Time on August 2, 2017, until 2:00 p.m. Eastern Time on August 7, 2017. The replay dial-in numbers are 855-859-2056 or 404-537-3406 for international callers; conference ID: 53182182.
Forward-Looking Statements:
Certain information set forth in this release contains “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements include statements concerning the benefits of store acquisitions, developments, favorable market conditions, our outlook and estimates for the year and other statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions and developments and other information that is not historical information. In some cases, forward-looking statements can be identified by terminology such as “believes,” “estimates,” “expects,” “may,” “will,” “should,” “anticipates,” or “intends,” or the negative of such terms or other comparable terminology, or by discussions of strategy. We may also make additional forward-looking statements from time to time. All such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary statements. There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this release. Any forward-looking statements should be considered in light of the risks referenced in the “Risk Factors” section included in our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Such factors include, but are not limited to:
 
•
adverse changes in general economic conditions, the real estate industry and the markets in which we operate;

•
failure to close pending acquisitions 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.
All forward-looking statements are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them, but there can be no assurance that management’s expectations, beliefs and projections will result or be achieved. All forward-looking statements apply only as of the date made. We undertake no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.
Definition of FFO:
FFO provides relevant and meaningful information about the Company’s operating performance that is necessary, along with net income and cash flows, for an understanding of the Company’s operating results. The Company believes FFO is a meaningful disclosure as a supplement to net income. Net income assumes that the values of real estate assets diminish predictably over time as reflected through depreciation and amortization expenses. The values of real estate assets fluctuate due to market conditions and the Company believes FFO more accurately reflects the value of the Company’s real estate assets. FFO is defined by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) as net income computed in accordance with U.S. generally accepted accounting principles (“GAAP”), excluding gains or losses on sales of operating stores and impairment write downs of depreciable real estate assets, plus depreciation and amortization related to real estate and after adjustments to record unconsolidated partnerships and joint ventures on the same basis. The Company believes that to further understand the Company’s performance, FFO should be considered along with the reported net income and cash flows in accordance with GAAP, as presented in the Company’s consolidated financial statements. FFO should not be considered a replacement of net income computed in accordance with GAAP.
For informational purposes, the Company also presents FFO as adjusted which excludes revenues and expenses not core to our operations, acquisition related costs (prior to 2017) and non-cash interest. 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 revenues and expenses not core to our operations, the costs related to acquiring stores and non-cash interest charges, 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. The computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to net income as an indication of the Company’s performance, as an alternative to net cash flow from operating activities as a measure of liquidity, or as an indicator of the Company’s ability to make cash distributions.
Definition of Same-Store:

The Company’s same-store pool for the periods presented consists of 732 stores that are wholly-owned and operated and that were stabilized by the first day of the earliest calendar year presented. The Company considers a store to be stabilized once it has been open for three years or has sustained average square foot occupancy of 80.0% or more for one calendar year. The Company believes that by providing same-store results from a stabilized pool of stores, with accompanying operating metrics including, but not limited to occupancy, rental revenue (growth), operating expenses (growth), net operating income (growth), etc., stockholders and potential investors are able to evaluate operating performance without the effects of non-stabilized occupancy levels, rent levels, expense levels, acquisitions or completed developments.  Same-store results should not be used as a basis for future same-store performance or for the performance of the Company’s stores as a whole.






About Extra Space Storage Inc.:
Extra Space Storage Inc., headquartered in Salt Lake City, Utah, is a self-administered and self-managed REIT. As of June 30, 2017, the Company owned and/or operated 1,470 self-storage stores in 38 states, Washington, D.C. and Puerto Rico. The Company’s stores comprise approximately one million units and approximately 111 million square feet of rentable space. The Company offers customers a wide selection of conveniently located and secure storage units across the country, including boat storage, RV storage and business storage. The Company is the second largest owner and/or operator of self-storage stores in the United States and is the largest self-storage management company in the United States.
###
For Information:
Jeff Norman
Extra Space Storage Inc.
(801) 365-1759




Extra Space Storage Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
 
June 30, 2017
 
December 31, 2016
 
(Unaudited)
 
 
Assets:
 
 
 
Real estate assets, net
$
6,782,788

 
$
6,770,447

Investments in unconsolidated real estate ventures
79,294

 
79,570

Cash and cash equivalents
31,648

 
43,858

Restricted cash
16,764

 
13,884

Receivables from related parties and affiliated real estate joint ventures
4,676

 
16,611

Other assets, net
122,293

 
167,076

Total assets
$
7,037,463

 
$
7,091,446

Liabilities, Noncontrolling Interests and Equity:
 
 
 
Notes payable, net
$
3,429,153

 
$
3,213,588

Exchangeable senior notes, net
614,173

 
610,314

Notes payable to trusts, net
117,383

 
117,321

Revolving lines of credit
128,000

 
365,000

Accounts payable and accrued expenses
92,678

 
101,388

Other liabilities
77,393

 
87,669

Total liabilities
4,458,780

 
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, 125,977,670 and 125,881,460 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively
1,260

 
1,259

Additional paid-in capital
2,569,965

 
2,566,120

Accumulated other comprehensive income
17,003

 
16,770

Accumulated deficit
(366,437
)
 
(339,257
)
Total Extra Space Storage Inc. stockholders' equity
2,221,791

 
2,244,892

Noncontrolling interest represented by Preferred Operating Partnership units, net of $120,230 notes receivable
154,490

 
147,920

Noncontrolling interests in Operating Partnership
200,596

 
203,354

Other noncontrolling interests
1,806

 
—

Total noncontrolling interests and equity
2,578,683

 
2,596,166

Total liabilities, noncontrolling interests and equity
$
7,037,463

 
$
7,091,446





Consolidated Statement of Operations for the three and six months ended June 30, 2017 and 2016
(In thousands, except share and per share data) - Unaudited
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Property rental
$
240,796

 
$
211,791

 
$
472,289

 
$
411,279

Tenant reinsurance
24,313

 
21,654

 
47,168

 
42,209

Management fees and other income
10,894

 
10,828

 
19,554

 
20,188

Total revenues
276,003

 
244,273

 
539,011

 
473,676

Expenses:
 
 
 
 
 
 
 
Property operations
67,295

 
62,430

 
133,940

 
123,542

Tenant reinsurance
3,804

 
3,941

 
7,724

 
8,252

Acquisition related costs and other1
—

 
3,138

 
—

 
7,191

General and administrative
21,865

 
20,512

 
40,673

 
43,914

Depreciation and amortization
46,632

 
43,950

 
96,064

 
86,847

Total expenses
139,596

 
133,971

 
278,401

 
269,746

Income from operations
136,407

 
110,302

 
260,610

 
203,930

Gain (loss) on real estate transactions, earnout from prior acquisition and impairment of real estate
(6,019
)
 
11,358

 
(6,019
)
 
9,814

Interest expense
(37,456
)
 
(32,802
)
 
(73,426
)
 
(64,161
)
Non-cash interest expense related to amortization of discount on equity component of exchangeable senior notes
(1,290
)
 
(1,240
)
 
(2,559
)
 
(2,473
)
Interest income
826

 
1,625

 
1,928

 
3,339

Interest income on note receivable from Preferred Operating Partnership unit holder
659

 
1,212

 
1,872

 
2,425

Income before equity in earnings of unconsolidated real estate ventures and income tax expense
93,127

 
90,455

 
182,406

 
152,874

Equity in earnings of unconsolidated real estate ventures
3,838

 
3,358

 
7,417

 
6,188

Equity in earnings of unconsolidated real estate ventures - gain on purchase of a joint venture partner's interest
—

 
—

 
—

 
26,923

Income tax expense
(2,867
)
 
(3,773
)
 
(5,991
)
 
(6,538
)
Net income
94,098

 
90,040

 
183,832

 
179,447

Net income allocated to Preferred Operating Partnership noncontrolling interests
(3,430
)
 
(3,434
)
 
(7,381
)
 
(6,614
)
Net income allocated to Operating Partnership and other noncontrolling interests
(3,662
)
 
(3,562
)
 
(7,163
)
 
(7,197
)
Net income attributable to common stockholders
$
87,006

 
$
83,044

 
$
169,288

 
$
165,636

Earnings per common share
 
 
 
 
 
 
 
Basic
$
0.69

 
$
0.66

 
$
1.34

 
$
1.33

Diluted
$
0.69

 
$
0.66

 
$
1.33

 
$
1.32

Weighted average number of shares
 
 
 
 
 
 
 
Basic
125,673,156

 
124,914,467

 
125,639,480

 
124,678,293

Diluted
132,783,402

 
132,025,915

 
132,759,354

 
132,152,519

Cash dividends paid per common share
$
0.78

 
$
0.78

 
$
1.56

 
$
1.37

(1)
Beginning January 1, 2017, acquisition related costs have been capitalized due to a change in accounting literature.




Reconciliation of GAAP Net Income to Total Same-Store Net Operating Income — for the three and six months ended June 30, 2017 and 2016 (In thousands) — Unaudited

 
For the Three Months Ended June 30,
 
For the Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
94,098

 
$
90,040

 
$
183,832

 
$
179,447

Adjusted to exclude:
 
 
 
 
 
 
 
Loss (gain) on real estate transactions, earnout from prior acquisition and impairment of real estate
6,019

 
(11,358
)
 
6,019

 
(9,814
)
Equity in earnings of unconsolidated real estate joint ventures
(3,838
)
 
(3,358
)
 
(7,417
)
 
(6,188
)
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
)
Acquisition related costs and other1
—

 
3,138

 
—

 
7,191

Interest expense
38,746

 
34,042

 
75,985

 
66,634

Depreciation and amortization
46,632

 
43,950

 
96,064

 
86,847

Income tax expense
2,867

 
3,773

 
5,991

 
6,538

General and administrative (includes stock compensation)
21,865

 
20,512

 
40,673

 
43,914

Management fees, other income and interest income
(12,379
)
 
(13,665
)
 
(23,354
)
 
(25,952
)
Net tenant reinsurance
(20,509
)
 
(17,713
)
 
(39,444
)
 
(33,957
)
Non same-store revenue
(27,165
)
 
(8,624
)
 
(52,090
)
 
(12,892
)
Non same-store expenses
9,443

 
3,905

 
18,462

 
6,230

Total same-store NOI
$
155,779

 
$
144,642

 
$
304,721

 
$
281,075

 
 
 
 
 
 
 
 
Same-store rental revenues
213,631

 
203,167

 
420,199

 
398,387

Same-store operating expenses
57,852

 
58,525

 
115,478

 
117,312

Total same-store NOI
$
155,779

 
$
144,642

 
$
304,721

 
$
281,075

(1)
Beginning January 1, 2017, acquisition related costs have been capitalized due to a change in accounting literature.








Reconciliation of the Range of Estimated GAAP Fully Diluted Earnings Per Share to Estimated Fully Diluted FFO Per Share — for the three months ending September 30, 2017 and year ending December 31, 2017 — Unaudited

 
For the Three Months Ending
September 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
$
0.67

 
$
0.70

 
$
2.54

 
$
2.61

Income allocated to noncontrolling interest - Preferred Operating Partnership and Operating Partnership
0.06

 
0.06

 
0.22

 
0.22

Fixed component of income allocated to non-controlling interest - Preferred Operating Partnership
(0.01
)
 
(0.01
)
 
(0.02
)
 
(0.02
)
Net income attributable to common stockholders for diluted computations
0.72

 
0.75

 
2.74

 
2.81

 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
Real estate depreciation
0.32

 
0.32

 
1.27

 
1.27

Amortization of intangibles
0.02

 
0.02

 
0.11

 
0.11

Unconsolidated joint venture real estate depreciation and amortization
0.01

 
0.01

 
0.05

 
0.05

Loss (gain) on real estate transactions, earnout from prior acquisition and impairment of real estate
—

 
—

 
0.04

 
0.04

Funds from operations attributable to common stockholders
$
1.07

 
$
1.10

 
$
4.21

 
$
4.28

 
 
 
 
 
 
 
 
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
$
1.08

 
$
1.11

 
$
4.25

 
$
4.32












Reconciliation of Estimated GAAP Net Income to Estimated Same-Store Net Operating Income —
for the year ending December 31, 2017 (In thousands) — Unaudited

 
For the Year Ending December 31, 2017
 
 Low
 
 High
Net Income
$
381,700

 
$
394,500

Adjusted to exclude:
 
 
 
Equity in earnings of unconsolidated joint ventures
(14,000
)
 
(15,000
)
Interest expense (includes non-cash)
157,500

 
156,500

Depreciation and amortization
192,000

 
192,000

Income tax expense
14,500

 
13,500

General and administrative (includes stock compensation)
79,500

 
78,500

Management fees, other income and interest income
(45,000
)
 
(45,000
)
Net tenant insurance
(78,500
)
 
(79,500
)
Non Same Store Revenue
(111,000
)
 
(111,000
)
Non Same Store Expense
37,000

 
37,000

Total Same Store NOI
$
613,700

 
$
621,500

 
 
 
 
Same Store Revenue
$
850,500

 
$
856,500

Same Store Expense
(236,800
)
 
(235,000
)
Total Same Store NOI
$
613,700

 
$
621,500