424B3
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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-272152

JOINT PROXY STATEMENT/PROSPECTUS

 

LOGO    LOGO

 

Dear Stockholders of Extra Space Storage Inc. and Stockholders of Life Storage, Inc.:

The board of directors of Extra Space Storage Inc., which we refer to as “Extra Space,” and the board of directors of Life Storage, Inc., which we refer to as “Life Storage,” have each unanimously approved a combination of Extra Space and Life Storage to bring together two self-storage industry-leading platforms.

Extra Space and Life Storage, together with certain of their subsidiaries, entered into an agreement and plan of merger on April 2, 2023, which was amended on May 18, 2023. In the proposed transaction, Life Storage stockholders will receive 0.895 of a newly issued share of Extra Space common stock for each share of Life Storage common stock that they own. The exchange ratio described above is fixed and will not be adjusted to reflect stock price changes prior to the closing. Extra Space common stock and Life Storage common stock are each traded on the New York Stock Exchange, which we refer to as the “NYSE,” under the symbols “EXR” and “LSI,” respectively. Based on the closing price of Extra Space common stock on the NYSE of $162.93 on March 31, 2023, the last trading day before public announcement of the proposed transaction, the exchange ratio represented approximately $145.82 in Extra Space common stock for each share of Life Storage common stock. Based on the closing price of Extra Space common stock on the NYSE of $143.36 on June 1, 2023, the latest practicable date before the date of this joint proxy statement/prospectus, the exchange ratio represented approximately $128.31 in Extra Space common stock for each share of Life Storage common stock.

The combination of Life Storage and Extra Space will be accomplished through a series of transactions consisting of (i) a merger of Eros Merger Sub, LLC, a wholly owned subsidiary of Extra Space, which we refer to as “Extra Space Merger Sub,” with and into Life Storage, which we refer to as the “company merger,” with Life Storage continuing as the surviving entity, which we refer to as the “Surviving Entity”; (ii) conversions of the Surviving Entity into a Maryland limited liability company and of Life Storage Holdings, Inc., a Delaware corporation and the general partner of Life Storage OP (as defined below), which we refer to as “Life Storage OP GP,” into a Delaware limited liability company; (iii) contributions by Extra Space to Extra Space Storage LP, which we refer to as “Extra Space OP,” of all outstanding equity interests of the Surviving Entity in exchange for the issuance by Extra Space OP to Extra Space of a number of newly issued partnership units in Extra Space OP equal to the number of shares of Extra Space common stock to be issued in the company merger; and (iv) a merger of Eros OP Merger Sub, LLC, a wholly owned subsidiary of Extra Space OP, which we refer to as “Extra Space OP Merger Sub,” with and into Life Storage LP, which we refer to as “Life Storage OP,” with Life Storage OP surviving the merger as a wholly owned indirect subsidiary of Extra Space OP, which we refer to as the “partnership merger” and, together with the company merger, the “mergers.” In addition to the exchange of shares of Life Storage common stock for Extra Space common stock, if the mergers are completed, (i) the general partner interests in Life Storage OP owned by Life Storage OP GP will be converted into one Common Unit (as defined in the Amended and Restated Agreement of Limited Partnership of Life Storage OP, dated June 4, 2021) of Life Storage OP; (ii) the Common Units owned by the Surviving Entity will be converted into 99 Common Units; and (iii) each Common Unit of Life Storage OP held by a limited partner of Life Storage OP, other than Life Storage or any wholly owned subsidiary of Life Storage, each of which we refer to as a “Minority Limited Partner,” will be converted into validly issued common units of Extra Space OP in an amount equal to one multiplied by 0.895. The obligations of the parties to effect the mergers are subject to the satisfaction or waiver of certain customary conditions set forth in the merger agreement (including the approval of Extra Space stockholders and Life Storage stockholders).

Upon completion of the mergers, we estimate that former holders of Life Storage common stock will own approximately 35% of the then outstanding Extra Space common stock, based on the number of shares of Extra Space common stock outstanding as of May 23, 2023 and the number of shares of Life Storage common stock


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and equity-based awards outstanding as of May 23, 2023. In connection with the mergers, based on the outstanding shares of Life Storage common stock as of May 23, 2023, we anticipate that Extra Space will issue a total of approximately 76,357,546 shares of Extra Space common stock, including 76,008,255 shares of Extra Space common stock in exchange for the outstanding shares of Life Storage common stock in the company merger and up to 349,291 shares of Extra Space common stock to be issued in exchange for the Life Storage stock options, the Life Storage restricted stock, certain Life Storage performance stock units, and the Life Storage deferred stock units.

The company merger and the deemed liquidation (as defined in the section entitled “The MergersMaterial United States Federal Income Tax Consequences of the Company Merger” beginning on page 109 of this joint proxy statement/prospectus), taken together, are intended to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, for United States federal income tax purposes, and accordingly, assuming the company merger and the deemed liquidation, taken together, so qualify, Life Storage stockholders generally will not recognize any gain or loss for United States federal income tax purposes on the surrender of their Life Storage common stock and receipt of Extra Space common stock, except with respect to cash they may receive in lieu of any fractional shares of Extra Space common stock.

Extra Space and Life Storage will each hold a special meeting of their respective stockholders on July 18, 2023 in connection with the mergers. The special meetings will be held exclusively online via live webcast and will not be held at a physical location.

At the Extra Space special meeting, Extra Space stockholders will be asked to consider and vote on a proposal to approve the issuance of shares of Extra Space common stock in connection with the company merger on the terms and conditions set forth in the merger agreement, which we refer to as the “Extra Space common stock issuance proposal.” The record date for determining the stockholders entitled to receive notice of, and to vote at, the Extra Space special meeting is May 23, 2023. The mergers cannot be completed unless Extra Space stockholders approve the Extra Space common stock issuance proposal by the affirmative vote of a majority of the votes cast by the holders of shares of Extra Space common stock on such matter.

At the special meeting of Life Storage stockholders, Life Storage stockholders will be asked to consider and vote on a proposal to approve the company merger, which we refer to as the “Life Storage merger proposal.” The record date for determining the stockholders entitled to receive notice of, and to vote at, the Life Storage special meeting is May 23, 2023. The mergers cannot be completed unless Life Storage stockholders approve the Life Storage merger proposal by the affirmative vote of holders of two-thirds of the outstanding shares of Life Storage common stock entitled to vote on such proposal.

This joint proxy statement/prospectus contains important information about Extra Space, Life Storage, the mergers, the merger agreement and the Extra Space and Life Storage special meetings. This document is also a prospectus for shares of Extra Space common stock that will be issued to Life Storage stockholders and holders of Life Storage equity-based awards pursuant to the merger agreement. We encourage you to read this joint proxy statement/prospectus, the annexes and documents incorporated herein by reference carefully before voting, including the section entitled “Risk Factors” beginning on page 16 of this joint proxy statement/prospectus.

Your vote is very important, regardless of the number of shares of Extra Space or Life Storage common stock you own. Whether or not you plan to attend the Extra Space or Life Storage special meeting, please authorize a proxy to vote your shares as promptly as possible to make sure that your shares of Extra Space or Life Storage common stock are represented at the Extra Space or Life Storage special meeting, as applicable. Please review this joint proxy statement/prospectus for more complete information regarding the mergers and the Extra Space and Life Storage special meetings.

The Extra Space board of directors unanimously recommends that the Extra Space stockholders vote FOR the Extra Space common stock issuance proposal, which approval is necessary to complete the mergers.


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The Life Storage board of directors unanimously recommends that the Life Storage stockholders vote FOR the Life Storage merger proposal, which approval is necessary to complete the mergers.

 

Sincerely,

 

JOSEPH D. MARGOLIS

Chief Executive Officer

Extra Space Storage Inc.

  

Sincerely,

 

JOSEPH V. SAFFIRE

Chief Executive Officer

Life Storage, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the mergers or the securities to be issued under this joint proxy statement/prospectus or passed upon the adequacy or accuracy of this joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.

This joint proxy statement/prospectus is dated June 6, 2023, and is first being mailed to Extra Space stockholders and Life Storage stockholders on or about June 7, 2023.

 


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LOGO

EXTRA SPACE STORAGE INC.

2795 East Cottonwood Parkway, Suite 300

Salt Lake City, Utah 84121

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON JULY 18, 2023

 

 

To the Stockholders of Extra Space Storage Inc.:

A special meeting of the stockholders of Extra Space Storage Inc., a Maryland corporation, which we refer to as “Extra Space,” will be conducted via a virtual live webcast on July 18, 2023, commencing at 9:00 a.m., Mountain Time, which we refer to as the “Extra Space special meeting.” The Extra Space special meeting will be held in a virtual format only. The link for the virtual live webcast is www.virtualshareholdermeeting.com/EXR2023SM. To be admitted to the Extra Space special meeting, you must enter the control number found on your proxy card or voting instruction form or notice you previously received. You may vote during the Extra Space special meeting by following the instructions available on the meeting website during the meeting. At the Extra Space special meeting, Extra Space stockholders will be asked to consider and vote upon the following matters:

 

  1.

a proposal to approve the issuance of shares of Extra Space common stock, which we refer to as the “Extra Space common stock issuance proposal,” in connection with the merger of Eros Merger Sub, LLC, a newly created wholly owned subsidiary of Extra Space, which we refer to as “Extra Space Merger Sub,” with and into Life Storage, Inc., a Maryland corporation, which we refer to as “Life Storage,” with Life Storage continuing as the surviving entity (we refer to such merger as the “company merger”), pursuant to which each outstanding share of Life Storage common stock (other than shares of Life Storage common stock owned by Life Storage, Life Storage LP, Extra Space, Extra Space Storage LP, Extra Space Merger Sub, Eros OP Merger Sub, LLC or any of their respective wholly owned subsidiaries, which will be cancelled) will be converted into the right to receive 0.895 of a newly issued share of Extra Space common stock, in each case, pursuant to, and on the terms and conditions set forth in, the Agreement and Plan of Merger, dated as of April 2, 2023, as amended on May 18, 2023 and as it may be further amended from time to time, by and among Extra Space, Life Storage and the other parties thereto, which we refer to as the “merger agreement,” a copy of which is attached as Annex A to the joint proxy statement/prospectus accompanying this notice; and

 

  2.

a proposal to approve one or more adjournments of the Extra Space special meeting to another date, time or place, if necessary or appropriate, to solicit additional proxies in favor of the Extra Space common stock issuance proposal, which we refer to as the “Extra Space adjournment proposal.”

Extra Space does not expect to transact any other business at the Extra Space special meeting or any postponement or adjournment thereof. Please refer to the attached joint proxy statement/prospectus for further information with respect to the business to be transacted at the Extra Space special meeting. The board of directors of Extra Space, which we refer to as the “Extra Space board,” has fixed the close of business on May 23, 2023 as the record date for the determination of Extra Space’s stockholders entitled to receive notice of, and to vote at, the Extra Space special meeting and any postponements or adjournments of the Extra Space special meeting. Only holders of record of shares of Extra Space common stock at the close of business on the record date are entitled to receive notice of, and to vote at, the Extra Space special meeting.


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Assuming a quorum is present, approval of the Extra Space common stock issuance proposal requires the affirmative vote of a majority of the votes cast by the holders of Extra Space common stock on such proposal. The mergers cannot be completed without the approval by Extra Space’s stockholders of the Extra Space common stock issuance proposal.

Assuming a quorum is present, approval of the Extra Space adjournment proposal requires the affirmative vote of a majority of the votes cast by the holders of Extra Space common stock on such proposal.

The Extra Space board has unanimously approved the merger agreement, the mergers and the other transactions contemplated by the merger agreement and unanimously recommends that the Extra Space stockholders vote FOR the Extra Space common stock issuance proposal and FOR the Extra Space adjournment proposal.

YOUR VOTE IS IMPORTANT

Whether or not you plan to attend the Extra Space special meeting, please authorize a proxy to vote your shares as promptly as possible to make sure that your shares are represented at the Extra Space special meeting. If Extra Space stockholders of record return properly executed proxies but do not indicate how their shares of Extra Space common stock should be voted on a proposal, the shares of Extra Space common stock represented by their properly executed proxy will be voted as the Extra Space board recommends and, therefore, FOR the Extra Space common stock issuance proposal and FOR the Extra Space adjournment proposal. Even if you plan to attend the Extra Space special meeting virtually, we urge you to submit your proxy as promptly as possible by (i) accessing the Internet website specified on your proxy card, (ii) calling the toll-free number specified on your proxy card, or (iii) completing, signing, dating and returning the enclosed proxy card in the accompanying postage-paid envelope prior to the Extra Space special meeting to ensure that your shares will be represented and voted at the Extra Space special meeting.

If your shares of Extra Space common stock are held in “street name” by your broker or other nominee, please follow the directions provided by your broker or other nominee regarding how to instruct your broker or other nominee to vote your shares of Extra Space common stock. If you do not provide voting instructions to your broker or other nominee, your broker or other nominee may not vote such shares with respect to any of the proposals being voted on at the Extra Space special meeting.    

You may revoke your proxy at any time before it is exercised at the Extra Space special meeting. Please review the joint proxy statement/prospectus accompanying this notice for more complete information regarding the company merger, the other transactions contemplated by the merger agreement and the Extra Space special meeting.

This notice and the enclosed joint proxy statement/prospectus are first being mailed to Extra Space stockholders on or about June 7, 2023.

 

      By Order of the Board of Directors of Extra Space Storage Inc.,
      Gwyn G. McNeal
      Secretary

Salt Lake City, UT

     
      June 6, 2023

 


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LOGO

LIFE STORAGE, INC.

6467 Main Street

Williamsville, New York 14221

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON JULY 18, 2023

 

 

To the Stockholders of Life Storage, Inc.:

A special meeting of the stockholders of Life Storage, Inc., a Maryland corporation, which we refer to as “Life Storage,” will be conducted via a virtual live webcast on July 18, 2023, commencing at 11:00 a.m., Eastern Time, which we refer to as the “Life Storage special meeting.” The Life Storage special meeting will be held in a virtual format only. The link for the virtual live webcast is www.virtualshareholdermeeting.com/LSI2023SM. To be admitted to the Life Storage special meeting, you must enter the control number found on your proxy card or voting instruction form. You may vote during the Life Storage special meeting by following the instructions available on the meeting website during the meeting. At the Life Storage special meeting, Life Storage stockholders will be asked to consider and vote upon the following matters:

 

  1.

a proposal to approve the merger of Eros Merger Sub, LLC with and into Life Storage, which we refer to as the “company merger,” pursuant to, and on the terms and conditions set forth in, the Agreement and Plan of Merger, dated as of April 2, 2023, as amended on May 18, 2023 and as it may be further amended from time to time, by and among Life Storage, Life Storage LP, Extra Space Storage Inc., Extra Space Storage LP, Eros Merger Sub, LLC and Eros OP Merger Sub, LLC, which we refer to as the “merger agreement,” and the other transactions contemplated by the merger agreement, which proposal we refer to as the “Life Storage merger proposal”;

 

  2.

a non-binding advisory proposal to approve the compensation that may be paid or become payable to the named executive officers of Life Storage in connection with the company merger and the other transactions contemplated by the merger agreement, which we refer to as the “Life Storage compensation proposal”; and

 

  3.

a proposal to approve one or more adjournments of the Life Storage special meeting to another date, time or place, if necessary or appropriate, to solicit additional proxies in favor of the Life Storage merger proposal, which we refer to as the “Life Storage adjournment proposal.”

Life Storage does not expect to transact any business other than as set forth above at the Life Storage special meeting or any postponement or adjournment thereof. Please refer to the attached joint proxy statement/prospectus for further information with respect to the business to be transacted at the Life Storage special meeting. The board of directors of Life Storage, which we refer to as the “Life Storage board,” has fixed the close of business on May 23, 2023 as the record date for the determination of Life Storage stockholders entitled to receive notice of, and to vote at, the Life Storage special meeting and any postponements or adjournments of the Life Storage special meeting. Only holders of record of shares of Life Storage common stock at the close of business on the record date are entitled to receive notice of, and to vote at, the Life Storage special meeting.

Approval of the Life Storage merger proposal requires the affirmative vote of holders of two-thirds of the outstanding shares of Life Storage common stock entitled to vote on such proposal. If a Life Storage stockholder does not vote on the Life Storage merger proposal, it will have the same effect as a vote by such holder against the proposal. The mergers cannot be completed without the approval by Life Storage stockholders of the Life Storage merger proposal.


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Assuming a quorum is present, approval of the Life Storage compensation proposal requires the affirmative vote of a majority of the votes cast on such proposal.

Assuming a quorum is present, approval of the Life Storage adjournment proposal requires the affirmative vote of a majority of the votes cast on such proposal.

The Life Storage board has unanimously approved the merger agreement, the mergers and the other transactions contemplated by the merger agreement and unanimously recommends that the Life Storage stockholders vote FOR the Life Storage merger proposal, FOR the Life Storage compensation proposal and FOR the Life Storage adjournment proposal.

YOUR VOTE IS IMPORTANT

Whether or not you plan to attend the Life Storage special meeting, please authorize a proxy to vote your shares as promptly as possible to make sure that your shares are represented at the Life Storage special meeting. If Life Storage stockholders of record return properly executed proxies but do not indicate how their shares of Life Storage common stock should be voted on a proposal, the shares of Life Storage common stock represented by their properly executed proxy will be voted as the Life Storage board recommends and, therefore, FOR the Life Storage merger proposal, FOR the Life Storage compensation proposal and FOR the Life Storage adjournment proposal. Even if you plan to attend the Life Storage special meeting virtually, we urge you to submit your proxy as promptly as possible by (i) accessing the Internet website specified on your proxy card, (ii) calling the toll-free number specified on your proxy card, or (iii) completing, signing, dating and returning the enclosed proxy card in the accompanying postage-paid envelope prior to the Life Storage special meeting to ensure that your shares will be represented and voted at the Life Storage special meeting.

If your shares of Life Storage common stock are held in “street name” by your broker or other nominee, please follow the directions provided by your broker or other nominee regarding how to instruct your broker or other nominee to vote your shares of Life Storage common stock. If you do not provide voting instructions to your broker or other nominee, your broker or other nominee may not vote such shares with respect to any of the proposals being voted on at the Life Storage special meeting.

You may revoke your proxy at any time before it is exercised at the Life Storage special meeting. Please review the joint proxy statement/prospectus accompanying this notice for more complete information regarding the company merger, the other transactions contemplated by the merger agreement and the Life Storage special meeting.

This notice and the enclosed joint proxy statement/prospectus are first being mailed to Life Storage stockholders on or about June 7, 2023.

 

     

By Order of the Board of Directors of Life
Storage, Inc.,

     

Alexander E. Gress

     

Secretary

Williamsville, NY

     
     

June 6, 2023


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ADDITIONAL INFORMATION

This joint proxy statement/prospectus incorporates important business and financial information about Extra Space and Life Storage from other documents that are not included in or delivered with this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information and Incorporation by Reference” beginning on page 188 of this joint proxy statement/prospectus.

Documents incorporated by reference are also available to Extra Space stockholders and Life Storage stockholders without charge upon written or oral request. You can obtain any of these documents by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers.

 

        

 

Extra Space Storage Inc.

2795 East Cottonwood Parkway, Suite 300

Salt Lake City, UT 84121

Attention: Investor Relations

(801) 365-1759

www.extraspace.com

  

Life Storage, Inc.

6467 Main Street

Williamsville, NY 14221

Attention: Investor Services

(716) 633-1850

www.lifestorage.com

To receive timely delivery of the requested documents in advance of the applicable special meeting, you should make your request no later than July 11, 2023.

ABOUT THIS DOCUMENT

This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed by Extra Space (File No. 333-272152) with the Securities and Exchange Commission, which we refer to as the “SEC,” constitutes a prospectus of Extra Space for purposes of the Securities Act of 1933, as amended, with respect to the shares of Extra Space common stock to be issued to Life Storage stockholders in exchange for shares of Life Storage common stock and to holders of Life Storage equity-based awards pursuant to the merger agreement. This joint proxy statement/prospectus also constitutes a joint proxy statement for Extra Space and Life Storage for purposes of the Securities Exchange Act of 1934, as amended. In addition, it constitutes a notice of meeting with respect to the Extra Space and Life Storage special meetings.

You should rely only on the information contained or incorporated by reference in this joint proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated June 6, 2023. You should not assume that the information contained in, or incorporated by reference into, this joint proxy statement/prospectus is accurate as of any date other than that date or the date of such incorporated information. Neither our mailing of this joint proxy statement/prospectus to Extra Space stockholders or Life Storage stockholders nor the issuance by Extra Space of shares of its common stock to Life Storage stockholders or holders of Life Storage equity-based awards pursuant to the merger agreement will create any implication to the contrary.

This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this joint proxy statement/prospectus regarding Extra Space has been provided by Extra Space, and information contained in this joint proxy statement/prospectus regarding Life Storage has been provided by Life Storage.


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TABLE OF CONTENTS

 

     Page  

DEFINED TERMS

     iv  

QUESTIONS AND ANSWERS

     ix  

SUMMARY

     1  
  The Parties to the Merger      1  

        

  The Mergers      3  
  Recommendation of the Extra Space Board of Directors      4  
  Recommendation of the Life Storage Board of Directors      4  
  The Extra Space Special Meeting      4  
  The Life Storage Special Meeting      5  
  Opinion of Extra Space’s Financial Advisor      5  
  Opinions of Life Storage’s Financial Advisors      6  
  Treatment of Outstanding Life Storage Equity-Based Awards      7  
  Directors and Management of the Combined Company Following the Mergers      8  
  Interests of Life Storage’s Directors and Executive Officers in the Mergers      8  
 

Listing of Extra Space Common Stock; Delisting and Deregistration of Life Storage Common Stock

     9  
  Stockholder Dissenters’ Rights in the Mergers      9  
  Expected Timing of the Mergers      9  
  Conditions to Completion of the Mergers      9  
  Regulatory Approvals Required for the Mergers      9  
  No Solicitation of Acquisition Proposals      9  
  No Change of Board Recommendation; No Entry into Alternative Transactions      10  
  Termination of the Merger Agreement      11  
  Termination Fees and Expenses      13  
  Remedies      15  
  Material United States Federal Income Tax Consequences of the Company Merger      15  
  Accounting Treatment of the Mergers      15  
  Comparison of Rights of Extra Space Stockholders and Life Storage Stockholders      15  

RISK FACTORS

     16  
  Risks Related to the Mergers      16  
  Risks Related to the Combined Company Following the Mergers      21  
 

Risks Related to an Investment in the Combined Company Common Stock Following the Mergers

     24  

COMPARATIVE MARKET PRICE DATA

     30  

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

     31  

THE COMPANIES

     33  
  Extra Space Storage Inc. and Extra Space Storage LP      33  
  Extra Space Merger Sub      33  
  Extra Space OP Merger Sub      34  
  Life Storage, Inc. and Life Storage LP      34  
  The Combined Company      34  

THE EXTRA SPACE SPECIAL MEETING

     36  
  Date, Time, Place and Purpose of the Extra Space Special Meeting      36  
  Recommendation of the Extra Space Board of Directors      36  
  Extra Space Record Date; Who Can Vote at the Extra Space Special Meeting      36  

 

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     Page  
  Directors and Officers of Extra Space      36  
  Required Vote; Quorum      36  
  Shares Held in “Street Name”      37  
  Abstentions and Broker Non-Votes      37  
  Manner of Submitting Proxy      37  

        

  Revocation of Proxies or Voting Instructions      38  
  Solicitation of Proxies; Payment of Solicitation Expenses      39  

PROPOSALS SUBMITTED TO EXTRA SPACE STOCKHOLDERS

     40  
  Extra Space Common Stock Issuance Proposal      40  
  Extra Space Adjournment Proposal      40  
  Other Business      41  

THE LIFE STORAGE SPECIAL MEETING

     42  
  Date, Time, Place and Purpose of the Life Storage Special Meeting      42  
  Recommendation of the Life Storage Board of Directors      42  
  Life Storage Record Date; Who Can Vote at the Life Storage Special Meeting      42  
  Directors and Officers of Life Storage      42  
  Required Vote; Quorum      43  
  Shares Held in “Street Name”      43  
  Abstentions and Broker Non-Votes      43  
  Manner of Submitting Proxy      44  
  Revocation of Proxies or Voting Instructions      44  
  Solicitation of Proxies; Payment of Solicitation Expenses      45  

PROPOSALS SUBMITTED TO LIFE STORAGE STOCKHOLDERS

     46  
  Life Storage Merger Proposal      46  
  Life Storage Compensation Proposal      46  
  Life Storage Adjournment Proposal      47  
  Other Business      47  

THE MERGERS

     48  
  General      48  
  Background of the Mergers      48  
  Recommendation of the Extra Space Board of Directors and Its Reasons for the Mergers      64  
  Recommendation of the Life Storage Board of Directors and Its Reasons for the Mergers      66  
  Opinion of Extra Space’s Financial Advisor      71  
  Opinions of Life Storage’s Financial Advisors      79  
  Certain Extra Space Unaudited Prospective Financial Information      96  
  Certain Life Storage Unaudited Prospective Financial Information      99  
  Interests of Life Storage’s Directors and Executive Officers in the Mergers      102  
  Directors of Extra Space after the Mergers      108  
  Regulatory Approvals Required for the Mergers      109  
  Material United States Federal Income Tax Consequences of the Company Merger      109  
  Accounting Treatment      114  
  Exchange of Shares in the Mergers      114  
  Dividends      115  
  Listing of Extra Space Common Stock      115  
  Delisting and Deregistration of Life Storage Common Stock      115  

THE MERGER AGREEMENT

     116  
  Form, Closing and Effective Time of the Mergers      116  
  Organizational Documents Following the Mergers      117  

 

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     Page  
  Directors and Management of the Combined Company Following the Mergers      117  
  Merger Consideration; Effects of the Mergers      117  
  Certain Transactions      120  
  Representations and Warranties      120  
  Covenants and Agreements      124  
  Conditions to Completion of the Mergers      143  
  Termination of the Merger Agreement      146  
  Miscellaneous Provisions      149  

DIRECTORS AND MANAGEMENT OF THE COMBINED COMPANY FOLLOWING THE MERGERS

     151  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF EXTRA SPACE COMMON STOCK AND EXTRA SPACE MANAGEMENT

     152  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF LIFE STORAGE COMMON STOCK AND LIFE STORAGE LP

     155  

DESCRIPTION OF CAPITAL STOCK

     157  

        

  General      157  
  Common Stock      157  
  Certain Provisions of Maryland Law and of the Extra Space Charter and the Extra Space Bylaws      162  

COMPARISON OF RIGHTS OF THE EXTRA SPACE STOCKHOLDERS AND THE LIFE STORAGE STOCKHOLDERS

     168  

STOCKHOLDER PROPOSALS

     185  
  2024 Extra Space Annual Meeting of Stockholders      185  
  2024 Life Storage Annual Meeting of Stockholders      185  

LEGAL MATTERS

     187  

EXPERTS

     187  

HOUSEHOLDING OF PROXY STATEMENT/PROSPECTUS

     187  

WHERE YOU CAN FIND MORE INFORMATION AND INCORPORATION BY REFERENCE

     188  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     191  
  Introduction      191  
  Pro Forma Information      191  
  Merger Consideration      192  
Annex A: Agreement and Plan of Merger      A-1  
Annex B: Opinion of Citigroup Global Markets Inc. (Extra Space’s Financial Advisor)      B-1  
Annex C: Opinion of Wells Fargo Securities, LLC (Life Storage’s Financial Advisor)      C-1  
Annex D: Opinion of BofA Securities, Inc. (Life Storage’s Financial Advisor)      D-1  

 

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DEFINED TERMS

The following terms are used throughout this joint proxy statement/prospectus. Unless stated otherwise, the terms set forth below, whenever used in this joint proxy statement/prospectus, have the following meanings:

 

   

“acquisition agreement” has the meaning set forth on page 135 of this joint proxy statement/prospectus.

 

   

“acquisition proposal” has the meaning set forth on page 135 of this joint proxy statement/prospectus.

 

   

“Aggregate Cap” has the meaning set forth on page 105 of this joint proxy statement/prospectus.

 

   

“BofA Securities” means BofA Securities, Inc., financial advisor to Life Storage.

 

   

“certificate” has the meaning set forth on page 114 of this joint proxy statement/prospectus.

 

   

“change in Extra Space recommendation” has the meaning set forth on page 137 of this joint proxy statement/prospectus.

 

   

“change in Life Storage recommendation” has the meaning set forth on page 137 of this joint proxy statement/prospectus.

 

   

“Citi” means Citigroup Global Markets Inc., lead financial advisor to Extra Space.

 

   

“closing” means the closing of the mergers.

 

   

“closing date” means the date on which the closing actually occurs.

 

   

“Code” means the Internal Revenue Code of 1986, as amended.

 

   

“Combined Company” means Extra Space and its subsidiaries after the effective time of the partnership merger.

 

   

“Combined Company common stock” means the common stock of Extra Space after the effective time of the partnership merger.

 

   

“company material adverse effect” has the meaning set forth on page 123 of this joint proxy statement/prospectus.

 

   

“company merger” means the merger of Extra Space Merger Sub with and into Life Storage, with Life Storage continuing as the surviving entity.

 

   

“company merger effective time” means the date and time the company merger becomes effective.

 

   

“contribution” means the contribution by Extra Space of all outstanding equity interests of the Surviving Entity to Extra Space OP in exchange for the issuance of Extra Space OP common units to Extra Space, which we refer to as the “issuance.”

 

   

“contribution and issuance effective time” means the date and time the contribution and issuance becomes effective.

 

   

“control shares” has the meaning set forth on page 163 of this joint proxy statement/prospectus.

 

   

“control share acquisition” has the meaning set forth on page 163 of this joint proxy statement/prospectus.

 

   

“Core FFO” means core funds from operations as adjusted by the respective managements of Life Storage and Extra Space.

 

   

“deemed liquidation” has the meaning set forth on page 111 of this joint proxy statement/prospectus.

 

   

“designated investment entity” has the meaning set forth on page 159 of this joint proxy statement/prospectus.

 

   

“DLLCA” means the Delaware Limited Liability Company Act.

 

   

“EBITDA” means adjusted earnings before interest, taxes, depreciation and amortization.

 

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“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

   

“exchange agent” means American Stock Transfer & Trust Company.

 

   

“exchange ratio” means the right to receive 0.895 of a share of Extra Space common stock or 0.895 Extra Space OP common units for each share of Life Storage common stock or Life Storage OP common unit, respectively.

 

   

“Extra Space” means Extra Space Storage Inc., a Maryland corporation.

 

   

“Extra Space board” means the board of directors of Extra Space.

 

   

“Extra Space bylaws” means the Second Amended and Restated Bylaws of Extra Space.

 

   

“Extra Space charter” means the Articles of Amendment and Restatement of Extra Space, as amended, supplemented and corrected from time to time.

 

   

“Extra Space common stock” means the common stock of Extra Space, par value $0.01 per share.

 

   

“Extra Space management forecasts” has the meaning set forth on page 97 of this joint proxy statement/prospectus.

 

   

“Extra Space Merger Sub” means Eros Merger Sub, LLC, a Delaware limited liability company and a wholly owned subsidiary of Extra Space.

 

   

“Extra Space OP” means Extra Space Storage LP, a Delaware limited partnership.

 

   

“Extra Space OP common units” means the common limited partnership interests of Extra Space OP.

 

   

“Extra Space OP Merger Sub” means Eros OP Merger Sub, LLC, a Delaware limited liability company and a wholly owned subsidiary of Extra Space OP.

 

   

“Extra Space OP partnership agreement” means the Fourth Amended and Restated Agreement of Limited Partnership of Extra Space OP, as amended from time to time.

 

   

“Extra Space parties” means Extra Space, Extra Space OP, Extra Space Merger Sub, and Extra Space OP Merger Sub, collectively.

 

   

“Extra Space recommendation” has the meaning set forth on page 137 of this joint proxy statement/prospectus.

 

   

“Extra Space REIT subsidiary” means any Extra Space subsidiary that qualifies as a REIT.

 

   

“Extra Space Selected Public Companies” has the meaning set forth on page 76 of this joint proxy statement/prospectus.

 

   

“Extra Space special meeting” means a special meeting of the stockholders of Extra Space conducted via a virtual live webcast at www.virtualshareholdermeeting.com/EXR2023SM on July 18, 2023, commencing at 9:00 a.m., Mountain Time.

 

   

“Extra Space stockholder approval” means the affirmative vote of a majority of the votes cast by the holders of Extra Space common stock on the approval of the issuance of shares of Extra Space common stock in connection with the company merger on the terms and conditions set forth in the merger agreement.

 

   

“Extra Space VWAP” means the volume weighted average price of Extra Space common stock for the 10 trading days immediately prior to the 2nd business day prior to the date of the company merger effective time, starting with the opening of trading on the 1st trading day of such period and ending with the closing of trading on the trading day immediately prior to the 2nd business day prior to the date of the company merger effective time, as reported by Bloomberg (or, in the event Bloomberg does not report such information, such third-party service as is mutually agreed upon in good faith by Extra Space and Life Storage).

 

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“FFO” means funds from operations.

 

   

“GAAP” means generally accepted accounting principles as applied in the United States.

 

   

“Hogan Lovells” means Hogan Lovells US LLP.

 

   

“Innisfree” has the meaning set forth on page xvii of this joint proxy statement/prospectus.

 

   

“interested stockholder” has the meaning set forth on page 178 of this joint proxy statement/prospectus.

 

   

“interim period” has the meaning set forth on page 124 of this joint proxy statement/prospectus.

 

   

“intervening event” has the meaning set forth on page 138 of this joint proxy statement/prospectus.

 

   

“Investment Company Act” means the Investment Company Act of 1940, as amended.

 

   

“IRS” means the Internal Revenue Service.

 

   

“J.P. Morgan” means J.P. Morgan Securities LLC, financial advisor to Extra Space.

 

   

“Latham” means Latham & Watkins LLP.

 

   

“Life Storage” means Life Storage, Inc., a Maryland corporation.

 

   

“Life Storage board” means the board of directors of Life Storage.

 

   

“Life Storage bylaws” means the Amended and Restated Bylaws of Life Storage.

 

   

“Life Storage charter” means the Articles of Amendment and Restatement of Life Storage, as amended, supplemented and corrected from time to time.

 

   

“Life Storage common stock” means the common stock of Life Storage, par value $0.01 per share.

 

   

“Life Storage DSUs” means each deferred stock unit with respect to shares of Life Storage common stock that is issued and outstanding as of immediately prior to the company merger effective time.

 

   

“Life Storage OP” means Life Storage LP, a Delaware limited partnership.

 

   

“Life Storage OP common unit” means a limited partnership interest in Life Storage OP designated as a “Common Unit” under the Life Storage OP partnership agreement.

 

   

“Life Storage OP preferred units” means a limited partnership interest in Life Storage OP designated as a “4.5% Series A Preferred Limited Partnership Unit” under the Life Storage OP partnership agreement.

 

   

“Life Storage OP GP” means Life Storage Holdings, Inc., a Delaware corporation and the general partner of Life Storage OP.

 

   

“Life Storage OP partnership agreement” means the Amended and Restated Agreement of Limited Partnership of Life Storage OP, as amended from time to time.

 

   

“Life Storage parties” means Life Storage and Life Storage OP, collectively.

 

   

“Life Storage PSUs” means each performance stock unit with respect to shares of Life Storage common stock that is issued and outstanding as of immediately prior to the company merger effective time.

 

   

“Life Storage recommendation” has the meaning set forth on page 137 of this joint proxy statement/prospectus.

 

   

“Life Storage REIT subsidiary” means any Life Storage subsidiary that qualifies as a REIT.

 

   

“Life Storage Restricted Shares” means each share of restricted Life Storage common stock that is issued and outstanding as of immediately prior to the company merger effective time and is unvested and/or subject to a repurchase option or obligation, risk of forfeiture or other condition.

 

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“Life Storage Selected Public Companies” has the meaning set forth on page 76 of this joint proxy statement/prospectus.

 

   

“Life Storage stockholder approval” means the affirmative vote of holders of two-thirds of the outstanding shares of Life Storage common stock entitled to vote on the approval of the company merger and the other transactions contemplated by the merger agreement.

 

   

“Life Storage special meeting” means a special meeting of the stockholders of Life Storage conducted via a virtual live webcast at www.virtualshareholdermeeting.com/LSI2023SM on July 18, 2023, commencing at 11:00 a.m., Eastern Time.

 

   

“LLC Conversions” means, immediately after the company merger effective time, the collective conversions of (i) the Surviving Entity into a Maryland limited liability company and (ii) Life Storage OP GP into a Delaware limited liability company.

 

   

“MacKenzie” has the meaning set forth on page xvii of this joint proxy statement/prospectus.

 

   

“mergers” means the company merger and the partnership merger.

 

   

“merger agreement” means the Agreement and Plan of Merger, dated as of April 2, 2023, by and among the Extra Space parties and the Life Storage parties, as amended on May 18, 2023 and as it may be further amended from time to time, a copy of which is attached as Annex A to this joint proxy statement/prospectus and is incorporated herein by reference.

 

   

“merger consideration” means 0.895 of a share of Extra Space common stock for each share of Life Storage common stock (other than shares of Life Storage common stock owned by any of the Life Storage parties, the Extra Space parties or any of their respective wholly owned subsidiaries).

 

   

“MGCL” means the Maryland General Corporation Law.

 

   

“Minority Limited Partners” means the limited partners of Life Storage OP other than Life Storage or any wholly owned subsidiary of Life Storage.

 

   

“new Extra Space OP common units” means the new Extra Space OP common units into which the Life Storage OP common units held by any Minority Limited Partner are converted in the partnership merger.

 

   

“NOI” means net operating income.

 

   

“notice period” has the meaning set forth on page 11 of this joint proxy statement/prospectus.

 

   

“NYSE” means the New York Stock Exchange.

 

   

“ownership limits” has the meaning set forth on page 159 of this joint proxy statement/prospectus.

 

   

“parent material adverse effect” has the meaning set forth on page 123 of this joint proxy statement/prospectus.

 

   

“partnership merger” means the merger of Extra Space OP Merger Sub with and into Life Storage OP, with Life Storage OP continuing as the surviving entity.

 

   

“partnership merger effective time” means the date and time the partnership merger becomes effective.

 

   

“Phillips Lytle” means Phillips Lytle LLP.

 

   

“Pro Forma Financial Statements” has the meaning set forth on page 191 of this joint proxy statement/prospectus.

 

   

“Qualified REIT Subsidiary” means a “qualified REIT subsidiary” within the meaning of Section 856(i)(2) of the Code.

 

   

“REIT” means a “real estate investment trust” within the meaning of Section 856 of the Code.

 

   

“SEC” means the Securities and Exchange Commission.

 

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“Securities Act” means the Securities Act of 1933, as amended.

 

   

“superior proposal” has the meaning set forth on page 138 of this joint proxy statement/prospectus.

 

   

“superior proposal notice” has the meaning set forth on page 137 of this joint proxy statement/prospectus.

 

   

“Surviving Entity” means Life Storage after giving effect to the company merger and the LLC Conversions.

 

   

“Taxable REIT Subsidiary” means a “taxable REIT subsidiary” within the meaning of Section 856(l) of the Code.

 

   

“top-up Life Storage PSUs” has the meaning set forth on page 103 of this joint proxy statement/prospectus.

 

   

“Transaction Bonus Plan” has the meaning set forth on page 105 of this joint proxy statement/prospectus.

 

   

“United States holder” has the meaning set forth on page 110 of this joint proxy statement/prospectus.

 

   

“Wells Fargo Securities” means Wells Fargo Securities, LLC, financial advisor to Life Storage.

 

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QUESTIONS AND ANSWERS

The following are answers to some questions that Extra Space stockholders and Life Storage stockholders may have regarding the proposed combination of Extra Space and Life Storage. Extra Space and Life Storage urge you to read carefully this entire joint proxy statement/prospectus, including the Annexes, and the documents incorporated by reference into this joint proxy statement/prospectus, because the information in this section does not provide all the information that might be important to you.

Q: What is the proposed transaction?

 

A:

Extra Space and Life Storage have entered into a merger agreement, pursuant to which, subject to the terms and conditions set forth in the merger agreement, Extra Space will acquire Life Storage in four steps: (i) first, in the company merger, Extra Space Merger Sub will merge with and into Life Storage, with Life Storage continuing as the surviving entity and a wholly owned subsidiary of Extra Space, (ii) immediately after the company merger effective time, the LLC Conversions will be effected, (iii) immediately after the LLC Conversions, Extra Space will contribute to Extra Space OP all the outstanding equity interests of the Surviving Entity in exchange for the issuance by Extra Space OP to Extra Space of a number of newly issued partnership units in Extra Space OP equal to the number of shares of Extra Space common stock to be issued in the company merger, and (iv) thereafter, in the partnership merger, Extra Space OP Merger Sub will merge with and into Life Storage OP, with Life Storage OP continuing as the surviving entity and a wholly owned indirect subsidiary of Extra Space OP.

Q: What will happen in the proposed transaction?

 

A:

At the company merger effective time, each issued and outstanding share of Life Storage common stock as of immediately before the company merger effective time will be automatically converted into the right to receive the merger consideration, together with cash in lieu of fractional shares, without interest, upon the terms and subject to the conditions set forth in the merger agreement.

At the partnership merger effective time, (i) the general partner interests in Life Storage OP owned by Life Storage OP GP as of immediately prior to the partnership merger effective time will be converted into one Life Storage OP common unit, and Life Storage OP GP will continue to be the sole general partner of Life Storage OP following the partnership merger effective time, (ii) the Life Storage OP common units owned by the Surviving Entity as of immediately prior to the partnership merger effective time will be converted into 99 Life Storage OP common units, and (iii) each Life Storage OP common unit held by a Minority Limited Partner that is issued and outstanding immediately prior to the partnership merger effective time will automatically be converted into 0.895 of a new validly issued Extra Space OP common unit (with each Minority Limited Partner’s Extra Space OP common units rounded up to the nearest whole Extra Space OP common unit), and each holder of such Life Storage OP common units will be admitted as a limited partner of Extra Space OP. No fractional new Extra Space OP common units will be issued.

See the section entitled “The Merger AgreementMerger Consideration; Effects of the Mergers” beginning on page 117 of this joint proxy statement/prospectus for detailed descriptions of the merger consideration and treatment of securities. See also the section entitled “The Merger AgreementMerger Consideration; Effects of the MergersLife Storage Equity-Based Awards” beginning on page 119 of this joint proxy statement/prospectus for detailed descriptions of the treatment of Life Storage equity-based awards in the mergers.

 

Q:

What happens if the company merger is not completed?

 

A:

If the company merger is not completed for any reason, Life Storage stockholders will not have their shares of Life Storage common stock exchanged for the merger consideration. Instead, each of Extra Space and Life Storage would remain a separate company.

 

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Q:

What happens if the market price of shares of Extra Space common stock or Life Storage common stock changes before the closing of the mergers?

 

A:

No change will be made to the exchange ratio of 0.895 if the market price of shares of Extra Space common stock or Life Storage common stock changes before the mergers. As a result, the market value of the consideration to be received by Life Storage stockholders in the company merger and Life Storage OP unitholders in the partnership merger will increase or decrease depending on the market price of shares of Extra Space common stock at the effective time of the mergers.

 

Q:

Why am I receiving this joint proxy statement/prospectus?

 

A:

Each of the Extra Space board and the Life Storage board is using this joint proxy statement/prospectus to solicit proxies of Extra Space stockholders and Life Storage stockholders, as applicable, in connection with seeking approval of the company merger in accordance with the terms of the merger agreement, and the other transactions contemplated by the merger agreement. In addition, Extra Space is using this joint proxy statement/prospectus as a prospectus for Life Storage stockholders because Extra Space is offering shares of Extra Space common stock to be issued in connection with the company merger. The mergers cannot be completed unless the holders of Extra Space common stock vote to approve the Extra Space common stock issuance proposal and the holders of Life Storage common stock vote to approve the Life Storage merger proposal.

Extra Space and Life Storage will each hold a meeting of its respective stockholders to obtain such approval and to consider other proposals as described elsewhere in this joint proxy statement/prospectus.

This joint proxy statement/prospectus contains important information about the company merger and the other proposals being voted on at the Extra Space special meeting and the Life Storage special meeting and you should read it carefully. The enclosed voting materials allow you to authorize a proxy to vote your Extra Space common stock or Life Storage common stock, as applicable, without attending the special meeting.

Your vote is important. You are encouraged to submit your proxy as promptly as possible.

 

Q:

Am I being asked to vote on any other proposals at the special meetings in addition to the Extra Space common stock issuance proposal or the Life Storage merger proposal, as applicable?

 

A:

At the Extra Space special meeting, Extra Space stockholders will be asked to consider and vote upon the following additional proposal:

 

   

the Extra Space adjournment proposal — a proposal to approve one or more adjournments of the Extra Space special meeting to another date, time or place, if necessary or appropriate, to solicit additional proxies in favor of the Extra Space common stock issuance proposal.

At the Life Storage special meeting, Life Storage stockholders will be asked to consider and vote upon the following additional proposals:

 

   

the Life Storage compensation proposal — a non-binding advisory proposal to approve the compensation that may be paid or become payable to the named executive officers of Life Storage in connection with the company merger and the other transactions contemplated by the merger agreement; and

 

   

the Life Storage adjournment proposal — a proposal to approve one or more adjournments of the Life Storage special meeting to another date, time or place, if necessary or appropriate, to solicit additional proxies in favor of the Life Storage merger proposal.

 

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Q:

Why are Extra Space and Life Storage proposing the mergers?

 

A:

Among other reasons, because if completed, the mergers are expected to provide a number of significant potential strategic opportunities and benefits, including combining two highly complementary portfolios, allowing the Combined Company to capture significant cost and revenue synergies while offering its customers exceptional service as a result of the combined portfolios. To review the reasons of the Extra Space board for the mergers in greater detail, see the section entitled “The MergersRecommendation of the Extra Space Board of Directors and Its Reasons for the Mergers” beginning on page 64 of this joint proxy statement/prospectus. To review the reasons of the Life Storage board for the mergers in greater detail, see the section entitled “The MergersRecommendation of the Life Storage Board of Directors and Its Reasons for the Mergers” beginning on page 66 of this joint proxy statement/prospectus.

 

Q:

Who will be the board of directors and management of the Combined Company?

 

A:

The merger agreement provides that Extra Space will take all actions necessary to add three directors designated by Life Storage, who are currently expected to be Life Storage’s Chief Executive Officer, Joseph V. Saffire, as well as Mark G. Barberio and Susan Harnett, to the Extra Space board at the company merger effective time. Except for the addition of the three directors designated by Life Storage to the Extra Space board, there will be no change to the members of the Extra Space board as a result of the mergers, and the directors of Extra Space as of immediately prior to the company merger effective time, together with the three additional directors designated by Life Storage, will continue to serve as the directors of the Combined Company. Kenneth M. Woolley will continue to serve as the Chairman of the Extra Space board.

The executive officers of Extra Space immediately prior to the company merger effective time will continue to serve as the executive officers of the Combined Company, with Joseph D. Margolis continuing to serve as the Chief Executive Officer of the Combined Company.

 

Q:

Will Extra Space and Life Storage continue to pay dividends or other distributions prior to the closing of the mergers?

 

A:

Yes.

The merger agreement permits Extra Space to pay (i) regular quarterly dividends on shares of Extra Space common stock at a rate not to exceed $1.62 per share of Extra Space common stock per quarter, (ii) the regular distributions that are required to be made in respect of the Extra Space OP common units in connection with any dividends paid on the shares of Extra Space common stock under the Extra Space OP partnership agreement, and (iii) distributions to the extent required for Extra Space to maintain its REIT qualification under the Code and/or to avoid or reduce the imposition of United States federal income or excise tax.

The merger agreement permits Life Storage to pay (i) regular quarterly dividends on shares of Life Storage common stock at a rate not to exceed $1.20 per share of Life Storage common stock per quarter, (ii) the regular distributions that are required to be made in respect of the Life Storage OP common units in connection with any permitted dividends paid on the shares of Life Storage common stock under the Life Storage OP partnership agreement, and (iii) distributions to the extent required for Life Storage to maintain its REIT qualification under the Code and/or to avoid or reduce the imposition of United States federal income or excise tax.

Life Storage has agreed that the record and payment dates for its quarterly dividends will be set to be the same dates as those of Extra Space. Without limiting the foregoing, the timing of quarterly dividends will be coordinated by Extra Space and Life Storage so that if either Extra Space stockholders or Life Storage stockholders receive a dividend for any particular quarter between January 1, 2023, and the partnership merger effective time, the stockholders of the other entity will also receive a dividend for that quarter between January 1, 2023 and the partnership merger effective time.

 

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Q:

When and where are the Extra Space special meeting and the Life Storage special meeting?

 

A:

The special meetings will be held via virtual format only and will not be held at a physical location.

The Extra Space special meeting will be conducted via a virtual live webcast on July 18, 2023, commencing at 9:00 a.m., Mountain Time. The link for the virtual live webcast is www.virtualshareholdermeeting.com/EXR2023SM. To be admitted to the Extra Space special meeting, you must enter the control number found on your proxy card or voting instruction form or notice you previously received. You may vote during the Extra Space special meeting by following the instructions available on the meeting website during the meeting.

The Life Storage special meeting will be conducted via a virtual live webcast on July 18, 2023, commencing at 11:00 a.m., Eastern Time. The link for the virtual live webcast is www.virtualshareholdermeeting.com/LSI2023SM. To be admitted to the Life Storage special meeting, you must enter the control number found on your proxy card or voting instruction form. You may vote during the Life Storage special meeting by following the instructions available on the meeting website during the meeting.

 

Q:

How can I vote my shares without virtually attending my company’s special meeting?

 

A:

Extra Space. If you are a holder of record of Extra Space common stock as of the record date for the Extra Space special meeting, you may vote by proxy by:

 

   

Telephone or via the Internet. This joint proxy statement/prospectus is accompanied by a proxy card with instructions for submitting voting instructions. Extra Space stockholders may authorize a proxy by telephone by calling the toll-free number or via the Internet by accessing the Internet address as specified on the enclosed proxy card. Shares will be voted as directed by Extra Space stockholders in the same manner as if such Extra Space stockholder had completed, signed, dated and returned a proxy card, as described below.

 

   

Mail: Extra Space stockholders may submit a proxy by completing, signing, dating and returning their proxy card or voting instruction card in the preaddressed postage-paid envelope provided.

If you hold Extra Space common stock in the name of a broker, bank or nominee, please follow the voting instructions provided by your broker, bank or nominee to ensure that your shares are represented at your special meeting.

Life Storage. If you are a holder of record of Life Storage common stock as of the record date for the Life Storage special meeting, you may vote by proxy by:

 

   

Telephone or via the Internet. This joint proxy statement/prospectus is accompanied by a proxy card with instructions for submitting voting instructions. Life Storage stockholders may authorize a proxy by telephone by calling the toll-free number or via the Internet by accessing the Internet address as specified on the enclosed proxy card. Shares will be voted as directed by Life Storage stockholders in the same manner as if such Life Storage stockholder had completed, signed, dated and returned a proxy card, as described below.

 

   

Mail: Life Storage stockholders may submit a proxy by completing, signing, dating and returning their proxy card or voting instruction card in the preaddressed postage-paid envelope provided.

If you hold shares of Life Storage common stock in the name of a broker, bank or nominee, please follow the voting instructions provided by your broker, bank or nominee to ensure that your shares are represented at your special meeting.

 

Q:

Who can vote at the Extra Space special meeting and the Life Storage special meeting?

 

A:

All holders of record of Extra Space common stock as of the close of business on May 23, 2023, the record date for determining stockholders entitled to notice of and to vote at the Extra Space special meeting, are entitled to receive notice of and to vote at the Extra Space special meeting. As of the close of business on

 

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  the record date, there were 135,049,081 shares of Extra Space common stock outstanding and entitled to vote at the Extra Space special meeting, held by approximately 504 holders of record. Each outstanding share of Extra Space common stock is entitled to one vote on each proposal presented at the Extra Space special meeting.

All holders of record of Life Storage common stock as of the close of business on May 23, 2023, the record date for determining stockholders entitled to notice of and to vote at the Life Storage special meeting, are entitled to receive notice of and to vote at the Life Storage special meeting. As of the close of business on the record date, there were 85,093,805 shares of Life Storage common stock outstanding and entitled to vote at the Life Storage special meeting, held by approximately 453 holders of record. Each outstanding share of Life Storage common stock is entitled to one vote on each proposal presented at the Life Storage special meeting.

 

Q:

What constitutes a quorum?

 

A:

For the Extra Space special meeting, to constitute a quorum, there must be present in person or by proxy holders of Extra Space common stock entitled to cast a majority of all the votes entitled to be cast at the Extra Space special meeting. If you submit a proxy but fail to provide voting instructions or abstain on any of the proposals listed on the proxy card, your shares will be counted for purpose of determining whether a quorum is present at the Extra Space special meeting. If your shares are held in “street name” by your broker or other nominee and you do not tell the nominee how to vote your shares, these shares will not be counted for purposes of determining whether a quorum is present for the transaction of business at the Extra Space special meeting.

For the Life Storage special meeting, to constitute a quorum, there must be present in person or by proxy holders of Life Storage common stock entitled to cast a majority of all the votes entitled to be cast at the Life Storage special meeting. If you submit a proxy but fail to provide voting instructions or abstain on any of the proposals listed on the proxy card, your shares will be counted for purpose of determining whether a quorum is present at the Life Storage special meeting. If your shares are held in “street name” by your broker or other nominee and you do not tell the nominee how to vote your shares, these shares will not be counted for purposes of determining whether a quorum is present for the transaction of business at the Life Storage special meeting.

 

Q:

What vote is required to approve the proposals?

 

A:

The proposals to be voted upon at the Extra Space special meeting and the Life Storage special meeting require the following votes in order to be approved:

Extra Space special meeting proposals:

 

   

Approval of the Extra Space common stock issuance proposal requires the affirmative vote of a majority of the votes cast by the holders of shares of Extra Space common stock on such proposal.

 

   

Approval of the Extra Space adjournment proposal requires the affirmative vote of a majority of the votes cast by the holders of shares of Extra Space common stock on such proposal.

Life Storage special meeting proposals:

 

   

Approval of the Life Storage merger proposal requires the affirmative vote of holders of two-thirds of the outstanding shares of Life Storage common stock entitled to vote on such proposal.

 

   

Approval of the Life Storage compensation proposal requires the affirmative vote of a majority of the votes cast on such proposal.

 

   

Approval of the Life Storage adjournment proposal requires the affirmative vote of a majority of the votes cast on such proposal.

 

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Q:

How does each of the Extra Space board and the Life Storage board recommend that Extra Space stockholders and Life Storage stockholders, respectively, vote on the proposals?

 

A:

Each of the Extra Space board and Life Storage board has unanimously approved the merger agreement, the mergers and the other transactions contemplated by the merger agreement.

The Extra Space board recommends that Extra Space stockholders vote FOR the Extra Space common stock issuance proposal and FOR the Extra Space adjournment proposal. For a more complete description of the recommendation of the Extra Space board, see the section entitled “The MergersRecommendation of the Extra Space Board of Directors and Its Reasons for the Mergers” beginning on page 64 of this joint proxy statement/prospectus.

The Life Storage board recommends that Life Storage stockholders vote FOR the Life Storage merger proposal, FOR the Life Storage compensation proposal and FOR the Life Storage adjournment proposal. For a more complete description of the recommendation of the Life Storage board, see the section entitled “The MergersRecommendation of the Life Storage Board of Directors and Its Reasons for the Mergers” beginning on page 66 of this joint proxy statement/prospectus.

 

Q:

Do any of Life Storage’s directors or executive officers have interests in the mergers that may differ from those of Life Storage stockholders?

 

A:

Certain of Life Storage’s directors and executive officers have interests in the mergers that are different from, or in addition to, their interests as Life Storage stockholders. The members of the Life Storage board were aware of and considered such Life Storage directors’ and executive officers’ interests, among other matters, in evaluating the merger agreement and the mergers, and in recommending that Life Storage stockholders vote FOR the Life Storage merger proposal.

For a description of these interests, see the section entitled “The MergersInterests of Life Storage’s Directors and Executive Officers in the Mergers” beginning on page 102 of this joint proxy statement/prospectus.

 

Q:

Are there any conditions to closing of the mergers that must be satisfied for the mergers to be completed?

 

A:

In addition to the approval of the Extra Space stockholders of the Extra Space common stock issuance proposal and the approval of the Life Storage stockholders of the Life Storage merger proposal, there are a number of customary conditions that must be satisfied or waived for the mergers to be consummated. For a description of all the conditions to the mergers, see the section entitled “The Merger AgreementConditions to Completion of the Mergers” beginning on page 143 of this joint proxy statement/prospectus.

 

Q:

Are there risks associated with the mergers that I should consider in deciding how to vote?

 

A:

Yes. There are a number of risks related to the mergers that are discussed in this joint proxy statement/prospectus in the section entitled “Risk Factors” beginning on page 16 of this joint proxy statement/prospectus.

 

Q:

If I do not vote for a proposal, what effect will that have?

 

A:

If you are an Extra Space stockholder, failure to vote, abstentions and broker non-votes will have no effect on the Extra Space common stock issuance proposal or the Extra Space adjournment proposal, in each case assuming a quorum is present.

If you are a Life Storage stockholder, failure to vote, abstentions and broker non-votes will have the same effect as votes AGAINST the Life Storage merger proposal. Failure to vote, abstentions and broker non-votes will have no effect on the Life Storage compensation proposal or the Life Storage adjournment proposal, in each case assuming a quorum is present.

 

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Q:

Will my rights as a stockholder of Extra Space change as a result of the mergers?

 

A:

No. The governing documents of Extra Space that are in effect immediately prior to the company merger effective time will remain in effect following the company merger effective time. Therefore, the rights of legacy Extra Space stockholders will not change as a result of the mergers, except insofar as such stockholders face a risk of dilution, as described in the section entitled “Risk Factors” beginning on page 16 of this joint proxy statement/prospectus.

 

Q:

Will my rights as a stockholder of Life Storage change as a result of the mergers?

 

A:

Yes. Life Storage stockholders will have different rights following the company merger effective time due to the differences between the governing documents of Extra Space and Life Storage. For more information regarding the differences in stockholder rights, see the section entitled “Comparison of Rights of the Extra Space Stockholders and the Life Storage Stockholders” beginning on page 168 of this joint proxy statement/prospectus.

 

Q:

When are the mergers expected to be completed?

 

A:

If Extra Space stockholders approve the Extra Space common stock issuance proposal and Life Storage stockholders approve the Life Storage merger proposal and if the other conditions to closing the mergers are satisfied or waived, it is currently expected that the mergers will be completed in the second half of 2023. However, there is no guarantee that the conditions to the mergers will be satisfied or that the mergers will close.

 

Q:

What are the material United States federal income tax consequences to United States holders of the mergers?

 

A:

The company merger and the deemed liquidation, taken together, are intended to qualify as a reorganization within the meaning of Section 368(a) of the Code. Assuming that the company merger and the deemed liquidation, taken together, qualify as a reorganization, United States holders of shares of Life Storage common stock generally will not recognize gain or loss for United States federal income tax purposes upon the receipt of Extra Space common stock in exchange for shares of Life Storage common stock in connection with the company merger, except with respect to cash received in lieu of fractional shares of Extra Space common stock. Holders of shares of Life Storage common stock should read the discussion in the section entitled “The MergersMaterial United States Federal Income Tax Consequences of the Company Merger” beginning on page 109 of this joint proxy statement/prospectus and consult their tax advisors to determine the tax consequences to them (including the application and effect of any state, local or non-United States income and other tax laws) of the mergers.

 

Q.

What happens if the Life Storage compensation proposal is not approved?

 

A.

Approval of the Life Storage compensation proposal is not a condition to completion of the mergers. Because the vote regarding merger-related compensation is advisory only, it will not be binding on either Life Storage or Extra Space regardless of whether the mergers are completed. Accordingly, if the mergers are completed, the merger-related compensation will become payable in connection with the mergers and, if applicable, a qualifying termination of employment, subject only to the conditions applicable thereto, regardless of the outcome of the vote on the non-binding advisory proposal.

 

Q:

Are Extra Space stockholders or Life Storage stockholders entitled to appraisal or dissenters’ rights?

 

A:

No. Extra Space stockholders and Life Storage stockholders are not entitled to exercise appraisal or dissenters’ rights in connection with the mergers. See the section entitled “The Merger AgreementMerger Consideration; Effects of the MergersDissenters’ Rights” beginning on page 119 of this joint proxy statement/prospectus for more information.

 

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Q:

What do I need to do now?

 

A:

After you have carefully read this joint proxy statement/prospectus, please respond by completing, signing and dating your proxy card or voting instruction card and returning it in the enclosed preaddressed postage-paid envelope or, if available, by submitting your proxy by one of the other methods specified in your proxy card or voting instruction card as promptly as possible so that your shares of Extra Space common stock or Life Storage common stock, as applicable, will be represented and voted at the Extra Space special meeting or the Life Storage special meeting, respectively. Please refer to your proxy card or voting instruction card forwarded by your broker or other nominee to see which voting options are available to you. The method by which you submit a proxy will in no way limit your right to vote at the Extra Space special meeting or the Life Storage special meeting, as applicable, if you later decide to attend the meeting virtually. However, if your Extra Space common stock or Life Storage common stock, as applicable, is held in the name of a broker or other nominee, you must follow the directions provided by your broker or other nominee regarding how to vote your shares of Extra Space common stock or Life Storage common stock at the Extra Space special meeting or the Life Storage special meeting, as applicable.

 

Q:

How will my proxy be voted?

 

A:

All shares of Extra Space common stock or Life Storage common stock, as applicable, entitled to vote and represented by properly completed proxies received prior to the Extra Space special meeting or the Life Storage special meeting, respectively, and not revoked, will be voted at such applicable special meeting as instructed on the proxies. If you properly sign, date and return a proxy card, but do not indicate how your Extra Space common stock or Life Storage common stock should be voted on a matter, the Extra Space or Life Storage common stock represented by your proxy, as applicable, will be voted as the Extra Space board or the Life Storage board, respectively, recommends and, therefore:

At the Extra Space special meeting: FOR the Extra Space common stock issuance proposal and FOR the Extra Space adjournment proposal.

At the Life Storage special meeting: FOR the Life Storage merger proposal, FOR the Life Storage compensation proposal and FOR the Life Storage adjournment proposal.

 

Q:

If I am a Life Storage stockholder, should I send in my Life Storage common stock certificates now?

 

A:

No. Please do not send in your Life Storage common stock certificates with your proxy. After the completion of the mergers, the exchange agent will send you instructions for exchanging Life Storage stock certificates for the merger consideration.

 

Q:

What should I do if I hold my shares of Life Storage common stock in book-entry form?

 

A:

You are not required to take any special additional actions if your shares of Life Storage common stock are not represented by a certificate and are instead held in book-entry form. After the completion of the company merger, the exchange agent will send you instructions for converting your book-entry shares into the merger consideration, including shares of Extra Space common stock in book-entry form and any cash to be paid instead of fractional shares in the company merger.

 

Q:

Can I revoke my proxy or change my vote after I have delivered my proxy?

 

A:

Yes. You may revoke your proxy or change your vote at any time before your proxy is exercised at the Extra Space special meeting or the Life Storage special meeting, as applicable. If you are a holder of record, you can do this in any of the three following ways:

 

   

by sending a written notice to the Corporate Secretary of Extra Space or Life Storage, as applicable, in time to be received before the Extra Space special meeting or the Life Storage special meeting, as applicable, stating that you would like to revoke your proxy;

 

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by completing, signing and dating another proxy card and returning it by mail in time to be received before the Extra Space special meeting or the Life Storage special meeting, as applicable, or by submitting a later-dated proxy by telephone or via the Internet, in which case your later-dated proxy will be recorded and your earlier proxy revoked; or

 

   

by virtually attending the Extra Space special meeting or the Life Storage special meeting, as applicable, and voting in person. Simply attending the Extra Space special meeting or the Life Storage special meeting, as applicable, without voting will not revoke your proxy or change your vote.

If your Extra Space common stock or Life Storage common stock, as applicable, is held in an account at a broker or other nominee and you desire to change your vote or vote virtually, you should contact your broker or other nominee for instructions on how to do so.

 

Q:

What does it mean if I receive more than one set of voting materials for the Extra Space special meeting or the Life Storage special meeting, as applicable?

 

A:

You may receive more than one set of voting materials for the Extra Space special meeting or the Life Storage special meeting, as applicable, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your Extra Space common stock or Life Storage common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold your Extra Space common stock or Life Storage common stock, as applicable. If you are a holder of record and your Extra Space common stock or Life Storage common stock, as applicable, is registered in more than one name, you may receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive or, if available, please submit your proxy by telephone or via the Internet.

 

Q:

Will proxy solicitors be used?

 

A:

Yes. Extra Space has engaged MacKenzie Partners, Inc., which we refer to as “MacKenzie,” and Life Storage has engaged Innisfree M&A Incorporated, which we refer to as “Innisfree,” to assist in the solicitation of proxies for the Extra Space special meeting and Life Storage special meeting, respectively. Extra Space estimates it will pay MacKenzie a fee of approximately $25,000. Life Storage will pay Innisfree reasonable and customary compensation, including a $75,000 retainer fee covering the first month of services and $40,000 per month thereafter. Each of Extra Space and Life Storage has also agreed to reimburse MacKenzie and Innisfree, respectively, for reasonable out-of-pocket expenses and disbursements incurred in connection with the proxy solicitation. In addition to mailing proxy solicitation material, Extra Space’s and Life Storage’s respective directors, officers and employees may also solicit proxies in person, by telephone or by any other electronic means of communication deemed appropriate. No additional compensation will be paid to Extra Space’s or to Life Storage’s respective directors, officers or employees for such services.

 

Q:

What if I have technical difficulties or trouble accessing the virtual live webcast for the Extra Space special meeting or the Life Storage special meeting?

 

A:

If you encounter any difficulties accessing the virtual live webcast for the Extra Space special meeting during the check-in or meeting time, please call the technical support number that will be posted on the meeting website log-in page at www.virtualshareholdermeeting.com/EXR2023SM for the Extra Space special meeting.

If you encounter any difficulties accessing the virtual live webcast for the Life Storage special meeting during the check-in or meeting time, please call the technical support number that will be posted on the meeting website log-in page at www.virtualshareholdermeeting.com/LSI2023SM for the Life Storage special meeting.

 

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Q:

Who can answer my questions?

 

A:

If you have any questions about the mergers or how to submit your proxy or need additional copies of this joint proxy statement/prospectus, the enclosed proxy card or voting instructions, you should contact:

 

        

 

 

 

Extra Space Storage Inc.

2795 East Cottonwood Parkway, Suite 300

Salt Lake City, UT 84121

Attention: Investor Relations

(801) 365-1759

 

Proxy Solicitor:

 

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, New York 10018

Call toll-free at:

(800) 322-2885

Or

Email: proxy@mackenziepartners.com

  

Life Storage, Inc.

6467 Main Street

Williamsville, NY 14221

Attention: Investor Services

(716) 633-1850

 

Proxy Solicitor:

 

Innisfree M&A Incorporated

Stockholders may call toll-free at:

(877) 825-8793

Banks/Brokers may call collect at:

(212) 750-5833

 

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SUMMARY

The following summary highlights some of the information contained in this joint proxy statement/prospectus. This summary may not contain all of the information that is important to you. For a more complete description of the merger agreement, the mergers and the other transactions contemplated by the merger agreement, Extra Space and Life Storage encourage you to read carefully this entire joint proxy statement/prospectus, including the attached Annexes and the other documents to which we have referred you because this section does not provide all the information that might be important to you with respect to the mergers and the Extra Space and Life Storage special meetings. See also the section entitled “Where You Can Find More Information and Incorporation by Reference” beginning on page 188 of this joint proxy statement/prospectus. We have included page references to direct you to a more complete description of the topics presented in this summary.

The Parties to the Merger

Extra Space Storage Inc. and Extra Space Storage LP (See page 33)

Extra Space Storage Inc.

2795 East Cottonwood Parkway, Suite 300

Salt Lake City, Utah 84121

(801) 365-4600

Extra Space is a fully integrated, self-administered and self-managed real estate investment trust formed as a Maryland corporation on April 30, 2004, to own, operate, manage, acquire, develop and redevelop self-storage properties. Extra Space closed its initial public offering on August 17, 2004.

Extra Space was formed in 2004 to continue the business of Extra Space Storage LLC and its subsidiaries, which had engaged in the self-storage business since 1977. As of December 31, 2022, Extra Space owned and/or operated 2,338 self-storage properties in 41 states and Washington, D.C., comprising approximately 176.1 million square feet of net rentable space in approximately 1.6 million units.

Extra Space operates in two distinct segments: (1) self-storage operations; and (2) tenant reinsurance. Extra Space’s self-storage operations activities include rental operations of wholly-owned self-storage properties. Tenant reinsurance activities include the reinsurance of risks relating to the loss of goods stored by tenants in Extra Space’s self-storage properties.

Substantially all of Extra Space’s business is conducted through Extra Space OP. Extra Space’s primary assets are general partner and limited partner interests in Extra Space OP. This structure is commonly referred to as an umbrella partnership REIT, or UPREIT. Extra Space has elected to be taxed as a REIT under the Code. To the extent Extra Space continues to qualify as a REIT, Extra Space will not be subject to United States federal tax, with certain exceptions, on Extra Space’s net taxable income that is distributed to its stockholders.

Extra Space’s primary business objectives are to maximize cash flow available for distribution to Extra Space’s stockholders and to achieve sustainable long-term growth in cash flow per share in order to maximize long-term stockholder value both at acceptable levels of risk. Extra Space continues to evaluate a range of growth initiatives and opportunities.

Extra Space common stock is listed on the NYSE, trading under the symbol “EXR.” Extra Space’s principal corporate offices are located at 2795 East Cottonwood Parkway, Suite 300, Salt Lake City, Utah 84121; its telephone number is (801) 365-4600.

 

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Extra Space Merger Sub (See page 33)

Extra Space Merger Sub, a wholly owned subsidiary of Extra Space, is a Delaware limited liability company organized on March 31, 2023 for the purpose of effecting the company merger. Extra Space Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement. The principal executive offices of Extra Space Merger Sub are located at 2795 East Cottonwood Parkway, Suite 300, Salt Lake City, Utah 84121.

Extra Space OP Merger Sub (See page 34)

Extra Space OP Merger Sub, a wholly owned subsidiary of Extra Space OP, is a Delaware limited liability company organized on March 31, 2023 for the purpose of effecting the partnership merger. Extra Space OP Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement. The principal executive offices of Extra Space OP Merger Sub are located at 2795 East Cottonwood Parkway, Suite 300, Salt Lake City, Utah 84121.

Life Storage, Inc. and Life Storage LP (See page 34)

6467 Main Street

Williamsville, NY 14221

Attention: Investor Services

Life Storage is a fully integrated, self-administered and self-managed REIT that acquires and manages self-storage properties throughout the United States. Headquartered in Buffalo, New York, Life Storage employs over 2,500 people and operates over 1,210 self-storage facilities encompassing over 88 million square feet in 37 states and the District of Columbia. Life Storage’s common stock is publicly traded on the NYSE under the symbol “LSI.” Life Storage OP is the primary operating subsidiary of Life Storage. As of March 31, 2023, Life Storage directly or indirectly, through its ownership of Life Storage OP GP, owned approximately 97.9% of the ownership interests of Life Storage OP, assuming conversion of the Life Storage OP preferred units as of such date (all of which were converted into Life Storage OP common units subsequent to March 31, 2023). The remaining 2.1% of the limited partnership interests are owned by unaffiliated third parties. Life Storage OP GP, a wholly-owned subsidiary of Life Storage, is the sole general partner of Life Storage OP. As the owner of the sole general partner of Life Storage OP, Life Storage has full and complete authority over Life Storage OP’s day-to-day operations and management. Life Storage does not have significant assets other than its investment in Life Storage OP.

The Combined Company (See page 34)

References to the Combined Company are to Extra Space after the partnership merger effective time. The Combined Company will continue to be named “Extra Space Storage Inc.” and will be a Maryland corporation. The Combined Company after the completion of the mergers is expected to have a total equity market capitalization of approximately $32.8 billion (based on the closing price of Extra Space common stock on May 22, 2023 of $148.65 per share). The Combined Company will represent the largest storage operation in the country with over 3,500 locations, over 264 million square feet and serving over two million customers.

The business of the Combined Company will be operated through Extra Space OP. Extra Space will have the full, exclusive and complete responsibility for and discretion in the day-to-day management and control of Extra Space OP.

The common stock of the Combined Company will continue to be listed on the NYSE, trading under the symbol “EXR.”

The Combined Company’s principal executive offices will continue to be located at 2795 East Cottonwood Parkway, Suite 300, Salt Lake City, Utah 84121, and its telephone number will be (801) 365-4600.

 

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The Mergers

The Merger Agreement (See page 116)

The Extra Space parties and the Life Storage parties have entered into the merger agreement, including the First Amendment thereto, attached as Annex A to this joint proxy statement/prospectus, which is incorporated herein by reference. Extra Space and Life Storage encourage you to carefully read the merger agreement in its entirety because it is the principal document governing the mergers and the other transactions contemplated by the merger agreement.

The merger agreement provides that the closing of the mergers will take place at the offices of Hogan Lovells, Columbia Square, 555 13th St NW, Washington, DC 20004 on the second business day following the date on which the last of the conditions to the closing of the mergers has been satisfied or waived (other than those conditions that by their terms are required to be satisfied at the closing, but subject to the satisfaction or, if permissible, waiver of such conditions at the closing), unless otherwise agreed by the Extra Space parties and the Life Storage parties.

The Mergers (See page 48)

Upon the terms and subject to the conditions set forth in the merger agreement, Life Storage and Extra Space will combine through a multi-step process:

 

   

first, in the company merger, Extra Space Merger Sub will merge with and into Life Storage, with Life Storage continuing as the surviving entity and a wholly owned subsidiary of Extra Space;

 

   

thereafter, the surviving entity in the company merger will be converted into a Maryland limited liability company and Life Storage OP GP will be converted into a Delaware limited liability company;

 

   

thereafter, in the contribution and issuance, Extra Space will cause all the outstanding equity interests of the Surviving Entity to be contributed to Extra Space OP in exchange for the issuance by Extra Space OP to Extra Space of a number of newly issued partnership units in Extra Space OP equal to the number of shares of Extra Space common stock to be issued in the company merger; and

 

   

thereafter, in the partnership merger, Extra Space OP Merger Sub will merge with and into Life Storage OP with Life Storage OP continuing as the surviving entity and a wholly owned indirect subsidiary of Extra Space OP.

Upon the consummation of the company merger described above, the separate existence of Extra Space Merger Sub will cease. Upon completion of the partnership merger described above, the separate existence of Extra Space OP Merger Sub will cease.

Merger Consideration (See page 117)

In the company merger, each share of Life Storage common stock issued and outstanding immediately prior to the company merger effective time will automatically be converted into 0.895 of a newly issued share of Extra Space common stock, without interest, plus the right, if any, to receive cash in lieu of fractional shares of Extra Space common stock into which such shares of Life Storage common stock would have been converted pursuant to the merger agreement. In the partnership merger, each Life Storage OP common unit that is issued and outstanding immediately prior to the partnership merger effective time will automatically be converted into 0.895 of a new validly issued Extra Space OP common unit (with each Minority Limited Partner’s Extra Space OP common units rounded up to the nearest whole Extra Space OP common unit).

 

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Recommendation of the Extra Space Board of Directors (See page 36)

The Extra Space board has unanimously approved the merger agreement, the mergers and the other transactions contemplated thereby. The Extra Space board made its determination after consultation with its legal and financial advisors and consideration of numerous factors.

The Extra Space board unanimously recommends that the Extra Space stockholders vote FOR the Extra Space common stock issuance proposal and FOR the Extra Space adjournment proposal.

Recommendation of the Life Storage Board of Directors (See page 42)

The Life Storage board has unanimously approved the merger agreement, the mergers and the other transactions contemplated thereby. The Life Storage board made its determination after consultation with its legal and financial advisors and consideration of numerous factors.

The Life Storage board unanimously recommends that the Life Storage stockholders vote FOR the Life Storage merger proposal, FOR the Life Storage compensation proposal and FOR  the Life Storage adjournment proposal.

The Extra Space Special Meeting (See page 36)

Extra Space has agreed to hold a special meeting for the purpose of voting upon the approval of the issuance of Extra Space common stock in connection with the company merger and other related matters. The Extra Space board recommends that the Extra Space stockholders approve the Extra Space common stock issuance proposal and the Extra Space board has agreed to use its reasonable best efforts to solicit the approval of the Extra Space common stock issuance proposal at the Extra Space special meeting. The Extra Space special meeting will be held on July 18, 2023, commencing at 9:00 a.m., Mountain Time, at the following link: www.virtualshareholdermeeting.com/EXR2023SM. The Extra Space special meeting will be held via virtual format only and will not be held at a physical location. To be admitted to the Extra Space special meeting, you must enter the control number found on your proxy card or voting instruction form or notice you previously received. You may vote during the Extra Space special meeting by following the instructions available on the meeting website during the meeting.

At the Extra Space special meeting, the Extra Space stockholders will be asked to consider and vote upon the following matters:

1. the Extra Space common stock issuance proposal; and

2. the Extra Space adjournment proposal.

Assuming a quorum is present, approval of the Extra Space common stock issuance proposal requires the affirmative vote of a majority of the votes cast by the holders of Extra Space common stock on such proposal.

Assuming a quorum is present, approval of the Extra Space adjournment proposal requires the affirmative vote of a majority of the votes cast by the holders of Extra Space common stock on such proposal.

At the close of business on the record date, directors and executive officers of Extra Space were entitled to vote 2,091,581 shares of Extra Space common stock, or approximately 1.55% of the Extra Space common stock issued and outstanding on that date. Extra Space currently expects that all Extra Space directors and executive officers will vote their shares of Extra Space common stock in favor of the proposal to approve the issuance of Extra Space common stock in connection with the company merger on the terms and conditions set forth in the merger agreement as well as the other proposals to be considered at the Extra Space special meeting, although none of them is contractually obligated to do so.

 

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Your vote as an Extra Space stockholder is very important. Accordingly, please sign and return the enclosed proxy card whether or not you plan to attend the Extra Space special meeting virtually.

The Life Storage Special Meeting (See page 42)

Life Storage has agreed to hold a special meeting for the purpose of voting upon the approval of the company merger and the other transactions contemplated by the merger agreement. The Life Storage board has agreed to recommend that the Life Storage stockholders approve the Life Storage merger proposal and to use its reasonable best efforts to solicit the approval of the Life Storage merger proposal at the Life Storage special meeting. The Life Storage special meeting will be held on July 18, commencing at 11:00 a.m., Eastern Time, at the following link: www.virtualshareholdermeeting.com/LSI2023SM. The Life Storage special meeting will be held in a virtual format only. To be admitted to the Life Storage special meeting, you must enter the control number found on your proxy card or voting instruction form. You may vote during the Life Storage special meeting by following the instructions available on the meeting website during the meeting.

At the Life Storage special meeting, the Life Storage stockholders will be asked to consider and vote upon the following matters:

1. the Life Storage merger proposal;

2. the Life Storage compensation proposal; and

3. the Life Storage adjournment proposal.

Assuming a quorum is present, approval of the Life Storage merger proposal requires the affirmative vote of holders of two-thirds of the outstanding shares of Life Storage common stock entitled to vote on such proposal.

Assuming a quorum is present, approval of the Life Storage compensation proposal requires the affirmative vote of a majority of the votes cast on such proposal.

Assuming a quorum is present, approval of the Life Storage adjournment proposal requires the affirmative vote of a majority of the votes cast on such proposal.

At the close of business on the record date, directors and executive officers of Life Storage were entitled to vote 335,933 shares of Life Storage common stock, or approximately 0.4% of the Life Storage common stock issued and outstanding on that date. Life Storage currently expects that all Life Storage directors and executive officers will vote their shares of Life Storage common stock in favor of the Life Storage merger proposal as well as the other proposals to be considered at the Life Storage special meeting, although none of them is contractually obligated to do so.

Your vote as a Life Storage stockholder is very important. Accordingly, please sign and return the enclosed proxy card whether or not you plan to attend the Life Storage special meeting virtually.

Opinion of Extra Space’s Financial Advisor (See page 71 and Annex B)

Extra Space has engaged Citi to act as its financial advisor in connection with the proposed transaction. In connection with Citi’s engagement, the Extra Space board requested that Citi evaluate the fairness, from a financial point of view, to Extra Space of the exchange ratio provided for pursuant to the merger agreement. On April 2, 2023, at a meeting of the Extra Space board held to evaluate the proposed transaction, Citi rendered an oral opinion, confirmed by delivery of a written opinion, dated April 2, 2023, to the Extra Space board to the effect that, as of such date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Citi, the exchange ratio provided for pursuant to the merger agreement was fair, from a financial point of view, to Extra Space.

 

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The full text of Citi’s written opinion, dated April 2, 2023, which describes the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Citi, is attached as Annex B to this joint proxy statement/prospectus and is incorporated herein by reference. Citi’s opinion was provided for the information of the Extra Space board (in its capacity as such) in connection with its evaluation of the fairness of the exchange ratio from a financial point of view, as of the date of the opinion, to Extra Space and did not address any other transactions or any terms (other than the exchange ratio to the extent expressly specified therein) or other aspects or implications of the mergers. Citi expressed no view as to, and its opinion did not address, the underlying business decision of Extra Space to effect the mergers or any other transactions, the relative merits of the mergers or any other transactions as compared to any alternative business strategies that might exist for Extra Space or the effect of any other transaction in which Extra Space might engage. Citi’s opinion is not intended to be and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act on any matters relating to the proposed transaction, any other transactions or otherwise.

Extra Space has agreed to pay Citi for its services in connection with the proposed transaction an aggregate fee of $18.0 million, of which $2.0 million was payable upon delivery of Citi’s opinion and $16.0 million is payable contingent upon consummation of the mergers. In addition, Extra Space agreed to reimburse Citi for Citi’s expenses, including fees and expenses of counsel, and to indemnify Citi and related parties against certain liabilities, including liabilities under federal securities laws, arising from Citi’s engagement.

For more information, see the section entitled “The MergersOpinion of Extra Space’s Financial Advisor” beginning on page 71 of this joint proxy statement/prospectus and Annex B to this joint proxy statement/prospectus.

Opinions of Life Storage’s Financial Advisors (See page 79 and Annexes C and D)

Opinion of Wells Fargo Securities

Life Storage retained Wells Fargo Securities as the financial advisor to the Life Storage board in connection with the mergers. At the meeting of the Life Storage board on April 2, 2023, Wells Fargo Securities rendered its oral opinion to the Life Storage board that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Wells Fargo Securities in preparing its opinion, the exchange ratio in the company merger was fair, from a financial point of view, to the holders of Life Storage common stock. Wells Fargo Securities subsequently confirmed this oral opinion by delivering its written opinion to the Life Storage board, dated April 2, 2023.

The full text of the written opinion of Wells Fargo Securities, dated April 2, 2023, which sets forth the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Wells Fargo Securities in preparing its opinion, is attached as Annex C to this joint proxy statement/prospectus and is incorporated herein by reference. Stockholders of Life Storage are urged to read the opinion in its entirety. Wells Fargo Securities’ written opinion was addressed to the Life Storage board (in its capacity as such) in connection with and for the purposes of its evaluation of the transaction, was directed only to the fairness, from a financial point of view, to the holders of Life Storage common stock of the exchange ratio in the company merger and did not address any other aspect of the transaction. The opinion does not constitute a recommendation to any stockholder of Life Storage as to how such stockholder should vote with respect to the transaction or any other matter.

For more information, see the section entitled “The MergersOpinions of Life Storage’s Financial AdvisorsOpinion of Wells Fargo Securities” beginning on page 79 of this joint proxy statement/prospectus and Annex C to this joint proxy statement/prospectus.

 

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Opinion of BofA Securities

In connection with the mergers, BofA Securities, Life Storage’s financial advisor, delivered to the Life Storage board an oral opinion on April 2, 2023, which was confirmed by delivery of a written opinion, dated April 2, 2023, as to the fairness, from a financial point of view and as of the date of the opinion, of the exchange ratio provided for in the company merger to the holders of Life Storage common stock (other than shares of Life Storage common stock held by Extra Space, Life Storage or any of their respective subsidiaries). The full text of the written opinion, dated April 2, 2023, of BofA Securities, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex D to this joint proxy statement/prospectus and is incorporated by reference herein in its entirety. BofA Securities provided its opinion to the Life Storage board (in its capacity as such) for the benefit and use of the Life Storage board in connection with and for purposes of its evaluation of the exchange ratio from a financial point of view. BofA Securities’ opinion does not address any other aspect of the transaction and no opinion or view was expressed as to the relative merits of the transaction in comparison to other strategies or transactions that might be available to Life Storage or in which Life Storage might engage or as to the underlying business decision of Life Storage to proceed with or effect the mergers. BofA Securities’ opinion does not address any other aspect of the transaction and does not constitute a recommendation to any stockholder as to how to vote or act in connection with the proposed transactions or any related matter.

For more information, see the section entitled “The MergersOpinions of Life Storages Financial AdvisorsOpinion of BofA Securities” beginning on page 87 of this joint proxy statement/prospectus and Annex D to this joint proxy statement/prospectus.

Treatment of Outstanding Life Storage Equity-Based Awards (See page 103)

Life Storage Restricted Shares

Each Life Storage Restricted Share award that is issued and outstanding as of immediately prior to the company merger effective time will vest in full and will, as of the company merger effective time, automatically be cancelled and converted into the right to receive promptly, and in any event within five business days, following the company merger effective time (i) a number of shares of Extra Space common stock equal to the product of the number of Life Storage Restricted Shares subject to such award issued and outstanding as of immediately prior to the company merger effective time, multiplied by 0.895, plus (ii) cash in lieu of any resulting fractional shares of Extra Space common stock, minus (iii) applicable taxes and other withholdings (which withholdings may include, but are not limited to, share withholding).

Life Storage PSUs

Each Life Storage PSU that is outstanding as of immediately prior to the company merger effective time will vest with respect to a number of shares of Life Storage common stock determined based on the actual achievement of the applicable performance conditions over the truncated performance period ending on the closing date and will automatically be cancelled and converted into the right to receive promptly, and in any event within five business days, following the company merger effective time (i) a number of shares of Extra Space common stock equal to the product of the number of shares of Life Storage common stock that vested in accordance with the foregoing, multiplied by 0.895, plus (ii) cash in lieu of any resulting fractional shares of Extra Space common stock, minus (iii) applicable taxes and other withholdings (which withholdings may include, but are not limited to, share withholding).

 

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Life Storage DSUs

Each Life Storage DSU that is issued and outstanding as of immediately prior to the company merger effective time will vest in full and will, as of the company merger effective time, automatically be cancelled and converted into the right to receive promptly, and in any event within five business days, following the company merger effective time (i) a number of shares of Extra Space common stock equal to the product of the number Life Storage DSUs issued and outstanding as of immediately prior to the company merger effective time, multiplied by 0.895, plus (ii) cash in lieu of any resulting fractional shares of Extra Space common stock, minus (iii) applicable taxes and other withholdings (which withholdings may include, but are not limited to, share withholding). However, to the extent that such payments cannot be paid at the time specified in the previous sentence without causing the imposition of additional taxes and penalties under Section 409A of the Code, such payments shall instead be paid at the earliest time after the company merger effective time that would not result in the imposition of such taxes and penalties.

Life Storage Stock Options

Not later than twenty days prior to the company merger effective time, Life Storage will provide written notice to each holder of an outstanding and unexercised option to purchase shares of Life Storage common stock, and each such holder will have at least fifteen days prior to the closing date to exercise such options. Each option that is outstanding and unexercised as of immediately prior to the company merger effective time, whether vested or unvested, will automatically be cancelled in exchange for no consideration as of the company merger effective time.

Directors and Management of the Combined Company Following the Mergers (See page 117)

The merger agreement provides that Extra Space will take all actions necessary to add three directors designated by Life Storage, who are currently expected to be Life Storage’s Chief Executive Officer, Joseph V. Saffire, as well as Mark G. Barberio and Susan Harnett, to the Extra Space board at the company merger effective time. Except for the addition of the three directors designated by Life Storage to the Extra Space board, there will be no change to the members of the Extra Space board or executive officers as a result of the mergers. Kenneth M. Woolley will continue to serve as Chairman of the Extra Space board, and Joseph D. Margolis will continue to serve as Extra Space’s Chief Executive Officer.

Interests of Life Storage’s Directors and Executive Officers in the Mergers (See page 102)

In considering the recommendation of the Life Storage board to vote in favor of the proposal to approve the company merger and the other transactions contemplated by the merger agreement, Life Storage stockholders should be aware that certain of Life Storage’s directors and executive officers have interests in the mergers that are different from, or in addition to, the interests of Life Storage stockholders generally, including accelerated vesting and other treatment of outstanding Life Storage equity-based awards in connection with the company merger, potential severance payments and benefits, potential retention or transaction bonus payments, potential appointment to the Extra Space board, and rights to ongoing indemnification and insurance coverage. The members of the Life Storage board were aware of and considered such Life Storage directors’ and executive officers’ interests, among other matters, in evaluating the merger agreement and the mergers, in reaching their decision to approve the merger agreement and the transactions contemplated by the merger agreement (including the mergers), and in recommending that Life Storage stockholders approve the company merger and the other transactions contemplated by the merger agreement.

 

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Listing of Extra Space Common Stock; Delisting and Deregistration of Life Storage Common Stock (See page 115)

It is a condition to each party’s obligation to complete the mergers that the shares of Extra Space common stock to be issued in connection with the company merger be approved for listing on the NYSE, subject to official notice of issuance. Extra Space has agreed to use its commercially reasonable efforts to have the application for the listing of the Extra Space common stock accepted by the NYSE as promptly as practicable. After the company merger is completed, the Life Storage common stock currently listed on the NYSE will cease to be listed on the NYSE and will be deregistered under the Exchange Act.

Stockholder Dissenters’ Rights in the Mergers (See page 119)

No dissenters’ or appraisal rights will be available with respect to the mergers or the other transactions contemplated by the merger agreement.

Expected Timing of the Mergers

The parties expect the mergers to be completed in the second half of 2023. Neither Extra Space nor Life Storage can predict the actual date on which the mergers will be completed, or if the mergers will be completed at all, because completion of the mergers is subject to conditions and factors outside of the control of both companies, including the approval of the issuance of Extra Space common stock in connection with the company merger by the Extra Space stockholders, the approval of the company merger by the Life Storage stockholders and the satisfaction of certain other closing conditions.

Conditions to Completion of the Mergers (See page 143)

The respective obligations of each of the Extra Space parties and the Life Storage parties to effect the mergers and to consummate the other transactions contemplated by the merger agreement are subject to the satisfaction or waiver of certain customary conditions, including, among others, the approval of the company merger by the Life Storage stockholders, the approval of the issuance of Extra Space common stock in connection with the company merger by the Extra Space stockholders, the absence of any legal prohibitions, listing of Extra Space common stock, delivery of certain tax opinions, the accuracy of the other parties’ representations and warranties (subject to customary materiality qualifiers), and compliance by the other parties with their respective obligations under the merger agreement (subject to customary materiality qualifiers).

Neither Life Storage nor Extra Space can be certain when, or if, the conditions to the completion of the mergers will be satisfied or waived, or that the mergers will be effected. See the section entitled “The Merger AgreementConditions to Completion of the Mergers” beginning on page 143 of this joint proxy statement/prospectus for more information.

Regulatory Approvals Required for the Mergers (See page 109)

Extra Space and Life Storage are not aware of any material federal or state regulatory requirements (including any mandatory waiting period) that must be complied with, or regulatory approvals that must be obtained, in connection with the mergers or the other transactions contemplated by the merger agreement, other than filings of applicable certificates or articles of merger with respect to the mergers with the Delaware Secretary of State and the State Department of Assessments and Taxation of Maryland.

No Solicitation of Acquisition Proposals (See page 135)

The merger agreement provides that each of Extra Space and Life Storage will not, and will cause its subsidiaries and its and their respective officers and directors not to, and will instruct and use its reasonable best

 

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efforts to cause its and their respective other affiliates, officers, directors, employees, consultants, investment bankers, financial advisors, attorneys, accountants and other representatives retained by such person or entity not to, directly or indirectly:

 

   

solicit, initiate or knowingly encourage or knowingly facilitate (including by way of furnishing non-public information) any inquiries, indications of interest or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, an acquisition proposal;

 

   

engage in, continue or otherwise participate in any negotiations or discussions concerning, or provide any nonpublic information or data concerning Life Storage or Extra Space to any third party in connection with an acquisition proposal or any inquiries, proposals, indications of interest or offers that constitute, or would reasonably be expected to lead to, an acquisition proposal;

 

   

approve or execute or enter into any letter of intent, agreement in principle, merger agreement, asset purchase or share exchange agreement, option agreement or other similar definitive agreement relating to any acquisition proposal; or

 

   

propose or agree to do any of the foregoing.

Additionally, each of Extra Space and Life Storage will, and will cause its subsidiaries and their respective officers and directors to, and will instruct and use its reasonable best efforts to cause its and its respective subsidiaries’ other representatives to:

 

   

cease immediately and terminate solicitations, discussions, negotiations or communications with any third party that may be ongoing with any third party with respect to any acquisition proposal; and

 

   

terminate any such third party’s access to data rooms.

Notwithstanding the above restrictions, under certain circumstances, and to the extent that the Extra Space board or the Life Storage board, as applicable, concludes in good faith (after consultation with outside legal counsel and financial advisors) that an acquisition proposal either constitutes or would reasonably be expected to lead to a superior proposal and that failure to do so would reasonably be expected to be inconsistent with their duties under applicable law, Extra Space and Life Storage, as applicable, may, prior to the Extra Space special meeting or the Life Storage special meeting, respectively, engage in, enter into or otherwise participate in discussions and negotiations with, and furnish non-public information to, any person in response to an unsolicited, bona fide written acquisition proposal made after the date of the merger agreement that did not result from a material breach of the merger agreement.

See the section entitled “The Merger AgreementCovenants and AgreementsNo Solicitation of Acquisition Proposals” beginning on page 135 of this joint proxy statement/prospectus for more information.

No Change of Board Recommendation; No Entry into Alternative Transactions (See page 135)

Prior to the receipt of the Extra Space stockholder approval, the Extra Space board may make a change in Extra Space recommendation, and prior to the Life Storage stockholder approval, the Life Storage board may make a change in Life Storage recommendation, in each case (as applicable), if and only if:

 

   

(i) an unsolicited bona fide written acquisition proposal (provided that the acquisition proposal did not result from a material breach by the applicable party of the non-solicitation covenant and covenants restricting the sharing of information in the merger agreement) is made to Extra Space or Life Storage, as applicable, and is not withdrawn, and the Extra Space board or the Life Storage board, as applicable, concludes in good faith (after consultation with its outside legal counsel and its financial advisors) that such acquisition proposal constitutes a superior proposal; or (ii) an intervening event has occurred; and in the case of either clause (i) or clause (ii), the Extra Space board or the Life Storage board, as applicable, concludes in good faith (after consultation with its outside legal counsel) that failure to take such action would reasonably be expected to be inconsistent with their duties under applicable law;

 

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four business days, ending at 11:59 p.m., Eastern Time, on such fourth business day, which we refer to as the “notice period,” have elapsed since Extra Space or Life Storage, as applicable, has given written notice to the other party advising the other party that it intends to take such action, which notice (i) in the case of an acquisition proposal, identifies the person making the superior proposal and describing the material terms and conditions of any such superior proposal that is the basis of the proposed action (and attaching copies of all agreements or other documents evidencing such superior proposal), and (ii) in the case of an intervening event, advising the other party that it intends to take such action and describing in reasonable detail the facts and circumstances that are the basis for the proposed action;

 

   

during the notice period, the Extra Space board or the Life Storage board, as applicable, considers and, if requested by the other party, engages, and causes its representatives to engage, in good faith discussions with the other party regarding any adjustment or modification of the terms of the merger agreement proposed by the other party so that the superior proposal ceases to constitute a superior proposal; and

 

   

the Extra Space board or the Life Storage board, as applicable, following the notice period, again concludes in good faith (after consultation with its outside legal counsel and its financial advisors and taking into account any adjustment or modification of the terms of the merger agreement proposed in writing by the other party) that (i) in the case of an acquisition proposal, such acquisition proposal giving rise to the superior proposal continues to constitute a superior proposal and that the failure to take such action would reasonably be expected to be inconsistent with their duties under applicable law and (ii) in the case of an intervening event, that the failure to take such action would reasonably be expected to be inconsistent with their duties under applicable law.

Unless the merger agreement is terminated, notwithstanding a change in Life Storage recommendation, unless Life Storage terminates the merger agreement in connection with a superior proposal, Life Storage must cause the Life Storage merger proposal to be submitted to a vote of its stockholders at the Life Storage special meeting and notwithstanding a change in Extra Space recommendation, Extra Space must cause the Extra Space common stock issuance proposal to be submitted to a vote of its stockholders at the Extra Space special meeting.

Neither Life Storage nor Extra Space may submit to the vote of its stockholders any acquisition proposal other than the mergers prior to the termination of the merger agreement.

See the section entitled “The Merger AgreementCovenants and AgreementsNo Solicitation of Acquisition Proposals” beginning on page 135 of this joint proxy statement/prospectus for more information.

Termination of the Merger Agreement (See page 146)

The merger agreement may be terminated and the mergers may be abandoned at any time prior to the company merger effective time, whether before or after the receipt of the Life Storage stockholder approval and the Extra Space stockholder approval (in each case, unless otherwise specified below), under the following circumstances:

 

   

by mutual written consent of Life Storage and Extra Space;

 

   

by either Life Storage or Extra Space if:

 

   

upon the completion of voting at the Life Storage special meeting, the Life Storage stockholder approval is not obtained (except that Life Storage will not have this right to terminate if the failure to obtain the Life Storage stockholder approval was primarily caused by a material breach by any of the Life Storage parties of their respective obligations with respect to the preparation of the Form S-4 and this joint proxy statement/prospectus, the Life Storage special meeting, non-solicitation of acquisition proposals or any change in Life Storage recommendation);

 

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upon the completion of voting at the Extra Space special meeting, the Extra Space stockholder approval is not obtained (except that Extra Space will not have this right to terminate if the failure to obtain the Extra Space stockholder approval was primarily caused by a material breach by any of the Extra Space parties of their respective obligations with respect to the preparation of the Form S-4 and this joint proxy statement/prospectus, the Extra Space special meeting, non-solicitation of acquisition proposals or any change in Extra Space recommendation);

 

   

a governmental authority of competent jurisdiction has issued an order, decree, judgment, injunction or other law or taken any other action, which permanently restrains, enjoins or otherwise prohibits or makes illegal the consummation of the mergers, and such order, decree, judgment, injunction, law or other action has become final and non-appealable; or

 

   

the mergers have not been consummated on or before 5:00 p.m., Eastern Time, on December 31, 2023 (except that this termination right will not be available to a party whose material breach of any provision of the merger agreement has been the primary cause of, or resulted in, the failure of the mergers to occur on or before such date).

 

   

by Life Storage if:

 

   

at any time prior to the receipt of the Life Storage stockholder approval, in order to enter into an acquisition agreement with respect to a superior proposal in compliance with the terms of the merger agreement (except that the merger agreement may not be so terminated unless Life Storage concurrently pays to Extra Space the termination fee described in the section entitled “The Merger AgreementTermination of the Merger AgreementTermination Fees and Expenses” beginning on page 147 of this joint proxy statement/prospectus);

 

   

there has been a change in Extra Space recommendation (except that Life Storage will no longer have this right to terminate if and when the Extra Space stockholder approval is obtained);

 

   

there is a willful breach by Extra Space or any of its subsidiaries or its or their respective representatives of the non-solicitation/change of recommendation covenants; or

 

   

any of the Extra Space parties has breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the merger agreement, which breach or failure to perform, either individually or in the aggregate, would result in, if occurring or continuing on the closing date, the related closing conditions not being satisfied on such date, and such breach or failure to perform is not cured or curable by the earlier of 30 days after notice of such breach or failure to perform is given or 5:00 p.m., Eastern Time, on December 31, 2023, unless Life Storage or Life Storage OP is in breach of any of its own representations, warranties, covenants or agreements set forth in the merger agreement such that the related closing conditions would not be satisfied.

 

   

by Extra Space if:

 

   

there has been a change in Life Storage recommendation (except that Extra Space will no longer have this right to terminate if and when the Life Storage stockholder approval is obtained);

 

   

there is a willful breach by Life Storage or any of its subsidiaries or its or their respective representatives of the non-solicitation/change of recommendation covenants; or

 

   

any of the Life Storage parties has breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the merger agreement, which breach or failure to perform, either individually or in the aggregate, would result in, if occurring or continuing on the closing date, the related closing conditions not being satisfied on such date, and such breach or failure to perform is not cured or curable by the earlier of 30 days after notice of such breach or failure to perform is given or 5:00 p.m., Eastern Time, on December 31, 2023, unless Extra Space

 

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or Extra Space OP is in breach of any of its own representations, warranties, covenants or agreements set forth in the merger agreement such that the related closing conditions would not be satisfied.

See the section entitled “The Merger AgreementTermination of the Merger Agreement” beginning on page 146 of this joint proxy statement/prospectus for more information.

Termination Fees and Expenses (See page 147)

Life Storage has agreed to pay to Extra Space a termination fee of $371 million if the merger agreement is terminated in the following circumstances:

 

   

Life Storage terminates the merger agreement, at any time prior to the receipt of the Life Storage stockholder approval, to enter into an acquisition agreement with respect to a superior proposal; or

 

   

Extra Space terminates the merger agreement following a change in Life Storage recommendation.

Further, Life Storage has agreed to pay to Extra Space a termination fee of $371 million upon the occurrence of any of the following (provided that for purposes of the discussion below, the references to “15%” in the definition of acquisition proposal will instead be “50%”):

 

   

termination of the merger agreement by Life Storage or Extra Space if after a vote at the Life Storage special meeting, the Life Storage stockholder approval is not obtained and prior to the termination of the merger agreement, Life Storage (i) receives or has received an acquisition proposal with respect to Life Storage or any Life Storage subsidiary that has been publicly announced prior to the time of the Life Storage special meeting and (ii) before the date that is 12 months after the date of termination of the merger agreement, any transaction or series of related transactions that constitutes an acquisition proposal is consummated by Life Storage or a Life Storage subsidiary or Life Storage or a Life Storage subsidiary enters into an acquisition agreement;

 

   

termination of the merger agreement by Life Storage or Extra Space if the consummation of the mergers has not occurred on or before 5:00 p.m., Eastern Time, on December 31, 2023 and prior to the termination of the merger agreement, Life Storage (i) receives or has received an acquisition proposal with respect to Life Storage or any Life Storage subsidiary that has been publicly announced or otherwise communicated to the Life Storage board prior to the date of termination of the merger agreement and (ii) before the date that is 12 months after the date of termination of the merger agreement, any transaction or series of related transactions that constitutes an acquisition proposal is consummated by Life Storage or a Life Storage subsidiary or Life Storage or a Life Storage subsidiary enters into an acquisition agreement; or

 

   

termination of the merger agreement by Extra Space, if any of the Life Storage parties have breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the merger agreement, which breach or failure to perform, either individually or in the aggregate, would result in, if occurring or continuing on the closing date, the related closing conditions not being satisfied on the closing date, and such breach or failure to perform is not cured or curable by the earlier of 30 days after notice of such breach or failure to perform is given or 5:00 p.m., Eastern Time, on December 31, 2023, and prior to the termination of the merger agreement, Life Storage (i) receives or has received an acquisition proposal with respect to Life Storage or any Life Storage subsidiary that has been publicly announced or otherwise communicated to the Life Storage board prior to the date of termination of the merger agreement and (ii) before the date that is 12 months after the date of termination of the merger agreement, any transaction or series of related transactions that constitutes an acquisition proposal is consummated by Life Storage or a Life Storage subsidiary or Life Storage or a Life Storage subsidiary enters into an acquisition agreement.

 

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Life Storage has agreed to pay to Extra Space all documented reasonable out-of-pocket expenses (including fees and expenses of counsel and other advisors) paid or payable by any of the Extra Space parties in connection with the merger agreement and the transactions contemplated by the merger agreement up to a maximum of $20 million if the merger agreement is terminated by either Life Storage or Extra Space because, upon the completion of the voting at the Life Storage special meeting or any adjournment or postponement thereof, the Life Storage stockholder approval is not obtained. Any such amount paid by Life Storage would be credited against the payment of any termination fee that Life Storage subsequently becomes obligated to pay Extra Space.

Extra Space has agreed to pay to Life Storage a termination fee of $761 million upon a termination of the merger agreement by Life Storage following a change in Extra Space recommendation.

Further, Extra Space has agreed to pay to Life Storage a termination fee of $761 million upon the occurrence of any of the following (provided that for purposes of the discussion below, the references to “15%” in the definition of acquisition proposal will instead be “50%”):

 

   

termination of the merger agreement by Life Storage or Extra Space if after a vote at the Extra Space special meeting, the Extra Space stockholder approval is not obtained, and prior to the termination of the merger agreement, Extra Space (i) receives or has received an acquisition proposal with respect to Extra Space or any Extra Space subsidiary that has been publicly announced prior to the time of the Extra Space special meeting and (ii) before the date that is 12 months after the date of termination of the merger agreement, any transaction or series of related transactions that constitutes an acquisition proposal is consummated by Extra Space or an Extra Space subsidiary or Extra Space or an Extra Space subsidiary enters into an acquisition agreement;

 

   

termination of the merger agreement by Life Storage or Extra Space if the consummation of the mergers has not occurred on or before 5:00 p.m., Eastern Time, on December 31, 2023 and prior to the termination of the merger agreement, Extra Space (i) receives or has received an acquisition proposal with respect to Extra Space or any Extra Space subsidiary that has been publicly announced or otherwise communicated to the Extra Space board prior to the date of termination of the merger agreement and (ii) before the date that is 12 months after the date of termination of the merger agreement, any transaction or series of related transactions that constitutes an acquisition proposal is consummated by Extra Space or an Extra Space subsidiary or Extra Space or an Extra Space subsidiary enters into an acquisition agreement; or

 

   

termination of the merger agreement by Life Storage, if any of the Extra Space parties has breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the merger agreement, which breach or failure to perform, either individually or in the aggregate, would result in, if occurring or continuing on the closing date, the related closing conditions not being satisfied on the closing date, and such breach or failure to perform is not cured or curable by the earlier of 30 days after notice of such breach or failure to perform is given or 5:00 p.m., Eastern Time, on December 31, 2023, and prior to the termination of the merger agreement, Extra Space (i) receives or has received an acquisition proposal with respect to Extra Space or any Extra Space subsidiary that has been publicly announced or otherwise communicated to the Extra Space board prior to the date of termination of the merger agreement and (ii) before the date that is 12 months after the date of termination of the merger agreement, any transaction or series of related transactions that constitutes an acquisition proposal is consummated by Extra Space or an Extra Space subsidiary or Extra Space or an Extra Space subsidiary enters into an acquisition agreement.

Extra Space has agreed to pay to Life Storage all documented reasonable out-of-pocket expenses (including fees and expenses of counsel and other advisors) paid or payable by any of the Life Storage parties in connection with the merger agreement and the transactions contemplated by the merger agreement up to a maximum of $20 million if the merger agreement is terminated by either Life Storage or Extra Space because, upon

 

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completion of the voting at the Extra Space special meeting or any adjournment or postponement thereof, the Extra Space stockholder approval is not obtained. Any such amount paid by Extra Space would be credited against the payment of any termination fee that Extra Space subsequently becomes obligated to pay Life Storage.

See the section entitled “The Merger AgreementTermination of the Merger Agreement” on page 146 of this joint proxy statement/prospectus for more information.

Remedies (See page 150)

The parties to the merger agreement are entitled to an injunction or injunctions to prevent breaches of the merger agreement by any other party and to specifically enforce the terms and provisions of the merger agreement.

Material United States Federal Income Tax Consequences of the Company Merger (See page 109)

Extra Space and Life Storage intend that the company merger and the deemed liquidation, taken together, qualify as a reorganization within the meaning of Section 368(a) of the Code. It is a condition to the completion of the mergers that Extra Space and Life Storage receive written opinions from their respective counsel to the effect that the company merger and the deemed liquidation, taken together, will qualify as a reorganization within the meaning of Section 368(a) of the Code (which opinions will be subject to customary exceptions, assumptions and qualifications). Assuming that the company merger and the deemed liquidation, taken together, qualify as a reorganization, United States holders of shares of Life Storage common stock generally will not recognize gain or loss for United States federal income tax purposes upon the receipt of shares of Extra Space common stock in exchange for shares of Life Storage common stock in connection with the company merger (except with respect to the receipt of cash in lieu of fractional shares of Extra Space common stock, if any).

For further discussion of material United States federal income tax consequences of the company merger, see the section entitled “The MergersMaterial United States Federal Income Tax Consequences of the Company Merger” beginning on page 109 of this joint proxy statement/prospectus.

Holders of Life Storage common stock should consult their tax advisors to determine the tax consequences to them (including the application and effect of any state, local or non-United States income and other tax laws) of the company merger and the ownership and disposition of shares of the Combined Company common stock.

Accounting Treatment of the Mergers (See page 114)

Extra Space prepares its financial statements in accordance with United States GAAP. The mergers will be accounted for by using the business combination accounting rules. See the section entitled “The MergersAccounting Treatment” beginning on page 114 of this joint proxy statement/prospectus for more information.

Comparison of Rights of Extra Space Stockholders and Life Storage Stockholders (See page 168)

The rights of Life Storage stockholders are currently governed by and subject to the provisions of the MGCL, the Life Storage charter and the Life Storage bylaws. Upon consummation of the company merger, the rights of the former Life Storage stockholders that receive shares of Extra Space common stock in the company merger will be governed by the MGCL, the Extra Space charter and the Extra Space bylaws, rather than the Life Storage charter and the Life Storage bylaws. See the section entitled “Comparison of Rights of the Extra Space Stockholders and the Life Storage Stockholders” beginning on page 168 of this joint proxy statement/prospectus for more information.

 

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RISK FACTORS

In addition to the other information included in this joint proxy statement/prospectus, including the matters addressed in the section entitled “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 31 of this joint proxy statement/prospectus, you should carefully consider the following risks before deciding how to vote your shares of Extra Space common stock or Life Storage common stock. In addition, you should read and consider the risks associated with each of the businesses of Extra Space and Life Storage because these risks will also affect the Combined Company. These risks can be found in the respective Annual Reports on Form 10-K for the year ended December 31, 2022, and subsequent Quarterly Reports on Form 10-Q of Extra Space and Life Storage, each of which is filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. You should also read and consider the other information in this joint proxy statement/prospectus and the other documents incorporated by reference into this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information and Incorporation by Reference” beginning on page 188 of this joint proxy statement/prospectus.

Risks Related to the Mergers

The exchange ratio is fixed and will not be adjusted in the event of any change in the stock prices of either Extra Space or Life Storage.

Upon the closing of the company merger, each outstanding share of Life Storage common stock (other than shares of Life Storage common stock owned by any of the Life Storage parties or any wholly owned subsidiary of Life Storage and each share of Life Storage common stock owned by any of the Extra Space parties or any of their respective wholly owned subsidiaries) will be converted into the right to receive 0.895 of a share of Extra Space common stock, with cash paid in lieu of any fractional shares, without interest. The exchange ratio of 0.895 was fixed in the merger agreement and, except for certain adjustments on account of changes in the capitalization of Extra Space or Life Storage, will not be adjusted for changes in the market prices of shares of either Extra Space common stock or Life Storage common stock. Changes in the market price of shares of Extra Space common stock prior to the closing of the company merger will affect the market value of the merger consideration that Life Storage stockholders will be entitled to receive upon completion of the company merger. Stock price changes may result from a variety of factors (many of which are beyond the control of either Extra Space or Life Storage), including the following factors:

 

   

market reaction to the announcement of the mergers and the prospects of the Combined Company;

 

   

changes in the respective businesses, operations, assets, liabilities and prospects of Extra Space, Life Storage or the Combined Company;

 

   

changes in market assessments of the business, operations, financial position and prospects of Extra Space, Life Storage or the Combined Company;

 

   

market assessments of the likelihood that the mergers will close;

 

   

interest rates (including changes or anticipated changes in interest rates), general market and economic conditions and other factors generally affecting the market prices of Extra Space common stock and Life Storage common stock;

 

   

federal, state and local legislation, governmental regulation and legal developments in the businesses in which Extra Space or Life Storage operate; and

 

   

other factors beyond the control of either Extra Space or Life Storage, including those described or referred to elsewhere in this “Risk Factors” section.

The market price of shares of Extra Space common stock at the closing of the mergers may vary from the price on the date the merger agreement was executed, on the date of this joint proxy statement/prospectus, on the date of the Extra Space special meeting and on the date of the Life Storage special meeting. As a result, the

 

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market value of the merger consideration represented by the exchange ratio will also vary. For example, based on the range of trading prices of shares of Extra Space common stock during the period after March 31, 2023, the last trading day before Life Storage and Extra Space announced the merger agreement, through June 1, 2023, the exchange ratio represented a market value ranging from $128.31 to $147.39 per share.

If the market price of shares of Extra Space common stock increases between the date the merger agreement was signed, the date of this joint proxy statement/prospectus, the date of the Extra Space special meeting or the date of the Life Storage special meeting and the date of the closing of the mergers, Life Storage stockholders could receive shares of Extra Space common stock that have a market value upon completion of the mergers that is greater than the market value of such shares calculated pursuant to the exchange ratio on the date the merger agreement was signed, the date of the joint proxy statement/prospectus, the date of the Extra Space special meeting or the date of the Life Storage special meeting, respectively. Conversely, if the market price of shares of Extra Space common stock declines between the date the merger agreement was signed, the date of this joint proxy statement/prospectus, the date of the Extra Space special meeting or the date of the Life Storage special meeting and the closing of the mergers, Life Storage stockholders could receive shares of Extra Space common stock that have a market value upon the closing of the mergers that is less than the market value of such shares calculated pursuant to the exchange ratio on the date the merger agreement was signed, the date of this joint proxy statement/prospectus, the date of the Extra Space special meeting or the date of the Life Storage special meeting, respectively. Furthermore, at the time of the Extra Space special meeting and the Life Storage special meeting, Extra Space stockholders and Life Storage stockholders will not know with certainty the value of the Extra Space common stock that Life Storage stockholders will receive upon completion of the mergers.

Therefore, while the number of shares of Extra Space common stock to be issued per share of Life Storage common stock is fixed, Extra Space stockholders and Life Storage stockholders cannot be sure of the market value of the merger consideration Life Storage stockholders will receive upon the closing of the mergers.

Holders of Extra Space common stock and Life Storage common stock will have a reduced ownership and voting interest in the Combined Company after the mergers and will exercise less influence over management.

The mergers will result in Extra Space stockholders and Life Storage stockholders having an ownership stake in the Combined Company that is smaller than their current stake in Extra Space and Life Storage, respectively, as of immediately prior to the mergers. Upon completion of the mergers, based on the number of shares of Extra Space common stock and Life Storage common stock outstanding on May 18, 2023, we estimate that continuing Extra Space stockholders will own approximately 65% of the issued and outstanding common stock of the Combined Company, and former Life Storage stockholders will own approximately 35% of the issued and outstanding common stock of the Combined Company. Consequently, Extra Space stockholders and Life Storage stockholders, as a general matter, will have less influence over the management and policies of the Combined Company after the company merger effective time than they currently exercise over the management and policies of Extra Space and Life Storage, respectively.

Completion of the mergers is subject to many conditions, and if these conditions are not satisfied or waived, the mergers will not be completed, which could result in a requirement that Extra Space or Life Storage pay certain termination fees.

The consummation of the mergers is subject to certain conditions, including (i) the approval of the company merger by the affirmative vote of the holders of two-thirds of the outstanding shares of Life Storage common stock entitled to vote on such matter, (ii) the approval of the Extra Space common stock issuance by the affirmative vote of a majority of the votes cast by the holders of Extra Space common stock, (iii) the shares of Extra Space common stock to be issued in the company merger having been approved for listing on the NYSE, (iv) the Form S-4 (of which this joint proxy statement/prospectus forms a part) having been declared effective, (v) the absence of any temporary restraining order, injunction or other order, decree or judgment being issued by any governmental authority and no law being enacted, which would have the effect of making illegal or

 

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otherwise prohibiting the consummation of the mergers, (vi) the receipt of certain legal opinions by Extra Space and Life Storage and (vii) other customary conditions specified in the merger agreement. See the section entitled “The Merger AgreementConditions to Completion of the Mergers” beginning on page 143 of this joint proxy statement/prospectus.

There can be no assurance that the conditions to the closing of the mergers will be satisfied or waived or that the mergers will be completed. Failure to consummate the mergers may adversely affect Extra Space’s or Life Storage’s results of operations and business prospects for the following reasons, among others: (i) each of Extra Space and Life Storage have incurred and will incur certain transaction costs, regardless of whether the proposed mergers close, which could adversely affect its financial condition, results of operations and ability to make distributions to its stockholders; and (ii) the proposed mergers, whether or not they close, will divert the attention of certain of each of Extra Space’s and Life Storage’s management and other key employees from ongoing business activities, including the pursuit of other opportunities that could be beneficial to Extra Space and Life Storage, respectively. In addition, Life Storage or Extra Space may terminate the merger agreement under certain circumstances, including, among other reasons, if the mergers are not completed by December 31, 2023.

If the merger agreement is terminated under certain circumstances specified in the merger agreement, Extra Space may be required to pay Life Storage a termination fee of $761 million and/or reimburse Life Storage’s transaction expenses up to an amount equal to $20 million, or Life Storage may be required to pay Extra Space a termination fee of $371 million and/or reimburse Extra Space’s transaction expenses up to an amount equal to $20 million. If the mergers are not consummated, the price of Extra Space common stock or Life Storage common stock might decline.

Failure to complete the mergers could negatively impact the stock prices and the future business and financial results of Extra Space or Life Storage.

If the mergers are not completed, the ongoing business of Extra Space or Life Storage could be materially adversely affected and without realizing any of the benefits of having completed the mergers, Extra Space and Life Storage will be subject to a variety of risks associated with the failure to complete the mergers, including the following:

 

   

the market price of Extra Space common stock or Life Storage common stock could decline;

 

   

Extra Space being required, under certain circumstances, to pay to Life Storage a termination fee of $761 million depending on the circumstances and/or reimburse Life Storage’s transaction expenses up to $20 million or Life Storage being required, under certain circumstances, to pay to Extra Space a termination fee of $371 million depending on the circumstances and/or reimburse Extra Space’s transaction expenses up to $20 million, as applicable;

 

   

if the merger agreement is terminated and the Extra Space board or the Life Storage board seeks another business combination, Extra Space stockholders or Life Storage stockholders, respectively, cannot be certain that Extra Space or Life Storage, respectively, will be able to find a party willing to enter into a transaction on terms equivalent to or more attractive than the terms that Extra Space and Life Storage have agreed to in the merger agreement;

 

   

Extra Space or Life Storage may experience negative reactions from the financial markets or their respective customers, vendors or employees;

 

   

Extra Space or Life Storage having to pay certain costs relating to the mergers, such as legal, accounting, financial advisor, filing, printing and mailing fees whether or not the mergers are completed; and

 

   

diversion of Extra Space’s or Life Storage’s management focus and resources from operational matters and other strategic opportunities while working to implement the mergers.

 

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If the mergers are not completed, these risks could materially affect the business, financial results and share price of Extra Space or Life Storage. In addition, if the mergers are not completed, Extra Space or Life Storage could be subject to litigation related to any failure to complete the mergers or related to any enforcement proceeding commenced against Extra Space or Life Storage to perform its obligations under the merger agreement. The materialization of any of these risks could adversely impact Extra Space’s or Life Storage’s ongoing business.

The pendency of the mergers could adversely affect the business and operations of Extra Space or Life Storage.

Prior to the effective time of the mergers, some customers, prospective customers or vendors of Extra Space or Life Storage may delay or defer decisions, which could negatively affect the revenues, earnings, cash flows and expenses of Extra Space or Life Storage, regardless of whether the mergers are completed. Similarly, current and prospective employees of Life Storage may experience uncertainty about their future roles with the Combined Company following the mergers, which may materially adversely affect the ability of Life Storage to attract and retain key personnel during the pendency of the mergers. In addition, third-party owners of stores which Extra Space or Life Storage manage may cancel their management agreements, which could negatively affect Extra Space’s or Life Storage’s revenues, earnings, cash flows and expenses, regardless of whether the mergers are completed, as well as negatively affect the financial position of the Combined Company. Further, due to operating restrictions in the merger agreement, Extra Space and Life Storage may be unable, during the pendency of the mergers, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial.

The merger agreement contains provisions that could make it difficult for a third party to acquire all or a significant portion of Extra Space or Life Storage prior to the mergers.

Pursuant to the merger agreement, each of Extra Space and Life Storage has agreed not to (i) solicit proposals relating to certain alternative transactions, (ii) engage in discussions or negotiations or provide non-public information in connection with any proposal for an alternative transaction from a third party or (iii) approve or enter into any agreements providing for any such alternative transaction, in each case, subject to certain exceptions to permit members of the Extra Space board and the Life Storage board to comply with their duties under applicable law. Notwithstanding these “no-shop” restrictions, prior to obtaining the Extra Space stockholder approval or the Life Storage stockholder approval, as applicable, under specified circumstances the Extra Space board or the Life Storage board, respectively, may change its recommendation of the transaction, and Life Storage may also terminate the merger agreement to accept a superior proposal upon payment of the termination fee described below.

The merger agreement provides that, in connection with the termination of the merger agreement under specified circumstances, Extra Space may be required to pay to Life Storage a termination fee of $761 million and/or reimburse Life Storage’s transaction expenses up to an amount equal to $20 million and Life Storage may be required to pay to Extra Space a termination fee of $371 million and/or reimburse Extra Space’s transaction expenses up to an amount equal to $20 million. See the sections entitled “The Merger AgreementCovenants and AgreementsNo Solicitation of Acquisition Proposals” and “The Merger AgreementTermination of the Merger AgreementTermination Fees and Expenses” beginning on pages 135 and 147 of this joint proxy statement/prospectus, respectively.

These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of Extra Space or Life Storage from considering or proposing such an acquisition, even if the potential competing acquirer was prepared to pay consideration with a higher per share value than the value proposed to be received or realized in the mergers, or might result in a potential competing acquirer proposing to pay a lower per share value than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances under the merger agreement.

 

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If the merger agreement is terminated and Extra Space or Life Storage determines to seek another business combination, Extra Space or Life Storage, respectively, may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the mergers contemplated by the merger agreement.

If the mergers are not consummated by December 31, 2023, either Extra Space or Life Storage may terminate the merger agreement.

Either Extra Space or Life Storage may terminate the merger agreement if the mergers have not been consummated by December 31, 2023. However, this termination right will not be available to a party if that party failed to comply with the merger agreement and that failure was the primary cause of, or resulted in, the failure to consummate the mergers on or before December 31, 2023. See the section entitled “The Merger AgreementTermination of the Merger Agreement” beginning on page 146 of this joint proxy statement/prospectus.

Some of the directors and executive officers of Life Storage have interests in the mergers that are different from, or in addition to, those of the other Life Storage stockholders.

In considering whether to approve the company merger and the other transactions contemplated by the merger agreement, Life Storage stockholders should recognize that members of management and the Life Storage board have interests in the mergers that differ from, or are in addition to, the interests of other Life Storage stockholders. Some of the directors and executive officers of Life Storage have arrangements that provide them with interests in the mergers that are different from, or in addition to, those generally of the Life Storage stockholders. These interests, among other things, may influence or may have influenced the directors and executive officers of Life Storage to support or approve the company merger and the other transactions contemplated by the merger agreement. See the section entitled “The MergersInterests of Life Storages Directors and Executive Officers in the Mergers” beginning on page 102 of this joint proxy statement/prospectus.

If the company merger and the deemed liquidation, taken together, do not qualify as a reorganization, there may be adverse tax consequences.

The company merger and the deemed liquidation, taken together, are intended to qualify as a reorganization within the meaning of Section 368(a) of the Code. It is a condition to the completion of the mergers that Extra Space and Life Storage receive written opinions from their respective counsel to the effect that the company merger and the deemed liquidation, taken together, will qualify as a reorganization within the meaning of Section 368(a) of the Code. The foregoing opinions, however, are limited to the factual representations provided by Extra Space and Life Storage to counsel and the assumptions set forth therein, and are not a guarantee that the company merger and the deemed liquidation, taken together, in fact, will qualify as a reorganization. Furthermore, such opinions are not binding on the IRS. Neither Life Storage nor Extra Space has requested or plans to request a ruling from the IRS that the company merger and the deemed liquidation, taken together, qualify as a reorganization. If the company merger and the deemed liquidation, taken together, were to fail to qualify as a reorganization, then each United States holder of shares of Life Storage common stock generally would recognize gain or loss, as applicable, equal to the difference between (i) the sum of the fair market value of the shares of Extra Space common stock and cash in lieu of any fractional share of Extra Space common stock received by such holder in the company merger; and (ii) such holder’s adjusted tax basis in its shares of Life Storage common stock.

An adverse outcome in any litigation or other legal proceedings relating to the merger agreement, or the transactions contemplated thereby, could have a material adverse impact on the businesses of Extra Space and Life Storage or their ability to consummate the transactions contemplated by the merger agreement.

Transactions like the mergers are frequently the subject of litigation, stockholder demands, or other legal proceedings, including actions alleging that either party’s board of directors breached their respective duties to

 

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their stockholders or other equity holders by entering into the merger agreement, by failing to obtain a greater value in the transaction for their stockholders or other equity holders or otherwise, or any other claims (contractual or otherwise) arising out of the mergers or the transactions related thereto, including such proceedings described in this joint proxy statement/prospectus. With respect to these proceedings, and any other litigation or other legal proceedings that are brought against Extra Space, Life Storage or their respective boards of directors or subsidiaries in connection with the merger agreement, or the transactions contemplated thereby, the respective parties to the proceeding intend to defend against any such claims made therein but they might not be successful in doing so. An adverse outcome in such matters, as well as the costs and efforts of a defense even if successful, could have a material adverse effect on the parties’ ability to consummate the mergers in a timely manner, or at all, or their respective business, results of operation or financial position, including through the possible diversion of either company’s resources or distraction of key personnel.

The opinions of the financial advisors of Extra Space and Life Storage will not reflect changes in circumstances between the date of such opinions and completion of the mergers.

 

Extra Space and Life Storage have not obtained updated opinions from their respective financial advisors as of the date of this joint proxy statement/prospectus and do not expect to receive updated opinions prior to completion of the mergers. Changes in the operations and prospects of Extra Space or Life Storage, general market and economic conditions and other factors that may be beyond the control of Extra Space or Life Storage, and on which the opinions of the financial advisors were based, may significantly alter the value of Extra Space or Life Storage or the prices of shares of Extra Space common stock or Life Storage common stock by the time the mergers are completed. The opinions do not speak as of the time the mergers will be completed or as of any date other than the date of such opinions. Because the financial advisors of Extra Space and Life Storage will not be updating their opinions, the opinions will not address the fairness of the merger consideration or the exchange ratio, as the case may be, from a financial point of view at the time the mergers are completed. The Extra Space board’s recommendation that the Extra Space stockholders vote “FOR” the proposals being submitted to the Extra Space stockholders and the Life Storage board’s recommendation that Life Storage stockholders vote “FOR” the proposals being submitted to Life Storage stockholders, however, are made as of the date of this joint proxy statement/prospectus. For a description of the opinions that Extra Space and Life Storage received from their respective financial advisors, see the sections entitled “The MergersOpinion of Extra Spaces Financial Advisor” and “The MergersOpinions of Life Storages Financial Advisors” beginning on pages 71 and 79 of this joint proxy statement/prospectus, respectively.

Risks Related to the Combined Company Following the Mergers

The Combined Company expects to incur substantial expenses related to the mergers.

The Combined Company expects to incur substantial expenses in connection with completing the mergers and integrating the operations and systems of Life Storage with those of Extra Space. While Extra Space has assumed that a certain level of expenses would be incurred, there are a number of factors beyond its control that could affect the total amount or the timing of the Combined Company’s expenses relating to the completion of the mergers and the Combined Company’s operations. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. As a result, the expenses associated with the mergers could, particularly in the near term, reduce the savings that the Combined Company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the integration of the operations of Life Storage following the completion of the mergers.

Following the mergers, the Combined Company may be unable to integrate the operations of Extra Space and Life Storage successfully and realize the anticipated synergies and other benefits of the mergers or do so within the anticipated time frame.

The mergers involve the combination of two companies that currently operate as independent public companies and their respective operating partnerships. The Combined Company is expected to benefit from the

 

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elimination of duplicative costs associated with supporting a public company platform and the leveraging of state-of-the-art technology and systems. However, the Combined Company will be required to devote significant management attention and resources to integrating the operations of Extra Space and Life Storage. Potential difficulties the Combined Company may encounter in the integration process include the following:

 

   

the inability to successfully combine the operations of Extra Space and Life Storage, including the integration of employees, customer records and maintaining cybersecurity protections, in a manner that permits the Combined Company to achieve the cost savings anticipated to result from the mergers, which would result in the anticipated benefits of the mergers not being realized in the time frame currently anticipated or at all;

 

   

the inability to dispose of former Life Storage assets or operations that the Combined Company desires to dispose of;

 

   

the difficulties of operating separate brands and the costs of potentially rebranding Life Storage stores over an unknown period of time;

 

   

the complexities associated with managing the combined businesses out of different locations and integrating personnel from the two companies;

 

   

the failure to retain key employees of either of the two companies;

 

   

potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the mergers; and

 

   

performance shortfalls as a result of the diversion of management’s attention caused by completing the mergers and integrating the companies’ operations.

For all these reasons, you should be aware that it is possible that the integration process could result in the distraction of the Combined Company’s management, the disruption of the Combined Company’s ongoing business or inconsistencies in the Combined Company’s operations, services, standards, controls, procedures and policies, any of which could adversely affect the ability of the Combined Company to maintain relationships with customers, vendors and employees or to achieve the anticipated benefits of the mergers, or could otherwise adversely affect the business and financial results of the Combined Company.

The Combined Company’s anticipated level of indebtedness may increase upon completion of the mergers and may increase the related risks Extra Space now faces.

In connection with the mergers, the Combined Company may assume and/or refinance certain indebtedness of Life Storage and, as a result, may be subject to increased risks associated with debt financing. Extra Space may raise additional capital or refinance certain of its indebtedness in connection with refinancing Life Storage’s indebtedness, including by amending the Extra Space credit facility or issuing additional debt. The Combined Company may incur substantial expenses in connection with assuming and/or refinancing the indebtedness of Life Storage and/or Extra Space.

As of March 31, 2023, Extra Space had indebtedness of approximately $7.3 billion. After giving effect to the mergers, the Combined Company’s total pro forma consolidated indebtedness will increase. Taking into account Extra Space’s existing indebtedness and the assumption of Life Storage’s debt in the mergers, the Combined Company’s pro forma consolidated indebtedness as of March 31, 2023, after giving effect to the mergers, would be approximately $10.5 billion.

The Combined Company’s increased indebtedness could have important consequences to holders of its common stock, including Life Storage stockholders that receive Extra Space common stock in the company merger, including:

 

   

increasing the Combined Company’s vulnerability to general adverse economic and industry conditions and changes in interest rates;

 

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requiring the use of a substantial portion of the Combined Company’s cash flow from operations for the payment of principal and interest on its indebtedness, thereby reducing its ability to use its cash flow to fund working capital, acquisitions, capital expenditures and general corporate requirements;

 

   

reducing the Combined Company’s credit ratings and thereby raising its financing costs;

 

   

limiting the Combined Company’s ability to obtain additional financing to fund future working capital, acquisitions, capital expenditures and other general corporate requirements; and

 

   

limiting the Combined Company’s flexibility in planning for, or reacting to, changes in its business and its industry.

A breach of the covenants under the agreements that govern the terms of any of the Combined Company’s indebtedness could result in an event of default under the applicable indebtedness. Such a default may allow the applicable creditors to foreclose on any collateral for such debt, accelerate the related debt, and/or terminate any related commitments to extend further credit and may result in a default under or the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In the event debtholders accelerate the repayment of the Combined Company’s indebtedness, the Combined Company may not have sufficient resources to repay such indebtedness.

The future results of the Combined Company will suffer if the Combined Company does not effectively manage its expanded operations following the mergers.

Following the mergers, the Combined Company expects to continue to expand its operations through additional acquisitions and development of properties, management of stores owned by third-parties and the Extra Space bridge loan program, some of which may involve complex challenges. The future success of the Combined Company will depend, in part, upon the ability of the Combined Company to manage its expansion opportunities, which may pose substantial challenges for the Combined Company to integrate new operations into its existing business in an efficient and timely manner, and upon its ability to successfully monitor its operations, costs, regulatory compliance and service quality, and to maintain other necessary internal controls. In addition, third-parties may cancel management agreements with the Combined Company. There is no assurance that the Combined Company’s expansion or acquisition opportunities will be successful, or that the Combined Company will be able to retain management of third-party stores or otherwise realize its expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits.

Counterparties to certain significant agreements with Life Storage may exercise contractual rights under such agreements in connection with the mergers.

Life Storage is a party to certain agreements that give the counterparty certain rights following a “change in control,” including in some cases the right to terminate the agreement or to require Life Storage to offer to redeem or repay certain indebtedness of Life Storage. Under some such agreements, the mergers may constitute a change in control, and therefore the counterparty may exercise certain rights under the agreement upon the closing of the mergers. Any such counterparty may request modifications of their respective agreements as a condition to granting a waiver or consent under their agreement. The pursuit of such rights by the counterparties may result in the Combined Company suffering a loss of potential future revenue or incurring liabilities and may result in the loss of rights that are material to the Combined Company’s business. There can be no assurances that such counterparties will not exercise their rights under these agreements, including termination rights or rights to require the repayment of Life Storage’s indebtedness where available, or that the exercise of any such rights under, or modification of, these agreements will not adversely affect the business or operations of the Combined Company.

 

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Risks Related to an Investment in the Combined Company Common Stock Following the Mergers

The market price and trading volume of the Combined Company common stock may be volatile.

The Combined Company’s common stock may experience significant price and volume fluctuations, and investors in shares of the Combined Company common stock may experience a decrease in the value of their shares, including decreases unrelated to the Combined Company’s operating performance or prospects. Extra Space and Life Storage cannot assure you that the market price of the Combined Company common stock will not fluctuate or decline significantly in the future.

In addition to the risks listed in this “Risk Factors” section, a number of factors could negatively affect the Combined Company’s share price or result in fluctuations in the price or trading volume of the Combined Company common stock, including:

 

   

the annual yield from distributions on the Combined Company common stock as compared to yields on other financial instruments;

 

   

equity issuances by the Combined Company, or future sales of substantial amounts of the Combined Company common stock by its existing or future stockholders, or the perception that such issuances or future sales may occur;

 

   

increases in market interest rates or a decrease in the Combined Company’s distributions to stockholders that lead purchasers of the Combined Company common stock to demand a higher yield;

 

   

changes in market valuations of similar companies;

 

   

fluctuations in stock market prices and volumes;

 

   

additions or departures of key management personnel;

 

   

the Combined Company’s operating performance and the performance of other similar companies;

 

   

actual or anticipated differences in the Combined Company’s quarterly operating results;

 

   

changes in expectations of future financial performance or changes in estimates of securities analysts;

 

   

publication of research reports about the Combined Company or its industry by securities analysts;

 

   

failure to qualify as a REIT for federal income tax purposes;

 

   

adverse market reaction to any indebtedness the Combined Company incurs in the future;

 

   

strategic decisions by the Combined Company or its competitors, such as acquisitions, divestments, spin-offs, joint ventures, strategic investments or changes in business strategy;

 

   

the passage of legislation or other regulatory developments that adversely affect the Combined Company or its industry or any failure by the Combined Company to comply with regulatory requirements;

 

   

the expiration or loss of local tax abatements, tax credit programs, or other governmental incentives;

 

   

the imposition of a penalty tax as a result of certain property transfers that may generate prohibited transaction income;

 

   

the inability of the Combined Company to sell properties if and when it would be appropriate to do so;

 

   

risks and liabilities in connection with the Combined Company’s co-investment ventures and investment in new or existing co-investment ventures, including that the Combined Company’s property ownership through joint ventures may limit its ability to act exclusively in its interests and may depend on the financial performance of its co-venturers;

 

   

speculation in the press or investment community;

 

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changes in the Combined Company’s earnings;

 

   

failure to satisfy the listing requirements of the NYSE;

 

   

failure to comply with the requirements of the Sarbanes-Oxley Act of 2002;

 

   

actions by institutional stockholders of the Combined Company;

 

   

changes in accounting principles;

 

   

changes in environmental conditions or the potential impact of climate change;

 

   

terrorist attacks or other acts of violence or war in areas in which the Combined Company’s properties are located or markets on which the Combined Company’s securities are traded; and

 

   

general economic and/or market conditions, including factors unrelated to the Combined Company’s performance.

In the past, securities class action litigation has often been instituted against companies following periods of volatility in the price of their common stock. This type of litigation could result in substantial costs and divert the Combined Company’s management’s attention and resources, which could have a material adverse effect on the Combined Company’s cash flows, its ability to execute its business strategy and the Combined Company’s ability to make distributions to its stockholders.

The market price of shares of the common stock of the Combined Company may be affected by factors different from those affecting the prices of shares of Extra Space common stock or Life Storage common stock before the mergers.

The results of operations of the Combined Company, as well as the market price of the common stock of the Combined Company, after the mergers may be affected by other factors in addition to those currently affecting Extra Space’s or Life Storage’s results of operations and the market prices of Extra Space common stock and Life Storage common stock. These factors include:

 

   

a greater number of shares of the Combined Company common stock outstanding as compared to the number of currently outstanding shares of Extra Space common stock;

 

   

different stockholders; and

 

   

different assets and capitalizations.

Accordingly, the historical market prices and financial results of Extra Space and Life Storage may not be indicative for the Combined Company after the mergers. For a discussion of the businesses of Extra Space and Life Storage and certain risks to consider in connection with investing in those businesses, see the documents incorporated by reference by Extra Space and Life Storage into this joint proxy statement/prospectus referred to in the section entitled “Where You Can Find More Information and Incorporation by Reference” beginning on page 188 of this joint proxy statement/prospectus.

The market price of the Combined Company common stock may decline as a result of the mergers.

The market price of the Combined Company common stock may decline as a result of the mergers if the Combined Company does not achieve the perceived benefits of the mergers as rapidly or to the extent anticipated by financial or industry analysts, or the effect of the mergers on the Combined Company’s financial results is not consistent with the expectations of financial or industry analysts.

In addition, upon consummation of the mergers, Extra Space stockholders and Life Storage stockholders will own interests in a Combined Company operating an expanded business with a different mix of properties, risks and liabilities. Current Extra Space stockholders and Life Storage stockholders may not wish to continue to

 

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invest in the Combined Company, or for other reasons may wish to dispose of some or all of their shares of the Combined Company common stock. If, following the company merger effective time, large amounts of the Combined Company common stock are sold, the price of the Combined Company common stock could decline.

After the mergers are completed, Life Storage stockholders that receive shares of Extra Space common stock in the company merger will have different rights that may be less favorable than their current rights as Life Storage stockholders.

After the closing of the mergers, Life Storage stockholders that receive shares of Extra Space common stock in the company merger will have different rights than they currently have as Life Storage stockholders. For a detailed discussion of the similarities and material differences between the current rights you have as a Life Storage stockholder and the rights you will have as a stockholder of the Combined Company following the mergers, see the section entitled “Comparison of Rights of the Extra Space Stockholders and the Life Storage Stockholders” beginning on page 168 of this joint proxy statement/prospectus.

The Combined Company cannot assure you that it will be able to continue paying dividends at or above the rates currently paid by Extra Space and Life Storage.

The stockholders of the Combined Company may not receive dividends at the same rate they received dividends as Extra Space stockholders and as Life Storage stockholders following the mergers for various reasons, including the following:

 

   

the Combined Company may not have enough cash to pay such dividends due to changes in the Combined Company’s cash requirements, capital spending plans, cash flow or financial position;

 

   

decisions on whether, when and in which amounts to make any future distributions will remain at all times entirely at the discretion of the Combined Company’s board of directors, which reserves the right to change Extra Space’s current dividend practices at any time and for any reason;

 

   

the Combined Company may desire to retain cash to maintain or improve its credit ratings; and

 

   

the amount of dividends that the Combined Company is permitted to make or that the Combined Company’s subsidiaries may distribute to the Combined Company may be subject to restrictions imposed by state law and restrictions imposed by the terms of any current or future indebtedness that the Combined Company or these subsidiaries may incur.

Stockholders of the Combined Company will have no contractual or other legal right to dividends that have not been authorized by the Combined Company’s board of directors and declared by the Combined Company.

The Combined Company may need to incur additional indebtedness in the future.

In connection with executing the Combined Company’s business strategies following the mergers, the Combined Company expects to evaluate the possibility of additional acquisitions and strategic investments, and the Combined Company may elect to finance these endeavors by incurring additional indebtedness. The amount of such indebtedness could have material adverse consequences for the Combined Company, including:

 

   

hindering the Combined Company’s ability to adjust to changing market, industry or economic conditions;

 

   

limiting the Combined Company’s ability to access the capital markets to refinance maturing debt or to fund acquisitions or emerging businesses;

 

   

limiting the amount of free cash flow available for future operations, acquisitions, dividends, stock repurchases or other uses;

 

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making the Combined Company more vulnerable to economic or industry downturns, including interest rate increases; and

 

   

placing the Combined Company at a competitive disadvantage compared to less leveraged competitors.

The historical and unaudited pro forma combined financial information included elsewhere in this joint proxy statement/prospectus may not be representative of the Combined Company’s results following the mergers, and accordingly, you have limited financial information on which to evaluate the Combined Company.

The unaudited pro forma combined financial information included elsewhere in this joint proxy statement/prospectus has been presented for informational purposes only and is not necessarily indicative of the financial position or results of operations that actually would have occurred had the mergers been completed as of the date indicated, nor is it indicative of the future operating results or financial position of the Combined Company. The unaudited pro forma condensed consolidated financial information reflects adjustments, which are based upon preliminary estimates, to allocate the purchase price to the Combined Company’s assets and liabilities. The purchase price allocation reflected in the unaudited pro forma condensed consolidated financial information included elsewhere in this joint proxy statement/prospectus is preliminary, and the final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of the Combined Company as of the date of the completion of the mergers. The unaudited pro forma combined financial information does not reflect future events that may occur after the company merger effective time, including the costs related to the planned integration of the two companies and any future nonrecurring charges resulting from the mergers, and does not consider potential impacts of current market conditions on revenues or expense efficiencies. The unaudited pro forma combined financial information presented elsewhere in this joint proxy statement/prospectus is based in part on certain assumptions regarding the mergers that Extra Space and Life Storage believe are reasonable under the circumstances. Extra Space and Life Storage cannot assure you that the assumptions will prove to be accurate over time.

The Combined Company may incur adverse tax consequences if Extra Space or Life Storage has failed or fails to qualify as a REIT for United States federal income tax purposes.

Each of Extra Space and Life Storage has operated in a manner that it believes has allowed it to qualify as a REIT for United States federal income tax purposes under the Code and each intends to continue to do so through the closing date or the company merger effective time, respectively. The Combined Company intends to continue operating in such a manner following the mergers. The closing of the mergers is conditioned on the receipt by Extra Space of an opinion of Life Storage’s counsel to the effect that, commencing with Life Storage’s taxable year ended December 31, 1995 and through the company merger effective time, Life Storage has been organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and on the receipt by Life Storage of an opinion of Extra Space’s counsel to the effect that, commencing with Extra Space’s taxable year ended December 31, 2004, Extra Space has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and Extra Space’s proposed method of operation will enable it to continue to meet the requirements for qualification and taxation as a REIT under the Code for its taxable year that includes the company merger effective time and future taxable years. The foregoing REIT opinions, however, are limited to the factual representations provided by Extra Space and Life Storage to counsel and the assumptions set forth therein, and are not a guarantee that Extra Space or Life Storage, in fact, has qualified or that the Combined Company will continue to qualify as a REIT. Moreover, such opinions are not binding on the IRS, and neither Extra Space nor Life Storage has requested or plans to request a ruling from the IRS that it qualifies as a REIT. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. The complexity of these provisions and of the applicable regulations (as in effect from time to time) of the United States Department of the Treasury under the Code is greater in the case of a REIT, like Extra Space and Life Storage, that holds assets through a partnership. The determination of various factual matters and circumstances not entirely within Extra Space’s and Life Storage’s control may affect their ability to qualify as REITs.

 

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In order to qualify as a REIT, each of Extra Space and Life Storage must satisfy a number of requirements, including requirements regarding the ownership of its stock and the composition of its gross income and assets. Also, a REIT must make distributions to stockholders aggregating annually at least 90% of its net taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains.

If Extra Space or Life Storage (or, following the mergers, the Combined Company) loses its REIT status, or is determined to have lost its REIT status in a prior year, it will face material tax consequences that would substantially reduce its cash available for distribution, including cash available to pay dividends to its stockholders, because:

 

   

it would be subject to United States federal income tax on its net income at regular corporate rates for the years it did not qualify for taxation as a REIT (and, for such years, would not be allowed a deduction for dividends paid to stockholders in computing its taxable income);

 

   

it could be subject to a federal alternative minimum tax and possibly increased state and local taxes for such periods;

 

   

unless it is entitled to relief under applicable statutory provisions, neither it nor any “successor” company could elect to be taxed as a REIT until the fifth taxable year following the year during which it was disqualified; and

 

   

for five years following re-election of REIT status, upon a taxable disposition of an asset owned as of such re-election, it could be subject to corporate level tax with respect to any built-in gain inherent in such asset at the time of re-election.

Even if Extra Space (or, following the mergers, the Combined Company) retains its REIT status, if Life Storage is determined to have lost its REIT status for a taxable year ending on or before the company merger, Life Storage would be subject to adverse tax consequences similar to those described above. This could substantially reduce the Combined Company’s cash available for distribution, including cash available to pay dividends to its stockholders, because, assuming that the Combined Company otherwise maintains its REIT qualification:

 

   

the Combined Company generally would be subject to corporate level tax with respect to the built-in gain on each asset of Life Storage existing at the time of the company merger if the Combined Company were to dispose of the Life Storage asset during the five-year period following the company merger;

 

   

the Combined Company would succeed to any earnings and profits accumulated by Life Storage for taxable periods that it did not qualify as a REIT, and the Combined Company would have to pay a special dividend and/or employ applicable deficiency dividend procedures (including interest payments to the IRS) to eliminate such earnings and profits (or if the Combined Company does not timely distribute those earnings and profits, the Combined Company could fail to qualify as a REIT); and

 

   

if Life Storage incurred any unpaid tax liabilities prior to the company merger, those tax liabilities would be transferred to the Combined Company as a result of the company merger.

If there is an adjustment to Life Storage’s taxable income or dividends paid deductions, the Combined Company could elect to use the deficiency dividend procedure in order to maintain Life Storage’s REIT status. That deficiency dividend procedure could require the Combined Company to make significant distributions to its stockholders and to pay significant interest to the IRS.

As a result of all these factors, Extra Space’s or Life Storage’s (or following the mergers, the Combined Company’s) failure to qualify as a REIT could impair the Combined Company’s ability to expand its business and raise capital, and would materially adversely affect the value of its capital stock.

 

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In certain circumstances, even if the Combined Company qualifies as a REIT, it and its subsidiaries may be subject to certain United States federal, state, and other taxes, which would reduce the Combined Company’s cash available for distribution to its stockholders.

Even if the Combined Company has qualified and continues to qualify as a REIT, it may be subject to some federal, state and local taxes on its income or property and, in certain cases, a 100% penalty tax, in the event it sells property as a dealer. In addition, the Combined Company’s domestic corporate subsidiaries that are taxable REIT subsidiaries could be subject to federal and state taxes, and its non-United States properties and companies are subject to tax in the jurisdictions in which they operate and are located. Any federal, state or other taxes the Combined Company pays will reduce its cash available for distribution to stockholders.

The Combined Company depends on key personnel for its future success, and the loss of key personnel or inability to attract and retain personnel could harm the Combined Company’s business.

The members of the Extra Space board, Extra Space’s executive officers and certain members of the Life Storage board will continue as the members of the board and executive management of the Combined Company. The future success of the Combined Company depends in large part on its ability to hire and retain a sufficient number of qualified personnel. The future success of the Combined Company also depends upon the service of the Combined Company’s executive officers, who have extensive market knowledge and relationships and will exercise substantial influence over the Combined Company’s operational, financing, acquisition and disposition activity. Among the reasons that they are important to the Combined Company’s success is that each has a national or regional industry reputation that is expected to attract business and investment opportunities and assist the Combined Company in negotiations with lenders, existing and potential customers and industry personnel.

Many of the Combined Company’s other key executive personnel, particularly its senior managers, also have extensive experience and strong reputations in the industry. In particular, the extent and nature of the relationships that these individuals have developed with financial institutions and existing and prospective customers is critically important to the success of the Combined Company’s business. The loss of services of one or more members of the Combined Company’s senior management team, or the Combined Company’s inability to attract and retain highly qualified personnel, could adversely affect the Combined Company’s business, diminish the Combined Company’s investment opportunities and weaken its relationships with lenders, business partners, existing and prospective customers and industry personnel, which could materially and adversely affect the Combined Company.

Extra Space and Life Storage face other risks.

The foregoing risks are not exhaustive, and you should be aware that, following the mergers, the Combined Company will face various other risks, including those discussed in reports filed by Extra Space and Life Storage with the SEC. See the section entitled “Where You Can Find More Information and Incorporation by Reference” beginning on page 188 of this joint proxy statement/prospectus.

 

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COMPARATIVE MARKET PRICE DATA

The following table presents the closing prices of Extra Space common stock and Life Storage common stock on March 31, 2023, the last trading day before the date of the public announcement of the merger agreement, and June 1, 2023, the last practicable trading day prior to the date of this joint proxy statement/prospectus. The table also shows the estimated implied value of the merger consideration for each share of Life Storage common stock on the relevant date, calculated by multiplying the closing prices of Extra Space common stock on those dates by 0.895.

 

     Extra Space
Closing Price
     Life Storage
Closing Price
     Implied Value of the
Merger
Consideration
 

March 31, 2023

   $  162.93      $  131.09      $  145.82  

June 1, 2023

   $ 143.36      $ 126.54      $ 128.31  

The above table shows only historical comparisons. These comparisons may not provide meaningful information to Extra Space stockholders or Life Storage stockholders in determining whether to approve the Extra Space common stock issuance proposal or the Life Storage merger proposal, as applicable, because the value of the merger consideration will fluctuate with the market price of Extra Space common stock. As a result, Extra Space stockholders and Life Storage stockholders are urged to obtain current market quotations for shares of Extra Space common stock and Life Storage common stock and to review carefully the other information contained in this joint proxy statement/prospectus or incorporated by reference into this joint proxy statement/prospectus in considering whether to approve the Extra Space common stock issuance proposal or the Life Storage merger proposal, as applicable. The market prices of Extra Space common stock and Life Storage common stock will fluctuate between the date of this joint proxy statement/prospectus and the date of completion of the company merger. No assurance can be given concerning the market prices of Extra Space common stock or Life Storage common stock before or after the company merger effective time.

 

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

The statements in this document that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. These forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which Extra Space and Life Storage operate as well as beliefs and assumptions of management of Extra Space and management of Life Storage. Such statements involve uncertainties that could significantly impact financial results of Extra Space or Life Storage. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “could,” and “will,” including variations of such words and similar expressions, are intended to identify such forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments that Extra Space or Life Storage expect or anticipate will occur in the future—including statements relating to the potential benefits of the proposed mergers, the expected timing to complete the proposed mergers, acquisition and development activity, disposition activity, general conditions in the geographic areas where Extra Space or Life Storage operate, and Extra Space’s and Life Storage’s respective debt, capital structure and financial position—are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Although Extra Space and Life Storage believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, neither Extra Space nor Life Storage can give assurance that these expectations will be attained, and therefore actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some of the factors that may affect outcomes and results include, but are not limited to:

 

  (i)

Extra Space’s and Life Storage’s ability to complete the proposed transaction on the proposed terms or on the anticipated timeline, or at all, including risks and uncertainties related to securing the necessary stockholder approvals and satisfaction of other closing conditions to consummate the proposed transaction;

 

  (ii)

the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement relating to the proposed transaction;

 

  (iii)

risks related to diverting the attention of Extra Space’s and Life Storage’s management from ongoing business operations;

 

  (iv)

failure to realize the expected benefits of the proposed transaction;

 

  (v)

significant transaction costs and/or unknown or inestimable liabilities;

 

  (vi)

the risk of stockholder litigation in connection with the proposed transaction, including resulting expense or delay;

 

  (vii)

the risk that Life Storage’s business will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected;

 

  (viii)

risks related to future opportunities and plans for the Combined Company, including the uncertainty of expected future financial performance and results of the Combined Company following completion of the proposed transaction;

 

  (ix)

the effect of the announcement of the proposed transaction on the ability of Extra Space and Life Storage to operate their respective businesses and retain and hire key personnel and to maintain favorable business relationships;

 

  (x)

risks related to the market value of the Extra Space common stock to be issued in the proposed transaction;

 

  (xi)

other risks related to the completion of the proposed transaction and actions related thereto;

 

  (xii)

national, international, regional and local economic and political climates and conditions;

 

  (xiii)

changes in global financial markets and interest rates;

 

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  (xiv)

increased or unanticipated competition for each of Extra Space’s and Life Storage’s properties;

 

  (xv)

risks associated with acquisitions, dispositions and development of properties, including increased development costs due to additional regulatory requirements related to climate change;

 

  (xvi)

maintenance of REIT status, tax structuring and changes in income tax laws and rates;

 

  (xvii)

availability of financing and capital, the levels of debt that each of Extra Space and Life Storage maintain and their respective credit ratings;

 

  (xviii)

environmental uncertainties, including risks of natural disasters;

 

  (xix)

risks related to the coronavirus pandemic;

 

  (xx)

those additional risks and factors discussed in the reports filed with the SEC by Extra Space and Life Storage from time to time, including those discussed under the heading “Risk Factors” in their respective most recently filed reports on Form 10-K and Form 10-Q; and

 

  (xxi)

other risks and uncertainties set forth in this joint proxy statement/prospectus in the section entitled “Risk Factors” beginning on page 16 of this joint proxy statement/prospectus.

Neither Extra Space nor Life Storage undertakes any duty to update any forward-looking statements appearing in this document except as may be required by law.

 

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THE COMPANIES

Extra Space Storage Inc. and Extra Space Storage LP

2795 East Cottonwood Parkway, Suite 300

Salt Lake City, Utah 84121

(801) 365-4600

Extra Space is a fully integrated, self-administered and self-managed real estate investment trust formed as a Maryland corporation on April 30, 2004, to own, operate, manage, acquire, develop and redevelop self-storage properties. Extra Space closed its initial public offering on August 17, 2004.

Extra Space was formed to continue the business of Extra Space Storage LLC and its subsidiaries, which had engaged in the self-storage business since 1977. As of December 31, 2022, Extra Space owned and/or operated 2,338 self-storage properties in 41 states and Washington, D.C., comprising approximately 176.1 million square feet of net rentable space in approximately 1.6 million units.

Extra Space operates in two distinct segments: (1) self-storage operations; and (2) tenant reinsurance. Extra Space’s self-storage operations activities include rental operations of wholly-owned self-storage properties. Tenant reinsurance activities include the reinsurance of risks relating to the loss of goods stored by tenants in Extra Space’s self-storage properties.

Substantially all of Extra Space’s business is conducted through Extra Space OP. Extra Space’s primary assets are general partner and limited partner interests in Extra Space OP. This structure is commonly referred to as an umbrella partnership REIT, or UPREIT. Extra Space has elected to be taxed as a REIT under the Code. To the extent Extra Space continues to qualify as a REIT, Extra Space will not be subject to United States federal tax, with certain exceptions, on Extra Space’s net taxable income that is distributed to its stockholders.

Extra Space’s primary business objectives are to maximize cash flow available for distribution to Extra Space’s stockholders and to achieve sustainable long-term growth in cash flow per share in order to maximize long-term stockholder value both at acceptable levels of risk. Extra Space continues to evaluate a range of growth initiatives and opportunities.

Extra Space common stock is listed on the NYSE, trading under the symbol “EXR.” Extra Space’s principal corporate offices are located at 2795 East Cottonwood Parkway, Suite 300, Salt Lake City, Utah 84121; its telephone number is (801) 365-4600. Extra Space’s website address is http://www.extraspace.com. Information contained on Extra Space’s website is not and should not be deemed a part of this joint proxy statement/prospectus, the accompanying prospectus supplement or any other report or filing filed with the SEC.

Additional information about Extra Space, Extra Space OP and their subsidiaries is included in documents incorporated by reference into this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information and Incorporation by Reference” beginning on page 188 of this joint proxy statement/prospectus.

Extra Space Merger Sub

Extra Space Merger Sub, a wholly owned subsidiary of Extra Space, is a Delaware limited liability company organized on March 31, 2023 for the purpose of effecting the company merger. Extra Space Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement. The principal executive offices of Extra Space Merger Sub are located at 2795 East Cottonwood Parkway, Suite 300, Salt Lake City, Utah 84121.

 

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Extra Space OP Merger Sub

Extra Space OP Merger Sub, a wholly owned subsidiary of Extra Space OP, is a Delaware limited liability company organized on March 31, 2023 for the purpose of effecting the partnership merger. Extra Space OP Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement. The principal executive offices of Extra Space OP Merger Sub are located at 2795 East Cottonwood Parkway, Suite 300, Salt Lake City, Utah 84121.

Life Storage, Inc. and Life Storage LP

6467 Main Street

Williamsville, NY 14221

Attention: Investor Services

Life Storage is a fully integrated, self-administered and self-managed REIT that acquires and manages self-storage properties throughout the United States. Headquartered in Buffalo, New York, Life Storage employs over 2,500 people and operates over 1,210 self-storage facilities encompassing over 88 million square feet in 37 states and the District of Columbia. Life Storage’s common stock is publicly traded on the NYSE under the symbol “LSI.” Life Storage OP is the primary operating subsidiary of Life Storage. As of March 31, 2023, Life Storage directly or indirectly, through its ownership of Life Storage OP GP, owned approximately 97.9% of the ownership interests of Life Storage OP, assuming conversion of the Life Storage OP preferred units as of such date (all of which were converted into Life Storage OP common units subsequent to March 31, 2023). The remaining 2.1% of the limited partnership interests are owned by unaffiliated third parties. Life Storage OP GP, a wholly-owned subsidiary of Life Storage, is the sole general partner of Life Storage OP. As the owner of the sole general partner of Life Storage OP, Life Storage has full and complete authority over Life Storage OP’s day-to-day operations and management. Life Storage does not have significant assets other than its investment in Life Storage OP.

Additional information about Life Storage, Life Storage OP GP, Life Storage OP and their subsidiaries is included in documents incorporated by reference into this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information and Incorporation by Reference” beginning on page 188 of this joint proxy statement/prospectus.

The Combined Company

References to the Combined Company are to Extra Space after the company merger effective time. The Combined Company will be named “Extra Space Storage Inc.” and will be a Maryland corporation. The merger agreement provides that Extra Space will take all actions necessary to add three directors designated by Life Storage, who are currently expected to be Life Storage’s Chief Executive Officer, Joseph V. Saffire, as well as Mark G. Barberio and Susan Harnett, to the Extra Space board at the company merger effective time. Except for the addition of the three directors designated by Life Storage to the Extra Space board, there will be no change to the members of the Extra Space board as a result of the mergers, and the directors of Extra Space as of immediately prior to the company merger effective time, together with the three additional directors designated by Life Storage, will continue to serve as the directors of the Combined Company. The Combined Company after the completion of the mergers is expected to have a total equity market capitalization of approximately $32.8 billion (based on the closing price of Extra Space common stock on May 22, 2023 of $148.65 per share). The Combined Company will represent the largest storage operation in the country with over 3,500 locations, over 264 million square feet and serving over two million customers.

The business of the Combined Company will be operated through Extra Space OP and its subsidiaries. The Extra Space parties will have the full, exclusive and complete responsibility for and discretion in the day-to-day management and control of Extra Space OP.

 

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The common stock of the Combined Company will continue to be listed on the NYSE, trading under the symbol “EXR.”

The Combined Company’s principal executive offices will continue to be located at 2795 East Cottonwood Parkway, Suite 300, Salt Lake City, Utah 84121, and its telephone number will be (801) 365-4600.

 

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THE EXTRA SPACE SPECIAL MEETING

This joint proxy statement/prospectus is being furnished in connection with the solicitation of proxies from Extra Space stockholders for use at the Extra Space special meeting.

Date, Time, Place and Purpose of the Extra Space Special Meeting

The special meeting of the Extra Space stockholders will be held on July 18, 2023, commencing at 9:00 a.m., Mountain Time, at the following link: www.virtualshareholdermeeting.com/EXR2023SM. The Extra Space special meeting will be held in a virtual format only. To be admitted to the Extra Space special meeting, you must enter the control number found on your proxy card or voting instruction form or notice you previously received. You may vote during the Extra Space special meeting by following the instructions available on the meeting website during the meeting.

At the Extra Space special meeting, Extra Space stockholders will be asked to consider and vote upon the following matters:

 

  1.

the Extra Space common stock issuance proposal; and

 

  2.

the Extra Space adjournment proposal.

Recommendation of the Extra Space Board of Directors

The Extra Space board has unanimously approved the merger agreement, the mergers and the other transactions contemplated thereby and unanimously recommends that the Extra Space stockholders vote FOR the Extra Space common stock issuance proposal and FOR the Extra Space adjournment proposal. For the reasons for this recommendation, see the section entitled “The MergersRecommendation of the Extra Space Board of Directors and Its Reasons for the Mergers” beginning on page 64 of this joint proxy statement/prospectus.

Extra Space Record Date; Who Can Vote at the Extra Space Special Meeting

Only holders of record of Extra Space common stock at the close of business on May 23, 2023, the record date for the Extra Space special meeting, are entitled to notice of, and to vote at, the Extra Space special meeting and any postponement or adjournment of the Extra Space special meeting. As of the close of business on the record date, there were 135,049,081 shares of Extra Space common stock outstanding and entitled to vote at the Extra Space special meeting, held by approximately 504 stockholders of record.

Each share of Extra Space common stock owned on Extra Space’s record date is entitled to one vote on each proposal at the Extra Space special meeting.

Directors and Officers of Extra Space

At the close of business on the record date, directors and executive officers of Extra Space were entitled to vote 2,091,581 shares of Extra Space common stock, or approximately 1.55% of the Extra Space common stock issued and outstanding on that date. Extra Space currently expects that all Extra Space directors and executive officers will vote their shares of Extra Space common stock in favor of the proposal to approve the Extra Space common stock issuance and the Extra Space adjournment proposal, although none of them is contractually obligated to do so.

Required Vote; Quorum

Assuming a quorum is present, approval of the Extra Space common stock issuance proposal requires the affirmative vote of a majority of votes cast by the holders of Extra Space common stock on such proposal. Assuming a quorum is present, approval of the Extra Space adjournment proposal requires the affirmative vote of a majority of votes cast by the holders of Extra Space common stock on such proposal.

 

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Regardless of the number of shares Extra Space common stock you own, your vote is important. Please complete, sign, date and promptly return the enclosed proxy card today or authorize a proxy to vote your shares by phone or Internet.

To constitute a quorum for the Extra Space special meeting, there must be present at the special meeting in person or by proxy holders of Extra Space common stock entitled to cast a majority of all the votes entitled to be cast at the meeting. If you submit a proxy but fail to provide voting instructions or abstain on any of the proposals listed on the proxy card, your shares will be counted for purpose of determining whether a quorum is present at the Extra Space special meeting. If your shares are held in “street name” by your broker or other nominee and you do not tell the nominee how to vote your shares, these shares will not be counted for purposes of determining whether a quorum is present for the transaction of business at the Extra Space special meeting.

In addition, under the Extra Space bylaws, if a quorum is not present at the Extra Space special meeting, the chairman of the Extra Space special meeting may adjourn the Extra Space special meeting until a date not more than 120 days after the original record date without notice other than announcement at the meeting.

Shares Held in “Street Name”

If Extra Space stockholders hold Extra Space common stock in an account of a broker or other nominee and they wish to vote such shares by proxy, they must return their voting instructions to the broker or other nominee.

If Extra Space stockholders hold shares of Extra Space common stock in an account of a broker or other nominee and they wish to attend and vote at the Extra Space special meeting, they must follow the directions provided by their broker or other nominee.

Abstentions and Broker Non-Votes

If your shares are held by a broker or other nominee on your behalf in “street name,” your broker or other nominee will send you instructions as to how to provide voting instructions for your shares by proxy. Many brokerage firms and other nominees have a process for their customers to provide voting instructions by telephone or via the Internet, in addition to providing voting instructions by proxy card. In accordance with the rules of the NYSE, brokers and other nominees who hold common stock in “street name” for their customers do not have discretionary authority to vote the shares with respect to the Extra Space common stock issuance proposal. Accordingly, if brokers or other nominees do not receive specific voting instructions from the beneficial owner of such shares, they may not vote such shares with respect to the Extra Space common stock issuance proposal. Under such circumstance, a “broker non-vote” would arise.

Assuming a quorum is present, abstentions and broker non-votes will have no effect on the Extra Space common stock issuance proposal or the Extra Space adjournment proposal.

Manner of Submitting Proxy

Extra Space stockholders may vote for or against the proposals submitted at the Extra Space special meeting in person or by proxy. Extra Space stockholders can authorize a proxy in the following ways:

 

   

Telephone or via the Internet. This joint proxy statement/prospectus is accompanied by a proxy card with instructions for submitting voting instructions. Extra Space stockholders may authorize a proxy by telephone by calling the toll-free number or via the Internet by accessing the Internet address as specified on the enclosed proxy card. Shares will be voted as directed by Extra Space stockholders in the same manner as if such Extra Space stockholder had completed, signed, dated and returned a proxy card, as described below.

 

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Mail: Extra Space stockholders may submit a proxy by completing, signing, dating and returning their proxy card or voting instruction card in the preaddressed postage-paid envelope provided.

Extra Space stockholders should refer to their proxy cards or the information forwarded by their broker or other nominee to see which options are available to them.

The Internet and telephone proxy submission procedures are designed to authenticate stockholders and to allow them to confirm that their instructions have been properly recorded. If you submit a proxy via the Internet or by telephone, then you need not return a written proxy card or voting instruction card by mail. The Internet and telephone facilities available to record holders will close at 9:59 p.m., Mountain Time, on July 17, 2023.

The method by which Extra Space stockholders submit a proxy will in no way limit their right to vote at the Extra Space special meeting if they later decide to virtually attend the meeting and vote in person. If Extra Space common stock is held in the name of a broker or other nominee, Extra Space stockholders must follow the directions provided by their broker or other nominee, to be able to vote virtually at the Extra Space special meeting.

All shares of Extra Space common stock entitled to vote and represented by properly completed proxies received prior to the Extra Space special meeting, and not revoked, will be voted at the Extra Space special meeting as instructed on the proxies. If Extra Space stockholders of record return properly executed proxies but do not indicate how their Extra Space common stock should be voted on a proposal, the Extra Space common stock represented by their properly executed proxy will be voted as the Extra Space board recommends and therefore, FOR the Extra Space common stock issuance proposal and FOR the Extra Space adjournment proposal. If your shares of Extra Space common stock are held in “street name” by your broker or other nominee and you do not provide voting instructions to your broker or other nominee, your broker or other nominee will not be permitted to vote those shares and it will have the effect as described in the section entitled “The Extra Space Special MeetingAbstentions and Broker Non-Votes” beginning on page 37 of this joint proxy statement/prospectus.

Revocation of Proxies or Voting Instructions

Extra Space stockholders of record may change their vote or revoke their proxy at any time before it is exercised at the Extra Space special meeting by:

 

   

submitting notice in writing to Extra Space’s Corporate Secretary at Extra Space Storage Inc., 2795 East Cottonwood Parkway, Suite 300, Salt Lake City, UT 84121, Attn: Corporate Secretary;

 

   

executing and delivering a later-dated proxy card or submitting a later-dated proxy by telephone or via the Internet; or

 

   

virtually attending the special meeting and voting in person at the Extra Space special meeting.

Written revocations will not be effective until received by Extra Space’s Corporate Secretary at or before the Extra Space special meeting. Telephone and Internet revocations will not be effective unless received on or before 9:59 p.m., Mountain Time, on July 17, 2023.

Attending the Extra Space special meeting without voting will not revoke your proxy.

Extra Space stockholders that hold Extra Space common stock in an account of a broker or other nominee may revoke their voting instructions by following the instructions provided by their broker or other nominee.

 

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Solicitation of Proxies; Payment of Solicitation Expenses

The solicitation of proxies from Extra Space stockholders is made on behalf of the Extra Space board. Extra Space will pay the cost of soliciting proxies from Extra Space stockholders. Extra Space has engaged MacKenzie to assist in the solicitation of proxies for the special meeting and Extra Space estimates it will pay MacKenzie a fee of approximately $25,000. Extra Space has also agreed to reimburse MacKenzie for reasonable expenses incurred in connection with the proxy solicitation. In addition to mailing proxy solicitation materials, Extra Space’s directors and officers and employees of Extra Space may also solicit proxies in person, by telephone or by any other electronic means of communication deemed appropriate. No additional compensation will be paid to Extra Space’s directors or officers or to employees of Extra Space for such services.

In accordance with the regulations of the SEC and NYSE, Extra Space also will reimburse brokerage firms and other custodians, nominees and fiduciaries for their expenses incurred in sending proxies and proxy materials to beneficial owners of Extra Space common stock.

 

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PROPOSALS SUBMITTED TO EXTRA SPACE STOCKHOLDERS

Extra Space Common Stock Issuance Proposal

(Proposal 1 on the Extra Space Proxy Card)

The Extra Space stockholders are being asked to consider and vote on a proposal to approve the issuance of Extra Space common stock in connection with the company merger on the terms and conditions set forth in the merger agreement. For a summary and detailed information regarding this proposal, see the information about the mergers, the contribution and issuance and the merger agreement throughout this joint proxy statement/prospectus, including the information set forth in the sections entitled “The Mergers” and “The Merger Agreement” beginning on pages 48 and 116 of this joint proxy statement/prospectus, respectively. A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus.

Pursuant to the merger agreement, approval of this proposal is a condition to the consummation of the mergers. If this proposal is not approved, the mergers will not be completed.

Assuming a quorum is present, approval of this proposal requires the affirmative vote of a majority of the votes cast by the holders of Extra Space common stock on such proposal.

Recommendation of the Extra Space Board of Directors

The Extra Space board unanimously recommends that Extra Space stockholders vote FOR the Extra Space common stock issuance proposal.

Extra Space Adjournment Proposal

(Proposal 2 on the Extra Space Proxy Card)

The Extra Space stockholders are being asked to approve a proposal that will give the chairman of the Extra Space special meeting the authority to adjourn the Extra Space special meeting one or more times to another date, time or place, to permit, among other things, further solicitation of proxies, if necessary or appropriate, to obtain additional votes in favor of the Extra Space common stock issuance proposal if there are not sufficient votes at the time of the Extra Space special meeting to approve such proposal.

If, at the Extra Space special meeting, the number of shares of Extra Space common stock present or represented by proxy and voting for the approval of the Extra Space common stock issuance proposal is insufficient to approve such proposal, Extra Space intends to adjourn the Extra Space special meeting to another place, date or time in order to enable the Extra Space board to solicit additional proxies for approval of the Extra Space common stock issuance proposal.

Extra Space is asking Extra Space stockholders to approve one or more adjournments of the Extra Space special meeting to another date, time or place, if necessary or appropriate, to solicit additional proxies in favor of the Extra Space common stock issuance proposal.

Assuming a quorum is present, approval of this proposal requires the affirmative vote of a majority of the votes cast by the holders of Extra Space common stock on such proposal. In addition, under the Extra Space bylaws, if a quorum is not present at the Extra Space special meeting, the chairman of the Extra Space special meeting may adjourn the Extra Space special meeting until a date not more than 120 days after the original record date without notice other than announcement at the meeting.

 

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Recommendation of the Extra Space Board of Directors

The Extra Space board unanimously recommends that Extra Space stockholders vote FOR the Extra Space adjournment proposal.

Other Business

No business may be brought before the Extra Space special meeting except as set forth in the notice of the Extra Space special meeting.

 

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THE LIFE STORAGE SPECIAL MEETING

This joint proxy statement/prospectus is being furnished in connection with the solicitation of proxies from Life Storage stockholders for use at the Life Storage special meeting.

Date, Time, Place and Purpose of the Life Storage Special Meeting

The special meeting of the Life Storage stockholders will be held on July 18, 2023, commencing at 11:00 a.m., Eastern Time, at the following link: www.virtualshareholdermeeting.com/LSI2023SM. The Life Storage special meeting will be held in a virtual format only. To be admitted to the Life Storage special meeting, you must enter the control number found on your proxy card or voting instruction form. You may vote during the Life Storage special meeting by following the instructions available on the meeting website during the meeting.

At the Life Storage special meeting, Life Storage stockholders will be asked to consider and vote upon the following matters:

 

  1.

the Life Storage merger proposal;

 

  2.

the Life Storage compensation proposal; and

 

  3.

the Life Storage adjournment proposal.

Recommendation of the Life Storage Board of Directors

The Life Storage board has unanimously approved the merger agreement, the mergers and the other transactions contemplated thereby and unanimously recommends that the Life Storage stockholders vote FOR the Life Storage merger proposal, FOR the Life Storage compensation proposal and FOR the Life Storage adjournment proposal. For the reasons for this recommendation, see the section entitled “The MergersRecommendation of the Life Storage Board of Directors and Its Reasons for the Mergers” beginning on page 66 of this joint proxy statement/prospectus.

Life Storage Record Date; Who Can Vote at the Life Storage Special Meeting

Only holders of record of Life Storage common stock at the close of business on May 23, 2023, the record date for the Life Storage special meeting, are entitled to vote at the Life Storage special meeting and any postponement or adjournment of the Life Storage special meeting, except in the event such special meeting is adjourned or postponed to a date more than one hundred twenty (120) days after the record date originally fixed for the meeting, in which case a new record date for such meeting will be fixed by the Life Storage board. As of the close of business on the record date, there were 85,093,805 shares of Life Storage common stock outstanding and entitled to vote at the Life Storage special meeting, held by approximately 453 stockholders of record.

Each share of Life Storage common stock owned on Life Storage’s record date is entitled to one vote on each proposal at the Life Storage special meeting.

Directors and Officers of Life Storage

At the close of business on the record date, directors and executive officers of Life Storage were entitled to vote 335,933 shares of Life Storage common stock, or approximately 0.4% of the Life Storage common stock outstanding on that date. Life Storage currently expects that all Life Storage directors and executive officers will vote their shares of Life Storage common stock in favor of the proposal to approve the company merger as well as the other proposals to be considered at the Life Storage special meeting, although none of them is contractually obligated to do so.

 

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Required Vote; Quorum

Approval of the Life Storage merger proposal requires the affirmative vote of holders of two-thirds of the outstanding shares of Life Storage common stock entitled to vote on such proposal.

Assuming a quorum is present, approval of the Life Storage compensation proposal requires the affirmative vote of holders of shares of Life Storage common stock constituting a majority of the votes cast on such proposal.

Assuming a quorum is present, approval of the Life Storage adjournment proposal requires the affirmative vote of holders of shares of Life Storage common stock constituting a majority of the votes cast on such proposal.

Regardless of the number of shares of Life Storage common stock you own, your vote is important. Please complete, sign, date and promptly return the enclosed proxy card today or authorize a proxy to vote your shares by phone or Internet. If you do not vote, this will have the same effect as a vote AGAINST the Life Storage merger proposal.

To constitute a quorum for the Life Storage special meeting, there must be present at the special meeting in person or by proxy the holders of outstanding shares of Life Storage common stock entitled to cast a majority of all the votes entitled to be cast at the Life Storage special meeting. If you submit a proxy but fail to provide voting instructions or abstain on any of the proposals listed on the proxy card, your shares will be counted for the purpose of determining whether a quorum is present at the Life Storage special meeting. If your shares are held in “street name” by your broker or other nominee and you do not tell the nominee how to vote your shares, these shares will not be counted for purposes of determining whether a quorum is present for the transaction of business at the Life Storage special meeting.

In addition, under Maryland law and the Life Storage bylaws, if a quorum is not present at the Life Storage special meeting, the chairman of the Life Storage special meeting may adjourn the Life Storage special meeting to a date not more than one hundred twenty (120) days after the original record date without notice other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.

Shares Held in “Street Name”

If Life Storage stockholders hold shares of Life Storage common stock in an account of a broker or other nominee and they wish to vote such shares by proxy, they must return their voting instructions to the broker or other nominee.

If Life Storage stockholders hold shares of Life Storage common stock in an account of a broker or other nominee and they wish to attend and vote at the Life Storage special meeting, they must follow the directions provided by their broker or other nominee.

Abstentions and Broker Non-Votes

If your shares are held by a broker or other nominee on your behalf in “street name,” your broker or other nominee will send you instructions as to how to provide voting instructions for your shares by proxy. Many brokerage firms and other nominees have a process for their customers to provide voting instructions by telephone or via the Internet, in addition to providing voting instructions by proxy card. In accordance with the rules of the NYSE, brokers and other nominees who hold common stock in “street name” for their customers do not have discretionary authority to vote the shares with respect to the Life Storage merger proposal, the Life Storage compensation proposal or the Life Storage adjournment proposal. Accordingly, if brokers or other

 

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nominees do not receive specific voting instructions from the beneficial owner of such shares, they may not vote such shares with respect to the Life Storage merger proposal, the Life Storage compensation proposal or the Life Storage adjournment proposal, as applicable. Under such circumstance, a “broker non-vote” would arise.

Abstentions and broker non-votes will have the same effect as votes AGAINST the Life Storage merger proposal. Assuming a quorum is present, abstentions and broker non-votes will have no effect on the Life Storage compensation proposal or the Life Storage adjournment proposal.

Manner of Submitting Proxy

Life Storage stockholders may vote for or against the proposals submitted at the Life Storage special meeting in person or by proxy. Life Storage stockholders can authorize a proxy in the following ways:

 

   

Telephone or via the Internet. This joint proxy statement/prospectus is accompanied by a proxy card with instructions for submitting voting instructions. Life Storage stockholders may authorize a proxy by telephone by calling the toll-free number or via the Internet by accessing the Internet address as specified on the enclosed proxy card. Shares will be voted as directed by Life Storage stockholders in the same manner as if such Life Storage stockholder had completed, signed, dated and returned a proxy card, as described below.

 

   

Mail: Life Storage stockholders may submit a proxy by completing, signing, dating and returning their proxy card or voting instruction card in the preaddressed postage-paid envelope provided.

Life Storage stockholders should refer to their proxy cards or the information forwarded by their broker or other nominee to see which options are available to them.

The Internet and telephone proxy submission procedures are designed to authenticate stockholders and to allow them to confirm that their instructions have been properly recorded. If you submit a proxy via the Internet or by telephone, then you need not return a written proxy card or voting instruction card by mail. The Internet and telephone facilities available to record holders will close at 11:59 p.m., Eastern Time, on July 17, 2023.

The method by which Life Storage stockholders submit a proxy will in no way limit their right to vote at the Life Storage special meeting if they later decide to virtually attend the meeting and vote in person. If shares of Life Storage common stock are held in the name of a broker or other nominee, Life Storage stockholders must follow the directions provided by their broker or other nominee to be able to vote virtually at the Life Storage special meeting.

All shares of Life Storage common stock entitled to vote and represented by properly completed proxies received prior to the Life Storage special meeting, and not revoked, will be voted at the Life Storage special meeting as instructed on the proxies. If Life Storage stockholders of record return properly executed proxies but do not indicate how their shares of Life Storage common stock should be voted on a proposal, the shares of Life Storage common stock represented by their properly executed proxy will be voted as the Life Storage board recommends and therefore, FOR the Life Storage merger proposal, FOR the Life Storage compensation proposal and FOR the Life Storage adjournment proposal. If your shares of Life Storage common stock are held in “street name” by your broker or other nominee and you do not provide voting instructions to your broker or other nominee, your broker or other nominee will not be permitted to vote those shares and it will have the effect as described in the section entitled “The Life Storage Special MeetingAbstentions and Broker Non-Votes” beginning on page 43 of this joint proxy statement/prospectus.

Revocation of Proxies or Voting Instructions

Life Storage stockholders of record may change their vote or revoke their proxy at any time before it is exercised at the Life Storage special meeting by:

 

   

submitting notice in writing to Life Storage’s Secretary at Life Storage, Inc., 6467 Main Street, Williamsville, New York 14221, Attn: Secretary;

 

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executing and delivering a later-dated proxy card or submitting a later-dated proxy by telephone or via the Internet; or

 

   

virtually attending the special meeting and voting in person at the Life Storage special meeting.

Written revocations will not be effective until received by Life Storage’s Secretary at or before the Life Storage special meeting. Telephone and Internet revocations will not be effective unless received on or before 11:59 p.m., Eastern Time, on July 17, 2023.

Attending the Life Storage special meeting without voting will not revoke your proxy.

Life Storage stockholders that hold Life Storage common stock in an account of a broker or other nominee may revoke their voting instructions by following the instructions provided by their broker or other nominee.

Solicitation of Proxies; Payment of Solicitation Expenses

The solicitation of proxies from Life Storage stockholders is made on behalf of the Life Storage board. Life Storage will pay the cost of soliciting proxies from Life Storage stockholders. Life Storage has engaged Innisfree to assist in the solicitation of proxies for the special meeting and Life Storage will pay Innisfree reasonable and customary compensation for these services, including a $75,000 retainer fee covering the first month of services and $40,000 per month thereafter. Life Storage has also agreed to reimburse Innisfree for reasonable expenses incurred in connection with the proxy solicitation. In addition to mailing proxy solicitation materials, Life Storage’s directors and officers and employees of Life Storage may also solicit proxies in person, by telephone or by any other electronic means of communication deemed appropriate. No additional compensation will be paid to Life Storage’s directors or officers or to employees of Life Storage for such services.

In accordance with the regulations of the SEC and NYSE, Life Storage also will reimburse brokerage firms and other custodians, nominees and fiduciaries for their expenses incurred in sending proxies and proxy materials to beneficial owners of Life Storage common stock.

 

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PROPOSALS SUBMITTED TO LIFE STORAGE STOCKHOLDERS

Life Storage Merger Proposal

(Proposal 1 on the Life Storage Proxy Card)

The Life Storage stockholders are being asked to consider and vote on a proposal to approve the merger of Eros Merger Sub, LLC with and into Life Storage in accordance with the terms of the merger agreement, and the other transactions contemplated by the merger agreement. For a summary and detailed information regarding this proposal, see the information about the mergers and the merger agreement throughout this joint proxy statement/prospectus, including the information set forth in the sections entitled “The Mergers” and “The Merger Agreement” beginning on pages 48 and 116 of this joint proxy statement/prospectus, respectively. A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus.

Pursuant to the merger agreement, approval of this proposal is a condition to the consummation of the mergers. If this proposal is not approved, the mergers will not be completed.

Approval of this proposal requires the affirmative vote of holders of two-thirds of the outstanding shares of Life Storage common stock entitled to vote on such proposal.

Recommendation of the Life Storage Board of Directors

The Life Storage board unanimously recommends that Life Storage stockholders vote FOR the Life Storage merger proposal.

Life Storage Compensation Proposal

(Proposal 2 on the Life Storage Proxy Card)

The Life Storage stockholders are being asked to consider and vote on a non-binding advisory proposal to approve the compensation that may be paid or become payable to the Life Storage named executive officers. Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and Section 14A of the Exchange Act, Life Storage is providing its stockholders with the opportunity to cast a non-binding advisory vote on the compensation that may be paid or become payable to Life Storage’s named executive officers, as determined in accordance with Item 402(t) of Regulation S-K, that is based upon or otherwise relates to the mergers and the other transactions contemplated by the merger agreement and arises from any form of arrangement or understanding, whether written or unwritten, between Life Storage or the Combined Company and the named executive officers of Life Storage. Life Storage therefore is asking its stockholders to vote on the adoption of the following resolution:

“RESOLVED, that the compensation that may be paid or become payable to Life Storage, Inc.’s named executive officers in connection with the mergers and the agreements or understandings pursuant to which such compensation may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K in the section entitled “The MergersInterests of Life Storage’s Directors and Executive Officers in the MergersQuantification of Potential Payments and Benefits to Life Storage’s Named Executive Officers in Connection with the Mergers” beginning on page 106 of the joint proxy statement/prospectus dated June 6, 2023 is hereby APPROVED.”

Vote Required

The vote regarding the Life Storage compensation proposal is a vote separate and apart from the vote on the Life Storage merger proposal. Because the vote regarding merger-related compensation is advisory only, it will not be binding on either Life Storage or Extra Space regardless of whether the mergers are completed.

 

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Accordingly, if the mergers are completed, the merger-related compensation will become payable in connection with the mergers and a qualifying termination of employment, subject only to the conditions applicable thereto, regardless of the outcome of this non-binding advisory vote.

Assuming a quorum is present, approval of the Life Storage compensation proposal requires the affirmative vote of a majority of the votes cast on such proposal.

Recommendation of the Life Storage Board of Directors

The Life Storage board unanimously recommends that Life Storage stockholders vote FOR the Life Storage compensation proposal.

Life Storage Adjournment Proposal

(Proposal 3 on the Life Storage Proxy Card)

The Life Storage stockholders are being asked to approve a proposal that will give the chairman of the Life Storage special meeting the authority to adjourn the Life Storage special meeting one or more times to another date, time or place, to permit, among other things, further solicitation of proxies, if necessary or appropriate, to obtain additional votes in favor of the Life Storage merger proposal if there are not sufficient votes at the time of the Life Storage special meeting to approve such proposal.

If, at the Life Storage special meeting, the number of shares of Life Storage common stock present in person or represented by proxy and voting for the approval of the Life Storage merger proposal is insufficient to approve such proposal, Life Storage intends to adjourn the Life Storage special meeting to another place, date or time in order to enable the Life Storage board to solicit additional proxies for approval of the proposal.

Assuming a quorum is present, approval of this proposal requires the affirmative vote of a majority of the votes cast on such proposal. In addition, under the Life Storage bylaws, if a quorum is not present at the Life Storage special meeting, the chairman of the Life Storage special meeting may adjourn the Life Storage special meeting to a date not more than one hundred twenty (120) days after the original record date without notice other than announcement at the meeting.

Recommendation of the Life Storage Board of Directors

The Life Storage board unanimously recommends that Life Storage stockholders vote FOR the Life Storage adjournment proposal.

Other Business

No business may be brought before the Life Storage special meeting except as set forth in the Life Storage special meeting notice.

 

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THE MERGERS

The following contains a discussion of various aspects of or relating to the merger agreement and the mergers. Extra Space and Life Storage encourage Extra Space stockholders and Life Storage stockholders to carefully read this entire joint proxy statement/prospectus, including the information set forth in the section entitled “The Merger Agreement” beginning on page 116 of this joint proxy statement/prospectus as well as the merger agreement and the other documents attached to this joint proxy statement/prospectus or incorporated herein by reference, for a more complete understanding of the merger agreement and the mergers.

General

The Extra Space board has unanimously (i) approved the merger agreement and (ii) declared the merger agreement and the transactions contemplated thereby, including the mergers, to be advisable and in the best interests of Extra Space and its stockholders and in the best interests of Extra Space OP, Extra Space Merger Sub and Extra Space OP Merger Sub. To review the reasons of the Extra Space board for the mergers, see the section entitled “The MergersRecommendation of the Extra Space Board of Directors and Its Reasons for the Mergers” beginning on page 64 of this joint proxy statement/prospectus.

The Life Storage board has unanimously (i) determined that the mergers and the other transactions contemplated by the merger agreement are advisable and in the best interests of Life Storage and its stockholders, and Life Storage OP and its limited partners, (ii) approved the mergers and the other transactions contemplated by the merger agreement, and (iii) approved and adopted the merger agreement. To review the reasons of the Life Storage board for the mergers, see the section entitled “The MergersRecommendation of the Life Storage Board of Directors and Its Reasons for the Mergers” beginning on page 66 of this joint proxy statement/prospectus.

Pursuant to the merger agreement, (i) Extra Space Merger Sub will merge with and into Life Storage, with Life Storage continuing as the surviving entity and a wholly owned subsidiary of Extra Space, (ii) immediately after the company merger effective time, the LLC Conversions will be effected, (iii) immediately after the LLC Conversions, Extra Space will contribute to Extra Space OP all the outstanding equity interests of the Surviving Entity in exchange for the issuance by Extra Space OP to Extra Space of a number of newly issued partnership units in Extra Space OP equal to the number of shares of Extra Space common stock to be issued in the company merger, and (iv) thereafter, Extra Space OP Merger Sub will merge with and into Life Storage OP, with Life Storage OP continuing as the surviving entity and a wholly owned indirect subsidiary of Extra Space OP. Life Storage stockholders will receive the merger consideration described below in the section entitled “The Merger AgreementMerger Consideration; Effects of the Mergers” beginning on page 117 of this joint proxy statement/prospectus.

Background of the Mergers

The boards of directors and management teams of Extra Space and Life Storage periodically and in the ordinary course evaluate and consider a variety of financial and strategic opportunities as part of their respective long-term strategies to enhance value for their respective stockholders, including potential acquisitions, divestitures, business combinations and other transactions. Members of the management teams of each of Extra Space and Life Storage from time to time have met or otherwise communicated informally and independently with each other and with representatives of other real estate companies and investors regarding industry trends and considerations and the performance, business, strategic direction and prospects of their respective companies.

On December 15, 2022, Joseph D. Russell, Jr., Chief Executive Officer of Public Storage, contacted Joseph V. Saffire, Chief Executive Officer of Life Storage, to propose a potential acquisition of Life Storage by Public Storage. During this conversation, Mr. Saffire indicated that the chairman of the Life Storage board, Mark G. Barberio, should be included in any discussion regarding a potential transaction involving Life Storage and

 

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Public Storage and Messrs. Saffire and Russell agreed to schedule a further discussion. No terms of a potential transaction were discussed during this conversation.

On December 22, 2022, Messrs. Saffire, Barberio and Russell, along with Ronald L. Havner, Jr., chairman of the board of trustees of Public Storage, spoke via video conference. During this discussion, Messrs. Havner and Russell proposed a potential acquisition of Life Storage by Public Storage in a stock-for-stock transaction that would value Life Storage at a premium to the current trading price of Life Storage common stock but did not provide a specific exchange ratio or specify an amount of premium that would be proposed. Messrs. Havner and Russell requested that the parties engage in further discussions regarding the proposed transaction in mid-January 2023.

On December 28, 2022, the Life Storage board held a meeting to discuss the unsolicited request by Public Storage that the parties engage in further discussions regarding a potential acquisition of Life Storage by Public Storage. Members of Life Storage management and representatives of Wells Fargo, which had provided various financial advisory and financing services to Life Storage in the past, were present. Also present were representatives of Phillips Lytle, which serves as regular outside counsel to Life Storage, and representatives of Hogan Lovells, which had represented Life Storage on prior significant transactions. A representative of Hogan Lovells discussed with the Life Storage board the directors’ fiduciary duties and certain other legal matters in the context of considering an unsolicited proposal for a potential business combination transaction under Maryland law. Mr. Barberio summarized the telephonic discussions with Public Storage representatives and the request by Public Storage for further discussions regarding a proposed acquisition of Life Storage by Public Storage. The Life Storage board then discussed with its legal and financial advisors and Life Storage management the Public Storage request as well as, among other things, Life Storage’s performance relative to its strategic plan and its prospects for continued successful execution of such strategic plan. Following such discussion, the Life Storage board unanimously determined that Life Storage would not pursue further discussions with Public Storage with respect to Public Storage’s acquisition proposal. The Life Storage board instructed Life Storage management to send a written response to Public Storage informing it of the Life Storage board’s determination.

On December 29, 2022, Life Storage delivered a letter to Public Storage indicating that Life Storage would not pursue further discussions with Public Storage regarding a potential acquisition of Life Storage by Public Storage. Also on December 29, 2022, Mr. Saffire telephoned Mr. Russell and informed him of the Life Storage board’s determination.

On January 12, 2023, Mr. Russell telephoned Mr. Saffire and expressed Public Storage’s continuing interest in an acquisition of Life Storage. Subsequently on January 12, 2023, Public Storage sent Life Storage a written preliminary non-binding proposal for a taxable all-stock transaction at an exchange ratio of 0.4192 of a share of Public Storage common stock for each share of Life Storage common stock, which the Public Storage proposal stated would have a current value of $124.12 per share of Life Storage common stock based on the closing price of Public Storage common stock on January 12, 2023. The letter also summarized Public Storage’s rationale for a strategic transaction and set forth certain benefits of the proposed transaction, all of which were reiterated in the letter sent by Public Storage to Life Storage on February 5, 2023, which was publicly released. In this section, we refer to this proposal as the “PSA January 12th Proposal.” The PSA January 12th Proposal also disclosed that Wachtell, Lipton, Rosen & Katz, which we refer to in this section as “Wachtell Lipton,” was engaged as Public Storage’s legal counsel.

On January 17, 2023, the Life Storage board held a meeting to discuss the PSA January 12th Proposal. Members of Life Storage management and representatives of Wells Fargo, Hogan Lovells and Phillips Lytle were present. A representative of Hogan Lovells discussed with the Life Storage board the directors’ fiduciary duties and certain other legal matters in the context of considering an unsolicited proposal for a potential business combination transaction under Maryland law. In light of the receipt of the PSA January 12th Proposal, the Life Storage board determined to formally engage outside legal and financial advisors at that time and authorized the engagement of Hogan Lovells as its outside legal counsel and Wells Fargo as its outside financial advisor.

 

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Following a preliminary discussion of the PSA January 12th Proposal, the Life Storage board unanimously determined that it would further review the PSA January 12th Proposal at an upcoming meeting with the assistance of Life Storage management and the Life Storage legal and financial advisors.

On January 18, 2023, Mr. Russell emailed Mr. Saffire to express again his interest in meeting to discuss the PSA January 12th Proposal. Mr. Saffire responded via email on January 19, 2023, acknowledging receipt of Mr. Russell’s email and noting that Life Storage was reviewing the PSA January 12th Proposal and would respond in due course.

On January 30, 2023, the Life Storage board held a meeting to discuss the PSA January 12th Proposal. Members of Life Storage management and representatives of Wells Fargo, Hogan Lovells and Phillips Lytle were present. A representative of Hogan Lovells discussed with the Life Storage board the directors’ fiduciary duties and certain other legal matters in the context of considering an unsolicited proposal for a potential business combination transaction under Maryland law. Representatives of Wells Fargo discussed with the Life Storage board the PSA January 12th Proposal, Life Storage’s stand-alone business plan and prospects, Life Storage’s operating and financial performance over the most recent three and five years and, among other topics, preliminary observations regarding a potential merger or sale to third parties, including Public Storage. The Life Storage board discussed the merits of and risks related to the PSA January 12th Proposal and to continuing to pursue Life Storage’s existing business strategy as an independent, stand-alone company, noting, among other things, that although the PSA January 12th Proposal represented a premium to recent trading prices of Life Storage common stock, Life Storage management believed that Life Storage had the potential to achieve significant growth in FFO and total stockholder returns. The Life Storage board discussed various alternative responses to Public Storage but unanimously determined that the PSA January 12th Proposal was not in the best interests of Life Storage stockholders. Following this discussion, the Life Storage board instructed Life Storage management to send a written response to Public Storage rejecting the PSA January 12th Proposal.

Also on January 30, 2023, Mr. Russell emailed Mr. Saffire to express Public Storage’s continued interest in an acquisition of Life Storage and reiterated certain benefits of the proposed acquisition previously set forth in the PSA January 12th Proposal, which benefits were reiterated in the PSA February 5th Proposal (as defined below). Mr. Russell also included information regarding a comparison of the operating margins of Public Storage and Life Storage and noted the higher operating margin of Public Storage, which information was reiterated in the PSA February 5th Proposal.

On January 31, 2023, Life Storage delivered a letter to Public Storage informing it that the Life Storage board had unanimously rejected the PSA January 12th Proposal.

Also during the week of January 30, 2023, Mr. Saffire communicated with the chief executive officer of a large self-storage company, which we refer to in this section as “Party A,” to seek to arrange a meeting between the Party A chief executive officer and Messrs. Saffire and Barberio, which meeting was subsequently scheduled for February 6 and 7, 2023.

On February 5, 2023, Public Storage sent a letter to Life Storage reiterating its proposal to acquire Life Storage at an exchange ratio of 0.4192 of a share of Public Storage common stock for each share of Life Storage common stock in a taxable all-stock transaction, which we refer to in this section as the “PSA February 5th Proposal.” The letter summarized Public Storage’s rationale for the strategic transaction and provided a brief summary of the communications between representatives of Public Storage and Life Storage since January 12, 2023. The letter also disclosed that Public Storage had engaged Goldman Sachs & Co LLC, which we refer to in this section as “Goldman Sachs,” as its financial advisor. Shortly thereafter, Public Storage issued a press release disclosing its interest in a potential acquisition of Life Storage, which included both the February 5th letter and the January 12th letter sent by Public Storage to Life Storage.

Also on February 5, 2023, Public Storage announced that it would increase the regular quarterly dividend on its common stock by 50% from $2.00 to $3.00 per share.

 

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On February 6 and 7, 2023, Messrs. Saffire and Barberio met with the chief executive officer of Party A and a member of the board of trustees of Party A to discuss a potential strategic transaction involving Life Storage and Party A. At the conclusion of the meeting, the chief executive officer of Party A declined to engage in further discussions in the near-term but indicated that Party A may consider re-engaging in discussions in early March 2023.

On February 9, 2023, the Life Storage board held a regularly scheduled meeting, which board meeting is held annually in February to review Life Storage’s operating and strategic plans, and at which members of Life Storage management and representatives of Wells Fargo, Hogan Lovells and Phillips Lytle were present. A representative of Hogan Lovells discussed with the Life Storage board the directors’ fiduciary duties and certain other legal matters in the context of reviewing and analyzing a potential business combination transaction under Maryland law. Representatives of Wells Fargo discussed with the Life Storage board the PSA February 5th Proposal and noted that it included the same terms as the PSA January 12th Proposal. Representatives of Wells Fargo also discussed with the Life Storage board the recently announced increase in Public Storage’s dividend, Life Storage’s stand-alone business plan and prospects, Life Storage’s operating and financial performance over the most recent three and five years and, among other topics, preliminary observations regarding a potential merger or sale to third parties, including Public Storage. Mr. Barberio also updated the Life Storage board regarding the recent discussions with Party A. The Life Storage board discussed, together with its legal and financial advisors, the change in dynamics by Public Storage from a private approach to a public campaign. Consistent with its discussions at its January 30, 2023 meeting, the Life Storage board discussed the merits of and risks related to the PSA February 5th Proposal and to continuing to pursue Life Storage’s existing business strategy as an independent, stand-alone company. The Life Storage board noted, among other things, that the PSA February 5th Proposal included the same terms as the PSA January 12th Proposal but still represented a premium to recent trading prices of Life Storage common stock. Life Storage management reiterated their belief that Life Storage had the potential to achieve significant growth in FFO and total stockholder returns and to further expand operating margins. Additional factors considered by the Life Storage board included Life Storage’s prospects for future creation of stockholder value, strong operating and financial performance since 2019, likely ability to scale its portfolio faster than Public Storage, and recent expansion of its operating margins and its efforts to further that progress. After further discussion, the Life Storage board unanimously determined that the PSA February 5th Proposal significantly undervalued Life Storage and its prospects for future growth and value creation, that the PSA February 5th Proposal, therefore, was not in the best interests of Life Storage stockholders, and unanimously determined to reject the PSA February 5th Proposal. Following these determinations, the Life Storage board directed management to issue a public announcement regarding the Life Storage board’s rejection of the PSA February 5th Proposal and the factors that the Life Storage board considered in making its determination.

In addition, in light of the public nature of the PSA February 5th Proposal, the Life Storage board determined to formally engage additional outside legal and financial advisors at that time and authorized the engagement of Quinn Emanuel Urquhart & Sullivan as special litigation counsel and BofA Securities, which had provided various financing services to Life Storage in the past, as an additional outside financial advisor.

On February 14, 2023, the Life Storage board held a meeting at which members of Life Storage management and representatives of Wells Fargo, BofA Securities, Hogan Lovells and Phillips Lytle were present. The Life Storage board’s legal and financial advisors reviewed and discussed with the Life Storage board a draft press release, which we refer to in this section as the “Rejection Release,” to be issued by Life Storage to announce the Life Storage board’s rejection of the PSA February 5th Proposal. The Rejection Release included, among other things, the factors that the Life Storage board considered in making its determination and stated that while the Life Storage board was open to exploring all opportunities to maximize stockholder value, the PSA February 5th Proposal was insufficient in that regard. The Life Storage board’s legal and financial advisors reviewed and discussed with the Life Storage board a draft communications plan to be implemented in connection with the Rejection Release, which was expected to be issued on February 16, 2023 after the close of trading on the NYSE. The Life Storage board also discussed with its legal and financial advisors the merits of

 

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and risks related to direct engagement with Public Storage and determined that such engagement should occur after the issuance by Life Storage of its 2022 earnings release and certain additional information regarding the Life Storage board’s determination regarding the PSA February 5th Proposal.

On February 15, 2023, the Extra Space board held a regularly scheduled meeting, at which members of Extra Space management were present. Among other matters, the Extra Space board discussed the PSA February 5th Proposal to Life Storage. Mr. Margolis noted that Extra Space had considered a potential business combination with Life Storage in the past and that Citi, which had provided financial advisory services to Extra Space from time to time, had prepared a preliminary analysis of the potential business combination. Following such discussion, the Extra Space board directed Extra Space management to be prepared to respond to any requests from Life Storage to discuss a potential business combination between Extra Space and Life Storage.

On February 16, 2023, Life Storage issued the Rejection Release.

Also on February 16, 2023, concurrently with the issuance of the Rejection Release, Mr. Barberio telephoned Mr. Havner to inform him of the issuance of the Rejection Release. Mr. Barberio also informed Mr. Havner that if, after Life Storage issued its 2022 earnings release and certain additional information regarding the Life Storage board’s determination regarding the PSA February 5th Proposal, which was expected to occur on February 23 and 24, 2023, Public Storage continued to be interested in engaging with Life Storage, then Life Storage would authorize its financial advisors to communicate with Public Storage’s financial advisors. Mr. Havner affirmed Public Storage’s continuing interest in such engagement.

On February 17, 2023, a representative of Goldman Sachs, on behalf of Public Storage, contacted a representative of BofA Securities and requested that a telephonic discussion be arranged between the financial advisors to each of Public Storage and Life Storage. At the direction of Life Storage, representatives of Wells Fargo and BofA Securities subsequently informed the representative of Goldman Sachs that the Life Storage financial advisors would be available for such telephonic discussion after Life Storage had issued its earnings release on February 24, 2023 and such financial advisors subsequently agreed that the discussion be held on February 27, 2023.

On February 22, 2023, the Life Storage board held a meeting at which members of Life Storage management and representatives of Wells Fargo, BofA Securities, Hogan Lovells and Phillips Lytle were present. The Life Storage board’s legal and financial advisors reviewed and discussed with the Life Storage board a draft investor presentation outlining the reasons for the Life Storage board’s rejection of the PSA February 5th Proposal and the factors that the Life Storage board considered in making its determination. Members of Life Storage management discussed with the Life Storage board the company’s earnings results for the quarter and year ended December 31, 2022, as well as financial guidance for fiscal year 2023 and an outlook for 2024, all of which was scheduled to be disclosed, together with the investor presentation, on February 23 and 24, 2023. The Life Storage board’s legal and financial advisors also reviewed and discussed with the Life Storage board a draft communications plan to be implemented in connection with the investor presentation and the earnings release.

On the evening of February 23, 2023, Life Storage issued a press release publicly disclosing its earnings results for the quarter and year ended December 31, 2022.

On the morning of February 24, 2023, Life Storage issued a press release announcing the publication on the Life Storage website of the investor presentation, which outlined the reasons for the Life Storage board’s unanimous rejection of the PSA February 5th Proposal and the factors that the Life Storage board considered in making its determination. Later that morning, Life Storage management held its regularly scheduled publicly available conference call to discuss the company’s earnings results for the quarter and year ended December 31, 2022, its financial guidance for fiscal year 2023 and an outlook for fiscal year 2024, and the investor presentation.

 

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On February 27, 2023, representatives of each of Wells Fargo and BofA Securities, on behalf of and at the direction of Life Storage, and Goldman Sachs and Morgan Stanley, on behalf of and at the direction of Public Storage, held a conference call to discuss a potential exchange of information and other due diligence activities between Life Storage and Public Storage. Life Storage’s financial advisors stated that Life Storage’s intent in exchanging such information was to assist Public Storage in submitting an enhanced proposal if it elected to do so and to assist Life Storage’s board in its review and analysis of any such proposal. At the conclusion of the call, at the direction of Life Storage, Life Storage’s financial advisors delivered to Public Storage’s financial advisors via email a form of non-disclosure agreement prepared by Hogan Lovells.

From February 28 through March 2, 2023, representatives of Hogan Lovells, on behalf of Life Storage, negotiated the terms of the non-disclosure agreement with representatives of Wachtell Lipton, on behalf of Public Storage.

On February 28, 2023, the Life Storage board held a meeting at which members of Life Storage management and representatives of Wells Fargo, BofA Securities, Hogan Lovells and Phillips Lytle were present. Members of Life Storage management discussed with the Life Storage board the communications received by Life Storage from significant stockholders and industry analysts in response to the issuance by the company of its earnings results for the quarter and year ended December 31, 2022, its financial guidance for fiscal year 2023 and an outlook for 2024, and the investor presentation. Members of Life Storage management noted that such communications were primarily focused on such stockholders encouraging the Life Storage board to engage in discussions with Public Storage and possibly other potential counterparties, including to determine if an improved price might be available. The Life Storage board also discussed with its legal and financial advisors certain other potential alternatives to an acquisition by Public Storage. Following such discussion, the Life Storage board authorized Messrs. Barberio and Saffire to make confidential inquiries to certain self-storage industry participants and non-industry capital sources.

On March 1, 2023, representatives of Public Storage sent to representatives of Life Storage an initial diligence request list.

On March 2, 2023, Life Storage and Public Storage executed a non-disclosure agreement, which provided for, among other things, a 28-day standstill period (with customary fall-away provisions), expiring on March 30, 2023, during which period Public Storage was prohibited from taking certain actions with respect to a potential acquisition of Life Storage. The non-disclosure agreement did not include an exclusivity provision that would prohibit Life Storage from discussing or negotiating a potential transaction with other potential counterparties during the 28-day standstill period. Later on March 2, 2023, Life Storage opened a virtual data room to provide confidential diligence materials regarding Life Storage to Public Storage and its advisors.

On March 3, 2023, in accordance with the Life Storage board’s authorization at its February 28 meeting and as directed by Mr. Barberio, Mr. Saffire telephoned the chief executive officer of Party A to inquire as to whether Party A would have an interest in further discussions regarding a potential strategic transaction with Life Storage. Mr. Saffire and the chief executive officer of Party A discussed arrangements for a follow-up discussion, which was subsequently scheduled for March 10, 2023. The chief executive officer of Party A noted that he was uncertain as to whether Party A would be able to provide sufficient value in a potential transaction to compete with the premium indicated by the PSA February 5th Proposal.

Also on March 3, 2023, in accordance with the Life Storage board’s authorization at its February 28 meeting and as directed by Mr. Barberio, Mr. Saffire telephoned Joseph D. Margolis, Chief Executive Officer of Extra Space, to inquire as to whether Extra Space would have an interest in discussions regarding a potential strategic transaction with Life Storage. During this call, Mr. Margolis confirmed that Extra Space had a strong interest in pursuing such discussions and Messrs. Saffire and Margolis agreed to schedule an in-person meeting to continue such discussions, which was subsequently held on March 8, 2023 in Sarasota, Florida.

 

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Also on March 3, 2023, representatives of Life Storage sent representatives of Public Storage a diligence request list for materials and information to assist Life Storage in its potential review and analysis of any enhanced proposal that Public Storage may submit.

From March 3, 2023 until April 1, 2023, the management teams of each of Public Storage and Life Storage, together with their respective financial and legal advisors, performed a diligence review with respect to the other company through a review of publicly available and non-public information and held a series of discussions regarding diligence matters.

On March 8, 2023, Messrs. Barberio, Margolis and Saffire met in Sarasota, Florida to discuss Extra Space’s interest in a potential strategic transaction with Life Storage. Mr. Margolis noted that Kenneth Woolley, chairman of the Extra Space board, was unable to attend the meeting due to ongoing travel outside of the United States. During these discussions, Mr. Margolis indicated that Extra Space would be interested in exploring a stock-for-stock, tax-free transaction. No nonpublic information was disclosed at the meeting nor were specific terms of a potential strategic transaction discussed. Later on March 8, 2023, Mr. Saffire delivered to Mr. Margolis via email a form of non-disclosure agreement prepared by Hogan Lovells.

On March 9, 2023, Public Storage provided Life Storage and its representatives with access to a virtual data room containing certain confidential information regarding Public Storage that had been requested by Life Storage and its advisors.

Also on March 9, 2023, Extra Space and Life Storage entered into a non-disclosure agreement, which included, among other things, a reciprocal standstill provision with a 12-month term (with customary fall-away provisions) and customary mutual confidentiality restrictions. The non-disclosure agreement did not include an exclusivity provision that would prohibit Life Storage from discussing or negotiating a potential transaction with other potential counterparties during the standstill period.

Later on March 9, 2023, Life Storage provided Extra Space and its representatives with access to the same Life Storage virtual data room that had been made available to Public Storage. From March 9, 2023 until the execution of the merger agreement on April 2, 2023, each of Public Storage and Extra Space had access to this virtual data room.

On March 10, 2023, Mr. Saffire spoke by telephone with the chief executive officer of Party A who informed Mr. Saffire that Party A remained uncertain regarding the viability of a strategic transaction with Life Storage. Following this March 10 discussion, there were no further communications between Life Storage and Party A.

On March 13, 2023, the Life Storage board held a meeting, at which members of Life Storage management and representatives of Wells Fargo, BofA Securities, Hogan Lovells and Phillips Lytle were present. Mr. Barberio and representatives of Wells Fargo and BofA Securities provided an update on discussions with each of Public Storage and Extra Space and the diligence review that was underway with each potential counterparty. Mr. Saffire updated the Life Storage board regarding his discussions with the chief executive officer of Party A. Messrs. Barberio and Saffire and representatives of Wells Fargo and BofA Securities also noted that various inquiries had been received from private capital sources regarding such parties’ interest in participating in an ancillary role in a strategic or other transaction but that none had expressed an interest in presenting an acquisition proposal. Alexander Gress, Chief Financial Officer of Life Storage, reviewed with the Life Storage board the company’s 5-year financial forecasts and the key underlying assumptions and various factors that could affect the company’s performance relative to such forecasts. After discussion, the Life Storage board authorized and directed its financial advisors to use the 5-year financial forecasts for the purposes of their fairness opinions and related analyses to provide the 5-year financial forecast to Public Storage, Extra Space and other potential counterparties. See the section entitled “The MergersCertain Life Storage Unaudited Prospective Financial Information” beginning on page 99 of this joint proxy statement/prospectus.

 

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On March 14, 2023, the Extra Space board held a meeting, at which members of Extra Space management and representatives of Citi were present. Mr. Margolis informed the Extra Space board of the unsolicited outreach from Life Storage and summarized the discussions with Life Storage representatives and the request by Life Storage for further discussions regarding a potential acquisition of Life Storage by Extra Space. The Extra Space board then discussed with representatives of Citi and Extra Space management the Life Storage acquisition opportunity, including preliminary synergy assessments. Following such discussion, the Extra Space board provided Extra Space management with direction on the potential valuation of Life Storage and authorized Extra Space management to pursue further discussions with respect to a potential acquisition of Life Storage.

Also on March 14, 2023, representatives of Hogan Lovells and Phillips Lytle participated in a conference call with representatives of Latham, counsel to Extra Space, to discuss preliminary matters with respect to a potential transaction between Life Storage and Extra Space. Latham serves as regular outside counsel to Extra Space and had been engaged to advise on a potential transaction with Life Storage. Representatives of Hogan Lovells presented to representatives of Latham a potential structure for a tax-free merger transaction with Extra Space, which took into account Extra Space’s UPREIT structure, Life Storage’s joint venture arrangements and Life Storage’s tax protection agreements with certain Life Storage operating partnership unitholders. Representatives of Hogan Lovells subsequently provided a copy of the presentation to Latham via email. Representatives of Hogan Lovells and representatives of Latham also discussed a process for each party’s diligence review of the other, and Latham was informed that Life Storage diligence materials would be posted to Life Storage’s virtual data room. Subsequent to March 14, 2023 and until the execution of the definitive merger agreement on April 2, 2023, representatives of Hogan Lovells and Phillips Lytle engaged in separate discussions with representatives of each of Wachtell Lipton and Latham regarding, among other matters, potential structure alternatives, proposed tax treatment for the transaction, Life Storage joint venture arrangements, Life Storage tax protection agreements, and certain employee compensation matters in connection with a potential strategic transaction, relating to, among other things, payment of 2023 annual bonuses and payment of severance to employees terminated in connection with the potential transaction.

On March 15, 2023, representatives of Hogan Lovells and Phillips Lytle participated in a conference call with representatives of Wachtell Lipton, counsel to Public Storage, to discuss certain structuring considerations for a potential transaction. Representatives of Hogan Lovells presented to representatives of Wachtell Lipton a potential structure for a merger transaction with Public Storage, which took into account Public Storage’s DownREIT structure, Public Storage’s stated preference for a taxable transaction (but provided for a tax deferred transaction at the operating partnership level), Life Storage’s joint venture arrangements and Life Storage’s tax protection agreements with certain Life Storage operating partnership unitholders. Representatives of Hogan Lovells subsequently provided a copy of the presentation to Wachtell Lipton via email.

On March 16, 2023, representatives of Hogan Lovells had a follow-up call with representatives of Latham to further discuss structuring considerations, including with respect to the potential for a tax-free transaction at the Life Storage operating partnership level and the potential impact of such structure on the Life Storage tax protection agreements.

Also on March 16, 2023, Messrs. Barberio and Saffire met in Atlanta, Georgia with Messrs. Woolley and Margolis to discuss Extra Space’s interest in a potential strategic transaction with Life Storage and the potential merits and challenges of such a transaction. Mr. Woolley noted that the Extra Space board had authorized Extra Space to move forward with the negotiation of a potential transaction with Life Storage. During these discussions, Messrs. Woolley and Margolis made an oral proposal for Extra Space to acquire all of the outstanding shares of Life Storage common stock in a stock-for-stock tax-free transaction at an exchange ratio of 0.835 of a share of Extra Space common stock for each share of Life Storage common stock. Mr. Barberio requested that Extra Space present any acquisition proposal in writing so that Mr. Barberio could provide the proposal to the Life Storage board for consideration.

Later on March 16, 2023, at the direction of Life Storage, representatives of Wells Fargo and BofA Securities participated in a conference call with representatives of Goldman Sachs and Morgan Stanley, in which

 

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the Public Storage financial advisors noted that Public Storage intended to submit an updated proposal the following week and requested certain additional information regarding the factors the Life Storage board would consider in evaluating a revised proposal, including the potential inclusion of cash as a portion of the proposed merger consideration. Representatives of Wells Fargo and BofA Securities responded that Life Storage was not providing guidance with respect to a preference for cash versus stock consideration but instead encouraged Public Storage to seek to provide the greatest overall value. Thereafter, from March 16, 2023 until March 31, 2023, representatives of Morgan Stanley and Goldman Sachs and representatives of Wells Fargo and BofA Securities held a series of discussions regarding financial and operating matters as well as transaction process and timing matters.

On March 17, 2023, the Extra Space board held a meeting, at which members of Extra Space management were present. Messrs. Woolley and Margolis provided an update to the Extra Space board regarding discussions with Life Storage representatives. As a part of this review, the Extra Space board discussed, among other matters, the strategic rationale of the potential acquisition of Life Storage, timing, proposed economic terms and other key considerations. After discussion, the Extra Space board authorized Extra Space management to continue negotiating an acquisition of all of the outstanding Life Storage common stock at a fixed exchange ratio of 0.835 of a share of Extra Space common stock for each share of Life Storage common stock. Following the March 17 Extra Space board meeting, Extra Space formally engaged on the same day Citi as its outside financial advisor in connection with the potential acquisition of Life Storage.

Later on March 17, 2023, Extra Space delivered to Life Storage a written letter confirming its prior oral proposal to acquire all of the outstanding Life Storage common stock at a fixed exchange ratio of 0.835 of a share of Extra Space common stock for each share of Life Storage common stock (which such letter noted would provide an implied value of $133.57 per share of Life Storage common stock based on the closing price of Extra Space common stock on March 16, 2023), which we refer to in this section as the “EXR March 17th Proposal.” The letter also indicated that Extra Space expected that any definitive merger agreement would contain a customary no shop provision that included a fiduciary out termination right, with the corresponding termination fee amount set at the upper end of the typical range for fully marketed acquisition transactions and that Extra Space would have matching rights for any proposals emerging after the execution of a definitive merger agreement.

Also on March 17, 2023, the management teams of each of Life Storage and Extra Space, together with their respective financial advisors, held a telephonic meeting and discussed the parties’ expectations as to various financial and operating diligence matters, including potential synergies and transaction costs. Thereafter, from March 17, 2023 until March 31, 2023, representatives of Citi and representatives of Wells Fargo and BofA Securities held a series of discussions regarding financial and operating matters as well as transaction process and timing matters.

Shortly after receiving the EXR March 17th Proposal, Mr. Barberio communicated to Mr. Woolley that the exchange ratio in the proposal would likely be perceived as inadequate given the potential of a higher bid. The chairmen determined to continue discussions and diligence sessions to further explore a potential strategic transaction between Life Storage and Extra Space.

Throughout the weeks of March 20 and March 27, 2023, Life Storage’s legal and financial advisors, members of Life Storage management and Mr. Barberio engaged in discussions and diligence sessions with legal and financial advisors of, and members of management and the chairman of the board of directors of, each of Public Storage and Extra Space.

On March 21, 2023, the Life Storage board held a meeting, at which members of Life Storage management and representatives of Wells Fargo, BofA Securities, Hogan Lovells and Phillips Lytle were present. Mr. Barberio provided the Life Storage board with an update regarding recent discussions with representatives of each of Public Storage and Extra Space and the status of the ongoing diligence reviews with each potential counterparty. Representatives of Wells Fargo then discussed with the Life Storage board, among other topics, a preliminary financial comparison of each of the PSA February 5th Proposal, the EXR March 17th Proposal and Life Storage’s independent business plan, which included a comparison of the relative benefits and considerations of each of the possible alternatives. During the meeting, the Life Storage board and its legal and financial advisors discussed (i) the benefits and risks of pursuing a strategic transaction with either Public

 

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Storage or Extra Space relative to continuing to pursue Life Storage’s existing business strategy as a stand-alone company, (ii) the relative benefits and risks of pursuing a strategic transaction with either Public Storage or Extra Space and the financial outlook of the combined company, (iii) whether there may be other potential counterparties that have both the financial ability and the interest in making and consummating an acquisition proposal at a value greater than that presented by either Public Storage or Extra Space, and (iv) a strategy designed to obtain the highest value from each of Public Storage and Extra Space. Wells Fargo and BofA Securities indicated that there were a limited number of potential buyers that would have the financial ability and interest in making an acquisition proposal for Life Storage, and Mr. Barberio reiterated to the Life Storage board that Party A had not demonstrated an interest in pursuing a potential transaction with Life Storage. Following a conversation amongst the Life Storage board and its financial and legal advisors regarding the risks of further outreach and associated leaks against the potential benefit of obtaining a proposal at a cash price that would be more attractive than the two proposals under consideration, the Life Storage board authorized its financial advisors to contact one specified potential cash buyer, who we refer to in this section as “Party B.” Following further discussion, Life Storage’s financial advisors were directed to encourage each of Public Storage and Extra Space to submit enhanced proposals and Hogan Lovells and Phillips Lytle were directed to prepare a form of draft merger agreement for Life Storage to present to each of Public Storage and Extra Space along with a request that a markup of such draft be returned to Life Storage in order that the Life Storage board would have a more fulsome view of each such party’s proposal.

Later on March 21, 2023, representatives of Wells Fargo and BofA Securities spoke by telephone with representatives of Morgan Stanley and Goldman Sachs to encourage Public Storage to submit an enhanced proposal.

Also on March 21, 2023, representatives of Wells Fargo and BofA Securities spoke by telephone with representatives of Citi to discuss the status of diligence activities. Life Storage’s financial advisors also communicated that Extra Space would be provided with a draft merger agreement in the next several days and that Extra Space was encouraged to submit a markup of such draft.

Also on March 21, 2023, Extra Space provided Life Storage and its representatives with access to a virtual data room containing certain confidential information regarding Extra Space that had been requested by Life Storage and its advisors.

On March 22, 2023, Bloomberg published an article speculating that Extra Space was considering submitting a proposal to acquire Life Storage.

On March 24, 2023, Public Storage delivered to Life Storage via email a written letter from Messrs. Russell and Havner in which it proposed to acquire all of the outstanding shares of Life Storage at an updated exchange ratio of 0.4400 shares of Public Storage common stock for each outstanding Life Storage share (which Public Storage stated in its letter was a five percent increase from the PSA February 5th Proposal), which we refer to in this section as the “PSA March 24th Proposal.”

Later on March 24, 2023, Messrs. Barberio and Saffire spoke via video conference with Messrs. Havner and Russell to acknowledge receipt of Public Storage’s updated offer letter and to inform Public Storage that Hogan Lovells would send to Wachtell Lipton the following day a draft merger agreement. Public Storage was encouraged to submit by the close of business on March 27, 2023 a markup of such draft as well as an enhanced proposal. Messrs. Barberio and Saffire noted to Messrs. Havner and Russell that the PSA March 24th Proposal did not, in effect, represent compelling value and encouraged Public Storage to “put its best foot forward” with a further enhanced proposal. Messrs. Barberio and Saffire informed Messrs. Havner and Russell that the Life Storage board was seeking resolution with respect to a potential strategic transaction within the next week, and each of Public Storage and Life Storage should work to complete its diligence review within that timeframe.

 

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Subsequently on March 24, 2023, at the direction of Life Storage, representatives of Wells Fargo and BofA Securities spoke by telephone with representatives of Morgan Stanley and Goldman Sachs to reiterate the guidance communicated by Messrs. Barberio and Saffire to Mr. Russell earlier that day. In response to questions from the Public Storage financial advisors, the Life Storage financial advisors reiterated that Life Storage was not providing guidance with respect to a preference for cash versus stock consideration but instead encouraged Public Storage to seek to provide the greatest overall value.

On March 25, 2023, Mr. Barberio spoke by telephone with Mr. Woolley to encourage Extra Space to submit an enhanced proposal by close of business on March 27, 2023. Extra Space was also informed that the Life Storage board was seeking resolution with respect to a potential strategic transaction within the next week, and each of Extra Space and Life Storage should work to complete its diligence review within that timeframe. Following such call, representatives of Wells Fargo and BofA Securities spoke by telephone with representatives of Citi to confirm the matters discussed between Mr. Barberio and Mr. Woolley.

Later on March 25, 2023, representatives of Hogan Lovells distributed, on behalf of Life Storage, the same form of draft merger agreement to counsel for each of Extra Space and Public Storage and requested a markup back from each party by the close of business on March 27, 2023. The draft merger agreement (i) included generally reciprocal representations and warranties, customary interim operating covenants and closing conditions, (ii) included a provision providing for the post-closing appointment of an unspecified number of current Life Storage board members to the board of directors of the combined company, with the number of board seats left open for each of Extra Space and Public Storage to propose, (iii) provided that Life Storage could continue to pay its quarterly dividend at a rate not to exceed $1.20 per share per quarter and would align its dividend payments to its counterparty’s dividend payments during the period between signing and closing of the potential transaction, (iv) included mutual non-solicitation or “no shop” restrictions on each party’s ability to solicit or negotiate alternative acquisition proposals, the ability of Life Storage to terminate the agreement to accept a superior proposal, the ability of either party to change its recommendation to its stockholders due to a superior proposal or an intervening event after signing and a mutual termination fee (equal to 2.75% of each such party’s equity value) and expense reimbursement (up to $20 million) that would be payable by either party under certain circumstances and (v) included a termination fee equal to 1% of Life Storage’s equity value payable by the counterparty to Life Storage in the event that the merger agreement was terminated due to the failure of the counterparty to obtain its stockholder approval for the transaction, which we refer to in this section as the “Parent No Vote Termination Fee.”

On March 26, 2023, Mr. Woolley spoke by telephone with Mr. Barberio regarding the continued interest by Extra Space in a strategic transaction with Life Storage. In response to a request from Mr. Woolley and after taking into account the significantly shorter period of time that had been available to Extra Space (as compared to Public Storage) to conduct diligence and develop a more informed proposal, Mr. Barberio indicated to Mr. Woolley that Life Storage would not object if Extra Space submitted its markup of the draft merger agreement later in the week.

On March 27, 2023, representatives of Wachtell Lipton sent to representatives of Hogan Lovells a markup of the draft merger agreement, which reflected a proposed acquisition of all of the outstanding share of Life Storage common stock for 0.4600 of a share of Public Storage common stock for each share of Life Storage common stock or, at the option of the Life Storage board, up to $26 per share in cash and 0.3692 of a share of Public Storage common stock for each outstanding share of Life Storage common stock. Such proposal was also communicated to Messrs. Barberio and Saffire in a separate letter also received on March 27, 2023, which clarified that at $26 of cash consideration per share of Life Storage common stock, Public Storage would not be required to obtain a vote of its stockholders in connection with the proposed transaction. The Public Storage proposal letter also stated that the revised exchange ratio of 0.4600 was a ten percent increase from the PSA February 5th Proposal and a five percent increase from the exchange ratio of 0.4400 that was provided in the PSA March 24th Proposal. The revised merger agreement included an updated structure proposal to reflect a taxable transaction for holders of Life Storage common stock but a tax-free transaction within Public Storage’s

 

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DownREIT structure for Life Storage OP unitholders, included a covenant requiring Life Storage to cooperate with Public Storage to obtain third party consents of joint venture partners, proposed that one current member of the Life Storage board would be appointed to the Public Storage board post-closing, revised the no shop provision in a manner that was more favorable to Public Storage, deleted the Parent No Vote Termination Fee and proposed that the termination fee payable by Life Storage would be 3% of Life Storage’s equity value and that the termination fee payable by Public Storage would be 4% of Life Storage’s equity value, among other comments. In this section, we refer to this proposal as the “PSA March 27th Proposal.”

On March 28, 2023, representatives of Hogan Lovells and Phillips Lytle sent to representatives of each of Wachtell Lipton and Latham an initial draft of Life Storage’s disclosure schedules to the merger agreement.

On March 29, 2023, Messrs. Woolley and Barberio spoke by telephone. Mr. Barberio reported to Mr. Woolley that the Life Storage board was scheduled to meet the following day and requested that Extra Space provide a markup of the draft merger agreement in advance of the meeting. Mr. Woolley previewed for Mr. Barberio several of the more material revised terms that would be reflected in the markup, including revisions to the amount of the termination fee and the deletion of the Parent No Vote Termination Fee. Consistent with the guidance provided to Public Storage, Mr. Barberio informed Mr. Woolley that Extra Space was encouraged to “put its best foot forward” with respect to a revised proposal. Also on March 29, 2023, representatives of Wells Fargo and BofA Securities spoke with representatives of Citi to confirm certain process matters.

On March 29, 2023, a representative of Hogan Lovells spoke by telephone with a representative of Wachtell Lipton to request that Wachtell Lipton provide a markup of the draft merger agreement that reflected its cash and stock proposal, noting that the markup that had been delivered on March 27 reflected only Public Storage’s all-stock proposal.

Later on March 29, 2023, representatives of Latham sent representatives of Hogan Lovells a markup of the draft merger agreement, which proposed a termination fee payable by Life Storage equal to 3.25% of Life Storage’s equity value and a termination fee payable by Extra Space equal to 3.25% of Extra Space’s equity value, included revisions to the deal protection provisions that were more favorable to Extra Space, deleted the Parent No Vote Termination Fee and proposed that three current members of the Life Storage board would be appointed to the Extra Space board post-closing, among other comments. The markup did not provide a specific exchange ratio.

On March 30, 2023, the Life Storage board held a meeting at which members of Life Storage management and representatives of Wells Fargo, BofA Securities, Hogan Lovells and Phillips Lytle were present. Mr. Barberio provided an update to the Life Storage board regarding recent discussions with each of Public Storage and Extra Space, including an overview of the PSA March 24th Proposal and the PSA March 27th Proposal in which Public Storage had increased its proposed exchange ratio and further proposed that, at the Life Storage board’s election, a portion of the merger consideration would be payable in cash. Mr. Barberio noted that each of Public Storage and Extra Space had provided comments to the same form of draft merger agreement distributed by Hogan Lovells. He also noted that Mr. Woolley had informed him that Extra Space would submit an updated proposal. Mr. Barberio reported that representatives of BofA Securities had contacted Party B, which had responded that given the current valuations for Life Storage it was not interested in pursuing discussions regarding an acquisition of Life Storage. Representatives of Wells Fargo then reviewed with the Life Storage board, among other topics, a preliminary financial comparison of the PSA March 24th Proposal and the PSA March 27th Proposal against the EXR March 17th Proposal, a preliminary comparison of potential synergies, a review of each of Public Storage’s and Extra Space’s forecasts and a preliminary financial review of the combined company that would result from a potential combination with each of Public Storage and Extra Space. Representatives of Hogan Lovells also discussed with the Life Storage board the material terms of each of the markups of the draft merger agreement that had been received from Public Storage and Extra Space. A representative of Hogan Lovells also discussed with the Life Storage board the directors’ fiduciary duties and

 

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certain other legal matters under Maryland law in the context of considering alternative potential business combination transaction proposals. A discussion then ensued amongst members of the Life Storage board and its legal and financial advisors and Life Storage management regarding the various alternatives.

Later on March 30, 2023, representatives of Hogan Lovells participated in a video conference call with representatives of Wachtell Lipton to discuss the draft merger agreement, including with respect to the transaction structure for Life Storage OP. Representatives of Wachtell Lipton sent to Hogan Lovells later that day a markup of the draft merger agreement that reflected its cash and stock proposal.

Also on March 30, 2023, Mr. Russell telephoned Mr. Barberio to inquire further about process and timing matters. During such conversation, Mr. Barberio encouraged Public Storage to “put its best foot forward” with a revised enhanced proposal. Mr. Barberio also discussed with Mr. Russell Public Storage’s proposal regarding the composition of the potential combined company board and Public Storage’s proposal to appoint one current member of the Life Storage board to the potential combined company board.

Subsequently on March 30, 2023, Mr. Barberio and Mr. Woolley spoke by telephone. Mr. Barberio informed Mr. Woolley that the Life Storage board had discussed Extra Space’s markup of the merger agreement and encouraged Extra Space to submit an enhanced proposal in terms of valuation. Mr. Woolley reiterated Extra Space’s continued interest in a strategic transaction with Life Storage and previewed that the Extra Space board would be meeting the next day to further discuss the strategic transaction and associated valuation issues.

Also on March 30, 2023, representatives of Latham sent to representatives of Hogan Lovells an initial draft of Extra Space’s disclosure schedules to the draft merger agreement.

Also on March 30, 2023, Extra Space engaged J.P. Morgan as an additional outside financial advisor in connection with the potential acquisition of Life Storage.

On the morning of March 31, 2023, at the direction of Life Storage, representatives of Wells Fargo and BofA Securities telephoned representatives of Goldman Sachs and Morgan Stanley to communicate that Life Storage was seeking best and final offers by the close of business that day. Representatives of Wells Fargo and BofA Securities also indicated that Hogan Lovells would send to Wachtell Lipton later that morning a revised form of the draft merger agreement responding to the revisions proposed by Public Storage and its advisors in the drafts previously provided to Life Storage. The Life Storage financial advisors also requested that Public Storage and its advisors include with their best and final proposal that evening a revised markup of the draft merger agreement. Shortly thereafter, representatives of Hogan Lovells spoke by telephone with representatives of Wachtell Lipton and confirmed the process outlined by Wells Fargo and BofA Securities and stated that representatives of Hogan Lovells would be available throughout the day for discussions, whether by telephone or email, certain of which occurred during such day. Shortly after these discussions, representatives of Hogan Lovells sent to representatives of Wachtell Lipton markups of the all-stock draft merger agreement and the cash and stock draft merger agreement. Later in the day, Mr. Havner telephoned Mr. Barberio and left a voicemail noting that Public Storage was willing to appoint two current members of the Life Storage board to the Public Storage board post-closing, an increase from the prior proposal of one current member of the Life Storage board joining the Public Storage board.

Also on March 31, 2023, Mr. Barberio spoke by telephone with Mr. Woolley to provide substantially similar guidance to Extra Space as had been previously provided to Public Storage, including with respect to the delivery by Extra Space by the close of business that day of an enhanced proposal and a further markup of a revised draft of the merger agreement that would be distributed that morning by representatives of Hogan Lovells to representatives of Latham. Shortly after such discussion, representatives of Hogan Lovells sent to representatives of Latham a markup of the revised draft merger agreement previously provided by Latham. Throughout the day on March 31, 2023, representatives of Hogan Lovells engaged with representatives of Latham to discuss various issues in the draft merger agreement. Also on March 31, 2023, representatives of Wells Fargo and BofA Securities spoke with representatives of Citi to confirm certain process matters.

 

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Also on March 31, 2023, the Extra Space board held a meeting, at which members of Extra Space management and representatives of Citi and Latham were present. Mr. Woolley provided an update to the Extra Space board regarding discussions with Life Storage representatives. Messrs. Woolley and Margolis presented materials prepared by Extra Space management and Citi regarding the strategic rationale and merits of the potential acquisition of Life Storage, including the anticipated synergies and an analysis of standalone and pro forma balance sheet considerations. A representative of Latham discussed with the Extra Space board the key terms and conditions, including closing conditions, deal protections and related matters, set forth in the draft merger agreement, as well as the Extra Space directors’ fiduciary duties and certain other legal matters in the context of reviewing and analyzing a potential business combination transaction under Maryland law. Extra Space management also discussed with the Extra Space board an updated valuation model and the basis for potentially increasing the exchange ratio previously proposed by Extra Space. After discussion with Extra Space management and its financial and legal advisors, the Extra Space board authorized Extra Space management to submit a revised proposal to acquire Life Storage at an increased exchange ratio of 0.895 of a share of Extra Space common stock for each share of Life Storage common stock.

Later on March 31, 2023, representatives of Hogan Lovells received revised markups of the draft merger agreements from each of Wachtell Lipton, on behalf of Public Storage, and Latham, on behalf of Extra Space. Extra Space also delivered to Life Storage via email a written letter from Mr. Margolis in which it proposed an updated exchange ratio of 0.895 shares of Extra Space common stock for each share of Life Storage common stock, reflecting a 7.19% increase from its previous proposal of 0.835 shares of Extra Space common stock for each share of Life Storage common stock. Based on the closing price of Extra Space common stock on March 31, 2023 of $162.93, an exchange ratio of 0.895 shares of Extra Space common stock for each outstanding share of Life Storage common stock implied a current value of $145.82 per share of Life Storage common stock. Public Storage delivered to Life Storage via email a written letter from Messrs. Russell and Havner in which it proposed an improved exchange ratio of 0.4650 shares of Public Storage common stock for each outstanding share of Life Storage common stock in an all-stock transaction or, in the alternative, a proposal for a combination of cash and stock with an exchange ratio of 0.3789 shares of Public Storage common stock plus $26.00 of cash for each share of Life Storage common stock. Based on the closing price of Public Storage common stock on March 31, 2023 of $302.14, an exchange ratio of 0.4650 shares of Public Storage common stock for each outstanding share of Life Storage common stock implied a current value of $140.50 per share of Life Storage common stock and an exchange ratio of 0.3789 shares of Public Storage common stock plus $26.00 of cash for each outstanding share of Life Storage common stock implied a current value of $140.48 per share of Life Storage common stock.

On April 1, 2023, representatives of Wachtell Lipton sent to representatives of Hogan Lovells an initial draft of Public Storage’s disclosure schedules to the merger agreement.

On the morning of April 1, 2023, the Life Storage board held a meeting at which members of Life Storage management and representatives of Wells Fargo, BofA Securities, Hogan Lovells and Phillips Lytle were present, to review and discuss the proposals received from Public Storage and Extra Space on March 31, 2023. A representative of Hogan Lovells discussed with the Life Storage board the directors’ fiduciary duties and certain other legal matters under Maryland law in the context of considering alternative potential business combination transaction proposals. A representative of Wells Fargo provided an update on the status of the discussions with each of Public Storage and Extra Space and discussed with the Life Storage board a preliminary financial comparison of the March 31 proposals received from each of Public Storage and Extra Space. A representative of Hogan Lovells then reviewed the material terms of the proposed revisions to the draft merger agreement delivered by legal counsel to each of Public Storage and Extra Space. The Life Storage board discussed each alternative as well as continuing to pursue Life Storage’s existing business strategy as an independent, stand-alone company and the viability of pursuing another strategic combination. Following these presentations and discussions, and other discussions by the Life Storage board concerning, among other things, the matters described in the section entitled “The MergersRecommendation of the Life Storage Board of Directors and Its Reasons for the Mergers” beginning on page 66 of this joint proxy statement/prospectus, the Life Storage board unanimously authorized Life Storage management and Life Storage’s legal and financial advisors to work to

 

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finalize the terms of the potential strategic transaction with Extra Space, including with respect to the draft merger agreement, on the terms described and discussed during the meeting.

Following the Life Storage board meeting on April 1, 2023, Mr. Barberio telephoned Mr. Woolley to inform Extra Space that the Life Storage board had authorized Life Storage to finalize the terms of the potential strategic transaction with Extra Space in line with the Extra Space proposal submitted on March 31, 2023.

Over the course of the day on April 1 and April 2, 2023, representatives of Hogan Lovells and Phillips Lytle and representatives of Latham, along with the management teams of each of Life Storage and Extra Space, worked to finalize the draft merger agreement and the disclosure schedules and exhibits to the merger agreement.

On the morning of April 2, 2023, the Life Storage board held a meeting at which members of Life Storage management and representatives of Wells Fargo, BofA Securities, Hogan Lovells and Phillips Lytle were present. A representative of Hogan Lovells discussed with the Life Storage board the directors’ fiduciary duties and certain other legal matters under Maryland law in the context of reviewing and analyzing a potential business combination transaction with Extra Space. A representative of Hogan Lovells provided the Life Storage board with an update regarding the status of negotiations with respect to the potential transaction. Representatives of Wells Fargo reviewed with the Life Storage board Wells Fargo’s preliminary financial analysis of the potential transaction. Representatives of BofA Securities reviewed with the Life Storage board BofA Securities’ preliminary financial analysis of the potential transaction. Representatives of Hogan Lovells then reviewed the material terms of the merger agreement. After discussion, representatives of Wells Fargo, BofA Securities and Hogan Lovells and members of Life Storage management responded to questions from the Life Storage board.

Also on the morning of April 2, 2023, the Extra Space board held a meeting at which members of Extra Space management and representatives of Citi, J.P. Morgan and Latham were present. Representatives of Citi reviewed with the Extra Space board its financial analysis of the potential transaction and delivered to the Extra Space board its oral opinion, subsequently confirmed by delivery of a written opinion dated April 2, 2023, to the effect that, as of that date and based upon and subject to the factors and assumptions set forth in Citi’s written opinion, the exchange ratio provided for pursuant to the merger agreement was fair, from a financial point of view, to Extra Space. The opinion of Citi is more fully described in the section entitled “The MergersOpinion of Extra Space’s Financial Advisor” beginning on page 71 of this joint proxy statement/prospectus. A representative of Latham provided the Extra Space board with an update regarding the status of negotiations with respect to the potential transaction and presented to the Extra Space board the material terms and conditions set forth in the merger agreement. The Extra Space board, with the advice and assistance of its financial advisors and outside legal counsel and Extra Space’s management team, evaluated and discussed the material terms of the merger agreement and the transactions contemplated thereby. Following these presentations and discussions, and other discussions by the Extra Space board concerning, among other things, the matters described in the section entitled “The MergersRecommendation of the Extra Space Board of Directors and Its Reasons for the Mergers” beginning on page 64 of this joint proxy statement/prospectus, the Extra Space board, by a unanimous vote of all directors, on behalf of Extra Space, Extra Space OP, Extra Space Merger Sub and Extra Space OP Merger Sub, then (i) determined that the mergers and the other transactions contemplated by the merger agreement were advisable and in the best interest of Extra Space and its stockholders, Extra Space OP and its limited partners, and Extra Space Merger Sub and Extra Space OP Merger Sub, (ii) authorized and approved the mergers and the other transactions contemplated by the merger agreement, (iii) authorized, approved and adopted the merger agreement, (iv) directed that the issuance of shares of Extra Space common stock in connection with the company merger be submitted for consideration at a meeting of Extra Space stockholders, and (v) recommended that Extra Space stockholders approve the issuance of shares of Extra Space common stock in connection with the company merger and approved the inclusion of such recommendation in the proxy statement to be sent to stockholders in respect of the mergers.

In the afternoon on April 2, 2023, the proposed final draft of the merger agreement was circulated to all parties. Representatives of Latham and representatives of Hogan Lovells and Phillips Lytle also finalized the terms of Extra Space’s and Life Storage’s disclosure schedules, as well as the exhibits to the merger agreement.

 

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Later in the afternoon on April 2, 2023, the Life Storage board held a meeting, at which members of Life Storage management and representatives of Wells Fargo, BofA Securities, Hogan Lovells and Phillips Lytle were present. Representatives of Hogan Lovells provided an update on the proposed final draft of the merger agreement. During the meeting, representatives of each of Wells Fargo and BofA Securities delivered to the Life Storage board its respective oral opinion, subsequently confirmed by delivery of a written opinion dated April 2, 2023, to the effect that, as of that date and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by each of Wells Fargo and BofA Securities in preparing its respective written opinion, the exchange ratio provided for in the proposed transaction with Extra Space was fair, from a financial point of view, to the holders of shares of Life Storage common stock (other than shares held by Life Storage, Extra Space or any of their respective affiliates or subsidiaries). The opinions of each of Wells Fargo and BofA Securities is more fully described in the section entitled “The MergersOpinions of Life Storage’s Financial Advisors” beginning on page 79 of this joint proxy statement/prospectus. The Life Storage board, with the advice and assistance of its financial advisors and outside legal counsel and Life Storage’s management team, evaluated and discussed the material terms of the merger agreement and the transactions contemplated thereby as well as the value and significant premium provided by the exchange ratio. Following these presentations and discussions, and other discussions by the Life Storage board concerning, among other things, the matters described in the section entitled “The MergersRecommendation of the Life Storage Board of Directors and Its Reasons for the Mergers” beginning on page 66 of this joint proxy statement/prospectus, the Life Storage board, by a unanimous vote of all directors, on behalf of Life Storage and Life Storage OP, then (i) determined that the mergers and the other transactions contemplated by the merger agreement were advisable and in the best interest of Life Storage and its stockholders, and Life Storage OP and its limited partners, (ii) authorized and approved the mergers and the other transactions contemplated by the merger agreement, (iii) authorized, approved and adopted the merger agreement, (iv) directed that the merger agreement and the transactions contemplated thereby, including the company merger, be submitted for consideration at a meeting of Life Storage stockholders, and (v) recommended that Life Storage’s stockholders approve the company merger and approved the inclusion of such recommendation in the proxy statement to be sent to stockholders in respect of the mergers.

On the afternoon of April 2, 2023, Life Storage and Extra Space executed and delivered the merger agreement.

Also on the afternoon of April 2, 2023, the management teams of each of Life Storage and Extra Space, together with their respective legal and financial advisors, reviewed and discussed a communications plan to be implemented in connection with the execution of the merger agreement.

On the morning of April 3, 2023, prior to the opening of trading of Life Storage common stock and Extra Space common stock on the NYSE, Life Storage and Extra Space issued a joint press release publicly announcing the mergers and execution of the merger agreement.

On May 18, 2023, Life Storage and Extra Space executed an amendment to the merger agreement, in accordance with Sections 2.5 and 9.5 of the merger agreement, to, among other matters, (i) remove the right of the Minority Limited Partners to elect to receive shares of Extra Space common stock in lieu of Extra Space OP common units in the partnership merger, (ii) remove the right of holders of Life Storage OP preferred units to elect to convert their respective Life Storage OP preferred units to Life Storage OP common units prior to the partnership merger effective time or receive a cash payment equal to the liquidation preference upon the consummation of the partnership merger, and (iii) replace the top-up cash payment to be paid to certain holders of Life Storage Restricted Shares with top-up grants of Life Storage PSUs. These changes were made, in part, to simplify the transaction structure and better reflect the business deal among the parties, while remaining consistent with the intended tax treatment of the mergers. In addition, the change described in clause (ii) above was made, in part, because all Life Storage OP preferred units had been converted to Life Storage OP common units and, therefore, no Life Storage OP preferred units were outstanding as of the date of the amendment to the merger agreement.

 

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Recommendation of the Extra Space Board of Directors and Its Reasons for the Mergers

In evaluating the merger agreement and the transactions contemplated thereby, including the mergers, the Extra Space board consulted with Extra Space’s senior management and its outside legal counsel and financial advisors and unanimously determined and declared that the merger agreement, the mergers and the other transactions contemplated by the merger agreement are advisable and in the best interests of Extra Space and its stockholders. The Extra Space board has unanimously approved the merger agreement and the transactions contemplated thereby and unanimously recommends that the Extra Space stockholders vote to approve the Extra Space common stock issuance on the terms and conditions set forth in the merger agreement.

In determining that the merger agreement and the transactions contemplated thereby are advisable and in the best interests of Extra Space and its stockholders, in approving the merger agreement and the transactions contemplated thereby and in recommending that Extra Space stockholders vote to approve the Extra Space common stock issuance on the terms set forth in the merger agreement, the Extra Space board considered various factors that it viewed as supporting its decisions, including the following material factors:

 

   

its expectation that the combination will have a transformative impact on the scale of Extra Space’s business, with the Combined Company becoming the largest storage operator (based on the number of self-storage locations) and the sixth largest REIT in the MSCI U.S. REIT Index;

 

   

its belief that the mergers will enhance the geographic diversification of Extra Space’s self-storage portfolio, creating a combined highly-diversified portfolio of quality storage assets in many markets benefitting from compelling demand and population demographic trends;

 

   

its expectation that the strategic fit between the Extra Space and Life Storage portfolios will allow Extra Space to capture significant cost and revenue synergies, including $100 million in annual run-rate operating synergies from general and administrative and property operating expense savings as well as improved property operating revenue and tenant insurance income;

 

   

its belief that the Combined Company’s scaled and growing third-party management, joint venture, and bridge loan platforms will contribute incremental income as well as create a robust pipeline for accelerated external growth;

 

   

its belief that, given management’s successful track record integrating past acquisitions, Extra Space can unlock substantial value from the Life Storage assets, increasing future property cashflows and generating additional income from self-storage operations;

 

   

its expectation that the mergers will increase the strength, size and diversification of the Extra Space balance sheet and create a strengthened credit profile through staggered debt maturities and potentially a lower cost of debt capital;

 

   

its belief that the Life Storage business and portfolio will provide compelling site and redevelopment opportunities for Extra Space (including opportunities to convert certain locations to be remotely managed), as well as additional opportunities for solar installations;

 

   

its belief that the businesses of Extra Space and Life Storage are highly complementary and that the integration of the two companies will be completed in a timely and efficient manner with minimal disruption to tenants and employees;

 

   

its expectation that upon completion of the mergers, Extra Space stockholders will own approximately 65% of the common stock of the Combined Company;

 

   

the oral opinion of Citi, subsequently confirmed in Citi’s written opinion dated April 2, 2023, to the effect that, as of the date of Citi’s written opinion and based upon and subject to the factors and assumptions set forth in Citi’s written opinion, the exchange ratio provided for pursuant to the merger agreement was fair from a financial point of view to Extra Space, as more fully described below in the section entitled “The MergersOpinion of Extra Space’s Financial Advisor” beginning on page 71 of this joint proxy statement/prospectus;

 

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that, at the company merger effective time, Life Storage Chief Executive Officer, Joseph V. Saffire, along with two other designated members from the Life Storage board, are expected to join the Extra Space board, and Extra Space will therefore benefit from such designees’ significant experience and expertise with respect to the self-storage business and Life Storage’s assets;

 

   

its expectation that the material increase in the amount of customer data available to analyze will allow Extra Space to make quicker and more impactful operating decisions;

 

   

that, following the mergers and except with respect to the addition of the three directors designated by Life Storage to the Extra Space board, there will be no changes to the Extra Space board or executive management team, with Kenneth M. Woolley serving as Chairman of the Combined Company and Joseph D. Margolis serving as Chief Executive Officer of the Combined Company;

 

   

management’s knowledge of Extra Space’s business, financial condition, results of operations, industry and competitors;

 

   

management’s knowledge of Life Storage’s business, financial condition, results of operations, industry and competitors, taking into account the results of Extra Space’s due diligence review of Life Storage;

 

   

restrictions on Life Storage’s ability to solicit acquisition proposals, engage in negotiations or discussions concerning, or provide any non-public information or data to any person or entity relating to, an acquisition proposal and enter into any agreement relating to any acquisition proposal, as further discussed in the section entitled “The Merger AgreementCovenants and AgreementsNo Solicitation of Acquisition Proposals” beginning on page 135 of this joint proxy statement/prospectus;

 

   

the merger agreement’s provisions requiring Life Storage to pay Extra Space a termination fee of $371 million and/or reimburse Extra Space’s transaction expenses up to an amount equal to $20 million if the merger agreement is terminated under specified circumstances;

 

   

the historical and then-current trading prices and volumes of shares of each of Extra Space common stock and Life Storage common stock;

 

   

the fact that the exchange ratio is fixed and will not be adjusted for fluctuations in the market price of Extra Space common stock or Life Storage common stock;

 

   

that the merger agreement provides Extra Space with sufficient operating flexibility between the signing of the merger agreement and the completion of the company merger for Extra Space to conduct its business in the ordinary course of business consistent with past practice;

 

   

the commitment on the part of each of Extra Space and Life Storage to complete the mergers as reflected in their respective obligations under the terms of the merger agreement and the absence of any significant closing conditions under the merger agreement, other than the approval of Life Storage stockholders and Extra Space stockholders, and the likelihood that the mergers will be completed on a timely basis; and

 

   

the other terms and conditions of the merger agreement.

The Extra Space board also considered a number of risks and other factors identified in its deliberations as weighing negatively against the mergers, including the following:

 

   

the risk of not capturing all of the anticipated estimated cost and long-term revenue synergies and the risk that other anticipated benefits of the mergers might not be realized on the expected time frame or at all;

 

   

the risk that the mergers might not be completed in a timely manner or at all, including as a result of the failure to obtain Extra Space stockholder approval or Life Storage stockholder approval, or the failure of Extra Space or Life Storage to satisfy other conditions to closing the mergers, and that such failure could negatively affect the price of Extra Space common stock and future business and financial results;

 

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the risk of diverting management focus and resources from operational matters and other strategic opportunities while working to implement the mergers;

 

   

the restrictions on the conduct of Extra Space’s business during the period between the execution of the merger agreement and the consummation of the mergers (or, if applicable, the termination of the merger agreement);

 

   

the costs to be incurred in connection with the mergers and related transactions;

 

   

the risk that Extra Space or Life Storage may be unable to retain key employees;

 

   

the potential impact on the market price of Extra Space common stock as a result of the issuance of the merger consideration to Life Storage stockholders;

 

   

restrictions on Extra Space’s ability to solicit acquisition proposals, engage in negotiations or discussions concerning, or provide any non-public information or data to any person or entity relating to, an acquisition proposal and enter into any agreement relating to any acquisition proposal, as further discussed in the section entitled “The Merger AgreementCovenants and AgreementsNo Solicitation of Acquisition Proposals” beginning on page 135 of this joint proxy statement/prospectus;

 

   

the merger agreement’s provisions requiring Extra Space to pay Life Storage a termination fee of $761 million and/or reimburse Life Storage’s transaction expenses up to an amount equal to $20 million if the merger agreement is terminated under specified circumstances;

 

   

the merger agreement’s provisions permitting Life Storage to terminate the merger agreement prior to the receipt of the Life Storage stockholder approval to enter into an acquisition agreement with respect to a superior proposal (subject to compliance with the provisions of the merger agreement regarding non-solicitation of acquisition proposals) upon payment by Life Storage to Extra Space of a termination fee of $371 million;

 

   

because the exchange ratio is fixed, the market value of the merger consideration – and in turn the purchase price paid by Extra Space to acquire Life Storage – could increase prior to the company merger effective time if the trading price of Extra Space common stock increases;

 

   

the risk of litigation relating to the mergers and the other transactions contemplated by the merger agreement; and

 

   

the risks described in the section entitled “Risk Factors” beginning on page 16 of this joint proxy statement/prospectus.

The foregoing discussion of factors considered by the Extra Space board is not intended to be exhaustive and may not include all the factors considered by the Extra Space board. In view of the wide variety of factors considered in connection with its evaluation of the mergers and the complexity of these matters, the Extra Space board did not attempt to quantify, rank or otherwise assign any relative or specific weights to the factors that it considered in reaching its determination to approve the mergers and the merger agreement. In addition, individual members of the Extra Space board may have given differing weights to different factors. The Extra Space board conducted an overall review of the factors described above and other factors, including through discussions with, and inquiry of, Extra Space’s management and outside legal and financial advisors.

After consideration of these factors, the Extra Space board determined that, overall, the potential benefits of the mergers outweighed the potential risks. Accordingly, the Extra Space board unanimously approved the merger agreement and the transactions contemplated thereby, including the mergers, and unanimously recommends that the Extra Space stockholders vote “FOR” the Extra Space common stock issuance proposal.

Recommendation of the Life Storage Board of Directors and Its Reasons for the Mergers

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advisors. After several meetings and discussions, the Life Storage board unanimously determined that the mergers and the other transactions contemplated by the merger agreement are advisable and in the best interests of Life Storage and its stockholders and Life Storage OP and its limited partners. The Life Storage board has unanimously approved the mergers and the other transactions contemplated by the merger agreement, has unanimously approved and adopted the merger agreement, and unanimously recommends that the Life Storage stockholders vote “FOR” the Life Storage merger proposal.

In determining that the mergers and the other transactions contemplated by the merger agreement are advisable and in the best interests of Life Storage and its stockholders and Life Storage OP and its limited partners, in approving the mergers and the other transactions contemplated by the merger agreement on the terms set forth in the merger agreement, in approving and adopting the merger agreement, and in recommending that Life Storage stockholders vote in favor of the Life Storage merger proposal, the Life Storage board considered various factors that it viewed as supporting its decisions, including the following material factors:

 

   

the receipt of Extra Space common stock as merger consideration provides Life Storage stockholders with the opportunity to have an ownership stake in the Combined Company, which is expected to provide a number of significant potential strategic opportunities and benefits, including the following:

 

   

the mergers combine two highly complementary portfolios, allowing the Combined Company to capture significant cost and revenue synergies;

 

   

the Combined Company will be among the largest publicly traded self-storage REITs in the United States based on equity market capitalization and number of stores; and

 

   

the Combined Company’s meaningful scale and debt rating are expected to allow it to capitalize on corporate and operating cost efficiencies and to gain more efficient access to less expensive capital;

 

   

the Life Storage board’s knowledge of the current and prospective environment in which the two companies operate, including industry, economic and market conditions, taking into account the results of Life Storage’s due diligence review of Extra Space (including with respect to operational, legal, financial and tax matters), including the following:

 

   

the information with respect to the business, operating results and financial condition of Extra Space, on both historical and prospective bases, including Extra Space’s operating performance;

 

   

the quality, breadth and experience of Extra Space’s senior management team; and

 

   

the complementary markets served by the two companies, the complementary business models of the two companies, including their use of joint ventures and their third-party management platforms;

 

   

the Life Storage board considered its view that the merger consideration was more favorable to Life Storage’s stockholders than the potential value that might result from other alternatives reasonably available to Life Storage, including the merger transaction proposed by Public Storage described in the section entitled “The MergersBackground of the Mergers” beginning on page 48 of this joint proxy statement/prospectus and Life Storage’s prospects on a stand-alone basis, based upon the Life Storage board’s extensive knowledge of Life Storage’s business, assets, financial condition and results of operations, its competitive position and historical and projected financial performance and following extensive discussions with Life Storage management and Life Storage’s financial advisors, including that:

 

   

the Life Storage board observed that the implied value per share of Life Storage common stock of $145.82 represented a 3.8% premium to the implied price Life Storage stockholders would receive in the merger transaction proposed by Public Storage in its best and final proposal submitted on March 31, 2023, as described in the section entitled “The MergersBackground of the Mergers” beginning on page 48 of this joint proxy statement/prospectus, based on the closing price of Public

 

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Storage common shares on March 31, 2023, the last full trading day prior to the public announcement of the signing of the merger agreement;

 

   

the Life Storage board determined, following discussions with Life Storage management and Life Storage’s financial advisors, that the potential synergies reflected in the mergers were more likely to be achieved than any potential synergies in the transaction proposed by Public Storage; and

 

   

the complementary business models and expected size of the Combined Company following consummation of the mergers would result in better long-term growth opportunities for the Combined Company than would result from a transaction with Public Storage;

 

   

current market and industry trends, Life Storage’s future prospects as an independent company and the challenges and risks that could affect Life Storage’s future performance on a stand-alone basis;

 

   

the merger consideration had an implied value per share of Life Storage common stock of $145.82, which represented a premium of approximately 31.9% to Life Storage’s common stock price, based on the closing price of Life Storage’s common stock on February 3, 2023, the last trading day prior to Public Storage’s public announcement of its proposal to acquire Life Storage;

 

   

the historical and then-current trading prices and volumes of shares of each of Life Storage common stock and Extra Space common stock;

 

   

the exchange ratio is fixed and will not fluctuate as a result of changes in the market price of Life Storage common stock or Extra Space common stock, which provides certainty as to the pro forma percentage ownership of the Combined Company that the Life Storage stockholders would receive in the company merger;

 

   

the expectation that upon completion of the mergers, Life Storage stockholders will own approximately 35% of the common stock of the Combined Company;

 

   

the merger consideration, consisting of Extra Space common stock, which will be listed for trading on the NYSE and be part of the S&P 500, continues to provide liquidity for Life Storage stockholders after the mergers;

 

   

the opinion of Wells Fargo Securities, dated April 2, 2023, to the Life Storage board as to the fairness, from a financial point of view and as of the date of the opinion, to the holders of shares of Life Storage common stock of the exchange ratio pursuant to the merger agreement, as more fully described below in the section entitled “The MergersOpinions of Life Storage’s Financial AdvisorsOpinion of Wells Fargo Securities” beginning on page 79 of this joint proxy statement/prospectus;

 

   

the opinion of BofA Securities, dated April 2, 2023, to the Life Storage board as to the fairness, from a financial point of view and as of the date of the opinion, of the exchange ratio provided for in the company merger to the holders of shares of Life Storage common stock (other than shares of Life Storage common stock held by Extra Space, Life Storage or any of their respective subsidiaries), as more fully described below in the section entitled “The MergersOpinions of Life Storage’s Financial AdvisorsOpinion of BofA Securities” beginning on page 87 of this joint proxy statement/prospectus;

 

   

the expectation that, assuming that the company merger and the deemed liquidation, taken together, qualify as a reorganization under Section 368(a) of the Code, holders of shares of Life Storage common stock that are United States holders generally will not recognize gain or loss for United States federal income tax purposes upon the receipt of Extra Space common stock in exchange for shares of Life Storage common stock in connection with the company merger, except with respect to cash received in lieu of fractional shares of Extra Space common stock;

 

   

Life Storage’s Chief Executive Officer, Joseph V. Saffire, as well as two other members of the current Life Storage board, are expected to be appointed to the Extra Space board at the company merger effective time, helping to oversee the ongoing equity investment of Life Storage stockholders and providing an opportunity for the Combined Company to benefit from their significant experience and expertise with respect to the self-storage business and Life Storage’s assets;

 

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the company merger is subject to approval by the holders of two-thirds of the outstanding shares of Life Storage common stock entitled to vote on the approval of the company merger and the other transactions contemplated by the merger agreement;

 

   

the merger agreement permits Life Storage to continue to pay its stockholders regular quarterly dividends of up to $1.20 per share of Life Storage common stock until the company merger effective time;

 

   

the merger agreement provides Life Storage with the ability, under certain specified circumstances, to consider an unsolicited acquisition proposal if the Life Storage board determines such proposal constitutes or would reasonably be expected to lead to a superior proposal and concludes in good faith that failure to take such action would reasonably be expected to be inconsistent with their duties under applicable law, and the merger agreement provides the Life Storage board with the ability, under certain specified circumstances, to make a change in recommendation or to terminate the merger agreement in order to enter into an agreement with respect to a superior proposal upon payment of a termination fee to Extra Space in an amount equal to $371 million;

 

   

the merger agreement provides Life Storage with sufficient operating flexibility between the signing of the merger agreement and the company merger effective time for Life Storage to conduct its business in the ordinary course of business consistent with past practice;

 

   

the commitment on the part of each of Life Storage and Extra Space to complete the mergers as reflected in their respective obligations under the merger agreement and the absence of any significant closing conditions under the terms of the merger agreement, other than the approval of Life Storage stockholders and Extra Space stockholders, and the likelihood that the mergers will be completed on a timely basis;

 

   

the merger agreement requires Extra Space to pay Life Storage a termination fee of $761 million and/or reimburse Life Storage’s transaction expenses up to an amount equal to $20 million if the merger agreement is terminated under specified circumstances;

 

   

the other terms of the merger agreement, including representations, warranties and covenants of the parties, as well as the conditions to their respective obligations under the merger agreement;

 

   

the mergers would be in the best interests of Life Storage stockholders in light of the expected long-term strategic and financial benefits associated with the combination of Life Storage and Extra Space, the ability of Life Storage stockholders to continue to benefit from the prospects of the Combined Company and the overall terms of the merger agreement and transactions contemplated thereby; and

 

   

the course of negotiations with Extra Space, which were conducted at arm’s length and during which the Life Storage board was advised by its legal and financial advisors, including that the negotiations resulted in an improved offer.

The Life Storage board also considered a number of risks and other potentially negative factors in considering the merger agreement, the mergers and the other transactions contemplated by the merger agreement, including the following:

 

   

following the completion of the company merger, Life Storage would no longer exist as an independent public company and Life Storage stockholders would be able to participate in any future earnings growth Life Storage might have achieved solely through their ownership of Extra Space common stock;

 

   

because the merger consideration is a fixed exchange ratio of shares of Extra Space common stock that will not fluctuate as a result of changes in the market price of Life Storage common stock or Extra Space common stock prior to the company merger effective time, the market value of the merger consideration could decrease prior to the company merger effective time if the trading price of Extra Space common stock decreases;

 

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the risk that the anticipated cost and long-term revenue synergies and other benefits to the Life Storage stockholders expected to result from the mergers might not be fully realized or not realized at all, including as a result of possible changes in the real estate market or the self-storage business affecting the markets in which the Combined Company will operate or as a result of potential difficulties integrating the two companies and their respective operations;

 

   

the risk that a different strategic alternative potentially could be more beneficial to Life Storage stockholders than the proposed mergers;

 

   

under the terms of the merger agreement, Life Storage must pay to Extra Space a termination fee in an amount of $371 million if the merger agreement is terminated under certain circumstances, which might discourage or deter other parties from proposing an alternative transaction that may be more advantageous to Life Storage stockholders;

 

   

under the terms of the merger agreement, if Life Storage stockholders vote on, but do not approve, the company merger, and the merger agreement is thereafter terminated, Life Storage may be required to reimburse Extra Space’s transaction expenses up to an amount equal to $20 million, regardless of whether an alternative transaction is available to Life Storage;

 

   

the terms of the merger agreement place limitations on the ability of Life Storage to solicit, initiate, knowingly encourage or knowingly facilitate any inquiries or the making of any proposal or offer by or with a third party with respect to a competing transaction and to furnish information to, or enter into discussions with, a third party interested in pursuing an alternative strategic transaction;

 

   

the risk that one or more of the conditions to the parties’ obligations to complete the mergers will not be satisfied or waived;

 

   

the risk of diverting management focus and resources from operational matters and other strategic opportunities as well as causing significant distractions for Life Storage’s employees while working to implement the mergers, which may result in harm to Life Storage’s business if the mergers do not close;

 

   

the risk that the mergers may not be completed in a timely manner or at all, including as a result of the failure to obtain Extra Space stockholder approval or Life Storage stockholder approval, or the failure of Extra Space or Life Storage to satisfy other conditions to closing the mergers;

 

   

the risk that failure to complete the mergers could negatively affect the price of Life Storage common stock and/or the future business and financial results of Life Storage;

 

   

the terms of the merger agreement provide the Extra Space board with the right to change its recommendation regarding the approval of the Extra Space common stock issuance proposal under certain circumstances (subject to the payment of a $761 million termination fee to Life Storage in the event Life Storage terminates the merger agreement as a result and prior to receipt of Extra Space stockholder approval);

 

   

the risk that if Extra Space stockholders fail to approve the Extra Space common stock issuance proposal or Life Storage stockholders fail to approve the Life Storage merger proposal, then Extra Space may terminate the merger agreement;

 

   

provisions in the merger agreement placing certain restrictions on the operation of Life Storage’s business during the period between the signing of the merger agreement and the company merger effective time may delay or prevent Life Storage from undertaking business opportunities that may arise or other actions it would otherwise take with respect to its operations absent the pending completion of the mergers;

 

   

Life Storage and Extra Space may be obligated to complete the mergers without having obtained appropriate consents, approvals or waivers from the counterparties under certain of Life Storage’s contracts that require consent or approval to consummate the mergers, and the risk that such

 

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consummation could trigger the termination of, or default under, such contracts or the exercise of rights by the counterparties under such contracts;

 

   

the risk of litigation relating to the mergers and the other transactions contemplated by the merger agreement;

 

   

certain of Life Storage’s directors and executive officers have certain interests in the mergers that might be different from the interests of Life Storage stockholders generally as described in the section entitled “The MergersInterests of Life Storage’s Directors and Executive Officers in the Mergers” beginning on page 102 of this joint proxy statement/prospectus;

 

   

the costs to be incurred in connection with the mergers and related transactions; and

 

   

the risks described in the section entitled “Risk Factors” beginning on page 16 of this joint proxy statement/prospectus.

The foregoing discussion of factors considered by the Life Storage board is not intended to be exhaustive and may not include all the factors considered by the Life Storage board. In view of the wide variety of factors considered by the Life Storage board in evaluating the merger agreement and the transactions contemplated by the merger agreement, including the company merger, and the complexity of these matters, the Life Storage board did not attempt to quantify, rank or otherwise assign any relative or specific weights to the factors that it considered. In addition, individual members of the Life Storage board may have given differing weights to different factors. The Life Storage board conducted an overall review of the factors described above and other factors, including through discussions with, and inquiry of, Life Storage’s management and outside legal counsel and financial advisors.

After consideration of these factors, the Life Storage board determined that, overall, the potential benefits of the mergers outweighed the potential risks. Accordingly, the Life Storage board determined that the mergers and the other transactions contemplated by the merger agreement are advisable and in the best interests of Life Storage and its stockholders and unanimously approved the merger agreement and the transactions contemplated thereby, including the mergers. The Life Storage board unanimously recommends that the Life Storage stockholders vote “FOR” the Life Storage merger proposal.

Opinion of Extra Space’s Financial Advisor

Extra Space has engaged Citi to act as its financial advisor in connection with the proposed transaction. In connection with Citi’s engagement, the Extra Space board requested that Citi evaluate the fairness, from a financial point of view, to Extra Space of the exchange ratio provided for pursuant to the merger agreement. On April 2, 2023, at a meeting of the Extra Space board held to evaluate the proposed transaction, Citi rendered an oral opinion, confirmed by delivery of a written opinion, dated April 2, 2023, to the Extra Space board to the effect that, as of such date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Citi, the exchange ratio provided for pursuant to the merger agreement was fair, from a financial point of view, to Extra Space.

The full text of Citi’s written opinion, dated April 2, 2023, which describes the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Citi, is attached as Annex B to this joint proxy statement/prospectus and is incorporated into this joint proxy statement/prospectus by reference. The description of Citi’s opinion set forth below is qualified in its entirety by reference to the full text of Citi’s opinion. Citi’s opinion was provided for the information of the Extra Space board (in its capacity as such) in connection with its evaluation of the fairness of the exchange ratio from a financial point of view, as of the date of the opinion, to Extra Space and did not address any other transactions or any terms (other than the exchange ratio to the extent expressly specified therein) or other aspects or implications of the mergers. Citi expressed no view as to, and its opinion did not address, the underlying business decision of Extra Space to effect the mergers or any other transactions, the relative

 

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merits of the mergers or any other transactions as compared to any alternative business strategies that might exist for Extra Space or the effect of any other transaction in which Extra Space might engage. Citi’s opinion is not intended to be and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act on any matters relating to the proposed transaction, any other transactions or otherwise.

In arriving at its opinion, Citi:

 

   

reviewed a draft, dated April 1, 2023, of the merger agreement;

 

   

held discussions with certain senior officers, directors and other representatives and advisors of Life Storage and certain senior officers and other representatives and advisors of Extra Space concerning the businesses, operations and prospects of Life Storage and Extra Space;

 

   

examined certain publicly available business and financial information relating to Life Storage and Extra Space as well as certain financial forecasts and other information and data relating to Life Storage and Extra Space which were provided to or discussed with us by the respective managements of Life Storage and Extra Space, in each case as reviewed and approved for Citi’s use by the Extra Space board;

 

   

reviewed the financial terms of the mergers as set forth in the merger agreement in relation to, among other things, current and historical market prices of Life Storage common stock and Extra Space common stock, the historical and projected earnings and other operating data of Life Storage and Extra Space and the capitalization and financial condition of Life Storage and Extra Space;

 

   

considered, to the extent publicly available, the financial terms of certain other transactions which Citi considered relevant in evaluating the mergers and analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations Citi considered relevant in evaluating those of Life Storage and Extra Space;

 

   

considered certain potential strategic implications and operational benefits (including the amount, timing and achievability thereof) anticipated to result therefrom and other potential pro forma financial effects of the mergers on Extra Space following the mergers that were prepared by management of Extra Space; and

 

   

conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as Citi deemed appropriate in arriving at its opinion.

In rendering its opinion, Citi assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with Citi and upon the assurances of the respective managements of Life Storage and Extra Space that they were not aware of any relevant information that had been omitted or that remained undisclosed to Citi. With respect to financial forecasts and other information and data relating to Life Storage and Extra Space provided to or otherwise reviewed by or discussed with Citi, Citi was advised by the respective managements of Life Storage and Extra Space, and assumed, that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the respective managements of Life Storage and Extra Space as to the future financial performance of Life Storage and Extra Space, the potential strategic implications and operational benefits (including the amount, timing and achievability thereof) anticipated to result from, and other potential pro forma financial effects of, the mergers and the other matters covered thereby. Citi expressed no view or opinion as to any financial forecasts and other information or data (or underlying assumptions on which any such financial forecasts and other information or data are based) provided to or otherwise reviewed by or discussed with Citi, and Citi assumed, with the Extra Space board’s consent, that the financial results, including with respect to the potential strategic implications and operational benefits anticipated to result from the mergers, reflected in such financial forecasts and other information and data would be realized in the amounts and at the times projected.

 

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Citi assumed, with Extra Space’s consent, that the mergers and any other transactions would be consummated in accordance with the terms, conditions and agreements set forth in the merger agreement and in compliance with all applicable laws, organizational documents and other requirements, without waiver, modification or amendment of any material term, condition or agreement, and that, in the course of obtaining the necessary governmental, regulatory or third party approvals, consents, releases, waivers and agreements for the mergers, any other transactions or otherwise, no delay, limitation, restriction, condition or other action, including any divestiture or other requirements, amendments or modifications, would be imposed or occur that would have an adverse effect on Extra Space, Life Storage or the mergers or any other transactions (including the contemplated benefits thereof) or that otherwise would be meaningful in any respect to Citi’s analyses or opinion. Citi also assumed, with the Extra Space board’s consent, that the company merger and the deemed liquidation, taken together, will qualify as a reorganization within the meaning of Section 368(a) of the Code. Citi was advised by the respective managements of Life Storage and Extra Space, and Citi assumed, with the Extra Space board’s consent, that each of Life Storage and Extra Space had operated in conformity with the requirements for qualification as a REIT for United States federal income tax purposes since its election to be taxed as a REIT and that the mergers and any other transactions would not adversely affect such REIT status or operations of the pro forma combined entity resulting from the mergers and any other transactions. Representatives of Extra Space advised Citi, and Citi assumed, that the final terms of the merger agreement would not vary materially from those set forth in the draft reviewed by Citi.

Citi’s opinion did not address any other transactions or any terms (other than the exchange ratio to the extent expressly specified therein) or other aspects or implications of the mergers, including, without limitation, the form or structure of the mergers, any adjustments to the exchange ratio, or any other agreement, arrangement or understanding to be entered into in connection with or contemplated by the merger agreement, any other transactions or otherwise. Citi’s opinion did not address the underlying business decision of Extra Space to effect the Merger or any other transactions, the relative merits of the mergers or any other transactions as compared to any alternative business strategies that might exist for Extra Space or the effect of any other transaction in which Extra Space might engage. Citi also did not express any opinion with respect to any accounting, tax, regulatory, legal or similar matters and Citi relied, with the Extra Space board’s consent, upon the assessments of representatives of Extra Space as to such matters. Citi also expressed no view as to, and its opinion did not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees of any parties to the mergers or any other transactions, or any class of such persons, relative to the exchange ratio or otherwise. Citi’s opinion was necessarily based upon information available to Citi, and financial, stock market and other conditions and circumstances existing and disclosed to Citi, as of the date thereof. Although subsequent developments may affect Citi’s opinion, Citi has no obligation to update, revise or reaffirm its opinion. As the Extra Space board was aware, the credit, financial and stock markets, the industries in which Extra Space and Life Storage operate, and the securities of Extra Space and Life Storage, have experienced and may continue to experience volatility, and Citi expressed no view or opinion as to any potential effects of such volatility on Extra Space or Life Storage or the mergers or any other transactions (including the contemplated benefits thereof). The issuance of Citi’s opinion was authorized by Citi’s fairness opinion committee.

In preparing its opinion, Citi performed a variety of financial and comparative analyses, including those described below. The summary of the analyses below is not a complete description of Citi’s opinion or the analyses underlying, and factors considered in connection with, Citi’s opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. Citi arrived at its ultimate opinion based on the results of all analyses and factors assessed as a whole, and it did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis. Accordingly, Citi believes that the analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying such analyses and its opinion.

 

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In its analyses, Citi considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of Extra Space and Life Storage. No company, business or transaction reviewed is identical or directly comparable to Extra Space, Life Storage or the mergers and an evaluation of these analyses is not entirely mathematical; rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading, acquisition or other values of the companies, businesses or transactions reviewed or the results from any particular analysis.

The estimates contained in Citi’s analyses and the ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by such analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, Citi’s analyses are inherently subject to substantial uncertainty.

Citi was not requested to, and it did not, recommend or determine the specific consideration payable in the mergers. The type and amount of consideration payable in the mergers were determined through negotiations between Extra Space and the Life Storage, and the decision of Extra Space to enter into the merger agreement was solely that of the Extra Space board. Citi’s opinion was only one of many factors considered by the Extra Space board in its evaluation of the mergers and any other transactions and should not be viewed as determinative of the views of the Extra Space board or the management of Extra Space with respect to the mergers or any other transactions or with respect to the exchange ratio.

Financial Analyses

The summary of the financial analyses described below under this heading “The MergersOpinion of Extra Space’s Financial AdvisorFinancial Analyses” is a summary of the material financial analyses prepared for the Extra Space board in connection with Citi’s opinion, dated April 2, 2023. The summary set forth below does not purport to be a complete description of the financial analyses performed by, and underlying the opinion of, Citi, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by Citi. Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary as the tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the financial analyses, could create a misleading or incomplete view of such financial analyses. Future results may be different from those described and such differences may be material. For purposes of Citi’s financial analyses described below, the term “NAV” refers to net asset value. Except as otherwise noted, financial data utilized for Life Storage and Extra Space in the financial analyses described below were based on certain financial forecasts and other information and data relating to Life Storage and Extra Space provided to or discussed with Citi by the respective managements of Life Storage and Extra Space, in each case as reviewed and approved for Citi’s use by the Extra Space board, or the Life Storage forecasts and the Extra Space forecasts, respectively.

Discounted Cash Flow Analyses

Citi performed separate discounted cash flow analyses of Life Storage and Extra Space as described below.

Life Storage. Citi performed a discounted cash flow analysis of Life Storage by calculating the estimated present value (as of December 31, 2022) of the standalone unlevered free cash flows that Life Storage was expected to generate, based on the Life Storage forecasts, during the calendar year ending December 31, 2023 through the calendar year ending December 31, 2027. For purposes of this analysis, stock-based compensation

 

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was treated as a cash expense. Citi calculated terminal values for Life Storage by applying terminal capitalization rates ranging from 5.15% to 6.15% to an estimated NOI for Life Storage’s terminal year (derived by applying a 2.5% growth rate to 2027E NOI as reflected in the Life Storage forecasts and accounting for certain assumptions regarding incremental NOI attributable to acquisitions completed in 2027) and valuing the ancillary tenant reinsurance and property management business separately. The present values (as of December 31, 2022) of the cash flows and terminal values were then calculated using a selected range of discount rates of 9.20% to 10.12% based on Citi’s estimates of Life Storage’s weighted average cost of capital and discounted using the mid-year convention. This analysis indicated an approximate implied equity value reference range for Life Storage of $115.56 to $151.73 per share.

Extra Space. Citi performed a discounted cash flow analysis of Extra Space by calculating the estimated present value (as of December 31, 2022) of the standalone unlevered free cash flows that Extra Space was expected to generate, based on the Extra Space forecasts, during the calendar year ending December 31, 2023 through the calendar year ending December 31, 2027. For purposes of this analysis, stock-based compensation was treated as a cash expense. Citi calculated terminal values for Extra Space by applying terminal capitalization rates ranging from 4.86% to 5.86% to an estimated NOI for Extra Space’s terminal year (derived by applying a 2.5% growth rate to 2027E NOI as reflected in the Extra Space forecasts and accounting for certain assumptions regarding incremental NOI attributable to acquisitions completed in 2027) and valuing the ancillary tenant reinsurance and property management business separately. The present values (as of December 31, 2022) of the cash flows and terminal values were then calculated using a selected range of discount rates of 8.59% to 9.42% based on Citi’s estimates of Extra Space’s weighted average cost of capital and discounted using the mid-year convention. This analysis indicated an approximate implied equity value reference range for Extra Space of $136.67 to $178.20 per share.

Utilizing the approximate implied per share equity value reference ranges derived for Life Storage and the approximate implied per share equity value reference ranges derived for Extra Space, in each case as described above, Citi calculated the following implied exchange ratio reference ranges, as compared to the exchange ratio, by comparing the high end of the range for Life Storage with the low end of the range for Extra Space and vice versa:

 

Implied Exchange Ratio

Reference Range

  

Transaction Exchange

Ratio

0.6485x - 1.1102x

   0.8950x

Selected Public Companies Analyses

Citi performed separate selected public companies analyses of Life Storage and Extra Space in which Citi reviewed certain financial and stock market information relating to Life Storage, Extra Space and the selected publicly traded companies listed further below.

Furthermore, with respect to each of the Life Storage Selected Public Companies and the Extra Space Selected Public Companies (both as defined below), Citi calculated:

 

   

the percentage premium or discount of the company’s closing share price on March 31, 2023 to its estimated NAV per share (which is based on such company’s estimate by Green Street Advisors);

 

   

the company’s Core FFO multiple for 2023, which was calculated by dividing (i) the closing share price on March 31, 2023 by (ii) the company’s estimated Core FFO per share for 2023 (which is based on such company’s consensus analyst forecast) (which we refer to collectively as the “2023E Core FFO Multiples” for purposes of Citi’s financial analyses described below); and

 

   

the company’s Core FFO multiple for 2024, which was calculated by dividing (i) the closing share price on March 31, 2023 by (ii) the company’s estimated Core FFO for 2024 (which is based on such company’s consensus analyst forecast) (which we refer to collectively as the “2024E Core FFO Multiples” for purposes of Citi’s financial analyses described below).

 

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Life Storage. Using publicly available information, including published estimates of (a) NAV per share, (b) calendar year 2023 estimated Core FFO per share and (c) calendar year 2024 estimated Core FFO per share, Citi reviewed and compared certain financial information for Life Storage to corresponding financial information, ratios and public market multiples, including NAV per share and Core FFO per share, for Public Storage, CubeSmart, National Storage Affiliates Trust and Extra Space, which we refer to collectively as the “Life Storage Selected Public Companies.” Citi selected the Life Storage Selected Public Companies based on its professional judgment and experience. Although none of the Life Storage Selected Public Companies are directly comparable to Life Storage, the companies were selected because they are publicly traded companies with operations or businesses that for purposes of analysis may be considered similar to certain operations of Life Storage.

Citi then applied selected ranges of NAV Premium/Discount derived from the Life Storage Selected Public Companies of (21.6%) to (2.9%) to the corresponding Green Street Advisors estimate of Life Storage’s NAV per share of $130.51, selected ranges of 2023E Core FFO Multiples derived from the Life Storage Selected Public Companies of 14.6x to 19.0x to the corresponding management forecast of Life Storage’s estimated 2023E Core FFO per share and selected ranges of 2024E Core FFO Multiples derived from the Life Storage Selected Public Companies of 14.2x to 18.0x to the corresponding management forecast of Life Storage’s estimated 2024 Core FFO per share. This analysis indicated the following implied per share equity value reference ranges for Life Storage:

 

     Implied Per Share
Equity Value
Reference Range

NAV Premium/Discount

   $102.30 - $126.71

2023E Core FFO Multiple

   $101.72 - $132.32

2024E Core FFO Multiple

   $111.70 - $141.53

Extra Space. Using publicly available information, including published estimates of (a) NAV per share, (b) calendar year 2023 estimated Core FFO per share and (c) calendar year 2024 estimated Core FFO per share, Citi reviewed and compared certain financial information for Extra Space to corresponding financial information, ratios and public market multiples, including NAV per share and Core FFO per share, for Public Storage, CubeSmart, National Storage Affiliates Trust and Life Storage, which we refer to collectively as the “Extra Space Selected Public Companies.” Citi selected the Extra Space Selected Public Companies based on its professional judgment and experience. Although none of the Extra Space Selected Public Companies are directly comparable to Extra Space, the companies were selected because they are publicly traded companies with operations or businesses that for purposes of analysis may be considered similar to certain operations of Extra Space.

Citi then applied selected ranges of NAV Premium/Discount derived from the Extra Space Selected Public Companies of (21.6%) to 0.4% to the corresponding Green Street Advisors estimate of Extra Space’s NAV per share of $167.81, selected ranges of 2023E Core FFO Multiples derived from the Extra Space Selected Public Companies of 14.6x to 18.9x to the corresponding management forecast of Extra Space’s estimated 2023E Core FFO per share and selected ranges of 2024E Core FFO Multiples derived from the Extra Space Selected Public Companies of 14.2x to 17.7x to the corresponding management forecast of Extra Space’s estimated 2024 Core FFO per share. This analysis indicated the following implied per share equity value reference ranges for Extra Space:

 

     Implied Per Share
Equity Value
Reference Range
 

NAV Premium/Discount

   $ 131.54 - $168.55  

2023E Core FFO Multiple

   $ 123.89 - $160.14  

2024E Core FFO Multiple

   $ 132.96 - $165.88  

 

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Utilizing the approximate implied per share equity value reference ranges derived for Life Storage and the approximate implied per share equity value reference ranges derived for Extra Space, in each case as described above, Citi calculated the following implied exchange ratio reference ranges, as compared to the exchange ratio, by comparing the high end of the range for Life Storage with the low end of the range for Extra Space and vice versa:

 

     Implied Exchange Ratio
Reference Range
     Transaction Exchange
Ratio
 

NAV Premium/Discount

     0.6070x – 0.9633x        0.8950x  

2023E Core FFO Multiple

     0.6352x – 1.0681x        0.8950x  

2024E Core FFO Multiple

     0.6734x – 1.0644x        0.8950x  

Certain Additional Information

Citi also observed certain additional information that was not considered part of its financial analyses with respect to its opinion but was noted for informational purposes, including the following:

Selected Precedent Transactions Analysis. Citi performed for Life Storage, as the company subject to a change-of-control transaction, an analysis of the implied equity value per share for Life Storage based on observed capitalization rates for ten precedent transactions in the self-storage sector, whereby Citi applied the range of implied capitalization rates derived from such transactions of 3.7% to 6.0% to the 2023E NOI estimate of $720 million (which excludes 2023E Acquisition NOI) provided by Life Storage’s management. Implied price per share was calculated as 2023E NOI divided by implied capitalization rate, plus net other tangible assets, minus net debt, then divided by the fully diluted share count of Life Storage. Based on this analysis, Citi derived a range of implied values per share for Life Storage of $109.49 to $195.09, as compared to the implied merger consideration of $145.82 based on Extra Space’s closing share price as of March 31, 2023 and the exchange ratio.

Relative Contributions Analysis. Citi performed a relative contributions analysis in which Citi reviewed the relative contributions of Life Storage and Extra Space to, among other things, the Combined Company’s estimated (i) EBITDA in calendar years 2023 and 2024, based on the Life Storage forecasts and Extra Space forecasts, (ii) Core FFO in calendar years 2023 and 2024, based on the Life Storage forecasts and Extra Space forecasts, (iii) NAV, based on Green Street Advisors estimates and Wall Street consensus estimates, and (iv) equity value, based on each company’s closing share price on March 31, 2023 (in each case, excluding potential strategic implications and operational benefits, including the amount, timing and achievability thereof, anticipated to result from the mergers and other potential pro forma financial effects of the mergers on Life Storage and Extra Space following the mergers that were prepared by the respective managements of Life Storage and Extra Space), which indicated implied exchange ratios ranging from 0.7333x to 0.8366x.

Illustrative Pro Forma Financial Impact Analysis. Citi performed an analysis of the pro forma financial impact of the mergers to the projected Core FFO per share of Extra Space for the calendar years 2023 and 2024, as well as to the NAV per share for Extra Space based on Green Street Advisors estimates, in each case taking into account the potential strategic implications and operational benefits (including the amount, timing and achievability thereof, anticipated to result from the mergers and other potential pro forma financial effects of the mergers on Life Storage and Extra Space following the mergers that were prepared by the respective managements of Life Storage and Extra Space), which indicated that the mergers could be accretive to Extra Space’s estimated Core FFO per share in calendar years 2023 and 2024 by approximately 0.9% and 0.9%, respectively, as well as to Extra Space’s estimated NAV per share by approximately 0.2% (including the full benefit of the combination synergies and savings) or dilutive by approximately (5.4)% (excluding such benefit).

Illustrative Discounted Cash Flow Analysis of Combined Company. Citi performed an illustrative discounted cash flow analysis of the Combined Company, including potential strategic implications and

 

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operational benefits (including the amount, timing and achievability thereof, anticipated to result from the mergers and other potential pro forma financial effects of the mergers on Life Storage and Extra Space following the mergers that were prepared by the respective managements of Life Storage and Extra Space) with respect to the unlevered free cash flows that the Combined Company was expected to generate during the calendar year ending December 31, 2023 through the calendar year ending December 31, 2027 (utilizing a selected range of terminal implied capitalization rates of 4.86% to 5.86% and a selected range of discount rates of 8.59% to 9.42%), which resulted in a range of implied values per share for the Combined Company which, as of December 31, 2022 and based on an exchange ratio of 0.8950x, resulted in an implied value per share of Extra Space common stock of $142.62 to $186.22 as compared to a stand-alone value per share of Extra Space common stock under the discounted cash flow analysis of $136.67 to $178.20.

Other. Citi also observed the following:

 

   

historical trading prices of Life Storage common stock and Extra Space common stock during the 52-week period ended March 31, 2023, which indicated low to high closing prices during such period of approximately $95.23 to $150.41 per share of Life Storage common stock and $141.04 to $219.95 per share of Extra Space common stock, which further indicated an implied exchange ratio of 0.6124x to 0.8235x representing the high and low exchange ratios calculated daily as Life Storage’s closing share price divided by Extra Space’s closing share price for such 52-week period ended March 31, 2023;

 

   

undiscounted publicly available Wall Street research analysts’ price targets for Life Storage common stock, which indicated standalone price targets of $120.00 to $140.00 per share of Life Storage common stock and $155.00 to $190.00 per share of Extra Space common stock, which further indicated an implied exchange ratio of 0.6316x to 0.9032x based on a comparison of the high and low values for each company with the respective low and high values of the other company and excluding non-overlapping Wall Street research analysts; and

 

   

the estimated NAV of Life Storage’s and Extra Space’s assets based on publicly available Wall Street research analysts’ estimates, which when calculated yielded implied per share equity value reference ranges of $127.13 to $140.85 per share of Life Storage common stock and $153.00 to $194.41 per share of Extra Space common stock, which further indicated an implied exchange ratio of 0.6539x to 0.9206x based on a comparison of the high and low values for each company with the respective low and high values of the other company and excluding non-overlapping Wall Street research analysts.

Miscellaneous

Extra Space has agreed to pay Citi for its services in connection with the proposed transaction an aggregate fee of $18.0 million, of which $2.0 million was payable upon delivery of Citi’s opinion and $16.0 million is payable contingent upon consummation of the mergers. In addition, Extra Space agreed to reimburse Citi for Citi’s expenses, including fees and expenses of counsel, and to indemnify Citi and related parties against certain liabilities, including liabilities under federal securities laws, arising from Citi’s engagement.

As the Extra Space board was aware, Citi and its affiliates in the past have provided, currently are providing and in the future may provide investment banking, commercial banking and other similar financial services to Extra Space unrelated to the proposed transaction, for which services Citi and such affiliates have received and expect to receive compensation, including, without limitation, during the two year period prior to the date of Citi’s opinion, having acted or acting as (i) joint book-running manager or joint co-manager for equity and debt offerings of Extra Space, (ii) sales agent for Extra Space’s equity issuance at-the-market program and (iii) lender under certain credit facilities of Extra Space. As the Extra Space board was also aware, Citi and its affiliates in the past have provided, currently are providing and in the future may provide investment banking, commercial banking and other similar financial services to Life Storage unrelated to the proposed transaction, for which services Citi and such affiliates have received and expect to receive compensation, including, without limitation,

 

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during the two year period prior to the date of Citi’s opinion, having acted or acting as (i) joint book-running manager for equity and debt offerings of Life Storage, (ii) sales agent for Life Storage’s equity issuance at-the-market program and (iii) lender under certain credit facilities of Life Storage. In the ordinary course of Citi’s business, Citi and its affiliates may actively trade or hold the securities of Life Storage and Extra Space for Citi’s own account or for the account of its customers and, accordingly, may at any time hold a long or short position in such securities. In addition, Citi and its affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with Life Storage, Extra Space and their respective affiliates.

The Extra Space board selected Citi to act as financial advisor in connection with the proposed transaction based on Citi’s reputation, experience and familiarity with Extra Space, Life Storage and their respective businesses. Citi is an internationally recognized investment banking firm that regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes.

Opinions of Life Storage’s Financial Advisors

Opinion of Wells Fargo Securities

Pursuant to an engagement letter dated January 27, 2023, Life Storage retained Wells Fargo Securities as the financial advisor to the Life Storage board in connection with a review of the potential transaction with Extra Space.

On April 2, 2023, Wells Fargo Securities rendered its oral opinion to the Life Storage board, which was subsequently confirmed in writing by delivery of Wells Fargo Securities’ written opinion, dated April 2, 2023 that, as of such date, the exchange ratio in the transaction was fair, from a financial point of view, to Life Storage.

In May 2023, after the negotiation and execution of the merger agreement, members of Extra Space management approached representatives of Wells Fargo Securities and its affiliates about arranging and/or providing financing for Extra Space and/or the Combined Company (the “potential financing transactions”). Wells Fargo Securities informed Life Storage of the potential financing transactions, and advised Life Storage of the potential or perceived conflicts of interest may arise or result from the participation of Wells Fargo Securities or its affiliates in connection with the potential financing transactions. After considering such potential or perceived conflicts of interest, Life Storage provided its consent to Wells Fargo Securities with respect to its or its affiliates’ participation in the potential financing transactions. The terms of the potential financing transactions remain subject to discussion among Extra Space and Wells Fargo Securities and its applicable affiliates and neither Wells Fargo Securities nor its affiliates have made any commitment to provide or arrange any potential financing transactions.

Wells Fargo Securities’ opinion was for the information and use of the Life Storage board (in its capacity as such) in connection with its evaluation of the transaction. Wells Fargo Securities’ opinion only addressed the fairness, from a financial point of view, to the holders of Life Storage common stock of the exchange ratio in the transaction and did not address any other aspect or implication of the transaction. The summary of Wells Fargo Securities’ opinion in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex C to this joint proxy statement/prospectus and sets forth the procedures followed, assumptions made, matters considered and limitations and qualifications on the review undertaken by Wells Fargo Securities in connection with the preparation of its opinion. However, neither Wells Fargo Securities’ written opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus is intended to be, and they do not constitute, advice or a recommendation to any stockholder of Life Storage as to how such stockholder should vote or act on any matter relating to the transaction.

 

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In arriving at its opinion, Wells Fargo Securities, among other things:

 

   

reviewed the Agreement and Plan of Merger, dated as of April 2, 2023, by and among the Extra Space parties and the Life Storage parties (which we refer to in this summary of Wells Fargo Securities’ opinion as the “merger agreement”);

 

   

reviewed certain publicly available business and financial information relating to Life Storage and Extra Space and the industries in which they operate;

 

   

compared the financial and operating performance of Life Storage and Extra Space with publicly available information concerning certain other companies Wells Fargo Securities deemed relevant, and compared current and historic market prices of Life Storage common stock and Extra Space common stock with similar data for such other companies;

 

   

reviewed certain internal financial analyses and forecasts for Life Storage (referred to in this summary of Wells Fargo Securities’ opinion as the “Life Storage management forecasts” and as described in more detail under the section entitled “The Mergers— Certain Life Storage Unaudited Prospective Financial Information—Life Storage Management Forecasts” beginning on page 101 of this joint proxy statement/prospectus”) and Extra Space (referred to in this summary of Wells Fargo Securities’ opinion as the “Extra Space forecasts” and as described in more detail in the section entitled “The MergersCertain Extra Space Unaudited Prospective Financial InformationExtra Space on a Standalone Basis” beginning on page 99 of this joint proxy statement/prospectus) prepared by the management of Life Storage and Extra Space;

 

   

reviewed certain estimates prepared by the managements of Life Storage and Extra Space as to the potential cost savings and synergies expected by such managements to be achieved as a result of the transaction (referred to in this summary of Wells Fargo Securities’ opinion as the “Synergies”);

 

   

discussed with the managements of Life Storage and Extra Space regarding certain aspects of the transaction, the business, financial condition and prospects of Life Storage and Extra Space, respectively, the effect of the transaction on the business, financial condition and prospects of Life Storage and Extra Space, respectively, and certain other matters that Wells Fargo Securities deemed relevant; and

 

   

considered such other financial analyses and investigations and such other information that Wells Fargo Securities deemed relevant.

In giving its opinion, Wells Fargo Securities assumed and relied upon the accuracy and completeness of all information that was publicly available or was furnished to or discussed with Wells Fargo Securities by Life Storage or Extra Space or otherwise reviewed by Wells Fargo Securities. Wells Fargo Securities did not independently verify any such information, and pursuant to the terms of Wells Fargo Securities’ engagement by Life Storage, Wells Fargo Securities did not assume any obligation to undertake any such independent verification. In relying on the Life Storage management forecasts, the Extra Space forecasts and the Synergies, Wells Fargo Securities assumed, with the consent of Life Storage, that they were reasonably prepared on bases reflecting the best currently available estimates and judgments of management as to the future performance and financial condition of Life Storage and Extra Space. Wells Fargo Securities expressed no view or opinion with respect to the Life Storage management forecasts, the Extra Space forecasts and the Synergies or the assumptions upon which they are based. Wells Fargo Securities assumed that any representations and warranties made by Life Storage and Extra Space in the merger agreement or in other agreements relating to the transaction will be true and accurate in all respects that are material to its analysis.

Wells Fargo Securities assumed that, for United States federal income tax purposes, the company merger and the deemed liquidation, taken together, will qualify as a “reorganization” within the meaning of Section 368 of the Code. Wells Fargo Securities also assumed that the transaction will have the tax consequences described in discussions with, and materials provided to it by, Life Storage. Wells Fargo Securities also assumed that, in the

 

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course of obtaining any regulatory or third-party consents, approvals or agreements in connection with the transaction, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on Life Storage, Extra Space or the contemplated benefits of the transaction. Wells Fargo Securities also assumed that the transaction will be consummated in compliance with all applicable laws and regulations and in accordance with the terms of the merger agreement without waiver, modification or amendment of any term, condition or agreement thereof that is material to its analyses or opinion. In addition, Wells Fargo Securities did not make any independent evaluation, inspection or appraisal of the assets or liabilities (contingent or otherwise) of Life Storage or Extra Space, nor was Wells Fargo Securities furnished with any such evaluations or appraisals. Wells Fargo Securities did not evaluate the solvency of Life Storage or Extra Space under any state or federal laws relating to bankruptcy, insolvency or similar matters. Wells Fargo Securities was advised that Life Storage and Extra Space each has operated in conformity with the requirements for qualification as a REIT for federal income tax purposes since their formation as a REIT and that the transaction would not adversely affect such status or operations.

Wells Fargo Securities’ opinion only addressed the fairness, from a financial point of view, of the exchange ratio to the holders of Life Storage common stock in the transaction, and Wells Fargo Securities expressed no opinion as to the fairness of any other consideration paid in connection with the transaction to the holders of any other class of securities, creditors or other constituencies of Life Storage or Life Storage OP. Furthermore, Wells Fargo Securities expressed no opinion as to any other aspect or implication (financial or otherwise) of the transaction, or any other agreement, arrangement or understanding entered into in connection with the transaction or otherwise, including, without limitation, the fairness of the amount or nature of, or any other aspect relating to, any compensation or consideration to be received by or otherwise payable to any officers, directors or employees of any party to the transaction, or class of such persons, relative to the exchange ratio or otherwise. Furthermore, Wells Fargo Securities did not express any advice or opinion regarding matters that require legal, regulatory, accounting, insurance, tax, environmental, executive compensation or other similar professional advice and has relied upon the assessments of Life Storage and its advisors with respect to such advice.

Wells Fargo Securities’ opinion was necessarily based upon information made available to Wells Fargo Securities as of the date of its opinion and financial, economic, market and other conditions as they existed and could be evaluated on the date of its opinion. Wells Fargo Securities did not undertake, and is under no obligation, to update, revise, reaffirm or withdraw its opinion, or otherwise comment on or consider events occurring or coming to its attention after the date of its opinion, notwithstanding that any subsequent development may affect its opinion. Wells Fargo Securities’ opinion did not address the relative merits of the transaction as compared to any alternative transactions or strategies that might have been available to Life Storage, nor did it address the underlying business decision of the Life Storage board or Extra Space to proceed with or effect the transaction. Wells Fargo Securities did not express any opinion as to the price at which the Life Storage common stock or the Extra Space common stock may be traded at any time.

Financial Analyses

In preparing its opinion to the Life Storage board, Wells Fargo Securities performed a variety of analyses, including those described below. The summary of Wells Fargo Securities’ analyses is not a complete description of the analyses underlying Wells Fargo Securities’ opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytical methods employed and the adaptation and application of these methods to the unique facts and circumstances presented. As a consequence, neither Wells Fargo Securities’ opinion nor its underlying analyses is readily susceptible to summary description. Wells Fargo Securities arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, methodology or factor. Accordingly, Wells Fargo Securities believes that its analyses and the following summary must be considered as a whole and that selecting portions of its analyses, methodologies and factors, without considering all analyses, methodologies and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying Wells Fargo Securities’ analyses and opinion.

 

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In performing its analyses, Wells Fargo Securities considered general business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. None of the selected companies used in Wells Fargo Securities’ analyses is identical to Life Storage nor Extra Space. Evaluation of the results of those analyses is not entirely mathematical. The financial analyses performed by Wells Fargo Securities were performed for analytical purposes only and are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond the control of Life Storage.

While the results of each analysis were taken into account in reaching its overall conclusion with respect to fairness, Wells Fargo Securities did not make separate or quantifiable judgments regarding individual analyses. Much of the information used in, and accordingly the results of, Wells Fargo Securities’ analyses are inherently subject to substantial uncertainty.

Wells Fargo Securities’ opinion was only one of many factors considered by the Life Storage board in evaluating the Transaction. Neither Wells Fargo Securities’ opinion nor its analyses were determinative of the exchange ratio or of the views of the Life Storage board or management with respect to the transaction or the exchange ratio. The type and amount of consideration payable in the company merger were determined through negotiations between Life Storage and Extra Space, and the decision to enter into the merger agreement was solely that of the Life Storage board.

The following is a summary of the material financial analyses performed by Wells Fargo Securities in connection with the preparation of its opinion rendered to, and reviewed with, the Life Storage board on April 2, 2023. The order of the analyses summarized below does not represent relative importance or weight given to those analyses by Wells Fargo Securities. The analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the analyses. Considering the data in the tables below without considering the full narrative description of the analyses, as well as the methodologies underlying and the assumptions made, procedures followed, matters considered and limitations and qualifications affecting each analysis, could create an incomplete view of Wells Fargo Securities’ analyses.

The estimates of the future financial performance of the companies listed below were based on public filings, including SEC, state regulatory and foreign filings, and research estimates for those companies and the estimates of the future financial performance of Life Storage and Extra Space relied upon for the financial analyses described below were based on the Life Storage management forecasts, the Extra Space forecasts and the Synergies.

Life Storage Financial Analyses

Life Storage Selected Public Companies Analysis. Wells Fargo Securities reviewed certain data for selected companies with publicly traded equity securities that Wells Fargo Securities deemed relevant. None of the selected companies used in Wells Fargo Securities’ analyses is identical to Life Storage. The selected companies were selected by Wells Fargo Securities because they were deemed by Wells Fargo Securities to be similar to Life Storage in one or more respects, including, among other things, that each selected company’s principal business is the ownership and operation of self-storage facilities.

Using publicly available information, Wells Fargo Securities calculated the multiple of each selected company’s trading price per share of common stock as of March 31, 2023 to the consensus equity research analysts estimates for such selected company’s projected core funds from operations per share of common stock for the years ending December 31, 2023 and December 31, 2024, respectively (referred to in this summary of Wells Fargo Securities’ opinion as the “Fully Diluted Price / Core FFO”).

 

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The companies selected by Wells Fargo Securities were as follows:

 

   

Public Storage

 

   

Extra Space

 

   

CubeSmart

 

   

National Storage Affiliates Trust

Taking into account the results of the selected public companies analysis, Wells Fargo Securities applied a Fully Diluted Price / Core FFO multiple range of 16.0x to 17.5x to Life Storage’s 2023 Adjusted Core FFO per share and a range of 15.5x to 17.0x to Life Storage’s 2024 Adjusted Core FFO per share, in each case, based on the Life Storage management forecasts, which were discussed with, and approved by, the Life Storage board for use by Wells Fargo Securities in connection with its financial analyses. The selected companies analysis indicated the following implied equity value per share reference ranges for Life Storage common stock:

 

     Implied Equity Value
Per share
 
     Low      High  

2023P Core FFO

   $ 110.86      $ 121.25  

2024P Core FFO

   $ 121.62      $ 133.39  

The implied equity value per share reference range was then compared to the implied per share value of the merger consideration as of March 31, 2023 of $145.82.

Life Storage Dividend Discount Analysis. Wells Fargo Securities performed a dividend discount analysis for Life Storage for the purpose of determining an implied equity value per share for Life Storage common stock on a standalone basis. Wells Fargo Securities calculated Life Storage’s projected dividends on shares of Life Storage common stock for the period from December 31, 2023 through December 31, 2026, based on the Life Storage management forecasts, which were discussed with, and approved by, the Life Storage board for use by Wells Fargo Securities in connection with its financial analyses. Wells Fargo Securities also calculated a range of terminal values for Life Storage as of December 31, 2026 by applying a range of terminal forward multiples of 16.00x to 17.50x to Life Storage’s Adjusted Core FFO per share for the year ending December 31, 2027 based on the Life Storage management forecasts, which were discussed with, and approved by, the Life Storage board for use by Wells Fargo Securities in connection with its financial analyses. Wells Fargo Securities then discounted the projected dividend estimates and the range of terminal values to present value as of December 31, 2022 using discount rates ranging from 10.00% to 11.00%.

The dividend discount analysis indicated an implied equity value per share reference range for Life Storage common stock of $131.54 to $147.09.

Extra Space Financial Analyses

Extra Space Selected Public Companies Analysis. Wells Fargo Securities reviewed certain data for selected companies with publicly traded equity securities that Wells Fargo Securities deemed relevant. None of the selected companies used in Wells Fargo Securities’ analyses is identical to Extra Space. The selected companies were selected by Wells Fargo Securities because they were deemed by Wells Fargo Securities to be similar to Extra Space in one or more respects, including, among other things, that each selected company’s principal business is the ownership and operation of self-storage facilities.

Using publicly available information, Wells Fargo Securities calculated the multiple of each selected company’s trading price per share of common stock as of March 31, 2023 (except for Life Storage, for which the multiple was based on the trading price as of February 3, 2023, the last trading day prior to Public Storage’s public offer) to the consensus equity research analysts estimates for such selected company’s projected core funds from operations value per share of common stock for the years ending December 31, 2023 and December 31, 2024, respectively.

 

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The companies selected by Wells Fargo Securities were as follows:

 

   

Public Storage

 

   

CubeSmart

 

   

Life Storage

 

   

National Storage Affiliates Trust

Taking into account the results of the selected public companies analysis, Wells Fargo Securities applied a Fully Diluted Price / Core FFO multiple range of 16.5x to 18.5x to Extra Space’s 2023 projected core funds from operations per share and a range of 15.5x to 17.5x to Extra Space’s 2024 projected core funds from operations per share, in each case, based on the Extra Space forecasts, which were discussed with, and approved by, the Life Storage board for use by Wells Fargo Securities in connection with its financial analyses. The selected companies analysis indicated the following implied equity value per share reference ranges for Extra Space common stock:

 

     Implied Equity Value
Per Share
 
     Low      High  

2023P Core FFO

   $ 139.62      $ 156.54  

2024P Core FFO

   $ 145.16      $ 163.89  

The implied equity value per share reference range was then compared to the closing per share value of the Extra Space share price as of March 31, 2023 of $162.93

Extra Space Dividend Discount Analysis. Wells Fargo Securities performed a dividend discount analysis for Extra Space for the purpose of determining an implied equity value per share for Extra Space common stock on a standalone basis. Wells Fargo Securities calculated Extra Space’s projected dividends on shares of Extra Space common stock for the period from December 31, 2023 through December 31, 2026, based on the Extra Space forecasts, which were discussed with, and approved by, the Life Storage board for use by Wells Fargo Securities in connection with its financial analyses. Wells Fargo Securities also calculated a range of terminal values for Extra Space as of December 31, 2026 by applying a range of terminal forward multiples of 17.0x to 19.0x to Extra Space’s projected core funds from operations per share for the year ending December 31, 2027 based on the Extra Space forecasts, which were discussed with, and approved by, the Life Storage board for use by Wells Fargo Securities in connection with its financial analyses. Wells Fargo Securities then discounted the projected dividend estimates and the range of the terminal values to present value as of December 31, 2022 using discount rates ranging from 10.00% to 11.00%.

The dividend discount analysis indicated an implied equity value per share reference range for Extra Space common stock of $154.70 to $176.03.

 

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Combined Company Financial Analyses

Pro Forma Exchange Ratio Analysis. Wells Fargo Securities compared the results for Extra Space to the results for Life Storage with respect to the selected public companies analyses and the dividend discount analyses described above. Wells Fargo Securities compared the highest implied equity value per share of Extra Space common stock to the lowest implied equity value per share of Life Storage common stock to derive the lowest exchange ratio implied by each pair of results. Wells Fargo Securities also compared the lowest implied equity value per share of Extra Space common stock to the highest implied equity value per share of Life Storage common stock to derive the highest exchange ratio implied by each pair of results. The ranges of implied exchange ratios resulting from this analysis were:

 

     Implied Exchange Ratios  
     Low      High  

Selected Public Companies Analysis

     

2023P Core FFO

2024P Core FFO

    

0.7082x

0.7421x

 

 

    

0.8685x

0.9189x

 

 

Dividend Discount Analysis

     

Dividend Discount Analysis

     0.7473x        0.9508x  

The ranges of implied exchange ratios resulting from the foregoing analyses were compared to the exchange ratio of 0.8950x.

Combined Company Pro Forma Dividend Discount Analysis-based Illustrative Value Creation Analysis. Wells Fargo Securities conducted an analysis of the pro forma value creation, based on the Extra Space forecasts and Life Storage management forecasts and taking into account the Synergies, estimates of transaction expenses in connection with the mergers and assumptions regarding financing of the Combined Company following the closing of the mergers, in each case, provided by the managements of Life Storage and Extra Space (collectively, the “pro forma projections,” which were discussed with, and approved by, the Life Storage board for use by Wells Fargo Securities in connection with its financial analyses), to the holders of Life Storage common stock. Wells Fargo Securities performed a pro forma dividend discount analysis for the Combined Company for the purpose of determining an implied pro forma equity value per share for the Combined Company common stock. Wells Fargo Securities calculated the Combined Company’s projected dividends on shares of Combined Company common stock for the period from December 31, 2023 through December 31, 2026, based on the pro forma projections. Wells Fargo Securities also calculated a range of terminal values for the Combined Company as of December 31, 2026 by applying a range of terminal forward multiples of 17.0x to 19.0x to the Combined Company’s projected core funds from operations per share for the year ending December 31, 2027 based on the pro forma projections, which were discussed with, and approved by, the Life Storage board for use by Wells Fargo Securities in connection with its financial analyses. Wells Fargo Securities then discounted the projected dividend estimates and the range of the terminal values to present value as of December 31, 2022 using discount rates ranging from 9.50% to 10.50%.

The dividend discount analysis indicated an implied pro forma per share equity value reference range for Combined Company common stock of $165.72 to $188.79. Wells Fargo Securities applied the exchange ratio to such implied pro forma equity value per share of Combined Company common stock. These calculations resulted in an implied range of pro forma equity values received per share of Life Storage common stock of $148.32 to $168.97.

Wells Fargo Securities then compared the highest implied pro forma equity value received per share of Life Storage common stock to the lowest implied equity value per share of standalone Life Storage common stock to derive the highest illustrative pro forma Combined Company premium implied by the results of such analysis. Wells Fargo Securities also compared the lowest implied pro forma equity value received per share of Life Storage common stock to the highest implied equity value per share of standalone Life Storage common stock to

 

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derive the lowest illustrative pro forma Combined Company premium implied by the results of such analysis. The range of value creation ratios resulting from this analysis were:

 

     Illustrative Pro Forma
Combined Company
Premium to Standalone
 

Combined Company Pro Forma Dividend Discount Analysis-based Illustrative Value Creation Analysis

  

Pro Forma Combined Company High / Standalone Life Storage Low

     28.5

Pro Forma Combined Company Low / Standalone Life Storage High

     0.8

Other Matters

Wells Fargo Securities is a trade name of Wells Fargo Securities, LLC, an investment banking subsidiary and affiliate of Wells Fargo & Company. Life Storage retained Wells Fargo Securities as its financial advisor in connection with the transaction based on Wells Fargo Securities’ experience and reputation. Wells Fargo Securities is regularly engaged to provide investment banking and financial advisory services in connection with mergers and acquisitions, financings, and financial restructurings. Life Storage has agreed to pay Wells Fargo Securities an aggregate fee currently estimated to be approximately $59.0 million, $12.0 million of which became payable to Wells Fargo Securities prior to and including the announcement date of the transaction of April 3, 2023, and the remainder of which is contingent and payable upon the consummation of the transaction. In addition, Life Storage has agreed to reimburse Wells Fargo Securities for certain expenses and to indemnify Wells Fargo Securities and certain related parties against certain liabilities and other items that may arise out of or relate to Wells Fargo Securities’ engagement. The issuance of Wells Fargo Securities’ opinion was approved by a fairness committee of Wells Fargo Securities.

Wells Fargo Securities and its affiliates provide a wide range of investment and commercial banking advice and services, including financial advisory services, securities underwritings and placements, securities sales and trading, brokerage advice and services, and commercial loans. During the two years preceding the date of Wells Fargo Securities’ written opinion, Wells Fargo Securities and its affiliates have had investment or commercial banking relationships with the Life Storage and the Extra Space, for which Wells Fargo Securities and such affiliates have received customary compensation. Such relationships have included acting as joint placement agent on offerings of equity securities by Life Storage in June and December 2021, as joint bookrunner on an offering of equity securities by Life Storage in September 2021, as sole bookrunner and lead arranger on Life Storage’s revolving credit facility in July 2022; and as joint bookrunner on an offering of equity securities by Extra Space in March 2021. Wells Fargo Securities or its affiliates are also an agent and a lender to one or more of the credit facilities of Life Storage, Extra Space and certain of their affiliates. During the two years preceding the date of Wells Fargo Securities’ written opinion, the aggregate fees recognized by Wells Fargo Securities from Life Storage and Extra Space for investment banking services were approximately $8.4 million and $0.4 million, respectively. In addition, Wells Fargo Securities and its affiliates hold, on a proprietary basis, less than 1% of the outstanding common stock of each of Life Storage and Extra Space. In the ordinary course of business, Wells Fargo Securities and its affiliates may trade or otherwise effect transactions in the securities or other financial instruments (including bank loans or other obligations) of Life Storage, Extra Space and certain of their affiliates for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities or financial instruments. Wells Fargo Securities and its affiliates have adopted policies and procedures designed to preserve the independence of their research and credit analysts whose views may differ from those of the members of the team of investment banking professionals involved in preparing Wells Fargo Securities’ opinion.

 

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In addition, in the future Wells Fargo Securities and its affiliates may provide banking and other financial services to Life Storage, Extra Space or the Combined Company and their respective affiliates, including in connection with the potential financing transactions.

Opinion of BofA Securities

Life Storage has retained BofA Securities to act as Life Storage’s financial advisor in connection with the transaction. BofA Securities is an internationally recognized investment banking firm which is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. Life Storage selected BofA Securities to act as Life Storage’s financial advisor in connection with the transaction on the basis of BofA Securities’ experience in transactions similar to the proposed transaction with Extra Space, its reputation in the investment community and its familiarity with Life Storage and its business.

On April 2, 2023, at a meeting of the Life Storage board held to evaluate the mergers, BofA Securities delivered to the Life Storage board an oral opinion, which was confirmed by delivery of a written opinion dated April 2, 2023, to the effect that, as of the date of the opinion and based on and subject to various assumptions and limitations described in its opinion, the exchange ratio provided for in the company merger was fair, from a financial point of view, to holders of Life Storage common stock (other than shares of Life Storage common stock held by Extra Space, Life Storage or any of their respective subsidiaries).

In May 2023, after the negotiation and execution of the merger agreement, members of Extra Space management approached representatives of BofA Securities and its affiliates, including Bank of America, N.A., about arranging and/or providing for financing for Extra Space and/or the Combined Company in connection with the potential financing transactions. BofA Securities informed Life Storage of the potential financing transactions, and advised Life Storage of the potential or perceived conflicts of interest that may arise or result from the participation of BofA Securities and/or its affiliates in such financing and the fees payable to BofA Securities and/or its affiliates in connection therewith. After considering such potential or perceived conflicts of interest, Life Storage provided its consent to BofA Securities with respect to its (or its affiliates’) participation in the potential financing transactions. The terms thereof remain subject to discussion among Extra Space and the applicable other parties thereto, and the foregoing disclosure should not be deemed to constitute a commitment of BofA Securities or any of its affiliates to provide or arrange any potential financing transactions.

The full text of BofA Securities’ written opinion to the Life Storage board, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex D to this joint proxy statement/prospectus and is incorporated by reference herein in its entirety. The following summary of BofA Securities’ opinion is qualified in its entirety by reference to the full text of the opinion. BofA Securities delivered its opinion to the Life Storage board for the benefit and use of the Life Storage board (in its capacity as such) in connection with and for purposes of its evaluation of the exchange ratio from a financial point of view. BofA Securities’ opinion does not address any other aspect of the transaction and no opinion or view was expressed as to the relative merits of the transaction in comparison to other strategies or transactions that might be available to Life Storage or in which Life Storage might engage or as to the underlying business decision of Life Storage to proceed with or effect the transaction. BofA Securities’ opinion does not address any other aspect of the transaction and does not constitute a recommendation to any stockholder as to how to vote or act in connection with the proposed transaction or any related matter.

In connection with rendering its opinion, BofA Securities:

 

   

reviewed certain publicly available business and financial information relating to Life Storage and Extra Space;

 

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reviewed certain internal financial and operating information with respect to the business, operations and prospects of Life Storage furnished to or discussed with BofA Securities by the management of Life Storage, including certain financial forecasts relating to Life Storage prepared by the management of Life Storage, referred to in this summary of BofA Securities’ opinion as the “Life Storage management forecasts”;

 

   

reviewed certain internal financial and operating information with respect to the business, operations and prospects of Extra Space furnished to or discussed with BofA Securities by the management of Life Storage, including certain financial forecasts relating to Extra Space prepared by the management of Extra Space, referred to in this summary of BofA Securities’ opinion as the “Extra Space forecasts”;

 

   

reviewed certain estimates as to the amount and timing of cost savings and revenue enhancements, net of cost to achieve, anticipated by the management of Life Storage, based on forecasts provided by Extra Space to result from the mergers, referred to in this summary of BofA Securities’ opinion as the “synergies”;

 

   

discussed the past and current business, operations, financial condition and prospects of Life Storage with members of senior management of Life Storage and Extra Space, and discussed the past and current business, operations, financial condition and prospects of Extra Space with members of senior management of Life Storage and Extra Space;

 

   

reviewed the potential pro forma financial impact of the transaction on the future financial performance of Extra Space, including the potential effect on Extra Space’s estimated funds from operations per share;

 

   

reviewed the trading histories for Life Storage common stock and Extra Space common stock and a comparison of such trading histories with each other and with the trading histories of other companies BofA Securities deemed relevant;

 

   

compared certain financial and stock market information of Life Storage and Extra Space with similar information of other companies BofA Securities deemed relevant;

 

   

reviewed the relative financial contributions of Life Storage and Extra Space to the future financial performance of the Combined Company on a pro forma basis;

 

   

considered the fact that Life Storage decided to explore its strategic alternatives and the results of BofA Securities’ efforts on behalf of Life Storage to solicit, at the direction of Life Storage, indications of interest and definitive proposals from third parties with respect to a possible acquisition of Life Storage;

 

   

reviewed a draft, dated April 2, 2023, of the merger agreement, referred to in this summary of BofA Securities’ opinion as the “Draft Agreement”; and

 

   

performed such other analyses and studies and considered such other information and factors as BofA Securities deemed appropriate.

In arriving at its opinion, BofA Securities assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with it and relied upon the assurances of the managements of Life Storage and Extra Space that they were not aware of any facts or circumstances that would make such information or data inaccurate or misleading in any material respect. With respect to the Life Storage management forecasts, BofA Securities was advised by Life Storage, and assumed, that they were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Life Storage as to the future financial performance of Life Storage. With respect to the Extra Space forecasts, BofA Securities was advised by Extra Space, and assumed, at the direction of Life Storage, that they were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Extra Space as to the future financial performance of Extra Space. With respect to the synergies, BofA Securities was advised by Life Storage,

 

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and assumed, with Life Storage’s consent, that they were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Life Storage as to the future financial performance of Extra Space and other matters covered thereby. BofA Securities relied, at the direction of Life Storage, on the assessments of the managements of Life Storage and Extra Space as to Extra Space’s ability to achieve the synergies and were advised by Life Storage and Extra Space, and assumed, with the consent of Life Storage, that the synergies will be realized in the amounts and at the times projected. BofA Securities did not make or was not provided with any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Life Storage or Extra Space, nor did it make any physical inspection of the properties or assets of Life Storage or Extra Space. BofA Securities did not evaluate the solvency or fair value of Life Storage or Extra Space under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. BofA Securities assumed, at the direction of Life Storage, that the transaction would be consummated in accordance with its terms, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the transaction, no delay, limitation, restriction or condition, including any divestiture requirements or amendments or modifications, would be imposed that would have an adverse effect on Life Storage, Extra Space or the contemplated benefits of the transaction. BofA Securities further assumed, at the direction of Life Storage, that the company merger will qualify for federal income tax purposes as a reorganization under the provisions of Section 368(a) of the Code. BofA Securities further assumed, at the direction of Life Storage, that Extra Space has elected and been subject to United States federal taxation as a REIT within the meaning of Section 856 of the Code and has satisfied all requirements to qualify as a REIT commencing with its taxable year ended December 31, 2004 through and including its taxable year ending December 31 immediately prior to the effective time of the mergers and have assumed, at the direction of Life Storage, that Extra Space will continue to operate in such a manner as to qualify as a REIT for its taxable year that includes and/or ends on the closing date of the transaction and will continue to operate in such a manner to qualify as a REIT. BofA Securities also has assumed, at the direction of Life Storage, that the final executed merger agreement did not differ in any material respect from the Draft Agreement reviewed by it. On May 12, 2023, representatives of BofA Securities advised Life Storage that its written opinion had erroneously stated that the Extra Space forecasts had been prepared by management of Life Storage instead of by management of Extra Space, and delivered to Life Storage a revised opinion letter and related presentation materials that correctly attributed the Extra Space forecasts to management of Extra Space.

BofA Securities expressed no view or opinion as to any terms or other aspects of the transaction (other than the exchange ratio to the extent expressly specified in its opinion), including, without limitation, the form or structure of the transaction, or any other arrangements, agreements or understandings entered into in connection with or related to the transaction or otherwise. BofA Securities’ opinion was limited to the fairness, from a financial point of view, of the exchange ratio to the holders of Life Storage common stock (other than shares of Life Storage common stock held by Extra Space, Life Storage or any of their respective subsidiaries) and no opinion or view was expressed with respect to any consideration received in connection with the transaction by the holders of any other class of securities, creditors or other constituencies of any party. In addition, no opinion or view was expressed with respect to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to any of the officers, directors or employees of any party to the transaction, or class of such persons, relative to the exchange ratio. Furthermore, no opinion or view was expressed as to the relative merits of the transaction in comparison to other strategies or transactions that might be available to Life Storage or in which Life Storage might engage or as to the underlying business decision of Life Storage to proceed with or effect the transaction. BofA Securities did not express any opinion as to what the value of Extra Space common stock actually would be when issued or the prices at which Life Storage common stock or Extra Space common stock would trade at any time, including following announcement or consummation of the transaction. In addition, BofA Securities expressed no opinion or recommendation as to how any stockholder should vote or act in connection with the transaction or any related matter. Except as described above, Life Storage imposed no other limitations on the investigations made or procedures followed by BofA Securities in rendering its opinion.

BofA Securities’ opinion was necessarily based on financial, economic, monetary, market and other conditions and circumstances as in effect on, and the information made available to BofA Securities as of, the

 

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date of its opinion. It should be understood that subsequent developments may affect its opinion, and BofA Securities does not have any obligation to update, revise or reaffirm its opinion. The issuance of BofA Securities’ opinion was approved by a fairness opinion review committee of BofA Securities.

The following represents a brief summary of the material financial analyses presented by BofA Securities to the Life Storage’s board in connection with its opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses performed by BofA Securities, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses performed by BofA Securities. Considering the data set forth in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses performed by BofA Securities.

Life Storage Financial Analyses

Selected Publicly Traded Companies Analysis. BofA Securities reviewed publicly available financial and stock market information for Life Storage and the following four publicly traded companies in the self-storage industry:

 

   

Public Storage

 

   

Extra Space

 

   

CubeSmart

 

   

National Storage Affiliates Trust

BofA Securities reviewed, among other things, total enterprise values, referred to in this summary of BofA Securities’ opinion as “TEVs,” of the selected publicly traded companies, calculated as their market values based on their closing stock prices on March 31, 2023 and the number of their fully diluted shares outstanding, plus debt, preferred stock, and less cash and cash equivalents, including cash from unsettled forward shares, as a multiple of the calendar year 2023 and 2024 estimated EBITDA. Financial data of the selected publicly traded companies were based on public filings and publicly available research analysts’ estimates as of March 31, 2023. Financial data of Life Storage was based on the Life Storage management forecasts.

BofA Securities also reviewed, among other things, per share equity values, based on closing stock prices on March 31, 2023, of the selected publicly traded companies as a multiple of calendar years 2023 and 2024 estimated FFO per share. Financial data of the selected publicly traded companies were based on public filings and publicly available research analysts’ estimates as of March 31, 2023. Financial data of Life Storage was based on the Life Storage management forecasts.

 

Selected Publicly Traded
Companies

   EV / 2023E EBITDA      EV / 2024E EBITDA      2023E FFO Multiple      2024E FFO Multiple  

Public Storage

     19.5x        18.5x        18.0x        17.1x  

Extra Space

     20.4x        19.3x        19.0x        18.0x  

CubeSmart

     19.4x        18.4x        17.2x        16.3x  

National Storage Affiliates Trust

     18.0x        17.0x        14.6x        14.2x  

BofA Securities then (i) applied calendar year 2023 EV / EBITDA multiples of 18.3x to 20.3x, derived from the selected publicly traded companies based on BofA Securities’ professional experience and judgment to Life Storage’s calendar year 2023 estimated EBITDA and (ii) applied calendar year 2024 EV / EBITDA multiples of 17.3x to 19.3x, derived from the selected publicly traded companies based on BofA Securities’ professional experience and judgment to Life Storage’s calendar year 2024 estimated EBITDA, to determine implied per

 

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share equity values. Similarly, BofA Securities (i) applied calendar year 2023 estimated FFO per share multiples of 16.2x to 18.2x, derived from the selected publicly traded companies based on BofA Securities’ professional experience and judgment to Life Storage’s calendar year 2023 estimated FFO and (ii) applied calendar year 2024 estimated FFO per share multiples of 15.4x to 17.4x, derived from the selected publicly traded companies based on BofA Securities’ professional experience and judgment to Life Storage’s calendar year 2024 estimated FFO to determine implied per share equity values. Estimated financial data of the selected publicly traded companies were based on publicly available research analysts’ estimates, and estimated financial data of Life Storage were based on the Life Storage management forecasts. This analysis indicated the following approximate implied per share equity value reference ranges for Life Storage, as compared to the per share price of Life Storage common stock implied by the exchange ratio in the company merger, calculated based on the closing price of Extra Space common stock on March 31, 2023, multiplied by the exchange ratio:

 

Implied Per Share Equity Value Reference Ranges for Life Storage

     Per Share Price Implied by
Exchange Ratio
 

2023E EBITDA

   2024E EBITDA      2023E FFO      2024E FFO         

$114.80 - $131.82

   $ 125.24 - $144.47      $ 112.41 - $126.27      $ 120.76 - $136.45      $ 145.82  

No company used in this analysis is identical or directly comparable to Life Storage. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which Life Storage was compared.

Discounted Cash Flow Analysis. BofA Securities performed a discounted cash flow analysis of Life Storage to calculate the estimated present value of the standalone unlevered, after-tax free cash flows that Life Storage was forecasted to generate during Life Storage’s fiscal years 2023 through 2027 based on the Life Storage management forecasts. BofA Securities calculated terminal values for Life Storage using perpetuity growth rates of 2.50% to 3.00%, which were based on United States long-term gross domestic product, referred to in this summary of BofA Securities’ opinion as “GDP,” growth per Congressional Budget Office data. This analysis implied the following forward EBITDA exit multiples of 14.6x to 20.3x and forward FFO exit multiples of 12.6x to 20.0x. The cash flows and terminal values were then discounted to present value as of December 31, 2022, assuming a mid-period convention for cash flows, using discount rates ranging from 7.8% to 9.2%, which were based on an estimate of Life Storage’s weighted average cost of capital. From the resulting enterprise values, BofA Securities deducted net debt as of the end of the fourth quarter of fiscal year 2022 to derive equity values. This analysis indicated the following approximate implied per share equity value reference ranges for Life Storage as compared to the per share price of Life Storage implied by the exchange ratio in the company merger:

 

Implied Per Share Equity Value

Reference Range for Life Storage

   Per Share Price Implied by Exchange Ratio  

$97.80 - $161.48

   $ 145.82  

Other Factors. BofA Securities also noted certain additional factors that were not considered part of BofA Securities’ material financial analysis with respect to its opinion but were reference for information purposes, including, among other things, the following:

 

   

historical trading prices and trading volumes of Life Storage common stock during the one-year period ended March 31, 2023, which ranged from $94.02 to $151.76 per share; and

 

   

one-year future stock price targets for Life Storage in publicly available research analysist reports, which (discounted one year by a 9.4% cost of equity) indicated stock price targets for Life Storage of a range of approximately $92.34 to $127.99 per share.

 

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Extra Space Financial Analyses

Selected Publicly Traded Companies Analysis. BofA Securities reviewed publicly available financial and stock market information for Extra Space and the following four publicly traded companies in the self-storage industry:

 

   

Public Storage

 

   

Life Storage

 

   

CubeSmart

 

   

National Storage Affiliates Trust

BofA Securities reviewed, among other things, TEVs of the selected publicly traded companies, calculated as their market values based on their closing stock prices on March 31, 2023 and the number of their fully diluted shares outstanding, plus debt, preferred stock, and less cash and cash equivalents, including cash from unsettled forward shares, as a multiple of the calendar year 2023 and 2024 estimated adjusted EBITDA. Financial data of the selected publicly traded companies were based on public filings and publicly available research analysts’ estimates as of March 31, 2023. Financial data of Extra Space was based on the Extra Space forecasts.

BofA Securities also reviewed, among other things, per share equity values, based on closing stock prices on March 31, 2023, of the selected publicly traded companies as a multiple of calendar years 2023 and 2024 estimated FFO per share. Financial data of the selected publicly traded companies were based on public filings and publicly available research analysts’ estimates as of March 31, 2023. Financial data of Extra Space was based on the Extra Space forecasts.

 

Selected Publicly
Traded Companies

   EV / 2023E EBITDA      EV / 2024E EBITDA      2023E FFO Multiple      2024E FFO Multiple  

Public Storage

     19.5x        18.5x        18.0x        17.1x  

Life Storage, Inc.

     20.5x        19.1x        18.9x        17.7x  

CubeSmart

     19.4x        18.4x        17.2x        16.3x  

National Storage Affiliates Trust

     18.0x        17.0x        14.6x        14.2x  

BofA Securities then (i) applied calendar year 2023 EV / EBITDA multiples of 18.4x to 20.4x, derived from the selected publicly traded companies based on BofA Securities’ professional experience and judgment to Extra Space’s calendar year 2023 estimated EBITDA and (ii) applied calendar year 2024 EV / EBITDA multiples of 17.2x to 19.2x, derived from the selected publicly traded companies based on BofA Securities’ professional experience and judgment to Extra Space’s calendar year 2024 estimated EBITDA, to determine implied per share equity values. Similarly, BofA Securities (i) applied calendar year 2023 estimated FFO per share multiples of 16.2x to 18.2x, derived from the selected publicly traded companies based on BofA Securities’ professional experience and judgment to Extra Space’s calendar year 2023 estimated FFO and (ii) applied calendar year 2024 estimated FFO per share multiples of 15.3x to 17.3x, derived from the selected publicly traded companies based on BofA Securities’ professional experience and judgment to Extra Space’s calendar year 2024 estimated FFO to determine implied per share equity values. Estimated financial data of the selected publicly traded companies were based on publicly available research analysts’ estimates, and estimated financial data of Extra Space were based on the Extra Space forecasts. This analysis indicated the following approximate implied per share equity value reference ranges for Extra Space, as compared to the closing per share price of Extra Space common stock on March 31, 2023:

 

Implied Per Share Equity Value Reference Ranges for Extra Space

   Per Share Price as of
March 31, 2023

2023E EBITDA

   2024E EBITDA    2023E FFO    2024E FFO     

$150.35 - $172.45

   $152.74 - $176.54    $137.02 - $153.95    $143.69 - $162.45    $162.93

 

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No company used in this analysis is identical or directly comparable to Extra Space. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which Extra Space was compared.

Discounted Cash Flow Analysis. BofA Securities performed a discounted cash flow analysis of Extra Space to calculate the estimated present value of the standalone unlevered, after-tax free cash flows that Extra Space was forecasted to generate during Extra Space’s fiscal years 2023 through 2027 based on the Extra Space forecasts. BofA Securities calculated terminal values for Extra Space using perpetuity growth rates of 2.5% to 3.0%, which were based on United States long-term GDP growth per Congressional Budget Office data. This analysis implied forward EBITDA exit multiples of 14.8x to 21.1x and forward FFO exit multiples of 13.2x to 21.2x. The cash flows and terminal values were then discounted to present value as of December 31, 2022, assuming a mid-period convention for cash flows, using discount rates ranging from 7.5% to 8.9%, which were based on an estimate of Extra Space’s weighted average cost of capital. From the resulting enterprise values, BofA Securities deducted net debt as of the end of the fourth quarter of fiscal year 2022 to derive equity values.

BofA Securities also estimated the per share impact of the pro forma Synergies due to synergies from revenue, tenant insurance, operating expenses and G&A, net of dis-synergies from property taxes expected to result from the Transactions based on the Extra Space forecasts. BofA Securities calculated the terminal values for the Synergies using perpetuity growth rates of 2.50% to 3.00%, which were based on United States long-term GDP growth per Congressional Budget Office data. This analysis implied forward EBITDA exit multiples of 14.8x to 21.0x and forward FFO exit multiples of 13.3x to 21.1x. The synergized cash flows and terminal values were then discounted to present value as of December 31, 2022, assuming a mid-year convention for cash flows, using discount rates ranging from 7.6% to 9.0%, which were based on a blended weighted average cost of capital based on Life Storage’s pro-forma ownership of 35% and Life Storage’s weighted average cost of capital range of 7.8% to 9.2% and Extra Space’s pro-forma ownership of 65% and Extra Space’s weighted average cost of capital range of 7.5% to 8.9%, which BofA Securities divided by the number of fully diluted shares of Extra Space common stock outstanding to calculate a range of Synergies per share of Extra Space common stock of $11.17 to $15.59, referred to in this summary of BofA Securities’ opinion as the “Pro Forma Synergies.” BofA Securities then added the range of Pro Forma Synergies to the range of implied standalone per share equity values of Extra Space common stock to compute a reference range of pro forma implied per share values.

These analyses indicated the following approximate implied per share equity value reference ranges for Extra Space (i) without and (ii) including the Synergies, as compared to the closing per share price of Extra Space common stock on March 31, 2023:

 

Implied Per Share Equity Value

Reference Range for Extra Space

  

Implied Per Share Equity

Value Reference Range for Extra Space

(Synergized)

  

Per Share Price as of March 31,

2023

$125.46 - $201.98

   $136.63 - $217.57    $162.93

Other Factors. BofA Securities also noted certain additional factors that were not considered part of BofA Securities’ material financial analysis with respect to its opinion but were reference for information purposes, including, among other things, the following:

 

   

historical trading prices and trading volumes of Extra Space common stock during the one-year period ended March 31, 2023, which ranged from $139.97 to $222.36 per share; and

 

   

one-year future stock price targets for Extra Space in publicly available research analyst reports, which (discounted one year by a 9.0% cost of equity) indicated stock price targets for Extra Space of a range of approximately $133.06 to $180.78 per share.

Summary of Material Relative Financial Analyses

Implied Exchange Ratio Analysis—Selected Companies Analysis. Utilizing the implied per share equity value and FFO reference ranges derived for Life Storage described above in the section entitled “The Mergers—

 

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Opinions of Life Storage’s Financial Advisors—Opinion of BofA Securities—Life Storage Financial Analyses—Selected Publicly Traded Companies Analysis” beginning on page 90 of this joint proxy statement/prospectus and for Extra Space described above in the section entitled “The Mergers—Opinions of Life Storage’s Financial Advisors—Opinion of BofA Securities—Extra Space Financial Analyses—Selected Publicly Traded Companies Analysis” beginning on page 92 of this joint proxy statement/prospectus for each of Life Storage and Extra Storage, as applicable, by dividing the low endpoint and the high endpoint of the per share equity value and FFO reference ranges derived for Life Storage by the high endpoint and low endpoint of the per share equity value and FFO reference ranges derived for Extra Space, respectively, BofA Securities calculated an approximate implied exchange ratio reference range. This analysis indicated the following approximate implied exchange ratio reference range, as compared to the exchange ratio:

 

Implied Exchange Ratio

    

2023E EBITDA

  

2024E EBITDA

  

2023E FFO

   2024E FFO    Exchange Ratio

0.6657x – 0.8767x

   0.7094x – 0.9459x    0.7302x – 0.9215x    0.7434x – 0.9496x    0.8950x

Implied Exchange Ratio Analysis—Discounted Cash Flow Analysis. Utilizing the implied per share equity value ranges derived for Life Storage described above in the section entitled “The Mergers—Opinions of Life Storage’s Financial Advisors—Opinion of BofA Securities—Life Storage Financial Analyses—Discounted Cash Flow Analysis” beginning on page 91 of this joint proxy statement/prospectus and for Extra Space described above in the section entitled “The Mergers—Opinions of Life Storage’s Financial Advisors—Opinion of BofA Securities—Extra Space Financial Analyses—Discounted Cash Flow Analysis” beginning on page 93 of this joint proxy statement/prospectus for each of Life Storage and Extra Storage, as applicable, by dividing the low endpoint and the high endpoint of the per share equity value reference ranges derived for Life Storage by the high endpoint and low endpoint of the per share equity value reference ranges derived for Extra Space, respectively, BofA Securities calculated an approximate implied exchange ratio reference range. This analysis indicated the following approximate implied exchange ratio reference range, as compared to the exchange ratio:

 

Implied Exchange Ratio

    

DCF (Standalone)

  

Synergized DCF

  

Exchange Ratio

0.4842x – 1.2871x

   0.4495x – 1.1819x    0.8950x

Has/Gets Analysis. BofA Securities performed a has/gets analysis to calculate the theoretical change in value for holders of Life Storage common stock resulting from the company merger based on a comparison of (i) the 100% ownership by holders of Life Storage common stock of Life Storage on a stand-alone basis and (ii) the pro forma ownership by holders of Life Storage common stock of Extra Space after giving effect to the transaction.

For the Life Storage common stock on a standalone basis, BofA Securities used the implied reference range indicated in the discounted cash flow analysis described above in the section entitled “The Mergers—Opinions of Life Storage’s Financial Advisors—Opinion of BofA Securities—Life Storage Financial Analysis—Discounted Cash Flow Analysis” beginning on page 91 of this joint proxy statement/prospectus. BofA Securities then performed the same analysis by calculating the range of implied per share equity values allocable to holders of Life Storage common stock on a pro forma basis, after giving effect to the company merger, by assuming approximately 35% pro forma ownership, based on the number of shares of Extra Space common stock estimated to be issued to holders of Life Storage common stock in the company merger, utilizing the results of the standalone discounted cash flow analysis for Life Storage and Extra Space described above in the sections entitled “The Mergers—Opinions of Life Storage’s Financial Advisors—Opinion of BofA Securities—Life Storage Financial Analysis—Discounted Cash Flow Analysis” and “The Mergers—Opinions of Life Storage’s Financial Advisors—Opinion of BofA Securities—Extra Space Financial Analysis—Discounted Cash Flow Analysis” beginning on pages 91 and 93 of this joint proxy statement/prospectus, respectively, and taking into account the net present value of the Synergies using a discount rate range of approximately 7.6% to 9.0%. At the direction of Life Storage management, the analysis assumed a terminal value for the Synergies beyond 2027 using a range of perpetuity growth rates from 2.5% to 3.0%.

 

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The analysis indicated the following approximate implied pro forma per share equity value reference ranges for Life Storage common stock pro forma after giving effect to the company merger, based on the exchange ratio, for each share of Life Storage common stock, compared to the range of implied per share equity values for Life Storage common stock on a standalone basis:

 

    

Per Share Equity Value Reference Ranges

for Life Storage common stock

Standalone    $97.80 – $161.48
Pro Forma    $134.93 – $159.46

Other Factors. BofA Securities also noted certain additional factors that were not considered part of BofA Securities’ material financial analysis with respect to its opinion but were referenced for information purposes, including, among other things, the following:

 

   

BofA Securities reviewed the potential pro forma financial effect of the company merger on Extra Space’s calendar years 2023 through 2025 estimated FFO. Estimated financial data of Extra Space were based on the Extra Space forecasts and estimated financial data of Life Storage were based on the Life Storage management forecasts, except that BofA Securities, with the consent of management of Life Storage, used certain different assumptions with respect to projected interest rates for new and incremental debt for the Combined Company. Based on the exchange ratio, this analysis indicated that the company merger could be dilutive to Extra Space’s estimated FFO for calendars years 2023 through 2024 and accretive to Extra Space’s estimated FFO for calendar year 2025. The actual results achieved by the Combined Company may vary from projected results and the variations may be material; and

 

   

the relationship between movements in Life Storage common stock and Extra Space common stock during the period commencing on January 1, 2020 and ended March 31, 2023, including the daily ratio of the closing price of Life Storage common stock to the closing price of Extra Space common stock during such period, and the average of this ratio calculated over various periods ended March 31, 2023.

Miscellaneous

As noted above, the discussion set forth above is a summary of the material financial analyses presented by BofA Securities to the Life Storage board in connection with its opinion and is not a comprehensive description of all analyses undertaken by BofA Securities in connection with its opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to partial analysis or summary description. BofA Securities believes that its analyses summarized above must be considered as a whole. BofA Securities further believes that selecting portions of its analyses and the factors considered or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying BofA Securities’ analyses and opinion. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that such analysis was given greater weight than any other analysis referred to in the summary.

In performing its analyses, BofA Securities considered industry performance, general business and economic conditions and other matters, many of which are beyond the control of Life Storage and Extra Space. The estimates of the future performance of Life Storage and Extra Space in or underlying BofA Securities’ analyses are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those estimates or those suggested by BofA Securities’ analyses. These analyses were prepared solely as part of BofA Securities’ analysis of the fairness, from a financial point of view, of the exchange ratio and were provided to the Life Storage board in connection with the delivery of BofA Securities’ opinion. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold or the prices at which any securities have traded or may trade at any time in the future. Accordingly, the

 

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estimates used in, and the ranges of valuations resulting from, any particular analysis described above are inherently subject to substantial uncertainty and should not be taken to be BofA Securities’ view of the actual values of Life Storage or Extra Space.

The type and amount of consideration payable in the company merger was determined through negotiations between Life Storage and Extra Space, rather than by any financial advisor, and was approved by the Life Storage board. The decision to enter into the merger agreement was solely that of the Life Storage board. As described above, BofA Securities’ opinion and analyses were only one of many factors considered by the Life Storage board in its evaluation of the proposed mergers and should not be viewed as determinative of the views of the Life Storage board or management with respect to the mergers or the exchange ratio.

Life Storage has agreed to pay BofA Securities for its services in connection with the mergers an aggregate fee of $15 million, $2 million of which was payable upon the delivery of its opinion and the remainder of which is contingent upon the completion of the mergers. Life Storage also has agreed to reimburse BofA Securities for its expenses incurred in connection with BofA Securities’ engagement and to indemnify BofA Securities, any controlling person of BofA Securities and each of their respective directors, officers, employees, agents and affiliates against specified liabilities, including liabilities under the federal securities laws.

BofA Securities and its affiliates comprise a full service securities firm and commercial bank engaged in securities, commodities and derivatives trading, foreign exchange and other brokerage activities, and principal investing as well as providing investment, corporate and private banking, asset and investment management, financing and financial advisory services and other commercial services and products to a wide range of companies, governments and individuals. In the ordinary course of their businesses, BofA Securities and its affiliates invest on a principal basis or on behalf of customers or manage funds that invest, make or hold long or short positions, finance positions or trade or otherwise effect transactions in the equity, debt or other securities or financial instruments (including derivatives, bank loans or other obligations) of Life Storage, Extra Space and certain of their respective affiliates.

BofA Securities and its affiliates in the past have provided, currently are providing, and in the future may provide investment banking, commercial banking and other financial services to Life Storage and certain of its subsidiaries and have received or in the future may receive compensation for the rendering of these services, including (i) acting as a selling group member on a US registered at-the-market equity sale program, (ii) having acted or acting as a lender and documentation agent under certain credit facilities of Life Storage and/or certain of its affiliates, and (iii) having provided or providing certain treasury management products and services to Life Storage and/or certain of its affiliates. From April 1, 2021 through March 31, 2023, BofA Securities and its affiliates derived aggregate revenues from Life Storage and its affiliates of approximately $500,000 for investment and corporate banking services.

In addition, BofA Securities and its affiliates in the past have provided, currently are providing, and in the future may provide investment banking, commercial banking and other financial services to Extra Space and/or certain of its affiliates, and have received or in the future may receive compensation for the rendering of these services, including (i) having acted or acting as a bookrunner, book-running manager, placement agent, underwriter or selling group member certain securities offerings, including for a US registered at-the market equity sale program and for certain debt offerings of Extra Space and/or certain of its affiliates, (ii) having acted or acting as a bookrunner, arranger and/or syndication agent for, and/or as a lender under, certain credit facilities and letters of credit, and other credit arrangements of Extra Space and/or certain of its affiliates, and (iii) having provided or providing certain treasury management products and services to the Extra Space and/or certain of its affiliates. From April 1, 2021 through March 31, 2023, BofA Securities and its affiliates derived aggregate revenues from Extra Space and its affiliates of approximately $8.6 million for investment and corporate banking services.

Certain Extra Space Unaudited Prospective Financial Information

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operations, funds from operations, as adjusted, or other results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, in connection with the mergers and the other transactions contemplated by the merger agreement, Extra Space’s management prepared and provided to the Extra Space board in connection with its evaluation of the mergers and the other transactions contemplated by the merger agreement, and to its financial advisors, Citi and J.P. Morgan, including in connection with Citi’s financial analyses described above in the section entitled “The MergersOpinion of Extra Space’s Financial Advisor” beginning on page 71 of this joint proxy statement/prospectus, certain unaudited prospective financial information as set forth below, which we refer to as the “Extra Space management forecasts.” The Extra Space management forecasts were also provided to Life Storage and its financial advisors, Wells Fargo Securities and BofA Securities. In preparing the Extra Space management forecasts, Extra Space’s management considered information communicated by Life Storage and certain synergies and other changes that Extra Space’s management projected to result from the mergers. The below summary of the Extra Space management forecasts is included for the purpose of providing Extra Space stockholders and Life Storage stockholders access to certain nonpublic information that was furnished to the Extra Space board, Citi, Life Storage, Wells Fargo Securities and BofA Securities, in connection with the mergers and such information may not be appropriate for other purposes, and is not included to influence the voting decision of any Extra Space stockholder or Life Storage stockholder.

The Extra Space management forecasts were not prepared with a view toward public disclosure, the published guidelines of the SEC regarding projections and forward-looking statements or the guidelines established by the American Institute of Certified Public Accountants for the preparation and presentation of financial projections. The inclusion of the Extra Space management forecasts should not be regarded as an indication that such information is predictive of actual future events or results and such information should not be relied upon as such, and readers of this joint proxy statement/prospectus are cautioned not to place undue reliance on the Extra Space management forecasts. The Extra Space management forecasts included in this joint proxy statement/prospectus have been prepared by, and are the responsibility of, Extra Space’s management.

While presented with numeric specificity, the unaudited prospective financial information set forth below was based on numerous variables and assumptions (including assumptions related to industry performance and general business, economic, market and financial conditions and additional matters specific to Extra Space’s business, Life Storage’s business and the business of the Combined Company on a pro forma basis giving effect to the mergers, including anticipated or possible synergies) that are inherently subjective and uncertain and are beyond the control of Extra Space’s management. Important factors that may affect actual results and cause this unaudited prospective financial information not to be achieved include, but are not limited to, risks and uncertainties relating to Extra Space’s business, Life Storage’s business and the business of the Combined Company on a pro forma basis giving effect to the mergers (including its ability to achieve strategic goals, objectives and targets and to achieve operating synergies over applicable periods), industry performance, general business and economic conditions and other factors described in the sections entitled “Cautionary Statement Concerning Forward-Looking Statements” and “Risk Factors” beginning on pages 31 and 16 of this joint proxy statement/prospectus, respectively. This unaudited prospective financial information also reflects numerous variables, expectations and assumptions available at the time they were prepared as to certain business decisions that are subject to change. As a result, actual results may differ materially from those contained in this unaudited prospective financial information. Accordingly, there can be no assurance that the projected results summarized below will be realized. Extra Space stockholders and Life Storage stockholders are urged to review the most recent SEC filings of both Extra Space and Life Storage for descriptions of the reported and anticipated results of operations and financial condition and capital resources, including in (i) “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Extra Space’s Annual Report on Form 10-K for the year ended December 31, 2022 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, which are incorporated by reference into this joint proxy statement/prospectus, and (ii) in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Life Storage’s Annual Report on Form 10-K for the year ended December 31, 2022 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, which are incorporated by reference into this joint proxy statement/prospectus.

 

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None of Extra Space, Life Storage or their respective officers, directors, affiliates, advisors or other representatives can give you any assurance that actual results will not differ materially from this unaudited prospective financial information.

EXTRA SPACE UNDERTAKES NO OBLIGATION TO UPDATE OR OTHERWISE REVISE OR RECONCILE THE BELOW UNAUDITED PROSPECTIVE FINANCIAL INFORMATION TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE THIS UNAUDITED PROSPECTIVE FINANCIAL INFORMATION WAS GENERATED OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING SUCH INFORMATION ARE SHOWN TO BE IN ERROR. SINCE THE UNAUDITED PROSPECTIVE FINANCIAL INFORMATION COVERS MULTIPLE YEARS, SUCH INFORMATION BY ITS NATURE BECOMES LESS PREDICTIVE WITH EACH SUCCESSIVE YEAR.

Extra Space and Life Storage may calculate certain non-GAAP financial metrics, including adjusted funds from operations, excluding gains and promotes and unlevered free cash flow using different methodologies. Consequently, the financial metrics presented in each company’s prospective financial information disclosures and in the sections of this joint proxy statement/prospectus with respect to the opinion of Extra Space’s financial advisor to Extra Space and Life Storage’s financial advisors to Life Storage may not be directly comparable to one another. Further, these financial metrics are “non-GAAP financial measures” as set forth in Item 10(e) of Regulation S-K and should not be considered as alternatives to net income (determined in accordance with GAAP) or any other GAAP financial measures or as an indication of Extra Space’s, Life Storage’s or the Combined Company’s performance. None of these non-GAAP measures represents cash generated from operating activities determined in accordance with GAAP, and none are a measure of liquidity or an indicator of Extra Space’s, Life Storage’s or the Combined Company’s ability to make cash distributions. The below unaudited prospective financial information should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP. SEC rules that may otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure do not apply to non-GAAP financial measures provided to directors or a financial advisor (like the below unaudited prospective financial information) in connection with a proposed transaction like the mergers when the disclosure is included in a document like this joint proxy statement/prospectus. In addition, reconciliations of non-GAAP financial measures to GAAP financial measures were not relied upon by Citi for purposes of its opinion or by the Extra Space board in connection with its consideration of the mergers. Accordingly, Extra Space has not provided a reconciliation of the non-GAAP financial measures to the relevant GAAP financial measures.

Extra Space has not made and makes no representation to Life Storage or any Extra Space stockholder or Life Storage stockholder, in the merger agreement or otherwise, concerning the below unaudited prospective financial information or regarding the ultimate performance of Extra Space, Life Storage or the Combined Company on a pro forma basis giving effect to the mergers compared to the unaudited prospective financial information or that the projected results will be achieved. In light of the foregoing factors and the uncertainties inherent in the unaudited prospective financial information, Extra Space urges all Extra Space stockholders and Life Storage stockholders not to place undue reliance on such information and to review Extra Space’s most recent SEC filings for a description of Extra Space’s reported financial results.

Neither Ernst & Young LLP nor any other registered public accounting firm has compiled, examined or performed any audit or other procedures with respect to the unaudited prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The report of Ernst & Young LLP contained in Extra Space’s Annual Report on Form 10-K for the year ended December 31, 2022, which is incorporated by reference into this joint proxy statement/prospectus, relates to the historical financial information of Extra Space. It does not extend to the unaudited prospective financial information and should not be read to do so. Furthermore, the unaudited prospective financial information does not take into account any circumstances or events occurring after the dates on which it was prepared.

 

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The Extra Space management forecasts were provided to the Extra Space board and Extra Space’s lead financial advisor, Citi, and standalone forecasts (other than unlevered free cash flow) were provided to Life Storage.

Extra Space on a Standalone Basis

The following table presents a summary of the Extra Space management forecasts relating to Extra Space (on a standalone basis) for the calendar years 2023 through 2027, which Extra Space management provided to Citi for purposes of its financial analysis as well as to Life Storage management and its financial advisors.

 

     Year Ending December 31,  
(in millions, except per share data)    2023E      2024E      2025E      2026E      2027E  

Total Consolidated Storage Rental NOI (1)

   $ 1,329      $ 1,429      $ 1,550      $ 1,663      $ 1,780  

EBITDA (2)

     1,587        1,710        1,838        1,984        2,143  

Core FFO (3)

     1,216        1,347        1,454        1,568        1,698  

Core FFO per share (4)

   $ 8.46      $ 9.37      $ 10.09      $ 10.87      $ 11.76  

Unlevered Free Cash Flow (5)

   $ 971      $ 727      $ 764      $ 891      $ 1,030  

Dividend per share

   $ 6.23      $ 6.90      $ 7.40      $ 8.00      $ 8.60  

 

(1)

Total Consolidated Storage Rental NOI as used by Extra Space is a non-GAAP measure and calculated as total revenues from storage rental business less property operating expenses.

(2)

EBITDA as used by Extra Space is a non-GAAP measure and calculated as Total Consolidated Storage Rental Net Operating Income plus revenue generated from the tenants reinsurance business as well as property management fees and other income, interest income and equity income from unconsolidated investments less general and administrative expenses and preferred distributions.

(3)

Core FFO as used by Extra Space is a non-GAAP measure and calculated as EBITDA less interest expense, depreciation, tax expense and other adjustments.

(4)

Core FFO per share represents Core FFO divided by the average weighted number of fully diluted shares of Extra Space common stock outstanding for the respective period.

(5)

Unlevered Free Cash Flow as used by Extra Space is a non-GAAP measure and is calculated as EBITDA less tax expense, capital expenditure for maintenance and redevelopments, property acquisitions, bridge loan investments and preferred investments, plus proceeds received from property dispositions.

Certain Life Storage Unaudited Prospective Financial Information

Although Life Storage periodically may issue limited financial guidance to investors, Life Storage does not as a matter of course make public long-term projections as to future revenues, earnings, net operating income, funds from operations, funds from operations, as adjusted, or other results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, in connection with the mergers and the other transactions contemplated by the merger agreement, Life Storage’s management prepared and provided to the Life Storage board in connection with its evaluation of the mergers and the other transactions contemplated by the merger agreement, and to Life Storage’s financial advisors, Wells Fargo Securities and BofA Securities, for their use and reliance in connection with their respective financial analyses and opinions (described in the section entitled “The MergersOpinions of Life Storages Financial Advisors” beginning on page 79 of this joint proxy statement/prospectus), certain unaudited prospective financial information regarding Life Storage’s operations on a standalone basis for fiscal years 2023 through 2027 (referred to in this section as the “Life Storage management forecasts”). The Life Storage management forecasts were also provided to Extra Space and its financial advisor, Citi. The below summaries of the Life Storage management forecasts are included for the purpose of providing Life Storage stockholders and Extra Space stockholders access to certain non-public information that was furnished to the Life Storage board, Wells Fargo Securities, BofA Securities, Extra Space and Citi, as applicable, in connection with the mergers and such information may not be appropriate for other purposes, and is not included to influence the voting decision of any Life Storage stockholder or Extra Space stockholder.

 

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The Life Storage management forecasts were not prepared with a view toward public disclosure, the published guidelines of the SEC regarding projections and forward-looking statements or the guidelines established by the American Institute of Certified Public Accountants for the preparation and presentation of financial projections, or GAAP, but, in the view of Life Storage’s management, were prepared on a reasonable basis, reflecting the best available estimates and judgments at the time of preparation, and presented as of the time of preparation, to the best of Life Storage management’s knowledge and belief, the expected course of action and the expected future financial performance of Life Storage or the Combined Company. The inclusion of the Life Storage management forecasts should not be regarded as an indication that such information is predictive of actual future events or results and such information should not be relied upon as such, and readers of this joint proxy statement/prospectus are cautioned not to place undue reliance on the Life Storage management forecasts. The Life Storage management forecasts included in this joint proxy statement/prospectus have been prepared by, and are the responsibility of, Life Storage’s management.

While presented with numeric specificity, the unaudited prospective financial information set forth below was based on numerous variables and assumptions (including assumptions related to industry performance and general business, economic, market and financial conditions and additional matters specific to Life Storage’s business) that are inherently subjective and uncertain and are beyond the control of Life Storage’s management. Important factors that may affect actual results and cause this unaudited prospective financial information not to be achieved include, but are not limited to, risks and uncertainties relating to the business of Life Storage or the Combined Company (including, in each case, its ability to achieve strategic goals, objectives and targets over applicable periods), industry performance, general business and economic conditions and other factors described in the sections entitled “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements” beginning on pages 16 and 31 of this joint proxy statement/prospectus, respectively. This unaudited prospective financial information also reflects numerous variables, expectations and assumptions available at the time they were prepared as to certain business decisions that are subject to change. As a result, actual results may differ materially from those contained in this unaudited prospective financial information. Accordingly, there can be no assurance that the projected results summarized below will be realized. Life Storage stockholders and Extra Space stockholders are urged to review the most recent SEC filings of Life Storage for a description of Life Storage’s reported and anticipated results of operations and financial condition and capital resources, including in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Life Storage’s Annual Report on Form 10-K for the year ended December 31, 2022 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, which are incorporated by reference into this joint proxy statement/prospectus.

None of Life Storage, Extra Space or their respective officers, directors, affiliates, advisors or other representatives can give you any assurance that actual results will not differ materially from this unaudited prospective financial information.

LIFE STORAGE UNDERTAKES NO OBLIGATION TO UPDATE OR OTHERWISE REVISE OR RECONCILE THE BELOW UNAUDITED PROSPECTIVE FINANCIAL INFORMATION TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE THIS UNAUDITED PROSPECTIVE FINANCIAL INFORMATION WAS GENERATED OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING SUCH INFORMATION ARE SHOWN TO BE IN ERROR. SINCE THE UNAUDITED PROSPECTIVE FINANCIAL INFORMATION COVERS MULTIPLE YEARS, SUCH INFORMATION BY ITS NATURE BECOMES LESS PREDICTIVE WITH EACH SUCCESSIVE YEAR.

Life Storage and Extra Space may calculate certain non-GAAP financial metrics, including NOI and Core FFO using different methodologies. Consequently, the financial metrics presented in each company’s prospective financial information disclosures and in the sections of this joint proxy statement/prospectus with respect to the opinion of each company’s financial advisor may not be directly comparable to one another. Further, these financial metrics are “non-GAAP financial measures” as set forth in Item 10(e) of Regulation S-K and should not

 

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be considered as alternatives to net income (determined in accordance with GAAP) or as an indication of Life Storage’s performance. None of these non-GAAP measures represents cash generated from operating activities determined in accordance with GAAP, and none are a measure of liquidity or an indicator of Life Storage’s ability to make cash distributions. The below unaudited prospective financial information should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP. SEC rules that may otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure do not apply to non-GAAP financial measures provided to directors or a financial advisor (like the below unaudited prospective financial information) in connection with a proposed transaction like the mergers when the disclosure is included in a document like this joint proxy statement/prospectus. In addition, reconciliations of non-GAAP financial measures to GAAP financial measures were not relied upon by Wells Fargo Securities or BofA Securities for purposes of their respective opinions or by the Life Storage board in connection with its consideration of the mergers. Accordingly, Life Storage has not provided a reconciliation of the non-GAAP financial measures to the relevant GAAP financial measures.

Life Storage has not made and makes no representation to any Life Storage stockholder or Extra Space stockholder, in the merger agreement or otherwise, concerning the below unaudited prospective financial information or regarding the ultimate performance of Life Storage or the Combined Company compared to the unaudited prospective financial information or that the projected results will be achieved. In light of the foregoing factors and the uncertainties inherent in the unaudited prospective financial information, Life Storage urges all stockholders not to place undue reliance on such information and to review Life Storage’s most recent SEC filings for a description of Life Storage’s reported financial results.

Neither Ernst & Young LLP nor any other registered public accounting firm has compiled, examined or performed any audit or other procedures with respect to the unaudited prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The report of Ernst & Young LLP contained in Life Storage’s Annual Report on Form 10-K for the year ended December 31, 2022, which is incorporated by reference into this joint proxy statement/prospectus, relates to the historical financial information of Life Storage. It does not extend to the unaudited prospective financial information and should not be read to do so. Furthermore, the unaudited prospective financial information does not take into account any circumstances or events occurring after the dates on which it was prepared.

Life Storage Management Forecasts

The following table presents a summary of the Life Storage management forecasts for fiscal years 2023 through 2027 for Life Storage on a standalone basis (amounts may reflect rounding), which Life Storage management provided to its financial advisors for purposes of their respective financial analysis as well as to Extra Space management and its financial advisor.

 

     Year Ending December 31,  
(in millions, except per share data)    2023E      2024E      2025E      2026E      2027E  

Total Consolidated Storage Rental NOI(1)

   $ 724      $ 808      $ 899      $ 998      $ 1,111  

Total Ancillary Business NOI(2)

   $ 74      $ 85      $ 92      $ 100      $ 108  

Total Income from Joint Ventures(3)

   $ 21      $ 28      $ 36      $ 44      $ 53  

EBITDA(4)

   $ 742      $ 838      $ 939      $ 1,048      $ 1,173  

Unlevered Free Cash Flow(5)

   $ 325      $ 265      $ 164      $ 60      $ 17  

Core FFO(6)

   $ 604      $ 684      $ 769      $ 837      $ 947  

Core FFO per share(7)

   $ 6.95      $ 7.87      $ 8.82      $ 9.51      $ 10.68  

Adjusted Core FFO per share(8)

   $ 6.93      $ 7.85      $ 8.80      $ 9.52      $ 10.78  

Dividend per share and unit(9)

   $ 4.80      $ 5.33      $ 5.86      $ 6.23      $ 6.84  

 

(1)

Total Consolidated Storage Rental NOI is a non-GAAP financial measure that is defined by Life Storage as total continuing revenues from Life Storage’s storage rental business less continuing property operating

 

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  expenses for Life Storage’s storage rental business. NOI also can be calculated by adding back to net income: interest expense, impairment and casualty losses, operating lease expenses, depreciation and amortization expense, any losses on sale of real estate, acquisition related costs, general and administrative expense, and deducting from net income: income from discontinued operations, interest income, any gains on sale of real estate, and equity in income of joint ventures.
(2)

Total Ancillary Business NOI is a non-GAAP financial measure that is defined by Life Storage as total continuing revenues from Life Storage’s businesses other than its storage rental business less continuing operating expenses for such businesses.

(3)

Total Income from Joint Ventures is a non-GAAP financial measure that comprises FFO from Life Storage’s storage related joint ventures and FFO from Life Storage’s bridge loan joint ventures.

(4)

EBITDA is a non-GAAP financial measure that is defined by Life Storage as Total Consolidated Storage Rental NOI plus Total Ancillary Business NOI plus Total Income from Joint Ventures, less general and administrative expenses.

(5)

Unlevered Free Cash Flow is a non-GAAP financial measure that is defined by Life Storage as EBITDA less capital expenditures, less property acquisitions, less investments in joint ventures, plus proceeds from the sale of properties.

(6)

Core FFO is a non-GAAP financial measure computed as FFO adjusted for certain items that can create earnings volatility and do not directly relate to Life Storage’s core business operations. The adjustments include gains or losses on the sale of land, gains or losses on the sale of non-real estate assets, uninsured damages and customer reinsurance claims, acquisition fees, costs related to officers’ retirements, board changes and other proxy related expenses, lawsuit settlements and make-whole payments on repaid debt. FFO is a non-GAAP financial measure computed in accordance with standards established by the National Association of Real Estate Investment Trusts (referred to in this section as “NAREIT”). It is calculated as net income attributable to common shareholders computed in accordance with GAAP, excluding gains or losses on sales of properties, plus impairment of real estate assets, plus depreciation and amortization and after adjustments to record unconsolidated partnerships and joint ventures on the same basis. Life Storage’s computation of Core FFO differs from NAREIT’s definition of FFO and may not be comparable to that of other REITs and real estate companies.

(7)

Core FFO per share is defined by Life Storage as Core FFO divided by the number of fully diluted shares of Life Storage common stock, including the number of shares of Life Storage common stock issued and outstanding, the number of Life Storage OP preferred units outstanding, and other dilutive equity equivalents including unvested share awards.

(8)

Adjusted Core FFO per share is defined as Core FFO per share calculated assuming conversion of Life Storage OP preferred units as of March 30, 2023 and including the impact of unvested share awards that would vest upon a change of control.

(9)

Based on the number of fully diluted shares of Life Storage common stock, including the number of shares of Life Storage common stock issued and outstanding, the number of Life Storage OP common units outstanding, the number of Life Storage OP preferred units outstanding, and other dilutive equity equivalents including unvested share awards that would vest upon a change of control.

Interests of Life Storage’s Directors and Executive Officers in the Mergers

In considering the recommendation of the Life Storage board to vote in favor of the proposal to approve the company merger and the other transactions contemplated by the merger agreement, Life Storage stockholders should be aware that certain of Life Storage’s directors and executive officers have interests in the mergers that are different from, or in addition to, the interests of Life Storage stockholders generally. The members of the Life Storage board were aware of and considered such Life Storage directors’ and executive officers’ interests, among other matters, in evaluating the merger agreement and the mergers, in reaching their decision to approve the merger agreement and the transactions contemplated by the merger agreement (including the mergers), and in recommending that Life Storage stockholders approve the company merger and the other transactions contemplated by the merger agreement. Such interests are described below. The company merger will be a “change in control” for purposes of the executive compensation and benefit plans and agreements described below.

 

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For purpose of this discussion, Life Storage’s executive officers since January 1, 2022 include Joseph V. Saffire (Life Storage’s Chief Executive Officer and member of the Life Storage board); Andrew J. Gregoire (Life Storage’s former Chief Financial Officer); Alexander E. Gress (Life Storage’s current Chief Financial Officer and Secretary), and David P. Dodman (Life Storage’s Chief Operating Officer).

Treatment of Outstanding Life Storage Equity-Based Awards

Life Storage Restricted Shares

Certain of Life Storage’s non-employee directors and executive officers hold Life Storage Restricted Shares. Each Life Storage Restricted Share award that is issued and outstanding as of immediately prior to the company merger effective time will vest in full and will, as of the company merger effective time, automatically be cancelled and converted into the right to receive promptly, and in any event within five business days, following the company merger effective time (i) a number of shares of Extra Space common stock equal to the product of the number of Life Storage Restricted Shares subject to such award issued and outstanding as of immediately prior to the company merger effective time, multiplied by 0.895, plus (ii) cash in lieu of any resulting fractional shares of Extra Space common stock, minus (iii) applicable taxes and other withholdings (which withholdings may include, but are not limited to, share withholding).

See the section entitled “The MergersInterests of Life Storage’s Directors and Executive Officers in the MergersQuantification of Potential Payments and Benefits to Life Storage’s Named Executive Officers in Connection with the Mergers” beginning on page 106 of this joint proxy statement/prospectus for an estimate of the value of the Life Storage Restricted Shares held by each of Life Storage’s named executive officers.

Life Storage PSUs

Each of Life Storage’s executive officers holds Life Storage PSUs and will receive a one-time, additional grant of Life Storage PSUs prior to the company merger effective time (the “top-up Life Storage PSUs”) based on the number of Life Storage Restricted Shares held by such executive officer as of immediately prior to the company merger effective time. If the closing price per share of Life Storage common stock during the 90-day period ending on the closing date exceeds the product of the exchange ratio, multiplied by the Extra Space VWAP, each grant of top-up Life Storage PSUs will represent the right to receive a number of shares of Life Storage common stock equal to (i) (A) the excess of the closing price per share of Life Storage common stock during the 90-day period ending on the closing date over the product of the exchange ratio, multiplied by the Extra Space VWAP, divided by (B) the average of the high and low sales prices per share of Life Storage common stock on the closing date (or if no shares of Life Storage common stock are traded on the closing date, the date preceding the closing date), multiplied by (ii) the number of Life Storage Restricted Shares held by such executive officer as of immediately prior to the company merger effective time.

Each Life Storage PSU (including a top-up Life Storage PSU) that is outstanding as of immediately prior to the company merger effe