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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     .
Commission File Number: 001-32269

EXTRA SPACE STORAGE INC.
(Exact name of registrant as specified in its charter) 
Maryland 20-1076777
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)

2795 East Cottonwood Parkway, Suite 300
Salt Lake City, Utah 84121
(Address of principal executive offices)

Registrant’s telephone number, including area code: (801365-4600

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934
Title of each classTrading symbolName of each exchange on which registered
Common Stock, $0.01 par valueEXRNew York Stock Exchange

 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filer   Accelerated filer 
Non-accelerated filer   Smaller reporting company 
Emerging growth company


1


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  x

The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, as of April 30, 2024, was 211,725,246.

2

Table of Contents
EXTRA SPACE STORAGE INC.

TABLE OF CONTENTS
 


3


STATEMENT ON FORWARD-LOOKING INFORMATION

Certain information set forth in this report contains “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions and other information that is not historical information. In some cases, forward-looking statements can be identified by terminology such as “believes,” “expects,” “estimates,” “may,” “will,” “should,” “anticipates” or “intends” or the negative of such terms or other comparable terminology, or by discussions of strategy. We may also make additional forward-looking statements from time to time. All such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary statements.

All forward-looking statements, including without limitation, management’s examination of historical operating trends and estimates of future earnings, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them, but there can be no assurance that management’s expectations, beliefs and projections will result or be achieved. All forward-looking statements apply only as of the date made. We undertake no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this report. Any forward-looking statements should be considered in light of the risks referenced in “Part II. Item 1A. Risk Factors” below and in “Part I. Item 1A. Risk Factors” included in our most recent Annual Report on Form 10-K. Such factors include, but are not limited to:
adverse changes in general economic conditions, the real estate industry and the markets in which we operate;
failure to realize the expected benefits of the recent acquisition of Life Storage, Inc. (“Life Storage”);
the risk that Life Storage’s business will not be fully integrated successfully or that such integration may be more difficult, time-consuming or costly than expected;
the uncertainty of expected future financial performance and results of the combined company following completion of the Life Storage merger;
failure to close pending acquisitions and developments on expected terms, or at all;
the effect of competition from new and existing stores or other storage alternatives, including increased or unanticipated competition for our properties, which could cause rents and occupancy rates to decline;
potential liability for uninsured losses and environmental contamination;
the impact of the regulatory environment as well as national, state, and local laws and regulations including, without limitation, those governing real estate investment trusts (“REITs”), tenant reinsurance and other aspects of our business, which could adversely affect our results;
our ability to recover losses under our insurance policies;
disruptions in credit and financial markets and resulting difficulties in raising capital or obtaining credit at reasonable rates or at all, which could impede our ability to grow;
our reliance on information technologies, which are vulnerable to, among other things, attack from computer viruses and malware, hacking, cyberattacks and other unauthorized access or misuse, any of which could adversely affect our business and results;
changes in global financial markets and increased interest rates;
availability of financing and capital, the levels of debt that we maintain and our credit ratings;
risks associated with acquisitions, dispositions and development of properties, including increased development costs due to additional regulatory requirements related to climate change and other factors;
reductions in asset valuations and related impairment charges;
our lack of sole decision-making authority with respect to our joint venture investments;
the effect of recent or future changes to U.S. tax laws;
the failure to maintain our REIT status for U.S. federal income tax purposes;
impacts from any outbreak of highly infectious or contagious diseases, including reduced demand for self-storage space and ancillary products and services such as tenant reinsurance, and potential decreases in occupancy and rental rates and staffing levels, which could adversely affect our results; and
economic uncertainty due to the impact of natural disasters, war or terrorism, which could adversely affect our business plan.

4


The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. You should carefully consider these risks before you make an investment decision with respect to our securities.

We disclaim any duty or obligation to update or revise any forward-looking statements set forth in this report to reflect new information, future events or otherwise.

5


PART I.     FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

Extra Space Storage Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands, except share data)
 
March 31, 2024December 31, 2023
(unaudited)
Assets:
Real estate assets, net$24,494,676 $24,555,873 
Real estate assets - operating lease right-of-use assets222,940 227,241 
Investments in unconsolidated real estate entities1,066,032 1,071,617 
Investments in debt securities and notes receivable1,058,506 904,769 
Cash and cash equivalents50,816 99,062 
Other assets, net587,150 597,700 
Total assets $27,480,120 $27,456,262 
Liabilities, Noncontrolling Interests and Equity:
Secured notes payable, net$1,269,752 $1,273,549 
Unsecured term loans, net2,251,714 2,650,581 
Unsecured senior notes, net7,016,085 6,410,618 
Revolving lines of credit620,000 682,000 
Operating lease liabilities232,682 236,515 
Cash distributions in unconsolidated real estate ventures71,988 71,069 
Accounts payable and accrued expenses338,027 334,518 
Other liabilities390,894 383,463 
Total liabilities 12,191,142 12,042,313 
Commitments and contingencies
Noncontrolling Interests and Equity:
Extra Space Storage Inc. stockholders' equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued or outstanding
  
Common stock, $0.01 par value, 500,000,000 shares authorized, 211,658,812 and 211,278,803 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively
2,117 2,113 
Additional paid-in capital14,776,888 14,750,388 
Accumulated other comprehensive income28,191 17,435 
Accumulated deficit(510,150)(379,015)
Total Extra Space Storage Inc. stockholders' equity14,297,046 14,390,921 
Noncontrolling interest represented by Preferred Operating Partnership units, net 218,824 222,360 
Noncontrolling interests in Operating Partnership, net and other noncontrolling interests773,108 800,668 
Total noncontrolling interests and equity15,288,978 15,413,949 
Total liabilities, noncontrolling interests and equity$27,480,120 $27,456,262 

See accompanying notes to unaudited condensed consolidated financial statements.

6


Extra Space Storage Inc.
Condensed Consolidated Statements of Operations
(amounts in thousands, except share data)
(unaudited)
 For the Three Months Ended March 31,
 20242023
Revenues:
Property rental$688,044 $433,962 
Tenant reinsurance81,347 47,704 
Management fees and other income30,148 21,384 
Total revenues799,539 503,050 
Expenses:
Property operations204,518 117,166 
Tenant reinsurance 18,505 9,089 
General and administrative43,722 34,763 
Depreciation and amortization196,966 78,490 
Total expenses463,711 239,508 
Income from operations335,828 263,542 
Interest expense(132,887)(80,099)
Non-cash interest expense related to amortization of discount on Life Storage unsecured senior notes(10,705) 
Interest income23,573 19,438 
Income before equity in earnings and dividend income from unconsolidated real estate entities and income tax expense215,809 202,881 
Equity in earnings and dividend income from unconsolidated real estate entities15,007 10,305 
Income tax expense(6,742)(4,308)
Net income224,074 208,878 
Net income allocated to Preferred Operating Partnership noncontrolling interests(2,208)(2,254)
Net income allocated to Operating Partnership and other noncontrolling interests(8,754)(10,320)
Net income attributable to common stockholders$213,112 $196,304 
Earnings per common share
Basic $1.01 $1.46 
Diluted $1.01 $1.46 
Weighted average number of shares
Basic211,283,335 134,511,273 
Diluted220,018,777 142,940,384 
Cash dividends paid per common share$1.62 $1.62 

See accompanying notes to unaudited condensed consolidated financial statements.

7

Extra Space Storage Inc.
Condensed Consolidated Statements of Comprehensive Income
(amounts in thousands)
(unaudited)
 For the Three Months Ended March 31,
 20242023
Net income$224,074 $208,878 
Other comprehensive income:
   Change in fair value of interest rate swaps11,202 (14,510)
Total comprehensive income235,276 194,368 
   Less: comprehensive income attributable to noncontrolling interests11,408 11,781 
Comprehensive income attributable to common stockholders$223,868 $182,587 


See accompanying notes to unaudited condensed consolidated financial statements.

8

Extra Space Storage Inc.
Condensed Consolidated Statement of Noncontrolling Interests and Equity
(amounts in thousands, except share data)
(unaudited)
Noncontrolling InterestExtra Space Storage Inc. Stockholders' Equity
Preferred Operating PartnershipOperating PartnershipOtherSharesPar ValueAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Noncontrolling Interests and Equity
Balances at December 31, 2022$261,502 $556,095 $1,080 133,921,020 $1,339 $3,345,332 $48,798 $(135,872)$4,078,274 
Issuance of common stock in connection with share based compensation— — — 89,564 1 5,498 — — 5,499 
Taxes paid upon net settlement of share based compensation— (7,087)— (7,449)— — (7,449)
Restricted stock grants cancelled— — — (2,222)— — — — — 
Redemption of Preferred A Units in the Operating Partnership for stock and cash(16,339)— — 851,698 8 11,015 — — (5,316)
Redemption of Preferred D Units in the Operating Partnership for stock(22,064)— — 154,307 2 22,062 — —  
Noncontrolling interest in consolidated joint venture— — 1,391 — — — — — 1,391 
Net income (loss)2,254 10,378 (58)— — — — 196,304 208,878 
Other comprehensive income— (793)— — — — (13,717)— (14,510)
Distributions to Operating Partnership units held by noncontrolling interests(2,413)(11,665)— — — — — — (14,078)
Dividends paid on common stock at $1.62 per share
— — — — — — — (219,988)(219,988)
Balances at March 31, 2023$222,940 $554,015 $2,413 135,007,280 $1,350 $3,376,458 $35,081 $(159,556)$4,032,701 
Balances at December 31, 2023$222,360 $791,754 $8,914 211,278,803 $2,113 $14,750,388 $17,435 $(379,015)$15,413,949 
Issuance of common stock for share based compensation, exercise of options and taxes paid upon net settlement— — — 96,927 1 (392)— — (391)
Issuance of common stock, net of offering costs— — — 2,310 — 365 — — 365 
Redemption of Operating Partnership units for stock(3,536)(22,991)— 280,772 3 26,527 — — 3 
Noncontrolling interest in consolidated joint ventures— — 206 — — — — — 206 
Net income2,208 8,737 17 — — — — 213,112 224,074 
Other comprehensive loss— 446 — — — — 10,756 — 11,202 
Distributions to Operating Partnership units held by noncontrolling interests(2,208)(13,975)— — — — — — (16,183)
Dividends paid on common stock at $1.62 per share
— — — — — — — (344,247)(344,247)
Balances at March 31, 2024$218,824 $763,971 $9,137 211,658,812 $2,117 $14,776,888 $28,191 $(510,150)$15,288,978 
See accompanying notes to unaudited condensed consolidated financial statements.

9


Extra Space Storage Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)
 For the Three Months Ended March 31,
 20242023
Cash flows from operating activities:
Net income$224,074 $208,878 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization196,966 78,490 
Amortization of deferred financing costs4,008 2,604 
Non-cash interest expense related to amortization of discount on Life Storage unsecured senior notes10,705  
Compensation expense related to share-based awards5,912 5,499 
Accrual of interest income added to principal of debt securities and notes receivable(7,555)(8,574)
Distributions from unconsolidated real estate ventures8,300 3,789 
Changes in operating assets and liabilities:
Other assets19,663 (2,188)
Accounts payable and accrued expenses1,112 4,724 
Other liabilities2,371 (11,573)
Net cash provided by operating activities465,556 281,649 
Cash flows from investing activities:
Acquisition of real estate assets and improvements(91,050)(47,296)
Development and redevelopment of real estate assets(35,825)(16,762)
Investment in unconsolidated real estate entities(2,412)(21,062)
Issuance and purchase of notes receivable(158,005)(58,378)
Principal payments received from notes receivable11,823 21,828 
Proceeds from sale of notes receivable 39,261 
Purchase of equipment and fixtures(6,602)(3,930)
Net cash used in investing activities(282,071)(86,339)
Cash flows from financing activities:
Proceeds from unsecured term loans and senior notes and revolving lines of credit1,679,470 1,381,592 
Principal payments on unsecured term loans and senior notes and revolving lines of credit(2,147,191)(1,879,049)
Proceeds from issuance of public bonds, net600,000 500,000 
Deferred financing costs(5,614)(6,080)
Proceeds from share issuances and redemption of stock options for cash, net592  
Redemption of Preferred OP units for cash (5,000)
Dividends paid on common stock(344,208)(219,988)
Distributions to noncontrolling interests(16,231)(14,078)
Net cash used in financing activities(233,182)(242,603)
Net decrease in cash, cash equivalents, and restricted cash(49,697)(47,293)
Cash, cash equivalents, and restricted cash, beginning of the period105,083 97,735 
Cash, cash equivalents, and restricted cash, end of the period$55,386 $50,442 
Cash and equivalents, including restricted cash at the beginning of the period:
Cash and equivalents$99,062 $92,868 
Restricted cash included in other assets6,021 4,867 
$105,083 $97,735 
Cash and equivalents, including restricted cash at the end of the period:
Cash and equivalents$50,816 $47,951 
Restricted cash included in other assets4,570 2,491 
$55,386 $50,442 

10


Extra Space Storage Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)
 For the Three Months Ended March 31,
 20242023
Supplemental schedule of cash flow information
Interest paid$107,758 $78,656 
Income taxes paid1,539 1,910 
Supplemental schedule of noncash investing and financing activities:
Redemption of Operating Partnership units held by noncontrolling interests for common stock
Noncontrolling interests in Operating Partnership$26,527 $116,336 
Common stock and paid-in capital(26,527)(11,336)
Noncontrolling interests in Operating Partnership Note Receivable Payoff (100,000)
OP Unit Redemption - Cash Proceeds (5,000)
Redemption of Preferred Operating Partnership units for common stock
Preferred Operating Partnership units$(3,536)$(33,403)
Additional paid-in capital3,536 $33,403 

See accompanying notes to unaudited condensed consolidated financial statements.


11


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Amounts in thousands, except store and share data, unless otherwise stated


1.    ORGANIZATION
Extra Space Storage Inc. (the “Company”) is a fully integrated, self-administered and self-managed REIT, formed as a Maryland corporation on April 30, 2004, to own, operate, manage, acquire, develop and redevelop professionally managed self-storage properties ("stores") located throughout the United States. The Company was formed to continue the business of Extra Space Storage LLC and its subsidiaries, which had engaged in the self-storage business since 1977. The Company’s interest in its stores is held through its operating partnership, Extra Space Storage LP (the “Operating Partnership”), which was formed on May 5, 2004. The Company’s primary assets are general partner and limited partner interests in the Operating Partnership, which meets the definition of a variable interest entity and is consolidated. This structure is commonly referred to as an umbrella partnership REIT, or UPREIT.

The Company invests in stores by acquiring wholly-owned stores or by acquiring an equity interest in real estate entities. At March 31, 2024, the Company had direct and indirect equity interests in 2,384 stores. In addition, the Company managed 1,409 stores for third parties, bringing the total number of stores which it owns and/or manages to 3,793. These stores are located in 42 states and Washington, D.C. The Company also offers tenant reinsurance at its owned and managed stores that insures the value of goods in the storage units.
2.    BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of the Company are presented on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they may not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of results that may be expected for the year ending December 31, 2024. The condensed consolidated balance sheet as of December 31, 2023 has been derived from the Company’s audited financial statements as of that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission.

Recently Issued Accounting Standards

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" (“ASU 2020-04”). ASU 2020-04 provides temporary optional guidance that provides transition relief for reference rate reform, including optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions that reference LIBOR or a reference rate that is expected to be discontinued as a result of reference rate reform if certain criteria are met. ASU 2020-04 is effective upon issuance, and the provisions generally can be applied prospectively as of January 1, 2020 through December 31, 2024. As of September 30, 2023, the Company had converted all of its LIBOR-indexed debt and derivatives to SOFR-based indexes (effective with the respective instrument’s next reset date for certain instruments). For all derivatives in hedge accounting relationships, the elective relief in Topic 848 that allows for the continuation of hedge accounting throughout the transition process was utilized.
3.    FAIR VALUE DISCLOSURES

Derivative Financial Instruments
Currently, the Company uses interest rate swaps to manage its interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash

12


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
receipts. The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate forward curves.

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. In conjunction with the FASB’s fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of March 31, 2024, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety were classified in Level 2 of the fair value hierarchy.

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2024, aggregated by the level in the fair value hierarchy within which those measurements fall. 
Fair Value Measurements at Reporting Date Using
DescriptionQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Other assets - Cash flow hedge swap agreements$ $33,645 $ 
Other liabilities - Cash flow hedge swap agreements$ $1,154 $ 

The Company did not have any significant assets or liabilities that are re-measured on a recurring basis using significant unobservable inputs as of March 31, 2024 or December 31, 2023.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Long-lived assets held for use are evaluated for impairment when events or circumstances indicate there may be impairment. The Company reviews each store at least annually to determine if any such events or circumstances have occurred or exist. The Company focuses on stores where occupancy and/or rental income have decreased by a significant amount. For these stores, the Company determines whether the decrease is temporary or permanent, and whether the store will likely recover the lost occupancy and/or revenue in the short term. In addition, the Company reviews stores in the lease-up stage and compares actual operating results to original projections.
When the Company determines that an event that may indicate impairment has occurred, the Company compares the carrying value of the related long-lived assets to the undiscounted future net operating cash flows attributable to the assets. An impairment loss is recorded if the net carrying value of the assets exceeds the undiscounted future net operating cash flows attributable to the assets. The impairment loss recognized equals the excess of net carrying value over the related fair value of the assets.
When real estate assets are identified by management as held for sale, the Company discontinues depreciating the assets and estimates the fair value of the assets, net of selling costs. The Company compares the carrying value of the related long-lived assets to the discounted future net operating cash flows attributable to the assets (categorized within Level 3 of the fair value hierarchy). If the estimated fair value, net of selling costs, of the assets that have been identified as held for sale is less than the net carrying value of the assets, the Company would recognize a loss on the assets held for sale. The operations of assets held for sale or sold during the period would be presented as part of normal operations. As of March 31, 2024, and December 31, 2023, no assets were held for sale.
The Company assesses annually whether there are any indicators that the value of the Company’s investments in unconsolidated real estate entities may be impaired and when events or circumstances indicate that there may be impairment.

13


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
An investment is impaired if management’s estimate of the fair value of the investment is less than its carrying value. To the extent impairment has occurred, and is considered to be other than temporary, the loss is measured as the excess of the carrying amount of the investment over the fair value of the investment.
The Company evaluates goodwill for impairment at least annually and whenever events, circumstances, and other related factors indicate that the fair value of the related reporting unit may be less than the carrying value. If the fair value of the reporting unit is determined to exceed the aggregate carrying amount, no impairment charge is recorded. Otherwise, an impairment charge is recorded for the amount in which the fair value of the reporting unit exceeds the carrying value. No impairments of goodwill were recorded for any period presented herein.
As of March 31, 2024 and December 31, 2023, the Company did not have any assets or liabilities measured at fair value on a nonrecurring basis.

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, restricted cash, receivables, other financial instruments included in other assets, accounts payable and accrued expenses, variable-rate notes payable, investments in debt securities and notes receivable, lines of credit and other liabilities reflected in the condensed consolidated balance sheets at March 31, 2024 and December 31, 2023 approximate fair value. Restricted cash is comprised of funds deposited with financial institutions located throughout the United States primarily relating to earnest money deposits on potential acquisitions.

The fair values of the Company’s notes receivable and notes receivable from Preferred and Common Operating Partnership unit holders were based on the discounted estimated future cash flow of the notes (categorized within Level 3 of the fair value hierarchy); the discount rate used approximated the current market rate for loans with similar maturities and credit quality. The fair values of the Company’s fixed-rate notes payable were estimated using the discounted estimated future cash payments to be made on such debt (categorized within Level 3 of the fair value hierarchy); the discount rates used approximated current market rates for loans, or groups of loans, with similar maturities and credit quality.

The fair values of the Company’s fixed-rate assets and liabilities were as follows for the periods indicated:
March 31, 2024December 31, 2023
Fair
Value
Carrying
Value
Fair
Value
Carrying
Value
Fixed rate debt$8,046,080 $8,594,608 $7,482,054 $8,048,605 

4.    ACQUISITIONS AND DISPOSITIONS

The Life Storage Merger

On July 20, 2023, the Company closed its merger with Life Storage (the "Life Storage Merger" or "Merger"), which included 757 wholly-owned stores and one consolidated joint venture store. Under the terms of the Life Storage Merger, Life Storage stockholders and holders of units of the Life Storage operating partnership received 0.895 of a share of common stock (or OP Unit, as applicable) of the Company for each issued and outstanding share (or operating partnership unit) of Life Storage they owned for total equity consideration of $11,602,808, based on the Company's closing share price on July 19, 2023. At closing, the Company retired $1,160,000 in balances on Life Storage's line of credit which included $375,000 that Life Storage used to pay off its private placement notes in connection with the closing of the Life Storage Merger. The Company also paid off $32,000 in secured loans. On July 25, 2023, the Company completed obligor exchange offers and consent solicitations (together the "Exchange Offers") related to Life Storage's various senior notes. Upon the closing of the Exchange Offers, a total of $2,351,100 of Life Storage's senior notes were exchanged for senior notes of the same tenor of Extra Space Storage L.P. The remaining Life Storage senior note balances which were not exchanged total $48,900 and no longer have any financial reporting requirements or covenants.


14


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
Consideration and Purchase Price Allocation

The Merger was accounted for as an asset acquisition in accordance with ASC Topic 805 which requires that the cost of an acquisition be allocated on a relative fair value basis to the assets acquired and the liabilities assumed. The following table summarizes the fair value of total consideration transferred in the Life Storage Merger:

Consideration TypeJuly 20, 2023
Common stock$11,353,338 
OP units249,470 
Cash for payoff of Life Storage credit facility and debt1,192,000 
Transaction Costs55,318 
Total consideration$12,850,127 


The following table summarizes the estimated fair values assigned to the assets acquired and liabilities assumed:
July 20, 2023
Real estate assets$14,587,735 
Equity investment in joint venture partnerships325,250 
Cash and other assets107,423 
Intangible assets - other82,000 
Trade name50,000 
Unsecured senior notes(2,106,866)
Accounts payable, accrued expenses and other liabilities(191,077)
Noncontrolling interests(4,338)
Fair value of net assets acquired$12,850,127 

Fair Value Measurement

The estimated fair values of assets acquired and liabilities assumed were primarily based on information that was available as of the closing date of the Life Storage Merger. The methodology used to estimate the fair values to apply purchase accounting and the ongoing financial statement impact, if any, are summarized below.

Real estate assets – Real estate assets acquired were recorded at fair value using standard valuation methodologies, including the cost and market approaches. The remaining useful lives for real estate assets, excluding land, were reset to 39 years. Tenant relationships for storage leases were recorded at fair value based on estimated costs the Company avoided to replace them. Tenant relationships are amortized to expense over 18 months, which is based on the Company’s historical experience with turnover in its stores.
Equity investment in joint venture partnerships - Equity investment in joint venture partnerships were recorded at fair value based on a direct capitalization of net operating income.
Intangible assets - other – Customer relationships relating to tenant reinsurance contracts were recorded at fair value based on the income approach which estimates the potential revenue loss the Company avoided to replace them. These assets are amortized to expense over 36 months, which is based on the Company’s historical experience with average length of stay for tenants.
Trade name – Trade names were recorded at fair value based on royalty payments avoided had the trade name been owned by a third party. This is determined using market royalty rates and a discounted cash flow analysis under the relief-from-royalty method. This method incorporates various assumptions, including projected revenue growth rates, the terminal growth rate, the royalty rate to be applied, and the discount rate utilized. The trade name is an indefinite lived asset and as such is not amortized.

15


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
Unsecured senior notes – Unsecured senior notes were recorded at fair value using readily available market data. The below-market value of debt is recorded as a debt discount and reported as a reduction of the unsecured senior notes balance on the condensed consolidated balance sheets. The discount is amortized using effective interest method as an increase to interest expense over the remaining terms of the unsecured senior notes.
Other assets and liabilities – the carrying values of cash, accounts receivable, prepaids and other assets, accounts payable, accrued expenses and other liabilities represented the fair values.

Store Acquisitions

The following table shows the Company’s acquisitions of stores for the three months ended March 31, 2024 and 2023. The table excludes purchases of raw land and improvements made to existing assets. All store acquisitions are considered asset acquisitions under ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business."
Total
PeriodNumber of StoresCash PaidFinance Lease LiabilityInvestments in Real Estate VenturesNet Liabilities/ (Assets) AssumedValue of Equity IssuedReal estate assets
Q1 20246$35,084 $ $ $171 $ $35,255 
Q1 2023113,111   6  13,117 
5.    REAL ESTATE ASSETS
The components of real estate assets are summarized as follows:
March 31, 2024December 31, 2023
Land$4,911,431 $4,904,705 
Buildings, improvements and other intangibles21,769,745 21,664,224 
Right of use asset - finance lease140,871 143,842 
Intangible assets - tenant relationships321,215 321,019 
Intangible lease rights27,743 27,743 
27,171,005 27,061,533 
Less: accumulated depreciation and amortization(2,802,341)(2,624,405)
Net operating real estate assets24,368,664 24,437,128 
Real estate under development/redevelopment126,012 118,745 
Real estate assets, net$24,494,676 $24,555,873 
6.     OTHER ASSETS
The components of other assets are summarized as follows:

16


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
March 31, 2024December 31, 2023
Goodwill$170,811 $170,811 
Receivables, net137,170 134,716 
Prepaid expenses and deposits75,610 85,153 
Other intangible assets, net56,915 66,332 
Trade name50,000 50,000 
Fair value of interest rate swaps33,645 26,183 
Equipment and fixtures, net49,202 48,697 
Deferred line of credit financing costs, net9,227 9,787 
Restricted cash4,570 6,021 
$587,150 $597,700 
7.    EARNINGS PER COMMON SHARE

Basic earnings per common share is computed using the two-class method by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during the period. All outstanding unvested restricted stock awards contain rights to non-forfeitable dividends and participate in undistributed earnings with common stockholders; accordingly, they are considered participating securities that are included in the two-class method. Diluted earnings per common share measures the performance of the Company over the reporting period while giving effect to all potential common shares that were dilutive and outstanding during the period. The denominator includes the weighted average number of basic shares and the number of additional common shares that would have been outstanding if the potential common shares that were dilutive had been issued, and is calculated using either the two-class, treasury stock or as if-converted method, whichever is most dilutive. Potential common shares are securities (such as options, Series A Participating Redeemable Preferred Units (“Series A Units”), Series B Redeemable Preferred Units (“Series B Units”), Series D Redeemable Preferred Units (“Series D Units” and, together with the Series A Units and Series B Units, the “Preferred OP Units”) and common Operating Partnership units (“OP Units”)) that do not have a current right to participate in earnings of the Company but could do so in the future by virtue of their option, redemption or conversion right.

In computing the dilutive effect of convertible securities, net income is adjusted to add back any changes in earnings in the period associated with the convertible security. The numerator also is adjusted for the effects of any other non-discretionary changes in income or loss that would result from the assumed conversion of those potential common shares. In computing diluted earnings per common share, only potential common shares that are dilutive (i.e. those that reduce earnings per common share) are included.

For the purposes of computing the diluted impact of the potential exchange of the Preferred Operating Partnership units for common shares upon redemption, where the Company has the option to redeem in cash or shares and where the Company has stated the intent and ability to settle the redemption in shares, the Company divided the total value of the Preferred Operating Partnership units by the average share price for the period presented. The average share price for the three months ended March 31, 2024 and 2023 was $145.80 and $157.15, respectively.

The following table presents the number of Preferred Operating Partnership units as if converted into potential common shares that were excluded from the computation of earnings per share as their effect would have been anti-dilutive.
For the Three Months Ended March 31,
20242023
Equivalent Shares (if converted)Equivalent Shares (if converted)
Series B Units230,234 213,606 
Series D Units1,272,862  
1,503,096 213,606 

17


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated

The computation of earnings per common share is as follows for the periods presented:

For the Three Months Ended March 31,
20242023
Net income attributable to common stockholders$213,112 $196,304 
Earnings and dividends allocated to participating securities(354)(304)
Earnings for basic computations212,758 196,000 
Earnings and dividends allocated to participating securities  
Income allocated to noncontrolling interest - Preferred Operating Partnership Units and Operating Partnership Units8,764 12,128 
Fixed component of income allocated to noncontrolling interest - Preferred Operating Partnership (Series A Units)  
Net income for diluted computations$221,522 $208,128 
Weighted average common shares outstanding:
Average number of common shares outstanding - basic 211,283,335 134,511,273 
OP Units8,731,738 7,214,649 
Series B Units  
Series D Units 1,210,056 
Unvested restricted stock awards included for treasury stock method  
Shares related to dilutive stock options3,704 4,406 
Average number of common shares outstanding - diluted220,018,777 142,940,384 
Earnings per common share
Basic$1.01 $1.46 
Diluted$1.01 $1.46 

8.    INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES
Investments in unconsolidated real estate entities and cash distributions in unconsolidated real estate ventures represent the Company's interest in preferred stock of SmartStop Self Storage REIT, Inc. ("SmartStop") and Strategic Storage Trust VI, Inc. ("Strategic Storage"), an affiliate of SmartStop, and the Company's noncontrolling interest in real estate joint ventures. The Company accounts for its investments in SmartStop and Strategic Storage preferred stock, which do not have a readily determinable fair value, at the transaction price less impairment, if any. The Company accounts for its investments in joint ventures using the equity method of accounting. The Company initially records these investments at cost and subsequently adjusts for cash contributions, distributions and net equity in income or loss, which is allocated in accordance with the provisions of the applicable partnership or joint venture agreement.
In these joint ventures, the Company and the joint venture partner generally receive a preferred return on their invested capital. To the extent that cash or profits in excess of these preferred returns are generated through operations or capital transactions, the Company would receive a higher percentage of the excess cash or profits, as applicable, than its equity interest.

The Company separately reports investments with net equity less than zero in cash distributions in unconsolidated real estate ventures in the condensed consolidated balance sheets. The net equity of certain joint ventures is less than zero because distributions have exceeded the Company's investment in and share of income from these joint ventures. This is generally the result of financing distributions, capital events or operating distributions that are usually greater than net income, as net income includes non-cash charges for depreciation and amortization while distributions do not.

18


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
Net investments in unconsolidated real estate entities and cash distributions in unconsolidated real estate ventures consist of the following:
 Number of StoresEquity Ownership %
Excess Profit % (1)
March 31,December 31,
 20242023
PRISA Self Storage LLC 854%4%$9,365 $9,435 
HF1 Sovran HHF Storage Holdings LLC 3720%20%104,679 105,339 
Storage Portfolio II JV LLC 3610%30%(8,528)(8,314)
Storage Portfolio IV JV LLC3210%30%48,006 48,184 
Storage Portfolio I LLC 2434%49%(42,661)(42,487)
PR II EXR JV LLC2325%25%107,530 108,160 
HF2 Sovran HHF Storage Holdings II LLC 2215%15%41,411 41,613 
HF5 Life Storage-HIERS Storage LLC 1720%20%25,988 26,051 
HF6 191 V Life Storage Holdings LLC 1720%20%11,474 12,702 
ESS-CA TIVS JV LP1655%
55%-65%
28,720 29,128 
VRS Self Storage, LLC 1645%54%(16,756)(16,386)
HF10 Life Storage HHF Wasatch Holdings LLC 1620%20%20,033 20,019 
Other unconsolidated real estate ventures131
10%-50%
10%-50%
314,784 317,104 
SmartStop Self Storage REIT, Inc. Preferred Stock (2)
n/an/an/a200,000 200,000 
Strategic Storage Trust VI, Inc. Preferred Stock (3)
n/an/an/a150,000 150,000 
Net Investments in and Cash distributions in unconsolidated real estate entities472$994,044 $1,000,548 
(1)    Includes pro-rata equity ownership share and promoted interest.
(2)    In October 2019, the Company invested $200,000 in shares of convertible preferred stock of SmartStop with a dividend rate of 6.25% per annum, subject to increase after five years. The preferred shares are generally not redeemable for five years, except in the case of a change of control or initial listing of SmartStop. Dividend income from this investment is included on the equity in earnings and dividend income from unconsolidated real estate entities line on the Company's condensed consolidated statements of operations.
(3)    In May 2023, the Company invested $150,000 in shares of convertible preferred stock of Strategic Storage with a dividend rate of 8.35% per annum, subject to increase after five years. The preferred shares are generally not redeemable for three years, except in the case of a change of control or initial listing of Strategic Storage. Dividend income from this investment is included on the equity in earnings and dividend income from unconsolidated real estate entities line on the Company's condensed consolidated statements of operations.
9.    INVESTMENTS IN DEBT SECURITIES AND NOTES RECEIVABLE
Investments in debt securities and notes receivable consists of the Company's investment in mandatorily redeemable preferred stock of Jernigan Capital, Inc. ("JCAP") in connection with JCAP's acquisition by affiliates of NexPoint Advisors, L.P. ("NexPoint") and receivables due to the Company under its bridge loan program. Information about these balances is as follows:
March 31, 2024December 31, 2023
Debt securities - Preferred Stock$300,000 $300,000 
Notes Receivable - Bridge Loans752,336 594,727 
Dividends and Interest Receivable 6,170 10,042 
$1,058,506 $904,769 
In November 2020, the Company invested $300,000 in the preferred stock of JCAP in connection with the acquisition of JCAP by NexPoint. This investment consisted of 200,000 Series A Preferred Shares valued at a total of $200,000, and 100,000

19


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
Series B Preferred Shares valued at a total of $100,000. In December 2022, the Company completed a modification with NexPoint Storage Partners (as successor in interest to JCAP) that exchanged the Series A and Series B Preferred Shares for 300,000 Series D Preferred Shares, valued at a total of $300,000. The Series D Preferred Shares are mandatorily redeemable after six years from the modification in December 2022, with two one-year extension options. NexPoint may redeem the Series D Preferred Shares at any time, subject to certain prepayment penalties. The Company accounts for the Series D Preferred Shares as a held to maturity debt security at amortized cost. The Series D Preferred Shares have an initial dividend rate of 8.5%. If the investment is not retired after six years, the preferred dividends increase annually.

The Company provides bridge loan financing to third-party self-storage operators. These notes receivable consist of mortgage loans receivable, which are collateralized by self-storage properties, and unsecured mezzanine loans receivable. As of March 31, 2024, 73% of the notes held are mortgage receivables. The Company intends to sell a portion of the mortgage receivables. These notes receivable typically have a term of three years with two one-year extensions, and have variable interest rates. During the three months ended March 31, 2024 the Company closed on $150,240 in initial loan draws and recorded $8,388 of draws for interest payments.

The bridge loans typically have a loan to value ratio between 70% and 80% at closing. None of the debt securities or notes receivable are in past-due or nonaccrual status and the allowance for potential credit losses is immaterial.
10.    DEBT
The components of term debt are summarized as follows:
Term DebtMarch 31, 2024December 31, 2023
Secured notes payable (1)
$1,274,914 $1,279,105 
Unsecured term loans2,260,000 2,660,000 
Unsecured senior notes7,325,001 6,725,000 
Total10,859,915 10,664,105 
Less: Discount on unsecured senior notes (2)
(263,644)(274,350)
Less: Unamortized debt issuance costs(58,720)(55,007)
Total$10,537,551 $10,334,748 
(1) The loans are collateralized by mortgages on real estate assets and the assignment of rents.
(2) Unsecured senior notes from the Life Storage Merger were recorded at fair value, resulting in a discount to be amortized over the term of the debt.

20


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
The following table summarizes the scheduled maturities of term debt, excluding available extensions, at March 31, 2024:
YearAmount
2024$248,250 
20251,121,321 
20261,409,581 
20271,315,511 
20281,028,700 
20291,542,439 
20301,344,113 
20311,650,000 
2032600,000 
Thereafter600,000 
$10,859,915 
Pursuant to the terms of the Credit Agreement, the Company may request an extension of the term of the revolving credit facility for up to two additional periods of six months each, after satisfying certain conditions.

As of March 31, 2024, amounts outstanding under the revolving credit facility bore interest at floating rates, at the Company’s option, equal to either (i) Adjusted Term or Daily Simple SOFR plus the applicable margin or (ii) the applicable base rate which is the applicable margin plus the highest of (a) 0.0%, (b) the federal funds rate plus 0.50%, (c) U.S. Bank’s prime rate or (d) the SOFR rate plus 1.00%. Per the Credit Agreement, the applicable SOFR rate margin and applicable base rate margin are based on the Company’s achieved debt rating, with the SOFR rate margin ranging from 0.7% to 2.2% per annum and the applicable base rate margin ranging from 0.00% to 1.20% per annum.

The Credit Agreement is guaranteed by the Company and is not secured by any assets of the Company. The Company's unsecured debt is subject to certain financial covenants. As of March 31, 2024, the Company was in compliance with all of its financial covenants.

All of the Company’s lines of credit are guaranteed by the Company. The following table presents information on the Company’s lines of credit, the proceeds of which are used to repay debt and for general corporate purposes, for the periods indicated:
As of March 31, 2024
Revolving Lines of CreditAmount DrawnCapacityInterest RateMaturity
Basis Rate (1)
Credit Line 1 (2)
$34,000 $140,000 6.69%7/1/2026
SOFR plus 1.35%
Credit Line 2 (3)(4)
586,000 2,000,000 6.22%6/22/2027
SOFR plus 0.875%
$620,000 $2,140,000 
(1) Daily Simple SOFR
(2) Secured by mortgages on certain real estate assets. On January 13, 2023, the maturity date was extended to July 1, 2026 with one extension of one year available.
(3) Unsecured. On June 22, 2023, the maturity date was extended to June 22, 2027 with two six-month extensions available. On August 11, 2023, the capacity was increased by $60.0 million.
(4) Basis Rate as of March 31, 2024. Rate is subject to change based on the Company's investment grade rating.

As of March 31, 2024, the Company’s percentage of fixed-rate debt to total debt was 77.2%. The weighted average interest rates of the Company’s fixed and variable-rate debt were 4.0% and 6.5%, respectively. The combined weighted average interest rate was 4.5%.

21


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
11.    DERIVATIVES

The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash payments principally related to the Company’s borrowings.

Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (“OCI”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. A portion of these changes is excluded from accumulated other comprehensive income as it is allocated to noncontrolling interests. During the three months ended March 31, 2024 and 2023, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. In the coming 12 months, the Company estimates that $21,656 will be reclassified as an increase to interest income.

The Company held 14 active derivative financial instruments, which had a total current notional amount of $1,384,038, as of March 31, 2024 and two forward-starting derivative financial instruments with effective dates of October 31, 2024 and July 14, 2025.

Fair Values of Derivative Instruments
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the condensed consolidated balance sheets:
 Asset / Liability Derivatives
Derivatives designated as hedging instruments:March 31, 2024December 31, 2023
Other assets$33,645 $26,183 
Other liabilities$1,154 $5,030 

Effect of Derivative Instruments
The table below presents the effect of the Company’s derivative financial instruments on the condensed consolidated statements of operations for the periods presented. No tax effect has been presented as the derivative instruments are held by the Company:
Gain (loss) recognized in OCI for the Three Months Ended March 31,Location of amounts reclassified from OCI into incomeGain (loss) reclassified from OCI for the Three Months Ended March 31,
Type2024202320242023
Swap Agreements$19,249 $(5,562)Interest expense$8,017 $8,950 



22


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
Credit-Risk-Related Contingent Features
The Company has agreements with some of its derivative counterparties that contain provisions pursuant to which the Company could be declared in default of its derivative obligations if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender.

The Company also has an agreement with some of its derivative counterparties that incorporates the loan covenant provisions of the Company’s indebtedness with a lender affiliate of the derivative counterparty. Failure to comply with the loan covenant provisions would result in the Company being in default on any derivative instrument obligations covered by the agreement.

As of March 31, 2024, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk related to these agreements, was $1,170. As of March 31, 2024, the Company had not posted any collateral related to these agreements. If the Company had breached any of these provisions as of March 31, 2024, it could have been required to cash settle its obligations under these agreements at their termination value of $1,170. 
12.    STOCKHOLDERS’ EQUITY

On July 20, 2023, the Company issued 76,217,359 shares of its common stock at $148.96 for a total value of $11,353,338 as part of the Life Storage Merger. See Acquisition and Disposition note above.

On April 15, 2024, the Company filed its $800,000 "at the market" equity program with the Securities and Exchange Commission using a shelf registration statement on Form S-3, and entered into separate equity distribution agreements with nine sales agents. No shares have been sold under the current "at the market" equity program, and no shares were sold under the previous "at the market" equity program, which spanned from August 9, 2021 through April 14, 2024.

On November 13, 2023, the Company's board of directors authorized a share repurchase program allowing for the repurchase of shares with an aggregate value up to $500,000. During the year ended December 31, 2023 and the three months ended March 31, 2024, no shares were repurchased. As of March 31, 2024, the Company had remaining authorization to repurchase shares with an aggregate value up to $500,000.
13.    NONCONTROLLING INTEREST REPRESENTED BY PREFERRED OPERATING PARTNERSHIP UNITS

Classification of Noncontrolling Interests
GAAP requires a company to present ownership interests in subsidiaries held by parties other than the company in the consolidated financial statements within the equity section, but separate from the company’s equity. It also requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations and requires changes in ownership interest to be accounted for similarly as equity transactions. If noncontrolling interests are determined to be redeemable, they are to be carried at their redemption value as of the balance sheet date and reported as temporary equity.

The Company has evaluated the terms of the Operating Partnership’s preferred units and classifies the noncontrolling interest represented by such preferred units as stockholders’ equity in the accompanying condensed consolidated balance sheets. The Company will periodically evaluate individual noncontrolling interests for the ability to continue to recognize the noncontrolling interest as permanent equity in the condensed consolidated balance sheets. Any noncontrolling interests that fail to qualify as permanent equity will be reclassified as temporary equity and adjusted to the greater of (1) the carrying amount and (2) the redemption value as of the end of the period in which the determination is made.

At March 31, 2024 and December 31, 2023, the noncontrolling interests represented by the Preferred OP Units qualified for classification as permanent equity on the Company's condensed consolidated balance sheets. The partnership agreement of the Operating Partnership (as amended, the "Partnership Agreement") provides for the designation and issuance of the OP Units. The balances for each of the specific Preferred OP Units as presented in the Statement of Noncontrolling Interests and Equity as of the periods indicated is as follows:


23


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
March 31, 2024December 31, 2023
Series B Units$33,567 $33,567 
Series D Units185,257 188,793 
$218,824 $222,360 

Series A Participating Redeemable Preferred Units

The Partnership Agreement provides for the designation and issuance of the Series A Units. The Series A Units have priority over all other partnership interests of the Operating Partnership with respect to distributions and liquidation.
As of March 31, 2024 and December 31, 2023, there were no outstanding Series A Units.

Series B Redeemable Preferred Units

The Partnership Agreement provides for the designation and issuance of the Series B Units. The Series B Units rank junior to the Series A Units, on parity with the Series C Units and Series D Units, and senior to all other partnership interests of the Operating Partnership with respect to distributions and liquidation.

The Series B Units were issued in 2013 and 2014. The Series B Units have a liquidation value of $25.00 per unit for a fixed liquidation value of $33,567 which represents 1,342,727 Series B Units. Holders of the Series B Units receive distributions at an annual rate of 6.0%. These distributions are cumulative. The Series B Units became redeemable at the option of the holder on the first anniversary of the date of issuance, which redemption obligation may be satisfied at the Company’s option in cash or shares of its common stock.

Series C Redeemable Preferred Units

The Partnership Agreement provides for the designation and issuance of the Series C Units. The Series C Units ranked junior to the Series A Units, on parity with the Series B Units and Series D Units, and senior to all other partnership interests of the Operating Partnership with respect to distributions and liquidation.

As of March 31, 2024 and December 31, 2023, there were no outstanding Series C Units.

Series D Redeemable Preferred Units

The Partnership Agreement provides for the designation and issuance of the Series D Units. The Series D Units rank junior to the Series A Units, on parity with the Series B Units and Series C Units, and senior to all other partnership interests of the Operating Partnership with respect to distributions and liquidation.
The Series D Units have a liquidation value of $25.00 per unit, for a fixed liquidation value of $185,257, which represents 7,410,300 Series D Units. Holders of the Series D Units receive distributions at an annual rate between 3.0% and 5.0%. These distributions are cumulative. The Series D Units become redeemable at the option of the holder on the first anniversary of the date of issuance, which redemption obligation may be satisfied at the Company’s option in cash or shares of its common stock. In addition, certain of the Series D Units are exchangeable for OP Units at the option of the holder until the tenth anniversary of the date of issuance, with the number of OP Units to be issued equal to $25.00 per Series D Unit, divided by the value of a share of common stock as of the exchange date.
During January 2024, 141,435 Series D Units were redeemed for 21,627 shares of common stock.

24


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
14.    NONCONTROLLING INTEREST IN OPERATING PARTNERSHIP AND OTHER NONCONTROLLING INTERESTS

Noncontrolling Interest in Operating Partnership

The Company’s interest in its stores is held through the Operating Partnership. Between its general partner and limited partner interests, the Company held a 95.4% ownership interest in the Operating Partnership as of March 31, 2024. The remaining ownership interests in the Operating Partnership (including Preferred OP Units) of 4.6% are held by certain former owners of assets acquired by the Operating Partnership. As of March 31, 2024 and December 31, 2023, the noncontrolling interests in the Operating Partnership are shown on the balance sheet net of a note receivable of $1,900 because a borrower under the note receivable is also a holder of OP Units. This note receivable originated in December 2014, bears interest at 5.0% per annum and matures on December 15, 2024.

The noncontrolling interest in the Operating Partnership represents OP Units that are not owned by the Company. OP Units are redeemable at the option of the holder, which redemption may be satisfied at the Company's option in cash, based upon the fair market value of an equivalent number of shares of the Company’s common stock (based on the ten-day average trading price) at the time of the redemption, or shares of the Company's common stock on a one-for-one basis, subject to anti-dilution adjustments provided in the Partnership Agreement. As of March 31, 2024, the ten-day average closing price of the Company's common stock was $141.47 and there were 8,626,449 OP Units outstanding. Assuming that all of the OP Unit holders exercised their right to redeem all of their OP Units on March 31, 2024 and the Company elected to pay the OP Unit holders cash, the Company would have paid $1,220,384 in cash consideration to redeem the units.

OP Unit activity is summarized as follows for the periods presented:
For the Three Months Ended March 31,
20242023
OP Units redeemed for common stock259,145  

GAAP requires a company to present ownership interests in subsidiaries held by parties other than the company in the consolidated financial statements within the equity section, but separate from the company’s equity. It also requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations, and requires changes in ownership interest to be accounted for similarly as equity transactions. If noncontrolling interests are determined to be redeemable, they are to be carried at their redemption value as of the balance sheet date and reported as temporary equity.

The Company has evaluated the terms of the OP Units and classifies the noncontrolling interest represented by the OP Units as stockholders’ equity in the accompanying condensed consolidated balance sheets. The Company will periodically evaluate individual noncontrolling interests for the ability to continue to recognize the noncontrolling amount as permanent equity in the condensed consolidated balance sheets. Any noncontrolling interests that fail to qualify as permanent equity will be reclassified as temporary equity and adjusted to the greater of (1) the carrying amount, or (2) its redemption value as of the end of the period in which the determination is made.

Other Noncontrolling Interests

Other noncontrolling interests represent the ownership interest of partners in nine consolidated joint ventures as of March 31, 2024. Three joint ventures each own one operating store and the other six joint ventures each have a property under development. The voting interest of each partner is between 2.0% and 17.0%.

Based on the facts and circumstances of each of the Company’s joint ventures, the Company has determined that one of the joint ventures at March 31, 2024 was a variable interest entity (“VIE”) in accordance with ASC 810, “Consolidation.” The Company has consolidated that joint venture as it was determined that the Company has the power to direct the activities of the joint venture and is the primary beneficiary of the joint venture.

25


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
15.    SEGMENT INFORMATION

The Company’s segment disclosures present the measure used by the chief operating decision makers ("CODMs") for purposes of assessing each segment’s performance. The Company’s CODMs are comprised of several members of its executive management team who use net operating income ("NOI") to assess the performance of the business for the Company’s reportable operating segments. The Company’s segments are comprised of two reportable segments: (1) self-storage operations and (2) tenant reinsurance. NOI for the Company's self-storage operations represents total property revenue less direct property operating expenses. NOI for the Company's tenant reinsurance segment represents tenant reinsurance revenues less tenant reinsurance expense.

The self-storage operations activities include rental operations of wholly-owned stores and self-storage units acquired in the Bargold transaction. The Company's consolidated revenues equal total segment revenues plus property management fees and other income. Tenant reinsurance activities include the reinsurance of risks relating to the loss of goods stored by tenants in the stores operated by the Company. Excluded from segment revenues and net operating income is property management fees and other income.

For all periods presented, substantially all of the Company's real estate assets, intangible assets, other assets, and accrued and other liabilities are associated with the self-storage operations segment. Financial information for the Company’s business segments is set forth below:
For the Three Months Ended March 31,
20242023
Revenues:
Self-Storage Operations$688,044 $433,962 
Tenant Reinsurance81,347 47,704 
Total segment revenues$769,391 $481,666 
Operating expenses:
Self-Storage Operations$204,518 $117,166 
Tenant Reinsurance18,505 9,089 
Total segment operating expenses$223,023 $126,255 
Net operating income:
Self-Storage Operations$483,526 $316,796 
Tenant Reinsurance62,842 38,615 
Total segment net operating income:$546,368 $355,411 
Other components of net income:
Management fees and other income$30,148 $21,384 
General and administrative expense(43,722)(34,763)
Depreciation and amortization expense(196,966)(78,490)
Interest expense (132,887)(80,099)
Non-cash interest expense related to amortization of discount on Life Storage unsecured senior notes(10,705) 
Interest income 23,573 19,438 
Equity in earnings and dividend income from unconsolidated real estate entities15,007 10,305 
Income tax expense(6,742)(4,308)
Net income $224,074 $208,878 


26


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
16.    COMMITMENTS AND CONTINGENCIES