No bad stock

Extra Space Storage Inc.
CEO : Mr. Joseph Daniel Margolis J.D.

Quarterly earnings growth(YoY,%)

Period	Revenue	Operating Income	EPS	Release Date
2022 Q4	18.6% YoY	-13.5%	-24.0%	2023-02-23

Joe Margolis says,

Strong Financial Performance

• 2022 same store revenue growth of 17.4%, highest in company history
• Core FFO growth above 20% for second consecutive year
• Q4 same store revenue growth of 11.8%, ahead of expectations
• Same store occupancy levels ended the year at 94.2%
• Total net rent per square foot increased 12.8% YoY
• Same store NOI growth of 13.4% despite expense pressure
• Core FFO growth of 9.4% in Q4 and 22.1% for the year

Strategic Acquisitions and Growth Efforts

• Acquired 10 stores in REIT or joint ventures
• Added 46 stores gross to third party management platform
• Closed over $250 million in bridge loans
• Integrating Storage Express portfolio with plans for operational efficiencies
• New operational strategies tested at Storage Express and Extra Space stores
• Early external growth opportunities in new and existing markets for Storage Express

Positive Outlook for 2023

• New supply continues to moderate, leading to lower competition in markets
• Steady customer demand with high occupancy levels
• Same store revenue growth remained above 10% in December
• Expect elevated occupancy to give greater pricing power with new and existing customers
• Same store NOI guidance of 3% to 5.5% due to continued expense pressures at lower levels than 2022

Long-Term Investment Strategy

• Strategic decisions made to provide solid long term returns for shareholders
• Modified term of $300 million preferred investment in NexPoint for longer duration and additional managed properties
• Acquisition strategy focused on asset light structures, non-stabilized stores or acquisitions with long term strategic implications
• Believe initiatives provide more total value for shareholders over time and unlock additional growth channels for years to come

Sustainability Recognition

• Received third consecutive Leader in the Light Award, NAREIT’s highest ESG and sustainability honor for real estate companies
• Recognized as a REIT that delivers strong financial results and has also created a sustainable portfolio and company

Scott Stubbs says,

Strong Q4 Performance

• The Q4 2022 FFO exceeded the high end of the range by $0.04, and the main driver was the better property net operating income.
• Total same store expense growth improved from the previous quarter due to lower repairs and maintenance expense and success with property tax appeals.
• Payroll expense growth, while still high, improved quarter-over-quarter, and this trend is expected to continue into 2023.

Balance Sheet

• $400 million of the variable rate debt has been swapped, reducing the floating interest rate exposure to under 29% of total debt net-of-variable rate bridge loan receivables.
• A $335 million unsecured term loan has been completed, and the proceeds have been used to pay down the revolving balances.
• There are no material maturities in 2023, and the company will likely access the investment-grade bond market for growth capital needs assuming it remains orderly.

2023 Guidance

• Same-store revenue and NOI ranges have been provided, assuming positive same-store revenue growth for the full year, with growth rate moderating more quickly in the first half of the year.
• Same-store expenses have improved, resulting in projected same-store NOI of 3% to 5.5%.
• The 2023 core FFO range is $8.30 to $8.60 per share.
• The headwinds that slow 2023 growth include investment in non-stabilized properties, the modification of the NexPoint preferred, and higher interest rates.
• Third-party management increase has been stronger than normal at this time of year, and most of the growth will be through capital light channels, with modest investment in acquisitions of $250 million due to current market conditions.

Future Outlook

• The company believes storage as an asset class is among the most resilient in both inflationary and recessionary environments and that their highly diversified portfolio is well-positioned for another solid year.
• The company is confident in its ability to maintain healthy growth through the year as it sees storage fundamentals normalizing to historical levels.

Q & A sessions,

Same Store Revenue Growth

• Extra Space had a same store revenue growth of 17.4% in 2022, the highest in the company’s history.
• Despite difficult comparisons and the return of seasonality, their same store revenue growth was ahead of expectations at 11.8% in Q4.
• They expect same store NOI growth of 3% to 5.5% in 2023, which is in line with historical norms and compares well to other asset classes in the current environment.

External Growth

• Extra Space acquired 10 stores in the REIT or in joint ventures and added 46 stores gross to their third party management platform.
• They closed over $250 million in bridge loans, which they expect to have a very strong year in 2023.
• They anticipate full integration of the Storage Express portfolio onto their platform by the end of Q2 2023, providing additional digital marketing, revenue management, and operational efficiencies.

Investment Strategy

• Extra Space modified the term of their $300 million preferred investment in NexPoint, trading yields for longer duration and additional managed properties.
• They continued their acquisition strategy which focuses on asset light structures, non-stabilized stores, or acquisitions with long term strategic implications, including Storage Express.

Operational Strategies

• Extra Space started to test new operational strategies at both Storage Express and Extra Space stores and are beginning to see some early external growth opportunities in new and existing markets for Storage Express.
• They believe elevated occupancy will give them greater pricing power with new and existing customers as they move through the leasing season.

Awards

• The Extra Space team received their third consecutive Leader in the Light Award, NAREIT’s highest ESG and sustainability honor for real estate companies.