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Extra Space Storage (EXR) Q1 FFO Tops Estimates, Revenues Miss

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Extra Space Storage, Inc. (EXR - Free Report) reported first-quarter 2021 core FFO per share of $1.50, beating the Zacks Consensus Estimate of $1.49. The figure was also 21% higher than the prior-year quarter’s $1.24.

Quarterly revenues were $358.9 million, up 7.9% year over year. However, the top line lagged the Zacks Consensus Estimate of $362 million.

Results reflect strong average occupancy and higher average rates to customers for the quarter, partially offset by lower late fees. The company also experienced reductions in payroll and marketing expenses, partially offset by increases in property taxes as well as repairs and maintenance.

Per Joe Margolis, CEO of Extra Space Storage, “We are off to a great start in 2021, with the strongest first quarter occupancy in our history, resulting in strong same-store NOI growth, and excellent FFO growth of 21.0%.  Our record-high occupancy is resulting in greater pricing power, and we are well positioned for a strong summer leasing season.”

Quarter in Detail

Same-store rental revenues increased 4.6% year over year to $278.9 million in the first quarter. The uptick in same-store revenues resulted from higher average occupancy and higher average rates to customers for the quarter, partially negated by lower late fees. Same-store square-foot occupancy expanded 480 basis points (bps) year over year to 95.7% as of Mar 31, 2021.

Same-store expenses edged down 0.2% year over year to $77.9 million and reflect reductions in payroll and marketing expenses. This was partially offset by increases in property taxes as well as repairs and maintenance. Consequently, same-store net operating income (NOI) increased 6.5% year over year to nearly $201 million.

Balance Sheet

Extra Space Storage exited 2021 with $60.3 million of cash and cash equivalents, down from $109.1 million recorded at the end of 2020. Notably, as of Mar 31, 2021, the company's percentage of fixed-rate debt to total debt was 67%.

In the quarter, the company sold 1,600,000 shares of common stock through an overnight offering for $129.13 per share  and another 585,685 shares of common stock, using its "at the market" ("ATM") program, at an average sales price of $115.90 per share, reaping net proceeds of $273.7 million. With this, the company did not have any shares available for issuance under its ATM program as of Mar 31, 2021. It expects to file a new plan in second-quarter 2021.

Moreover, the company closed $27.1 million in mortgage and mezzanine bridge loans, and sold $81.8 million in mortgage bridge loans in the first quarter.

Also, it received an issuer credit rating of Baa2, with a stable outlook from Moody's Investors Service.

Portfolio Activity

In the January-March period, Extra Space Storage acquired nine operating stores for $148.4 million.

The company also disposed of 16 wholly-owned stores in a new joint venture for aggregate sales price of $168.9 million. This resulted in a $64.5-million gain on real estate transactions.

Extra Space Storage added 61 stores (gross) to its third-party management platform. As of Mar 31, 2021, it managed 763 stores for third parties and 269 stores in joint ventures, with total stores under management reaching 1,032.

Outlook

For 2021, the company projects core FFO per share of $5.95-$6.10. The Zacks Consensus Estimate for the same is pegged at $6.03.

The company’s full-year projections are backed by same-store revenue growth assumptions of 5-6%, same-store NOI increase of 6-8% and $350 million in acquisitions.

Dividend Update

On Mar 31, the company paid out a first-quarter dividend of $1, reflecting an 11.1% increase from the prior quarter, to stockholders of record at the close of business on Mar 15, 2021.

Extra Space Storage currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Extra Space Storage Inc Price, Consensus and EPS Surprise

 

Extra Space Storage Inc Price, Consensus and EPS Surprise

Extra Space Storage Inc price-consensus-eps-surprise-chart | Extra Space Storage Inc Quote

Performance of Other REITs

PS Business Parks, Inc. (PSB - Free Report) reported first-quarter 2021 core FFO per share of $1.67, meeting the Zacks Consensus Estimate. However, the reported figure decreased 2.9% year over year.

Boston Properties Inc.’s (BXP - Free Report) first-quarter 2021 FFO per share of $1.56 beat the Zacks Consensus Estimate of $1.55. The quarterly figure also exceeded the mid-point of the company’s guidance by a cent, highlighting better-than-projected portfolio performance and higher fee income.

Highwoods Properties, Inc.’s (HIW - Free Report) first-quarter 2021 FFO per share of 91 cents surpassed the Zacks Consensus Estimate of 87 cents. However, FFO per share declined 2.2% from 91 cents recorded in the year-ago period.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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