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Extra Space Storage (EXR) Tops Q2 FFO Estimates, Raises View

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Extra Space Storage, Inc. (EXR - Free Report) reported second-quarter 2021 core FFO per share of $1.64, beating the Zacks Consensus Estimate of $1.56. The figure is also 33.3% higher than the prior-year quarter’s $1.23.

Quarterly revenues were $378.6 million, up 15.7% year over year. However, the top line lagged the Zacks Consensus Estimate of $379.8 million.

Results reflect strong average occupancy, and higher average rates to new and existing customers. The company also witnessed reductions in payroll and marketing expenses, partially offset by rise in property taxes and credit card processing fees.

Moreover, the company raised the mid-point of its FFO guidance by 8.3% to $6.53 per share, backed by its impressive performance in the year so far and improved outlook for the rest of the year.

Per Joe Margolis, CEO of Extra Space Storage, "We had an exceptionally strong second quarter, with record setting occupancy and very strong rental rates, resulting in same-store NOI growth of over 20%.  Our excellent property performance, coupled with accretive investments, led to FFO growth of 33.3%.”

Quarter in Detail

Same-store rental revenues increased 13.6% year over year to $294.8 million in the second quarter. This uptick resulted from higher average occupancy and higher average rates to new and existing customers, higher late fees and lower bad debt, partly offset by increased discounts. Same-store square-foot occupancy expanded 280 basis points (bps), year over year, to 97% as of Jun 30, 2021.

Same-store expenses declined 2.3% year over year to $74.8 million, and underline reductions in payroll and marketing expense, muted by rise in property taxes and credit card processing fees to some extent. Consequently, same-store net operating income (NOI) increased 20.2% year over year to nearly $219.9 million.

Balance Sheet

Extra Space Storage exited second-quarter 2021 with $56 million of cash and cash equivalents, down from the $109.1 million recorded at the end of 2020. Notably, as of Jun 30, 2021, the company's percentage of fixed-rate debt to total debt was 72.7%.

During the reported quarter, the company completed its inaugural public bond offering, issuing $450 million of 10-year 2.55% senior unsecured notes due 2031.

Apart from this, the company closed $43 million in mortgage and mezzanine bridge loans, and sold $6 million in mortgage bridge loans in the second quarter.

Portfolio Activity

During the April-June period, Extra Space Storage acquired 13 operating stores and two stores at completion of construction for a total cost of roughly $184 million. In association with joint-venture partners, the company acquired five operating stores for a total of $68.7 million, of which the company invested $6.9 million.

Extra Space Storage added 39 stores (gross) to its third-party management platform. As of Jun 30, 2021, it managed 768 stores for third parties and 253 stores in joint ventures, with total stores under management of 1,021.

Outlook

The REIT raised the full-year core FFO per share range to $6.45-$6.60, marking an 8.3% increase at the mid-point. The Zacks Consensus Estimate for the same is pegged at $6.21.

The company’s full-year projections are backed by same-store revenue growth assumptions of 10-11%, same-store NOI increase of 13.5-15.5% and $500 million in acquisitions.

Extra Space Storage currently carries a Zacks Rank of 3 (Hold). 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

We now look forward to the earnings releases of other REITs like Welltower Inc. (WELL - Free Report) , Digital Realty Trust, Inc. (DLR - Free Report) and Kimco Realty Corporation (KIM - Free Report) scheduled for Jul 29.

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.