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Extra Space Storage (EXR) Tops Q3 FFO Estimates, Raises View

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Extra Space Storage, Inc. (EXR - Free Report) reported third-quarter 2021 core FFO per share of $1.85, beating the Zacks Consensus Estimate of $1.71. The figure is also 33.3% higher than the prior-year quarter’s $1.30.

Quarterly revenues were $412.5 million, up 20.3% year over year. Further, the top line surpassed the Zacks Consensus Estimate of $406.7 million.

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

Per Joe Margolis, CEO of Extra Space Storage, "Same-store revenue and NOI accelerated in the third quarter to 18.4% and 27.8%, respectively, due to record setting occupancy and exceptionally strong rental rates.  We also continue to experience strong external growth, and during the quarter surpassed 2,000 Extra Space Storage branded locations. Our excellent property performance, coupled with our disciplined investment strategy, led to FFO growth of 41.2% in the quarter."

Quarter in Detail

The same-store rental revenues increased 18.4%, year over year, to $318.4 million in the third quarter. This uptick resulted from higher average occupancy and higher average rates to the new and existing customers, higher late fees and lower bad debt, partly offset by increased discounts.

The same-store square-foot occupancy expanded 90 basis points (bps), year over year, to 96.7% as of Sep 30, 2021.

The same-store expenses declined 4% year over year to $75.9 million, and underline the reductions in payroll, marketing expense and property taxes muted by a rise in credit card processing fees, repairs and maintenance expense and insurance expense to some extent. Consequently, the same-store net operating income (NOI) increased 27.8% year over year to $242.5 million.

Balance Sheet

Extra Space Storage exited third-quarter 2021 with $65.6 million of cash and cash equivalents, down from the $109.1 million recorded at the end of 2020. Notably, as of Sep 30, 2021, the company's percentage of fixed-rate debt to total debt was 80.4%.

During the reported quarter, the company completed a public bond offering, issuing $600 million of 2.35% senior unsecured notes due 2032.

Apart from this, the company closed $75.5 million in mortgage and mezzanine bridge loans, and sold $30.1 million in mortgage bridge loans during the third quarter.

Portfolio Activity

During the July-September period, Extra Space Storage acquired 10 operating stores and four stores at completion of construction for a total cost of roughly $198 million. In association with the joint-venture partners, the company acquired 10 operating stores for a total cost of $133.6 million, of which the company invested $13.4 million.

Extra Space Storage added 96 stores (gross) to its third-party management platform. As of Sep 30, 2021, it managed 827 stores for third parties and 261 stores in joint ventures, with total stores under management of 1,088.

Outlook

The REIT raised the full-year core FFO per share range to $6.75-$6.85. The Zacks Consensus Estimate for the same is pegged at $6.58.

The company’s full-year projections are backed by same-store revenue growth assumptions of 12.5-13.5%, same-store NOI increase of 18-19.5% and $700 million in acquisitions.

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

We now look forward to the earnings releases of other REITs like Apple Hospitality REIT, Inc. (APLE - Free Report) , CubeSmart  (CUBE - Free Report) and Sunstone Hotel Investors, Inc. (SHO - Free Report) scheduled for Nov 4.

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.