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Extra Space Storage's (EXR) FFO & Revenues Beat, '22 View Up

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Extra Space Storage Inc. (EXR - Free Report) reported second-quarter 2022 core funds from operations (FFO) per share of $2.13, beating the Zacks Consensus Estimate of $2.04. The figure also came in 29.9% higher than the prior-year quarter’s $1.64.

The results reflect better-than-anticipated top-line growth. The same-store net operating income (NOI) improved year over year, partially offset by higher same-store operating expenses.

Quarterly revenues were $474.9 million, up 25.4% year over year. The top line also exceeded the Zacks Consensus Estimate of $463.5 million.

Per Joe Margolis, CEO of Extra Space Storage, "We continue to find accretive investments through our deep industry relationships and expand our diversified portfolio. We achieved FFO growth of 29.9%, allowing us to increase our annual FFO guidance for the second time this year."

Quarter in Detail

Same-store rental revenues increased 21.7% year over year to $362.2 million in the second quarter, surpassing our estimate of $360.2 million. This uptick resulted from higher average rates for existing customers and higher other operating income, partly muted by lower occupancy.

Same-store expenses flared up 9.3% year over year to $83.5 million, reflecting an increase in payroll, credit card processing fees, repairs and maintenance, utilities and insurance, partially offset by lower property taxes due to successful appeals of prior period taxes.  

Consequently, same-store net operating income (NOI) increased 26% year over year to $278.7 million.

The same-store square-foot occupancy contracted 100 basis points (bps) year over year to 95.9% as of Jun 30, 2022. Our estimate for the same was pegged at 95.6%.

Portfolio Activity

During the April-June period, Extra Space Storage acquired 12 operating stores and three stores at the completion of construction and completed one development for a total cost of roughly $231.4 million. In association with joint-venture (JV) partners, EXR acquired 16 operating stores for a total cost of $332.1 million, of which it invested $57.6 million.

Extra Space Storage added 40 stores (gross) to its third-party management platform. As of Jun 30, 2022, it managed 864 stores for third parties and 304 stores in JVs, with total stores under the management of 1,168.

Further, on Jun 1, 2022, EXR acquired Bargold Storage Systems, LLC for $180 million. Bargold had 17,000 storage units as of the same date.

The company disposed of two properties during the second quarter for roughly $41 million. This resulted in a gain of around $14.2 million for EXR.

Balance Sheet

Extra Space Storage exited second-quarter 2022 with nearly $58.7 million of cash and cash equivalents, down from nearly $66 million recorded on Mar 31, 2022. As of Jun 30, 2022, EXR's percentage of fixed-rate debt to total debt was 74.8%. The combined weighted average interest rate was 3.1%, with a weighted average maturity of around 5.5 years.

During the reported quarter, Extra Space Storage originated $70.3 million in mortgage and mezzanine bridge loans. Also, it sold $44.7 million in mortgage bridge loans.

During the second quarter, it repurchased 381,786 shares of common stock under its stock repurchase program at an average price of $165.01 per share for a total cost of $63 million. This was inclusive of transaction costs. As of Jun 30, 2022, EXR had the authorization to purchase up to an additional $337 million under the plan.

Raised 2022 Guidance

Extra Space Storage raised its 2022 outlook.

It expects core FFO per share in the range of $8.30-$8.50, up from $8.05-$ 8.30 projected earlier. The Zacks Consensus Estimate for the same is currently pegged at $8.27.

Management revised estimates for same-store revenue growth, expecting it to lie within 16-18%, up from the earlier range of 13-15%. Same-store NOI growth is projected in the band of 18.5-21.5%, up from 15-18% estimated earlier and acquisitions of $1.2 billion, up from the previous estimate of $800 million.

Extra Space Storage currently carries a Zacks Rank #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

Simon Property Group, Inc.’s (SPG - Free Report) second-quarter 2022 comparable FFO per share of $2.96 exceeded the Zacks Consensus Estimate of $2.91. The figure compares favorably with the year-ago quarter’s $2.92.

SPG’s quarterly results reflected healthy operating performance and growth in occupancy levels. The retail REIT behemoth also raised the 2022 FFO per share outlook based on the quarterly results. It also announced a hike in the quarterly dividend.

Boston Properties Inc.’s (BXP - Free Report) second-quarter 2022 FFO per share of $1.94 beat the Zacks Consensus Estimate of $1.85. The figure also compared favorably with the year-ago quarter’s $1.72.

BXP’s quarterly results reflect growth in the bottom line. Also, it experienced strong leasing activity during the quarter.

AvalonBay Communities, Inc.’s (AVB - Free Report) second-quarter 2022 core FFO per share of $2.43 surpassed the Zacks Consensus Estimate of $2.35. The figure increased 22.7% on a year-over-year basis.

AVB’s second-quarter results reflect a year-over-year increase in same-store residential rental revenues driven by strong, effective lease rate growth and higher rent relief.

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.