Extra Space Storage Inc. (EXR Quick QuoteEXR - Free Report) reported third-quarter 2022 core funds from operations (FFO) per share of $2.21, beating the Zacks Consensus Estimate of $2.18. The figure was also 19.5% higher than the prior-year quarter’s $1.85.

The results reflect better-than-anticipated top-line growth. The same-store net operating income (NOI), too, improved year over year. It revises its outlook for 2022.

Quarterly revenues were $498.9 million, up 20.9% year over year. The top line also exceeded the Zacks Consensus Estimate of $496.4 million.

Per Joe Margolis, CEO of Extra Space Storage, “We completed the acquisition of Storage Express, a strategic transaction that we believe unlocks another future growth channel in the remotely managed storage category. Our internal and external growth efforts continue to enhance and diversify our platform and portfolio and led to achieved Core FFO growth of 19.5%."

Quarter in Detail

Same-store rental revenues increased 15.5% year over year to $371.9 million in the third quarter, surpassing our estimate of $360.2 million. This uptick resulted from higher average rates for existing customers and a rise in other operating income, partly muted by lower occupancy.

Same-store expenses flared up 12.6% year over year to $87.5 million, reflecting an increase in payroll, credit card processing fees, utilities, property taxes and insurance.

Consequently, same-store net operating income (NOI) increased 16.4% year over year to $284.5 million.

The same-store square-foot occupancy contracted 150 basis points (bps) year over year to 95.2% as of Sep 30, 2022. Our estimate for the same was pegged at 95.4%.

Portfolio Activity

During the September quarter, Extra Space Storage acquired 116 operating stores [including the acquisition of multiple entities doing business as Storage Express (Storage Express)] and completed one development for a total cost of around $759.9 million.

In association with joint-venture (JV) partners, EXR acquired 11 operating stores for a total cost of $210.3 million, of which it invested $25.7 million.

Extra Space Storage added 40 stores (22 stores net) to its third-party management platform. As of Sep 30, 2022, it managed 886 stores for third parties and 315 stores in JVs, with total stores under the management of 1,201.

Balance Sheet

Extra Space Storage exited third-quarter 2022 with $86.9 million of cash and cash equivalents, up from nearly $58.7 million recorded as of Jun 30, 2022.

As of Sep 30, 2022, EXR's percentage of fixed-rate debt to total debt was 62.2%. The combined weighted average interest rate was 3.6%, with a weighted average maturity of around 5.4 years.

During the reported quarter, Extra Space Storage originated $113.8 million in mortgage and mezzanine bridge loans. It also sold $125.8 million in mortgage bridge loans.

During the third quarter, it did not issue any shares under its at-the-market (ATM) program and had $800 million available for issuance.  Also, it did not repurchase any shares of common stock and had the authorization to buy up to an additional $337 million under the plan as of Sep 30, 2022.

2022 Guidance Revised

Extra Space Storage revised its 2022 outlook.

It expects core FFO per share in the range of $8.30-$8.40, tweaked from the earlier guided range of $8.30-$8.50. The Zacks Consensus Estimate for the same is currently pegged at $8.49.

Management revised estimates for same-store revenue growth, expecting it to lie within 16.25-17.25% compared with the earlier range of 16-18%. Same-store NOI growth is projected in the band of 18.5-20%, tweaked from 18.5-21.5% estimated earlier. Acquisitions of $1.65 billion are anticipated, up from the previous estimate of $1.2 billion.

Extra Space Storage currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Prologis, Inc. (PLD Quick QuotePLD - Free Report) reported third-quarter 2022 core FFO per share of $1.73, beating the Zacks Consensus Estimate of $1.71. The figure jumped a whopping 66.3% from the year-ago quarter’s $1.04.

PLD’s results reflect healthy leasing activity with solid rent growth. The bottom line, too, improved.

Highwoods Properties Inc.’s (HIW Quick QuoteHIW - Free Report) third-quarter 2022 FFO per share of $1.04 surpassed the Zacks Consensus Estimate of 97 cents. The figure climbed 8.3% year over year.

HIW’s quarterly results reflect robust leasing activity and improvement in rents. The top line grew year over year. However, the same-property cash NOI took a slight dip from the year-ago quarter’s figure.

Boston Properties Inc.’s (BXP Quick QuoteBXP - Free Report) third-quarter 2022 FFO per share of $1.91 outpaced the Zacks Consensus Estimate of $1.87. The figure increased 10.4% year over year.

BXP’s quarterly results reflect healthy leasing activity alongside year-over-year growth in the top line. It also carried out strategic acquisitions, redevelopments and dispositions during the quarter. The company revised its 2022 outlook for FFO.

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.