Extra Space Storage Inc

Previous wording

As of June 30, 2024, we owned or had ownership interests in 2,389 operating stores. Of these stores, 1,912 are wholly-owned, five are in consolidated joint ventures, and 472 are in unconsolidated joint ventures. In addition, we managed an additional 1,423 stores for third parties bringing the total number of stores which we own and/or manage to 3,812. These stores are located in 42 states and Washington, D.C. The majority of our stores are clustered around large population centers. The clustering of assets around these population centers enables us to reduce our operating costs through economies of scale. Our acquisitions have given us an increased scale in many core markets as well as a foothold in many markets where we had no previous presence.

Current wording

As of September 30, 2024, we owned or had ownership interests in 2,401 operating stores. Of these stores, 1,934 are wholly-owned, seven are in consolidated joint ventures, and 460 are in unconsolidated joint ventures. In addition, we managed an additional 1,461 stores for third parties bringing the total number of stores which we own and/or manage to 3,862. These stores are located in 42 states and Washington, D.C. The majority of our stores are clustered around large population centers. The clustering of assets around these population centers enables us to reduce our operating costs through economies of scale. Our acquisitions have given us an increased scale in many core markets as well as a foothold in many markets where we had no previous presence.

Previous wording

As of June 30, 2024, approximately 2,235,000 tenants were leasing storage units at the operating stores that we own and/or manage, primarily on a month-to-month basis, providing the flexibility to increase rental rates over time as market conditions permit. Existing tenants generally receive rate increases at least annually, for which no direct correlation has been drawn to our vacancy trends. Although leases are short-term in duration, the typical tenant tends to remain at our stores for an extended period of time. For stores that were stabilized as of June 30, 2024, the average length of stay for tenants who have vacated was approximately 17.5 months.

Current wording

As of September 30, 2024, approximately 2,245,000 tenants were leasing storage units at the operating stores that we own and/or manage, primarily on a month-to-month basis, providing the flexibility to increase rental rates over time as market conditions permit. Existing tenants generally receive rate increases at least annually, for which no direct correlation has been drawn to our vacancy trends. Although leases are short-term in duration, the typical tenant tends to remain at our stores for an extended period of time. For stores that were stabilized as of September 30, 2024, the average length of stay for tenants who have vacated was approximately 17.2 months.

Previous wording

The average annual rent per square foot for our existing customers at stabilized stores, net of discounts and bad debt, was $20.38 for the three months ended June 30, 2024 and 2023. Average annual rent per square foot for new leases was $15.60 for the three months ended June 30, 2024, compared to $17.15 for the three months ended June 30, 2023. The average discounts, as a percentage of rental revenues, at all stabilized properties during these periods were 2.3% and 2.7%, respectively.

Current wording

The average annual rent per square foot for our existing customers at stabilized stores, net of discounts and bad debt, was $20.55 for the three months ended September 30, 2024, compared to $20.73 for the three months ended September 30, 2023. Average annual rent per square foot for new leases was $13.49 for the three months ended September 30, 2024, compared to $15.63 for the three months ended September 30, 2023. The average discounts, as a percentage of rental revenues, at all stabilized properties during these periods were 2.2% and 2.7%, respectively.

Previous wording

(1) Includes five consolidated joint ventures and excludes approximately 18,000 units related to Bargold.

Current wording

(1) Includes seven consolidated joint ventures and excludes approximately 18,200 units related to Bargold.

Previous wording

Comparison of the three and six months ended June 30, 2024 and 2023

Current wording

Comparison of the three and nine months ended September 30, 2024 and 2023

Previous wording

Results for the three and six months ended June 30, 2024 included the operations of 2,389 stores (1,912 wholly-owned, five in consolidated joint ventures, and 472 in joint ventures accounted for using the equity method) compared to the results for the three and six months ended June 30, 2023, which included the operations of 1,457 stores (1,133 wholly-owned, one in a consolidated joint venture, and 323 in joint ventures accounted for using the equity method).

Current wording

Results for the three and nine months ended September 30, 2024 included the operations of 2,401 stores (1,934 wholly-owned, seven in consolidated joint ventures, and 460 in joint ventures accounted for using the equity method) compared to the results for the three and nine months ended September 30, 2023, which included the operations of 2,369 stores (1,896 wholly-owned, two in a consolidated joint venture, and 471 in joint ventures accounted for using the equity method).

Previous wording

Property Rental—The increase in property rental revenues for the three and six months ended June 30, 2024 was primarily the result of an increase of $501,213 associated with the merger of Life Storage (the “Life Storage Merger”), other acquisitions completed in 2023, and acquisitions completed in the first six months of 2024. We acquired 761 wholly-owned stores in 2023 and an additional nine wholly-owned stores during the six months ended June 30, 2024.

Current wording

Property Rental—The increase in property rental revenues for the nine months ended September 30, 2024 was primarily the result of an increase of $561,324 associated with the merger of Life Storage (the “Life Storage Merger”), other acquisitions completed in 2023, and acquisitions completed in the first nine months of 2024. We acquired 771 wholly-owned stores in 2023 and an additional 20 wholly-owned stores during the nine months ended September 30, 2024. The Life Storage Merger occurred on July 20, 2023; therefore the three months ended September 30, 2024 include the additional store count for the full quarter compared to the three months ended September 30, 2023 only including the significantly increased store count from the Merger date forward.

Previous wording

Tenant Reinsurance—The increase in tenant reinsurance revenues was due primarily to an increase in the number of stores operated. We operated 3,812 stores at June 30, 2024 compared to 2,388 stores at June 30, 2023.

Current wording

Tenant Reinsurance—The increase in tenant reinsurance revenues was due primarily to an increase in the number of stores operated. The three and nine months ended September 30, 2024 include the larger store count from the Life Storage Merger for the entire respective periods, while the results for the three and nine months ended September 30, 2023 only include the Life Storage stores from July 20, 2023 forward. We operated 3,862 stores at September 30, 2024 compared to 3,651 stores at September 30, 2023.

Previous wording

Management Fees and Other Income—Management fees and other income primarily represent the fees collected for our management of stores owned by third parties and unconsolidated joint ventures and other transaction fee income. The increase for the three and six months ended June 30, 2024 was due to both an increase in the number of stores managed and an increase in the overall revenue of stores under management when compared to the same period last year. As of June 30, 2024, we managed 1,895 stores for joint ventures and third parties, compared to 1,254 stores as of June 30, 2023.

Current wording

Management Fees and Other Income—Management fees and other income primarily represent the fees collected for our management of stores owned by third parties and unconsolidated joint ventures and other transaction fee income. The increase for the nine months ended September 30, 2024 was due to both an increase in the number of stores managed and an increase in the overall revenue of stores under management when compared to the same period last year. As of September 30, 2024, we managed 1,921 stores for unconsolidated joint ventures and third parties, compared to 1,755 stores as of September 30, 2023.

Previous wording

Property Operations—The increase in property operations expense during the three and six months ended June 30, 2024 consists primarily of an increase of $152,504 related to the Life Storage Merger, other acquisitions completed in 2023, and acquisitions completed in the first six months of 2024. We acquired 761 wholly-owned stores in 2023 and an additional nine wholly-owned stores during the six months ended June 30, 2024. Additionally, for the three and six months ended June 30,

Current wording

Property Operations—The increase in property operations expense during the three and nine months ended September 30, 2024 consists primarily of an increase of $174,964 related to the Life Storage Merger and acquisitions completed in the first nine months of 2024. The Life Storage Merger occurred on July 20, 2023; therefore the three and nine months ended September 30, 2024 include the additional store count for the full quarter, as compared to the three and nine months ended September 30, 2023 only including the significantly increased store count from acquisition date forward. We acquired 771 wholly-owned stores in 2023 and an additional 20 wholly-owned stores during the nine months ended September 30, 2024. Additionally, for the three and nine months ended September 30, 2024 there was an increase of $16,139 at our stabilized stores primarily due to property and casualty insurance, payroll, marketing, and property tax, partially offset by utilities.

Previous wording

Tenant Reinsurance—Tenant reinsurance expense represents the costs that are incurred to provide tenant reinsurance. These increases are primarily related to an increase in stores. We operated 3,812 stores at June 30, 2024 compared to 2,388 stores at June 30, 2023.

Current wording

Tenant Reinsurance—Tenant reinsurance expense represents the costs that are incurred to provide tenant reinsurance. The increase is largely due to the number of stores operated during each period. The three and nine months ended September 30, 2024 include the larger store count from the Life Storage Merger for the entire respective periods, while the results for the three and nine months ended September 30, 2023 only include those stores from July 20, 2023 forward. We operated 3,862 stores at September 30, 2024 compared to 3,651 stores at September 30, 2023.

Previous wording

Depreciation and Amortization—Depreciation and amortization expense increased as a result of the acquisition of new stores. We acquired 761 wholly-owned stores in 2023 and an additional nine wholly-owned stores during the six months ended June 30, 2024. Additionally, the increase relates to the amortization of intangibles recorded as part of the Life Storage Merger.

Current wording

Depreciation and Amortization—Depreciation and amortization expense increased as a result of the acquisition of new stores. We acquired 771 wholly-owned stores in 2023 (757 wholly-owned stores in the Life Storage Merger on July 20, 2023) and an additional 20 wholly-owned stores during the nine months ended September 30, 2024. As a result, depreciation expense was higher for the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023. Additionally, the increase relates to the amortization of intangibles recorded as part of the Life Storage Merger.

Previous wording

Interest Expense—The increase in interest expense during the three and six months ended June 30, 2024 was primarily the result of a higher debt balance and higher weighted average interest rate compared to the same period in the prior year. As of June 30, 2024, we had approximately $11.8 billion in total face value of debt, compared to approximately $7.5 billion at June 30, 2023. The increase in the face value of debt is due to the Life Storage Merger. The weighted average interest rate of the total of fixed- and variable-rate debt was 4.6% at June 30, 2024, compared to 4.5% at June 30, 2023.

Current wording

Interest Expense—The increase in interest expense during the three and nine months ended September 30, 2024 was primarily the result of higher outstanding debt and a higher weighted average interest rate compared to the same period in the prior year. As of September 30, 2024, we had approximately $11.8 billion in total face value of debt, compared to approximately $11.3 billion as of September 30, 2023. The total face value of debt as of September 30, 2023 reflected an additional $3.7 billion of debt issued in connection with closing the Life Storage Merger on July 20, 2023.

Previous wording

Interest Income—Interest income represents interest earned on variable interest rate bridge loans, debt securities and on notes receivable from Common and Preferred Operating Partnership unit holders. The increase in interest income during the three and six months ended June 30, 2024 was primarily the result of an increase in amount of bridge loans held combined with an increase in interest rates. The balance of bridge loans was $1,136,306 as of June 30, 2024, compared to $540,355 as of June 30, 2023.

Current wording

Interest Income—Interest income represents interest earned on variable interest rate bridge loans, debt securities and on notes receivable from Common and Preferred Operating Partnership unit holders. The increase in interest income during the three and nine months ended September 30, 2024 was primarily the result of an increase in the amount of bridge loans outstanding combined with an increase in interest rates. The balance of bridge loans was $1,032,244 as of September 30, 2024, compared to $533,000 as of September 30, 2023.

Previous wording

Income Tax Expense—The increase in income tax expense for the three and six months ended June 30, 2024 was primarily the result of an increase in book income and a decrease in permanent tax deductions related to stock awards.

Current wording

Income Tax Expense—The increase in income tax expense for the three and nine months ended September 30, 2024 was primarily the result of an increase in book income and a decrease in permanent tax deductions related to stock awards.

Previous wording

Our same-store pool for the periods presented consists of 1,078 stores that are wholly-owned and operated and that were stabilized by the first day of the earliest calendar year presented. We consider a store to be stabilized once it has been open for three years or has sustained average square foot occupancy of 80% or more for one calendar year. We believe that by providing same-store results from a stabilized pool of stores, with accompanying operating metrics including, but not limited to: occupancy, rental revenue growth, operating expense growth, net operating income growth, etc., stockholders and potential investors are able to evaluate operating performance without the effects of non-stabilized occupancy levels, rent levels, expense levels, acquisitions or completed developments. Same-store results should not be used as a basis for future same-store performance or for the performance of our stores as a whole. The following table presents operating data for our same-store portfolio.

Current wording

Our same-store pool for the periods presented consists of 1,075 stores that are wholly-owned and operated and that were stabilized by the first day of the earliest calendar year presented. We consider a store to be stabilized once it has been open for three years or has sustained average square foot occupancy of 80% or more for one calendar year. We believe that by providing same-store results from a stabilized pool of stores, with accompanying operating metrics including, but not limited to: occupancy, rental revenue growth, operating expense growth, net operating income growth, etc., stockholders and potential investors are able to evaluate operating performance without the effects of non-stabilized occupancy levels, rent levels, expense levels, acquisitions or completed developments. Same-store results should not be used as a basis for future same-store performance or for the performance of our stores as a whole. The following table presents operating data for our same-store portfolio.

Previous wording

Cash flows from operating activities for the six months ended June 30, 2024 increased when compared to the same period in the prior year. Cash flows used in investing activities relate primarily to our acquisition and development of new stores, sales of stores, investments in unconsolidated real estate entities and notes receivable from bridge loans, and fluctuate depending on our actions in those areas. Cash flows from financing activities depend primarily on our debt and equity financing activities. A summary of cash flows along with significant components are as follows:

Current wording

Cash flows from operating activities for the nine months ended September 30, 2024 increased when compared to the same period in the prior year. Cash flows used in investing activities relate primarily to our acquisition and development of new stores, sales of stores, investments in unconsolidated real estate entities notes receivable from bridge loans, and fluctuate depending on our actions in those areas. Cash flows from financing activities depend primarily on our debt and equity financing activities. A summary of cash flows along with significant components are as follows:

Previous wording

As of June 30, 2024, we had $76,973 available in cash and cash equivalents. Our cash and cash equivalents are held in accounts managed by third party financial institutions and consist of invested cash and cash in our operating accounts. During 2024 and 2023, we experienced no loss or lack of access to our cash or cash equivalents; however, there can be no assurance that access to our cash and cash equivalents will not be impacted by adverse conditions in the financial markets.

Current wording

As of September 30, 2024, we had $88,931 available in cash and cash equivalents. Our cash and cash equivalents are held in accounts managed by third party financial institutions and consist of invested cash and cash in our operating accounts. During 2024 and 2023, we experienced no loss or lack of access to our cash and cash equivalents; however, there can be no assurance that access to our cash and cash equivalents will not be impacted by adverse conditions in the financial markets.

Previous wording

As of June 30, 2024, we had $11,803,723 face value of debt, resulting in a debt to total enterprise value ratio of 25.5%. As of June 30, 2024, the ratio of total fixed-rate debt and other instruments to total debt was 75.0% ($8,857,343 total fixed-rate debt including $1,383,303 on which we have interest rate swaps that have been included as fixed-rate debt). The weighted average interest rate of the total of fixed- and variable-rate debt at June 30, 2024 was 4.6%. Certain real estate assets are pledged as collateral for our debt. We are subject to certain restrictive covenants relating to our outstanding debt. We were in compliance with all financial covenants at June 30, 2024.

Current wording

As of September 30, 2024, we had $11,827,208 face value of debt, resulting in a debt to total enterprise value ratio of 22.8%. As of September 30, 2024, the ratio of total fixed-rate debt and other instruments to total debt was 78.3% ($9,256,376 total fixed-rate debt including $1,382,568 on which we have interest rate swaps that have been included as fixed-rate debt). The weighted average interest rate of the total of fixed- and variable-rate debt at September 30, 2024 was 4.5%. Certain real estate assets are pledged as collateral for our debt. We are subject to certain restrictive covenants relating to our outstanding debt. We were in compliance with all financial covenants at September 30, 2024.

Previous wording

We hold a BBB+/Stable rating from S&P, which was upgraded from BBB/Stable in July 2023 in connection with the Life Storage Merger, and a Baa2 rating from Moody's Investors Service. We intend to manage our balance sheet to maintain these ratings. Certain of our real estate assets are pledged as collateral for our debt. As of June 30, 2024, we had a total of 1,680 unencumbered stores as defined by our public bonds. Our unencumbered asset value was calculated as $32,357,105 and our total asset value was calculated as $38,192,174 according to the calculations as defined by our public bonds.

Current wording

We hold a BBB+/Stable rating from S&P, which was upgraded from BBB/Stable in July 2023 in connection with the Life Storage Merger, and a Baa2 rating from Moody's Investors Service. We intend to manage our balance sheet to maintain these ratings. Certain of our real estate assets are pledged as collateral for our debt. As of September 30, 2024, we had a total of 1,705 unencumbered stores as defined by our public bonds. Our unencumbered asset value was calculated as $29,442,214 and our total asset value was calculated as $34,958,852 according to the calculations as defined by our public bonds.

Previous wording

On April 15, 2024, we entered into equity distribution agreement (the “Equity Distribution Agreement”) with certain sales agents and forward purchasers named therein. Under the terms of the Equity Distribution Agreement, we may issue and sell, and the forward purchasers may sell, from time to time through or to the sales agents, shares of our common stock having an aggregate offering price of up to $800 million. The shares of common stock will be offered pursuant to our effective registration statement on Form S-3 (Registration Statement No. 333-278690) previously filed with and declared effective by the Securities and Exchange Commission (the “SEC”) and a prospectus supplement and accompanying prospectus, filed with the SEC. As of June 30, 2024, no shares have been sold under the Equity Distribution Agreement, which we refer to as our "at the market" equity program.

Current wording

On April 15, 2024, we entered into an equity distribution agreement (the “Equity Distribution Agreement”) with certain sales agents and forward purchasers named therein. Under the terms of the Equity Distribution Agreement, we may issue and sell, and the forward purchasers may sell, from time to time through or to the sales agents, shares of our common stock having an aggregate offering price of up to $800 million. The shares of common stock will be offered pursuant to our effective registration statement on Form S-3 (Registration Statement No. 333-278690) previously filed with and declared effective by the Securities and Exchange Commission (the “SEC”) and a prospectus supplement and accompanying prospectus, filed with the SEC. As of September 30, 2024, no shares have been sold under the Equity Distribution Agreement, which we refer to as our "at the market" equity program.