Extra Space Storage reaches high marks (Series 3 of 5)


Second largest self-storage REIT, Extra Space Storage (NYSE: EXR) reaches high marks when it comes to cleanliness and employee satisfaction. However, do not take that as a sign that you can move in with your TV and sofa to live and work from your storage box. Some store managers live on-site, but the same ability is not extended to renters. Besides, you are not allowed to plug in appliances.

Extra Space Storage was founded in 1977 and enjoys ownership interest in 828 stores spread across 35 states as well as Puerto Rico and Washington, DC. Of those, 557 are wholly owned while 271 are joint venture partnerships. Add in 260 units owned by third parties, but operated by Extra Space Storage in return for a management fee and the entirety of this storage enterprise is just plain massive. It should be noted that 86 percent of the company’s revenues is derived from the rental side of business.

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Additional high marks:

  • Dividends have compounded at an annual growth rate of 18% since going public in 2004. The company has experienced only one reduction and that was in 2009 when just surviving the Great Recession intact could be taken as a good sign. An even better sign is that current dividend distribution levels have actually surpassed those from the pre-recession era.

EXR Q4 14 Revenues

  • Funds from operation (FFO) per share have increased at a compounded annual growth rate of 28 percent over the past three years, but management forecasts at least a 15 percent rate of growth in 2015. The company’s double digit rate of growth in revenue over the past three years has far surpassed expectations while at the same time enjoying same store revenue and net operating income growth in the high single digits. Occupancy rates have increased by over a hundred of basis points.


  • Extra Space Storage has consistently aimed at deleverage of its debt and current debt to enterprise figure stand at around 25 percent. That figure is more than reasonable in comparison to the figures reported by Sovran Storage and CubeSmart. In addition, 36% of the debt of Extra Space Storage is subject to variable interest rates. The combined weighted average interest rate is 3.4% with a weighted average maturity of approximately 4.6 years. As for the bad news: 84% of the loan is secured.

Extra Space Storage has been trading at a median year-end price-to-FFO figure of 22.2x. The projected FFO per share for the current year (2015) is $2.90 which translates into a fair price somewhere in the $64 range. That figure is just slightly below the $66.85 per share price the stock hit on April 21, 2015.

Out of the thirteen sell-side analysts covering the stock, six favor Extra Space Storage while seven have placed it on hold. The six “buy” ratings should at a minimum be taken as a sign that the stock should be moved to your watchlist.

Who knows, maybe they will allow self-storage living.



Metrics 2011 2012 2013 2014 2015P*
Dividends declared per common share, $ 0.56 0.85 1.45 1.81 1.88
Q4 Dividend, $ 0.14 0.25 0.40 0.62
Dividend payout ratio, in percent 46 52 68 69
Dividend yield, in percent 2.3 2.3 3.4 3.1
FFO per share, $ 1.20 1.59 1.96 2.52 2.90
FFO per share (Q4 only), $ 0.35 0.43 0.52 0.62
AFFO per share, $ 1.23 1.64 2.12 2.61 2.94
Debt to total capitalization, in percent 36.2 27.4 27.5 24.7
Net Debt to EBITDA 6.94 6.03 5.50 5.61
Revenues – Total, in percent 17.1 24.1 27.2 24.3
Revenues – Same Store, in percent 5.8 6.6 7.4 7.5 6.3
NOI – Same Store, in percent 9.3 10.2 10.0 9.5 7.0
Occupancy – Same Store, in percent 86.9 87.9 89.2 91.4
Share Price on 31 December, $ 24.23 36.39 42.13 58.64 64.24
P/FFO on 31 December 20.2 22.9 21.5 23.3 22.2
 *2015P – 2015 Projections

Written by Heli Brecailo

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