Extra Space Storage (EXR) Q3 FFO & Revenues Beat Estimates
Zacks Investment Research | Oct 30, 2018 11:11PM ET
Extra Space Storage, Inc.’s (NYSE:EXR) third-quarter 2018 core funds from operations (FFO) per share of $1.20 outpaced the Zacks Consensus Estimate of $1.19. The figure also came in 6.2% higher than the prior-year quarter.
Results reflect growth in same-store revenues and net operating income (NOI). Further, higher rental rates supported growth, while increased discounts partly muted the benefit.
Quarterly revenues of $307 million climbed 8% year over year. Also, the revenue figure surpassed the Zacks Consensus Estimate of $302.4 million.
Behind the Headlines
Same-store rental revenues increased 3.2% year over year to $244.0 million during the third quarter, while same-store NOI was up 3.3% to $178.3 million. The upswing in same-store revenues stemmed from higher rental rates for new and existing customers, but was partly muted by increased discounts. Same-store square foot occupancy was 93.9% as of Sep 30, 2018, up 20 basis points from 93.7% as of Sep 30, 2017.
Notably, during the reported quarter, Atlanta, Hawaii, Indianapolis, Las Vegas and Los Angeles were the major markets, which recorded revenue growth above the company's portfolio average. However, markets, which performed below the company's portfolio average, included Charleston, Dallas, Norfolk/Virginia Beach, Washington D.C. and West Palm Beach/Boca Raton.
Portfolio Activity
Extra Space Storage acquired five operating stores, and one store at completion of construction for an aggregate investment of around $74.3 million in the Jul-Sep period. Also, in combination with the JV partners, the company acquired eight operating stores, three Certificate of Occupancy stores, as well as accomplished one development for a total cost of about $127.1 million. Of this, the company invested $34.6 million.
On the other hand, it disposed a store in Menlo Park, CA, for $40.7 million, realizing a gain of $30.7 million. The asset sale came as part of the reverse 1031 exchange for stores earlier purchased by the company.
As of Sep 30, 2018, the company managed 507 stores for third-party owners. Moreover, with additional 227 stores owned and operated in joint ventures, the company’s total stores under management reached 734.
Balance Sheet
Extra Space Storage exited the Sep-end quarter with roughly $45.4 million of cash and cash equivalents, down from $55.7 million at the end of 2017. As of Sep 30, 2018, the company's percentage of fixed-rate debt to total debt was 74.4%.
In addition, during the quarter, 343,251 shares of common stock were sold by the company using its ATM equity program, at an average sales price of $99.75 per share. This resulted in net proceeds of $33.8 million after deduction of offering costs. Finally, as of Sep 30, 2018, Extra Space Storage had $315.1 million available for issuance under its ATM equity program.
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Outlook
Extra Space Storage revised its outlook for 2018. The company now anticipates core FFO per share of $4.62-$4.66. The Zacks Consensus Estimate for the same is currently pegged at $4.63 and lies within the guided range.
The company projects same-store revenue growth of 3.75- 4.25% and same-store property NOI growth of around 3.5-4.25% for the current year.
In Conclusion
Impressive performance of Extra Space Storage in the third quarter is encouraging. The company enjoys presence in key cities and opts for strategic joint ventures to drive long-term profitability. Focus on expansion of its geographical footprint through accretive acquisitions and third-party management platforms bode well for Extra Space Storage. Additionally, a solid balance sheet and fragmented ownership of its industry will likely be conducive to portfolio consolidation and strategic acquisitions.
Nevertheless, many of the company’s markets are witnessing an escalating supply of new self-storage space, which is anticipated to heighten competition, curb its power to raise rents and turn on more discounting. Rate hike adds to its woes.
Extra Space Storage currently has a Zacks Rank #3 (Hold). You can see Original post
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