Extra Space Storage(US:EXR)2025-08-01 20:37markdown [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements (unaudited)](index=6&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(unaudited)) The company's financial statements show an increase in total assets to **$29.4 billion** as of June 30, 2025, from **$28.8 billion** at year-end 2024, primarily driven by growth in real estate assets. For the six months ended June 30, 2025, total revenues grew to **$1.66 billion** from **$1.61 billion** year-over-year, and net income attributable to common stockholders increased to **$520.6 million** from **$399.0 million**. Net cash from operations remained stable at approximately **$1.0 billion** [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$29,368,011** | **$28,847,926** | | Real estate assets, net | $25,099,810 | $24,587,627 | | **Total Liabilities** | **$14,690,922** | **$13,988,564** | | Unsecured senior notes, net | $8,618,943 | $7,756,968 | | **Total Extra Space Storage Inc. stockholders' equity** | **$13,790,842** | **$13,947,535** | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$841,618** | **$810,663** | **$1,661,615** | **$1,610,202** | | Property rental | $721,004 | $697,100 | $1,425,384 | $1,385,144 | | **Net Income** | **$262,716** | **$195,412** | **$547,641** | **$419,486** | | Net income attributable to common stockholders | $249,731 | $185,872 | $520,606 | $398,984 | | **Diluted EPS** | **$1.18** | **$0.88** | **$2.45** | **$1.88** | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,025,265 | $1,010,800 | | Net cash used in investing activities | ($614,255) | ($764,767) | | Net cash used in financing activities | ($425,625) | ($269,572) | | **Net decrease in cash** | **($14,615)** | **($23,539)** | - Key investing activities in the first six months of 2025 included **$464.5 million** for real estate acquisitions and **$360.4 million** for issuing new notes receivable, partially offset by **$133.2 million** in proceeds from real estate sales and a **$200.0 million** return of investment from an unconsolidated venture[28](index=28&type=chunk) - Financing activities were dominated by significant debt turnover, with **$6.44 billion** in proceeds from new debt and **$6.97 billion** in principal payments. The company also paid **$688.1 million** in dividends to common stockholders[28](index=28&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) The notes detail the company's structure as a self-storage REIT operating **4,179 stores** (owned and/or managed) as of June 30, 2025. Key activities include the acquisition of **45 stores** for **$697.1 million** and the sale of **12 stores** for **$133.8 million** in the first half of 2025. The company's debt portfolio totaled **$12.0 billion**, with a weighted average interest rate of **4.4%**. Segment reporting highlights two main operations: self-storage and tenant reinsurance, with self-storage operations generating **$974.2 million** in NOI for the six-month period [Note 1: Organization](index=13&type=section&id=1.%20ORGANIZATION) - Extra Space Storage Inc. is a self-administered REIT focused on owning, operating, and managing self-storage properties across the United States[32](index=32&type=chunk) - As of June 30, 2025, the company owns and/or manages a total of **4,179 stores**, comprising **2,430 stores** with direct or indirect equity interests and **1,749 stores** managed for third parties[33](index=33&type=chunk) [Note 4: Acquisitions and Dispositions](index=16&type=section&id=4.%20ACQUISITIONS%20AND%20DISPOSITIONS) Store Acquisitions Summary | Period | Number of Stores | Total Real Estate Assets Value (in thousands) | | :--- | :--- | :--- | | **Total 2025 (YTD)** | **45** | **$697,149** | | Q2 2025 | 28 | $448,928 | | Q1 2025 | 17 | $248,221 | | **Total 2024 (YTD)** | **9** | **$62,996** | - During the six months ended June 30, 2025, the company sold **12 stores** for approximately **$133.8 million**, resulting in a net gain of **$34.9 million** after accounting for losses on other asset sales[53](index=53&type=chunk) [Note 7: Earnings Per Common Share](index=18&type=section&id=7.%20EARNINGS%20PER%20COMMON%20SHARE) Earnings Per Common Share Calculation (in thousands, except per share data) | Description | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net income attributable to common stockholders | $520,606 | $398,984 | | Weighted average common shares outstanding - basic | 211,895,586 | 211,433,877 | | Weighted average common shares outstanding - diluted | 211,895,586 | 220,114,016 | | **Basic EPS** | **$2.45** | **$1.88** | | **Diluted EPS** | **$2.45** | **$1.88** | [Note 10: Debt](index=22&type=section&id=10.%20DEBT) - Total term debt increased to **$12.0 billion** at June 30, 2025, from **$11.2 billion** at December 31, 2024[71](index=71&type=chunk) - As of June 30, 2025, the company's debt had a combined weighted average interest rate of **4.4%**, with **77.6%** of it being fixed-rate debt[78](index=78&type=chunk) - The company established a **$1 billion** commercial paper program in November 2024, with **$700 million** outstanding as of June 30, 2025[74](index=74&type=chunk) [Note 12: Stockholders' Equity](index=24&type=section&id=12.%20STOCKHOLDERS%27%20EQUITY) - In the first six months of 2025, the company repurchased **68,585 shares** for **$8.6 million** under its **$500 million** share repurchase program, with **$491.4 million** remaining authorized[89](index=89&type=chunk) - The company has an **$800 million** "at the market" (ATM) equity program established in April 2024, but no shares have been sold under it as of June 30, 2025[88](index=88&type=chunk) [Note 15: Segment Information](index=27&type=section&id=15.%20SEGMENT%20INFORMATION) - The company operates through two reportable segments: (1) self-storage operations and (2) tenant reinsurance. Performance is assessed by the Executive Committee based on Net Operating Income (NOI)[106](index=106&type=chunk) Segment Net Operating Income (NOI) (in thousands) | Segment | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Self-Storage Operations | $974,181 | $983,724 | | Tenant Reinsurance | $139,223 | $126,916 | | **Total Segment NOI** | **$1,113,404** | **$1,110,640** | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=30&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management reports that revenue growth for the first half of 2025 was driven by acquisitions, which added **$47.6 million** in property rental revenue. However, same-store NOI decreased by **2.2%** year-over-year due to an **17.5%** increase in property taxes. The company's liquidity remains strong with **$125 million** in cash and access to credit facilities. The FFO attributable to common stockholders and unit holders was **$867.4 million** for the first six months of 2025, a slight increase from **$855.0 million** in the prior year [Properties](index=31&type=section&id=PROPERTIES) - As of June 30, 2025, the company's portfolio includes **4,179 owned and/or managed stores** across **43 states** and Washington, D.C[122](index=122&type=chunk) - The portfolio consists of **2,005 wholly-owned stores**, **11 in consolidated joint ventures**, **414 in unconsolidated joint ventures**, and **1,749 stores** managed for third parties[122](index=122&type=chunk) - The top three states by total store count are **Florida (542)**, **Texas (537)**, and **California (421)**[125](index=125&type=chunk) [Results of Operations](index=33&type=section&id=RESULTS%20OF%20OPERATIONS) Revenue Analysis for the Six Months Ended June 30 (in thousands) | Revenue Source | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Property rental | $1,425,384 | $1,385,144 | $40,240 | 2.9% | | Tenant reinsurance | $173,284 | $165,052 | $8,232 | 5.0% | | Management fees and other income | $62,947 | $60,006 | $2,941 | 4.9% | | **Total revenues** | **$1,661,615** | **$1,610,202** | **$51,413** | **3.2%** | - The **$40.2 million** increase in property rental revenue for H1 2025 was primarily due to **$47.6 million** from acquisitions, partially offset by a **$10.7 million** decrease from dispositions[127](index=127&type=chunk) Expense Analysis for the Six Months Ended June 30 (in thousands) | Expense Category | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Property operations | $451,203 | $401,420 | $49,783 | 12.4% | | General and administrative | $90,926 | $83,623 | $7,303 | 8.7% | | Depreciation and amortization | $357,622 | $391,775 | ($34,153) | (8.7)% | | **Total expenses** | **$933,812** | **$914,954** | **$18,858** | **2.1%** | [Funds From Operations (FFO)](index=35&type=section&id=FUNDS%20FROM%20OPERATIONS) FFO Reconciliation (in thousands) | Description | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net income attributable to common stockholders | $520,606 | $398,984 | | Adjustments (Depreciation, Amortization, etc.) | $346,749 | $456,020 | | **FFO attributable to common stockholders and unit holders** | **$867,355** | **$855,004** | [Same-Store Results](index=36&type=section&id=SAME-STORE%20RESULTS) - The same-store pool consists of **1,829 wholly-owned, stabilized properties**[143](index=143&type=chunk) Same-Store Performance for the Six Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Total rental revenues | $1,325,379 | $1,323,413 | 0.1% | | Total operating expenses | $383,824 | $360,981 | 6.3% | | **Net operating income (NOI)** | **$941,555** | **$962,432** | **(2.2)%** | | Square foot occupancy (period end) | 94.6% | 94.0% | 0.6% | - The increase in same-store operating expenses was driven by a **17.5%** rise in property taxes for the six-month period[144](index=144&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) - As of June 30, 2025, the company had **$125.0 million** in cash and cash equivalents[149](index=149&type=chunk) Debt Profile as of June 30, 2025 | Metric | Value (USD) | | :--- | :--- | | Total face value of debt | $13,169,719,000 | | Total fixed-rate debt % | 77.6% | | Weighted average interest rate | 4.4% | - The company holds a **BBB+/Stable** rating from S&P and a **Baa2/Positive** rating from Moody's[153](index=153&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to interest rate risk, primarily through its variable-rate debt. As of June 30, 2025, approximately **$2.9 billion** of its **$13.2 billion** total debt was subject to variable rates. A hypothetical **100 basis point (1%)** change in the SOFR would impact annual earnings and cash flows by approximately **$29.4 million** - As of June 30, 2025, the company had approximately **$13.2 billion** in total debt, with **$2.9 billion** subject to variable interest rates[161](index=161&type=chunk) - A **100 basis point (1%)** increase or decrease in SOFR would change annual interest expense by approximately **$29.4 million**[161](index=161&type=chunk) [Controls and Procedures](index=41&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of June 30, 2025. There were no material changes to the internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[165](index=165&type=chunk) - No changes occurred during the most recent quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[166](index=166&type=chunk) [PART II. OTHER INFORMATION](index=42&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=42&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various legal proceedings and claims arising in the ordinary course of business. Management establishes accrued liabilities for losses that are both probable and reasonably estimable, but the ultimate outcomes are inherently unpredictable - The company is subject to various legal proceedings and claims from its ordinary course of business, with outcomes that cannot be determined with certainty[167](index=167&type=chunk) [Risk Factors](index=42&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes have been made to the risk factors described in the Annual Report on Form 10-K for the year ended December 31, 2024[168](index=168&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) There were no unregistered sales of equity securities during the period - None[169](index=169&type=chunk) [Exhibits](index=43&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including various agreements, indentures, and certifications by the CEO and CFO - The report includes a comprehensive list of filed exhibits, such as the Equity Distribution Agreement, merger agreements, articles of incorporation, debt indentures, and executive certifications[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)