Extra Space Storage(EXR) - 2022 Q1 - Quarterly Report

STATEMENT ON FORWARD-LOOKING INFORMATION This section clarifies that the report contains forward-looking statements based on current expectations and assumptions, which are subject to various risks and uncertainties Forward-Looking Statements and Risks This section clarifies that the report contains forward-looking statements based on current expectations and assumptions, which are subject to various risks and uncertainties. It disclaims any obligation to publicly update these statements and advises readers to consider the listed risk factors - Forward-looking statements are identified by terminology such as 'believes,' 'expects,' 'estimates,' 'may,' 'will,' 'should,' 'anticipates,' or 'intends' and are based on current expectations and assumptions[7][8] - The company disclaims any duty or obligation to update or revise any forward-looking statements to reflect new information, future events, or otherwise[12] - Key risks that could cause actual results to differ materially include adverse changes in economic conditions, competition, potential liability for uninsured losses, regulatory impacts, disruptions in financial markets, impacts from the COVID-19 pandemic, reliance on information technologies, increased interest rates, and economic uncertainty due to natural disasters, war, or terrorism[9] PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (unaudited) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, comprehensive income, noncontrolling interests and equity, and cash flows, providing a snapshot of the company's financial performance and position for the reported interim periods Condensed Consolidated Balance Sheets | Metric | March 31, 2022 (unaudited) (in thousands) | December 31, 2021 (in thousands) | | :--------------------------------------- | :---------------------------------------- | :------------------------------- | | Total Assets | $10,591,750 | $10,474,477 | | Total Liabilities | $6,713,586 | $6,688,501 | | Total Extra Space Storage Inc. Stockholders' Equity | $3,210,215 | $3,116,496 | | Total Liabilities, Noncontrolling Interests and Equity | $10,591,750 | $10,474,477 | Condensed Consolidated Statements of Operations | Metric | For the Three Months Ended March 31, 2022 (in thousands) | For the Three Months Ended March 31, 2021 (in thousands) | | :--------------------------------------- | :------------------------------------------------------- | :------------------------------------------------------- | | Total Revenues | $443,562 | $358,857 | | Total Expenses | $208,252 | $181,667 | | Net Income | $217,717 | $215,501 | | Net Income Attributable to Common Stockholders | $203,579 | $202,998 | | Basic EPS | $1.52 | $1.54 | | Diluted EPS | $1.51 | $1.53 | | Cash Dividends Paid Per Common Share | $1.50 | $1.00 | Condensed Consolidated Statements of Comprehensive Income | Metric | For the Three Months Ended March 31, 2022 (in thousands) | For the Three Months Ended March 31, 2021 (in thousands) | | :--------------------------------------- | :------------------------------------------------------- | :------------------------------------------------------- | | Net Income | $217,717 | $215,501 | | Change in Fair Value of Interest Rate Swaps | $51,649 | $23,013 | | Total Comprehensive Income | $269,366 | $238,514 | | Comprehensive Income Attributable to Common Stockholders | $252,582 | $224,911 | Condensed Consolidated Statement of Noncontrolling Interests and Equity | Metric | Balances at December 31, 2021 (in thousands) | Balances at March 31, 2022 (in thousands) | | :--------------------------------------- | :----------------------------------------- | :---------------------------------------- | | Total Noncontrolling Interests and Equity | $3,785,976 | $3,878,164 | | Issuance of Common Stock in Connection with Share Based Compensation | — | $4,542 | | Redemption of Operating Partnership Units for Cash | — | $(2,672) | | Redemption of Preferred B Units for Cash | — | $(3,375) | | Issuance of Common Stock in Conjunction with Acquisitions | — | $40,965 | | Net Income | $217,717 | $217,717 | | Other Comprehensive Income | — | $51,649 | | Dividends Paid on Common Stock | $(128,245) | $(202,527) | Condensed Consolidated Statements of Cash Flows | Metric | For the Three Months Ended March 31, 2022 (in thousands) | For the Three Months Ended March 31, 2021 (in thousands) | | :--------------------------------------- | :------------------------------------------------------- | :------------------------------------------------------- | | Net Cash Provided by Operating Activities | $287,465 | $203,880 | | Net Cash Provided by (Used in) Investing Activities | $(121,372) | $42,595 | | Net Cash Used in Financing Activities | $(169,621) | $(311,689) | | Net Decrease in Cash, Cash Equivalents, and Restricted Cash | $(3,528) | $(65,214) | | Cash, Cash Equivalents, and Restricted Cash, End of Period | $72,666 | $62,795 | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS This section provides detailed notes to the unaudited condensed consolidated financial statements, covering the company's organization, accounting policies, fair value disclosures, real estate assets, earnings per share, acquisitions, investments, debt, derivatives, equity, noncontrolling interests, segment information, and commitments and contingencies 1. ORGANIZATION The company operates as a self-administered REIT, owning and managing a large portfolio of self-storage properties across multiple states - Extra Space Storage Inc. is a fully integrated, self-administered and self-managed real estate investment trust (REIT) focused on owning, operating, managing, acquiring, developing, and redeveloping self-storage properties[35] - As of March 31, 2022, the Company had direct and indirect equity interests in 1,283 stores and managed an additional 847 stores for third parties, totaling 2,130 stores across 41 states and Washington, D.C[36] 2. BASIS OF PRESENTATION The unaudited condensed consolidated financial statements adhere to U.S. GAAP for interim reporting, incorporating specific hedge accounting expedients for reference rate reform - The accompanying unaudited condensed consolidated financial statements are presented in accordance with U.S. GAAP for interim financial information and instructions to Form 10-Q[37] - The Company elected to apply hedge accounting expedients related to probability and effectiveness assessments for future LIBOR-indexed cash flows, as provided by ASU 2020-04 and ASU 2021-01, to manage reference rate reform[38] 3. FAIR VALUE DISCLOSURES This section outlines the company's fair value measurements for financial instruments, particularly interest rate swaps, and discloses assets held for sale - The Company uses interest rate swaps to manage interest rate risk, with valuations determined using discounted cash flow analysis and observable market-based inputs, primarily classified within Level 2 of the fair value hierarchy[40][42] - As of March 31, 2022, the Company had two operating stores classified as held for sale, with their estimated fair value less selling costs exceeding their carrying value, resulting in no impairment loss[48] Financial Instrument Fair and Carrying Values | Financial Instrument | Fair Value (March 31, 2022, in thousands) | Carrying Value (March 31, 2022, in thousands) | | :------------------------------------------------------- | :------------------------------------------ | :-------------------------------------------- | | Notes receivable from Preferred and Common Operating Partnership unit holders | $98,054 | $101,900 | | Fixed rate notes receivable | $1,248 | $1,251 | | Fixed rate debt | $4,780,095 | $4,860,356 | 4. REAL ESTATE ASSETS This section details the composition of the company's net operating real estate assets, including land, buildings, and properties under development Real Estate Assets Breakdown | Asset Category | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--------------------------------------- | :---------------------------- | :------------------------------- | | Land | $2,186,751 | $2,151,319 | | Buildings, improvements and other intangibles | $8,347,651 | $8,227,094 | | Right of use asset - finance lease | $114,668 | $117,718 | | Intangible assets - tenant relationships | $135,535 | $134,577 | | Intangible lease rights | $12,443 | $12,443 | | Less: accumulated depreciation and amortization | $(1,929,716) | $(1,867,750) | | Net operating real estate assets | $8,867,332 | $8,775,401 | | Real estate under development/redevelopment | $73,392 | $59,248 | | Real estate assets, net | $8,940,724 | $8,834,649 | | Real estate assets held for sale included in real estate assets, net | $23,742 | $8,436 | 5. EARNINGS PER COMMON SHARE This section provides the calculation of basic and diluted earnings per common share, detailing net income and average shares outstanding Earnings Per Common Share Calculation | Metric | For the Three Months Ended March 31, 2022 | For the Three Months Ended March 31, 2021 | | :--------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net income attributable to common stockholders | $203,579 | $202,998 | | Earnings for basic computations | $203,293 | $202,686 | | Net income for diluted computations | $214,414 | $214,008 | | Average number of common shares outstanding - basic | 134,180,175 | 132,007,556 | | Average number of common shares outstanding - diluted | 141,581,862 | 139,676,548 | | Basic EPS | $1.52 | $1.54 | | Diluted EPS | $1.51 | $1.53 | 6. STORE ACQUISITIONS This section details the company's store acquisition activities, including the number of properties acquired and the associated cash and equity consideration Store Acquisition Summary | Quarter | Number of Stores | Cash Paid (in thousands) | Investments in Real Estate Ventures (in thousands) | Net Liabilities/Assumed Value (in thousands) | Value of OP Units Issued (in thousands) | Total Real Estate Assets (in thousands) | | :------ | :--------------- | :----------------------- | :------------------------------------------------- | :------------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Q1 2022 | 14 | $185,910 | $747 | $274 | $40,965 | $227,896 | | Q1 2021 | 9 | $148,940 | — | $2,944 | — | $151,884 | 7. INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES This section outlines the company's equity investments in unconsolidated real estate entities, including joint ventures and preferred stock holdings - The Company's investments in unconsolidated real estate entities include preferred stock of SmartStop Self Storage REIT, Inc. and noncontrolling interests in real estate joint ventures, accounted for using the equity method[64] - During the three months ended March 31, 2022, the Company contributed $4,321 thousand in cash to its joint ventures, including its pro-rata portion of the purchase price of two operating stores[71] Investments in Unconsolidated Real Estate Entities | Investment | Number of Stores | Equity Ownership % | Excess Profit % | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :------------------------------------------------------- | :--------------- | :----------------- | :-------------- | :---------------------------- | :------------------------------- | | PRISA Self Storage LLC | 85 | 4% | 4% | $8,746 | $8,792 | | SmartStop Self Storage REIT, Inc. Preferred Stock | n/a | n/a | n/a | $200,000 | $200,000 | | Net Investments in and Cash distributions in unconsolidated real estate entities | 288 | | | $410,785 | $393,744 | 8. INVESTMENTS IN DEBT SECURITIES AND NOTES RECEIVABLE This section provides an overview of the company's investments in debt securities and notes receivable, including bridge loans and mezzanine debt - In February 2022, the Company sold its senior mezzanine note receivable for $103,315 thousand in cash, recognizing the remaining unamortized discount as interest income[75] - During the three months ended March 31, 2022, the Company sold $39,718 thousand in mortgage bridge loans to third parties and closed on $134,408 thousand in new mortgage bridge loans[76] Debt Securities and Notes Receivable | Investment | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--------------------------------------- | :---------------------------- | :------------------------------- | | Debt securities - NexPoint Series A Preferred Stock | $200,000 | $200,000 | | Debt securities - NexPoint Series B Preferred Stock | $100,000 | $100,000 | | Notes Receivable-Bridge Loans | $348,185 | $279,042 | | Notes Receivable-Senior Mezzanine Loan, net | — | $102,079 | | Dividends Receivable | $45,922 | $38,066 | | Total | $694,107 | $719,187 | 9. DEBT This section details the company's debt structure, including secured and unsecured, fixed and variable rate obligations, and recent senior note issuances - In March 2022, the Operating Partnership issued $400.0 million principal amount of 3.900% Senior Notes due 2029[79] - As of March 31, 2022, the Company was in compliance with all financial covenants related to its unsecured debt[87] Debt Structure | Debt Type | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | Fixed Rate | Variable Rate | Maturity Dates | | :--------------------------------------- | :---------------------------- | :------------------------------- | :--------- | :------------ | :------------------------------------------------------- | | Secured fixed-rate | $929,980 | $930,830 | 2.46% - 4.50% | | October 2022 - February 2030 | | Secured variable-rate | $368,038 | $392,679 | | 1.29% - 1.95% | October 2022 - September 2030 | | Unsecured fixed-rate | $3,930,376 | $3,575,000 | 1.40% - 4.39% | | February 2024 - March 2032 | | Unsecured variable-rate | $594,624 | $550,000 | | 1.40% | February 2024 - October 2026 | | Total | $5,823,018 | $5,448,509 | | | | 10. DERIVATIVES This section describes the company's use of interest rate swaps as cash flow hedges to manage interest rate risk and stabilize interest expense - The Company uses interest rate swaps as cash flow hedges to manage exposure to interest rate movements, aiming to stabilize interest expense[90] - As of March 31, 2022, the Company held 19 derivative financial instruments with a total combined notional amount of $1,934,369 thousand[93] Derivative Gains and Losses | Derivative Type | Gain (loss) recognized in OCI for the Three Months Ended March 31, 2022 (in thousands) | Gain (loss) reclassified from OCI into income for the Three Months Ended March 31, 2022 (in thousands) | | :--------------------------------------- | :--------------------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------- | | Swap Agreements | $42,741 | $(8,912) | 11. STOCKHOLDERS' EQUITY This section details changes in stockholders' equity, including common stock issuances for acquisitions and the status of the share repurchase program - On January 7, 2022, the Company issued 186,766 shares of common stock, valued at $40,965 thousand, to acquire two stores[99] - The Company has an authorized share repurchase program of up to $400,000 thousand, but no shares have been repurchased under this program to date[102] 12. NONCONTROLLING INTEREST REPRESENTED BY PREFERRED OPERATING PARTNERSHIP UNITS This section outlines the characteristics of noncontrolling interests represented by various series of preferred operating partnership units - Noncontrolling interests represented by Preferred OP Units are classified as permanent equity on the condensed consolidated balance sheets[104][105] - Series A Units have a fixed priority return of 2.3% and a fixed liquidation value of $101,700 thousand, redeemable at the holder's option in cash or common stock[108] - Series B Units have a liquidation value of $25.00 per unit, receive cumulative distributions at an annual rate of 6.0%, and 135,000 Series B Units were redeemed for $3,375 thousand in cash on February 15, 2022[111][112] - Series D Units have a liquidation value of $25.00 per unit, receive cumulative distributions at an annual rate between 3.0% and 5.0%, and are redeemable or exchangeable for OP Units[115] 13. NONCONTROLLING INTEREST IN OPERATING PARTNERSHIP AND OTHER NONCONTROLLING INTERESTS This section clarifies the company's ownership in the Operating Partnership and the redeemable nature of outstanding operating partnership units - The Company held a 94.0% ownership interest in the Operating Partnership as of March 31, 2022[117] - OP Units are redeemable at the option of the holder for cash or common stock; as of March 31, 2022, redeeming all 6,515,408 outstanding OP Units for cash would require $1,300,801 thousand[118] 14. SEGMENT INFORMATION This section presents financial performance data for the company's two reportable segments: self-storage operations and tenant reinsurance - The Company has two reportable segments: self-storage operations and tenant reinsurance, with Net Operating Income (NOI) used as the key performance measure[123] Segment Performance | Segment | Revenues (March 31, 2022, in thousands) | Revenues (March 31, 2021, in thousands) | Operating Expenses (March 31, 2022, in thousands) | Operating Expenses (March 31, 2021, in thousands) | Net Operating Income (March 31, 2022, in thousands) | Net Operating Income (March 31, 2021, in thousands) | | :--------------------------------------- | :---------------------------------------- | :---------------------------------------- | :------------------------------------------------ | :------------------------------------------------ | :-------------------------------------------------- | :-------------------------------------------------- | | Self-Storage Operations | $379,808 | $303,593 | $103,542 | $92,367 | $276,266 | $211,226 | | Tenant Reinsurance | $43,797 | $39,619 | $7,042 | $7,161 | $36,755 | $32,458 | | Total Segment | $423,605 | $343,212 | $110,584 | $99,528 | $313,021 | $243,684 | 15. COMMITMENTS AND CONTINGENCIES This section outlines the company's involvement in legal proceedings and details future commitments for property acquisitions - The Company is involved in various legal proceedings and claims, with outcomes inherently unpredictable, and accrues liabilities when losses are probable and estimable[126] - As of March 31, 2022, the Company was under agreement to acquire 18 wholly-owned stores for $266,595 thousand and four joint venture stores for $13,010 thousand, with closings scheduled for 2022 and 2023[127] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial condition and results of operations, including an overview of its business, the impact of COVID-19, property portfolio details, a detailed analysis of revenues and expenses, Funds From Operations (FFO), same-store results, cash flows, and liquidity and capital resources CAUTIONARY LANGUAGE This section advises readers to review the discussion alongside the financial statements and forward-looking information for comprehensive understanding - The discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and the 'Statement on Forward-Looking Information' for a complete understanding[130] CRITICAL ACCOUNTING POLICIES The preparation of financial statements relies on estimates and judgments, which, if different, could materially impact reported financial results - Preparation of financial statements requires estimates, judgments, and assumptions, which are believed to be appropriate and correct based on available information, but material differences could affect reported financials[131] OVERVIEW This section provides an overview of the company's REIT business model, focusing on self-storage operations and dynamic revenue management strategies - The Company is a REIT that owns, operates, manages, acquires, develops, and redevelops self-storage properties, deriving substantially all revenues from storage operations and tenant reinsurance[133] - The Company employs industry-leading revenue management systems to analyze, set, and adjust rental rates in real time, aiming to maximize cash flows from its diverse portfolio[134] - The self-storage business experiences seasonal fluctuations, with occupancy generally higher in summer months due to increased moving activity[135] COVID-19 UPDATE This section addresses the ongoing impact of the COVID-19 pandemic on the economy, company operations, and potential effects on customers - The COVID-19 pandemic continues to impact the U.S. and world economies, leading the Company to implement measures like 'work from home' and contactless rental processes[137] - Customers may still be impacted by the pandemic and related governmental responses, potentially affecting their ability to pay rent or renew leases, and the business may face additional governmental restrictions[137] PROPERTIES This section details the company's extensive property portfolio, including owned, joint venture, and managed self-storage stores, and rental rate trends - As of March 31, 2022, the Company owned or had ownership interests in 1,283 operating stores (995 wholly-owned, 288 in unconsolidated joint ventures) and managed an additional 847 stores for third parties, totaling 2,130 stores[138] - The average annual rent per square foot for existing customers at stabilized stores was $20.04 for Q1 2022, up from $16.21 for Q1 2021, while for new leases it was $19.68 for Q1 2022, up from $16.54 for Q1 2021[140] Property Portfolio by Location | Location | REIT Owned Property Count | REIT Owned Net Rentable Square Feet | Joint Venture Owned Property Count | Joint Venture Owned Net Rentable Square Feet | Managed Property Count | Managed Net Rentable Square Feet | Total Property Count | Total Net Rentable Square Feet | | :--------------------------------------- | :------------------------ | :---------------------------------- | :--------------------------------- | :------------------------------------------- | :--------------------- | :------------------------------- | :------------------- | :----------------------------- | | California | 175 | 13,438,621 | 49 | 3,594,254 | 82 | 7,696,360 | 306 | 24,729,235 | | Florida | 110 | 8,389,054 | 37 | 3,057,198 | 111 | 8,840,510 | 258 | 20,286,762 | | Texas | 102 | 8,371,945 | 23 | 1,843,882 | 78 | 6,769,854 | 203 | 16,985,681 | | Totals | 995 | 75,971,028 | 288 | 21,882,717 | 847 | 66,296,873 | 2,130 | 164,150,618 | RESULTS OF OPERATIONS This section provides a comprehensive analysis of the company's operational performance, including store count and key financial drivers Overview This overview summarizes the total number of wholly-owned and joint venture stores operated by the company during the period - For the three months ended March 31, 2022, the Company operated 1,283 stores (995 wholly-owned, 288 in joint ventures), an increase from 1,206 stores in the prior year period[146] Revenues This section analyzes the changes in total revenues, driven by increases in property rental, tenant reinsurance, and management fees - The increase in property rental revenues was primarily due to a $62,695 thousand increase at stabilized stores from higher average rates and an $18,897 thousand increase from acquisitions[147] - Tenant reinsurance revenues increased due to an increase in the number of stores operated (2,130 stores at March 31, 2022 vs. 1,969 at March 31, 2021)[148] Revenue Breakdown | Revenue Type | March 31, 2022 (in thousands) | March 31, 2021 (in thousands) | Change (in thousands) | % Change | | :--------------------------------------- | :---------------------------- | :---------------------------- | :-------------------- | :------- | | Property rental | $379,808 | $303,593 | $76,215 | 25.1% | | Tenant reinsurance | $43,797 | $39,619 | $4,178 | 10.5% | | Management fees and other income | $19,957 | $15,645 | $4,312 | 27.6% | | Total revenues | $443,562 | $358,857 | $84,705 | 23.6% | Expenses This section details the changes in operating expenses, including property operations, general and administrative, and depreciation - Property operations expense increased primarily due to $7,053 thousand from acquisitions and $5,912 thousand at stabilized stores, partially offset by $2,101 thousand decrease from property sales[151] - General and administrative expenses increased due to higher corporate payroll and other expenses, reflecting nationwide wage growth and the management of additional stores[153] Expense Breakdown | Expense Type | March 31, 2022 (in thousands) | March 31, 2021 (in thousands) | Change (in thousands) | % Change | | :--------------------------------------- | :---------------------------- | :---------------------------- | :-------------------- | :------- | | Property operations | $103,542 | $92,367 | $11,175 | 12.1% | | Tenant reinsurance | $7,042 | $7,161 | $(119) | (1.7)% | | General and administrative | $29,762 | $23,540 | $6,222 | 26.4% | | Depreciation and amortization | $67,906 | $58,599 | $9,307 | 15.9% | | Total expenses | $208,252 | $181,667 | $26,585 | 14.6% | Other Revenues and Expenses This section analyzes other revenues and expenses, including gains on real estate transactions, interest income and expense, and equity earnings - Interest expense increased due to a higher weighted average interest rate and debt balance[156] - Interest income increased primarily from bridge loans, notes receivable, and the repayment of a senior mezzanine note receivable[158] Other Revenues and Expenses Summary | Item | March 31, 2022 (in thousands) | March 31, 2021 (in thousands) | Change (in thousands) | % Change | | :--------------------------------------- | :---------------------------- | :---------------------------- | :-------------------- | :------- | | Gain on real estate transactions | $— | $63,883 | $(63,883) | —% | | Interest expense | $(42,538) | $(40,695) | $(1,843) | 4.5% | | Interest income | $18,989 | $12,304 | $6,685 | 54.3% | | Equity in earnings and dividend income from unconsolidated real estate entities | $9,097 | $6,956 | $2,141 | 30.8% | | Income tax expense | $(3,141) | $(4,137) | $996 | (24.1)% | | Total other revenues & expenses, net | $(17,593) | $38,311 | $(55,904) | (145.9)% | FUNDS FROM OPERATIONS This section defines and presents Funds From Operations (FFO) as a supplemental measure of operating performance, adjusting for non-cash real estate items - Funds from operations (FFO) is presented as a supplement to net earnings, providing relevant information about operating performance by excluding gains/losses on sales of operating stores and impairment write-downs, plus real estate-related depreciation and amortization[161] Funds From Operations Attributable to Common Stockholders and Unit Holders | Metric | For the Three Months Ended March 31, 2022 (in thousands) | For the Three Months Ended March 31, 2021 (in thousands) | | :--------------------------------------- | :------------------------------------------------------- | :------------------------------------------------------- | | Net income attributable to common stockholders | $203,579 | $202,998 | | Real estate depreciation | $62,692 | $55,815 | | Amortization of intangibles | $2,766 | $693 | | Gain on real estate transactions | $— | $(63,883) | | Unconsolidated joint venture real estate depreciation and amortization | $3,853 | $2,505 | | Funds from operations attributable to common stockholders and unit holders | $286,456 | $210,059 | SAME-STORE RESULTS This section provides key performance indicators for the company's stabilized same-store property pool, including revenues, expenses, and occupancy - The same-store pool consists of 870 wholly-owned and operated stores stabilized by the first day of the earliest calendar year presented[165] - Same-store expenses increased due to higher payroll, credit card processing fees, repairs and maintenance (snow removal), and insurance, partially offset by lower marketing expense[165] Same-Store Performance | Metric | For the Three Months Ended March 31, 2022 (in thousands) | For the Three Months Ended March 31, 2021 (in thousands) | Percent Change | | :--------------------------------------- | :------------------------------------------------------- | :------------------------------------------------------- | :------------- | | Same-store rental revenues | $341,888 | $280,990 | 21.7% | | Same-store operating expenses | $84,857 | $79,480 | 6.8% | | Same-store net operating income | $257,031 | $201,510 | 27.6% | | Same-store square foot occupancy as of quarter end | 94.5% | 95.3% | | | Properties included in same-store | 870 | 870 | | CASH FLOWS This section summarizes the company's cash flows from operating, investing, and financing activities, highlighting key drivers of change - Cash flows from operating activities increased due to continued total revenue growth[168] - Cash flows used in investing activities primarily relate to the acquisition and development of REIT and joint venture assets, as well as bridge loan program activity[168] Cash Flow Summary | Cash Flow Activity | For the Three Months Ended March 31, 2022 (in thousands) | For the Three Months Ended March 31, 2021 (in thousands) | | :--------------------------------------- | :------------------------------------------------------- | :------------------------------------------------------- | | Net cash provided by operating activities | $287,465 | $203,880 | | Net cash provided by (used in) investing activities | $(121,372) | $42,595 | | Net cash used in financing activities | $(169,621) | $(311,689) | | Acquisition and development of real estate assets | $(210,521) | $(175,838) | | Proceeds from issuance of public bonds, net | $400,000 | $— | | Dividends paid on common stock | $(202,527) | $(132,540) | LIQUIDITY AND CAPITAL RESOURCES This section assesses the company's liquidity and capital resources, including cash, debt metrics, credit ratings, and covenant compliance - As of March 31, 2022, the Company had $65,978 thousand in cash and cash equivalents and a debt to total enterprise value ratio of 17.1%[172][173] - The ratio of total fixed-rate debt and other instruments to total debt was 80.4% at March 31, 2022, with a weighted average interest rate of 2.8% on total debt[173] - The Company maintains BBB/Stable (S&P) and Baa2 (Moody's) credit ratings and was in compliance with all financial covenants at March 31, 2022[173][176] OFF-BALANCE SHEET ARRANGEMENTS The company confirms it has no material off-balance sheet arrangements or guarantees with unconsolidated entities - The Company does not have any material relationships with unconsolidated entities or financial partnerships for off-balance sheet arrangements, nor has it guaranteed any obligations of such entities[179] SEASONALITY The self-storage business experiences seasonal fluctuations, with higher revenues and occupancy typically occurring in summer months - The self-storage business is subject to seasonal fluctuations, with a greater portion of revenues and profits realized from May through September, and highest occupancy typically at the end of July[180] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section discusses the company's exposure to market risks, particularly interest rate risk, and quantifies the potential impact of changes in interest rates on its financial performance Market Risk Market risk encompasses potential losses from adverse changes in market prices and interest rates, affecting future income and financial instrument fair values - Market risk refers to the risk of loss from adverse changes in market prices and interest rates, which can impact the Company's future income, cash flows, and fair values of financial instruments[181] Interest Rate Risk This section quantifies the company's exposure to interest rate risk, detailing the portion of debt subject to variable rates and the impact of hypothetical rate changes - As of March 31, 2022, approximately $1.2 billion of the Company's $6.0 billion total debt was subject to variable interest rates[182] - A hypothetical 100 basis point increase or decrease in LIBOR would increase or decrease future earnings and cash flows by approximately $11.8 million annually[182] ITEM 4. CONTROLS AND PROCEDURES This section addresses the effectiveness of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting (1) Disclosure Controls and Procedures The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2022[187] (2) Changes in internal control over financial reporting There were no material changes in internal control over financial reporting during the most recent quarter - There were no changes in internal control over financial reporting during the most recent quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[188] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS This section discloses the company's involvement in various legal proceedings and claims arising in the ordinary course of business, noting the inherent unpredictability of litigation outcomes - The Company is involved in various legal proceedings and claims in the ordinary course of business, with outcomes that cannot be determined with certainty[190] - Management establishes an accrued liability for litigation when loss contingencies are probable and reasonably estimable, but there may be exposure to losses in excess of accrued amounts[190] ITEM 1A. RISK FACTORS This section refers readers to the comprehensive discussion of risk factors in the company's most recent Annual Report on Form 10-K, stating that no material changes have occurred since that filing - Readers should carefully consider the risk factors discussed in 'Part I. Item 1A. Risk Factors' in the Annual Report on Form 10-K for the year ended December 31, 2021[191] - There have been no material changes to the risk factors described in the Annual Report on Form 10-K[191] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section reports on the issuance of common stock in an unregistered sale for the acquisition of properties - On January 7, 2022, the Company issued 186,766 shares of common stock, valued at $40,965 thousand, in a private placement to acquire two stores[192] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This section states that there were no defaults upon senior securities - None[193] ITEM 4. MINE SAFETY DISCLOSURES This section indicates that mine safety disclosures are not applicable to the company - Not Applicable[194] ITEM 5. OTHER INFORMATION This section states that there is no other information to report - None[195] ITEM 6. EXHIBITS This section lists the exhibits filed as part of the Form 10-Q, including various indentures, certifications, and XBRL formatted financial data - Exhibits include indentures related to senior notes (4.1, 4.2, 4.3, 4.4), certifications of the Chief Executive Officer and Chief Financial Officer (31.1, 31.2, 32.1), and XBRL formatted financial statements (101, 104)[197][198] SIGNATURES This section contains the official signatures of the company's authorized officers, certifying the accuracy and completeness of the report Report Signatures This section contains the required signatures of the registrant's authorized officers, certifying the filing of the report - The report is duly signed on behalf of Extra Space Storage Inc. by Joseph D. Margolis, Chief Executive Officer, and P. Scott Stubbs, Executive Vice President and Chief Financial Officer, on May 6, 2022[200]