Extra Space Storage(US:EXR)2022-08-04 19:10Financial Data and Key Metrics Changes - Life Storage reported core funds from operations (FFO) of $1.65 per share for Q2 2022, representing a 37.5% increase year-over-year [7][11] - Same store revenue increased by 18.9% compared to Q2 2021, primarily driven by increased rental rates [12] - Same store net operating income (NOI) margin expanded by 370 basis points to 73%, with a year-over-year growth in same store NOI of 25.4% for the quarter [16] Business Line Data and Key Metrics Changes - Same store achieved rate growth was 20% over the previous year, with occupancy averaging 94% during the quarter, a 40 basis point increase from Q1 [7][13] - The company acquired 13 wholly owned stores for $262.6 million and added 17 stores to its third-party management platform [8][10] - The wholly owned portfolio grew close to 18% from one year ago, with over 75% of acquisitions being stabilized properties [9] Market Data and Key Metrics Changes - The acquisition pipeline remains strong with an additional $258 million under contract, and the third-party management portfolio grew 13% year-over-year to 385 stores [10] - Street rates during the quarter were almost 8% higher than the previous year, but showed a slight decline in July compared to last July [47] Company Strategy and Development Direction - The company is focused on strategic growth through acquisitions and enhancing its third-party management platform [8][9] - Life Storage plans to increase its wholly owned acquisition guidance to between $800 million to $1 billion for the year [11] - The company is leveraging technology and data analytics to optimize revenue management and improve operational efficiencies [51] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a potential slowdown in the housing market due to rising mortgage rates but noted that this could lead to increased demand for storage solutions [36][38] - The company anticipates double-digit revenue growth in the second half of the year, despite tough comparisons from the previous year [31][32] - Management expressed confidence in the strength of consumer demand and the company's ability to maintain pricing power [42][43] Other Important Information - The company refinanced its credit facility, increasing it from $500 million to $1.25 billion, providing significant liquidity through January 2027 [18][19] - The net-debt-to-recurring EBITDA ratio improved to 4.6x, down from 5.0x a year ago, indicating a stronger balance sheet [19] Q&A Session Summary Question: How does management view the balance between rate and occupancy moving forward? - Management has built a normal cyclical trend into guidance, expecting occupancy to drop about 250 basis points from July to year-end, with rates potentially declining 0% to 5% below last year [22][23] Question: What is the outlook for acquisitions in the Sunbelt region? - Management noted a pause in seller activity due to challenging debt markets but remains active in pursuing acquisitions, with some portfolios retrading [27][28] Question: How does management view the impact of the housing market slowdown? - Management believes that a slowdown in home sales could lead to increased demand for storage, as consumers may opt for storage solutions instead of moving [36][38] Question: What are the expectations for same store revenue in Q4 and 2023? - Management anticipates double-digit revenue growth in the second half of the year, with a strong start expected for 2023 [31][32][40] Question: Are there any signs of weakness in customer income levels or regions? - Management reported no significant regional differences in customer behavior, noting that demand remains strong despite inflationary pressures [42][43] Question: What is the outlook for occupancy levels transitioning into 2023? - Management expects occupancy to end the year above historical norms, in the range of 91% to 92% [45]