Extra Space Storage CEO Joe Margolis said on the firm’s q2 2019 earnings call that the REIT saw a solid quarter with positive rate growth and healthy occupancy in a competitive summer leasing season. Same-store revenue and NOI both increased by 3.9% exceeding company estimates. “This property outperformance contributed to better-than-expected FFO growth of 6.1%, which was $0.02 above the top-end of our guidance,” he said.
According to Margolis, “We are pleased with our results in the first half of the year and the success our team and best-in-class platform have had mitigating the impact felt from new supply. In order to achieve this performance, we increased our advertising spend significantly on a year-over-year basis. And we do not expect the increased advertising spend to abate anytime soon.”
As anticipated, the timing of expected deliveries slipped on many developments, he added. “As these delayed projects deliver and begin their lease up, we expect additional moderation in the back half of the year. However, while the market will continue to be very competitive large operators with diversified portfolios and sophisticated systems like Extra Space Storage are best positioned to navigate the supply cycle.”
He notes that the REIT continues to actively explore external growth opportunities that present attractive risk/reward metrics. “Widely marketed acquisitions are still very expensive. However, we continue to find success acquiring off-market acquisitions through long-standing relationships.
During the quarter we purchased a non-marketed 11 property portfolio in a joint venture structure for $228 million. We also acquired one Certificate of Occupancy project and completed one development for a total investment by the company of $57 million.”
Lastly, he pointed out that the company has also executed innovative capital-light opportunities to enhance shareholder returns. “In the quarter, we closed our first net lease transaction with W.P. Carey, which will include 36 total assets including five New York City assets that are new to our platform.”