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Extra Space Storage Continues Solid Rate Growth


2018 has been playing out as expected for Extra Space Storage Inc. So said firm CEO, Joe Margolis on the company’s Q3 earnings call. “Revenue, NOI and FFO growth are all start remained within guidance and expectations,” he said. “Occupancy continues to be strong ending the quarter at 93.9%, 20 basis points above 2017’s mark. This is especially encouraging, because last year’s quarter end occupancy benefited from the hurricanes.”

He explained that the company continues to have solid rate growth, which was partially offset by increased but expected discounts, resulting in same-store revenue growth of 3.2%. “The year-over-year impact from discounts should taper off in the fourth quarter. And we project higher same-store revenue growth.”

External growth was also strong in the quarter. “We continue to be selective and disciplined in our acquisition efforts, but have been able to find acquisitions with acceptable risk adjusted returns, primarily through existing relationships. By year end, we expect to have acquired over $1 billion in properties with Extra Space investing approximately $600 million. Between acquisitions and third-party management contracts, we have added 140 stores through the quarter. We have more than 500 third-party properties and a total of 734 stores, including joint ventures.”

The company report related to new supply remains generally unchanged. “We are seeing an impact from new supply in certain sub-markets, and its impact varies by location. New stars appear to be down in many MSAs already saturated with new development and activity is migrating to markets where there may be a better yield. We continue to see delays in deliveries and see many proposed projects being abandoned. Our highly diversified portfolio, while certainly not immune to the effects of new supply, reduces volatility. And our sophisticated platform is better prepared to respond to competition than ever before.”

Lastly, at this time last year, the company reported the impact hurricanes had on its customers, its employees and its properties. Unfortunately, the Southeast experienced severe weather again, but he reported that the company’s portfolio was relatively unscathed. “We did not have any material disruption with customers or employees, and damage to our properties was minimal.”