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Extra Space Storage (EXR) Q1 FFO & Revenues Lag Estimates

Extra Space Storage Inc. EXR reported first-quarter 2023 core funds from operations (FFO) per share of $2.02, which missed the Zacks Consensus Estimate of $2.05.

Quarterly revenues of $503.1 million also lagged the Zacks Consensus Estimate of $513.7 million.

Results reflect lower-than-anticipated revenues on lower occupancy levels. Higher operating expenses acted as a dampener in the quarter. The company also maintained its 2023 outlook.

Nonetheless, on a year-over-year basis, while core FFO per share improved marginally, revenues increased 13.4%.

Quarter in Detail

Same-store rental revenues increased 7.4% year over year to $384.1 million in the first quarter. This uptick resulted from higher average rates to existing customers and a rise in other operating income, partly muted by lower occupancy.

Same-store expenses increased 3.5% year over year to $93.2 million, reflecting an increase in payroll, marketing, credit card processing fees, utilities, and insurance, partially offset by savings in repairs and maintenance, and property taxes.

Consequently, same-store net operating income (NOI) increased 8.7% year over year to $290.9 million.

The same-store square-foot occupancy contracted 80 basis points year over year to 93.5% as of Mar 31, 2023.

Portfolio Activity

During the first quarter, Extra Space Storage acquired one store at completion of construction for around $13.1 million. In association with joint-venture (JV) partners, EXR acquired five operating stores for a total cost of $101.2 million, of which, it invested $20.2 million.

The company added 48 stores (44 store net) to its third-party management platform. As of Mar 31, 2023, it managed 931 stores for third parties and 323 stores in unconsolidated JVs, resulting in 1,254 total stores under management.

Balance Sheet

Extra Space Storage exited the first quarter of 2023 with $47.9 million of cash and cash equivalents, down from $92.8 million recorded as of Dec 31, 2022.

As of Mar 31, 2023, EXR's percentage of fixed-rate debt to total debt was 70.7%. The combined weighted average interest rate was 4.3%, with a weighted average maturity of around five years.

During the reported quarter, Extra Space Storage originated $53 million in mortgage and mezzanine bridge loans. It also sold $34.2 million in mortgage bridge loans.

In the first quarter, the company did not issue any shares under its at-the-market program and presently has $800 million available for issuance. Also, it did not repurchase any shares of common stock and had the authorization to buy up to an additional $337 million under the plan as of Mar 31, 2023.

2023 Guidance

Extra Space Storage maintained its guidance for the current year.

It earlier projected core FFO per share in the range of $8.30-$8.60. The Zacks Consensus Estimate for the same is currently pegged at $8.53, which lies within the guided range.

Management retained its estimates for same-store revenue growth at 3.75-5.25%, same-store expenses at 5-6% and same-store NOI growth in the band of 3-5.5%.

Extra Space Storage currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Extra Space Storage Inc Price, Consensus and EPS Surprise

 

Extra Space Storage Inc Price, Consensus and EPS Surprise
Extra Space Storage Inc Price, Consensus and EPS Surprise

Extra Space Storage Inc price-consensus-eps-surprise-chart | Extra Space Storage Inc Quote

 

Performance of Other REITs

SBA Communications Corporation SBAC reported first-quarter 2023 adjusted FFO per share of $3.13, outpacing the Zacks Consensus Estimate of $3.11. Moreover, the figure reflects a rise of 5.7% from the prior-year quarter.

SBAC’s site-leasing revenues improved year over year on healthy leasing activity amid elevated tower space demand. Moreover, it has continued to benefit from the addition of sites to its portfolio. The company also raised its 2023 outlook.

Digital Realty Trust DLR reported first-quarter 2023 core FFO per share of $1.66, beating the Zacks Consensus Estimate by a whisker. The figure, however, fell short of the year-ago quarter’s $1.67.

DLR experienced year-over-year growth in operating revenues during the quarter. However, rising rental property operating expenses acted as a dampener.

Prologis, Inc. PLD reported first-quarter 2023 core FFO per share of $1.22, beating the Zacks Consensus Estimate of $1.21. This also compares favorably with the year-ago quarter’s figure of $1.09.

PLD’s results reflected solid demand for industrial real estate, leading to low vacancies and an increase in rents. The industrial REIT raised the midpoint of its 2023 guidance.

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Note- Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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