Company Reports

No-moat-rated Extra Space Storage reported a decent set of numbers in the first quarter given the context of a relatively difficult demand environment. The firm reported core funds from operations, or FFO, of $1.96 per share, 3.0% lower than the $2.02 per share FFO during the first quarter of 2023. The company has maintained its 2024 full-year core FFO guidance of $7.85-$8.15 per share, representing a 1.2% decline at the midpoint. We are maintaining our $160 per share fair value estimate for Extra Space Storage after incorporating the first-quarter results.

We believe that there are several attractive opportunities across the US REIT sector for investors to consider. Following the recovery of many REIT sector fundamentals from the pandemic by mid-2021, we viewed the REIT sector as fairly valued through early 2022. However, the past two years have seen the rapid rise in interest rates and a slowing economy, which has led to major valuation declines across the sector. Our analysis of the REIT sector over the past 25 years suggests that the relative stock performance of REITs is negatively correlated with interest rate movements. The second and third quarters of 2023 saw large interest rate increases with the 10-year Treasury approaching 5%, which led to the sector underperforming. This occurred even as many REITs reported same-store net operating income, or NOI, growth at historical highs in 2022 due to high inflation. Higher interest rates, lower liquidity, tighter capital market conditions, and decelerating same-store NOI growth all led to a significant correction in the stock price for many REITs.

Extra Space Storage acquires, owns, and operates self-storage facilities, which offer storage spaces of varying sizes and features on a monthly lease, for personal and business use. The company also has a lucrative insurance business and a strategically important third-party management business.

No-moat-rated Extra Space Storage reported a lackluster set of numbers in the fourth quarter as demand for self-storage is expected to cool down even further in 2024. The firm reported core funds from operations, or FFO, of $2.02 per share, 3.3% lower than the $2.09 per share FFO during the fourth quarter of 2022. The company guided for 2024 full-year core FFO to be in the $7.85-$8.15 per share range, representing a 1.2% decline at the midpoint. We are maintaining our $165 per share fair value estimate for Extra Space Storage after incorporating the fourth-quarter results.

Extra Space Storage acquires, owns, and operates self-storage facilities, which offer storage spaces of varying sizes and features on a monthly lease, for personal and business use. The company also has a lucrative insurance business and a strategically important third-party management business.

No-moat-rated Extra Space Storage reported a middling set of numbers in the third quarter as demand for self-storage starts to cool down. The firm reported core funds from operations, or FFO, of $2.02 per share, 8.6% lower than the $2.21 per share FFO during the third quarter of 2022 partly due to higher interest expenses. The company has largely maintained its FFO guidance as it expects 2023 full-year core FFO to be in the $8.05-$8.20 per share range, representing a 3.7% decline compared with last year. We are maintaining our $165 per share fair value estimate for Extra Space Storage after incorporating the third-quarter results.

The share prices of U.S. real estate investment trusts have fallen by approximately 30% from their 2021 highs because of higher interest rates and stress in some commercial real estate sectors. We think that the correction is overdone and the current valuations offer an attractive entry point for patient investors. Our core REIT coverage is trading at a discount of approximately 25% to our fair value estimate. We estimate that the average REIT within our U.S. coverage is currently trading at a dividend yield that is 126 basis points higher than the historical average. We see marked differences in valuation across different REIT sectors in the United States. For instance, the industrial sector is fairly valued, with stock valuations already accounting for future growth, but other sectors like offices, hotels, and malls are trading at attractive discounts.

No-moat-rated Extra Space Storage reported lackluster results as demand for self-storage starts to moderate. The firm reported core funds from operations, or FFO, of $2.06 per share, 3.3% lower than the $2.13 per share FFO during the second quarter of 2022. Management has revised the outlook for the back half of the year due to lower-than-expected new customer rates in recent months. The company's updated 2023 full-year core FFO guidance is $8.15-$8.35 per share, representing a 2.4% decline at the midpoint when compared with previous guidance. We note that the results of the company are worse than its peer Public Storage. We are reducing our fair value estimate for Extra Space Storage to $165 per share from $177 as we slightly moderate our long-term expectations for the sector.

Extra Space Storage acquires, owns, and operates self-storage facilities, which offer storage spaces of varying sizes and features on a monthly lease, for personal and business use. The company also has a lucrative insurance business and a strategically important third-party management business.

No-moat-rated Extra Space Storage achieved solid same-store net operating income growth in the first quarter that was offset by higher interest expenses due to rising interest rates. The firm reported core funds from operations, or FFO, of $2.02 per share, 0.5% higher than the $2.01 per share FFO during the first quarter of 2022. The company maintained its 2023 full-year core FFO guidance of $8.30 to $8.60 per share, representing flattish growth at the midpoint when compared with the 2022 core FFO of $8.44. We are maintaining our $177 fair value estimate for the company as we incorporate first-quarter results.

No-moat-rated Extra Space Storage has entered into a definitive merger agreement to acquire Life Storage in an all-stock deal. Life Storage shareholders will receive 0.8950 of an Extra Space share for each Life Storage share they own, representing a total consideration of approximately $145.82 per share as per Extra Space's share price on March 31, 2023. The combined entity will have an enterprise value of approximately $47 billion and 65% of the combined entity will be owned by Extra Space's shareholders. The combined entity will become the largest self-storage operator in the United States, with over 3,500 locations and 264 million square feet. The transaction is expected to be accretive to core FFO per share within the first year of closing and be leverage neutral for Extra Space's shareholders. We do not plan to materially change our $177 fair value estimate for Extra Space Storage.

Extra Space Storage acquires, owns, and operates self-storage facilities, which offer storage spaces of varying sizes and features on a monthly lease, for personal and business use. The company also has a lucrative insurance business and a strategically important third-party management business.

Extra Space Storage acquires, owns, and operates self-storage facilities, which offer storage spaces of varying sizes and features on a monthly lease, for personal and business use. The company also has a lucrative insurance business and a strategically important third-party management business.

No-moat-rated Extra Space Storage ended the year with modest results as the firm reported core funds from operations, or FFO, of $2.09 per share, 9.4% higher than the $1.91 per share FFO during the fourth quarter of 2022. As we have highlighted previously, the self-storage sector has started to moderate after two strong years of growth. The company gave 2023 full-year core FFO guidance of $8.30 to $8.60 per share, representing flattish growth at the midpoint when compared with 2022 core FFO of $8.44. We are maintaining our $173 fair value estimate for the company as we incorporate fourth-quarter results.

Extra Space Storage acquires, owns, and operates self-storage facilities, which offer storage spaces of varying sizes and features on a monthly lease, for personal and business use. The company also has a lucrative insurance business and a strategically important third-party management business.

No-moat-rated Extra Space Storage reported middling results in the third quarter, as we see increasing signs of growth moderation in the self-storage market in the upcoming years. The self-storage sector has experienced very strong growth in the last two years because of several factors including pandemic-related disruptions, work-from-home dynamic, strong economic recovery, and a vibrant housing market. This had resulted in historically high occupancy rates and robust rental growth for the sector but a slowing economy and additional supply to the market will result in substantial growth moderation in the upcoming years.

With the United States experiencing historically high inflation growth, many investors are wondering if real estate provides a natural hedge against inflation and if the REIT sector should therefore outperform the broader equity market. Many REITs in our coverage have reported rent and revenue growth at or near historic peaks over the past several quarters, with inflation being one of the largest reasons for the high growth. Given this and some historical evidence that REITs outperformed in the 1970s and early 1980s when inflation was similarly high, some investors are questioning why REITs have not outperformed in 2022.

No-moat Extra Space Storage reported a good set of numbers for the second quarter. It reported funds from operations of $2.12 per share, 30% higher than the $1.64 during the second quarter of 2021. The company also increased its 2022 FFO guidance to $8.30-$8.50 per share from $8.05-$8.30, representing an increase of 2.8% at the midpoint. We have slightly increased our near-term projections in line with the latest guidance and are increasing our fair value estimate to $173 per share from $167 after incorporating second-quarter results.

Extra Space Storage acquires, owns, and operates self-storage facilities, which offer storage spaces of varying sizes and features on a monthly lease, for personal and business use. The company also has a lucrative insurance business and a strategically important third-party management business.

We are relaunching the coverage of Extra Space Storage after taking a fresh look at it. We assign a no-moat rating, a stable moat trend, and an exemplary capital allocation rating to the company. We are decreasing our fair value estimate for Extra Space Storage to $167 per share from $185 per share.