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Extra Space Storage Inc EXR

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Morningstar’s Analysis

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Extra Space Storage Q3 Outperformance Driven by Double-Digit Revenue Growth; FVE Increased to $178

Kevin Brown, CFA Equity Analyst

Analyst Note

| Kevin Brown, CFA |

Extra Space Storage reported very strong third-quarter results, leading us to increase our fair value estimate for the no-moat company to $178 from $130. Same-store occupancy fell 30 basis points sequentially to 96.7%, but is still up 90 basis points year over year. A combination of higher average rates charged to new and existing customers, higher late fees, and a higher rate of rent collection from tenants led to same-store revenue increasing 18.4%. Meanwhile, the company managed to cut both payroll costs and marketing expenses, leading to same-store operating expenses falling 4.0% year over year. Combined, same-store net operating income increased 27.8%. Management raised 2021 same-store NOI guidance to a range of 18.0%-19.5%, which is 4.25% above the company's prior guidance midpoint but in line with the 18.1% growth the company has reported year to date. While we don't believe that Extra Space Storage will be able to continually produce same-store NOI growth near these record levels beyond the next few quarters, we also don't anticipate a correction coming for the company and believe it should continue to grow at a more modest level off of this higher base.

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Company Profile

Business Description

Extra Space Storage owns, operates, and manages more than 1,800 self-storage properties in 38 states, with over 100 million net rentable square feet of storage space. Of these properties, the majority are wholly owned, while some facilities are owned through joint ventures and others are owned by third parties and managed by Extra Space Storage in exchange for a management fee. The company is structured as an umbrella partnership REIT, or UPREIT.

2795 East Cottonwood Parkway, Suite 300
Salt Lake City, UT, 84121
T +1 801 365-4600
Sector Real Estate
Industry REIT - Industrial
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Hard Assets
Employees 4,013