Extra Space Storage Q1 2025 Earnings Report

Extra Space Storage EPS Results

• Actual EPS: $2.00
• Consensus EPS: $1.96
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: $1.96

Extra Space Storage Revenue Results

• Actual Revenue: $820.00 million
• Expected Revenue: $705.12 million
• Beat/Miss: Beat by +$114.87 million
• YoY Revenue Growth: +2.60%

Extra Space Storage Announcement Details

• Quarter: Q1 2025
• Date: 4/29/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, April 30, 2025
• Conference Call Time: 1:00PM ET

Extra Space Storage (NYSE:EXR), headquartered in Salt Lake City, Utah, is a self-administered and self-managed REIT and a member of the S&P 500. As of December 31, 2023, the Company owned and/or operated 3,714 self-storage stores in 42 states and Washington, D.C. The Company's stores comprise approximately 2.6 million units and approximately 283.0 million square feet of rentable space operating under the Extra Space, Life Storage and Storage Express brands. The Company offers customers a wide selection of conveniently located and secure storage units across the country, including boat storage, RV storage and business storage. It is the largest operator of self-storage properties in the United States.

Extra Space Storage Q1 2025 Earnings Call Transcript

Key Takeaways

• Q1 performance: Core FFO of $2.00 per share (+2% YoY) and record same-store occupancy of 93.4% drove a 0.3% increase in same-store revenue.
• External growth momentum included $153.8 million in acquisitions, a JV restructuring yielding 100% ownership of six assets and $1.7 million embedded promote, $53.2 million of bridge loans closed (with $27.7 million sold), and a net addition of 100 third-party managed stores, bringing the platform to 1,675 locations.
• Controllable expenses were reduced by 1.9%, but property tax and weather-related costs lifted uncontrollable expenses 8%, resulting in a 1.2% decline in same-store NOI.
• Two bond issuances totaling $850 million (5-year at 5.17% and 10-year at 5.4%) maintained a 4.4% weighted-average interest rate and supported a conservative leverage profile.
• The company reaffirmed its full-year 2025 FFO, revenue and NOI guidance, citing sector resilience, diversified markets and a strong balance sheet amid economic uncertainties.

Presentation

[Operator]

Good afternoon, ladies and gentlemen, and welcome to the Extra Space Storage, Inc. Q1 twenty twenty five Earnings Conference Call. This call is being recorded on Wednesday, 04/30/2025. I would now like to turn the conference over to Jared Cundy. Please go ahead.

[Jared Conley, Investor Relations at Extra Space Storage]

Thank you, John, and welcome to Extra Space Storage's first quarter twenty twenty five earnings call. In addition to our press release, we have furnished unaudited supplemental financial information on our website. Please remember that management's prepared remarks and answers to your questions may contain forward looking statements as defined in the Private Securities Litigation Reform Act. Actual results could differ materially from those stated or implied by our forward looking statements due to risks and uncertainties associated with the company's business. These forward looking statements are qualified by the cautionary statements contained in the company's latest filings with the SEC, which we encourage our listeners to review.

[Jared Conley, Investor Relations at Extra Space Storage]

Forward looking statements represent management's estimates as of today, 04/30/2025. The company assumes no obligation to revise or update any forward looking statements because of the changing market conditions or other circumstances after the date of this conference call. I would now like to turn the call over to Joe Margolis, Chief Executive Officer.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Thank you for joining us today. I'm pleased to report a solid first quarter with performance exceeding our internal projections across several key metrics. Our core FFO of $2 per share represents a 2% increase year over year. Same store occupancy remained at historically high levels ending the quarter at 93.4%. This represents an improvement of 100 basis points from the first quarter twenty twenty four and ten basis points from the previous quarter and drove positive same store revenue growth of 0.3%.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Our positive revenue growth demonstrates the continued resilience of our portfolio and effective revenue management, customer acquisition and operational strategies. We also expect to see additional benefit from the performance of the former life storage assets, which continue to see leasing and pricing improvements since being unified under the Extra Space Storage brand. Our external growth initiatives demonstrated strong momentum in the first quarter. We completed $153,800,000 in wholly owned acquisitions, adding 12 high quality stores to our portfolio. We also dissolved a 23 property joint venture and realized an embedded promote of $1,700,000 In this transaction, we exchanged our 25% ownership interest in 17 properties for a 100% ownership interest in six properties.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Our bridge loan program remained active with the team closing 53,200,000 in loans during the quarter. We sold $27,700,000 in bridge loans as part of our capital allocation strategy and ended the quarter with approximately $1,400,000,000 in loans on our balance sheet. This program continues to provide attractive risk adjusted returns while building and enhancing valuable relationships with owners across the storage sector. Our Management Plus platform showed remarkable growth, adding 113 stores gross and achieving a net addition of 100 properties. This brings our third party managed portfolio to sixteen seventy five stores, reinforcing our position as the leading third party management provider in the industry.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Our multichannel approach to external growth combining wholly owned acquisitions, joint ventures, bridge lending and third party management continues to provide us with numerous opportunities to expand our footprint and enhance shareholder value. As we evaluate the current macro environment, we understand why investors across asset classes are concerned. We share the concerns about interest rates, volatility and economic uncertainty. However, we are also encouraged by many attributes of our sector, portfolio and platform, which have led us to maintain our 2025 guidance. First, the self storage sector has historically demonstrated resilience during economic downturns due to its need based demand drivers and broad customer base.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Second, we have a highly diversified portfolio with exposure to markets in all stages of development and economic cycles, removing much of the market volatility experienced in smaller and more concentrated portfolios. And finally, our sophisticated systems, experienced team, economies of scale and strong balance sheet position us well to optimize performance and to outperform the storage sector as a whole in the long run regardless of market conditions. We are encouraged by the strength of many key current operational metrics strength and have not seen any change in customer health or behavior to date. We have high same store occupancy, improvement in new customer rates, low move out activity and stable delinquency, which all position us well for future growth. We remain confident in our ability to execute our diversified investment strategy as opportunities arise across our multiple growth channels.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

We remain focused on maximizing FFO by executing our proven operational strategies and maintaining our industry leading platform. I will now turn the time over to Scott.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

Thanks Joe and hello everyone. As Joe mentioned, our first quarter financial results were ahead of our internal expectations. Our core FFO of $2 per share represents a 2% increase from the prior year. This outperformance was driven by better than expected same store revenue, higher tenant insurance and greater interest income. On the expense front, we saw a notable divergence between controllable and uncontrollable costs.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

Our operations team successfully reduced controllable expenses by 1.9% year over year through operational efficiencies and strategic cost management. However, uncontrollable expenses increased by 8% primarily due to continued property tax pressure and weather related expenses. This dynamic of controllable versus uncontrollable expenses resulted in a same store NOI decrease of 1.2% compared to the first quarter of twenty twenty four. We continue to strengthen our balance sheet as we executed two bond offerings in the quarter. One five year issuance of $350,000,000 at an effective rate of 5.17% and a second ten year issuance of $500,000,000 at 5.4%.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

These offerings demonstrate our continued access to public debt markets and our ability to secure favorable terms despite the volatile interest rate environment. We continue to maintain a conservative leverage profile with almost 90% of our debt at fixed rates net of our bridge loans receivable. This helps insulate us from near term interest rate fluctuations. Our weighted average interest rate stands at 4.4% reflecting our ability to secure competitive financing across market cycles. Based on our first quarter performance and current market conditions, we are maintaining our full year 2025 FFO guidance.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

Same store revenue, expense and NOI guidance also remains unchanged. This guidance assumes no significant recovery of the housing market and reflects our strong occupancy levels and stable new customer rates balanced against broader economic uncertainties. On the expense front, we anticipate continued pressure from property taxes and other uncontrollable costs. We have updated a few items in our guidance including a $17,000,000 reduction at the midpoint in equity and earnings. This reduction reflects the repayment of the SmartStop two hundred million dollars preferred investment and the expected buyout of certain JV partners.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

The income from the properties we have and will purchase from our JV partners is now reflected in non same store NOI. We've also increased interest expense to account for these partners' buyouts and to reflect the change in the forward interest curve. Our annual acquisition guidance has also been increased to account for the JV buyouts that are currently under agreement. We are encouraged by our core business fundamentals and are confident that our diversified portfolio and systems will maximize performance in all economic scenarios. And with that, John, let's open it up for questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from the line of Michael Goldsmith from UBS. Your line is now open.

[Michael Goldsmith, US REITs Analyst at UBS Securities LLC]

Good afternoon. Thanks a lot for taking my question. It looks like street rates closed the gap pretty materially in the first quarter. I was wondering what's driving that? It doesn't feel like demand is incrementally picking up, but I'd love to hear your comments there. And then also if you can provide an update on just how the conditions played out so far in April?

[Scott Stubbs, EVP & CFO at Extra Space Storage]

Yes. Michael, so far quarter to date things have played out very similar to what we were expecting. So no major surprises maybe slightly ahead of what we originally expected. In terms of street rates, our street rates have gone from negative 9% in Q3 last year to year end street rates of negative 6%. In the first quarter, we average our average was slightly negative and then by the end of the quarter and into April, we were flat.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

So street rates have improved. We're encouraged by that improvement. A 6% movement in the quarter is encouraging, but it's still pretty early to say where those are going to go into our rental season.

[Michael Goldsmith, US REITs Analyst at UBS Securities LLC]

Got it. And as a follow-up, during the first quarter you had same store revenue growth of 30 basis points. The midpoint of the guidance range implies that same store revenue remained in that range through the year. I guess, like, that a reasonable outcome for same store revenue just to kind of remain where it is through the year? Or are you just trying to maintain some flexibility given some of

[Scott Stubbs, EVP & CFO at Extra Space Storage]

the uncertainty out there? Thanks. Yes. So I think it depends on where you are in the range. I mean you're assuming the midpoint in your comments here.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

We gave a fairly wide range for the year and that had to do with not really know some of the economic conditions that we were going to see. So I think we're now moving into the leasing season. If we do see that rate power, I think that you'll see us above the midpoint of the range. And if we don't see much rate power, I think you could see it play out midpoint to below. Thank you very much. Good luck in the second quarter. Thanks, Michael.

[Operator]

Your next question comes from the line of Jeffrey Spector from BofA Securities. Your line is now open.

[Samir Khanal, Director at Bank of America]

Hi. Actually, it's Sameer Kunal. Sorry about that. So good morning, everybody. So Joe, it looks like you had the ability to raise guidance, but you didn't.

[Samir Khanal, Director at Bank of America]

And it doesn't look like you've seen any changes in customer behavior. But I guess what instructions are you giving your troops on the ground as it relates to leasing, right, the spring leasing season? Has there been a shift in strategy at all given the uncertainty you've kind of mentioned in your opening remarks?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

No. There's been no change of instruction or strategy. Our goal is to maximize revenue. We have systems and processes in place to do that. I don't need to give instructions on a day to day basis.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

The algorithms are pricing every unit in every building on a nightly basis, taking into account both our massive dataset that we have and what's going on on the ground today. And we're I'm very, very confident that our that our both our systems and our people are set up to take advantage of whatever opportunities present themselves and react to the environment as it unfolds.

[Samir Khanal, Director at Bank of America]

Thank you for that. And then I guess my second question is, I mean, in your opening remarks you talked about the sort of the positive impact from LSI that you're seeing, maybe expand on that. I mean, you talked about improved leasing in that portfolio, maybe just give a little bit more color. Thanks.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Sure. Absolutely. Good question. So overall, the former LSI stores rebranded as Extra Space are progressing as expected. We're seeing improvement in both organic and local search results, although there's still further room to improve there.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

The occupancy gap between the former Life Storage same store pool and the former Extra Space same store pool is close to 30 basis points, which is as tight as it's ever been. If you look at the three month period prior to the conversion to a single brand and compare it to the three month first quarter twenty twenty five period, rentals at the former Life Storage stores are up 10.4%. Life's the rate growth at the Life Storage stores is faster than the rate growth at the Extra Space stores. And on the expense side, in the first quarter, we saved $1,300,000 in paid search at the Life Storage stores. Physically, we've had 500 stores that have their signage replaced, three fifty offices complete.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

We'll have the painting done by year end. So while we're well on our way there, we're not done and we hope to get further improvement as the physical part of the rebranding is completed as well. So overall, happy where we are, happy with the pace of progress and looking forward to it continuing.

[Samir Khanal, Director at Bank of America]

Thank you for that. And finally Scott just one last one on this exchange of the 25% ownership interest for the properties to the existing joint venture. Was there an impact in 1Q from that at all?

[Scott Stubbs, EVP & CFO at Extra Space Storage]

There actually is no impact. It basically has moved from equity an equity pickup to it will be wholly owned and that transaction actually happened on March 31. So going forward it's reflected in non same store NOI.

[Samir Khanal, Director at Bank of America]

Okay, perfect. Thank you.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

Thanks, Sameer. Thanks, Sameer.

[Operator]

Your next question comes from the line of Nick Yulico from Scotiabank. Your line is now open.

[Nicholas Yulico, Managing Director at Scotiabank]

Thanks. I was hoping to just get a feel for the acquisition yields for what was done in the quarter and what's under contract right now?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Sure. So we bought a wide variety of types of assets in the first quarter. The underwritten months to stabilization range from one month to nineteen months. So that could that tells you they're at different stage of lease up. Initial yields range from 2.3% to 6.5% and they stabilize in the upper 6% to 7%.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

So obviously, higher stabilized yields if you're further out on the stabilization projection.

[Nicholas Yulico, Managing Director at Scotiabank]

Okay, great. Thank you. And then just second question is, and I know Scott kind of framed out some of the change in move in rate growth in the fall versus the fourth quarter. And even if we looked at it like sequentially in terms of what the move in rents were in the first quarter versus the fourth quarter, it was there was a higher sequential jump in that move in rate than there was a year ago during those similar periods and at the same time you had occupancy up. So I guess is the message here that you guys are feeling a little bit better about pushing rate and removing some of the discounting on the front end? How should we think about that? Thanks.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

I think we're feeling good about things. I think it's still too early to say moving into the leasing season. We have rates have moved up sequentially month over month which is good. But on a year over year basis they've and from the previous quarter they moved up 6% and they continue to move. But we'll see how those move as we move into the leasing season.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

So we would almost tell you it's really too early to tell.

[Nicholas Yulico, Managing Director at Scotiabank]

Okay. Thank you.

[Operator]

Your next question comes from the line of Todd Thomas from KeyBanc Capital Markets. Your line is now open.

[Anthony (AJ) Peak, Equity Research Associate Analyst at KeyBanc Capital Markets]

Hi, this is AJ on for Todd. Quick question, just real quick around the April data. Could you quantify the occupancy for April thus far and what that looks like year over year?

[Scott Stubbs, EVP & CFO at Extra Space Storage]

Yes. Occupancy at the April is 93.7%. So it's a slight increase from where we were at the end of Q1. So good movement in April.

[Anthony (AJ) Peak, Equity Research Associate Analyst at KeyBanc Capital Markets]

Okay. And then real quick around kind of the 3PM growth kind of throughout the balance of the year. And I guess just more broadly in this environment, how do how have the discussions changed around either the 3PM structured financing or even acquisitions with sellers?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

So 3PM growth was really strong, a hundred net. That includes the assets in partnership that were moved from managed wholly owned, sorry. So very strong quarter, hundred net is phenomenal growth. We continue to see strong demand from operators who are having trouble in the environment. We're seeing an increase in that demand and a significant decrease in demand from new developments as development pipeline continues to slow down.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Similarly, on the bridge loan program, we see demand kind of converse to the acquisition market. So as the acquisition market continues to be muted, continued bid ask spread, we see a number of borrowers seeking to kind of get a bridge solution instead of selling and they'll try again in three years. So very good activity on both of those fronts.

[Anthony (AJ) Peak, Equity Research Associate Analyst at KeyBanc Capital Markets]

Okay. Thank you.

[Operator]

Your next question comes from the line of Ronald Tandem from Morgan Stanley. Your line is now open.

[Ronald Kamden, Managing Director, Head of US REITs and CRE Research at Morgan Stanley]

Great. Just two quick ones from my end. Just love some comments on the expense side, how you're sort of thinking about it. Obviously, taxes were higher as you expected, but just any sort of relief as you go through the year?

[Scott Stubbs, EVP & CFO at Extra Space Storage]

Yes. So property taxes and property and casualty insurance are the two areas that we kind of see pressure this year. So property taxes in the first quarter were higher. Some of that is a function of the bills that we received in the fourth quarter and we were effectively we had to catch up that accrual in the fourth quarter. So you had a harder comp from the first quarter of last year.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

So on an annual basis, we wouldn't expect them to increase at this rate, but on a quarterly basis it was a tougher comp. So the expense pressure is coming more from what we we're doing what we can to control these expenses whether it's appealing things on the property and casualty side. We've been very active in meeting with a lot of carriers trying to make sure that we have as many people in the bid process as possible. But those are somewhat you're somewhat subject to market conditions on the property and casualty side.

[Ronald Kamden, Managing Director, Head of US REITs and CRE Research at Morgan Stanley]

Great. My second question is just obviously April sounds like it's going well. But just from a macro perspective, after April 2, as you're sort of thinking about your business, your markets, bad debt kind of feedback, any sort of signs that tariffs are having an impact anywhere on your business, business customer, anything that's coming up that you could share? Thanks.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

So from a customer standpoint, we're seeing no impact as of today in any metric. So demand, which was mentioned earlier is measured by Google search generic Google search terms is actually better now than it was last year at this time and better than 2019. There is demand out there. We're not seeing any change in customer behavior in terms of acceptance of ECRIs, defaults, bad debt. The business is still good with no change.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Looking forward, we don't know. And we don't know what the effect of tariffs are going to be on customer and customer behavior. I do know that our systems and our ability to collect and react to data will optimize whatever comes to fruition. So I feel good about that. I also think that tariffs and we don't even know what tariffs are going to mean in the long run are going to have an effect on pricing.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Immigration policy may have commodity pricing, steel pricing. Immigration policy is going to have an effect on labor pricing. And I think those things will reduce further reduce new development in the future, which is a good thing for our business.

[Ronald Kamden, Managing Director, Head of US REITs and CRE Research at Morgan Stanley]

Great. Thanks so much. That's it for me.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Thanks, Ronald.

[Operator]

Your next question comes from the line of Spencer Glimcher from Green Street. Your line is now open.

[Spenser Glimcher, Managing Director at Green Street Advisors, LLC]

You. Joe, you commented on the sector's resiliency during economic downtimes. With that in mind, have you guys started to see more capital looking to get into the space in recent months?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

I don't know if we've seen more capital, Spencer. I think over the long term, there's been an increase in institutional capital looking to get into this space. When withdrawal queues in the open end fund started and there was other reallocations of capital, it slowed down somewhat. We were certainly more busy with our joint venture partners in 2020, '20 '20 '1 and 2022 than we were in 2024 and currently this year. But there still is a lot of capital that is interested in self storage.

[Spenser Glimcher, Managing Director at Green Street Advisors, LLC]

Okay. That's helpful. Thanks so much.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Sure.

[Operator]

Your next question comes from the line of Eric Wolf from Citi. Your line is now open.

[Eric Wolfe, Director at Citi]

Hey, thanks. You mentioned that demand as measured by Google search is stronger than last year and I think 2019 as well. But if you listen to the homebuilders, it seems like demand is pretty soft right now in affordability concerns. Apartments are seeing record low turnover. So I'm just curious if there are other demand sources besides moving that are becoming a bit more important drivers of demand.

[Eric Wolfe, Director at Citi]

Essentially just wondering why the Google searches look good right now at a time that the sort of moving environment seems to be a bit weaker than normal.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Yes. So moving demand certainly has declined. The peak for us was the third quarter of twenty twenty one when 63% of our customers told us they were in the process of moving. And that's not only moving to a for sale house that might be moving apartment to apartment or house to apartment or back home or to a dorm, but the peak was 63% of our customers. And now it's about 54% in the first quarter.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

So there clearly is a decline, but people are still moving. There's still a substantial demand from that. The increase in demand has been in the lack of space customer. And that's about 35% of our customers now are telling us that they are renting because they don't have enough space in their current situation. And the positive there is the length of stay of the lack of space customers twice that of the moving customer.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

And one reason we see low vacates, I think is because of this shift and it's helped increase our both our occupancy and our average length of stay.

[Eric Wolfe, Director at Citi]

That's helpful. That lack of space customers that more pronounced in certain markets? Like I guess I would think New York, big major urban markets where people tend to rent more than buy, but I was just curious if it breaks down by market at all?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Yes, I think your rationale is logical, right? New York has always been a market with less transition and more kind of lack of space, small living space tenants. And you see that in market performance, right? New York, both New York MSA and the New York boroughs outperformed our portfolio average by a significant amount, but that's a healthy market right now.

[Eric Wolfe, Director at Citi]

Thank you.

[Operator]

Your next question comes from the line of Juan Sanabria from BMO Capital Markets. Your line is now open.

[Juan Sanabria, Managing Director at BMO Capital Markets]

Hi, good morning. A question on the rates as it relates to guidance for your customers. You're flat now, and you said that was kind of one of the main variables whether you're at the high or low end. If rates are flat year over year on average for the balance of the year, what what would that mean in terms of where you'd be in within the guidance range, all else equal?

[Scott Stubbs, EVP & CFO at Extra Space Storage]

Yeah. Juan, we actually haven't, you know, guided using rates. We when we do our modeling, when we do all of that, we are guiding using revenue dollars. And so when I'm speaking to rates and strength of that, it's more in generalities. So I would tell you, obviously, rates are going to produce more revenue and lower rates are going to produce less, but we are guiding more on revenue versus rate.

[Juan Sanabria, Managing Director at BMO Capital Markets]

Okay. Fair enough. And then just a question on ECRIs. You've heard from some that, there's been maybe some moderation in initialize, maybe the quantum that's asked for on average. Have you guys done any of that or seen that, more broadly in the industry as you've kinda gotten more upfront or less paying upfront and those rates have stabilized year over year?

[Juan Sanabria, Managing Director at BMO Capital Markets]

But is there any kind of offsetting ECRIs as part of that give and take between the two discrete rates and ECRIs?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

I think broadly, no. I think what changes ECRI for us, I'm not speaking about the industry, is street rate. If we bring someone in at a discounted rate, an introductory rate, we'll try to get them through ECRI to street rate to or close to street rate in a reasonable period of time. And if street rate is not growing, that gives us less of an opportunity to do that. And if street rate is growing, then you get a little larger ECRI.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

But I would think that's the variable is where street rate is going.

[Juan Sanabria, Managing Director at BMO Capital Markets]

Thank you.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Sure.

[Operator]

Your next question comes from the line of Brad Heffern from RBC. Your line is now open.

[Brad Heffern, Director at RBC Capital Markets]

Yeah. Hey, everyone. You mentioned the Google search data having gotten a little better and that demand is finally sort of stabilized and also gotten a little better. What do you think is driving that? Have we finally just gotten to low enough pricing that that's stabilizing things?

[Brad Heffern, Director at RBC Capital Markets]

Obviously, nothing's happened on the housing front. Supply is pretty slow moving. So just wondering what you think is driving it.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

I don't think pricing has anything to do with it. Like, people are searching for storage near me before they have any idea what the the price is. I think it's it's life events and, you know, just all the typical things in good economies and bad economies and in all economies that happen that drive people to need storage. And it's one of the great, great things about our businesses. These things happen during all economic periods.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

People are going to get divorced regardless of what the economy is going on and etcetera, etcetera. So, I think it's just normal demand that is created by life events.

[Brad Heffern, Director at RBC Capital Markets]

Okay. Got it. And then on the tariffs, are you expecting any direct impact on tenants like away from losing your job or like the macroeconomic impacts? I know it's hard to quantify, but I'm just wondering if you have small businesses where there's they have an Amazon business, maybe a unit full of imports from China, where it might be a headwind?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

So if that's true, it's a really small part of our business to start with. And I also think to the extent there are negative impacts, so the tenant that has Amazon imports from China now is out of business, there'll be offsetting positive impacts of the business that ran out of a small flex space and their business is hurting and they have to downsize and operate out of a 10 by 20. So overall, I don't think it's going to be a big I'm pretty sure it's not going to be a big mover to our business.

[Brad Heffern, Director at RBC Capital Markets]

Okay. Thank you.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Sure.

[Operator]

Your next question comes from the line of Eric Luebchow from Wells Fargo. Your line is now open.

[Eric Luebchow, Director - Senior Equity Analyst at Wells Fargo Securities]

Great. Thank you. I know you don't guide to occupancy or moving rates, but I think last call you had talked about maybe some of your occupancy burning off throughout the course of the year and that could give you a little bit more leverage in pricing. So just wondering if those dynamics kind of still hold on and what you see in the market and how we should think about the next few quarters?

[Scott Stubbs, EVP & CFO at Extra Space Storage]

What we've said in the past about occupancy is we expect less occupancy benefit in the middle and back half of the year than what we saw in the front half and we still assume that to be true.

[Eric Luebchow, Director - Senior Equity Analyst at Wells Fargo Securities]

Okay. Appreciate that. And then on the acquisition guide, the $600,000,000 in your updated guide, I guess how should we think about the potential mix there between wholly owned acquisitions or JV investments? And I guess have you seen any real change in stabilized cap rates or bid ask spreads in the market year to date versus last year?

[Scott Stubbs, EVP & CFO at Extra Space Storage]

Yes. The best place to see the split is the table in the press release and you'll see a footnote over the column and the stuff that's to happen going forward. So of those 28 properties, 27 of those are JVs and then I'll have Joe comment on the market.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Yes. I don't think I could accurately give you a market cap rate. Transactions that we see close all seem to have some unique story or circumstances of why the asset was sold at the price it was. I'm not sure there's enough volume that I'm comfortable to saying this is the clearing price or the clearing yield for an asset of a particular quality and particular market. It gets a very quiet and uncertain market right now.

[Juan Sanabria, Managing Director at BMO Capital Markets]

All right. Appreciate it. Thank you. Sure.

[Operator]

Your next question comes from the line of Caitlin Burrows from Goldman Sachs. Your line is now open.

[Caitlin Burrows, Vice President at Goldman Sachs]

Hi, good morning there. I was wondering if you could just comment on your supply outlook for the year?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

So in the first quarter, we saw deliveries in our micro markets of our same store pool was as expected. We expected about 10% kind of on a square foot basis increase in those markets in 2025. And we're in the first quarter, we were tracking to that. I would not at all be surprised if the new deliveries goes down further, Just from what we're seeing in conversations with developers, inquiries in our Management plus platform, it is difficult now to understand what your costs are going to be and understand what your returns are going to be and it's significantly slowing down development.

[Caitlin Burrows, Vice President at Goldman Sachs]

Sense. And then it looks like actually post quarter you guys did some buybacks. So just wondering how you decided to do that and how you were thinking about that opportunity versus other uses of capital?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

It's a great way to ask the question because that is the decision. It's a capital allocation decision. And our stock price got to a point where we thought it was a very easy decision to allocate capital to that. We put a program in place. We were hoping to slowly buy a sizable amount of stock and without moving the market and two hours later, the President put a pause on tariffs and the stock jumped and our program ended.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

So we only ended up buying a little bit of stock. It was at a favorable price. I wish we had a greater opportunity to buy more and we'll continue going forward to look at that as one of our many options of how to allocate capital.

[Caitlin Burrows, Vice President at Goldman Sachs]

Thanks.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

You're welcome.

[Operator]

Your next question comes from the line of Michael Griffin from Evercore ISI. Your line is now open.

[Michael Griffin, Director at Evercore]

Great, thanks. Wondering if you could give a little more context and color on kind of these upcoming JV buyouts or acquisitions you have for the remainder of the year. Can we get a sense or is it you approaching your partner? I imagine you obviously own and probably manage properties, so you have a good sense for how they're operating on the ground. I mean, these capital partners more finite life vehicles that need to bring capital back to investors?

[Michael Griffin, Director at Evercore]

Give us a sense of what the kind of property mix is here and how these deals came to be?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Sure. So we have two joint venture buyouts that have been agreed to, but not closed. Both situations, this is a capital allocation decision for the partner. They'd like to take this capital and put it somewhere else. One is a 2019 venture with 11 stores, one is a 2021 venture with 16 stores.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

We will realize a $3,100,000 promote in one and a $4,200,000 promote in the other. In the first one, we'll invest about $100,000,000 at a first year yield of 7.7%. And the second one, we will have incremental capital about $55,000,000 at about 7.4. So both accretive and good uses of capital.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

Yes. And maybe just one clarifying point there. That's the cash invested. We're also assuming debt on both of those JVs to get to the total purchase price that's in the tables in the press release.

[Michael Griffin, Director at Evercore]

Yes. That's certainly helpful context, Scott. And then, Scott, I know you laid out kind of in your prepared remarks, as it relates to guidance, you're not expecting a recovery in the housing market. But I imagine job growth is also relatively correlated with storage demand. We've obviously got this the jobs report coming out on Friday.

[Michael Griffin, Director at Evercore]

I think if that really starts to fall off a cliff, whether it's bigger declines that people expect or maybe job losses, I mean, you done any analysis around that and how that could impact your expectation for growth?

[Scott Stubbs, EVP & CFO at Extra Space Storage]

We have. We've looked for coative factors over the years and job creation, job growth does impact it. We clearly prefer strong job growth than shrinking jobs. But at the same time change is what drives self storage. And good times, bad times there's going to be change.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

And so even during the last downturn 02/2009, we saw negative same store growth of 2.9%. So we feel like self storage is set up to not be recession nothing's recession proof, but it does very well in a downturn also.

[Michael Griffin, Director at Evercore]

Great. That's it for me. Thanks for the time. Your

[Operator]

next question comes from the line of Ravi Vaidya from Mizuho. Your line is now open.

[Ravi Vaidya, Vice President at Mizuho Financial Group]

I hope you guys are doing well. As we look ahead to the peak leasing season here, which markets do you expect to see strong and outsized demand from? And which ones may be a bit more concerning or something to monitor, whether it be a weak pricing, lower demand or higher operating expenses? Thanks.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

I would think the answer to that question relates to supply really. So the markets that have are still absorbing supply, Atlanta, some of the Florida markets on the Southwest Coast, Phoenix maybe, we'll have more difficulty than the markets that are already absorbed supply or never really were in that type of supply situation.

[Ravi Vaidya, Vice President at Mizuho Financial Group]

Got it. Thank you. You're welcome.

[Operator]

Your next question comes from the line of Ki Bin Kim from Truist. Your line is now open.

[Ki Bin Kim, Managing Director at Truist Securities]

Thank you. Good morning. Just going back to the bridge loan topic. Can you illustrate for us like how much more demand you might be seeing in that program given the volatility in the cost of capital market?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

I think we're seeing steady demand. I'm not sure we're seeing increasing demand when you say more demand. I think we're seeing steady demand in that business. And it's kind of a wide variety of demand, fewer new development projects, right, at CEO, more borrowers who are buying out an equity partner or tried to sell and couldn't or didn't want to at the price they could sell. So we're looking for a temporary solution and other people who want to do additions to their property or other situations like that. But I think demand is more steady than increasing.

[Ki Bin Kim, Managing Director at Truist Securities]

Okay. And on the LSI assets, you mentioned improving rentals and occupancy. For rate, for the comparable properties to EXR, like where is that gap today and how's it trended?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Overall, the trend is positive. We're the LSI stores are improving their rate growth is better than the Extra Space properties. We're not really looking at two separate pools anymore. I'm reporting on that. We will just report our same store pool and you can look at prior pools where the change is 95% LSI to see the difference in performance.

[Ki Bin Kim, Managing Director at Truist Securities]

Okay. Thank you.

[Operator]

Your next question comes from the line of Mike Mueller from JPMorgan. Your line is now open.

[Mike Mueller, Analyst at JPMorgan Chase]

Yes. Hi. I guess first question, if a recession actually happens, can you talk about how you think you'd approach operating the portfolio, say, to the playbook from the GFC?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Yes, really, really good question. I think we're in a much, much better position than we were in 02/2009 to maximize performance in a downturn. We just didn't have the systems, the data, the experience back then that we have now. And we did a bunch of things back then that in hindsight we didn't need to do, right? We had a vacate problem in 02/2009, not a demand problem, which was interesting.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Our problem was really on the vacate side. And we tried unilaterally lowering customers' rates to get them not to vacate. And obviously, that doesn't work. When people don't need storage, they don't need storage. So I'm much more confident that our systems will react real time to what's going on to optimize performance.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

And all we can do is do the best we can in the situation that's presented to us, but we are set up well to perform as best as we can regardless of the cards we're dealt.

[Mike Mueller, Analyst at JPMorgan Chase]

Got it. Okay. Maybe one other quick one too. Give a sense as to what portion of, I guess, the bridge loans that you extend ultimately translate into some sort of acquisition? Has there been a

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

consistent ratio in the conversion of say number of loans to acquisition transactions? So we've closed about $2,500,000,000 worth of bridge loans and we bought about $595,000,000 of collateral. That's about 24% of all loans by dollars end up being acquisitions. It's lumpy though, I will tell you that. It's not consistent quarter after quarter.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

It's more situational. But it's one of the great attributes and in addition to the fees we get, the interest, the management economics, the expansion of our relationships, it's one of the other great benefits of this program is it's a somewhat proprietary acquisition pipeline.

[Mike Mueller, Analyst at JPMorgan Chase]

Got it. Thank you.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Sure.

[Operator]

Your next question comes from the line of Brendan Lynch from Barclays. Your line is now open.

[Brendan Lynch, Director at Barclays Capital]

Great. Thanks for taking my questions. We're a few months on from the fires in Los Angeles. Can you give us an update on how it's impacting operations and customer behavior?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

So we don't see the increase in demand from fires like we do from hurricanes. So there's not a change in customer behavior that way there's a demand. Obviously, our pricing has been restricted by the state of emergency that's in place. We think that's going to affect the overall portfolio performance by about 20 basis points in revenue this year. And it kind of is what it is.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

There's we will sorry to repeat myself. We will optimize given the situation that we're in.

[Brendan Lynch, Director at Barclays Capital]

That makes sense. Thank you. Another question on the marketing spend. It was down 12.5% year over year at a time when you're increasing occupancy. How should we think about that marketing spend going forward? And what is changing in your approach?

[Scott Stubbs, EVP & CFO at Extra Space Storage]

Yes. So marketing spend we view as a tool to maximize revenue. And so if we have opportunities to spend more, to drive more demand, to increase pricing, we're going to do it. Now that should be offset by some of the savings from the LSI going to a single brand. Do expect savings there in terms of only bidding on one.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

But we absolutely view it as an opportunity and also an expense.

[Brendan Lynch, Director at Barclays Capital]

Great. Thank you.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

Thanks, Brendon.

[Operator]

Your next question comes from the line of Omotayo Okusanya from Deutsche Bank. Your line is now open.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Good morning out there. Quick one on guidance. Again, you almost doubled your acquisition outlook, but just to kind of kept guidance the same. Can you just walk us through a little bit of that train of thought?

[Scott Stubbs, EVP & CFO at Extra Space Storage]

Yes. So the increasing guidance is offset by a portion of the decrease in equity and earnings. Equity and earnings is going down by about $17,000,000 That decrease relates to two components. The first is the repayment of the SmartStop preferred which is about $10,000,000 of the $17,000,000 and the other 7,000,000 is effectively moving into non same store NOI.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Okay. That's helpful. And then again, pardon me if I missed it, but ECRI trends in 1Q, could you just talk a little bit about exactly how much you increased ECRIs? And then I think there was a prior question about how that could potentially be impacted by a slowdown in the economy or recession and how you're kind of thinking about it for the rest of the year?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

So really no change to our ECRI program in the first quarter other than with respect to Los Angeles and other states of emergencies where we're legally restricted. And also no change in customer behavior. As we've discussed previously, we track move outs in response to ECRI every month, and we see that, that's been very steady with no increase in move outs to the ECRI.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Got you. Last one, if I may ask. Any interest at all in doing anything internationally? Again, you have you have a peer that's doing things that's, you know, all the way in The UK, all the way in Australia. I'm just kinda curious how you kinda think about some of those markets where maybe the product itself is not quite as mature and there might be a little bit more opportunity for growth?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Yes. We certainly look at international opportunities. We were invested in Mexico for a while. We've looked at lots of other opportunities and there's really two big hurdles we want to jump over before go outside The U. S.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

One is that we want to make at least and preferably more returned on the dollar invested overseas as the dollar invested here, net of taxes and currency and setting up systems and all the costs of going international. So it's got to be accretive net of all of those things. And then secondly, it's got to be scalable. We're not really interested in buying two assets in Toronto. It's not worth the head.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

So if we can find something that's accretive for our shareholders and we can make it scalable over time, then we'd be very interested in it. And we certainly look at a lot of opportunities and we'll pull the trigger if we can ever satisfy those conditions.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Sounds good. Thank you.

[Operator]

Your next question comes from the line of Todd Thomas from KeyBanc Capital Markets. Your line is now open.

[Todd Thomas, Managing Director & Equity Research Analyst at KeyBanc Capital Markets]

Yes. Hi. Just a couple of quick follow ups here. First, Joe, you noted that there could be some instances of demand from tenants that might need to downsize from a flex space and look to a larger storage unit or multiple units. Are you seeing any use cases like that worth noting, anything to report along those lines?

[Todd Thomas, Managing Director & Equity Research Analyst at KeyBanc Capital Markets]

Or was that just a point that you were making to sort of simply demonstrate the businesses various demand drivers?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

It's really the latter. It's we have seen that it's anecdotal. We don't have enough volume of that to track over time. It's not a major part of our business. But the point I was trying to make is that while positive economic growth, job growth creates storage demand and we prefer that.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

There is also storage demand that's created by negative economic circumstances. And I was just trying to give an example.

[Todd Thomas, Managing Director & Equity Research Analyst at KeyBanc Capital Markets]

Okay, got it. And I understand you're not breaking out the LSI portfolio going forward, but I'm just curious, the contribution to same store growth this year that tailwind from the LSI portfolio. Do you expect that to increase during the year or is the impact sort of greatest early in the year to start the year here in the first quarter for example?

[Scott Stubbs, EVP & CFO at Extra Space Storage]

We would expect it to not increase to be flat to slightly moderating.

[Todd Thomas, Managing Director & Equity Research Analyst at KeyBanc Capital Markets]

Okay. And then just one more. Going back to the third party management platform, you've seen pretty sizable growth there over the last couple of years. Are there any constraints at all to growing that platform as you look ahead? Any sort of obstacles that you face or any plans to do anything more strategic with the third party management business over time?

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Once we manage every store in the country, we'll be done. That's the constraint. I don't think so. I think we have a scalable platform. The larger we get, the more advantages we have of scale in terms of data and costs and efficiencies.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

So I think we can continue to grow this platform, maybe not 100 stores a quarter, but certainly we can continue to grow it. We can as we expand into new markets that gives us more opportunities and it's a integral part of our business that gives us benefits across lots of verticals. It helps our bridge loan business, helps our acquisition business, helps us with data. So I don't think we'd want to do something strategic if you mean like carve it off and sell it. I don't think that's in the plans.

[Todd Thomas, Managing Director & Equity Research Analyst at KeyBanc Capital Markets]

Okay. All right. Thank you.

[Operator]

Your next question comes from the line of Michael Griffin from Evercore ISI. Your line is now open.

[Michael Griffin, Director at Evercore]

Hey, thanks for taking the follow-up. Just wanted a little more clarity. I noticed, I think the move in volume quarter over quarter or year over year in the same store pool looked like it was down about 12%, one hundred and sixty five thousand units this quarter versus one hundred and eighty eight thousand first quarter of last year. Is there anything to read into this? I mean that seems like a pretty notable drop off, but any color you have here would be helpful. Thank you.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

Some of that is a function on the comp from last year. We actually had a very good rental volume last year. But overall move in and move out volume are down. But probably the more important number here is occupancy. I mean occupancy and revenue growth are doing what we would expect.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

So I wouldn't tell you there's anything to read into it.

[Michael Griffin, Director at Evercore]

Great. Thank you so much.

[Scott Stubbs, EVP & CFO at Extra Space Storage]

Thanks, Michael.

[Operator]

Our next question comes from the line of Caitlin Burrows from Goldman Sachs. Your line is now open.

[Caitlin Burrows, Vice President at Goldman Sachs]

Hi. Quick follow-up on the business use realizing that it's a small part of your business. I'm just wondering if you have any idea if that's like 2% of your business or 6% or more or you don't know? So

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

we don't know exactly because it's easy to track a customer that signs their lease in the corporate name. But we also have lots of businesses that sign their lease in an individual name and they're a landscape or a local business. So we know about 5% or six percent of our tenants sign in business names. So probably our not probably our overall business uses is somewhere north of that. And it's gone down over time as a larger portion of our portfolio is multi storey buildings where a fewer percentage of our units are the First Floor 10 by tens outside access that the businesses prefer, that most businesses prefer.

[Caitlin Burrows, Vice President at Goldman Sachs]

Got it. Thanks.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Sure. You're welcome.

[Operator]

There are no further questions at this time. I will now turn the call over to Joe Margolis, CEO. Please continue.

[Joseph Margolis, Chief Executive Officer at Extra Space Storage]

Yes. Thank you everyone for your interest in X Space and your good questions. We're encouraged by the start of the year as we've tried to say and we're prepared for whatever the future puts in front of us. I hope everyone has a great day. Thank you.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Jared Conley, Investor Relations
• Joseph Margolis, Chief Executive Officer
• Scott Stubbs, EVP & CFO

Analysts

• Michael Goldsmith, US REITs Analyst at UBS Securities LLC
• Samir Khanal, Director at Bank of America
• Nicholas Yulico, Managing Director at Scotiabank
• Anthony (AJ) Peak, Equity Research Associate Analyst at KeyBanc Capital Markets
• Ronald Kamden, Managing Director, Head of US REITs and CRE Research at Morgan Stanley
• Spenser Glimcher, Managing Director at Green Street Advisors, LLC
• Eric Wolfe, Director at Citi
• Juan Sanabria, Managing Director at BMO Capital Markets
• Brad Heffern, Director at RBC Capital Markets
• Eric Luebchow, Director - Senior Equity Analyst at Wells Fargo Securities
• Caitlin Burrows, Vice President at Goldman Sachs
• Michael Griffin, Director at Evercore
• Ravi Vaidya, Vice President at Mizuho Financial Group
• Ki Bin Kim, Managing Director at Truist Securities
• Mike Mueller, Analyst at JPMorgan Chase
• Brendan Lynch, Director at Barclays Capital
• Omotayo Okusanya, Managing Director at Deutsche Bank
• Todd Thomas, Managing Director & Equity Research Analyst at KeyBanc Capital Markets