Market Overview

Life Storage, Inc. Reports Third Quarter Results

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Life Storage, Inc. (NYSE:LSI), a leading national owner and operator of self-storage properties, reported operating results for the quarter ended September 30, 2020.

Highlights for the Third Quarter Included:

  • Generated net income attributable to common shareholders of $37.1 million, or $0.78 per fully diluted common share.
  • Achieved adjusted funds from operations ("FFO")(1) per fully diluted common share of $1.52, a 4.1% increase over the same period in 2019.
  • Increased same store revenue by 1.2% and same store net operating income ("NOI")(2) by 0.4%, year-over-year.
  • Achieved 11th straight quarter of less than 1% increase year-over-year growth of same store operating expense (excluding property taxes).
  • Acquired 25 stabilized stores from two of our joint ventures for a total valuation of $326.7 million.
  • Added 30 stores to the Company's third-party management platform.
  • Completed a $400 million offering of 2.2% Senior Unsecured Notes due 2030.
  • Bolstered Warehouse Anywhere's ecommerce solution through a partnership with Deliverr, a leading technology-enabled fulfillment organization, with the build-out of a micro-fulfillment center in Las Vegas and a second planned in Chicago.

Joe Saffire, the Company's Chief Executive Officer, stated, "We had a great quarter on many fronts. Our stores returned to positive top line revenue and NOI growth. We achieved record third quarter same store occupancy, up 290 basis points year-over-year at quarter end. We acquired 25 stores from two of our strategic joint venture partners and our acquisition pipeline remains robust. We added 30 stores to our third-party management platform as owners are drawn to our technology platforms and peer-leading same store performance. Our B2B platform, Warehouse Anywhere, achieved several positive customer pilot outcomes. And our balance sheet and liquidity position remain strong and support our ability to execute on our strategic initiatives."

COVID-19 PANDEMIC:

The COVID-19 global health crisis and related economic disruption has had an adverse effect on the Company's year-to-date financial results in 2020. However, the Company experienced several positive trends in the third quarter and October, which include:

  • Same store move-ins were 11.0% higher and same store move-outs were 7.7% lower in the third quarter of 2020 than the same period last year, resulting in weighted average quarterly occupancy of 93.0% compared to 90.7% in the third quarter of 2019. Same store occupancy was 93.2% at both September 30, 2020 and October 31, 2020.
  • The impact of delayed auctions continued to decrease as auction activities have resumed in nearly all markets. Had normal auction activity occurred, the Company estimates same store occupancy would have been approximately 92.5% as of September 30, 2020 and 92.8% at October 31, 2020.
  • Cash collection rates have returned to pre-COVID-19 levels.

FINANCIAL RESULTS:

In the third quarter of 2020, the Company generated net income attributable to common shareholders of $37.1 million or $0.78 per fully diluted common share, compared to net income attributable to common shareholders of $140.0 million, or $2.99 per fully diluted common share, in the third quarter of 2019. Net income in the same quarter last year benefited from a $100.2 million gain on sale of storage facilities.

Funds from operations for the quarter were $1.49 per fully diluted common share compared to $1.46 for the same period last year. After adjusting for the $1.5 million impact of uninsured damages and customer reinsurance claims associated with hurricane damage in September 2020, adjusted FFO per fully diluted common share for the quarter was $1.52, compared to $1.46 for the quarter ended September 30, 2019.

OPERATIONS:

Same store revenues for the stabilized stores wholly owned by the Company since December 31, 2018 increased 1.2% from the third quarter of 2019. The increase resulted from the net impact of a 230 basis point increase in average occupancy and a 2.4% decline in realized rental rates.

Same store operating expenses increased 2.7% for the third quarter of 2020 compared to the prior year period, the result of increased real estate taxes and internet marketing costs. The increases were offset by decreases in payroll and benefits, repair and maintenance, utilities, advertising, insurance and office and other operating expenses. This is the eighth straight quarter of declining payroll and benefits when comparing to the same period of the prior year. Same store NOI increased 0.4% in the third quarter of 2020 as compared to the third quarter of 2019.

The Company's 2020 same store pool consists of the 515 stabilized stores wholly owned since December 31, 2018. Two stores that were damaged from hurricanes in September 2020 were removed from the same store pool in the third quarter. Twenty-two of the stores purchased through December 31, 2019 at certificate of occupancy or that were in the early stages of lease-up are not included, regardless of their current occupancies. The Company believes that occupancy levels achieved during the lease-up period, using discounted rates, are not truly indicative of a new store's performance, and therefore do not result in a meaningful year-over-year comparison in future years. The Company will include such stores in its same store pool in the second year after the stores achieve 80% sustained occupancy using market rates and incentives.

PORTFOLIO TRANSACTIONS:

During the quarter, the Company acquired 25 stabilized stores in New Jersey (6), Ohio (6), Texas (5), Pennsylvania (4), Florida (3), and Georgia (1) for a total purchase price of $326.7 million. Seventeen of the properties were acquired from Sovran HHF Storage Holdings LLC, a joint venture in which the Company has a 20% common interest, and eight of the properties were acquired from Sovran HHF Storage Holdings II LLC, a joint venture in which the Company has a 15% common interest. The net investment to acquire the properties was $295.3 million.

During the third quarter, the Company entered into contracts to acquire three self-storage facilities in Missouri, New Jersey, and New York for an aggregate purchase price of $37.9 million. Subsequent to September 30, 2020, the Company entered into contracts to acquire five self-storage facilities in Florida (2), South Carolina (2) and California (1) for an aggregate purchase price of $59.6 million. The purchases of these facilities are subject to customary conditions to closing, and there is no assurance that any of these facilities will be acquired.

THIRD-PARTY MANAGEMENT:

The Company continues to aggressively and profitably grow its third-party management platform. During the quarter, the Company added 30 stores. As of quarter end, the Company managed 317 facilities in total, including those in which it owns a minority interest.

FINANCIAL POSITION:

At September 30, 2020, the Company had approximately $110.2 million of cash on hand, and approximately $500 million available on its line of credit.

On September 23, 2020, the Company completed an offering of $400 million aggregate principal amount of 2.2% Senior Unsecured Notes due 2030. The proceeds were used to fund a portion of the 25-store portfolio acquisition noted above, for general corporate purposes and to fund the October 2020 repayment of a $100 million term note due August 2021 and a related $4.0 million make-whole expense.

During the three months ended September 30, 2020, the Company issued 1,285,546 shares of common stock under its continuous equity offering program at a weighted average issue price of $105.51 per share, generating net proceeds after expenses of $134.2 million.

Below are key financial ratios at September 30, 2020:

Debt to Enterprise Value (at $105.27/share)

31.2%

Debt to Book Cost of Storage Facilities

44.4%

Debt to Recurring Annualized EBITDA

5.8x

Debt Service Coverage

4.3x

COMMON STOCK DIVIDEND:

Subsequent to quarter end, the Company's Board of Directors approved a quarterly dividend of $1.07 per share, or $4.28 annualized. The dividend was paid on October 26, 2020 to shareholders of record on October 13, 2020.

YEAR 2020 EARNINGS GUIDANCE:

Continued uncertainties resulting from the ongoing COVID-19 pandemic and related economic disruption across the country and its impact on customer demand in individual markets, continue to make it challenging to provide an outlook and guidance with reasonable accuracy. However, the Company believes it is well positioned to continue to strengthen its share of the resilient self-storage markets it serves due to its disciplined business model and a strong balance sheet to support its strategic initiatives.

The Company will continue with suspension of quantitative guidance and revisit this practice next quarter.

FORWARD LOOKING STATEMENTS:

When used in this news release, the words "intends," "believes," "expects," "anticipates," and similar expressions are intended to identify "forward-looking statements" within the meaning of that term in Section 27A of the Securities Act of 1933 and in Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the effect of competition from new self-storage facilities, which would cause rents and occupancy rates to decline; risks associated with the COVID-19 global health crisis or similar events, including but not limited to (i) the impact to the health of our employees and/or customers, (ii) the negative impacts to the economy and to self-storage customers which could reduce the demand for self-storage or reduce our ability to collect rent, (iii) reducing or eliminating our ability to increase rents charged to our current or future customers, (iv) limiting our ability to collect rent from or evict past due customers, (v) we could see an increase in move-outs of longer-term customers due to the economic uncertainty and significant rise in unemployment resulting from the COVID-19 global health crisis which could lead to lower occupancies and reduced average rental rates as longer-term customers are replaced with new customers at lower rates, and (vi) potential negative impacts on the cost and availability of debt and equity which could have a negative impact on our capital and growth plans; the Company's ability to evaluate, finance and integrate acquired self-storage facilities into the Company's existing business and operations; the Company's ability to effectively compete in the industry in which it does business; the Company's existing indebtedness may mature in an unfavorable credit environment, preventing refinancing or forcing refinancing of the indebtedness on terms that are not as favorable as the existing terms; interest rates may fluctuate, impacting costs associated with the Company's outstanding floating rate debt; the Company's ability to comply with debt covenants; any future ratings on the Company's debt instruments; regional concentration of the Company's business may subject it to economic downturns in the states of Florida and Texas; the Company's reliance on its call center; and tax law changes that may change the taxability of future income.

CONFERENCE CALL:

Life Storage will hold its Third Quarter Earnings Release Conference Call at 9:00 a.m. Eastern Time on Friday, November 6, 2020. To help avoid connection delays, participants are encouraged to pre-register using this link. Anyone unable to pre-register may access the conference call at 844-707-6940 (domestic) or 412-317-5702 (international). Management will accept questions from registered financial analysts after prepared remarks; all others are encouraged to listen to the call via webcast by accessing the investor relations tab at lifestorage.com. The webcast will be archived for a period of six months.

ABOUT LIFE STORAGE, INC:

Life Storage, Inc. is a self-administered and self-managed equity REIT that is in the business of acquiring and managing self-storage facilities. Located in Buffalo, New York, the Company operates more than 900 storage facilities in 30 states and in the province of Ontario, Canada. The Company serves both residential and commercial storage customers with storage units rented by month. Life Storage consistently provides responsive service to approximately 500,000 customers, making it a leader in the industry. For more information visit http://invest.lifestorage.com.

Life Storage, Inc.
Balance Sheet Data
(unaudited)
 
September 30, December 31,
(dollars in thousands)

2020

2019

Assets
Investment in storage facilities:
Land

$

937,030

 

$

884,235

 

Building, equipment and construction in progress

 

4,263,222

 

 

3,865,238

 

 

5,200,252

 

 

4,749,473

 

Less: accumulated depreciation

 

(842,592

)

 

(756,333

)

Investment in storage facilities, net

 

4,357,660

 

 

3,993,140

 

Cash and cash equivalents

 

110,247

 

 

17,458

 

Accounts receivable

 

13,970

 

 

12,218

 

Receivable from joint ventures

 

3,223

 

 

1,302

 

Investment in joint ventures

 

143,633

 

 

154,984

 

Prepaid expenses

 

10,601

 

 

7,771

 

Intangible asset - in-place customer leases

 

5,685

 

 

2,910

 

Trade name

 

16,500

 

 

16,500

 

Other assets

 

27,536

 

 

26,681

 

Total Assets

$

4,689,055

 

$

4,232,964

 

 
Liabilities
Line of credit

$

-

 

$

65,000

 

Term notes, net

 

2,254,783

 

 

1,858,271

 

Accounts payable and accrued liabilities

 

107,980

 

 

103,942

 

Deferred revenue

 

16,204

 

 

11,699

 

Mortgages payable

 

34,352

 

 

34,851

 

Total Liabilities

 

2,413,319

 

 

2,073,763

 

 
Noncontrolling redeemable Operating Partnership Units at redemption value

 

25,848

 

 

26,307

 

 
Equity
Common stock

 

482

 

 

467

 

Additional paid-in capital

 

2,533,402

 

 

2,376,723

 

Accumulated deficit

 

(278,726

)

 

(238,338

)

Accumulated other comprehensive loss

 

(5,270

)

 

(5,958

)

Total Shareholders' Equity

 

2,249,888

 

 

2,132,894

 

Total Liabilities and Shareholders' Equity

$

4,689,055

 

$

4,232,964

 

Life Storage, Inc.
Consolidated Statements of Operations
(unaudited)
July 1, 2020   July 1, 2019 January 1, 2020   January 1, 2019
to   to to   to
(dollars in thousands, except share data) September 30, 2020   September 30, 2019 September 30, 2020   September 30, 2019
     
Revenues    
Rental income

$

135,965

 

 

$

128,565

 

$

393,701

 

 

$

381,625

 

Other operating income

 

15,827

 

 

 

13,260

 

 

43,458

 

 

 

35,405

 

Management and acquisition fee income

 

4,518

 

 

 

3,809

 

 

13,107

 

 

 

10,156

 

Total operating revenues

 

156,310

 

 

 

145,634

 

 

450,266

 

 

 

427,186

 

     
Expenses    
Property operations and maintenance

 

36,199

 

 

 

32,215

 

 

101,297

 

 

 

96,809

 

Real estate taxes

 

17,729

 

 

 

16,116

 

 

52,751

 

 

 

48,427

 

General and administrative

 

13,369

 

 

 

11,554

 

 

38,498

 

 

 

34,401

 

Payments for rent

 

-

 

 

 

75

 

 

-

 

 

 

358

 

Depreciation and amortization

 

31,960

 

 

 

26,055

 

 

86,524

 

 

 

77,561

 

Amortization of in-place customer leases

 

1,058

 

 

 

799

 

 

3,811

 

 

 

1,678

 

Total operating expenses

 

100,315

 

 

 

86,814

 

 

282,881

 

 

 

259,234

 

     
Gain on sale of storage facilities

 

-

 

 

 

100,222

 

 

-

 

 

 

100,222

 

Gain on sale of real estate

 

-

 

 

 

-

 

 

302

 

 

 

1,076

 

Income from operations

 

55,995

 

 

 

159,042

 

 

167,687

 

 

 

269,250

 

     
Other income (expense)    
Interest expense (A)

 

(20,544

)

 

 

(19,760

)

 

(61,056

)

 

 

(56,339

)

Interest income

 

8

 

 

 

289

 

 

14

 

 

 

340

 

Equity in income of joint ventures

 

1,829

 

 

 

1,175

 

 

3,915

 

 

 

3,095

 

     
Net income

 

37,288

 

 

 

140,746

 

 

110,560

 

 

 

216,346

 

Net income attributable to noncontrolling interests in the Operating Partnership

 

(193

)

 

 

(744

)

 

(576

)

 

 

(1,148

)

Net income attributable to common shareholders

$

37,095

 

 

$

140,002

 

$

109,984

 

 

$

215,198

 

   
Earnings per common share attributable to common shareholders - basic

$

0.78

 

 

$

3.00

 

$

2.34

 

 

$

4.62

 

     
Earnings per common share attributable to common shareholders - diluted

$

0.78

 

 

$

2.99

 

$

2.34

 

 

$

4.61

 

     
Common shares used in basic earnings per share calculation

 

47,223,842

 

 

 

46,586,030

 

 

46,915,323

 

 

 

46,577,704

 

     
Common shares used in diluted earnings per share calculation

 

47,299,906

 

 

 

46,657,105

 

 

46,985,647

 

 

 

46,641,673

 

     
Dividends declared per common share

$

1.07

 

 

$

1.00

 

$

3.21

 

 

$

3.00

 

     
     
(A) Interest expense for the period ending September 30 consists of the following    
Interest expense

$

19,948

 

 

$

19,146

 

$

59,258

 

 

$

54,625

 

Amortization of debt issuance costs

 

596

 

 

 

614

 

 

1,798

 

 

 

1,714

 

Total interest expense

$

20,544

 

 

$

19,760

 

$

61,056

 

 

$

56,339

 

Life Storage, Inc.
Computation of Funds From Operations (FFO) (1)
(unaudited)
July 1, 2020 July 1, 2019 January 1, 2020 January 1, 2019
to to to to
(dollars in thousands, except share data) September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
 
Net income attributable to common shareholders

$

37,095

 

$

140,002

 

$

109,984

 

$

215,198

 

Noncontrolling interests in the Operating Partnership

 

193

 

 

744

 

 

576

 

 

1,148

 

Depreciation of real estate and amortization of intangible
assets exclusive of debt issuance costs

 

32,417

 

 

26,269

 

 

88,557

 

 

77,797

 

Depreciation and amortization from unconsolidated joint ventures

 

1,024

 

 

1,598

 

 

4,502

 

 

4,468

 

Gain on sale of storage facilities

 

-

 

 

(100,222

)

 

-

 

 

(100,222

)

Funds from operations allocable to noncontrolling
interest in Operating Partnership

 

(367

)

 

(360

)

 

(1,060

)

 

(1,055

)

Funds from operations available to common shareholders

 

70,362

 

 

68,031

 

 

202,559

 

 

197,334

 

FFO per share - diluted

$

1.49

 

$

1.46

 

$

4.31

 

$

4.23

 

 
Adjustments to FFO
Uninsured damages and customer reinsurance claims, net

$

1,546

 

$

-

 

$

1,546

 

$

-

 

Lawsuit settlement

$

-

 

$

-

 

$

-

 

 

(1,651

)

Gain on sale of land

 

-

 

 

-

 

 

(302

)

 

(1,076

)

Acquisition fee

 

-

 

 

-

 

 

(217

)

 

-

 

Costs related to officer's retirement

 

-

 

 

-

 

 

-

 

 

443

 

Funds from operations resulting from non-recurring items
allocable to noncontrolling interest in Operating Partnership

 

(8

)

 

-

 

 

(5

)

 

12

 

Adjusted funds from operations available to common shareholders

 

71,900

 

 

68,031

 

 

203,581

 

 

195,062

 

Adjusted FFO per share - diluted

$

1.52

 

$

1.46

 

$

4.33

 

$

4.18

 

 
Common shares - diluted

 

47,299,906

 

 

46,657,105

 

 

46,985,647

 

 

46,641,673

 

Life Storage, Inc.
Computation of Net Operating Income (2)
(unaudited)
July 1, 2020 July 1, 2019 January 1, 2020 January 1, 2019
to to to to
(dollars in thousands) September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
 
Net Income

$

37,288

 

$

140,746

 

$

110,560

 

$

216,346

 

General and administrative

 

13,369

 

 

11,554

 

 

38,498

 

 

34,401

 

Payments for rent

 

-

 

 

75

 

 

-

 

 

358

 

Depreciation and amortization

 

33,018

 

 

26,854

 

 

90,335

 

 

79,239

 

Gain on sale of storage facilities

 

-

 

 

(100,222

)

 

-

 

 

(100,222

)

Gain on sale of real estate

 

-

 

 

-

 

 

(302

)

 

(1,076

)

Interest expense

 

20,544

 

 

19,760

 

 

61,056

 

 

56,339

 

Interest income

 

(8

)

 

(289

)

 

(14

)

 

(340

)

Equity in income of joint ventures

 

(1,829

)

 

(1,175

)

 

(3,915

)

 

(3,095

)

Net operating income

$

102,382

 

$

97,303

 

$

296,218

 

$

281,950

 

 
Same store (4)

$

84,303

 

$

83,949

 

$

243,549

 

$

241,594

 

Net operating income related to tenant reinsurance

 

7,059

 

 

6,768

 

 

21,254

 

 

19,286

 

Other stores and management fee income

 

11,020

 

 

6,586

 

 

31,415

 

 

21,070

 

Total net operating income

$

102,382

 

$

97,303

 

$

296,218

 

$

281,950

 

Life Storage, Inc.
Quarterly Same Store Data (3) (4) 515 mature stores owned since 12/31/18
(unaudited)
July 1, 2020 July 1, 2019
to to Percentage
(dollars in thousands) September 30, 2020 September 30, 2019 Change Change
 
Revenues:
Rental income

$

124,614

$

123,162

$

1,452

 

1.2

%

Other operating income

 

1,781

 

1,764

 

17

 

1.0

%

Total operating revenues

 

126,395

 

124,926

 

1,469

 

1.2

%

 
Expenses:
Payroll and benefits

 

9,218

 

9,460

 

(242

)

-2.6

%

Real estate taxes

 

16,209

 

15,241

 

968

 

6.4

%

Utilities

 

4,085

 

4,359

 

(274

)

-6.3

%

Repairs and maintenance

 

3,564

 

3,583

 

(19

)

-0.5

%

Office and other operating expense

 

3,751

 

3,817

 

(66

)

-1.7

%

Insurance

 

1,466

 

1,478

 

(12

)

-0.8

%

Advertising

 

62

 

113

 

(51

)

-45.1

%

Internet marketing

 

3,737

 

2,926

 

811

 

27.7

%

Total operating expenses

 

42,092

 

40,977

 

1,115

 

2.7

%

 
Net operating income (2)

$

84,303

$

83,949

$

354

 

0.4

%

 
 
QTD Same store move ins

 

55,365

 

49,859

 

5,506

 

 
QTD Same store move outs

 

51,043

 

55,325

 

(4,282

)

Other Comparable Quarterly Same Store Data (4)
(unaudited)
July 1, 2020 July 1, 2019
to to Percentage
September 30, 2020 September 30, 2019 Change Change
2019 Same store pool (502 stores)
Revenues

$

123,760

$

122,404

$

1,356

1.1

%

Expenses

 

41,000

 

39,929

 

1,071

2.7

%

Net operating income

$

82,760

$

82,475

$

285

0.3

%

 
 
2018 Same store pool (486 stores)
Revenues

$

119,378

$

118,137

$

1,241

1.1

%

Expenses

 

39,318

 

38,400

 

918

2.4

%

Net operating income

$

80,060

$

79,737

$

323

0.4

%

Life Storage, Inc.
Year to Date Same Store Data (3) (4) 515 mature stores owned since 12/31/18
(unaudited)
January 1, 2020 January 1, 2019
to to Percentage
(dollars in thousands) September 30, 2020 September 30, 2019 Change Change
 
Revenues:
Rental income

$

363,209

$

360,660

$

2,549

 

0.7

%

Other operating income

 

4,641

 

5,155

 

(514

)

-10.0

%

Total operating revenues

 

367,850

 

365,815

 

2,035

 

0.6

%

 
Expenses:
Payroll and benefits

 

27,879

 

29,353

 

(1,474

)

-5.0

%

Real estate taxes

 

48,436

 

45,697

 

2,739

 

6.0

%

Utilities

 

10,738

 

11,699

 

(961

)

-8.2

%

Repairs and maintenance

 

10,801

 

12,692

 

(1,891

)

-14.9

%

Office and other operating expense

 

10,838

 

11,696

 

(858

)

-7.3

%

Insurance

 

4,407

 

4,431

 

(24

)

-0.5

%

Advertising

 

186

 

708

 

(522

)

-73.7

%

Internet marketing

 

11,016

 

7,945

 

3,071

 

38.7

%

Total operating expenses

 

124,301

 

124,221

 

80

 

0.1

%

 
Net operating income (2)

$

243,549

$

241,594

$

1,955

 

0.8

%

 
 
YTD Same store move ins

 

152,499

 

148,987

 

3,512

 

 
YTD Same store move outs

 

135,953

 

147,009

 

(11,056

)

Life Storage, Inc.
Other Data - unaudited

Same Store (3)

All Stores (5)

2020

2019

2020

2019

 
Weighted average quarterly occupancy

 

93.0

%

 

90.7

%

 

92.3

%

 

89.2

%

 
Occupancy at September 30

 

93.2

%

 

90.3

%

 

92.4

%

 

88.8

%

 
Rent per occupied square foot

$

14.43

 

$

14.79

 

$

14.44

 

$

14.71

 

Life Storage, Inc.
Other Data - unaudited (continued)
 
Investment in Storage Facilities: (unaudited)
The following summarizes activity in storage facilities during the nine months ended September 30, 2020:
 
Beginning balance

$

4,749,473

 

Property acquisitions

 

413,022

 

Improvements and equipment additions:
Expansions

 

31,650

 

Roofing, paving, and equipment:
Stabilized stores

 

12,191

 

Recently acquired stores

 

47

 

Change in construction in progress (Total CIP $22.4 million)

 

(5,884

)

Dispositions and Impairments

 

(247

)

Storage facilities at cost at period end

$

5,200,252

 

 
 
Comparison of Selected G&A Costs (unaudited) Quarter Ended
September 30, 2020 September 30, 2019
 
Management and administrative salaries and benefits

$

7,792

 

$

6,557

Training

 

173

 

 

296

Call center

 

814

 

 

744

Life Storage Solutions costs

 

205

 

 

255

Income taxes

 

961

 

 

490

Legal, accounting and professional

 

945

 

 

944

Other administrative expenses (6)

 

2,479

 

 

2,268

$

13,369

 

$

11,554

 
Net rentable square feet September 30, 2020
Wholly owned properties

 

42,689,838

 

Joint venture properties

 

6,701,445

 

Third party managed properties

 

16,463,115

 

 

65,854,398

 

 
September 30, 2020 September 30, 2019
 
Common shares outstanding

 

48,199,008

 

 

46,656,891

Operating Partnership Units outstanding

 

243,966

 

 

247,466

(1) We believe that Funds from Operations ("FFO") provides relevant and meaningful information about our operating performance that is necessary, along with net earnings and cash flows, for an understanding of our operating results. FFO adds back historical cost depreciation, which assumes the value of real estate assets diminishes predictably in the future. In fact, real estate asset values increase or decrease with market conditions. Consequently, we believe FFO is a useful supplemental measure in evaluating our operating performance by disregarding (or adding back) historical cost depreciation.
Funds from operations is defined by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT") as net income available to common shareholders computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains or losses on sales of properties, plus impairment of real estate assets, plus depreciation and amortization and after adjustments to record unconsolidated partnerships and joint ventures on the same basis. We believe that to further understand our performance, FFO should be compared with our reported net income and cash flows in accordance with GAAP, as presented in our consolidated financial statements.
Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, or as an indicator of our ability to make cash distributions.
(2) Net operating income or "NOI" is a non-GAAP (generally accepted accounting principles) financial measure that we define as total continuing revenues less continuing property operating expenses. NOI also can be calculated by adding back to net income: interest expense, impairment and casualty losses, operating lease expenses, depreciation and amortization expense, any losses on sale of real estate, acquisition related costs, general and administrative expense, and deducting from net income: income from discontinued operations, interest income, any gains on sale of real estate, and equity in income of joint ventures. We believe that NOI is a meaningful measure to investors in evaluating our operating performance, because we utilize NOI in making decisions with respect to capital allocations, in determining current property values, and in comparing period-to-period and market-to-market property operating results. Additionally, NOI is widely used in the real estate industry and the self-storage industry to measure the performance and value of real estate assets without regard to various items included in net income that do not relate to or are not indicative of operating performance, such as depreciation and amortization, which can vary depending on accounting methods and book value of assets. NOI should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP, such as total revenues, operating income and net income.
(3) Includes the stores owned and/or managed by the Company for the entire periods presented that are consolidated in our financial statements. Does not include unconsolidated joint ventures or other stores managed by the Company.
(4) Revenues and expenses do not include items related to tenant reinsurance.
(5) Does not include unconsolidated joint venture stores or other stores managed by the Company.
(6) Other administrative expenses include office rent, travel expense, investor relations and miscellaneous other expenses.

 

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