Life Storage, Inc. Reports Fourth Quarter and Full Year 2021 Results
Life Storage, Inc. (NYSE:LSI), a leading national owner and operator of self-storage properties, reported operating results for the quarter and year ended December 31, 2021. All share and per share information has been retrospectively adjusted to reflect the January 2021 three-for-two stock split made in the form of a 50% stock dividend.
Highlights for the Fourth Quarter Included:
Generated net income attributable to common shareholders of $74.1 million, or $0.90 per fully diluted common share. Achieved adjusted funds from operations (“FFO”)(1) per fully diluted common share of $1.41, a 31.8% increase over the same period in 2020. Increased same store revenue by 16.9% and same store net operating income (“NOI”)(2) by 23.9%, year-over-year. Acquired 50 stores for $826.6 million, including eight stores from the Company’s third-party management platform. With our joint venture partners, acquired 13 stores for a total cost of approximately $291 million, of which the Company invested $52 million. Added 29 stores (gross) to the Company’s third-party management platform.Highlights for the Full Year Included:
Generated net income attributable to common shareholders of $249.3 million, or $3.17 per fully diluted common share. Achieved adjusted funds from operations (“FFO”)(1) per fully diluted common share of $5.07, a 27.7% increase over the same period in 2020. Increased same store revenue by 14.1% and same store net operating income (“NOI”)(2) by 19.4%, year-over-year. Acquired 112 wholly owned stores for $1,696.3 million, including 31 stores from the Company’s third-party management and joint venture platforms. With our joint venture partners, acquired 30 stores for a total cost of approximately $611 million, of which the Company invested $81 million. Added 103 stores (gross) to the Company’s third-party management platform; the Company grew its third-party management portfolio 11% in 2021 despite acquiring 31 previously managed stores. Completed a $600 million offering of 2.4% Senior Unsecured Notes due 2031.Joe Saffire, the Company’s Chief Executive Officer, stated, “We continued to successfully accelerate our growth in 2021. Each day our team executed to deliver exceptional results and I am very proud of what we accomplished together. We achieved record acquisition volume in 2021 as we closed $2.3 billion in wholly owned and joint venture acquisitions, adding 144 properties to our platform to be just under 1,100 properties. With a growing acquisition and a third-party management pipeline, we are well positioned to continue executing on our strategic initiatives to further grow shareholder value in 2022 and beyond.”
FINANCIAL RESULTS:
In the fourth quarter of 2021, the Company generated net income attributable to common shareholders of $74.1 million or $0.90 per fully diluted common share, compared to net income attributable to common shareholders of $41.6 million, or $0.57 per fully diluted common share, in the fourth quarter of 2020.
For the year ended December 31, 2021, the Company achieved $249.3 million of net income attributable to common shareholders, or $3.17 per fully diluted common share, as compared to $151.6 million, or $2.13 per fully diluted common share, for the year ended December 31, 2020.
Funds from operations for the quarter were $1.41 per fully diluted common share compared to $1.02 for the same period last year. Adjusted FFO per fully diluted common share for the quarter was $1.41 compared to $1.07 for the quarter ended December 31, 2020.
For the year ended December 31, 2021, FFO per fully diluted common share was $5.08 compared to $3.90 for the year ended December 31, 2020. Adjusted FFO per fully diluted common share for the year was $5.07 as compared to adjusted FFO for the year ended December 31, 2020 of $3.97.
OPERATIONS:
Revenues for the 531 stabilized stores wholly owned by the Company since December 31, 2019 increased 16.9% in the fourth quarter of 2021 compared to the same quarter of 2020. The increase largely resulted from the net impact of a 110 basis point increase in average occupancy and the net impact of a 15.2% increase in realized rental rates.
Same store operating expenses increased 1.9% for the fourth quarter of 2021 compared to the prior year period, the result of increased marketing costs, office and other operating expenses, and repairs and maintenance. The increases were partially offset by decreases in real estate taxes, and payroll and benefits. Same store NOI increased 23.9% in the fourth quarter of 2021 as compared to the fourth quarter of 2020.
During the fourth quarter of 2021, the Company achieved double digit same store revenue growth in each of its 31 major markets. Overall, the markets with the strongest positive revenue impact were Austin, TX; Las Vegas, NV; Buffalo-Upstate, NY and various Florida Markets.
PORTFOLIO TRANSACTIONS:
Wholly Owned Portfolio
During the quarter, the Company acquired 50 stores in Florida (17), Georgia (9), Connecticut (6), Texas (4), Illinois (4), North Carolina (3), South Carolina (2), Colorado (2), Tennessee (1), Virginia (1) and Maine (1) for a total purchase price of $826.6 million.
At December 31, 2021, the Company was under contract to acquire ten self-storage facilities in California (9) and Maryland (1) for an aggregate purchase price of $246.3 million. During January 2022, the Company completed the acquisition of six self-storage facilities in California for an aggregate purchase price of $165.0 million. Subsequent to December 31, 2021, the Company entered into contracts to acquire 15 self-storage facilities in Texas (4), North Carolina (4), Florida (3), South Carolina (1), Illinois (1), Massachusetts (1) and Georgia (1) for an aggregate purchase price of $236.2 million. The purchases of the remaining 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 29 stores (gross). As of quarter end, the Company managed 367 facilities in total, including those in which it owns a minority interest.
FINANCIAL POSITION:
At December 31, 2021, the Company had approximately $171.9 million of cash on hand, and approximately $500 million available on its line of credit.
To support acquisition activity, the Company issued equity securities and priced a bond offering during the fourth quarter. During the quarter, the Company issued 1,527,771 shares of common stock under its continuous equity offering program at a weighted average issue price of $140.44 per share, generating net proceeds after expenses of $212 million. Additionally, the Company completed a previously announced $600 million Senior Unsecured Notes offering at 2.4% due 2031 that closed on October 7, 2021.
Below are key financial ratios at December 31, 2021:
• Debt to Enterprise Value (at $153.18/share)
17.7%
• Debt to Book Cost of Storage Facilities
39.7%
• Debt to Recurring Annualized EBITDA
4.5x
• Debt Service Coverage
5.5x
COMMON STOCK DIVIDEND:
Subsequent to quarter end, the Company’s Board of Directors approved a 16% increase to its quarterly dividend to $1.00 per share, or $4.00 annualized. The dividend was paid on January 26, 2022 to shareholders of record on January 14, 2022.
YEAR 2022 EARNINGS GUIDANCE:
The following assumptions covering operations have been utilized in formulating guidance for 2022:
Year 2022 Earnings Guidance
Current Guidance Range
Same Store Revenue
9.50%
-
10.50%
Same Store Operating Costs (excluding property taxes)
4.50%
-
5.50%
Same Store Property Taxes
6.25%
-
7.25%
Total Same Store Operating Expenses
5.00%
-
6.00%
Same Store Net Operating Income
11.50%
-
12.50%
General & Administrative
$69M
-
$71M
Expansions & Enhancements
$65M
-
$75M
Capital Expenditures
$30M
-
$35M
Wholly Owned Acquisitions
$550M
-
$650M
Joint Venture Investments
$50M
-
$100M
Adjusted Funds from Operations per Share
$5.93
-
$6.03
Reconciliation of Guidance
1Q 2022
Range or Value
FY 2022
Range or Value
Earnings per share attributable to common shareholders - diluted
$0.82 - $0.86
$3.76 - $3.86
Plus: real estate depreciation and amortization
0.54 - 0.54
2.17 - 2.17
FFO per share
$1.36 - $1.40
$5.93 - $6.03
The Company’s 2022 same store pool consists of the 581 stabilized stores wholly owned since December 31, 2020. 38 of the stores purchased through December 31, 2021 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.
FORWARD LOOKING STATEMENTS:
When used herein, 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.
All forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements. We may also make additional forward-looking statements from time to time. All such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary statements. All forward-looking statements apply only as of the date made. We undertake no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained herein. Any forward-looking statements should be considered in light of the risks referenced in the “Risk Factors” section included in our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Such factors include, but are not limited to:
adverse changes in general economic conditions, the real estate industry and in the markets in which we operate; the effect of competition from new self-storage facilities or other storage alternatives, which would cause rents and occupancy rates to decline; impacts from the COVID-19 pandemic or the future outbreak of other highly infectious or contagious diseases on the U.S., regional and global economies and our financial condition and results of operations; potential liability for uninsured losses and environmental contamination; the impact of the regulatory environment as well as national, state, and local laws and regulations including, without limitation, those governing real estate investment trusts (“REITs”), tenant reinsurance and other aspects of our business, which could adversely affect our results; loss of key personnel; the Company’s ability to evaluate, finance and integrate acquired self-storage facilities on expected terms into the Company’s existing business and operations; the Company’s ability to effectively compete in the industry in which it does business; disruptions in credit and financial markets and resulting difficulties in raising capital or obtaining credit at reasonable rates or at all, which could impede our ability to grow; 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 increase, impacting costs associated with the Company’s outstanding floating rate debt, if any, and impacting the Company’s ability to comply with debt covenants; exposure to litigation or other claims; risks associated with breaches of our data security; the regional concentration of the Company's business may subject the Company to economic downturns in the states of Florida and Texas; the Company’s cash flow may be insufficient to meet required payments of operating expenses, principal, interest and dividends; and failure to maintain our REIT status for U.S. federal income purposes, including tax law changes that may change the taxability of future income.The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. You should carefully consider these risks before you make an investment decision with respect to our securities.
CONFERENCE CALL:
Life Storage will hold its Fourth Quarter Earnings Release Conference Call at 9:00 a.m. Eastern Time on Friday, February 25, 2022. 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 877.234.0062 (domestic) or 973.413.6112 (international); passcode 105369 or request to be joined into the Life Storage call. 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 90 days; a telephone replay will also be available for 14 days by calling 877.481.4010 and entering passcode 44506.
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 just under 1,100 storage facilities in 35 states. The Company serves both residential and commercial storage customers with storage units rented by month. Life Storage consistently provides responsive service to approximately 600,000 customers, making it a leader in the industry. For more information visit http://invest.lifestorage.com.
Balance Sheet Data
(unaudited)
December 31,
December 31,
(dollars in thousands)2021
2020
Assets Investment in storage facilities: Land$
1,185,976
$
951,813
Building, equipment and construction in progress
5,904,481
4,378,510
7,090,457
5,330,323
Less: accumulated depreciation
(1,007,650
)
(873,178
)
Investment in storage facilities, net
6,082,807
4,457,145
Cash and cash equivalents
171,865
54,400
Accounts receivable
17,784
15,464
Receivable from joint ventures
333
1,064
Investment in joint ventures
213,003
143,042
Prepaid expenses
9,918
8,326
Intangible asset - in-place customer leases
13,966
5,409
Trade name
16,500
16,500
Other assets
30,421
26,498
Total Assets
$
6,556,597
$
4,727,848
Liabilities Line of credit
$
-
$
-
Term notes, net
2,747,838
2,155,457
Accounts payable and accrued liabilities
131,778
112,654
Deferred revenue
27,277
17,416
Mortgages payable
37,030
37,777
Total Liabilities
2,943,923
2,323,304
Noncontrolling redeemable Preferred Operating Partnership Units at redemption value
90,783
-
Noncontrolling redeemable Common Operating Partnership Units at redemption value
142,892
26,446
Equity Common stock
836
495
Additional paid-in capital
3,697,000
2,671,311
Accumulated deficit
(314,713
)
(288,667
)
Accumulated other comprehensive loss
(4,124
)
(5,041
)
Total Shareholders' Equity
3,378,999
2,378,098
Total Liabilities and Shareholders' Equity
$
6,556,597
$
4,727,848
Consolidated Statements of Operations
(unaudited) October 1, 2021 October 1, 2020 January 1, 2021 January 1, 2020 to to to to (dollars in thousands, except share data) December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020 Revenues Rental income
$
194,441
$
145,852
$
690,758
$
539,554
Tenant reinsurance
16,294
12,234
58,103
44,742
Other operating income
4,387
4,119
17,577
15,069
Management and acquisition fee income
6,037
4,300
22,127
17,406
Total operating revenues
221,159
166,505
788,565
616,771
Expenses Property operations and maintenance
40,129
32,503
143,648
122,544
Tenant reinsurance
6,448
4,474
22,882
15,729
Real estate taxes
18,067
17,550
79,861
70,302
General and administrative
17,210
13,557
62,617
52,055
Depreciation and amortization
36,817
30,777
134,754
117,302
Amortization of in-place customer leases
4,014
1,812
12,365
5,623
Total operating expenses
122,685
100,673
456,127
383,555
Gain on sale of real estate
-
-
-
302
Income from operations
98,474
65,832
332,438
233,518
Other income (expense) Interest expense (A)
(24,316
)
(24,959
)
(86,786
)
(86,015
)
Interest and dividend income
39
4
827
19
Equity in income of joint ventures
1,570
923
5,696
4,838
Net income
75,767
41,800
252,175
152,360
Net income attributable to noncontrolling preferred interests in the Operating Partnership
(1,018
)
-
(1,494
)
-
Net income attributable to noncontrolling common interests in the Operating Partnership
(604
)
(213
)
(1,364
)
(789
)
Net income attributable to common shareholders$
74,145
$
41,587
$
249,317
$
151,571
Earnings per common share attributable to common shareholders - basic
$
0.90
$
0.57
$
3.18
$
2.13
Earnings per common share attributable to common shareholders - diluted
$
0.90
$
0.57
$
3.17
$
2.13
Common shares used in basic earnings per share calculation
82,293,536
73,100,672
78,424,956
71,054,907
Common shares used in diluted earnings per share calculation
82,522,589
73,275,641
78,608,151
71,177,763
Dividends declared per common share
$
0.8600
$
0.7133
$
3.0800
$
2.8533
(A) Interest expense for the period ending December 31 consists of the following Interest expense
$
23,586
$
20,325
$
84,248
$
79,584
Make-whole payment on repaid note
$
-
$
4,030
$
-
$
4,030
Amortization of debt issuance costs
730
604
2,538
2,401
Total interest expense
$
24,316
$
24,959
$
86,786
$
86,015
Computation of Funds From Operations (FFO) (1)
(unaudited) October 1, 2021 October 1, 2020 January 1, 2021 January 1, 2020 to to to to (dollars in thousands, except share data) December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020 Net income attributable to common shareholders
$
74,145
$
41,587
$
249,317
$
151,571
Noncontrolling common interests in the Operating Partnership
604
213
1,364
789
Depreciation of real estate and amortization of intangible assets exclusive of debt issuance costs
40,287
31,955
144,978
120,512
Depreciation and amortization from unconsolidated joint ventures
1,988
1,311
6,227
5,814
Funds from operations allocable to noncontrolling interest in Operating Partnership
(945
)
(382
)
(2,177
)
(1,443
)
Funds from operations available to common shareholders
116,079
74,684
399,709
277,243
FFO per share - diluted
$
1.41
$
1.02
$
5.08
$
3.90
Adjustments to FFO Costs related to officer's retirement
465
-
620
-
Acquisition fee
(472
)
-
(1,752
)
(217
)
Gain on sale of land
-
-
-
(302
)
Uninsured damages and customer reinsurance claims, net
-
-
-
1,546
Make-whole payment on repaid note
4,030
4,030
Funds from operations resulting from non-recurring items allocable to noncontrolling interest in Operating Partnership
-
(21
)
5
(26
)
Adjusted funds from operations available to common shareholders
116,072
78,693
398,582
282,274
Adjusted FFO per share - diluted
$
1.41
$
1.07
$
5.07
$
3.97
Common shares - diluted
82,522,589
73,275,641
78,608,151
71,177,763
Computation of Net Operating Income (2)
(unaudited) October 1, 2021 October 1, 2020 January 1, 2021 January 1, 2020 to to to to (dollars in thousands) December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020 Net Income
$
75,767
$
41,800
$
252,175
$
152,360
General and administrative
17,210
13,557
62,617
52,055
Depreciation and amortization
40,831
32,589
147,119
122,925
Gain on sale of real estate
-
-
-
(302
)
Interest expense
24,316
24,959
86,786
86,015
Interest and dividend income
(39
)
(4
)
(827
)
(19
)
Equity in income of joint ventures
(1,570
)
(923
)
(5,696
)
(4,838
)
Net operating income$
156,515
$
111,978
$
542,174
$
408,196
Same store (4)
$
112,553
$
90,876
$
409,459
$
342,846
Net operating income related to tenant reinsurance
9,846
7,760
35,221
29,013
Other stores and management fee income
34,116
13,342
97,494
36,337
Total net operating income
$
156,515
$
111,978
$
542,174
$
408,196
Quarterly Same Store Data (3) (4) 531 mature stores owned since 12/31/19
(unaudited) October 1, 2021 October 1, 2020 to to Percentage (dollars in thousands) December 31, 2021 December 31, 2020 Change Change Revenues: Rental income
$
153,787
$
131,282
$
22,505
17.1
%
Other operating income
1,700
1,714
(14
)
-0.8
%
Total operating revenues
155,487
132,996
22,491
16.9
%
Expenses: Payroll and benefits
9,999
10,222
(223
)
-2.2
%
Real estate taxes
14,564
15,046
(482
)
-3.2
%
Utilities
3,453
3,250
203
6.2
%
Repairs and maintenance
5,193
4,925
268
5.4
%
Office and other operating expense
4,703
4,273
430
10.1
%
Insurance
1,719
1,644
75
4.6
%
Advertising
69
50
19
38.0
%
Internet marketing
3,234
2,710
524
19.3
%
Total operating expenses
42,934
42,120
814
1.9
%
Net operating income (2)$
112,553
$
90,876
$
21,677
23.9
%
QTD Same store move ins
47,479
48,102
(623
)
QTD Same store move outs
48,948
47,967
981
Other Comparable Quarterly Same Store Data (4)
(unaudited) October 1, 2021 October 1, 2020 to to Percentage December 31, 2021 December 31, 2020 Change Change 2020 Same store pool (515 stores) Revenues
$
150,649
$
128,791
$
21,858
17.0
%
Expenses
41,404
40,785
619
1.5
%
Net operating income$
109,245
$
88,006
$
21,239
24.1
%
2019 Same store pool (502 stores) Revenues$
147,361
$
126,133
$
21,228
16.8
%
Expenses
40,350
39,677
673
1.7
%
Net operating income$
107,011
$
86,456
$
20,555
23.8
%
Year to Date Same Store Data (3) (4) 531 mature stores owned since 12/31/19
(unaudited) January 1, 2021 January 1, 2020 to to Percentage (dollars in thousands) December 31, 2021 December 31, 2020 Change Change Revenues: Rental income
$
578,658
$
506,469
$
72,189
14.3
%
Other operating income
6,893
6,519
374
5.7
%
Total operating revenues
585,551
512,988
72,563
14.1
%
Expenses: Payroll and benefits
38,900
38,995
(95
)
-0.2
%
Real estate taxes
67,142
64,918
2,224
3.4
%
Utilities
14,654
14,273
381
2.7
%
Repairs and maintenance
18,259
16,098
2,161
13.4
%
Office and other operating expense
16,680
15,397
1,283
8.3
%
Insurance
6,374
6,151
223
3.6
%
Advertising
212
241
(29
)
-12.0
%
Internet marketing
13,871
14,069
(198
)
-1.4
%
Total operating expenses
176,092
170,142
5,950
3.5
%
Net operating income (2)$
409,459
$
342,846
$
66,613
19.4
%
YTD Same store move ins
194,816
204,976
(10,160
)
YTD Same store move outs
188,925
187,935
990
Life Storage, Inc. Other Data - unaudited
Same Store (3)
All Stores (5)
2021
2020
2021
2020
Weighted average quarterly occupancy
94.2
%
93.1
%
93.7
%
92.4
%
Occupancy at December 31
93.9
%
92.9
%
93.0
%
92.2
%
Rent per occupied square foot$
16.97
$
14.73
$
16.84
$
14.69
Other Data - unaudited (continued) Investment in Storage Facilities: (unaudited) The following summarizes activity in storage facilities during the twelve months ended December 31, 2021: Beginning balance
$
5,330,323
Property acquisitions
1,675,366
Improvements and equipment additions: Expansions
24,319
Roofing, paving, and equipment: Stabilized stores
26,326
Recently acquired stores
8,924
Change in construction in progress (Total CIP $44.6 million)
25,946
Dispositions and Impairments
(747
)
Storage facilities at cost at period end$
7,090,457
Comparison of Selected G&A Costs (unaudited) Quarter Ended Year Ended December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020 Management and administrative salaries and benefits
$
10,238
$
9,784
$
39,218
$
31,800
Training
337
320
680
887
Call center
854
865
3,151
3,160
Life Storage Solutions costs
463
467
1,272
1,029
Income taxes
(193
)
(1,001
)
1,679
1,628
Legal, accounting and professional
1,180
430
4,048
3,360
Costs related to officer's retirement
465
-
620
-
Other administrative expenses (6)
3,866
2,692
11,949
10,191
$
17,210
$
13,557
$
62,617
$
52,055
Net rentable square feet December 31, 2021 Wholly owned properties
51,325,614
Joint venture properties
8,772,111
Third party managed properties
18,532,262
78,629,987
December 31, 2021 December 31, 2020 Common shares outstanding
83,565,710
74,211,920
Operating Partnership Units outstanding
960,708
334,149
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