Life Storage, Inc. Reports First Quarter 2022 Results
Life Storage, Inc. (NYSE:LSI), a leading national owner and operator of self-storage properties, reported operating results for the quarter ended March 31, 2022.
Highlights for the First Quarter Included:
Generated net income attributable to common shareholders of $73.6 million, or $0.88 per fully diluted common share. Achieved funds from operations (“FFO”)(1) per fully diluted common share of $1.44, a 33.3% increase over the same period in 2021. Increased same store revenue by 15.6% and same store net operating income (“NOI”)(2) by 21.9%, year-over-year. Acquired 18 stores for $351.5 million, including one store from the Company’s third-party management platform. Added 25 stores (gross) to the Company’s third-party management platform.Joe Saffire, the Company’s Chief Executive Officer, stated, “We are off to a very strong start for the year as we continue to demonstrate strong pricing power in our footprint and robust acquisition activity. We added more scale to our key existing markets with the addition of 18 wholly owned stores and 25 stores to our third-party management platform. With a strong pipeline ahead, healthy consumer demand trends, and our ability to continue to operationally execute on our strategic initiatives, we are well positioned to continue to grow shareholder value through 2022 and beyond.”
FINANCIAL RESULTS:
In the first quarter of 2022, the Company generated net income attributable to common shareholders of $73.6 million or $0.88 per fully diluted common share, compared to net income attributable to common shareholders of $47.4 million, or $0.63 per fully diluted common share, in the first quarter of 2021.
Funds from operations for the quarter were $1.44 per fully diluted common share compared to $1.08 for the same period last year.
OPERATIONS:
Revenues for the 580 stabilized stores wholly owned by the Company since December 31, 2020 increased 15.6% in the first quarter of 2022 compared to the same quarter of 2021. The increase largely resulted from the impact of a 14.9% increase in realized rental rates and a 20 basis point increase in average occupancy.
Same store operating expenses increased 2.9% for the first quarter of 2022 compared to the prior year period, the result of increased internet marketing costs, utilities, and office and other operating expenses. The increases were partially offset by decreases in payroll and benefits. Same store NOI increased 21.9% in the first quarter of 2022 as compared to the first quarter of 2021.
During the first quarter of 2022, the Company achieved double digit same store revenue growth in 32 of its 33 major markets. Overall, the markets with the strongest positive revenue impact were various Florida markets; Atlanta, GA; Las Vegas, NV; Buffalo, NY; and Austin, TX.
PORTFOLIO TRANSACTIONS:
Wholly Owned Portfolio
During the quarter, the Company acquired 18 stores in California (6), North Carolina (4), Texas (4), Illinois (1), Georgia (1), South Carolina (1), and Maryland (1) for a total purchase price of $351.5 million.
At March 31, 2022, the Company was under contract to acquire 15 self-storage facilities in California (3), Florida (6), New York (2), Massachusetts (1), Illinois (1), Georgia (1) and Texas (1) for an aggregate purchase price of $279.1 million. Subsequent to March 31, 2022, the Company completed the acquisition of five of these self-storage facilities in Florida (3), Georgia (1) and Massachusetts (1) for an aggregate purchase price of $88.5 million. In addition, the Company acquired the remaining ownership interest in a joint venture in which the Company had a 85.8% common and preferred investment. The net investment to acquire the remaining equity in this joint venture, which owns a property located in New York, was $5.2 million. Also subsequent to March 31, 2022, the Company entered into contracts to acquire three self-storage facilities in Florida, California and North Carolina for an aggregate purchase price of $54.8 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 25 stores (gross). As of quarter end, the Company managed 378 facilities in total, including those in which it owns a noncontrolling interest.
FINANCIAL POSITION:
At March 31, 2022, the Company had approximately $50.2 million of cash on hand, and approximately $365 million available on its line of credit.
During the quarter, the Company issued 686,712 shares of common stock under its continuous equity offering program at a weighted average issue price of $136.48 per share, generating net proceeds after expenses of $92.8 million.
Below are key financial ratios at March 31, 2022:
Debt to Enterprise Value (at $140.43/share) 19.6% Debt to Book Cost of Storage Facilities 39.5% Debt to Recurring Annualized EBITDA 4.9x Debt Service Coverage 5.8xCOMMON STOCK DIVIDEND:
Subsequent to quarter end, the Company’s Board of Directors approved a quarterly dividend of $1.00 per share, or $4.00 annualized. The dividend was paid on April 26, 2022 to shareholders of record on April 14, 2022.
YEAR 2022 EARNINGS GUIDANCE:
The following assumptions covering operations have been utilized in formulating guidance for 2022:
Current Guidance
Range
Prior Guidance
Range
(February 24, 2022)
Same Store Revenue
10.50%
-
11.50%
9.50%
-
10.50%
Same Store Operating Costs (excluding property
taxes)
4.50%
-
5.50%
4.50%
-
5.50%
Same Store Property Taxes
6.25%
-
7.25%
6.25%
-
7.25%
Total Same Store Operating Expenses
5.00%
-
6.00%
5.00%
-
6.00%
Same Store Net Operating Income
13.0%
-
14.0%
11.5%
-
12.5%
General & Administrative
$69M
-
$71M
$69M
-
$71M
Expansions & Enhancements
$65M
-
$75M
$65M
-
$75M
Capital Expenditures
$30M
-
$35M
$30M
-
$35M
Wholly Owned Acquisitions
$700M
-
$900M
$550M
-
$650M
Joint Venture Investments
$50M
-
$100M
$50M
-
$100M
Adjusted Funds from Operations per Share
$6.04
-
$6.14
$5.93
-
$6.03
Reconciliation of Guidance
2Q 2022
Range or Value
FY 2022
Range or Value
Earnings per share attributable to
common shareholders - diluted
$0.94 - $0.98
$3.82 - $3.92
Plus: real estate depreciation and
amortization
0.56 - 0.56
2.22 - 2.22
FFO per share
$1.50 - $1.54
$6.04 - $6.14
The Company’s 2022 same store pool consists of the 580 stabilized stores wholly owned since December 31, 2020. Forty-two of the stores purchased through March 31, 2022, 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 First Quarter Earnings Release Conference Call at 9:00 a.m. Eastern Time on Thursday, May 5, 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 888.506.0062 (domestic) or 973.528.0011 (international); passcode 829431 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 45168.
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 over 1,100 storage facilities in 36 states. The Company serves both residential and commercial storage customers with storage units rented by month. Life Storage consistently provides responsive service to approximately 625,000 customers, making it a leader in the industry. For more information visit http://invest.lifestorage.com.
March 31,
December 31,
(dollars in thousands)2022
2021
Assets Investment in storage facilities: Land$
1,224,576
$
1,185,976
Building, equipment and construction in progress
6,229,832
5,904,481
7,454,408
7,090,457
Less: accumulated depreciation
(1,048,299
)
(1,007,650
)
Investment in storage facilities, net
6,406,109
6,082,807
Cash and cash equivalents
50,206
171,865
Accounts receivable
18,209
17,784
Receivable from joint ventures
804
333
Investment in joint ventures
214,641
213,003
Prepaid expenses
12,462
9,918
Intangible asset - in-place customer leases
11,854
13,966
Trade name
16,500
16,500
Other assets
28,706
30,421
Total Assets
$
6,759,491
$
6,556,597
Liabilities Line of credit
$
135,000
$
-
Term notes, net
2,748,787
2,747,838
Accounts payable and accrued liabilities
112,136
131,778
Deferred revenue
29,495
27,277
Mortgages payable
36,837
37,030
Total Liabilities
3,062,255
2,943,923
Noncontrolling redeemable Preferred Operating Partnership Units at redemption value
90,761
90,783
Noncontrolling redeemable Common Operating Partnership Units at redemption value
131,780
142,892
Equity Common stock
843
836
Additional paid-in capital
3,791,598
3,697,000
Accumulated deficit
(313,851
)
(314,713
)
Accumulated other comprehensive loss
(3,895
)
(4,124
)
Total Shareholders' Equity
3,474,695
3,378,999
Total Liabilities and Shareholders' Equity
$
6,759,491
$
6,556,597
$
205,509
$
150,283
Tenant reinsurance
17,267
12,619
Other operating income
4,858
4,395
Management and acquisition fee income
5,856
4,590
Total operating revenues
233,490
171,887
Expenses Property operations and maintenance
42,368
33,740
Tenant reinsurance
6,847
4,780
Real estate taxes
24,523
19,887
General and administrative
15,826
14,183
Depreciation and amortization
40,795
31,288
Amortization of in-place customer leases
5,606
2,071
Total operating expenses
135,965
105,949
Income from operations
97,525
65,938
Other income (expense) Interest expense (A)
(24,240
)
(20,346
)
Interest and dividend income
15
779
Equity in income of joint ventures
2,118
1,221
Net income
75,418
47,592
Net income attributable to noncontrolling preferred interests in the Operating Partnership
(996
)
-
Net income attributable to noncontrolling common interests in the Operating Partnership
(847
)
(209
)
Net income attributable to common shareholders$
73,575
$
47,383
Earnings per common share attributable to common shareholders - basic
$
0.88
$
0.63
Earnings per common share attributable to common shareholders - diluted
$
0.88
$
0.63
Common shares used in basic earnings per share calculation
83,644,426
75,387,332
Common shares used in diluted earnings per share calculation
83,837,773
75,510,201
Dividends declared per common share
$
1.0000
$
0.7400
(A) Interest expense for the period ending March 31 consists of the following Interest expense
$
23,510
$
19,743
Amortization of debt issuance costs
730
603
Total interest expense
$
24,240
$
20,346
$
73,575
$
47,383
Noncontrolling common interests in the Operating Partnership
847
209
Depreciation of real estate and amortization of intangible assets exclusive of debt issuance costs
45,866
32,819
Depreciation and amortization from unconsolidated joint ventures
1,802
1,202
Funds from operations allocable to noncontrolling interest in Operating Partnership
(1,389
)
(359
)
Funds from operations available to common shareholders
120,701
81,254
FFO per share - diluted
$
1.44
$
1.08
Common shares - diluted
83,837,773
75,510,201
$
75,418
$
47,592
General and administrative
15,826
14,183
Depreciation and amortization
46,401
33,359
Interest expense
24,240
20,346
Interest and dividend income
(15
)
(779
)
Equity in income of joint ventures
(2,118
)
(1,221
)
Net operating income$
159,752
$
113,480
Same store (4)
$
120,547
$
98,868
Net operating income related to tenant reinsurance
10,420
7,839
Other stores and management fee income
28,785
6,773
Total net operating income
$
159,752
$
113,480
$
169,446
$
146,430
$
23,016
15.7
%
Other operating income
1,924
1,845
79
4.3
%
Total operating revenues
171,370
148,275
23,095
15.6
%
Expenses: Payroll and benefits
10,823
11,068
(245
)
-2.2
%
Real estate taxes
19,744
19,327
417
2.2
%
Utilities
4,506
4,136
370
8.9
%
Repairs and maintenance
5,331
5,126
205
4.0
%
Office and other operating expense
4,704
4,422
282
6.4
%
Insurance
1,763
1,722
41
2.4
%
Advertising
52
52
-
0.0
%
Internet marketing
3,900
3,554
346
9.7
%
Total operating expenses
50,823
49,407
1,416
2.9
%
Net operating income (2)$
120,547
$
98,868
$
21,679
21.9
%
QTD Same store move ins
50,203
51,745
(1,542
)
QTD Same store move outs
49,951
46,560
3,391
$
155,574
$
134,500
$
21,074
15.7
%
Expenses
46,157
44,726
1,431
3.2
%
Net operating income$
109,417
$
89,774
$
19,643
21.9
%
2020 Same store pool (514 stores) Revenues$
150,732
$
130,185
$
20,547
15.8
%
Expenses
44,698
43,347
1,351
3.1
%
Net operating income$
106,034
$
86,838
$
19,196
22.1
%
Same Store (3)
All Stores (5)
2022
2021
2022
2021
Weighted average quarterly occupancy93.6%
93.4%
93.0%
92.7%
Occupancy at March 3193.7%
94.0%
92.9%
93.1%
Rent per occupied square foot$17.11
$14.89
$16.98
$14.82
$
7,090,457
Property acquisitions
348,017
Improvements and equipment additions: Expansions
5,060
Roofing, paving, and equipment: Stabilized stores
3,980
Recently acquired stores
1,653
Change in construction in progress (Total CIP $55.0 million)
5,430
Dispositions and Impairments
(189
)
Storage facilities at cost at period end$
7,454,408
Comparison of Selected G&A Costs (unaudited) Quarter Ended March 31, 2022 March 31, 2021 Management and administrative salaries and benefits
$
9,911
$
8,612
Training
136
102
Call center
840
700
Life Storage Solutions costs
345
299
Income taxes
358
573
Legal, accounting and professional
1,101
1,063
Other administrative expenses (6)
3,135
2,834
$
15,826
$
14,183
Net rentable square feet March 31, 2022 Wholly owned properties
52,569,873
Joint venture properties
8,857,421
Third party managed properties
19,593,021
81,020,315
March 31, 2022 March 31, 2021 Common shares outstanding
84,307,259
76,477,796
Operating Partnership Units outstanding
960,208
333,398
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