Life Storage, Inc. Reports Third Quarter 2021 Results
Life Storage, Inc. (NYSE:LSI), a leading national owner and operator of self-storage properties, reported operating results for the quarter ended September 30, 2021. Certain 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 Third Quarter Included:
Generated net income attributable to common shareholders of $70.3 million, or $0.89 per fully diluted common share. Achieved adjusted funds from operations (“FFO”)(1) per fully diluted common share of $1.37, a 35.6% increase over the same period in 2020. Increased same store revenue by 17.4% and same store net operating income (“NOI”)(2) by 24.3%, year-over-year. Acquired 29 stores for $336.0 million, including 10 stores from the Company’s third-party management platform. Added 30 stores (gross) to the Company’s third-party management platform.Joe Saffire, the Company’s Chief Executive Officer, stated, “Operating fundamentals remain strong as we continue to enjoy record seasonal occupancy and robust pricing power. We continue to aggressively expand our footprint, having achieved a significant milestone during the quarter when we crossed the 1,000-store threshold. We have more than $1.7 billion of wholly owned acquisitions that have closed this year or are currently under contract. The hard work of our acquisitions and third-party management teams over the past several years executing on our relationship-based strategy to be well positioned when opportunities become available is clearly paying off. The ability of our Operations team to seamlessly onboard such high volumes of stores while also managing elevated occupancy is equally inspiring.”
FINANCIAL RESULTS:
In the third quarter of 2021, the Company generated net income attributable to common shareholders of $70.3 million or $0.89 per fully diluted common share, compared to net income attributable to common shareholders of $37.1 million, or $0.52 per fully diluted common share, in the third quarter of 2020.
Funds from operations for the quarter were $1.37 per fully diluted common share compared to $0.99 for the same period last year. Adjusted FFO per fully diluted common share for the quarter was $1.37 compared to $1.01 for the quarter ended September 30, 2020, after adjusting for $1.5 million of uninsured damages and customer reinsurance claims incurred in the third quarter of 2020.
OPERATIONS:
Revenues for the 531 stabilized stores wholly owned by the Company since December 31, 2019 increased 17.4% in the third quarter of 2021 compared to the same quarter of 2020. The increase largely resulted from the net impact of a 220 basis point increase in average occupancy and the net impact of a 14.3% increase in realized rental rates.
Same store operating expenses increased 3.5% for the third quarter of 2021 compared to the prior year period, primarily due to increased real estate taxes and repair and maintenance costs. The increases were partially offset by decreases in marketing expenses. Same store NOI increased 24.3% in the third quarter of 2021 as compared to the same quarter last year.
During the third 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: Las Vegas, NV; Buffalo-Upstate, NY; Austin, TX and various Florida markets.
PORTFOLIO TRANSACTIONS:
Wholly Owned Portfolio
During the quarter, the Company acquired 29 stores in Alabama (7), Georgia (7), Florida (3), New Hampshire (2), Oklahoma (2), South Carolina (2), Texas (2), Arizona (1), Colorado (1), Kentucky (1) and Ohio (1) for a total purchase price of $336.0 million.
At September 30, 2021, the Company was under contract to acquire 33 self-storage facilities in Florida (14), Georgia (8), Texas (4), California (3), Illinois (3) and Virginia (1) for an aggregate purchase price of $548.9 million. Subsequent to quarter end, the Company entered into contracts to acquire 20 self-storage facilities in Connecticut (6), Florida (3), North Carolina (3), Colorado (2), South Carolina (2), Georgia (1), Illinois (1), Maine (1) and Tennessee (1) for an aggregate purchase price of $322.4 million. The Company acquired 13 of these facilities subsequent to quarter end for $234.5 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.
As of the date of this press release, the Company has acquired 75 stores for $1.1 billion since January 1, 2021.
Joint Venture Portfolio
During the quarter, the Company contributed an additional $27.3 million to an existing joint venture with a self-storage facility in Brooklyn, NY.
THIRD-PARTY MANAGEMENT:
The Company continues to aggressively and profitably grow its third-party management platform. During the quarter, the Company added 30 stores (gross). As of quarter end, the Company managed 357 facilities in total, including those in which it owns a minority interest.
FINANCIAL POSITION:
At September 30, 2021, the Company had approximately $136.2 million of cash on hand, and approximately $500 million available on its line of credit.
To support its acquisition activity, the Company issued equity securities during the third quarter and priced a bond offering. On September 16, 2021, the Company completed an underwritten public offering of 2,875,000 shares of common stock at $122.30 per share, raising $348.8 million after expenses. Additionally, the Company issued 1,097,516 shares of common stock under its continuous equity offering program at a weighted average issue price of $119.29 per share, generating net proceeds after expenses of $129.5 million. The Company also issued $89.8 million in preferred Operating Partnership Units and $1.5 million of common Operating Partnership Units as part of the consideration for a portfolio acquisition during the quarter. Finally, the Company completed an offering of $600 million aggregate principal amount of 2.4% Senior Unsecured Notes due 2031 that priced on September 28, 2021 and closed on October 7, 2021.
Below are key financial ratios at September 30, 2021:
● Debt to Enterprise Value (at $114.74/share)
18.8%
● Debt to Book Cost of Storage Facilities
35.4%
● Debt to Recurring Annualized EBITDA
3.9x
● Debt Service Coverage
6.3x
COMMON STOCK DIVIDEND:
Subsequent to quarter end, the Company’s Board of Directors approved a 16% increase to its quarterly dividend to $0.86 per share, or $3.44 annualized, on a post-split basis. The dividend was paid on October 26, 2021 to shareholders of record on October 13, 2021.
YEAR 2021 EARNINGS GUIDANCE:
The following assumptions covering operations have been utilized in formulating guidance for 2021:
Year 2021 Earnings Guidance
Current Guidance
Range
Prior Guidance
Range
(August 3, 2021)
Same Store Revenue
12.50%
-
13.50%
10.50%
-
11.50%
Same Store Operating Costs (excluding property taxes)
1.75%
-
2.75%
2.25%
-
3.25%
Same Store Property Taxes
6.75%
-
7.75%
6.75%
-
7.75%
Total Same Store Operating Expenses
3.75%
-
4.75%
4.00%
-
5.00%
Same Store Net Operating Income
17.0%
-
18.0%
13.5%
-
14.5%
General & Administrative
$61.0M
-
$62.0M
$59.5M
-
60.5M
Expansions & Enhancements
$40M
-
$50M
$40M
-
$50M
Capital Expenditures
$29M
-
$33M
$21M
-
$26M
Wholly Owned Acquisitions
$1,700M
-
$1,900M
$800M
-
$1,000M
Joint Venture Investments
$57M
-
$110M
$28M
-
$30M
Adjusted Funds from Operations per Share
$4.92
-
$4.96
$4.69
-
$4.79
Reconciliation of Guidance
4Q 2021
Range or Value
FY 2021
Range or Value
Earnings per share attributable to common shareholders – diluted
$0.74 - $0.78
$3.01 - $3.05
Plus: real estate depreciation and amortization
0.53 - 0.53
1.91 - 1.91
Adjusted FFO per share
$1.27 - $1.31
$4.92 - $4.96
The Company’s 2021 same store pool consists of the 531 stabilized stores wholly owned since December 31, 2019. Thirty-six of the stores purchased through September 30, 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 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 our actual results, performance or achievements 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; the Company’s cash flow may be insufficient to meet required payments of operating expenses, principal, interest and dividends; 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 Wednesday, November 3, 2021. 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 975924 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 43091.
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 1,000 storage facilities in 34 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.
2021
2020
Assets Investment in storage facilities: Land
$
1,078,022
$
951,813
Building, equipment and construction in progress
5,165,247
4,378,510
6,243,269
5,330,323
Less: accumulated depreciation
(970,924
)
(873,178
)
Investment in storage facilities, net
5,272,345
4,457,145
Cash and cash equivalents
136,157
54,400
Accounts receivable
15,845
15,464
Receivable from joint ventures
589
1,064
Investment in joint ventures
161,834
143,042
Prepaid expenses
11,740
8,326
Intangible asset - in-place customer leases
7,999
5,409
Trade name
16,500
16,500
Other assets
38,408
26,498
Total Assets
$
5,661,417
$
4,727,848
Liabilities Line of credit
$
-
$
-
Term notes, net
2,157,418
2,155,457
Accounts payable and accrued liabilities
128,824
112,654
Deferred revenue
24,925
17,416
Mortgages payable
37,220
37,777
Total Liabilities
2,348,387
2,323,304
Noncontrolling redeemable Preferred Operating Partnership Units at redemption value
90,241
-
Noncontrolling redeemable Common Operating Partnership Units at redemption value
40,811
26,446
Equity Common stock
820
495
Additional paid-in capital
3,482,742
2,671,311
Accumulated deficit
(297,230
)
(288,667
)
Accumulated other comprehensive loss
(4,354
)
(5,041
)
Total Shareholders' Equity
3,181,978
2,378,098
Total Liabilities and Shareholders' Equity
$
5,661,417
$
4,727,848
$
182,937
$
135,965
$
496,316
$
393,701
Other operating income
19,959
15,827
54,999
43,458
Management and acquisition fee income
5,360
4,518
16,091
13,107
Total operating revenues
208,256
156,310
567,406
450,266
Expenses Property operations and maintenance
42,638
36,199
119,953
101,297
Real estate taxes
21,397
17,729
61,794
52,751
General and administrative
16,141
13,369
45,407
38,498
Depreciation and amortization
33,531
31,960
97,937
86,524
Amortization of in-place customer leases
3,627
1,058
8,350
3,811
Total operating expenses
117,334
100,315
333,441
282,881
Gain on sale of real estate
-
-
-
302
Income from operations
90,922
55,995
233,965
167,687
Other income (expense) Interest expense (A)
(21,350
)
(20,544
)
(62,470
)
(61,056
)
Interest and dividend income
2
8
787
14
Equity in income of joint ventures
1,477
1,829
4,126
3,915
Net income
71,051
37,288
176,408
110,560
Net income attributable to noncontrolling preferred interests in the Operating Partnership
(476
)
-
(476
)
-
Net income attributable to noncontrolling common interests in the Operating Partnership
(301
)
(193
)
(760
)
(576
)
Net income attributable to common shareholders$
70,274
$
37,095
$
175,172
$
109,984
Earnings per common share attributable to common shareholders - basic
$
0.89
$
0.52
$
2.27
$
1.56
Earnings per common share attributable to common shareholders - diluted
$
0.89
$
0.52
$
2.27
$
1.56
Common shares used in basic earnings per share calculation
78,961,434
70,835,763
77,135,429
70,372,985
Common shares used in diluted earnings per share calculation
79,179,816
70,949,859
77,303,339
70,478,471
Dividends declared per common share
$
0.7400
$
0.7133
$
2.2200
$
2.1400
(A) Interest expense for the period ending September 30 consists of the following Interest expense
$
20,748
$
19,948
$
60,662
$
59,258
Amortization of debt issuance costs
602
596
1,808
1,798
Total interest expense
$
21,350
$
20,544
$
62,470
$
61,056
$
70,274
$
37,095
$
175,172
$
109,984
Noncontrolling common interests in the Operating Partnership
301
193
760
576
Depreciation of real estate and amortization of intangible assets exclusive of debt issuance costs
36,615
32,417
104,691
88,557
Depreciation and amortization from unconsolidated joint ventures
1,796
1,024
4,239
4,502
Funds from operations allocable to noncontrolling interest in Operating Partnership
(465
)
(367
)
(1,231
)
(1,060
)
Funds from operations available to common shareholders
108,521
70,362
283,631
202,559
FFO per share - diluted
$
1.37
$
0.99
$
3.67
$
2.87
Adjustments to FFO Costs related to officer's retirement
155
-
155
-
Acquisition fee
-
-
(1,280
)
(217
)
Gain on sale of land
-
-
-
(302
)
Uninsured damages and customer reinsurance claims, net
-
1,546
-
1,546
Funds from operations resulting from non-recurring items allocable to noncontrolling interest in Operating Partnership
(1
)
(8
)
5
(5
)
Adjusted funds from operations available to common shareholders
108,675
71,900
282,511
203,581
Adjusted FFO per share - diluted
$
1.37
$
1.01
$
3.65
$
2.89
Common shares - diluted
79,179,816
70,949,859
77,303,339
70,478,471
$
71,051
$
37,288
$
176,408
$
110,560
General and administrative
16,141
13,369
45,407
38,498
Depreciation and amortization
37,158
33,018
106,287
90,335
Gain on sale of real estate
-
-
-
(302
)
Interest expense
21,350
20,544
62,470
61,056
Interest and dividend income
(2
)
(8
)
(787
)
(14
)
Equity in income of joint ventures
(1,477
)
(1,829
)
(4,126
)
(3,915
)
Net operating income$
144,221
$
102,382
$
385,659
$
296,218
Same store (4)
$
108,436
$
87,210
$
296,906
$
251,968
Net operating income related to tenant reinsurance
9,258
7,059
25,376
21,254
Other stores and management fee income
26,527
8,113
63,377
22,996
Total net operating income
$
144,221
$
102,382
$
385,659
$
296,218
$
151,459
$
128,692
$
22,767
17.7
%
Other operating income
1,822
1,849
(27
)
-1.5
%
Total operating revenues
153,281
130,541
22,740
17.4
%
Expenses: Payroll and benefits
9,456
9,514
(58
)
-0.6
%
Real estate taxes
17,639
16,688
951
5.7
%
Utilities
4,107
4,192
(85
)
-2.0
%
Repairs and maintenance
4,218
3,679
539
14.7
%
Office and other operating expense
4,149
3,841
308
8.0
%
Insurance
1,566
1,500
66
4.4
%
Advertising
48
64
(16
)
-25.0
%
Internet marketing
3,662
3,853
(191
)
-5.0
%
Total operating expenses
44,845
43,331
1,514
3.5
%
Net operating income (2)$
108,436
$
87,210
$
21,226
24.3
%
QTD Same store move ins
49,439
57,114
(7,675
)
QTD Same store move outs
53,151
52,483
668
$
148,512
$
126,395
$
22,117
17.5
%
Expenses
43,502
42,092
1,410
3.3
%
Net operating income$
105,010
$
84,303
$
20,707
24.6
%
2019 Same store pool (502 stores) Revenues$
145,225
$
123,759
$
21,466
17.3
%
Expenses
42,350
40,999
1,351
3.3
%
Net operating income$
102,875
$
82,760
$
20,115
24.3
%
$
424,871
$
375,186
$
49,685
13.2
%
Other operating income
5,193
4,806
387
8.1
%
Total operating revenues
430,064
379,992
50,072
13.2
%
Expenses: Payroll and benefits
28,902
28,775
127
0.4
%
Real estate taxes
52,578
49,872
2,706
5.4
%
Utilities
11,201
11,024
177
1.6
%
Repairs and maintenance
13,066
11,173
1,893
16.9
%
Office and other operating expense
11,976
11,123
853
7.7
%
Insurance
4,655
4,507
148
3.3
%
Advertising
143
191
(48
)
-25.1
%
Internet marketing
10,637
11,359
(722
)
-6.4
%
Total operating expenses
133,158
128,024
5,134
4.0
%
Net operating income (2)$
296,906
$
251,968
$
44,938
17.8
%
YTD Same store move ins
147,337
156,874
(9,537
)
YTD Same store move outs
139,977
139,968
9
Life Storage, Inc. Other Data - unaudited
Same Store (3)
All Stores (5)
2021
2020
2021
2020
Weighted average quarterly occupancy
95.2
%
93.0
%
94.8
%
92.3
%
Occupancy at September 30
94.6
%
93.1
%
94.2
%
92.4
%
Rent per occupied square foot$
16.57
$
14.50
$
16.52
$
14.44
$
5,330,323
Property acquisitions
858,781
Improvements and equipment additions: Expansions
10,179
Roofing, paving, and equipment: Stabilized stores
19,476
Recently acquired stores
3,470
Change in construction in progress (Total CIP $40.1 million)
21,501
Dispositions and Impairments
(461
)
Storage facilities at cost at period end$
6,243,269
Comparison of Selected G&A Costs (unaudited) Quarter Ended September 30, 2021 September 30, 2020 Management and administrative salaries and benefits
$
10,585
$
7,792
Training
98
173
Call center
845
814
Life Storage Solutions costs
232
205
Income taxes
731
961
Legal, accounting and professional
912
945
Costs related to officer's retirement
155
-
Other administrative expenses (6)
2,583
2,479
$
16,141
$
13,369
Net rentable square feet September 30, 2021 Wholly owned properties
47,595,779
Joint venture properties
7,746,297
Third party managed properties
18,702,202
74,044,278
September 30, 2021 September 30, 2020 Common shares outstanding
82,017,283
72,298,512
Operating Partnership Units outstanding
344,531
365,949
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