Life Storage, Inc. (NYSE:LSI), a leading national owner and
operator of self-storage properties, reported operating results for
the quarter ended March 31, 2023.
Highlights for the First Quarter
Included:
- Generated net income attributable to common shareholders of
$81.6 million, or $0.96 per fully diluted common share.
- Achieved adjusted funds from operations (“FFO”)(1) per fully
diluted common share of $1.63, a 13.2% increase over the same
period in 2022.
- Increased same store revenue by 10.5% and same store net
operating income (“NOI”)(2) by 12.8%, year-over-year.
- With a joint venture partner, acquired one store for a total
cost of $22.4 million, of which the Company invested $4.1
million
- Added 16 stores (12 net) to the Company’s third-party
management platform.
Joe Saffire, the Company’s Chief Executive Officer, stated, “The
Life Storage team continues to fire on all cylinders with this
quarter marking the 10th straight quarter in which we achieved
double-digit adjusted FFO growth. I couldn’t be prouder of what the
team has accomplished.”
FINANCIAL RESULTS:
In the first quarter of 2023, the Company generated net income
attributable to common shareholders of $81.6 million, or $0.96 per
fully diluted common share, compared to net income attributable to
common shareholders of $73.6 million, or $0.88 per fully diluted
common share, in the first quarter of 2022.
Funds from operations for the quarter were $1.54 per fully
diluted common share compared to $1.44 for the same period last
year. Adjusted FFO per fully diluted common share for the quarter
was $1.63 after adjusting for a net total of $7.4 million in merger
related costs, gain on sale of non-real estate assets,
non-controlling interest, and acquisition fees, compared to $1.44
for the same period last year.
OPERATIONS:
Revenues for the 664 stabilized stores wholly owned by the
Company since December 31, 2021 increased 10.5% in the first
quarter of 2023 compared to the same quarter of 2022. The increase
largely resulted from the impact of a 13.6% increase in realized
rental rates.
Same store operating expenses increased 5.2% for the first
quarter of 2023 compared to the prior year period, primarily the
result of higher real estate taxes, office and other operating
expenses, and payroll and benefits. Same store NOI increased 12.8%
in the first quarter of 2023 as compared to the first quarter of
2022.
General and administrative expenses for the quarter ended March
31, 2023 were impacted by $8.3 million of merger related costs.
During the first quarter of 2023, the Company achieved 9% or
greater same store revenue growth in 25 of its 38 major markets.
Overall, the markets with the strongest positive revenue impact
were Los Angeles, CA; Miami, FL; Dallas, TX; Orlando, FL; and
Tampa, FL.
PORTFOLIO TRANSACTIONS:
Joint Venture Portfolio
During the quarter, the Company with a joint venture partner
acquired one store in New Jersey for a total purchase price of
$22.4 million, of which the Company invested $4.1 million.
Subsequent to March 31, 2023, the Company and a joint venture
partner acquired four self-storage facilities in New York for a
total purchase price of $150.0 million, of which the Company
invested $15.1 million.
THIRD-PARTY MANAGEMENT:
During the quarter, the Company added 16 stores (12 net) to its
third-party management platform. As of quarter end, the Company
managed 452 facilities in total, including those in which it owns a
noncontrolling interest.
FINANCIAL POSITION:
At March 31, 2023, the Company had approximately $32.8 million
of cash on hand, and approximately $631 million available on its
line of credit.
Below are key financial ratios as of March 31, 2023:
• Debt to Enterprise Value (at $131.09/share)
23.1%
• Debt to Book Cost of Storage Facilities
39.6%
• Debt to Recurring Annualized EBITDA 4.9x
• Debt Service Coverage 5.2x
COMMON STOCK DIVIDEND:
Subsequent to quarter end, the Company’s Board of Directors
approved a quarterly dividend of $1.20 per share, or $4.80
annualized. The dividend was paid on April 26, 2023 to shareholders
of record on April 14, 2023.
YEAR 2023 EARNINGS GUIDANCE:
The Company maintains its previously announced earnings guidance
for fiscal 2023. The following assumptions covering operations have
been utilized in formulating guidance for 2023:
Year 2023 Earnings
Guidance
Current Guidance Range
(1)
Same Store Revenue
4.00%
-
5.50%
Same Store Operating Costs (excluding
property taxes)
4.00%
-
5.00%
Same Store Property Taxes
6.25%
-
7.25%
Total Same Store Operating Expenses
4.75%
-
6.25%
Same Store Net Operating Income
3.75%
-
5.25%
General & Administrative
$76M
-
$78M
Expansions & Enhancements
$65M
-
$75M
Capital Expenditures
$30M
-
$35M
Wholly Owned Acquisitions
$150M
-
$250M
Joint Venture Investments
$50M
-
$100M
Adjusted Funds from Operations per
Share
$6.75
-
$6.95
Reconciliation of Guidance
2Q 2023
Range or
Value
FY 2023
Range or
Value
Earnings per share attributable to common
shareholders - diluted
$1.12 - $1.16
$4.42 - $4.62
Plus: real estate depreciation and
amortization
0.58 -
0.58
2.33 -
2.33
Adjusted FFO per share
$1.70 -
$1.74
$6.75 -
$6.95
(1)
Guidance does not reflect the impact of fees and other costs
incurred or expected to be incurred by the Company in connection
with its response to Public Storage’s unsolicited proposal or the
pending merger with Extra Space Storage.
The Company’s 2023 same store pool consists of the 664
stabilized stores wholly owned since December 31, 2021. Forty-four
of the stores purchased through March 31, 2023, 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;
- risks associated with our ability to consummate the Mergers
with Extra Space and the timing and closing of the Mergers
including, among other things, the ability of the Company to obtain
shareholder approval required to consummate the Mergers, the
satisfaction or waiver of other conditions to closing in the Merger
Agreement, unanticipated difficulties or expenditures relating to
the Mergers, potential difficulties in employee retention as a
result of the Mergers, the occurrence of any event, change or other
circumstances that could give rise to the termination of the
Mergers and the outcome of legal proceedings instituted against the
Company, its directors and others related to the Mergers;
- 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 Wednesday, May 3,
2023. 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 444471 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 48170.
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 1,200 storage facilities in 37 states and the
District of Columbia. The Company serves both residential and
commercial storage customers with storage units rented by month.
Life Storage consistently provides responsive service to more than
690,000 customers, making it a leader in the industry. For more
information visit https://invest.lifestorage.com/.
Life Storage, Inc. Balance Sheet Data
(unaudited) March 31,
December 31, (dollars in thousands)
2023
2022
Assets Investment in storage facilities: Land
$
1,309,475
$
1,307,425
Building, equipment and construction in progress
6,886,522
6,864,381
8,195,997
8,171,806
Less: accumulated depreciation
(1,215,348
)
(1,170,520
)
Investment in storage facilities, net
6,980,649
7,001,286
Cash and cash equivalents
32,765
24,406
Accounts receivable
23,281
24,153
Receivable from joint ventures
795
1,562
Investment in joint ventures
276,436
275,190
Prepaid expenses
14,165
10,363
Intangible asset - in-place customer leases
2,159
4,212
Trade name
16,500
16,500
Other assets
29,804
30,058
Total Assets
$
7,376,554
$
7,387,730
Liabilities Line of credit
$
619,000
$
595,000
Term notes, net
2,752,580
2,751,632
Accounts payable and accrued liabilities
136,409
148,130
Deferred revenue
34,530
33,192
Mortgages payable
32,466
36,258
Total Liabilities
3,574,985
3,564,212
Noncontrolling redeemable Preferred Operating
Partnership Units at redemption value
30,090
89,077
Noncontrolling redeemable Common Operating
Partnership Units
201,373
107,074
Equity Common stock
851
850
Additional paid-in capital
3,884,890
3,886,317
Accumulated deficit
(317,570
)
(261,510
)
Accumulated other comprehensive loss
(2,978
)
(3,207
)
Total Shareholders' Equity
3,565,193
3,622,450
Noncontrolling interest in consolidated subsidiary
4,913
4,917
Total Equity
3,570,106
3,627,367
Total Liabilities and Equity
$
7,376,554
$
7,387,730
Life Storage, Inc. Consolidated Statements
of Operations (unaudited) January 1, 2023 January 1,
2022 to to (dollars in thousands, except share data) March 31, 2023
March 31, 2022
Revenues Rental income
$
240,483
$
205,509
Tenant reinsurance
20,291
17,267
Other operating income
5,895
4,858
Management and acquisition fee income
6,933
5,856
Total operating revenues
273,602
233,490
Expenses Property operations and maintenance
47,306
42,368
Tenant reinsurance
9,220
6,847
Real estate taxes
27,437
24,523
General and administrative
27,818
15,826
Depreciation and amortization
45,716
40,795
Amortization of in-place customer leases
2,053
5,606
Total operating expenses
159,550
135,965
Gain on sale of non-real estate assets
686
-
Income from operations
114,738
97,525
Other income (expense) Interest expense
(A)
(33,113
)
(24,240
)
Interest and dividend income
12
15
Equity in income of joint ventures
1,629
2,118
Net income
83,266
75,418
Net income attributable to noncontrolling preferred interests in
the Operating Partnership
(330
)
(996
)
Net income attributable to noncontrolling common interests in the
Operating Partnership
(1,333
)
(847
)
Net loss attributable to noncontrolling common interests in
consolidated subsidiary
5
-
Net income attributable to common shareholders
$
81,608
$
73,575
Earnings per common share attributable to common
shareholders - basic
$
0.96
$
0.88
Earnings per common share attributable to common
shareholders - diluted
$
0.96
$
0.88
Common shares used in basic earnings per share calculation
84,935,860
83,644,426
Common shares used in diluted earnings per share calculation
85,378,412
83,837,773
Dividends declared per common share
$
1.2000
$
1.0000
(A) Interest expense for the period ending March
31 consists of the following Interest expense
$
32,173
$
23,510
Amortization of debt issuance costs
940
730
Total interest expense
$
33,113
$
24,240
Life Storage, Inc. Computation of Funds From Operations
(FFO) (1) (unaudited) January 1, 2023 January 1, 2022 to
to (dollars in thousands, except share data) March 31, 2023 March
31, 2022 Net income attributable to common shareholders
$
81,608
$
73,575
Noncontrolling common interests in the Operating Partnership
1,333
847
Noncontrolling preferred interests in the Operating Partnership
during conversion period
330
-
Depreciation of real estate and amortization of intangible assets
exclusive of debt issuance costs
47,573
45,866
Depreciation and amortization from unconsolidated joint ventures
3,187
1,802
Funds from operations allocable to noncontrolling interest in
Operating Partnership
(2,154
)
(1,389
)
Funds from operations available to common shareholders
131,877
120,701
FFO per share - diluted
$
1.54
$
1.44
Adjustments to FFO Gain on sale of non-real estate
assets
(686
)
(40
)
Merger related costs
8,314
-
Acquisition fee
(90
)
-
Funds from operations resulting from non-recurring items allocable
to noncontrolling interest in Operating Partnership
(121
)
-
Adjusted funds from operations available to common shareholders
139,294
120,661
Adjusted FFO per share - diluted
$
1.63
$
1.44
Common shares - diluted
85,378,412
83,837,773
Life Storage, Inc. Computation of Net Operating Income
(2) (unaudited) January 1, 2023 January 1, 2022 to to
(dollars in thousands) March 31, 2023 March 31, 2022 Net
Income
$
83,266
$
75,418
General and administrative
27,818
15,826
Depreciation and amortization
47,769
46,401
Interest expense
33,113
24,240
Interest and dividend income
(12
)
(15
)
Equity in income of joint ventures
(1,629
)
(2,118
)
Net operating income
$
190,325
$
159,752
Same store (4)
$
152,523
$
135,169
Net operating income related to tenant reinsurance
11,071
10,420
Other stores, management fee income, and gain on sale of non-real
estate assets
26,731
14,163
Total net operating income
$
190,325
$
159,752
Life Storage, Inc. Quarterly Same Store Data (3) (4) 664
mature stores owned since 12/31/21 (unaudited) January
1, 2023 January 1, 2022 to to Percentage (dollars in thousands)
March 31, 2023 March 31, 2022 Change Change
Revenues:
Rental income
$
211,534
$
190,883
$
20,651
10.8
%
Other operating income
1,746
2,062
(316
)
-15.3
%
Total operating revenues
213,280
192,945
20,335
10.5
%
Expenses: Payroll and benefits
12,754
12,368
386
3.1
%
Real estate taxes
23,613
22,418
1,195
5.3
%
Utilities
5,413
5,083
330
6.5
%
Repairs and maintenance
6,295
5,995
300
5.0
%
Office and other operating expense
5,782
5,342
440
8.2
%
Insurance
2,250
2,045
205
10.0
%
Advertising
-
60
(60
)
-100.0
%
Internet marketing
4,650
4,465
185
4.1
%
Total operating expenses
60,757
57,776
2,981
5.2
%
Net operating income (2)
$
152,523
$
135,169
$
17,354
12.8
%
QTD Same store move ins
58,659
58,042
617
QTD Same store move outs
61,161
57,040
4,121
Other Comparable Quarterly Same Store Data (4)
(unaudited) January 1, 2023 January 1, 2022 to
to Percentage March 31, 2023 March 31, 2022 Change
Change
2022 Same store pool (576 stores) Revenues
$
187,786
$
170,458
$
17,328
10.2
%
Expenses
52,953
50,521
2,432
4.8
%
Net operating income
$
134,833
$
119,937
$
14,896
12.4
%
2021 Same store pool (526
stores) Revenues
$
169,911
$
154,662
$
15,249
9.9
%
Expenses
48,078
45,854
2,224
4.9
%
Net operating income
$
121,833
$
108,808
$
13,025
12.0
%
Life Storage, Inc.
Other Data - unaudited Same Store (3) All Stores (5)
2023
2022
2023
2022
Weighted average quarterly occupancy
90.7
%
93.5
%
90.0
%
93.0
%
Occupancy at March 31
90.4
%
93.6
%
89.5
%
92.9
%
Rent per occupied square foot
$19.31
$17.00
$19.22
$16.98
Life Storage, Inc.
Other Data - unaudited (continued)
Investment in Storage Facilities:
(unaudited) The following summarizes activity in
storage facilities during the three months ended March 31, 2023:
Beginning balance
$
8,171,806
Wholly owned property acquisitions
-
Improvements and equipment additions: Expansions
14,426
Roofing, paving, and equipment: Stabilized stores
7,513
Recently acquired stores
426
Change in construction in progress (Total CIP $46.5 million)
3,232
Dispositions and Impairments
(1,406
)
Storage facilities at cost at period end
$
8,195,997
Comparison
of Selected G&A Costs (unaudited) Quarter Ended
March 31, 2023 March 31, 2022 Management and administrative
salaries and benefits
$
11,229
$
9,911
Training
271
136
Call center
1,224
840
Life Storage Solutions costs
814
345
Income taxes
931
358
Legal, accounting and professional
1,167
1,101
Merger related costs
8,314
-
Other administrative expenses (6)
3,868
3,135
$
27,818
$
15,826
Net rentable square feet
March 31, 2023 Wholly owned
properties
55,526,370
Joint venture properties
10,642,430
Third party managed properties
23,692,267
89,861,067
March 31, 2023
March 31, 2022
Common shares outstanding
85,061,573
84,307,259
Common Operating Partnership Units outstanding
1,602,323
960,208
(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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230502005951/en/
Life Storage, Inc. Brent Maedl (716) 328-9756
bmaedl@lifestorage.com
Life Storage (NYSE:LSI)
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