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Life Storage, Inc. Reports First Quarter 2022 Results

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BUFFALO, N.Y., May 04, 2022--(BUSINESS WIRE)--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 5.8x

COMMON 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.

Life Storage, Inc.

Balance Sheet Data

(unaudited)

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

Life Storage, Inc.

Consolidated Statements of Operations

(unaudited)

January 1, 2022

January 1, 2021

to

to

(dollars in thousands, except share data)

March 31, 2022

March 31, 2021

Revenues

Rental income

$

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

Life Storage, Inc.

Computation of Funds From Operations (FFO) (1)

(unaudited)

January 1, 2022

January 1, 2021

to

to

(dollars in thousands, except share data)

March 31, 2022

March 31, 2021

Net income attributable to common shareholders

$

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

Life Storage, Inc.

Computation of Net Operating Income (2)

(unaudited)

January 1, 2022

January 1, 2021

to

to

(dollars in thousands)

March 31, 2022

March 31, 2021

Net Income

$

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

Life Storage, Inc.

Quarterly Same Store Data (3) (4) 580 mature stores owned since 12/31/20

(unaudited)

January 1, 2022

January 1, 2021

to

to

Percentage

(dollars in thousands)

March 31, 2022

March 31, 2021

Change

Change

Revenues:

Rental income

$

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

Other Comparable Quarterly Same Store Data (4)

(unaudited)

January 1, 2022

January 1, 2021

to

to

Percentage

March 31, 2022

March 31, 2021

Change

Change

2021 Same store pool (530 stores)

Revenues

$

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

%

Life Storage, Inc.

Other Data - unaudited

Same Store (3)

All Stores (5)

2022

2021

2022

2021

Weighted average quarterly occupancy

93.6%

93.4%

93.0%

92.7%

Occupancy at March 31

93.7%

94.0%

92.9%

93.1%

Rent per occupied square foot

$17.11

$14.89

$16.98

$14.82

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, 2022:

Beginning balance

$

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

(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/20220504005951/en/

Contacts

Life Storage, Inc.
Alex Gress
(716) 295-6833
agress@lifestorage.com

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