For Extra Space Storage, anticipated headwinds from the coronavirus pandemic have shifted to tailwinds.
Joe Margolis, CEO of the Salt Lake City, UT-based self-storage REIT, said during the company’s Nov. 5 third-quarter earnings call that “tailwinds have proved stronger than we expected, while the headwinds have not been as significant or have not materialized.”
Margolis said rental volume continues to be healthy, while the number of people vacating units remains “muted.” Extra Space reported same-store occupancy of 95.9% as of Sept. 30, compared with 93.8% at the same point last year.
“In short, our stores are performing significantly better than we expected earlier in the pandemic,” Margolis said.
During the REIT’s second-quarter earnings call, executives forecast a decline in same-store revenue in the third and fourth quarters. Same-store rental revenue did decline 1.5% to $271.7 million in the third quarter. But Extra Space posted positive revenue growth in October, Margolis said, and the REIT expects that trend to continue in the fourth quarter.
“The primary headwind impacting performance is new supply in certain markets,” Margolis said. “While the pandemic has delayed new deliveries and may reduce new projects and planning, properties are still being delivered and excess inventory is still leasing up, which will continue to suppress rate growth in high supply markets.”
In another positive development, Extra Space announced Nov. 6 that it had completed a $300 million preferred equity investment in self-storage financing REIT Jernigan Capital in tandem with the purchase of Jernigan by affiliates of NexPoint Advisors. In October, Dallas, TX-based NexPoint wrapped up its $900 million acquisition of Memphis, TN-based Jernigan.
Other highlights of Extra Space’s third-quarter earnings:
- Same-store operating expenses rose 1.5% to $79.3 million.
- Same-store NOI fell 2.7% to $192.5 million.
- About $79.5 million in bridge loans have been closed so far this year, with an additional $235.4 million set to close in 2020 and another $167.7 million on tap for 2021.
- Acquisitions for 2020 are projected to total $287 million.
- After the third quarter ended, Extra Space invested an additional $50 million in preferred equity in Smart Stop Self Storage REIT. That brings Extra Space’s total investment in Smart Stop to $200 million.
- 72 facilities were added to the third-party management platform in the first nine months of 2020.