Life Storage, Inc. Reports Second 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 June 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 Second Quarter Included:
Generated net income attributable to common shareholders of $57.5 million, or $0.74 per fully diluted common share. Achieved adjusted funds from operations (“FFO”)(1) per fully diluted common share of $1.20, a 27.7% increase over the same period in 2020. Increased same store revenue by 14.7% and same store net operating income (“NOI”)(2) by 20.2%, year-over-year. Acquired 17 stores for $267.5 million, including nine stores from the Company’s third-party management platform. Added 26 stores (gross) to the Company’s third-party management platform.Joe Saffire, the Company’s Chief Executive Officer, stated, “I cannot be more pleased with how our team has performed during the past year. We continue to grow occupancy and drive revenue growth while controlling costs. We also continue to find accretive acquisitions, having invested a record $534 million in wholly owned stores during the first half of the year and our acquisition pipeline remains robust. We are excited about our new joint venture, which is adding 17 class A lease-up stores to our platform and providing further opportunity for growth. Our third-party management business continues to surpass our expectations as independent owners are attracted to our performance and innovative technology. Warehouse Anywhere, our unique and innovative tech-enabled business, continues to successfully execute on its growing pipeline of new clients in search of inventory management and last-mile logistics support.”
FINANCIAL RESULTS:
In the second quarter of 2021, the Company generated net income attributable to common shareholders of $57.5 million or $0.74 per fully diluted common share, compared to net income attributable to common shareholders of $36.5 million, or $0.52 per fully diluted common share, in the second quarter of 2020.
Funds from operations for the quarter were $1.22 per fully diluted common share compared to $0.94 for the same period last year. Adjusted FFO per fully diluted common share for the quarter was $1.20, after adjusting for a $1.3 million acquisition fee, compared to $0.94 for the quarter ended June 30, 2020.
OPERATIONS:
Revenues for the 531 stabilized stores wholly owned by the Company since December 31, 2019 increased 14.7% in the second quarter of 2021 compared to the same quarter of 2020. The increase largely resulted from the net impact of a 420 basis point increase in average occupancy and the net impact of an 8.3% increase in realized rental rates.
Same store operating expenses increased 3.9% for the second 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 20.2% in the second quarter of 2021 as compared to the same quarter last year.
During the second quarter of 2021, the Company achieved same store revenue growth in each of its 31 major markets. Overall, the markets with the strongest positive revenue impact were: New York-Newark-Jersey City; Houston, TX; Chicago, IL; New England-Other and Buffalo-Upstate.
PORTFOLIO TRANSACTIONS:
Wholly Owned Portfolio
During the quarter, the Company acquired 17 stores in New Jersey (5), Texas (4), Florida (3), North Carolina (3) and New Hampshire (2) for a total purchase price of $267.5 million.
At June 30, 2021, the Company was under contract to acquire four self-storage facilities in New Hampshire (2), Arizona (1) and Florida (1) for an aggregate purchase price of $54.1 million. The Company acquired two of these facilities subsequent to quarter end for $22.1 million. Also subsequent to quarter end, the Company entered into a contract to acquire four self-storage facilities in Texas for an aggregate purchase price of $47.5 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 35 stores for $555.8 million since January 1, 2021.
Joint Venture Portfolio
During the quarter, the Company acquired a 20% minority interest, for which the Company contributed $28.7 million, in 17 stores in Wisconsin (5), Florida (4), Georgia (2), Illinois (2), Connecticut (1), New Jersey (1), New York (1) and North Carolina (1).
THIRD-PARTY MANAGEMENT:
The Company continues to aggressively and profitably grow its third-party management platform. During the quarter, the Company added 26 stores (gross). As of quarter end, the Company managed 340 facilities in total, including those in which it owns a minority interest.
FINANCIAL POSITION:
At June 30, 2021, the Company had approximately $29.9 million of cash on hand, and approximately $359.9 million available on its line of credit.
During the three months ended June 30, 2021, the Company issued 1,520,125 shares of common stock under its continuous equity offering program at a weighted average issue price of $98.67 per share, generating net proceeds after expenses of $148.5 million.
Below are key financial ratios at June 30, 2021:
Debt to Enterprise Value (at $107.35/share) 21.9% Debt to Book Cost of Storage Facilities 40.0% Debt to Recurring Annualized EBITDA 5.0x Debt Service Coverage 5.3xCOMMON STOCK DIVIDEND:
Subsequent to quarter end, the Company’s Board of Directors approved a quarterly dividend of $0.74 per share, or $2.96 annualized, on a post-split basis. The dividend was paid on July 26, 2021 to shareholders of record on July 14, 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
(May 4, 2021)
Same Store Revenue
10.50%
-
11.50%
5.50%
-
6.50%
Same Store Operating Costs (excluding property taxes)
2.25%
-
3.25%
2.25%
-
3.25%
Same Store Property Taxes
6.75%
-
7.75%
6.75%
-
7.75%
Total Same Store Operating Expenses
4.00%
-
5.00%
4.00%
-
5.00%
Same Store Net Operating Income
13.5%
-
14.5%
6.50%
-
7.50%
General & Administrative
$59.5M
-
$60.5M
$57M
-
$58M
Expansions & Enhancements
$40M
-
$50M
$40M
-
$50M
Capital Expenditures
$21M
-
$26M
$21M
-
$26M
Wholly Owned Acquisitions
$800M
-
$1,000M
$550M
-
$600M
Joint Venture Investments
$28M
-
$30M
$20M
-
$25M
Adjusted Funds from Operations per Share
$4.69
-
$4.79
$4.33
-
$4.41
Reconciliation of Guidance
3Q 2021
Range or Value
FY 2021
Range or Value
Earnings per share attributable to common shareholders – diluted
$0.73 - $0.77
$2.72 - $2.82
Plus: real estate depreciation and amortization
0.51 - 0.51
1.97 - 1.97
FFO per share
$1.24 - $1.28
$4.69 - $4.79
The Company’s 2021 same store pool consists of the 531 stabilized stores wholly owned since December 31, 2019. Thirty of the stores purchased through June 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 Second Quarter Earnings Release Conference Call at 9:00 a.m. Eastern Time on Wednesday, August 4, 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 674512 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 42035.
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 950 storage facilities in 33 states. The Company serves both residential and commercial storage customers with storage units rented by month. Life Storage consistently provides responsive service to more than 575,000 customers, making it a leader in the industry. For more information visit http://invest.lifestorage.com.
June 30,
December 31,
(dollars in thousands)2021
2020
Assets Investment in storage facilities: Land$
1,038,136
$
951,813
Building, equipment and construction in progress
4,849,523
4,378,510
5,887,659
5,330,323
Less: accumulated depreciation
(937,451
)
(873,178
)
Investment in storage facilities, net
4,950,208
4,457,145
Cash and cash equivalents
29,881
54,400
Accounts receivable
14,087
15,464
Receivable from joint ventures
635
1,064
Investment in joint ventures
139,495
143,042
Prepaid expenses
10,211
8,326
Intangible asset - in-place customer leases
7,155
5,409
Trade name
16,500
16,500
Other assets
26,916
26,498
Total Assets
$
5,195,088
$
4,727,848
Liabilities Line of credit
$
140,000
$
-
Term notes, net
2,156,823
2,155,457
Accounts payable and accrued liabilities
109,508
112,654
Deferred revenue
22,587
17,416
Mortgages payable
37,406
37,777
Total Liabilities
2,466,324
2,323,304
Noncontrolling redeemable Operating Partnership Units at redemption value
35,765
26,446
Equity Common stock
781
495
Additional paid-in capital
3,002,782
2,671,311
Accumulated deficit
(305,981
)
(288,667
)
Accumulated other comprehensive loss
(4,583
)
(5,041
)
Total Shareholders' Equity
2,692,999
2,378,098
Total Liabilities and Shareholders' Equity
$
5,195,088
$
4,727,848
$
163,096
$
128,828
$
313,379
$
257,736
Other operating income
18,026
14,009
35,040
27,631
Management and acquisition fee income
6,140
4,176
10,730
8,589
Total operating revenues
187,262
147,013
359,149
293,956
Expenses Property operations and maintenance
38,794
32,247
77,315
65,097
Real estate taxes
20,510
17,614
40,397
35,022
General and administrative
15,083
12,223
29,266
25,129
Depreciation and amortization
33,118
27,536
64,406
54,564
Amortization of in-place customer leases
2,653
1,451
4,724
2,753
Total operating expenses
110,158
91,071
216,108
182,565
Gain on sale of real estate
-
-
-
302
Income from operations
77,104
55,942
143,041
111,693
Other income (expense) Interest expense (A)
(20,774
)
(20,266
)
(41,119
)
(40,513
)
Interest and dividend income
7
2
786
7
Equity in income of joint ventures
1,428
970
2,649
2,086
Net income
57,765
36,648
105,357
73,273
Net income attributable to noncontrolling interests in the Operating Partnership
(249
)
(191
)
(459
)
(383
)
Net income attributable to common shareholders$
57,516
$
36,457
$
104,898
$
72,890
Earnings per common share attributable to common shareholders - basic
$
0.75
$
0.52
$
1.38
$
1.04
Earnings per common share attributable to common shareholders - diluted
$
0.74
$
0.52
$
1.37
$
1.04
Common shares used in basic earnings per share calculation
77,057,520
70,267,332
76,222,426
70,141,595
Common shares used in diluted earnings per share calculation
77,219,999
70,359,207
76,365,100
70,242,776
Dividends declared per common share
$
0.7400
$
0.7133
$
1.4800
$
1.4267
(A) Interest expense for the period ending June 30 consists of the following Interest expense
$
20,171
$
19,678
$
39,914
$
39,311
Amortization of debt issuance costs
603
588
1,205
1,202
Total interest expense
$
20,774
$
20,266
$
41,119
$
40,513
$
57,516
$
36,457
$
104,898
$
72,890
Noncontrolling interests in the Operating Partnership
249
191
459
383
Depreciation of real estate and amortization of intangible assets exclusive of debt issuance costs
35,257
28,398
68,076
56,140
Depreciation and amortization from unconsolidated joint ventures
1,241
1,682
2,443
3,478
Funds from operations allocable to noncontrolling interest in Operating Partnership
(407
)
(348
)
(766
)
(694
)
Funds from operations available to common shareholders
93,856
66,380
175,110
132,197
FFO per share - diluted
$
1.22
$
0.94
$
2.29
$
1.88
Adjustments to FFO Gain on sale of land
-
-
-
(302
)
Acquisition fee
(1,280
)
-
(1,280
)
(217
)
Funds from operations resulting from non-recurring items allocable to noncontrolling interest in Operating Partnership
5
-
5
3
Adjusted funds from operations available to common shareholders
92,581
66,380
173,835
131,681
Adjusted FFO per share - diluted
$
1.20
$
0.94
$
2.28
$
1.87
Common shares - diluted
77,219,999
70,359,207
76,365,100
70,242,776
$
57,765
$
36,648
$
105,357
$
73,273
General and administrative
15,083
12,223
29,266
25,129
Depreciation and amortization
35,771
28,987
69,130
57,317
Gain on sale of real estate
-
-
-
(302
)
Interest expense
20,774
20,266
41,119
40,513
Interest and dividend income
(7
)
(2
)
(786
)
(7
)
Equity in income of joint ventures
(1,428
)
(970
)
(2,649
)
(2,086
)
Net operating income$
127,958
$
97,152
$
241,437
$
193,837
Same store (4)
$
98,534
$
81,949
$
188,469
$
164,758
Net operating income related to tenant reinsurance
8,280
7,319
16,118
14,195
Other stores and management fee income
21,144
7,884
36,850
14,884
Total net operating income
$
127,958
$
97,152
$
241,437
$
193,837
$
140,269
$
122,383
$
17,886
14.6
%
Other operating income
1,778
1,463
315
21.5
%
Total operating revenues
142,047
123,846
18,201
14.7
%
Expenses: Payroll and benefits
9,423
9,420
3
0.0
%
Real estate taxes
17,516
16,592
924
5.6
%
Utilities
3,301
3,212
89
2.8
%
Repairs and maintenance
4,146
3,449
697
20.2
%
Office and other operating expense
3,791
3,479
312
9.0
%
Insurance
1,566
1,500
66
4.4
%
Advertising
48
64
(16
)
-25.0
%
Internet marketing
3,722
4,181
(459
)
-11.0
%
Total operating expenses
43,513
41,897
1,616
3.9
%
Net operating income (2)$
98,534
$
81,949
$
16,585
20.2
%
QTD Same store move ins
51,060
53,371
(2,311
)
QTD Same store move outs
44,668
43,027
1,641
$
137,566
$
119,932
$
17,634
14.7
%
Expenses
42,209
40,640
1,569
3.9
%
Net operating income$
95,357
$
79,292
$
16,065
20.3
%
2019 Same store pool (502 stores) Revenues$
134,557
$
117,456
$
17,101
14.6
%
Expenses
41,121
39,602
1,519
3.8
%
Net operating income$
93,436
$
77,854
$
15,582
20.0
%
$
273,412
$
246,494
$
26,918
10.9
%
Other operating income
3,371
2,957
414
14.0
%
Total operating revenues
276,783
249,451
27,332
11.0
%
Expenses: Payroll and benefits
19,445
19,261
184
1.0
%
Real estate taxes
34,940
33,184
1,756
5.3
%
Utilities
7,095
6,832
263
3.8
%
Repairs and maintenance
8,848
7,494
1,354
18.1
%
Office and other operating expense
7,827
7,282
545
7.5
%
Insurance
3,089
3,006
83
2.8
%
Advertising
96
128
(32
)
-25.0
%
Internet marketing
6,974
7,506
(532
)
-7.1
%
Total operating expenses
88,314
84,693
3,621
4.3
%
Net operating income (2)$
188,469
$
164,758
$
23,711
14.4
%
YTD Same store move ins
97,898
99,760
(1,862
)
YTD Same store move outs
86,826
87,485
(659
)
2021
2020
2021
2020
Weighted average quarterly occupancy
95.1%
90.9%
94.7%
90.0%
Occupancy at June 30
95.7%
91.8%
95.0%
91.0%
Rent per occupied square foot$15.34
$14.17
$15.32
$14.12
$
5,330,323
Property acquisitions
527,214
Improvements and equipment additions: Expansions
4,469
Roofing, paving, and equipment: Stabilized stores
10,970
Recently acquired stores
1,792
Change in construction in progress (Total CIP $31.9 million)
13,232
Dispositions and Impairments
(341
)
Storage facilities at cost at period end$
5,887,659
Comparison of Selected G&A Costs (unaudited) Quarter Ended June 30, 2021 June 30, 2020 Management and administrative salaries and benefits
$
9,784
$
6,704
Training
143
186
Call center
751
750
Life Storage Solutions costs
277
150
Income taxes
568
871
Legal, accounting and professional
893
911
Other administrative expenses (6)
2,667
2,651
$
15,083
$
12,223
Net rentable square feet June 30, 2021 Wholly owned properties
45,795,071
Joint venture properties
7,896,032
Third party managed properties
17,716,675
71,407,778
June 30, 2021 June 30, 2020 Common shares outstanding
78,041,891
70,377,668
Operating Partnership Units outstanding
332,399
365,949
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