Portfolio

Acquisitions

In a competitive acquisition environment, we continue to be disciplined and transact only at levels that are beneficial for our shareholders. In 2017, we acquired 52 properties in 43 markets with a total investment of $603 million. We have been particularly successful sourcing off-market transactions through our joint ventures, third-party management and other relationships. 75% of our 2017 acquisitions were off-market transactions.

Included in these totals are 16 newly constructed purpose-built stores which we purchased at completion. The addition of these new assets provides many of the benefits of new development without accepting entitlement and construction risk. These new stores improve our average portfolio life, strengthen our presence in key markets, improve our portfolio demographics and provide an attractive long-term return.

When seeking acquisition candidates, we focus on long-term value creation and the ability of our newly acquired properties to further round out our diversified portfolio. We have increased our presence in markets where we lacked scale. Extra Space also sold a majority interest in a 36-property portfolio - to rebalance our exposure to certain markets where we were over weighted, and to reinvest the proceeds in higher demographic markets.

Joint Ventures

Joint ventures have produced—and will continue to produce—an outsized return on dollars invested. In addition to our participation in the NOI growth of these stores, they provide additional income streams and promoted return opportunities. These returns are leveraged, since we receive the benefits without full investment in the real estate.

Joint ventures also provide us with additional capital flexibility to pursue transactions. Certain ventures allow us to invest in new developments on a programmatic basis, without accepting entitlement or construction risk. We currently have a number of joint ventures where our ownership varies from minority to majority positions, in which we are gaining a promoted return.

Third-Party Management

Extra Space Storage has the largest third-party management program in the country. We have the largest third-party management program in the country. Property management provides additional income and enables us to take advantage of significant economies of scale, additional data and off-market acquisition opportunities. In 2017, we added 156 properties to the platform, with a fairly even balance of newly constructed stores as well as stabilized facilities. We also currently have the largest pipeline of stores being added to the platform that we have seen in our history, as more owners seek to align themselves with the top operator in storage.

Redevelopment

We have a robust redevelopment program in place to enhance NOI at existing properties by increasing net rentable square feet (NRSF) and optimizing unit mix.

In 2017, we created 7,200 new units at existing stores through expansion projects or by reconfiguring the existing unit mix. Redevelopment also improves our average portfolio life by making upgrades to properties that reduce their effective age and keeps stores relevant in high-rent per square foot markets.

Part of our redevelopment program involves improving the consistency of the Extra Space Storage brand throughout the portfolio. We focus on using our office space, signage and colors to ensure customers know we are Extra Space Storage and where to transact business. In 2017, we rebranded 97 stores and plan to rebrand the entire portfolio over the next five years.