Dear Fellow Shareholders,

13.8% Core FFO growth Best in the Industry

In 2017, we celebrated our 40th year in the storage industry. Over those 40 years, we have grown from one employee and a single location, to almost 1,500 stores and 3,400 team members spread throughout 39 states, Washington D.C. and Puerto Rico. We finished the year with over 112 million square feet of storage, comprising one million units and serving over 880,000 customers. Extra Space Storage is a member of the S&P 500 and recognized as a blue-chip REIT, with a market cap of over $11 billion.

We are pleased with the growth we have seen over the last four decades, and the returns such growth has produced for our shareholders. We are also pleased with how we achieved it. As we have grown, we have focused on four elements of our business that have been the “properties” of our success. They are our platform, our portfolio, our people and our performance.

Our Platform

The Extra Space Storage platform is second to none in the storage industry, and has been a differentiator for our company.  With an early, intense and continuing focus on technology, Extra Space has led the industry in innovation, introducing the sector's first revenue management system, internet based point of sale systems and sophisticated strategies in digital marketing, search engine optimization and the move to mobile.  Our focus on the collection and use of data in decision making has driven us to challenge industry norms and maximize revenue growth. 

The power of our platform has captured the attention of other operators and capital sources, who recognize the value that can be added through this best-in-class platform.  As a result, Extra Space Storage has become the largest third-party management company in the storage sector, which only adds to the scale and proficiency of our operating systems.

The innovation hasn't stopped.  It is part of our corporate DNA, and we continue to find ways to use data analytics, optimization and automation to acquire customers, enhance revenue and reduce expenses – all while providing a high-quality customer experience.

Our Portfolio

The second element of our success is a nationally diversified portfolio. We have focused on a balanced growth approach, with exposure to many primary and secondary markets throughout the country. We understand that real estate is cyclical, and do not have exposure to any one metropolitan statistical area (MSA) in excess of 15%. This diversification reduces volatility, and provides a more safe and stable investment for our shareholders.

We regularly evaluate the composition of our portfolio, and seek to add newer assets in key markets to maintain our geographic diversification as well as strong demographics in our portfolio.

We proactively complete strategic redevelopment and expansion projects to maximize the revenue at each individual property and provide brand consistency throughout the portfolio. We also focus on the physical quality of our stores, and work tirelessly to keep them clean, secure and well lit.

Our People

Our third element of success is our people. We firmly believe we have the best team in the business, and that our people provide Extra Space a competitive advantage. Our focus on our customers and our commitment to the growth and development of our team create a passionate and engaged workforce. Earlier this year, we were recognized by Glassdoor as one of the top 100 companies to work for in the U.S. out of over 700,000 companies considered. Our culture helps us to recruit and retain the best people, and our seasoned management team has developed a reputation for consistent execution. We believe that when we take care of our employees, our employees take care of our customers.

Our Performance

The first three elements drive the fourth, which is our performance. Our growth has been steady and profitable, with the Company’s number one focus being to maximize the long-term return to our shareholders. We have been successful with this goal, delivering the top 5-year and 10-year total return to shareholders in the storage sector, and a top five total return to shareholders among all public REITs. The growth in our stock price and dividend are the result of industry leading core FFO per share growth, driven by strong same-store performance, accretive acquisitions, mutually beneficial joint ventures and profitable third-party management.

Our organizational structure allows us to grow using the most efficient types of capital available in the market. We continue to evolve and strengthen our balance sheet, which is flexible and provides us access to many types of debt and equity. Perhaps even more importantly, it is built to last another 40 years.

I appreciate your support as I transitioned into my role as CEO in 2017. I view you not only as shareholders, but as partners, and I am pleased with the success that we experienced together in 2017. We are off to another great start in 2018, and I look forward to meeting with you throughout the year, and in future years to come.

Warmest Regards,

Joseph D. Margolis
Chief Executive Officer