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2020 Annual Report

Innovating for a better tomorrow

CEO Letter

Joseph Margolis Photo

“We always say that the best days of our company are ahead of us and every year we prove it to be true. No matter the challenges, we will innovate today to deliver a better tomorrow. With our reliable portfolio, robust platform, and resilient team of people, we are building value for our shareholders, no matter the economic cycles.”

Joseph D. Margolis
Chief Executive Officer

Dear Fellow Shareholders-

It goes without saying that 2020 brought unexpected challenges to individuals, families and businesses across the world. Our long-time company mission of “helping customers to their better tomorrow” hit even closer to home in 2020, as we helped tenants navigate the various changes in their lives due to the COVID-19 pandemic. Innovation is one of our Company’s five values, and I am proud of how the Extra Space team took every challenge as an opportunity to find a new, innovative way to help our customers to their better tomorrow.

Our innovation not only benefitted our customers, but also all of our stakeholders. In a year that many companies were forced into layoffs and furloughs, we continued to grow our portfolio, hire new team members and expand partnerships. While many REITs had to cancel projects, Extra Space continued to find creative ways to invest capital in the storage sector and expand the reach of our platform. While many companies struggled to retain tenants, we reached all-time highs in occupancy, averaging 95.6% in the 2nd half of the year. Our response to COVID-19, the diversification of our portfolio, and the resilience of the storage sector, led to strong Core Funds from Operations (Core FFO) growth of 8.2% and a one-year total return to shareholders of 13.6%, in a year where many public REITs posted negative returns.

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  • 831%
    Total 10-Year Shareholder Return

  • $960 million
    Total 2020 Investments

  • 94.8% Occupancy
    as of December 31, 2020

Innovative Operations

This year, in response to COVID-19, we implemented new office procedures and layouts at each location to emphasize safety for employees and customers, and to provide a safe in-person transaction process. We also quickly completed the rollout of our “Rapid Rental” online leasing platform, allowing customers to complete the full leasing process contact-free, at any time of day, by-passing the leasing office and moving straight into their unit. This was an immediate success with customers given the changed environment, with over 20% of rentals coming through this system while maintaining high customer satisfaction ratings. In addition, we completed technology projects which provide the infrastructure needed to expand other initiatives like Bluetooth gate and unit access, GPS interactive store maps, and enhanced customer communication tools. These innovations are expected to reduce operating expenses and to improve the customer experience for years to come.

Innovative Team

Through the pandemic we continued to hire, train and develop diverse top talent across the organization. Due to our historical focus on technology, we had the tools in place to allow employees in our corporate offices and call-center to transition quickly to hybrid work-from-home set ups with little disruption in processes.

Our team managed all of this change, while going through the personal stresses and struggles associated with 2020. To help alleviate that stress, we created new policies to assist employees, including relief paid time off, additional flexibility so our team could attend to needs at home, while still bringing their best selves to work each day, and allowing employees to continue to accrue paid time off at a time when vacations were not possible due to lock-downs. We continue to provide additional tools to our team, to promote overall wellness, safety, acceptance and career development, and to preserve our unique company culture. It is said that crisis does not create character but reveals character, and I could not be prouder of the character the Extra Space team has shown the past year.

Innovative External Growth

When people think of Extra Space Storage’s innovative culture, often they think of technology initiatives. However, our innovation is not limited to technology, it also applies to our strategic growth and deployment of capital. In 2020, we continued to find creative avenues to deploy capital in the self-storage sector at attractive risk adjusted returns. In 2020, we continued to expand our bridge loan program, closing over $220 million in new loans, with a similar sized pipeline already approved for 2021 and growing. We also developed new partnerships allowing us to sell portions of our note balances to increase yields, and to manage concentration. In addition, we made a $300 million preferred investment in connection with the acquisition of Jernigan Capital by affiliates of NexPoint Advisors, an innovative structure in the storage sector. We continue to rapidly grow our third-party management platform by adding 165 stores in 2020. Our various investment strategies allowed us to place almost $1 billion dollars in capital for the year.

Innovative Balance Sheet

Our evolving balance sheet has been transforming into one that reflects the stable, mature company Extra Space has become. We continue to reduce our secured debt exposure and ladder our maturities through long-term private placement debt transactions, while reducing our overall cost of capital. This evolution qualified us for a second investment grade issuer credit rating of Baa2 stable from Moody’s Investor Service. Our Moody’s rating, in addition to our existing BBB rating with a stable outlook from S&P Global Ratings, provides us access to the public investment grade debt markets, another significant milestone for our already durable balance sheet. These advancements will further allow Extra Space to efficiently capitalize our growth for many years to come.

Innovative Sustainability

Our innovation even extends to the way we manage our company to ensure it endures and thrives for decades to come. We have promoted sustainability through environmental initiatives, such as $20 million in solar investment in 2020. We have improved socially by increasing our diversity and inclusion initiatives with heightened focus on training around implicit bias and allyship. We have also continued to incorporate corporate governance best practices, and to increase the diversity of our board of directors. These efforts have been noticed. This year, NAREIT awarded us their Leader in the Light award for our ESG practices, making us the first self-storage company to be recognized in the award’s 15-year history. Industry thought leaders like GRESB, Just Capital, Sustainalytics and S&P Global all recognized Extra Space as a sustainability leader in the sector.

Looking Ahead

Across every avenue, we are finding ways to innovate and continually improve. Every day we are building a company that will be better and stronger than we found it the day before. Our approach has led to fantastic historical results, and our tomorrow looks bright. We always say that the best days of our company are ahead of us and every year we prove it to be true. No matter the challenges, we will innovate today to deliver a better tomorrow. With our reliable portfolio, robust platform, and resilient team of people, we are building value for our shareholders, no matter the economic cycles.

Joe Margolis
Chief Executive Officer