Extra Space Storage Inc. (EXR)

Q1 2010 Earnings Conference Call

May 4, 2010 1:00 PM ET

Executives

Clint Halverson – IR

Spencer Kirk – President

Karl Haas – EVP & COO

Kent Christensen – EVP & CFO

Analysts

Eric Wolf – Citigroup

Ki Bin Kim – Macquarie

Todd Thomas – KeyBanc Capital Markets

Paula Poskon – Robert W. Baird

Smedes Rose – KBW

Michael Knott – Green Street Advisors

Presentation

Operator

Greetings and welcome to the Extra Space Storage First Quarter 2010 Earnings Conference call. (Operator Instructions) It is now my pleasure to introduce your host, Clint Halverson with Extra Space Storage. Thank you Mr. Halverson, you may begin.

Clint Halverson

Thank you, Rob. Welcome to Extra Space Storage’s first quarter 2010 conference call. In addition to our press release we’ve also furnished unaudited supplemental financial information on our website. Please remember that managements’ prepared remarks and answers to your questions contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters which are subject to risks and uncertainties that may cause actual results to differ from those discussed today.

Examples of forward-looking statements include those related to Extra Space Storage’s development and acquisition programs, revenues and operating income, FFO and guidance. We encourage all of our listeners to review a more detailed discussion related to these forward-looking statements contained in the Company’s filings with the SEC. Forward-looking statements represent management’s estimates as of today, Tuesday, May 4, 2010.

Extra Space Storage assumes no obligation to update these forward-looking statements in the future because of changing market conditions or other circumstances. I would now like to turn the call over to Spencer Kirk, Chairman and Chief Executive Officer.

Spencer Kirk

Hello everyone. Thank you for joining us today. With me are Kent Christensen, our Chief Financial Officer and Karl Haas, our Chief Operating Officer. Since we spoke in late February economic recovery appears to be gaining more stem as does our property performance. As I noted in both the second and third quarters of last year, we began to see concerns of bottoming out, what we were reluctant to call an inflection point.

Expense did not indicate a V shape rebound and given our (inaudible) visibility we were not ready to found the all clear bell. Several quarters later improving operating as business fundamentals have persisted and must be acknowledge. In the first quarter we report a net $0.19 of FFO per share, street rates are up, occupancy is up and that again shows income is up. We’ve improved our balance sheet and occupancy and use of cash. It is worth to note that during this quarter we completed and brought online one state of the art development project which property along the remainder of the development pipeline and existing lease of assets combined to add an incremental $0.24 to $0.27 of FFO to our earnings over the next 45 years.

I made it clear during the downturn the storages recessionary symptom not recession proof. We see further evidence of this hypothesis based on the performance of our portfolio. The storage in the first quarter help us the economy concerns. We are eager to see the boost in sub stores demand from improvements in job growth, the (inaudible) in housing markets and continually rising consumer settlement. This is why (inaudible) recovery is back to recession level. However we are confident that our high quality portfolio of advanced operating platforms and better development pro have lack of new self-storage of supply will provide a base for solid results going forward.

Let me now turn the call over to Karl Haas to set operations.

Karl Haas

Thanks Spence. Overall we are pleased with the way our platform has performed in the first quarter. Our same store performance was solid given the operating conditions with same store net operating income down just 0.3% from the same time last year compared to down 4% in the fourth quarter of 2009. Revenues were down only 1% year-over-year versus minus 6.9% in the fourth quarter.

Our same store expenses were down 2% driven by lower utilities, property taxes and insurance. Receivables continued to try under historic lows. We gained 1.8% in same store occupancy delta mostly from the impact of lower vacates which were down 8.5% from the first quarter of 2009. This compares very favorably to the 1.1% delta in December 2009. This has been the trend we have observed over that last 12 months are we are watching carefully as we enter a busy season.

New rentals were down a bit year-over-year, mostly due to a slow February which was driven by bad weather in East Coast. In April, we have seen a welcome pickup with a 6% increase in rentals over 2009. Revenues have improved significantly from our year-over-year low your down on this 5% in September ‘09 and we have increased positive year-over-year revenue delta improvement, we’ve seen increase year-over-year revenue delta improvement each month since and street were asking rates are now up 7% over last year.

We continue to find the tools and analytics that allow us to test pricing and optimizer yield. We are achieving growth in rates and occupancy while offering price and flexibility to our customers, meaning that we are pricing based on the channel. Additionally, we’ve continued to implement our existing customer rate increase program. We are still seeing no material increase in move out through due to these rate increases. At our national sales centers which is now been employees over a year, we continue to meet or exceed our initial performance or expectation.

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