Extra Space Storage Inc

Thank you. This is the operator. Today's conference is scheduled to begin momentarily. Until that time, your lines will again be placed on music hold. Thank you for your patience. Music THE END Thank you for standing by, and welcome to the Quarter 2020 Extra Space Third Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during that session, please press star 1 on your telephone. If you require any further assistance, please press star 0. I will now turn the call over to Mr. Jeff Norman. Please begin, sir.

Thank you, Jenny, and welcome to Extra Space Storage's third quarter 2020 earnings call. In addition to our press release, we have furnished unaudited supplemental financial information on our website. Please remember that management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in the company's latest filings with the SEC, which we encourage our listeners to review. Forward-looking statements represent management's estimates as of today, November 5th, 2020. The company assumes no obligation to revise or update any forward-looking statements because of changing market conditions or other circumstances after the date of this conference call. I'd now like to turn the call over to Joe Margolis, Chief Executive Officer.

Thanks, Jeff, and thank you everyone for joining us on today's call. I trust everyone and their families remain healthy and are managing through this difficult time. 2020 has been a challenging and eventful year. and the unprecedented conditions related to the pandemic have made it difficult to forecast performance. On our last call, we discussed the tailwinds we are experiencing in terms of rental activity, muted vacates, positive achieved rate trends, and the resumption of normal operations. We also discussed the potential headwinds that we believed we could face, including economic and political risk, as well as changing customer behavior and new supply. During the third quarter and to date, the tailwinds have proved stronger than we expected, while the headwinds have not been as significant or have not materialized. Rental volume remains healthy, while vacate volume remains muted, resulting in all-time high occupancy of approximately 96%. Through July, Occupancy was inflated with non-paying customers due to the inability to auction delinquent units. However, as the quarter continued and auctions resumed, we have been able to maintain our high occupancy and collections have returned to historically normal levels. Our elevated occupancy resulted in the return of pricing power during the third quarter. In short, our stores are performing significantly better than we expected earlier in the pandemic. On the last call, we stated that we expected to have negative same-store revenue growth in the third and fourth quarters. Due to the continuation of the tailwinds we are experiencing, we have achieved positive revenue growth in October and are confident we will produce positive revenue growth in the fourth quarter. We remain mindful of the potential macro and industry-specific uncertainties that we have referenced during the third quarter. However, at present, these risks do not appear to be negatively impacting the demand for storage or consumers' ability and willingness to pay for our product. The primary headwind impacting performance is new supply in certain markets. While the pandemic has delayed new deliveries and may reduce new projects and planning, properties are still being delivered and excess inventory is still leasing up, which will continue to suppress rate growth in high supply markets. Despite the improving trends, our same-store NOI remained negative in the third quarter. However, even with the disruption COVID-19 caused to our operations, we continue grow core FFO per share, which is our ultimate goal. In the third quarter, FFO per share increased 5.6%, and FFO growth for the first three quarters was 5%, both sizable beats over consensus. Our flexible organizational structure and focus on innovative capital light strategies have enhanced FFO through new external growth channels and non-same-store income streams. These contributions paired with improving same-store trends lead us to believe that our 2020 FFO will comfortably exceed the high end of our pre-COVID expectations. Turning to external growth, acquisition volume has picked up in the sector as markets have started to settle. but pricing for widely brokered deals, particularly for stabilized properties, remains very competitive. During the quarter, we have closed or put under contract an additional $140 million of acquisitions, bringing our total expected investment in 2020 to $287 million. In addition to acquisitions, we continue to find ways to creatively invest capital in the storage sector. Our bridge loan program continues to grow with approximately $315 million in bridge loans scheduled to close in 2020, with the expectation to sell 70 to 80 percent of the balances. We've also approved $167 million of loans to close in 2021. We also purchased $103 million senior mezzanine note at a small discount, and subsequent to quarter end, we invested an additional $50 million in SmartStop through our previously negotiated preferred equity investment. And through three quarters, we have added 72 stores net to our third party management platforms. In short, we continue to execute on our strategy to maximize shareholders' long-term value through optimizing property level operations and efficiently and creatively investing capital in the storage sector at acceptable risk levels. I'll now turn the time over to Scott.