Extra Space Storage Inc

Thank you for standing by and welcome to the Q2 2021 Extra Space Storage Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. Should you require any further assistance, please press star 0. I would now like to hand the conference over to your host, Senior Vice President, Capital Markets, Jeff Norman. Please go ahead.

Thank you, Lateef. Welcome to Extra Space Storage's second quarter 2021 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 are 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, July 28th, 2021. 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 would now like to turn the call over to Joe Margolis, Chief Executive Officer.

Thanks, Jeff, and thanks, everyone, for joining the call. Before I turn to the results, I want to take a moment and congratulate the entire Extra Space team. One of our goals for this year was to get to 2,021 stores in the year 2021. And we've achieved that, which is a great thing. You know, when I first started with Extra Space, we had 12 stores. And it's incredible to see the exceptional growth of this company value we've created for our shareholders. So I want to thank all the folks at Extra Space who contributed to our achieving that goal. I'm also happy to announce that we recently published our 2020 sustainability report with disclosures and information related to the company's environmental, social, and governance initiatives. I invite our listeners to review the report on the sustainability page of our investor relations website. Heading into the second quarter, our management team had high expectations due to our record high occupancy levels, significant pricing power, and a relatively easy 2020 comparable. And actual performance far exceeded these elevated expectations. Same store occupancy set another new high watermark at the end of June at 97%. which is incredible as you consider the diversification of our national portfolio. The elevated occupancy led to exceptional pricing power with achieved rates to new customers in the quarter over 60% higher than 2020 levels. While this is inflated by an artificially low prior year comp, achieved rates were over 30% greater than 2019 levels and accelerated through the quarter. In addition to the benefit from new customer rates, we have continued to bring existing customers closer to current street rates as more of the state of emergency rate restrictions are lifted throughout the country. Other income is no longer a drag on revenue due to late fees improving year over year and actually contributed 20 basis points to revenue growth in the quarter. And finally, higher discounts primarily due to higher rates were offset by lower bad debt. These drivers produced same-store revenue growth of 13.6 percent, a 900 basis point acceleration from Q1, and same-store NOI growth of 20.2 percent, an acceleration of over 1,300 basis points. In addition, our external growth initiatives produced steady returns outside of the same-store pool, resulting in FFO growth of 33.3 percent. Turning to external growth, the acquisition market continues to be, in our view, expensive. Given the pricing we are seeing in the market, we have listed an additional 17 stores for outright disposition, which we expect to close during the back half of 2021. We continue to be actively engaged in acquisitions, but we remain disciplined. Year to date, we have been able to close or put under contract acquisitions totaling $400 million of extra space investment. These are primarily lease-up properties, and several of the properties came from our bridge loan program. We have increased our 2021 acquisition guidance to $500 million in extra space investment. Looking forward, many of our acquisitions will be completed in joint ventures. and we have plenty of capital to invest if we find additional opportunities that create long-term value for our shareholders. We were active on the third-party management front, adding 39 stores in the quarter and a total of 100 stores through the first six months. Our growth was partially offset by dispositions where owners sold their properties. In the quarter, we purchased 11 of these stores in the REIT or in one of our joint ventures. Our first half outperformance coupled with steady external growth and the improved outlook for the second half of 2021 allowed us to increase our annual FFO guidance by 50 cents or 8.3% at the midpoint. While we still assume a seasonal occupancy moderation of approximately 300 basis points from this summer's peak to the winter trough, The moderation will begin from a higher starting point than we previously expected. As a result, we assume minimal impact on revenue growth from the negative occupancy delta in the back half of the year. Our guidance assumes moderating but still strong rate growth for the duration of 2021, which should result in another great year for extra space storage. I would now like to turn the time over to Scott.