What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-02-28 compared with 2021-02-26 · 35 added, 29 removed, 128 unchanged (33% of the section changed)

5 unchanged sentences

These companies were reorganized after the consummation of our IPO and various formation transactions.

As of December 31, 2020 we owned and/or operated 1,921 stores in 40 states, Washington, D.C.

and Puerto Rico, comprising approximately 149.2 million square feet of net rentable space in approximately 1.4 million units.

As of December 31, 2021 we owned and/or operated 2,096 stores in 41 states, and Washington, D.C., comprising approximately 160.9 million square feet of net rentable space in approximately 1.5 million units.

We operate in two distinct segments:

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The self-storage business is subject to seasonal fluctuations.

A greater portion of revenues and profits are realized from May through September.

A greater portion of revenues and profits are typically realized from May through September.

Historically, our highest level of occupancy has been at the end of July, while our lowest level of occupancy has been in late February and early March.

The self-storage industry is a mature industry that has seen the average occupancy continue to increase.

According to the Self-Storage Almanac (the “Almanac”), in 2014, the national average physical occupancy rate was 89.1% of net rentable square feet, compared to an average physical occupancy rate of 92.2% in 2020.

According to the Self-Storage Almanac (the “Almanac”), the national average physical occupancy rate was 90.2% of net rentable square feet in 2015, compared to an average physical occupancy rate of 94.5% in 2021.

Our average occupancy for wholly-owned stores for 2021 was 94.8%.

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We are the second largest self-storage operator in the United States.

We are one of five public self-storage REITs along with CubeSmart, Life Storage, National Storage Affiliates and Public Storage.

Our four primary competitors who are public self-storage REITs are CubeSmart, Life Storage, National Storage Affiliates and Public Storage.

Long-Term Growth and Investment Strategies

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Acquire self-storage stores

Our acquisitions team continues to pursue the acquisition of multi-store portfolios and single stores that we believe can provide stockholder value.

Our acquisitions team continues to pursue the acquisition of multi-store portfolios and single stores which can range from fully occupied to various stages of lease-up that we believe can provide stockholder value.

We have established a reputation as a reliable, ethical buyer, which we believe enhances our ability to negotiate and close acquisitions.

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We remain a disciplined buyer and only execute acquisitions that we believe will strengthen our portfolio and increase stockholder value.

In addition to the pursuit of stabilized stores, from time to time we develop stores from the ground up and provide the construction capital.

In addition to the pursuit of operating stores, from time to time we develop stores from the ground up and provide the construction capital.

We also purchase stores at the completion of construction from third party developers, who build to our specifications.

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However, in the short term, these acquisitions cause dilution to our earnings during the two-to-four year period required to lease up the Certificate of Occupancy stores.

We expect that this trend will continue in 2021 as we continue to acquire Certificate of Occupancy stores.

We expect that this trend will continue as we continue to acquire Certificate of Occupancy stores.

Grow our management business

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Expand our bridge loan program

To broaden the opportunities available, we have implemented a bridge lending program, under which we provide financing to operating properties that we manage.

We anticipate that this program will help us increase our management business, create additional future acquisition opportunities, and strengthen our relationships with partners, all while providing interest and fee income.

We generally originate mortgage loans and mezzanine loans, with the intent to sell the mortgage loans to third parties, while retaining our interests in the mezzanine loans.

To broaden the opportunities available, we have a bridge lending program, under which we provide financing to operating properties that we manage.

This program helps us increase our management business, create additional future acquisition opportunities, and strengthen our relationships with partners, all while generating interest and fee income.

We generally originate mortgage loans and mezzanine loans, with the intent to sell many of the mortgage loans to third parties, while retaining our interests in the mezzanine loans.

Invest in other self-storage businesses selectively

We have recently made investments in preferred stock of other self-storage companies.

These investments benefit us by not only providing dividend income, but also have increased our management business, creating additional future acquisition opportunities through creating and strengthening relationships with the companies in which we invest.

We have made investments in preferred stock of other self-storage companies.

These investments benefit us by providing dividend income, increasing our management business, and creating additional future acquisition opportunities through relationships with the companies in which we invest.

We may pursue additional investment opportunities as they become available.

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cash generated from operations, borrowings under our revolving lines of credit (the "Credit Lines"), secured and unsecured financing, equity offerings, joint ventures and the sale of stores.

Credit Lines - We have three credit lines which we primarily use as short term bridge financing until we obtain longer-term financing through either debt or equity.

Credit Lines - We have two credit lines which we primarily use as short-term bridge financing until we obtain longer-term financing through either debt or equity.

As of December 31, 2021, our Credit Lines had available capacity of $1.4 billion, of which $855.0 million was undrawn.

Secured and Unsecured Debt - Historically, we had primarily used traditional secured mortgage loans to finance store acquisitions and development efforts.

More recently, we obtain unsecured bank term loans and issue unsecured private placement bonds.

Secured and Unsecured Debt - We primarily use public bonds, unsecured private placement bonds and unsecured bank term loans to finance store acquisitions and development efforts.

We will continue to utilize a combination of secured and unsecured financing for future store acquisitions and development.

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During the year ended December 31, 2021, we issued 585,685 shares of common stock through our ATM program and received net proceeds of approximately $66.6 million.

We also sold 1,600,000 shares of common stock in a registered offering structured as a bought deal at a price of $129.13 per share resulting in net proceeds of $206.6 million.

During the year ended December 31, 2020, we issued 899,048 shares of common stock through our ATM program and received net proceeds of approximately $103.5 million.

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Most joint venture agreements include buy-sell rights, as well as rights of first offer in connection with the sale of stores by the joint venture.

We generally manage the day-to-day operations of the stores owned in these joint ventures and have the right to participate in major decisions relating to sales of stores or financings by the applicable joint venture, but do not control the joint ventures.

We manage the day-to-day operations of the stores owned in these joint ventures and have the right to participate in major decisions relating to sales of stores or financings by the applicable joint venture, but do not control the joint ventures.

Sale of Properties - We have not historically sold a high volume of stores, as we generally believe we are able to optimize the cash flow from stores through continued operations.

However, we may sell more stores or interests in stores in the future in response to changing economic, financial or investment conditions.

For the year ended December 31, 2021, we sold 16 stores for $200.3 million.

For the year ended December 31, 2020, we sold four stores located in Florida for $46.6 million.

For the year ended December 31, 2019, we sold one store located in New York for $11.3 million.

For the year ended December 31, 2018, we sold one store located in California for $40.2 million.

Generally, stores are subject to various laws, ordinances and regulations, including regulations relating to lien sale rights and procedures and the Americans with Disabilities Act of 1990.

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In addition, noncompliance with any of these laws, ordinances or regulations could result in the imposition of fines or an award of damages to private litigants and also could require substantial capital expenditures to ensure compliance.

Our stores are also subject to various state of emergency regulations enacted as a result of the COVID-19 pandemic and expect such regulations to remain in effect throughout 2021.

Insurance activities are subject to state insurance laws and regulations as determined by the particular insurance commissioner for each state in accordance with the McCarran-Ferguson Act, and are subject to the Gramm-Leach-Bliley Act and the privacy regulations promulgated by the Federal Trade Commission pursuant thereto.

Store management activities may be subject to state real estate brokerage laws and regulations as determined by the particular real estate commission for each state.

Our collection and processing of personal information may be subject to various data privacy and security laws, which govern the collection, use, disclosure of personal information and are constantly evolving, may conflict with each other to complicate compliance efforts and can results in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing.

Changes in any of the laws governing our conduct could have an adverse impact on our ability to conduct our business or could materially affect our financial position, results of operations or cash flows.

Human Capital

At Extra Space, our culture is driven by our belief that our people are a key driver in our success.

We believe that if we focus on attracting, developing, and retaining diverse top talent at all levels of the organization, our employees will take care of our customers and drive growth for our shareholders.

As of December 31, 2021, we had 4,309 employees and believe our relationship with our employees is good.

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In 2021, we invited our employees to participate in an employee satisfaction survey.

We achieved an overall satisfaction score of over 90%.

We achieved an overall satisfaction score of 74% with over 78% of our employees participating in our survey.

Compensation, Health and Well Being

The Company offers competitive health benefits and encourages its employees to participate in employee health and wellness programs.

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We also offer other health-oriented benefits such as smoking cessation programs and a fitness program that allows for reimbursements to employees for expenses incurred relating to fit-friendly activities, sports or exercise equipment.

In order to attract and retain top talent, we offer training and development opportunities for our employees.

In 2020, we invested in training and development for our employees, which included leadership training, communication training, individual learning plans, site manager training and mentorship programs.

Our field employees received on average 8.2 hours of training in 2020.

Training and Development

In order to attract and retain diverse top talent, we offer training and development opportunities for our employees.

In 2021, we invested in training and development for our employees, which included leadership training, communication training,

individual learning plans, site manager training and mentorship programs.

Our field employees received on aver age 8 ho urs of training in 2021 and each new hire received an average of 82 hours of training in 2021.

Additionally, the Company provides its employees with an education assistance program through Western Governors University that allows our employees a path to an undergraduate degree in business or information technology through scholarships and other assistance.

The Company has always valued the safety of our employees and provides regular training for our employees to increase safety at our sites.

During the pandemic, we chose to close our doors to in-person customers until we could install personal protective equipment for our employees.

We understood that such a dramatic move would affect our revenues, but felt that as a company it was more important to ensure the safety of our employees.

We moved quickly to put the necessary equipment in place and reopened with a safer and more sanitized environment for our employees.

The Company undertakes a wide spectrum of initiatives to attract and retain a diverse workforce.

The Company has a Diversity and Inclusion Committee that has been active since 2018.

During 2020, the Company launched implicit bias and allyship training for its employees, produced videos featuring our CEO discussing the importance of diversity and inclusion to the Company.

During 2021, we continued to make masks and other protective equipment available to our employees.

We also paid out more than $500,000 to employees in an effort to encourage our employees to get vaccinated against COVID-19.

In addition, we paid out more than $380,000 in relief pay to our employees who were unable to work due to testing positive for COVID-19.

Diversity and Inclusion

The Company values diversity and inclusion and undertakes a wide spectrum of initiatives to attract and retain a diverse workforce.

During 2021, the Company launched four employee resource groups that provide our employees a space to build community by celebrating their culture, providing mentoring opportunities and developing educational content for Extra Space.

The Company will continue to implement and pursue diversity and inclusion initiatives and goals that allow us to attract and retain top talent, improve employee engagement, increase innovation and customer insight and enhance the quality of our decision making.

Forbes Magazine recently named the Company as a Best Employer for Diversity in 2020.

Our employee population is approximately 48% female and approximately 48% have self-identified as people of color:

Black or African American (16%), Hispanic or Latino (21%), Asian (3%), of two or more races (4%), Native American (0.5%), and Pacific Islander (0.5%).

We believe that our emphasis on training and development, employee safety, employee health and well-being, and a commitment to diversity and inclusion leads to an increase in employee productivity and positions us to attract and retain top diverse talent.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business