What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-28 compared with 2022-02-28 · 306 added, 308 removed, 1214 unchanged (34% of the section changed)

3 unchanged sentences

AND SCHEDULES

Report of Independent Registered Public Accounting Fir m (PCAOB ID:

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 202 2 and 202 1

54 unchanged sentences

Cash and cash equivalents 92,868 71,126

Restricted cash 5,068 18,885

Other assets, net 414,426 164,240

17 unchanged sentences

Additional paid-in capital 3,345,332 3,285,948

Accumulated other comprehensive loss ( 42,546 ) ( 99,093 )

Accumulated other comprehensive income (loss) 48,798 ( 42,546 )

Accumulated deficit ( 135,872 ) ( 128,245 )

17 unchanged sentences

Tenant reinsurance 33,560 29,488 26,494

Transaction related costs 1,548 — —

General and administrative 129,251 102,194 96,594

6 unchanged sentences

Interest income 69,422 49,703 15,192

Income before equity in earnings and dividend income from unconsolidated real estate ventures and income tax expense 859,473 509,031 451,157

Income before equity in earnings and dividend income from unconsolidated real estate entities and income tax expense 900,653 859,473 509,031

Equity in earnings and dividend income from unconsolidated real estate entities 41,428 32,358 22,361

Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partner's interest 6,251 — —

Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets — 6,251 —

Income tax expense ( 20,925 ) ( 20,324 ) ( 13,810 )

16 unchanged sentences

Net income $ 921,156 $ 877,758 $ 517,582

Other comprehensive income (loss):

Other comprehensive income:

Change in fair value of interest rate swaps 96,249 59,325 ( 73,686 )

8 unchanged sentences

Stockholders' Equity

Preferred Operating Partnership Operating Partnership Other Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Noncontrolling Interests and Equity

Preferred Operating Partnership Operating Partnership Other Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Noncontrolling Interests and Equity

Shares Par Value

1 unchanged sentence

Issuance of common stock upon the exercise of options — — — 134,930 1 4,758 — — 4,759

Restricted stock grants issued — — — 109,081 2 — — — 2

Issuance of common stock in connection with share based compensation — — — 143,187 1 16,280 — — ` 16,281

Restricted stock grants cancelled — — — ( 5,083 ) — — — — —

Issuance of common stock, net of offering costs — — — 899,048 9 103,459 — — 103,468

Compensation expense related to stock-based awards — — — — — 13,051 — — 13,051

Repayment of receivable for preferred operating units pledged as collateral on loan — 1,211 — — — — — — 1,211

Buyback of common stock, net of offering costs — — — ( 826,797 ) ( 8 ) — — ( 67,865 ) ( 67,873 )

Redemption of Operating Partnership units for stock — ( 4,572 ) — 123,993 1 4,571 — — —

Conversion of Preferred C Units in the Operating Partnership for Common Operating Partnership Units ( 4,374 ) 4,374 — — — — — — —

Issuance of Preferred D Units in the Operating Partnership in conjunction with acquisitions 28,022 — — — — — — — 28,022

Repurchase of equity portion of 2015 exchangeable senior notes — — — 1,323,781 14 ( 14 ) — — —

Repayment of receivable with Preferred operating units pledged as collateral on loan — 16,213 — — — — — — 16,213

Redemption of Preferred B Units in the Operating Partnership for cash ( 1,000 ) — — — — — — — ( 1,000 )

Redemption of Preferred D Units in the Operating Partnership for stock ( 2,724 ) — — 30,495 1 2,723 — — —

Noncontrolling interest in consolidated joint venture — — 66 — — — — — 66

10 unchanged sentences

Stockholders' Equity

Preferred Operating Partnership Operating Partnership Other Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Noncontrolling Interests and Equity

Preferred Operating Partnership Operating Partnership Other Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Noncontrolling Interests and Equity

Shares Par Value

4 unchanged sentences

Issuance of common stock, net of offering costs — — — 2,185,685 22 273,167 — — 273,189

Buyback of common stock, net of offering costs — — — ( 826,797 ) ( 8 ) — — ( 67,865 ) ( 67,873 )

Redemption of Operating Partnership units for stock — ( 6,373 ) — 165,652 2 6,371 — — —

Repurchase of equity portion of 2015 exchangeable senior notes — — — 1,323,781 14 ( 14 ) — — —

Repayment of receivable with Preferred operating units pledged as collateral on loan — 16,213 — — — — — — 16,213

Redemption of Preferred B Units in the Operating Partnership for cash ( 1,000 ) — — — — — — — ( 1,000 )

Redemption of Preferred D Units in the Operating Partnership for stock ( 2,724 ) — — 30,495 1 2,723 — — —

Redemption of Preferred B Units in the Operating Partnership for stock ( 2,834 ) — — 15,265 1 2,833 — — —

Redemption of Operating Partnership units for cash — ( 173 ) — — — ( 615 ) — — ( 788 )

Repayment of receivable with Operating Partnership units pledged as collateral — 411 — — — — — — 411

Issuance of Operating Partnership units in conjunction with acquisitions — 188,319 — — — — — — 188,319

Issuance of Preferred D units in the Operating Partnership in conjunction with acquisitions 88,074 — — — — — — — 88,074

Purchase of remaining equity interest in existing consolidated joint venture — — — — — ( 18,141 ) — — ( 18,141 )

Noncontrolling interest in consolidated joint venture — — ( 82 ) — — — — — ( 82 )

Net income (loss) 14,697 35,414 ( 2 ) — — — — 827,649 877,758

Other comprehensive loss ( 456 ) ( 3,103 ) — — — — ( 70,127 ) — ( 73,686 )

Other comprehensive income 366 2,412 — — — — 56,547 — 59,325

Distributions to Operating Partnership units held by noncontrolling interests ( 13,245 ) ( 25,849 ) — — — — — — ( 39,094 )

7 unchanged sentences

Stockholders' Equity

Preferred Operating Partnership Operating Partnership Other Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Noncontrolling Interests and Equity

Preferred Operating Partnership Operating Partnership Other Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Noncontrolling Interests and Equity

Shares Par Value

Balances at December 31, 2021 $ 259,110 $ 410,053 $ 317 133,922,305 $ 1,339 $ 3,285,948 $ ( 42,546 ) $ ( 128,245 ) $ 3,785,976

Issuance of common stock upon the exercise of options — — — 62,322 — 4,572 — — 4,572

Issuance of common stock in connection with share based compensation — — — 204,349 2 21,386 — — 21,388

Restricted stock grants cancelled — — — ( 10,614 ) — — — — —

Issuance of common stock, net of offering costs — — — 2,185,685 22 273,167 — — 273,189

Redemption of Operating Partnership units for stock — ( 6,373 ) — 165,652 2 6,371 — — —

Redemption of Preferred B Units in the Operating Partnership for stock ( 2,834 ) — — 15,265 1 2,833 — — —

Redemption of Operating Partnership units for cash — ( 1,654 ) — — — ( 2,963 ) — — ( 4,617 )

Repayment of receivable with Operating Partnership units pledged as collateral — 411 — — — — — — 411

Redemption of Preferred B Units in the Operating Partnership for cash ( 4,500 ) — — — — — — — ( 4,500 )

Issuance of Operating Partnership units in conjunction with business combination — 16,000 — — — — — — 16,000

Issuance of Operating Partnership units in conjunction with acquisitions — 125,000 — — — — — — 125,000

Issuance of Preferred D units in the Operating Partnership in conjunction with acquisitions 88,074 — — — — — — — 88,074

Purchase of remaining equity interest in existing consolidated joint venture — — — — — ( 18,141 ) — — ( 18,141 )

Issuance of Preferred D units in the Operating Partnership in conjunction with business combination 6,000 — — — — — — — 6,000

Issuance of common stock in conjunction with acquisitions — — — 186,766 2 40,961 — — 40,963

Repurchase of common stock, net of offering costs — — — ( 381,786 ) ( 4 ) — — ( 63,004 ) ( 63,008 )

Noncontrolling interest in consolidated joint venture — — 771 — — — — — 771

Net income (loss) 14,697 35,414 ( 2 ) — — — — 827,649 877,758

Net income 17,623 42,853 ( 8 ) — — — — 860,688 921,156

Other comprehensive income 577 4,328 — — — — 91,344 — 96,249

19 unchanged sentences

Gain on real estate transactions ( 14,249 ) ( 140,760 ) ( 18,075 )

Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partner's interest ( 6,251 ) —

Distributions from unconsolidated real estate ventures in excess of earnings 7,035 6,893 6,358

Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets — ( 6,251 )

Distributions from unconsolidated real estate ventures 13,162 7,035 6,893

Changes in operating assets and liabilities:

5 unchanged sentences

Acquisition of real estate assets ( 1,291,491 ) ( 1,233,298 ) ( 320,148 )

Cash paid for business combination ( 157,302 ) — —

Development and redevelopment of real estate assets ( 62,019 ) ( 56,226 ) ( 67,300 )

12 unchanged sentences

Principal payments on notes payable and revolving lines of credit ( 4,207,700 ) ( 5,500,290 ) ( 2,014,730 )

Principal payments on notes payable to trusts — — ( 30,928 )

Proceeds from issuance of public bonds, net 396,100 1,040,349 —

1 unchanged sentence

Repurchase of exchangeable senior notes — — ( 575,000 )

Proceeds from principal payments on note receivable collateralized by OP Units — 411 16,213

Net proceeds from exercise of stock options — 4,572 4,759

Repurchase of common stock ( 63,008 ) — ( 67,873 )

Proceeds from principal payments on notes receivable collateralized by OP Units and Preferred OP Units 411 16,213 —

Redemption of Preferred B Units for cash ( 4,500 ) — —

Redemption of Operating Partnership units held by noncontrolling interests ( 4,617 ) ( 788 ) ( 1,000 )

6 unchanged sentences

Cash, cash equivalents, and restricted cash, end of the period $ 97,735 $ 76,194 $ 128,009

Cash and equivalents, including restricted cash at the beginning of the period:

Cash and equivalents $ 71,126 $ 109,124 $ 65,746

Restricted cash included in other assets 5,068 18,885 4,987

$ 76,194 $ 128,009 $ 70,733

Cash and equivalents, including restricted cash at the end of the period:

Cash and equivalents $ 92,868 $ 71,126 $ 109,124

Restricted cash included in other assets 4,867 5,068 18,885

$ 97,735 $ 76,194 $ 128,009

Supplemental schedule of cash flow information

5 unchanged sentences

Common stock and paid-in capital $ — $ 6,373 $ 4,005

Contribution of Preferred OP Units to unconsolidated real estate venture

Investments in unconsolidated real estate ventures $ — $ — $ ( 28,022 )

Value of Preferred Operating Partnership units issued — — 28,022

Redemption of Preferred Operating Partnership units for common stock

1 unchanged sentence

Additional paid-in capital $ — $ 2,834 $ 2,724

Issuance of Preferred OP Units for additional investment in unconsolidated real estate venture

Preferred OP Units $ — $ — $ 4,374

Common OP Units — — ( 4,374 )

Issuance of OP and Preferred OP units in conjunction with business combination

Preferred OP units issued $ ( 6,000 ) $ — $ —

OP units issued $ ( 16,000 ) $ — $ —

Acquisition and establishment of operating lease right of use assets and lease liabilities

1 unchanged sentence

Operating lease liabilities $ ( 16,298 ) $ ( 6,655 ) $ ( 8,014 )

Accounts payable and accrued expenses — — 9,357

Acquisitions of real estate assets

Real estate assets, net $ 171,703 $ 318,036 $ 41,491

Value of Operating Partnership and Preferred Operating Partnership units issued ( 276,393 ) — —

Value of equity issued $ ( 165,965 ) $ ( 276,393 ) $ —

Notes payable assumed $ — $ ( 20,028 ) $ —

1 unchanged sentence

Finance lease liability $ ( 6,823 ) $ ( 26,998 ) $ ( 41,491 )

Net liabilities assumed — — ( 1,129 )

Accrued construction costs and capital expenditures

Acquisition of real estate assets $ 368 $ 1,323 $ 656

Development and redevelopment of real estate assets — — 1,601

Accounts payable and accrued expenses $ ( 368 ) $ ( 1,323 ) $ ( 656 )

See accompanying notes

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amounts in thousands, except store and share data, unless otherwise stated

DESCRIPTION OF BUSINESS

15 unchanged sentences

All intercompany balances and transactions have been eliminated in consolidation .

For comparison purposes, the Company has reclassified a portion of Notes payable, net to Unsecured term loans, net and Unsecured senior notes, net on the Consolidated Balance Sheets as of December 31, 2020, to conform to the presentation as of December 31, 2021.

Variable Interest Entities

Principles of Consolidation

The Company accounts for arrangements that are not controlled through voting or similar rights as variable interest entities (“VIEs”).

6 unchanged sentences

If the Company is determined to be the primary beneficiary of the VIE, the assets, liabilities and operations of the VIE are consolidated with the Company’s financial statements.

The Company had one consolidated VIE consisting of four stores as of December 31, 2021 and no consolidated VIEs as of December 31, 2020.

The Company determined that its operating partnership met the definition of a VIE and is consolidated.

Additionally, as of December 31, 2021 the Company determined in addition to its operating partnership that it had one consolidated joint venture VIE, consisting of four stores.

Substantially all of the assets and liabilities of the Company are related to the operating partnership VIE.

The assets and credit of the VIE can only be used to satisfy the VIE's own contractual obligations, and the VIE's creditors have no recourse to the general credit of the Company.

The Company’s investments in real estate joint ventures, where the Company has significant influence, but not control, and joint ventures which are VIEs in which the Company is not the primary beneficiary, are recorded under the equity method of accounting on the accompanying consolidated financial statements.

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

41 unchanged sentences

To the extent impairment has occurred, and is considered to be other than temporary, the loss is measured as the excess of the carrying amount of the investment over the fair value of the investment.

The Company evaluates goodwill for impairment at least annually and whenever events, circumstances, and other related factors indicate that fair value of the related reporting unit may be less than the carrying value.

If the fair value of the reporting unit is determined to exceed the aggregate carrying amount, no impairment charge is recorded.

Otherwise, an impairment charge is recorded to the extent the carrying amount of the goodwill exceeds the amount that would be allocated to goodwill if the reporting unit were acquired for estimated fair value.

No impairments of goodwill were recorded for any period presented herein.

As of December 31, 2022 and 2021, the Company did not have any assets or liabilities measured at fair value on a nonrecurring basis.

1 unchanged sentence

The carrying values of cash and cash equivalents, restricted cash, receivables, other financial instruments included in other assets, accounts payable and accrued expenses, variable-rate notes payable, investments in debt securities and notes receivable, revolving lines of credit and other liabilities reflected in the consolidated balance sheets at December 31, 2022 and 2021, approximate fair value.

The fair values of the Company’s notes receivable and notes receivable from Preferred Operating Partnership unit holders were based on the discounted estimated future cash flow of the notes (categorized within Level 3 of the fair value hierarchy);

The fair values of the Company’s notes receivable and notes receivable from Preferred and Common Operating Partnership unit holders were based on the discounted estimated future cash flow of the notes (categorized within Level 3 of the fair value hierarchy);

the discount rate used approximated the current market rate for loans with similar maturities and credit quality.

1 unchanged sentence

the discount rates used approximated current market rates for loans, or groups of loans, with similar maturities and credit quality.

The fair value of the Company’s exchangeable senior notes was estimated using an average market price for similar securities obtained from a third party.

The fair values of the Company’s fixed-rate assets and liabilities were as follows for the periods indicated:

8 unchanged sentences

Direct and allowable internal costs associated with the development, construction, renovation, and improvement of real estate assets are capitalized.

Interest, property taxes, and other costs associated with development incurred during the construction period are capitalized.

Interest, property taxes, and other

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

costs associated with development incurred during the construction period are capitalized.

The construction period begins when expenditures for the real estate assets have been made and activities that are necessary to prepare the asset for its intended use are in progress.

2 unchanged sentences

Major replacements and betterments that improve or extend the life of the asset are capitalized and depreciated over their estimated useful lives.

Depreciation is

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

computed using the straight-line method over the estimated useful lives of the buildings and improvements, which are generally between five and 39 years.

Depreciation is computed using the straight-line method over the estimated useful lives of the buildings and improvements, which are generally between five and 39 years.

The purchase of stores are considered asset acquisitions.

4 unchanged sentences

Any debt assumed as part of the acquisition is recorded at fair value based on current interest rates compared to contractual rates.

Acquisition-related transactions costs are capitalized as part of the purchase price.

Acquisition-related transaction costs are capitalized as part of the purchase price.

Intangible lease rights represent:

16 unchanged sentences

The Company periodically evaluates the investment for impairment.

No impairment indicators were noted as of December 31, 2021.

No impairments were recorded during the year ended December 31, 2022.

EXTRA SPACE STORAGE INC.

4 unchanged sentences

The Company recognizes interest income related to the debt securities and notes receivable using the effective interest method, with deferred fees and costs amortized over the lives of the related loans as yield adjustment.

Additionally, the discount related to purchased notes receivable is being amortized to interest income over the remaining period of the notes.

Cash and Cash Equivalents

1 unchanged sentence

The Company considers all highly liquid debt instruments with a maturity date of three months or less to be cash equivalents.

Restricted Cash

Restricted cash is comprised of escrowed funds deposited with financial institutions located throughout the United States relating to earnest money deposits on potential acquisitions, real estate taxes, loan collateral, operating reserves and insurance and capital expenditures.

Other assets consist of equipment and fixtures, capitalized software, rents receivable from our tenants, other receivables, other intangible assets, deferred tax assets, prepaid expenses and the fair value of interest rate swaps.

Other assets consist of restricted cash, equipment and fixtures, capitalized software, rents receivable from our tenants, other receivables, other intangible assets, deferred tax assets, prepaid expenses, the fair value of interest rate swaps, and goodwill.

Depreciation of equipment and fixtures is computed on a straight-line basis over three to five years .

2 unchanged sentences

During the year ended December 31, 2022 and 2021, the Company recorded amortization expense of $ 5,147 and $ 3,072 , respectively, relating to capitalized software costs.

No significant amortization of software costs was recorded prior to 2020 as the software was still in the application development stage.

Derivative Instruments and Hedging Activities

14 unchanged sentences

The Company has entered into interest rate swap agreements to manage a portion of its interest rate risk.

Redemption of Common Operating Partnership Units

The Company has the option to redeem common Operating Partnership Units in cash or shares of common stock.

Redemption of common Operating Partnership units for shares of common stock, when redeemed under the original provisions of the Operating Partnership agreement, is accounted for by reclassifying the underlying net book value of the units from noncontrolling interest to the Company’s equity.

Redemption of common Operating Partnership units for cash is accounted for by reducing the underlying net book value of the units from noncontrolling interest.

EXTRA SPACE STORAGE INC.

1 unchanged sentence

Amounts in thousands, except store and share data, unless otherwise stated

Exchange of Common Operating Partnership Units

Redemption of common Operating Partnership units for shares of common stock, when redeemed under the original provisions of the Operating Partnership agreement, are accounted for by reclassifying the underlying net book value of the units from noncontrolling interest to the Company’s equity.

Revenue and Expense Recognition

28 unchanged sentences

Tenants can purchase policies in amounts of 2,000 dollars to 10,000 dollars of insurance coverage in exchange for a monthly fee.

As of December 31, 2021, the average insurance coverage for tenants was approximately 3,300 dollars.

As of December 31, 2022, the average insurance coverage for tenants was approximately 3,500 dollars (coverage numbers not in thousands).

The Company’s exposure per claim is limited by the maximum amount of coverage chosen by each tenant.

For the years ended December 31, 2022, 2021 and 2020, the number of individual claims made were 8,542 , 8,748 and 8,226 , respectively (claim numbers not in thousands).

EXTRA SPACE STORAGE INC.

1 unchanged sentence

Amounts in thousands, except store and share data, unless otherwise stated

For the years ended December 31, 2021, 2020 and 2019, the number of individual claims made were 8,748 , 8,226 and 7,888 , respectively (claim numbers not in thousands).

The following table presents information on the portion of the Company’s unpaid claims liability, which is included in other liabilities on the Company's consolidated balance sheets, that relates to tenant insurance for the periods indicated:

13 unchanged sentences

The Company has elected to be treated as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code").

In order to maintain its qualification as a REIT, among other things, the Company is required to distribute at least 90% of its REIT taxable income to its stockholders and meet certain tests regarding the nature of its income and assets.

In order to maintain its qualification as a REIT, among other requirements, the Company is required to distribute at least 90% of its REIT taxable income to its stockholders and meet certain tests regarding the nature of its income and assets.

As a REIT, the Company is not subject to U.S.

20 unchanged sentences

At December 31, 2022 and 2021, there were no material unrecognized tax benefits.

Interest and penalties relating

Interest and penalties relating to uncertain tax positions will be recognized in income tax expense when incurred.

As of December 31, 2022 and 2021, the Company had no interest or penalties related to uncertain tax provisions.

EXTRA SPACE STORAGE INC.

1 unchanged sentence

Amounts in thousands, except store and share data, unless otherwise stated

to uncertain tax positions will be recognized in income tax expense when incurred.

As of December 31, 2021 and 2020, the Company had no interest or penalties related to uncertain tax provisions.

Stock-Based Compensation

7 unchanged sentences

The denominator includes the weighted average number of basic shares and the number of additional common shares that would have been outstanding if the potential common shares that were dilutive had been issued, and is calculated using either the two-class, treasury stock or as if-converted method, whichever is most dilutive.

Potential common shares are securities (such as options, convertible debt, Series A Participating Redeemable Preferred Units (“Series A Units”), Series B Redeemable Preferred Units (“Series B Units”), Series C Convertible Redeemable Preferred Units (“Series C Units”), Series D Redeemable Preferred Units (“Series D Units” and together with the Series A Units, Series B Units and Series C Units, the “Preferred OP Units") and common Operating Partnership units (“OP Units”)) that do not have a current right to participate in earnings of the Company but could do so in the future by virtue of their option, redemption or conversion right.

In computing the dilutive effect of convertible securities, net income is adjusted to add back any changes in earnings in the period associated with the convertible security.

The numerator also is adjusted for the effects of any other non-discretionary changes in income or loss that would result from the assumed conversion of those potential common shares.

In computing diluted earnings per common share, only potential common shares that are dilutive (those that reduce earnings per common share) are included.

For the years ended December 31, 2021, 2020 and 2019 there were no anti-dilutive shares outstanding.

Potential common shares are securities (such as options, convertible debt, Series A Participating Redeemable Preferred Units (“Series A Units”), Series B Redeemable Preferred Units (“Series B Units”), and Series D Redeemable Preferred Units (“Series D Units”) and together with the Series A Units and Series B Units, the “Preferred OP Units") and common Operating Partnership units (“OP Units”)) that do not have a current right to participate in earnings of the Company but could do so in the future by virtue of their option, redemption or conversion right.

For the purposes of computing the diluted impact of the potential exchange of the Preferred OP Units for common shares upon redemption, where the Company has the option to redeem in cash or shares and where the Company has stated the intent and ability to settle the redemption in shares, the Company divided the total liquidation value of the Preferred OP Units by the average share price of $ 183.21 for the year ended December 31, 2022.

8 unchanged sentences

1,328,177 972,655 8,273,612

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

As of December 31, 2021 and 2020 the Operating Partnership had no exchangeable senior notes issued or outstanding.

In October and November 2020, a portion of the 3.125 % Exchangeable Senior Notes due 2035 (the “2015 Notes”) were exchanged for cash and shares of the Company's common stock and the remaining 2015 Notes were redeemed for cash.

The 2015 Notes could potentially have had a dilutive impact on the Company's earnings per share calculations.

The 2015 Notes were exchangeable by holders into shares of the Company's common stock under certain circumstances per the terms of the indenture governing the 2015 Notes.

The Company had irrevocably agreed to pay only cash for the accreted principal amount of the 2015 Notes relative to its exchange obligations, but retained the right to satisfy the exchange obligation in excess of the accreted principal amount in cash and/or common stock.

Although the Company had retained that right to satisfy the exchange obligation in excess of the accreted principal amount of the 2015 Notes in cash and/or common stock, Accounting Standards Codification (“ASC”) 260, “Earnings per Share,” required an assumption that shares would be used to pay the exchange obligation in excess of the accreted principal amount, and required that those shares be included in the Company’s calculation of weighted average common shares outstanding for the diluted earnings per share computation.

For the year ended December 31, 2021, the Company had repaid the principal and accrued interest of its 2015 Notes, and therefore, no shares relating to the 2015 Notes were included in the computation of diluted earnings per share.

For the years ended December 31, 2020 and 2019, zero and 993,114 shares, respectively, related to the 2015 Notes were included in the computation of diluted earnings per share.

For the purposes of computing the diluted impact on earnings per share of the potential exchange of Series A Units for common shares upon redemption, where the Company has the option to redeem in cash or shares and where the Company has stated the positive intent and ability to settle at least $ 101,700 of the instrument in cash (or net settle a portion of the Series A Units against the related outstanding note receivable), only the amount of the instrument in excess of $ 101,700 is considered in the calculation of shares contingently issuable for the purposes of computing diluted earnings per share as allowed by ASC 260-10-45-46.

9 unchanged sentences

Earnings for basic computations 859,487 826,466 481,073

Earnings and dividends allocated to participating securities — — 680

Income allocated to noncontrolling interest - Preferred Operating Partnership Units and Operating Partnership Units 50,706 43,093 —

5 unchanged sentences

Series A Units 875,480 875,480 —

Unvested restricted stock awards included for treasury stock method — — 212,402

Shares related to exchangeable senior notes and dilutive stock options 5,098 12,708 43,298

4 unchanged sentences

Recently Issued Accounting Standards

In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, "Leases (Topic 842)," which modifies the accounting for leases, intending to increase transparency and comparability of organizations by requiring balance sheet presentation of leased assets and increased financial statement disclosure of leasing arrangements.

ASU 2016-02 requires entities to recognize a liability for their lease obligations and a corresponding asset representing the right to use the underlying asset over the lease term.

ASU 2016-02 became effective for annual and interim periods beginning after December 15, 2018.

The Company adopted the standard using the modified retrospective approach as of January 1, 2019.

The Company elected the package of practical expedients upon adoption, which allows for the application of the standard solely to the transition period in 2019 but does not require application to prior fiscal comparative periods presented.

The Company also elected the practical expedient provided in a subsequent amendment to ASU 2016-02 that removed the requirement to separate lease and non-lease components.

The Company did not record a significant cumulative catch-up adjustment upon the adoption of ASC 2016-02.

The primary impact was related to the Company's 22 operating ground leases and two corporate facility leases under which it served as lessee as of the adoption date.

The Company recognized lease liabilities totaling $ 104,863 and right-of-use assets related to operating leases totaling $ 95,506 as of the adoption date.

Refer to Note 14 for further discussion of the Company's leases.

In June 2016, the FASB issued ASU 2016-13, " Financial Instruments - Credit Losses (Topic 326):

4 unchanged sentences

The adoption of this standard by the Company did not have a material impact on the Company's consolidated financial statements.

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

In March 2020, the FASB issued ASU 2020-04, " Reference Rate Reform (Topic 848):

5 unchanged sentences

Application of these expedients preserves the presentation of derivatives and debt contracts consistent with past presentation.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848):

Scope, which refines the scope of Topic 848 and clarifies some of its guidance.

The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

In December 2022, the FASB issued ASU 2022-06, Deferral of the Sunset Date of Topic 848 (“ASU 2022-06”) which was issued to defer the sunset date of Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform to December 31, 2024.

ASU 2022-06 is effective immediately for all companies.

ASU 2022-06 will have no impact on the Company’s consolidated financial statements for the year ended December 31, 2022.

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

In June 2022, the FASB issued ASU 2022-03, " Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions " ("ASU 2022-03").

ASU 2022-03 clarifies the guidance on fair value measurement of an equity security that is subject to a contractual sale restriction.

Currently, some entities apply a discount to the fair value of an equity security subject to a contractual sale restriction, while others do not.

This update eliminates the diversity in practice by clarifying that a recognition of a discount related to a contractual sale restriction is not permitted.

The Company occasionally issues Operating Partnership units that are subject to trading restrictions in conjunction with business combinations and asset acquisitions.

The Company does not currently recognize a discount related to such trading restrictions.

ASU 2022-03 has no impact on the Company's consolidated financial statements and has been early adopted for the year ended December 31, 2022.

REAL ESTATE ASSETS

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December 31, 2022 December 31, 2021

Land - operating $ 2,148,093 $ 1,952,097

Land - development 3,226 3,372

Land $ 2,356,746 $ 2,151,319

Buildings, improvements and other intangibles 9,425,468 8,227,094

8 unchanged sentences

Real estate assets held for sale included in real estate assets, net $ — $ 8,436

As of December 31, 2021, the Company had one store classified as held for sale.

The estimated fair value less selling costs of this asset is greater than the carrying value of the asset, and therefore no loss has been recorded related to this asset.

Assets held for sale are included in the self-storage operations segment of the Company’s segment information.

The Company amortizes to expense intangible assets—tenant relationships on a straight-line basis over the average period that a tenant is expected to utilize the facility (currently estimated at 18 months).

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Amortization related to the tenant relationships and lease rights was $ 13,981 , $ 4,778 , and $ 2,258 for the years ended December 31, 2022, 2021 and 2020, respectively.

The remaining balance of the unamortized lease rights will be amortized over the next seven to 40 years.

The remaining balance of the unamortized lease rights will be amortized over the next six to 39 years.

Accumulated amortization related to intangibles was 144,144 and 130,561 as of December 31, 2022 and 2021, respectively.

The components of other assets are summarized as follows:

December 31, 2022 December 31, 2021

Equipment and fixtures, net $ 42,808 $ 29,060

Deferred line of credit financing costs, net 4,846 7,408

Prepaid expenses and deposits 50,318 39,384

Receivables, net 85,937 83,050

Goodwill 170,811 —

Restricted cash 4,867 5,068

Fair value of interest rate swaps 54,839 270

$ 414,426 $ 164,240

EXTRA SPACE STORAGE INC.

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Consideration Paid Total

Quarter Number of Stores Total Cash Paid Loan Assumed Finance Lease Liability Investments in Real Estate Ventures Net Liabilities/ (Assets) Assumed Value of OP Units Issued Real estate assets

Period Number of Stores Total Cash Paid Loan Assumed Finance Lease Liability Investments in Real Estate Ventures Net Liabilities/ (Assets) Assumed Value of Equity Issued Real estate assets

Total 2022 153 $ 1,366,348 $ 1,193,261 $ — $ 6,823 $ 1,085 $ ( 786 ) $ 165,965 $ 1,366,348

Total 2021 74 $ 1,344,574 $ 1,011,483 $ 20,028 $ 26,998 $ 5,383 $ 4,292 $ 276,390 $ 1,344,574

(1) Store acquisitions during the year ended December 31, 2021 included the acquisition of five stores previously held in joint venture where the Company held a noncontrolling interest.

The Company purchased its partner's equity interest in these joint ventures, and the properties owned by the joint ventures became wholly owned by the Company.

In addition, store acquisitions include the acquisition of two stores that were subject to finance land leases.

The right-of-use assets associated with these leases are included in real estate assets above.

(2) Store acquisitions during the year ended December 31, 2020 include the acquisition of three stores that were subject to finance land leases.

The right-of-use assets associated with these leases are included in real estate assets above.

On September 15, 2022, the Company completed the acquisition of multiple entities doing business as Storage Express for a purchase price of $ 590.0 million.

A portion of the consideration paid was in the form of the issuance of 619,294 OP units (a total value of $ 125.0 million) and the remainder in cash.

The portfolio included 106 operating stores and eight parcels of land for future development, all located in Illinois, Indiana, Kentucky and Ohio.

This acquisition did not meet the definition of a business under ASU 2017-01, " Business Combinations (Topic 805):

Clarifying the Definition of a Business " and was therefore recorded as an asset acquisition.

Other Investments

On June 1, 2022, the Company completed the acquisition of Bargold Storage Systems, LLC ("Bargold") for a purchase price of approximately $ 179.3 million.

Bargold leases space in apartment buildings, primarily in New York City and its boroughs, builds out the space as storage units, and subleases the units to tenants.

As of June 1, 2022, Bargold had approximately 17,000 storage units with an approximate occupancy of 97 %.

This acquisition is considered a business combination under ASU 2017-01, " Business Combinations (Topic 805):

Clarifying the Definition of a Business ."

The following table summarizes the total consideration transferred to acquire Bargold:

Total cash paid by the company $ 157,302

Fair value of Series D Units issued 16,000

Fair value of OP Units issued 6,000

Total consideration transferred $ 179,302

As part of this acquisition, we recorded an expense of $ 1,465 related to transaction costs.

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date:

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

Cash and cash equivalents $ 175

Fixed assets 6,411

Developed technology 500

Trademarks 500

Customer relationships 1,870

Other assets 125

Accounts payables and accrued liabilities assumed ( 1,090 )

Nets asset acquired 8,491

Goodwill 170,811

Total assets acquired $ 179,302

The following table summarizes the revenues and earnings related to Bargold since the acquisition date of June 1, 2022, which are included in the Company's consolidated statement of operations for the year ended December 31, 2022:

Total revenues $ 9,374

Net income from operations $ 1,718

Pro Forma Information

As noted above, during the year ended December 31, 2022, the Company acquired Bargold.

The following pro forma financial information is based on the combined historical financial statements of the Company and Bargold, however, only includes revenue and presents the Company's results as if the acquisition had occurred on January 1, 2021.

Net income was excluded as it was impracticable to report expenses due to the lack of historical accrual basis accounting.

For the Year Ended December 31, 2022 For the Year Ended December 31, 2021

Pro Forma Pro Forma

Total revenues $ 1,930,816 $ 1,592,021

Store Dispositions

The Company disposed of one store on May 18 and one on June 21, 2022, for a total cash consideration of approximately $ 38.7 million, resulting in a gain of approximately $ 14.2 million.

Both had been classified as held for sale.

On December 16, 2021 the Company sold 16 stores that had been classified as held for sale for total cash consideration of $ 200,292 .

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The Company recognized a gain of $ 63,477 related to the sale of these properties.

On December 18, 2020, the Company sold four stores located in Florida that had been classified as held for sale for a total sale price of $ 46,592 .

The Company recorded a gain on the sale of $ 19,600 .

On April 11, 2019, the Company sold a store located in New York that had been classified as held for sale for $ 11,272 in cash.

The Company recorded a gain on the sale of $ 1,205 .

INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES

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The Company initially records these investments at cost and subsequently adjusts for cash contributions, distributions and net equity in income or loss, which is allocated in accordance with the provisions of the applicable partnership or joint venture agreement.

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

In these joint ventures, the Company and the joint venture partner generally receive a preferred return on their invested capital.

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The net equity of certain joint ventures is less than zero because distributions have exceeded the Company's investment in and share of income from these joint ventures.

This is generally the result of

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

financing distributions, capital events or operating distributions that are usually greater than net income, as net income includes non-cash charges for depreciation and amortization while distributions do not.

This is generally the result of financing distributions, capital events or operating distributions that are usually greater than net income, as net income includes non-cash charges for depreciation and amortization while distributions do not.

Net Investments in unconsolidated real estate entities and Cash distributions in unconsolidated real estate ventures consist of the following:

Number of Stores Equity Ownership % Excess Profit % (1)

PR EXR Self Storage, LLC 5 25 % 40 % $ 59,393 $ 60,092

WICNN JV LLC (2)

— 10 % 35 % — 36,032

VRS Self Storage, LLC 16 45 % 54 % ( 14,269 ) 17,186

ESS-CA TIVS JV LP (3)

16 55 % 60 % 32,288 —

GFN JV, LLC (2)

— 10 % 30 % — 18,397

ESS-NYFL JV LP 11 16 % 24 % 11,796 12,211

PRISA Self Storage LLC 84 4 % 4 % $ 8,596 $ 8,792

Alan Jathoo JV LLC 9 10 % 10 % 7,621 7,780

Storage Portfolio IV JV LLC 27 10 % 30 % 40,174 —

Storage Portfolio III JV LLC 5 10 % 30 % 5,596 5,726

ESS Bristol Investments LLC 8 10 % 30 % 2,628 2,810

Extra Space Northern Properties Six LLC 10 10 % 35 % ( 3,029 ) ( 2,541 )

Storage Portfolio II JV LLC 36 10 % 30 % ( 7,200 ) ( 6,116 )

Storage Portfolio IV JV LLC 32 10 % 30 % 49,139 40,174

Storage Portfolio I LLC 24 34 % 49 % ( 41,372 ) ( 40,168 )

PR II EXR JV LLC 23 25 % 25 % 110,172 70,403

Other minority owned stores 13 10 - 50 %

ESS-CA TIVS JV LP 16 55 % 60 % 30,778 32,288

VRS Self Storage, LLC 16 45 % 54 % ( 15,399 ) ( 14,269 )

ARA-EXR JV LLC 12 10 % 30 % 19,137 —

ESS-NYFL JV LP 11 16 % 24 % 11,332 11,796

Extra Space Northern Properties Six LLC 10 10 % 35 % ( 3,382 ) ( 3,029 )

Alan Jathoo JV LLC 9 10 % 10 % 7,414 7,621

ESS Bristol Investments LLC 8 10 % 30 % 2,110 2,628

ESS - BGO Atlanta GA JV LLC 7 20 % 35 % 30,467 —

Storage Portfolio V JV LLC 6 10 % 30 % 9,517 —

PR EXR Self Storage, LLC 5 25 % 40 % 58,476 59,393

Storage Portfolio III JV LLC 5 10 % 30 % 5,467 5,596

Other unconsolidated real estate ventures 14 20 - 50 %

39,808 18,635

4 unchanged sentences

(1) Includes pro-rata equity ownership share and promoted interest.

(2) In June 2021, the WICNN JV LLC and GFN JV, LLC joint ventures sold all 17 of the stores owned by the joint ventures to a third party.

Subsequent to the sales, these joint ventures were dissolved.

As a result of these transactions, the Company recorded a gain of $ 5,739 , which is included in Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partner's interest in the Company's consolidated statements of operations.

(3) The Company sold 16 operating stores to this newly formed joint venture in March 2021.

The Company received cash of $ 132,759 and an interest in the new joint venture valued at $ 33,556 .

This joint venture is unconsolidated and the Company accounts for its investment under the equity method of accounting as the Company does not have voting control but does exercise significant influence over the joint venture.

(2) The Company invested in shares of convertible preferred stock of SmartStop.

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Amounts in thousands, except store and share data, unless otherwise stated

Also in June 2021, the WICNN JV LLC and GFN JV, LLC joint ventures sold all 17 of the stores owned by the joint ventures to a third party.

Subsequent to the sales, these joint ventures were dissolved.

In accordance with ASC 810, the Company reviews all of its joint venture relationships annually to ensure that there are no entities that require consolidation.

As of December 31, 2022, there were no previously unconsolidated entities that were required to be consolidated as a result of this review.

The Company entered into two new unconsolidated real estate ventures with a total of 45 stores and a total investment of $ 109,583 during the year ended December 31, 2021.

The Company entered into four new unconsolidated real estate joint ventures of which added a total of 27 stores and a total investment of $ 66,592 to the Company's portfolio during the year ended December 31, 2022.

Additionally, the Company's existing joint ventures added 10 stores for a total investment of $ 54,724 during the year ended December 31, 2022.

The Company accounts for its investment in these ventures under the equity method of accounting.

In January 2019, the Company purchased its joint venture partners' interests in the Extra Space West One LLC and Extra Space West Two LLC joint ventures, which owned a total of 12 stores.

The Company paid $ 172,505 of cash to acquire the equity interests, and subsequent to this acquisition, the Company owned 100.0 % of the joint ventures and the related stores.

Equity in earnings and dividend income from unconsolidated real estate entities consists of the following:

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Equity in earnings of Storage Portfolio II JV LLC 3,398 1,802 559

Equity in earnings of Storage Portfolio IV JV LLC 917 112 —

Equity in earnings of Storage Portfolio I LLC 4,684 2,833 1,636

Equity in earnings of PR II EXR JV LLC 1,229 ( 8 ) —

Equity in earnings of ESS-CA TIVS JV LP 2,753 1,274 —

Equity in earnings of VRS Self Storage, LLC 5,401 4,352 3,509

Equity in earnings of ARA-EXR JV LLC 180 — —

Equity in earnings of ESS-NYFL JV LLC 803 427 ( 331 )

Equity in earnings of WICNN JV LLC 1,050 1,878 1,373

Equity in earnings of Extra Space Northern Properties Six LLC 1,734 1,363 1,088

Equity in earnings of ESS-BGO Atlanta GA JV LLC 55 — —

Equity in earnings of Alan Jathoo JV LLC 482 270 57

Equity in earnings of Bristol Investments LLC 350 177 ( 67 )

Equity in earnings of GFN JV, LLC 546 788 450

Equity in earnings of Storage Portfolio V JV LLC ( 33 ) — —

Equity in earnings of PR EXR Self Storage, LLC 1,030 491 ( 211 )

Equity in earnings of Storage Portfolio IV JV LLC 112 — —

Equity in earnings of ESS-CA TIVS JV LP 1,274 — —

Equity in earnings of PR II EXR JV LLC ( 8 ) — —

Equity in earnings of WICNN JV LLC — 1,050 1,878

Equity in earnings of GFN JV, LLC — 546 788

Equity in earnings of other minority owned stores 2,664 2,450 1,258

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Equity in earnings of certain of our joint ventures includes the amortization of the Company’s excess purchase price of $ 24,839 of these equity investments over its original basis.

The excess basis is amortized over forty years .

The excess basis is amortized over 39 years.

The Company provides management services to joint ventures for a fee.

Management fee revenues for affiliated real estate joint ventures for the years ended December 31, 2022, 2021 and 2020 were $ 24,389 , $ 17,619 and $ 15,657 , respectively.

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

INVESTMENTS IN DEBT SECURITIES AND NOTES RECEIVABLE

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("JCAP") in connection with JCAP's acquisition by affiliates of NexPoint Advisors, L.P.

("NexPoint Investment") and receivables due to the Company under its bridge loan program.

Information about these balances is as follows:

("NexPoint") and receivables due to the Company under its bridge loan program.

Information about these balances is as

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

December 31, 2022 December 31, 2021

Debt securities - NexPoint Series A Preferred Stock $ 200,000 $ 200,000

Debt securities - NexPoint Series B Preferred Stock 100,000 100,000

Debt securities - NexPoint Preferred Stock $ 300,000 $ 300,000

Notes Receivable - Bridge Loans 491,879 279,042

Notes Receivable - Senior Mezzanine Loan, net — 102,079

Dividends Receivable 38,066 4,889

Dividends and Interest Receivable 66,170 38,066

$ 858,049 $ 719,187

In November 2020, the Company invested $ 300,000 in the preferred stock of JCAP in connection with the acquisition of JCAP by affiliates of NexPoint Advisors, L.P.

This investment consists of 200,000 Series A Preferred Shares valued at total of $ 200,000 , and 100,000 Series B Preferred Shares valued at a total of $ 100,000 .

The JCAP preferred stock is mandatorily redeemable after five years , with two one-year extension options.

In November 2020, the Company invested $ 300,000 in the preferred stock of JCAP in connection with the acquisition of JCAP by affiliates of NexPoint.

This investment consisted of 200,000 Series A Preferred Shares valued at a total of $ 200,000 , and 100,000 Series B Preferred Shares valued at a total of $ 100,000 .

In December 2022, the Company completed a modification with Nexpoint Storage Partners (as successor in interest to JCAP) that exchanged the Series A and B Preferred Shares for 300,000 Series D Preferred Shares, valued at a total of $ 300,000 .

The JCAP Series D preferred stock is mandatorily redeemable after six years from the modification in December 2022, with two one-year extension options.

NexPoint may redeem the Preferred Shares at any time, subject to certain prepayment penalties.

The Company accounts for the JCAP preferred stock as a held to maturity debt security at amortized cost.

The Series A Preferred Shares and the Series B Preferred Shares have initial dividend rates of 10.0 % and 12.0 %, respectively.

If the investment isn't retired after five years , the preferred dividends increase annually.

The Series D Preferred Shares have initial dividend rates of 8.5 %.

If the investment is not retired after six years , the preferred dividends increase annually.

In July 2020, the Company purchased a senior mezzanine note receivable with a principal amount of $ 103,000 .

This note receivable bears interest at 5.5 %, matures in December 2023 and is collateralized through an entity interest in which it or its subsidiaries wholly own 62 storage facilities.

The Company paid cash of $ 101,142 for the note receivable and accounts for the discount at amortized cost.

The discount is being amortized over the term of the note receivable.

In February 2022, the Company sold this note receivable to a junior mezzanine lender, which exercised its right to buy the Company's position for the full principal balance plus interest due.

The note receivable bore interest at 5.5 %, with a maturity in December 2023 and was collateralized through an equity interest in which it or its subsidiaries wholly own 62 storage facilities.

The Company paid cash of $ 101,142 for the note receivable and accounted for the discount at amortized cost.

The discount was being amortized over the term of the note receivable.

In February 2022, a junior mezzanine lender exercised its right to buy the Company’s position for the full principal balance plus interest due, as a result of which the Company sold this note for a total of $ 103,315 in cash.

The remaining unamortized discount was recognized in that quarter as interest income.

The Company provides bridge loan financing to third-party self-storage operators.

These notes receivable consist of primary mortgage and mezzanine loans receivable, collateralized by self-storage properties.

These notes receivable consist of mortgage loans receivable, collateralized by self-storage properties.

These notes receivable typically have a term of three years with two one-year extensions, and have variable interest rates.

The Company intends to sell the majority of the mortgage receivables and keep the mezzanine receivables to maturity.

During the year ended December 31, 2021, the Company sold a total principal amount of $ 172,566 of its mortgage bridge loans receivable to third parties for a total of $ 172,002 in cash and closed on $ 317,482 in new mortgage and mezzanine bridge loan.

The Company intends to sell some of the mortgage receivables.

In certain scenarios the notes may be sold at a premium or discount.

When this occurs, a gain or loss is recorded at the time of sale.

During the year ended December 31, 2022, the Company sold a total principal amount of $ 211,240 of its mortgage bridge loans receivable to third parties and closed on $ 529,245 in new mortgage bridge loans.

There were no material gains or losses recorded for the year ended December 31, 2022.

EXTRA SPACE STORAGE INC.

1 unchanged sentence

Amounts in thousands, except store and share data, unless otherwise stated

In May 2021, the Operating Partnership executed its initial public bond issuance by selling $ 450.0 million principal amount of 2.550 % Senior Notes due 2031 (the "Notes Due 2031").

Interest on the Notes Due 2031 is paid semi-annually in arrears on June 1 and December 1 of each year.

The Notes Due 2031 will mature on June 1, 2031, and the Operating Partnership may redeem the Notes Due 2031 at its option and sole discretion at any time prior to March 31, 2031 for cash equal to the outstanding principal amount plus the present value of the remaining scheduled interest payments, plus any accrued but unpaid interest.

In March 2022, the Operating Partnership executed a public bond issuance by selling $ 400.0 million principal amount of 3.900 % Senior Notes due 2029 (the "Notes Due 2029").

Interest on the Notes Due 2029 is paid semi-annually in arrears on April 1 and October 1 of each year.

The Notes Due 2029 will mature on April 1, 2029, and the Operating Partnership may redeem the Notes Due 2029 at its option and sole discretion at any time prior to April 1, 2029 for cash equal to the outstanding principal amount plus the present value of the remaining scheduled interest payments, plus any accrued but unpaid interest.

In September 2021, the Operating Partnership executed a public bond issuance by selling $ 600.0 million principal amount of 2.350 % Senior Notes due 2032 (the "Notes Due 2032").

1 unchanged sentence

The Notes Due 2032 will mature on March 15, 2032, and the Operating Partnership may redeem the Notes Due 2032 at its option and sole discretion at any time prior to March 15, 2032 for cash equal to the outstanding principal amount plus the present value of the remaining scheduled interest payments, plus any accrued but unpaid interest.

The Operating Partner may redeem the Notes Due 2031 and/or the Notes Due in 2032 in whole at any time or in part from time to time, at the Operating Partnership’s option and sole discretion, at a redemption price equal to the greater of (i) 100% of the principal amount of the notes being redeemed and (ii) a make-whole premium calculated in accordance with the indenture governing the notes, plus, in each case, accrued and unpaid interest thereon to, but not including, the applicable redemption date.

In May 2021, the Operating Partnership executed its initial public bond issuance by selling $ 450.0 million principal amount of 2.550 % Senior Notes due 2031 (the "Notes Due 2031").

Interest on the Notes Due 2031 is paid semi-annually in arrears on June 1 and December 1 of each year.

The Operating Partner may redeem the Notes Due 2029, the Notes Due 2031, and/or the Notes Due in 2032 (collectively, the "Notes") in whole at any time or in part from time to time, at the Operating Partnership’s option and sole discretion, at a redemption price equal to the greater of (i) 100 % of the principal amount of the notes being redeemed and (ii) a make-whole premium calculated in accordance with the indenture governing the notes, plus, in each case, accrued and unpaid interest thereon to, but not including, the applicable redemption date.

Notwithstanding the foregoing, on or after the date three months prior to the maturity date of the applicable notes, the redemption price will be equal to 100 % of the principal amount of the notes being redeemed, plus accrued and unpaid interest thereon to, but not including, the applicable redemption date.

Certain events are considered events of default, which may result in the accelerated maturity of the Notes Due 2031 and/or the Notes Due 2032, including, among other things, a default for 30 days in the payment of any installment of interest under the notes or a default in the payment of the principal amount or redemption price due with respect to the notes, when the same become due and payable.

The Notes Due 2031 and the Notes Due 2032 are unsecured, and are fully and unconditionally guaranteed by the Company, ESS Holdings Business Trust I, and ESS Holdings Business Trust II (the "Guarantors," and together with the Operating Partnership, the "Obligated Group"), on a joint and several basis.

The guarantee of the Notes Due 2031 and the Notes Due 2032 will be a senior unsecured obligation of each Guarantor.

Certain events are considered events of default, which may result in the accelerated maturity of the Notes, including, among other things, a default for 30 days in the payment of any installment of interest under the notes or a default in the payment of the principal amount or redemption price due with respect to the notes, when the same become due and payable.

The Notes are unsecured, and are fully and unconditionally guaranteed by the Company, ESS Holdings Business Trust I, and ESS Holdings Business Trust II (the "Guarantors," and together with the Operating Partnership, the "Obligated Group"), on a joint and several basis.

The guarantee of the Notes will be a senior unsecured obligation of each Guarantor.

The Guarantors have no material operations separate from the operation of the Operating Partnership and no material assets, other than their respective investments directly or indirectly in the Operating Partnership, and therefore the assets, liabilities, and results of operations of the Obligated Group are not materially different than those reported in the Company's financial statements.

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$ 521,820 $ 930,830 2.55 % - 4.50 %

June 2022 - February 2030

July 2023 - February 2030

Secured variable-rate (1)

772,604 392,679 5.36 % - 5.80 %

April 2022 - May 2027

August 2023 - September 2030

Unsecured fixed-rate 4,240,376 3,575,000 2.35 % - 5.12 %

1 unchanged sentence

Unsecured variable-rate 884,624 550,000 5.41 %

February 2024 - October 2026

January 2025 - January 2028

Total 6,419,424 5,448,509

2 unchanged sentences

(1) The loans are collateralized by mortgages on real estate assets and the assignment of rents.

(2) Basis rate is 30-day USD LIBOR

(2) Basis rates include 30-day USD LIBOR, Term SOFR and Daily Simple SOFR

At December 31, 2022, the terms of the Second Amended and Restated Credit Agreement dated June 22, 2021 (the "Credit Agreement") are as follows:

11 unchanged sentences

425,000 February 2024

Tranche 6 Term Loan Facility (1)

175,000 January 2028

Tranche 7 Term Loan Facility (1)

425,000 July 2029

(1) The term loan amounts have been fully drawn as of December 31, 2022.

Pursuant to the terms of the Credit Agreement, the Company may request an extension of the term of the revolving credit facility for up to two additional periods of six months each, after satisfying certain conditions.

As of December 31, 2021, amounts outstanding under the revolving credit facility bore interest at floating rates, at the Company’s option, equal to either (i) LIBOR plus the applicable Eurodollar rate margin or (ii) the applicable base rate which is the applicable margin plus the highest of (a) 0.0 %, (b) the federal funds rate plus 0.50 %, (c) U.S.

Bank’s prime rate or (d) the Eurodollar rate plus 1.00 %.

Per the Credit Agreement, the applicable Eurodollar rate margin and applicable base rate margin are based on the Company’s achieved debt rating, with the Eurodollar rate margin ranging from 0.7 % to 2.25 % per annum and the applicable base rate margin ranging from 0.00 % to 0.60 % per annum.

As of December 31, 2022, amounts outstanding under the revolving credit facility bore interest at floating rates, at the Company’s option, equal to either (i) Adjusted Term SOFR/Adjusted Daily Simple SOFR ("ASOFR") plus the applicable margin or (ii) the applicable base rate which is the applicable margin plus the highest of (a) 0.0 %, (b) the federal funds rate plus 0.50 %, (c) U.S.

Bank’s prime rate or (d) the SOFR rate plus 1.00 %.

Per the Credit Agreement, the applicable SOFR rate margin and applicable base rate margin are based on the Company’s achieved debt rating, with the SOFR rate margin ranging from 0.7 % to 1.6 % per annum and the applicable base rate margin ranging from 0.00 % to 0.60 % per annum.

The Credit Agreement is guaranteed by the Company and is not secured by any assets of the Company.

1 unchanged sentence

As of December 31, 2022, the Company was in compliance with all of its financial covenants.

In July 2022, the Company completed an accordion transaction in its credit facility, which added a $ 175.0 million unsecured debt tranche maturing January 2028 and a $ 425.0 million unsecured debt tranche maturing July 2029.

The current interest rates for the tranches are ASOFR + 0.95 % and ASOFR + 1.25 %, respectively.

EXTRA SPACE STORAGE INC.

9 unchanged sentences

Credit Line 1 (2)

$ 55,000 $ 140,000 1.6 % 7/1/2023 LIBOR plus 1.45 %

$ 35,000 $ 140,000 5.7 % 7/1/2023 SOFR plus 1.35 %

Credit Line 2 (3)(4)

480,000 1,250,000 1.0 % 6/20/2025 LIBOR plus 0.85 %

910,000 1,250,000 5.3 % 6/20/2025 SOFR plus 0.95 %

$ 945,000 $ 1,390,000

(1) 30-day USD LIBOR

(1) Term SOFR or Daily Simple SOFR

(2) Secured by mortgages on certain real estate assets.

One two -year extension available.

On January 13, 2023 the maturity date was extended to July 1, 2026 with one one -year extension available.

(3) Unsecured.

2 unchanged sentences

Rate is subject to change based on our investment grade rating.

As of December 31, 2022, the Company’s percentage of fixed-rate debt to total debt was 64.7 %.

The weighted average interest rates of the Company’s fixed and variable-rate debt were 3.4 % and 5.5 %, respectively.

The combined weighted average interest rate was 4.1 %.

The Company is exposed to certain risk arising from both its business operations and economic conditions.

2 unchanged sentences

Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.

The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash payments principally related to the Company’s borrowings.

Cash Flow Hedges of Interest Rate Risk

2 unchanged sentences

Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (“OCI”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

A portion of these changes is excluded from accumulated other comprehensive income as it is allocated to noncontrolling interests.

During the years ended December 31, 2021, 2020 and 2019,

EXTRA SPACE STORAGE INC.

1 unchanged sentence

Amounts in thousands, except store and share data, unless otherwise stated

such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.

During 2022, the Company estimates that $ 28,070 will be reclassified as an increase to interest expense.

the hedged forecasted transaction affects earnings.

A portion of these changes is excluded from accumulated other comprehensive income as it is allocated to noncontrolling interests.

During the years ended December 31, 2022, 2021 and 2020, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.

During 2023, the Company estimates that $ 37,005 will be reclassified as a decrease to interest expense.

The following table summarizes the terms of the Company’s 19 derivative financial instruments, which have a total combined notional amount of $ 1,837,714 as of December 31, 2022:

13 unchanged sentences

No tax effect has been presented as the derivative instruments are held by the Company:

Gain (loss) recognized in OCI For the Year Ended December 31, Location of amounts reclassified from OCI into income Gain (loss) reclassified from OCI For the Year Ended December 31,

Gain recognized in OCI for the Year Ended December 31, Location of amounts reclassified from OCI into income Loss reclassified from OCI for the Year Ended December 31,

Type 2022 2021 2022 2021 2020

5 unchanged sentences

As of December 31, 2022, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $ 0 .

As of December 31, 2021, the Company had not posted any collateral related to these agreements.

If the Company had breached any of these provisions as of December 31, 2021, it could have been required to cash settle its obligations under these agreements at their termination value of $ 41,331 .

EXTRA SPACE STORAGE INC.

1 unchanged sentence

Amounts in thousands, except store and share data, unless otherwise stated

NOTES PAYABLE TO TRUSTS

The Operating Partnership had three wholly-owned unconsolidated subsidiaries (“Trust", “Trust II”, “Trust III,” together, the "Trusts") that had issued trust preferred securities to third parties and common securities to the Operating Partnership during 2005.

The Trusts loaned proceeds from the sale of the preferred and common securities to the Operating Partnership in the form of notes.

The Trusts were VIEs because the holders of the equity investment at risk (that is the Trusts' preferred securities) did not have the power to direct the activities of the entities that most significantly affected the entities’ economic performance due to their lack of voting or similar rights.

Because the Operating Partnership’s investment in the Trusts’ common securities was financed directly by the Trusts as a result of its loan of the proceeds to the Operating Partnership, that investment was not considered an equity investment at risk.

The Operating Partnership’s investment in the Trusts was not a variable interest because equity interests are variable interests only to the extent that the investment is considered to be at risk, and therefore the Operating Partnership was not the primary beneficiary of the Trusts.

Since the Company was not the primary beneficiary of the Trusts, they were not consolidated.

A debt obligation was recorded in the form of notes for the proceeds as discussed above, which were owed to the Trusts.

The Company had also included its investment in the Trusts’ common securities in other assets on the Company's consolidated balance sheets.

During the year ended December 31, 2018, the Company repaid a total principal amount of $ 88,662 of the notes payable to Trusts, representing all of the notes payable to Trust III, all of the notes payable to Trust II, and all but $ 30,928 of the notes payable to Trust.

The Trusts used the proceeds from these repayments to redeem their preferred and common securities.

In January 2019, the Company repaid the remaining balance of $ 30,928 of notes payable to Trust.

During the time the notes were outstanding, the Company did not provide financing or other support during the periods presented to the Trusts that it was not previously contractually obligated to provide.

The Company’s maximum exposure to loss as a result of its involvement with the Trusts was equal to the total amount of the notes discussed above less the amounts of the Company’s investments in the Trusts’ common securities.

The net amount was equal to the notes payable that the Trusts owed to third parties for their investments in the Trusts’ preferred securities.

EXCHANGEABLE SENIOR NOTES

12 unchanged sentences

The Company therefore accounted for the liability and equity component of the 2015 Notes separately.

The equity components were included in paid-in capital in stockholders’ equity in the consolidated balance sheets, and the value of the

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

equity components were treated as original issue discount for purposes of accounting for the debt components.

The equity components were included in paid-in capital in stockholders’ equity in the consolidated balance sheets, and the value of the equity components were treated as original issue discount for purposes of accounting for the debt components.

The discount was amortized as interest expense over the remaining period of the debt through its first redemption date, October 1, 2020 for the 2015 Notes.

15 unchanged sentences

The amount allocated to the extinguishment of the liability component is equal to the fair value of that component immediately prior to extinguishment.

The difference between the consideration attributed to the extinguishment of the liability component and the sum of (a) the net carrying amount of the repurchased liability component, and (b) the related unamortized debt issuance costs, is recognized as a gain on debt extinguishment.

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

difference between the consideration attributed to the extinguishment of the liability component and the sum of (a) the net carrying amount of the repurchased liability component, and (b) the related unamortized debt issuance costs, is recognized as a gain on debt extinguishment.

The remaining settlement consideration is allocated to the reacquisition of the equity component of the repurchased 2013 Notes and 2015 Notes and recognized as a reduction of stockholders’ equity.

12 unchanged sentences

Gain/(loss) on repurchase $ — $ — $ —

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

STOCKHOLDERS’ EQUITY

3 unchanged sentences

The transfer agent and registrar for the Company’s common stock is American Stock Transfer & Trust Company.

During the year ended December 31, 2022, the Company sold no shares of common stock.

On August 9, 2021, the Company filed its $ 800,000 "at the market" equity program with the Securities and Exchange Commission using a shelf registration statement on Form S-3, and entered into separate equity distribution agreements with ten sales agents.

2 unchanged sentences

On March 23, 2021, the Company sold 1,600,000 shares of its common stock in a registered offering structured as a bought deal at a price of $ 129.13 per share resulting in net proceeds of $ 206,572 .

During the year ended December 31, 2020, the Company sold 899,048 shares of common stock at an average sales price of $ 116.42 per share, resulting in net proceeds of $ 103,468 .

In November 2017, the Company's board of directors authorized a three-year share repurchase program to allow for the repurchase of shares with an aggregate value up to $ 400,000 .

On October 15, 2020, the Company's board of directors authorized a share repurchase program allowing for the repurchase of shares with an aggregate value up to $ 400,000 .

During the year ended December 31, 2022, the Company repurchased 381,786 shares at an average price of $ 165.03 per share, paying a total of $ 63,008 .

On October 15, 2020, the Company's board of directors authorized a new share repurchase program allowing for the repurchase of shares with an aggregate value up to $ 400,000 .

No shares were repurchased during the year ended December 31, 2021.

As of December 31, 2022, the Company had remaining authorization to repurchase shares with an aggregate value up to $ 336,992 .

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

NONCONTROLLING INTEREST REPRESENTED BY PREFERRED OPERATING PARTNERSHIP UNITS

10 unchanged sentences

The balances for each of the specific preferred OP units as presented in the Statement of Noncontrolling Interests and Equity as of the periods indicated is as follows:

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

December 31, 2022 December 31, 2021

16 unchanged sentences

The Series A Units are shown on the balance sheet net of the $ 100,000 loan because the borrower under the loan is also the holder of the Series A Units.

On January 25, 2023, the remaining balance of the Series A units were redeemed for $ 5,000 in cash, 851,698 shares of common stock, and the repayment of the $ 100,000 note receivable.

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

Series B Redeemable Preferred Units

The Partnership Agreement provides for the designation and issuance of the Series B Units.

The Series B Units rank junior to the Series A Units, on parity with the Series C Units and Series D Units, and senior to all other partnership interests of the Operating Partnership with respect to distributions and liquidation.

The Series B Units were issued in 2013 and 2014 and have a liquidation value of $ 25.00 per unit for a current fixed liquidation value of $ 38,068 which represents 1,522,727 Series B Units.

The Series B Units rank junior to the Series A Units, on parity with the Series C Units (defined below) and Series D Units, and senior to all other partnership interests of the Operating Partnership with respect to distributions and liquidation.

The Series B Units were issued in 2013 and 2014, have been redeemed at various times, and have a liquidation value of $ 25.00 per unit for a current fixed liquidation value of $ 33,568 which represents 1,342,727 Series B Units outstanding at December 31, 2022.

Holders of the Series B Units receive distributions at an annual rate of 6.0 %.

3 unchanged sentences

Series C Convertible Redeemable Preferred Units

The Partnership Agreement provides for the designation and issuance of the Series C Units.

The Series C Units rank junior to the Series A Units, on parity with the Series B Units and Series D Units, and senior to all other partnership interests of the Operating Partnership with respect to distributions and liquidation.

The Series C Units were issued in 2013 and 2014 and had a liquidation value of $ 42.10 per unit.

The Series C Units became redeemable at the option of the holder one year from the date of issuance, which redemption obligation could be satisfied at the Company’s option in cash or shares of its common stock.

The Partnership Agreement provides for the designation and issuance of the Series C Convertible Redeemable Preferred Units ("Series C Units").

The Series C Units were issued in 2013 and 2014.

In December 2014, the Operating Partnership loaned holders of the Series C Units $ 20,230 .

1 unchanged sentence

The Series C Units were shown on the balance sheet net of the loan because the borrower under the loan receivable was also the holder of the Series C Units.

On December 1, 2018, certain holders of the Series C Units converted their Series C Units into common OP Units, with a total of 407,996 Series C Units being converted into a total of 373,113 common OP Units.

On April 25, 2019, the remaining

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

296,020 Series C Units were converted into 270,709 OP Units.

In 2018, certain holders of the Series C Units converted their Series C Units into common OP Units and the remaining Series C Units were converted into common OP Units in 2019.

The remaining outstanding balance of the loan receivable of $ 1,900 and $ 1,900 is shown as a reduction of the noncontrolling interests related to the OP Units as of December 31, 2022 and December 31, 2021, respectively.

3 unchanged sentences

The Series D Units rank junior to the Series A Units, on parity with the Series B Units and Series C Units, and senior to all other partnership interest of the Operating Partnership with respect to distributions and liquidation.

The Series D Units have a liquidation value of $ 25.00 per unit, for a current fixed liquidation value of $ 205,435 which represents 8,217,422 Series D Units.

The Series D Units have a liquidation value of $ 25.00 per unit, for a current fixed liquidation value of $ 211,436 which represents 8,457,422 Series D Units outstanding at December 31, 2022.

Holders of the Series D Units receive distributions at an annual rate between 3.0 % and 5.0 %.

3 unchanged sentences

The Series D Units have been issued at various times from 2014 to 2022.

During the year ended December 31, 2021, the Operating Partnership issued a total of 3,522,937 Series D Units valued at $ 88,073 in conjunction with store acquisitions.

During the year ended December 31, 2022, the Operating Partnership issued a total of 88,319 Series D Units in conjunction with store acquisitions.

On January 3, 2023, 890,594 Series D units were redeemed for 154,307 shares of common stock.

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

NONCONTROLLING INTEREST IN OPERATING PARTNERSHIP AND OTHER NONCONTROLLING INTERESTS

3 unchanged sentences

The remaining ownership interests in the Operating Partnership (including Preferred OP Units) of 6.7 % are held by certain former owners of assets acquired by the Operating Partnership.

As of December 31,2021 and December 31, 2020, the noncontrolling interests in the Operating Partnership are shown on the balance sheet net of notes receivable of $ 1,900 and $ 2,311 , respectively, because the borrowers under the loan receivable are also holders of OP Units (Note 12).

As of December 31, 2022 and 2021, the noncontrolling interests in the Operating Partnership are shown on the balance sheet net of notes receivable of $ 1,900 and $ 1,900 , respectively, because the borrowers under the loan receivable are also holders of OP Units (Note 12).

This loan receivable bears interest at 5.0 % per annum and matures on December 15, 2024.

9 unchanged sentences

Cash paid for OP Units redeemed $ 4,617 $ 788 $ —

OP Units issued in conjunction with acquisitions 897,803 — —

Value of OP Units issued in conjunction with acquisitions $ 188,319 $ — $ —

OP Units issued upon redemption of Series C Units — — 270,709

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

On December 1, 2018, 373,113 common OP Units were issued in the conversion of 407,996 Series C Units.

These newly issued OP Units were pledged as collateral on the existing loan receivable to the Series C Unit holders.

As a result, noncontrolling interests in the Operating Partnership was reported net of $ 11,091 of the loan receivable as of December 31, 2018, which represents the portion of the note receivable that is collateralized by the OP Units.

The remaining 296,020 Series C Units were converted into 270,709 OP Units on April 25, 2019 and the remainder of the loan receivable was reported net with the OP Units.

The remaining total outstanding balance of the loan receivable of $ 1,900 and $ 2,311 is shown as a reduction of the noncontrolling interests related to the OP Units as of December 31, 2021 and 2020, respectively.

OP Units issued in conjunction with business combination and acquisitions 711,037 897,803 —

Value of OP Units issued in conjunction with business combination and acquisitions $ 141,000 $ 188,319 $ —

GAAP requires a company to present ownership interests in subsidiaries held by parties other than the company in the consolidated financial statements within the equity section but separate from the company’s equity.

5 unchanged sentences

Other Noncontrolling Interests

Other noncontrolling interests represent the ownership interest of partners in two consolidated joint ventures as of December 31, 2021.

One joint venture owns four stores in Georgia and the other owns one property under development in Florida.

Other noncontrolling interests represent the ownership interest of partners in five consolidated joint ventures as of December 31, 2022.

One joint venture owns one operating store in Florida and the others own four properties all under development.

The voting interests of the partners are 10% or less.

On August 25, 2021, the Company purchased for $ 12,215 in cash the remaining third party ownership interest in a previously consolidated joint venture that owned two operating stores.

On December 15, 2021, the Company purchased for $ 6,100 in cash the remaining third party ownership interest in previously consolidated joint venture that owned four operating stores.

The Company adopted ASC 842, "Leases," effective January 1, 2019 on a modified retrospective basis as allowed under the standard and thus prior periods have not been restated.

The Company elected the package of transition practical expedients, and has therefore (1) not reassessed whether any expired or existing contracts are or contain leases, (2) not reassessed the lease classification for any expired or existing leases, and (3) not reassessed initial direct costs for any expired or existing leases.

Lessee Accounting

The Company recognized right-of-use assets related to operating leases totaling $ 95,506 and lease liabilities of $ 104,863 as of the adoption date, January 1, 2019.

These are presented as “Operating lease liabilities” and “Real estate assets-operating lease right-of-use assets” on the Company’s consolidated balance sheets.

Right-of-use assets associated with finance leases are included in real estate assets, net and finance lease liabilities are included in other liabilities on the Company's consolidated balance sheets.

During the year ended December 31, 2021, the Company recorded new finance lease right-of-use assets and finance lease liabilities totaling $ 26,998 associated with the acquisition of two stores with land leases.

The Company also recorded a finance lease right-of-use asset and a finance lease liability of $ 40,916 related to a corporate office lease.

In June and August 2019, the Company entered into new triple-net lease agreements to lease land and buildings at 22 and five operating stores, respectively.

These leases are categorized as operating leases, and have contractual lease terms of 25 years, but have termination options after 10 years that result in lease terms of 10 years under ASC 842.

The Company recorded

EXTRA SPACE STORAGE INC.

1 unchanged sentence

Amounts in thousands, except store and share data, unless otherwise stated

new operating lease right-of-use assets and operating lease liabilities of $ 127,532 and $ 52,224 , respectively, in conjunction with these new lease agreements.

Lessee Accounting

The Company accounts for leases under ASC 842, "Leases." Right-of-use assets associated with operating leases are included in “Real estate assets - operating lease right-of-use assets” and operating lease liabilities are included in “Operating lease liabilities” on the Company's consolidated balance sheets.

Right-of-use assets associated with finance leases are included in "Real estate assets, net" and finance lease liabilities are included in "Other liabilities" on the Company's consolidated balance sheets.

During the year ended December 31, 2022, the Company recorded new finance lease right-of-use assets and finance lease liabilities totaling $ 6,823 associated with the acquisition of two stores with land leases.

The Company is lessee under several types of lease agreements.

5 unchanged sentences

These leases have original lease terms between five and 14 years, with no extension options.

Subsequent to year-end the Company modified and extended the lease of its corporate offices to add additional space and extend the lease until 2034.

In 2021 the Company modified and extended the lease of its corporate offices to add additional space and extend the lease until 2034.

• Leases of 15 regional offices.

These leases have original lease terms between three and five years .

These leases have original lease terms between two and five years .

The Company has the option on certain of these leases to extend the lease term for up to three additional years.

11 unchanged sentences

The Company will recognize costs from these variable lease payments in the period in which the obligation for those payments is incurred.

The Company has a signed lease agreement for a store in California.

The store is under construction by the lessor, and the Company will take possession of the leased asset upon completion of construction, which is estimated to be completed in 2022.

The lease term is 15 years from the lease commencement date, with three 10 -year extension options and one 5 -year extension option.

The Company has not recorded right-of-use asset or lease liability related to this lease as of December 31, 2021 as the lease term has not yet commenced.

The lease commencement date will occur when the Company takes possession of the leased asset, and the Company will recognize a lease liability and right-of-use asset relating to the lease at that time.

As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available surrounding the Company’s unsecured borrowing rates and implied secured spread at the lease commencement date in determining the present value of lease payments.

33 unchanged sentences

Lease liabilities $ 229,035 $ 145,553 $ 374,588

The Company elected the package of practical expedients upon adoption of ASC 842, which allows for the application of the standard solely to the transition period in 2019 and does not require application to prior fiscal comparative periods represented.

Disclosures required under the previous leasing standard are presented for prior years.

EXTRA SPACE STORAGE INC.

13 unchanged sentences

Options expire 10 years from the date of grant.

Beginning in 2017, the CNG Committee decided to the replace stock options granted to executives with performance based stock units for executive compensation.

See the "Performance-Based Stock Units" section below.

Also as defined under the terms of the Plan, restricted stock grants may be awarded.

2 unchanged sentences

however, the grantee has the ability to vote the shares and receive nonforfeitable dividends paid on shares.

Unless otherwise determined by the Compensation Committee at the time of grant, the forfeiture and transfer restrictions on the shares lapse over a four-year period beginning on the date of grant.

Unless otherwise determined by the Compensation Committee at the time of grant, the forfeiture and transfer restrictions on the shares lapse over a one-year period or a four-year period beginning on the date of grant.

For actions taken prior to July 2020, references to the Compensation Committee refer to its predecessor, the CNG Committee;

12 unchanged sentences

Ending Exercisable 9,272 $ 82.47 2.98 $ 600

The aggregate intrinsic value in the table above represents the total value (the difference between the Company’s closing stock price on the last trading day of 2021 and the exercise price, multiplied by the number of in-the-money options) that would

The aggregate intrinsic value in the table above represents the total value (the difference between the Company’s closing stock price on the last trading day of 2022 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2022.

The amount of

EXTRA SPACE STORAGE INC.

1 unchanged sentence

Amounts in thousands, except store and share data, unless otherwise stated

have been received by the option holders had all option holders exercised their options on December 31, 2021.

The amount of aggregate intrinsic value will change based on the fair market value of the Company’s stock.

aggregate intrinsic value will change based on the fair market value of the Company’s stock.

The total intrinsic value of options exercised for the years ended December 31, 2022, 2021 and 2020 was $ 0 , $ 3,925 and $ 10,016 , respectively.

22 unchanged sentences

The fair value of common stock awards is determined based on the closing trading price of the Company’s common stock on the grant date.

A summary of the Company’s employee and director share grant activity is as follows:

EXTRA SPACE STORAGE INC.

1 unchanged sentence

Amounts in thousands, except store and share data, unless otherwise stated

A summary of the Company’s employee and director share grant activity is as follows:

Restricted Stock Grants Shares Weighted-Average Grant-Date Fair Value

22 unchanged sentences

Granted 45,242 129.38

Released ( 30,071 ) $ 112.16

Unvested at December 31, 2020 123,311 $ 104.25

34 unchanged sentences

The Company has elected to use the Tax-Law-Ordering approach to determine when excess tax benefits will be realized.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act (“IRA”).

The provisions include the new Corporate Alternative Minimum Tax (“CAMT”), an excise tax on stock buybacks, and significant tax incentives for energy and climate initiatives, and all of these provisions are effective for tax year 2023.

The Company has evaluated the impact of these provisions and does not expect the enactment of these provisions to have a material impact on the Company's consolidated financial statements.

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

The income tax provision for the years ended December 31, 2022, 2021 and 2020, is comprised of the following components:

5 unchanged sentences

Total tax expense $ 16,430 $ 4,495 $ 20,925

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

For the Year Ended December 31, 2021

36 unchanged sentences

Operating and Finance lease liabilities 8,418 7,936

SmartStop TRS — 219

Other 916 1,554

State deferred taxes 5,232 6,548

8 unchanged sentences

The Company’s CODMs are comprised of several members of its executive management team who use net operating income ("NOI") to assess the performance of the business for the Company’s reportable operating segments.

NOI for our self-storage operations represents total property revenue less direct property operating expenses.

NOI for our tenant reinsurance segment represents tenant reinsurance revenues less tenant reinsurance expense.

The Company’s segments are comprised of two reportable segments:

(1) self-storage operations and (2) tenant reinsurance.

The self-storage operations activities include rental operations of wholly-owned stores.

NOI for self-storage operations represents total property revenue less direct property operating expenses.

NOI for tenant reinsurance represents tenant reinsurance revenues less tenant reinsurance expense.

The self-storage operations activities include rental operations of wholly-owned stores and Bargold.

The Company's consolidated revenues equal total segment revenues plus property management fees and other income.

1 unchanged sentence

Excluded from segment revenues and net operating income is property management fees and other income.

For all periods presented, substantially all of our real estate assets, intangible assets, other assets, and accrued and other liabilities are associated with the self-storage operations segment.

For all periods presented, substantially all real estate assets, intangible assets, other assets, and accrued and other liabilities are associated with the self-storage operations segment.

Financial information for the Company’s business segments is set forth below:

19 unchanged sentences

Property management fees and other income 83,904 66,264 52,129

Transaction related costs ( 1,548 ) — —

General and administrative expense ( 129,251 ) ( 102,194 ) ( 96,594 )

5 unchanged sentences

Equity in earnings and dividend income from unconsolidated real estate entities 41,428 32,358 22,361

Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partner's interest 6,251 — —

Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets — 6,251 —

Income tax expense ( 20,925 ) ( 20,324 ) ( 13,810 )

1 unchanged sentence

COMMITMENTS AND CONTINGENCIES

As of December 31, 2021, the Company was under agreement to acquire nine stores at a total purchase price of $ 136,491 .

These stores are scheduled to close in 2022.

Additionally, the Company is under agreement to acquire three stores in 2022 with joint venture partners, for a total investment of $ 5,850 .

As of December 31, 2022, the Company was under agreement to acquire 12 stores at a total purchase price of $ 156,678 .

Ten stores are scheduled to close in 2023 and two are scheduled to close in 2024.

Additionally, the Company is under agreement to acquire seven stores in 2023 with joint venture partners, for a total investment of $ 26,002 .

The Company is involved in various legal proceedings and is subject to various claims and complaints arising in the ordinary course of business.

3 unchanged sentences

The estimated loss, if any, is based upon currently available information and is subject to significant judgment, a variety of assumptions, and known and unknown uncertainties.

The Company could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations in any particular period, notwithstanding the fact that the Company is currently

The Company could in the future incur judgments or enter into settlements of claims that could have a material

EXTRA SPACE STORAGE INC.

1 unchanged sentence

Amounts in thousands, except store and share data, unless otherwise stated

vigorously defending any legal proceedings against it.

adverse effect on its results of operations in any particular period, notwithstanding the fact that the Company is currently vigorously defending any legal proceedings against it.

As of December 31, 2022, the Company was involved in various legal proceedings and was subject to various claims and complaints arising in the ordinary course of business.

3 unchanged sentences

Extra Space Storage Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts in thousands, except store and share data, unless otherwise stated

Real Estate and Accumulated Depreciation

(Dollars in thousands)

As of December 31, 2022

Building and Improvements Initial Cost Adjustments and Costs to Land and Building Subsequent to Acquisition Gross carrying amount at December 31, 2022

10 unchanged sentences

HI 14 — 28,537 160,978 14,085 28,537 175,063 203,600 38,133

ID 2 — 4,047 25,235 20 4,047 25,255 29,302 162

IL 60 16,627 61,580 344,755 38,447 61,033 383,749 444,782 62,487

16 unchanged sentences

OH 24 11,374 19,973 77,180 10,995 19,973 88,175 108,148 18,509

OK 1 — 721 6,125 — 721 6,125 6,846 65

OR 8 16,431 15,066 68,044 2,617 15,066 70,661 85,727 12,199

42 unchanged sentences

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 8. Financial Statements and Supplementary Data