What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-29 compared with 2023-02-28 · 275 added, 305 removed, 1215 unchanged (32% of the section changed)

37 unchanged sentences

Description of the Matter For the year ended December 31, 2023, the Company completed the acquisition of 771 self-storage properties (“stores”) for a total purchase price of $13.0 billion.

As further discussed in Note 2 of the consolidated financial statements, the transactions were accounted for as asset acquisitions, and the purchase price was allocated to the real estate assets acquired based on their relative fair values, which are estimated using unobservable inputs.

Auditing the accounting for the Company’s 2022 acquisitions of stores was subjective because in determining the fair value of acquired land and buildings, the Company had to rely on unobservable inputs due to the lack of available directly comparable market information.

In particular, the fair value estimates were sensitive to assumptions such as price of land per square foot, and current replacement cost estimates, including adjustments for the age, class, height, square footage, condition, location, and turnkey factor associated with the acquired assets.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over management’s accounting for acquired stores, including controls over the review of assumptions underlying the purchase price allocation and accuracy of the underlying data used.

For example, we tested controls over the determination of the fair value of the land and building assets, including the controls over the review of the valuation models and the underlying assumptions used to develop such estimates.

For the 2022 store acquisitions described above, our procedures included, but were not limited to, evaluating the Company’s valuation methodologies and evaluating the significant assumptions used to determine the fair value of the assets acquired.

For certain of these asset acquisitions, we tested the completeness and accuracy of the underlying data by, among other things, recalculating the current replacement cost of buildings and comparing the adjustments for the age, class, height, square footage, condition, location, and turnkey factor with the acquired assets to industry publications.

Additionally, we also compared significant assumptions, including prices per square foot to third-party sources such as recent land sales.

For certain of these asset acquisitions, we involved our valuation specialists to assist in the assessment of the methodology utilized by the Company, in addition to performing corroborative analyses to assess whether the conclusions in the valuation were supported by observable market data.

For example, our valuation specialists used independently identified data sources to evaluate management’s selected comparable land sales and replacement cost assumptions.

As further discussed in Notes 2 and 5 of the consolidated financial statements, the transactions were accounted for as asset acquisitions, and the purchase price was allocated based on a relative fair value of assets acquired and liabilities assumed, which consisted principally of land and buildings.

Auditing the accounting for the Company’s 2023 acquisitions of stores was subjective because the Company, with the assistance of its external valuation specialist if applicable, had to exercise a high level of management judgment in determining the estimated fair value of acquired land and buildings.

Determining the fair value of acquired land was difficult due to the lack of available directly comparable land market information.

The estimated fair value of the acquired buildings was based upon the estimated replacement cost, which were calculated by estimating the cost of building similar stores in comparable markets and adjusting those costs for the age, quality, and building characteristics associated with the acquired stores.

Determining the fair value of the acquired buildings was challenging due to the judgment utilized by management in determining the significant assumptions utilized in, or the adjustments applied to, the valuation of each building.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over management’s accounting for acquired stores, including controls over the review of significant assumptions underlying the purchase price allocation and accuracy of the underlying data used.

For the 2023 store acquisitions described above, our procedures included, but were not limited to, reading the purchase and sale agreements and other closing documents, evaluating whether the Company had appropriately determined the transaction was an asset acquisition or business combination and performing sensitivity analyses.

For certain of these store acquisitions, we also evaluated the methods and significant assumptions used by the Company to determine the fair value of the land and buildings and tested the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

Additionally, for certain of these asset acquisitions, we involved our valuation specialists to assist in the assessment of the methodology utilized by the Company, in addition to performing corroborative analyses to assess whether the conclusions in the valuation were supported by observable market data.

For example, our valuation specialists used independently identified data sources to evaluate management’s selected comparable land sales and building replacement cost assumptions.

/s/ Ernst & Young LLP

30 unchanged sentences

Additional paid-in capital 14,750,388 3,345,332

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

Accumulated other comprehensive income 17,435 48,798

Accumulated deficit ( 379,015 ) ( 135,872 )

17 unchanged sentences

Tenant reinsurance 58,874 33,560 29,488

Transaction related costs 1,548 — —

Transaction costs — 1,548 —

Life Storage Merger transition costs 66,732 — —

General and administrative 146,408 129,251 102,194

4 unchanged sentences

Interest expense ( 419,035 ) ( 219,171 ) ( 166,183 )

Non-cash interest expense related to amortization of discount on equity component of exchangeable senior notes — — ( 3,675 )

Non-cash interest expense related to amortization of discount on Life Storage unsecured senior notes ( 18,786 ) — —

Interest income 84,857 69,422 49,703

38 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 )

10 unchanged sentences

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 combinations — 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 combinations 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

14 unchanged sentences

Issuance of common stock in connection with share based compensation — — — 149,995 2 26,636 — — 26,638

Taxes paid upon net settlement of share based compensation — — — ( 8,295 ) — ( 7,640 ) — — ( 7,640 )

Restricted stock grants cancelled — — — ( 10,084 ) — — — — —

Redemption of Operating Partnership units for stock — ( 225 ) — 2,803 — 225 — — —

Redemption of Operating Partnership units for cash — ( 89 ) — — — ( 19 ) — — ( 108 )

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

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

Redemption of Preferred A Units in the Operating Partnership for stock and cash ( 16,339 ) — — 851,698 8 11,015 — — ( 5,316 )

Redemption of Preferred D Units in the Operating Partnership for stock ( 22,265 ) — — 154,307 2 22,263 — — —

Redemption of Preferred D Units in the Operating Partnership for cash ( 377 ) — — — — — — — ( 377 )

Life Storage Merger issuance of common stock and Operating Partnership units — 249,470 — 76,217,359 762 11,352,576 — — 11,602,808

Noncontrolling interest in consolidated joint ventures — — 7,959 — — — — — 7,959

Net income (loss) 9,011 38,369 ( 125 ) — — — — 803,198 850,453

Other comprehensive loss — ( 1,389 ) — — — — ( 31,363 ) — ( 32,752 )

Distributions to Operating Partnership units held by noncontrolling interests ( 9,172 ) ( 50,477 ) — — — — — — ( 59,649 )

13 unchanged sentences

Amortization of deferred financing costs 18,949 8,773 10,587

Non-cash interest expense related to amortization of discount on equity component of exchangeable senior notes — — 3,675

Non-cash lease expense 1,903 1,869 1,173

Compensation expense related to stock-based awards 21,386 17,303 16,281

Non-cash interest expense related to amortization of discount on Life Storage unsecured senior notes 18,786 — —

Compensation expense related to share-based awards 26,638 21,386 17,303

Accrual of interest income added to principal of debt securities and notes receivable ( 37,907 ) ( 38,412 ) ( 34,550 )

8 unchanged sentences

Cash flows from investing activities:

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

Acquisition of real estate assets and improvements ( 320,711 ) ( 1,291,491 ) ( 1,233,298 )

Life Storage Merger, net of cash acquired ( 1,182,411 ) — —

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

4 unchanged sentences

Issuance and purchase of notes receivable ( 330,499 ) ( 529,245 ) ( 317,482 )

Investment in debt securities — — ( 300,000 )

Proceeds from sale of notes receivable 167,495 210,048 172,002

4 unchanged sentences

Proceeds from the sale of common stock, net of offering costs — — 273,189

Proceeds from notes payable and revolving lines of credit 5,188,011 4,666,632 3,281,000

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

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

Proceeds from unsecured term loans and senior notes and revolving lines of credit 8,663,003 5,584,111 5,706,981

Principal payments on unsecured term loans and senior notes and revolving lines of credit ( 7,088,984 ) ( 4,207,700 ) ( 5,500,290 )

Deferred financing costs ( 39,418 ) ( 9,321 ) ( 10,698 )

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

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

1 unchanged sentence

Repurchase of common stock — ( 63,008 ) —

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

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

Redemption of Preferred OP units for cash ( 5,377 ) ( 4,500 ) —

Redemption of Operating Partnership units for cash ( 108 ) ( 4,617 ) ( 788 )

Contributions from noncontrolling interests 74 — —

Distributions to minority investors ( 70 ) — —

Dividends paid on common stock ( 1,046,341 ) ( 805,311 ) ( 600,994 )

19 unchanged sentences

Common stock and paid-in capital 16,336 — 6,373

Noncontrolling interests in Operating Partnership Note Receivable Payoff 100,000 — —

Redemption of Preferred Operating Partnership units for common stock

10 unchanged sentences

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

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

Net liabilities assumed — — ( 20,028 )

Investment in unconsolidated real estate ventures — 1,085 5,383

Finance lease liability — ( 6,823 ) ( 26,998 )

Life Storage Merger real estate assets

Real estate assets, net $ 13,575,501 $ — $ —

Value of common stock issued ( 11,353,338 ) — —

Unsecured senior notes ( 2,106,866 ) — —

Value of OP units issued ( 249,470 ) — —

Net liabilities assumed ( 191,077 ) — —

Investment in unconsolidated real estate ventures 325,250 — —

Accrued construction costs and capital expenditures

1 unchanged sentence

Accounts payable and accrued expenses ( 10,508 ) ( 368 ) ( 1,323 )

Establishment of finance lease assets and lease liabilities

Real estate assets, net $ — $ — $ 67,992

Other liabilities — — ( 67,992 )

See accompanying notes

29 unchanged sentences

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.

Additionally, as of December 31, 2023 the Company determined in addition to its operating partnership that it had one consolidated joint venture VIE, consisting of one store.

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

86 unchanged sentences

(1) purchase price amounts allocated to leases on three stores that cannot be classified as ground or building leases;

these rights are amortized to expense over the life of the leases and (2) intangibles related to ground leases on eight stores where the leases were assumed by the Company at rates that were lower than the current market rates for similar leases.

these rights are amortized to expense over the life of the leases and (2) intangibles related to ground leases on nine stores where the leases were assumed by the Company at rates that were lower than the current market rates for similar leases.

The values associated with these assumed leases were recorded as intangibles, which will be amortized over the lease terms.

5 unchanged sentences

Investments in unconsolidated real estate entities and Cash distributions in unconsolidated real estate ventures represent the Company's noncontrolling interest in real estate joint ventures that own stores and the Company's interest in preferred stock of SmartStop Self Storage REIT, Inc.

("SmartStop").

("SmartStop") and Strategic Storage Trust VI, Inc.

("Strategic Storage"), an affiliate of SmartStop.

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 in the accompanying consolidated financial statements.

15 unchanged sentences

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

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 .

The Company capitalizes certain costs during the application development stage when developing software for internal use.

As of December 31, 2022 and 2021, unamortized software costs were $ 23,165 and $ 21,493 .

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.

Derivative Instruments and Hedging Activities

18 unchanged sentences

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Revenue and Expense Recognition

7 unchanged sentences

These services are provided in exchange for monthly management fees, which are based on a percentage of revenues collected from stores owned by third parties and unconsolidated joint ventures.

MSAs generally have original terms from three to five years , after which management services are provided on a month-to-month basis unless terminated.

MSAs generally have original terms from three to five years , after which

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

management services are provided on a month-to-month basis unless terminated.

Management fees are due on the last day of each calendar month that management services are provided.

8 unchanged sentences

Tenant reinsurance premiums are recognized as revenue over the period of insurance coverage.

The Company records an unpaid claims liability at the end of each period based on existing unpaid claims and historical claims payment history.

The unpaid claims liability represents an estimate of the ultimate cost to settle all unpaid claims as of each period end, including both reported but unpaid claims and claims that may have been incurred but have not been reported.

The Company uses a third party claims administrator to adjust all tenant reinsurance claims received.

The administrator evaluates each claim to determine the ultimate claim loss and includes an estimate for claims that may have been incurred but not reported.

Annually, a third party actuary evaluates the adequacy of the unpaid claims liability.

Prior year claim reserves are adjusted as experience develops or new information becomes known.

The impact of such adjustments is included in the current period operations.

The unpaid claims liability is not discounted to its present value.

Each tenant chooses the amount of insurance coverage they want through the tenant reinsurance program.

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

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

As of December 31, 2023, the total number of tenant insurance policies was 1.0 million, which was an aggregate coverage of approximately $ 3.0 billion.

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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:

For the Year Ended December 31,

Tenant Reinsurance Claims:

2022 2021 2020

Unpaid claims liability at beginning of year $ 9,112 $ 8,294 $ 8,109

Claims and claim adjustment expense for claims incurred in the current year 20,533 16,901 14,534

Claims and claim adjustment expense (benefit) for claims incurred in the prior years 179 122 ( 1,351 )

Payments for current year claims ( 18,137 ) ( 11,913 ) ( 9,697 )

Payments for prior year claims ( 5,289 ) ( 4,292 ) ( 3,301 )

Unpaid claims liability at the end of the year $ 6,398 $ 9,112 $ 8,294

Advertising Costs

24 unchanged sentences

federal corporate income tax and state insurance premiums tax.

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities.

2 unchanged sentences

As of December 31, 2023 and 2022, the Company had no interest or penalties related to uncertain tax provisions.

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Stock-Based Compensation

14 unchanged sentences

Common OP Units 7,970,487 — —

Series A Units (Variable Only) — — 875,480

Series B Units 236,130 187,664 246,618

19 unchanged sentences

Series A Units — 875,480 875,480

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

Shares related to dilutive stock options 3,893 5,098 12,708

Average number of common shares outstanding - diluted 169,220,882 141,681,388 140,016,028

3 unchanged sentences

Recently Issued Accounting Standards

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

Measurement of Credit Losses on Financial Instruments." ASU 2016-13 changes how entities measure credit losses for most financial assets.

This standard requires an entity to estimate its lifetime "expected credit loss" and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset.

In November 2018, the FASB issued ASU 2018-19, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses," which clarified that receivables arising from operating leases are within the scope of the leasing standard (ASU 2016-02), and not within the scope of ASU 2016-13.

This new standard became effective for the Company on January 1, 2020.

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

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

8 unchanged sentences

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.

ASU 2022-06 had no impact on the Company’s consolidated financial statements 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 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

15 unchanged sentences

Amortization related to the tenant relationships and lease rights was $ 59,807 , $ 13,981 , and $ 4,778 for the years ended December 31, 2023, 2022 and 2021, respectively.

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

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

Accumulated amortization related to intangibles was 317,511 and 144,144 as of December 31, 2023 and 2022, respectively.

1 unchanged sentence

December 31, 2023 December 31, 2022

Goodwill $ 170,811 $ 170,811

Receivables, net 134,716 85,937

Prepaid expenses and deposits 85,153 50,318

Other intangible assets, net 66,332 —

Trade name 50,000 —

Fair value of interest rate swaps 26,183 54,839

Equipment and fixtures, net 48,697 42,808

Deferred line of credit financing costs, net 9,787 4,846

Prepaid expenses and deposits 50,318 39,384

Receivables, net 85,937 83,050

Goodwill 170,811 —

Restricted cash 6,021 4,867

Fair value of interest rate swaps 54,839 270

$ 597,700 $ 414,426

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

The Company capitalizes certain costs during the application development stage when developing software for internal use.

As of December 31, 2023 and 2022, unamortized software costs were $ 18,844 and $ 23,165 .

During the year ended December 31, 2023 and 2022, the Company recorded amortization expense of $ 5,377 and $ 5,147 , respectively, relating to capitalized software costs.

EXTRA SPACE STORAGE INC.

2 unchanged sentences

PROPERTY ACQUISITIONS AND DISPOSITIONS

The Life Storage Merger

On July 20, 2023, the Company closed its merger with Life Storage (the "Life Storage Merger" or "Merger"), which included 757 wholly-owned stores and one consolidated joint venture store.

Under the terms of the Life Storage Merger, Life Storage stockholders and holders of units of the Life Storage operating partnership received 0.895 of a share of common stock (or OP Unit, as applicable) of the Company for each issued and outstanding share (or operating partnership unit) of Life Storage they owned for total consideration of $ 11,602,808 , based on the Company's closing share price on July 19, 2023.

At closing, the Company retired $ 1,160,000 in balances on Life Storage's line of credit which included $ 375,000 that Life Storage used to pay off its private placement notes in connection with the closing of the Life Storage Merger.

The Company also paid off $ 32,000 in secured loans.

On July 25, 2023, the Company completed obligor exchange offers and consent solicitations (together the "Exchange Offers") related to Life Storage's various senior notes.

Upon the closing of the Exchange Offers, a total of $ 2,351,100 of Life Storage's senior notes were exchanged for senior notes of the same tenor of Extra Space Storage L.P.

The remaining Life Storage senior note balances which were not exchanged total $ 48,900 and no longer have any financial reporting requirements or covenants.

Consideration and Purchase Price Allocation

The Merger was accounted for as an asset acquisition in accordance with ASC Topic 805 which requires that the cost of an acquisition be allocated on a relative fair value basis to the assets acquired and the liabilities assumed.

The following table summarizes the fair value of total consideration transferred in the Life Storage Merger:

Consideration Type July 20, 2023

Common stock $ 11,353,338

OP units 249,470

Cash for payoff of Life Storage credit facility and debt 1,192,000

Transaction Costs 55,318

Total consideration $ 12,850,127

The following table summarizes the estimated fair values assigned to the assets acquired and liabilities assumed:

July 20, 2023

Real estate assets $ 14,587,735

Equity investment in joint venture partnerships 325,250

Cash and other assets 107,423

Intangible assets - other 82,000

Trade name 50,000

Unsecured senior notes ( 2,106,866 )

Accounts payable, accrued expenses and other liabilities ( 191,077 )

Noncontrolling interests ( 4,338 )

Fair value of net assets acquired $ 12,850,127

Fair Value Measurement

The estimated fair values of assets acquired and liabilities assumed were primarily based on information that was available as of the closing date of the Life Storage Merger.

The methodology used to estimate the fair values to apply purchase accounting and the ongoing financial statement impact, if any, are summarized below:

• Real estate assets – Real estate assets acquired were recorded at fair value using standard valuation methodologies, including the cost and market approaches.

The remaining useful lives for real estate assets, excluding land, were reset to 39 years.

Tenant relationships for storage leases were recorded at fair value based on estimated costs the Company

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

avoided to replace them.

Tenant relationships are amortized to expense over 18 months, which is based on the Company’s historical experience with turnover in its stores.

• Equity investment in joint venture partnerships - Equity investment in joint venture partnerships were recorded at fair value based on a direct capitalization of net operating income.

• Intangible assets - other – Customer relationships relating to tenant reinsurance contracts were recorded at fair value based on the income approach which estimates the potential revenue loss the Company avoided to replace them.

These assets are amortized to expense over 36 months, which is based on the Company’s historical experience with average length of stay for tenants.

• Trade name – Trade names were recorded at fair value based on royalty payments avoided had the trade name been owned by a third party.

This is determined using market royalty rates and a discounted cash flow analysis under the relief-from-royalty method.

This method incorporates various assumptions, including projected revenue growth rates, the terminal growth rate, the royalty rate to be applied, and the discount rate utilized.

The trade name is an indefinite lived asset and as such is not amortized.

• Unsecured senior notes – Unsecured senior notes were recorded at fair value using readily available market data.

The below-market value of debt is recorded as a debt discount and reported as a reduction of the unsecured senior notes balance on the condensed consolidated balance sheets.

The discount is amortized using effective interest method as an increase to interest expense over the remaining terms of the unsecured senior notes.

• Other assets and liabilities – the carrying values of cash, accounts receivable, prepaids and other assets, accounts payable, accrued expenses and other liabilities represented the fair values.

December 31, 2023 Three Months Ended December 31, 2023 For the Year Ended December 31, 2023

Intangible Assets:

Gross Carrying Amount Accumulated Amortization Amortization Expense Amortization Expense

Trade name $ 50,000 $ — $ — $ —

Intangible assets - other 82,000 15,695 9,417 15,695

132,000 15,695 9,417 15,695

Estimated Aggregate Amortization Expense

Intangible Assets:

2024 2025 2026

Trade name $ — $ — $ —

Intangible assets - other 23,375 19,833 11,569

$ 23,375 $ 19,833 $ 11,569

Store Acquisition

5 unchanged sentences

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

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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.

16 unchanged sentences

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

12 unchanged sentences

Pro Forma Information

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

13 unchanged sentences

INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES

("SmartStop") and the Company's noncontrolling interest in real estate joint ventures that own stores.

The Company accounts for its investment in SmartStop preferred stock, which does not have a readily determinable fair value, at the transaction price less impairment, if any.

Investments in unconsolidated real estate entities and Cash distributions in unconsolidated real estate ventures represent the Company's interest in preferred stock of SmartStop and Strategic Storage, an affiliate of SmartStop, and the Company's noncontrolling interest in real estate joint ventures that own stores.

The Company accounts for its investments in SmartStop and Strategic Storage preferred stock, which do not have a readily determinable fair value, at the transaction price less impairment, if any.

The Company accounts for its investments in joint ventures using the equity method of accounting.

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.

3 unchanged sentences

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.

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

1 unchanged sentence

PRISA Self Storage LLC 85 4 % 4 % $ 9,435 $ 8,596

HF1 Sovran HHF Storage Holdings LLC 37 20 % 20 % 105,339 —

Storage Portfolio II JV LLC 36 10 % 30 % ( 8,314 ) ( 7,200 )

2 unchanged sentences

PR II EXR JV LLC 23 25 % 25 % 108,160 110,172

HF2 Sovran HHF Storage Holdings II LLC 22 15 % 15 % 41,613 —

HF5 Life Storage-HIERS Storage LLC 17 20 % 20 % 26,051 —

HF6 191 V Life Storage Holdings LLC 17 20 % 20 % 12,702 —

ESS-CA TIVS JV LP 16 55 % 55 %- 65 %

29,128 30,778

VRS Self Storage, LLC 16 45 % 54 % ( 16,386 ) ( 15,399 )

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

HF10 Life Storage HHF Wasatch Holdings LLC 16 20 % 20 % 20,019 —

Other unconsolidated real estate ventures 131 10 %- 50 %

3 unchanged sentences

n/a n/a n/a 200,000 200,000

Strategic Storage Trust VI, Inc.

Preferred Stock (3)

n/a n/a n/a 150,000 —

Net Investments in and Cash distributions in unconsolidated real estate entities 472 $ 1,000,548 $ 515,060

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

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

The dividend rate for the preferred shares is 6.25 % per annum, subject to increase after five years .

(2) In October 2019, the Company invested $ 200,000 in shares of convertible preferred stock of SmartStop with a dividend rate of 6.25 % per annum, subject to increase after five years .

The preferred shares are generally not redeemable for five years , except in the case of a change of control or initial listing of SmartStop.

Dividend income from this investment is included on the equity in earnings and dividend income from unconsolidated real estate entities line on the Company's consolidated statement of operations.

Dividend income from this investment is included on the equity in earnings and dividend income from unconsolidated real estate entities line on the Company's condensed consolidated statements of operations.

(3) In May 2023, the Company invested $ 150,000 in shares of convertible preferred stock of Strategic Storage with a dividend rate of 8.35 % per annum, subject to increase after five years .

The preferred shares are generally not redeemable for three years , except in the case of a change of control or initial listing of Strategic Storage.

In June 2021, the Company sold its interest in two unconsolidated joint ventures to its joint venture partner.

1 unchanged sentence

The Company also purchased its joint venture partners' interests in two unconsolidated joint ventures.

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

3 unchanged sentences

As of December 31, 2023, there were no previously unconsolidated entities that were required to be consolidated as a result of this review.

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.

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

The Company entered into 17 new unconsolidated real estate joint ventures (including 16 from the Life Storage Merger), which added a total of 146 stores and a total investment of $ 305,921 to the Company's portfolio during the year ended December 31, 2023.

Additionally, the Company's existing joint ventures added nine stores for a total investment of $ 27,583 during the year ended December 31, 2023.

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

2 unchanged sentences

2023 2022 2021

Dividend income from SmartStop preferred stock $ 12,509 $ 12,500 $ 9,968

Equity in earnings of PRISA Self Storage LLC $ 3,320 $ 3,272 $ 2,719

Equity in earnings of HF1 Sovran HHF Storage Holdings LLC (1)

Equity in earnings of Storage Portfolio II JV LLC 3,094 3,398 1,802

2 unchanged sentences

Equity in earnings of PR II EXR JV LLC 2,227 1,229 ( 8 )

Equity in earnings of HF2 Sovran HHF Storage Holdings II LLC (1)

Equity in earnings of HF5 Life Storage-HIERS Storage LLC (1)

Equity in earnings of HF6 191 V Life Storage Holdings LLC (1)

Equity in earnings of ESS-CA TIVS JV LP 3,873 2,753 1,274

Equity in earnings of VRS Self Storage, LLC 5,253 5,401 4,352

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

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

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 Storage Portfolio V JV LLC ( 33 ) — —

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

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

Equity in earnings of GFN JV, LLC — 546 788

Equity in earnings of HF10 Life Storage HHF Wasatch Holdings LLC (1)

Equity in earnings of other minority owned stores (1)

7,740 7,265 6,774

Dividend income from SmartStop preferred stock 12,500 12,509 12,500

Dividend income from Strategic Storage preferred stock 8,401 — —

$ 54,835 $ 41,428 $ 32,358

(1) The earnings of the 16 joint ventures from the Life Storage Merger are from the close of acquisition on July 20, 2023.

Equity in earnings of certain of our joint ventures includes the amortization of the Company’s excess purchase price of $ 60,253 of these equity investments over its original basis.

6 unchanged sentences

("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

Information about these balances is as follows:

December 31, 2023 December 31, 2022

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

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

Notes Receivable - Bridge Loans 594,727 491,879

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

Dividends and Interest Receivable 10,042 66,170

3 unchanged sentences

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.

The JCAP Series D preferred stock is mandatorily

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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 Company accounts for the JCAP preferred stock as a held to maturity debt security at amortized cost and evaluates whether the fair value is below the amortized cost basis at each reporting period.

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

7 unchanged sentences

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

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

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

As of December 31, 2023, 70 % of the notes held are mortgage receivables.

The Company intends to sell a portion of the mortgage receivables.

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 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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").

Interest on the Notes Due 2032 is paid semi-annually in arrears on March 15 and September 15 of each year.

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.

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.

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, 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.

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

During the year ended December 31, 2023, the Company sold a total principal amount of $ 167,495 of its mortgage bridge loans receivable to third parties for a total of $ 167,495 in cash, closed on $ 283,039 in initial loan draws, and recorded $ 27,366 of draws from interest holdbacks.

The bridge loans typically have a loan to value ratio between 70 % and 80 %.

None of the debt securities or notes receivable are in past-due or nonaccrual status and the allowance for potential credit losses is immaterial.

The components of term debt are summarized as follows:

3 unchanged sentences

$ 401,319 $ 521,820 2.67 % - 4.62 %

July 2023 - February 2030

April 2025 - February 2030

Secured variable-rate (1)

877,786 772,604 6.35 % - 6.88 %

August 2023 - September 2030

November 2024 - September 2030

Unsecured fixed-rate 7,921,633 4,240,376 2.08 % - 5.90 %

February 2024 - March 2032

January 2025 - March 2032

Unsecured variable-rate 1,463,367 884,624 6.30 % - 6.63 %

January 2025 - January 2028

June 2024 - July 2029

Total 10,664,105 6,419,424

Discount on unsecured senior notes (3)

( 274,350 ) —

Unamortized debt issuance costs ( 55,007 ) ( 32,962 )

1 unchanged sentence

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

(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:

Debt Capacity Maturity Date

Revolving Credit Facility $ 1,250,000 June 2025

Tranche 1 Term Loan Facility (1)

400,000 January 2027

Tranche 2 Term Loan Facility (1)

425,000 October 2026

Tranche 3 Term Loan Facility (1)

245,000 January 2025

Tranche 4 Term Loan Facility (1)

255,000 June 2026

Tranche 5 Term Loan Facility (1)

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.

(2) Basis rates include Term SOFR and Daily Simple SOFR

(3) Unsecured senior notes from the Life Storage Merger were recorded at fair value, resulting in a discount to be amortized over the term of the debt.

The following table summarizes the scheduled maturities of term debt, excluding available extensions, at December 31, 2023:

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

2025 1,123,120

2026 1,409,581

2027 1,316,907

2028 1,029,000

2029 1,542,759

2030 1,344,488

2031 1,650,000

Total $ 10,664,105

On June 22, 2023, the Company entered into the Third Amended and Restated Credit Agreement (the "Credit Agreement") which increased the commitment of the revolving credit facility to $ 1,940,000 , and later to $ 2,000,000 with an Increasing Lender Supplement entered into in August 2023, and extended its maturity to June 2027.

In connection with entering into the Credit Agreement, the Company paid off Tranche 5 and added the Tranche 8 term loan, maturing June 2024, which allowed the Company to draw up to $ 1,000,000 in connection with the Life Storage Merger.

Tranche 8 was fully drawn on July 20, 2023, in connection with the closing of the Life Storage Merger, paid down to $ 400,000 in December 2023, and fully paid off in January 2024.

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, 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.

As of December 31, 2023, amounts outstanding under the revolving credit facility bore interest at floating rates, at the Company’s option, equal to either (i) Adjusted Term or Daily Simple SOFR 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 %.

3 unchanged sentences

As of December 31, 2023, 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

The following table summarizes the scheduled maturities of term debt, excluding available extensions, at December 31, 2022:

2023 $ 386,684

Thereafter 3,215,997

All of the Company’s lines of credit are guaranteed by the Company.

5 unchanged sentences

Credit Line 2 (3)(4)

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

642,000 2,000,000 6.3 % 6/22/2027 ASOFR plus 0.775 %

$ 682,000 $ 2,140,000

(1) Term SOFR or Daily Simple SOFR

(1) Daily Simple SOFR

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

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

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

(3) Unsecured.

Two six -month extensions available.

On June 22, 2023, the maturity date was extended to June 22, 2027 with two six -month extensions available.

On August 11, 2023, the capacity was increased by $ 60 million.

(4) Basis Rate as of December 31, 2023.

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

Rate is subject to change based on the Company's investment grade rating.

As of December 31, 2023, the Company’s percentage of fixed-rate debt to total debt was 73.4 %.

1 unchanged sentence

The combined weighted average interest rate was 4.6 %.

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

7 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

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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.

1 unchanged sentence

During 2024, the Company estimates that $ 19,010 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:

The following table summarizes the terms of the Company’s 15 active and four forward-starting derivative financial instruments, which have a total combined current notional amount of $ 1,448,566 as of December 31, 2023:

Hedge Product Range of Notional Amounts Strike Effective Dates Maturity Dates

12 unchanged sentences

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

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,

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,

Type 2023 2022 2023 2022 2021

Swap Agreements $ 8,730 $ 88,372 Interest expense $ 41,541 $ ( 7,877 ) $ ( 35,764 )

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Credit-Risk-Related Contingent Features

3 unchanged sentences

As of December 31, 2023, 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 $ 5,082 .

EXTRA SPACE STORAGE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

EXCHANGEABLE SENIOR NOTES

In September 2015, the Operating Partnership issued $ 575,000 of its 3.125 % Exchangeable Senior Notes due 2035.

Costs incurred to issue the 2015 Notes were approximately $ 11,992 , consisting primarily of a 2.0 % underwriting fee.

These costs were amortized as an adjustment to interest expense over five years , which represented the estimated term based on the first available redemption date, and were included in exchangeable senior notes, net, in the consolidated balance sheets.

The 2015 Notes were general unsecured senior obligations of the Operating Partnership and were fully guaranteed by the Company.

Interest was payable on April 1 and October 1 of each year.

The Notes bore interest at 3.125 % per annum and contained an exchange settlement feature, which provided that the 2015 Notes could, under certain circumstances, be exchangeable for cash (for the principal amount of the 2015 Notes) and, with respect to any excess exchange value, for cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the Company’s option.

The Operating Partnership could redeem the 2015 Notes at any time to preserve the Company’s status as a REIT.

In addition, on or after October 5, 2020, the Operating Partnership could redeem the 2015 Notes for cash, in whole or in part, at 100 % of the principal amount plus accrued and unpaid interest, upon at least 30 days but not more than 60 days prior written notice to the holders of the 2015 Notes.

The holders of the 2015 Notes had the right to require the Operating Partnership to repurchase the 2015 Notes for cash, in whole or in part, on October 1 of the years 2020, 2025 and 2030, (unless the Operating Partnership had called the 2015 Notes for redemption), and upon the occurrence of certain designated events, in each case for a repurchase price equal to 100 % of the principal amount of the 2015 Notes plus accrued and unpaid interest.

Additionally, the 2015 Notes could have been exchanged during any calendar quarter, if the last reported sale price of the common stock of the Company was greater than or equal to 130 % of the exchange price for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter.

The Company redeemed all outstanding 2015 Notes on November 2, 2020.

GAAP requires entities with convertible debt instruments that may be settled entirely or partially in cash upon conversion to separately account for the liability and equity components of the instrument in a manner that reflects the issuer’s economic interest cost.

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 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.

The effective interest rate on the liability components of the 2015 Notes was 4.0 %, which approximates the market rate of interest of similar debt without exchange features (i.e.

nonconvertible debt) at the time of issuance.

The amount of interest cost recognized relating to the contractual interest rate and the amortization of the discount on the liability component for the Notes were as follows for the periods indicated:

For the Year Ended December 31,

2022 2021 2020

Contractual interest $ — $ — $ 13,476

Amortization of discount — — 3,675

Total interest expense recognized $ — $ — $ 17,151

Repurchase of 2015 Notes

On October 1, 2020, the holders of $ 71,513 principal amount of the 2015 Notes exchanged their Notes.

The Company paid cash of $ 71,513 for the principal amount and issued 124,819 shares of common stock with a value of $ 13,495 for the exchange value in excess of the principal amount.

On November 2, 2020, the holders of an additional $ 503,432 principal amount of the 2015 Notes exchanged their Notes.

The Company paid cash of $ 503,487 for the principal amount and issued 1,198,962 shares of common stock with a value of $ 138,900 for the exchange value in excess of the principal amount.

Also on November 2, 2020, the Company redeemed the remaining $ 55 of outstanding principal amount of the 2015 Notes for cash.

The Company allocated the value of the consideration paid to repurchase the 2013 Notes and the 2015 Notes (1) to the extinguishment of the liability component and (2) to the reacquisition of the equity component.

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

Information about the repurchases is as follows:

For the Year Ended December 31,

2022 2021 2020

Principal amount repurchased $ — $ — $ 575,000

Amount allocated to:

Extinguishment of liability component $ — $ — $ 575,000

Reacquisition of equity component — — —

Total consideration paid for repurchase $ — $ — $ 575,000

Exchangeable senior notes repurchased $ — $ — $ 575,000

Extinguishment of liability component — — ( 575,000 )

Discount on exchangeable senior notes — — —

Related debt issuance costs — — —

Gain/(loss) on repurchase $ — $ — $ —

As of December 31, 2023, the Company had not posted any collateral related to these agreements.

If the Company had breached any of these provisions as of December 31, 2023, it could have been required to cash settle its obligations under these agreements at their termination value of $ 5,082 .

STOCKHOLDERS’ EQUITY

4 unchanged sentences

During the year ended December 31, 2023, the Company sold no shares of common stock.

On July 20, 2023, the Company issued 76,217,359 shares of its common stock for a total value of $ 11,353,338 .

This was based on an exchange ratio of 0.895 per share conversion of Life Storage common stock at the Company's closing share price on July 19, 2023 of $ 148.96 as part of the Life Storage Merger.

On January 7, 2022, the Company issued 186,766 shares of its common stock to acquire two stores for $ 40,965 .

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 .

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 November 13, 2023, the Company's board of directors authorized a share repurchase program allowing for the repurchase of shares with an aggregate value up to $ 500,000 .

During the year ended December 31, 2023, no shares were repurchased.

As of December 31, 2023, the Company had remaining authorization to repurchase shares with an aggregate value up to $ 500,000 .

32 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.

On January 25, 2023, the redemption obligation for all outstanding Series A Units was satisfied in $ 5,000 cash and 851,698 shares of its common stock, which was net of the noncash settlement of the $ 100,000 loan.

result of this redemption, no Series A Units were outstanding as of December 31, 2023.

EXTRA SPACE STORAGE INC.

8 unchanged sentences

The Series B Units became redeemable at the option of the holder on the first anniversary of the date of issuance, which redemption obligations may be satisfied at the Company’s option in cash or shares of its common stock.

On August 31, 2021, 113,360 Series B Units were redeemed for 15,265 shares of common stock.

Series C Convertible Redeemable Preferred Units

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 .

The note receivable, which was collateralized by the Series C Units, bears interest at 5.0 % and matures on December 15, 2024.

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.

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.

See footnote 13 for further discussion of noncontrolling interests.

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

The Series C Units ranked

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.

As of December 31, 2023 and December 31, 2022, there were no outstanding Series C Units.

Series D Redeemable Preferred Units

6 unchanged sentences

In addition, certain of the Series D Units are exchangeable for common OP Units until the tenth anniversary of the date of issuance, with the number of common OP Units to be issued equal to $ 25.00 per Series D Unit, divided by the value of a share of common stock as of the exchange date.

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

In November 2023, 15,093 Series D units were redeemed for cash of $ 377 .

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

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.

On June 1, 2022, the Operating Partnership

issued a total of 240,000 Series D Units valued at $ 6,000 in connection with the acquisition of Bargold.

EXTRA SPACE STORAGE INC.

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Other Noncontrolling Interests

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.

Other noncontrolling interests represent the ownership interest of partners in nine consolidated joint ventures as of December 31, 2023.

These joint ventures have ownership in 12 stores;

two are operating and the remaining are under development.

The voting interests of the partners are 31 % or less.

5 unchanged sentences

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.

During the year ended December 31, 2023, the Company recorded no new finance lease right-of-use assets and finance lease liabilities.

The Company is lessee under several types of lease agreements.

7 unchanged sentences

• Leases of 18 regional offices.

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

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

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

61 unchanged sentences

Options expire 10 years from the date of grant.

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

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

The stock grants are subject to a vesting period over which the restrictions are released and the stock certificates are given to the grantee.

37 unchanged sentences

7,690 2.15 85.99 7,690 85.99

The Company recorded compensation expense relating to outstanding options of $ 0 , $ 0 and $ 27 in general and administrative expense for the years ended December 31, 2022, 2021 and 2020, respectively.

The Company recorded no compensation expense relating to outstanding options in general and administrative expense for the years ended December 31, 2023, 2022 and 2021.

Net proceeds received for the years ended December 31, 2023, 2022 and 2021, related to option exercises was $ 0 , $ 0 and $ 4,572 , respectively.

72 unchanged sentences

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.

41 unchanged sentences

State deferred taxes ( 4,564 ) ( 3,607 )

Captive insurance subsidiary ( 10,760 ) —

Total deferred tax liabilities ( 58,764 ) ( 42,816 )

9 unchanged sentences

The state income tax net operating losses expire between 2024 and 2043.

The valuation allowance is associated with the state income tax net operating losses.

The valuation allowance associated with the state income tax net operating losses was released in 2023.

The tax years 2019 through 2022 remain open related to the state returns, and 2020 through 2022 for the federal returns.

32 unchanged sentences

Property management fees and other income 101,986 83,904 66,264

Transaction related costs ( 1,548 ) — —

Transaction costs — ( 1,548 ) —

Life Storage Merger transition costs ( 66,732 ) — —

General and administrative expense ( 146,408 ) ( 129,251 ) ( 102,194 )

10 unchanged sentences

As of December 31, 2023, the Company was under agreement to acquire 8 stores at a total purchase price of $ 73,811 .

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 .

Eight stores are scheduled to close in 2024 and none are scheduled to close in 2025.

Additionally, the Company is under agreement to acquire two stores in 2024 with joint venture partners, for a total investment of $ 2,764 .

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

2 unchanged sentences

In such cases, there may be an exposure to loss in excess of any amounts accrued.

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

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

EXTRA SPACE STORAGE INC.

1 unchanged sentence

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

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.

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 vigorously defending any legal proceedings against it.

As of December 31, 2023, the Company was involved in various legal proceedings and was subject to various claims and complaints arising in the ordinary course of business.

26 unchanged sentences

MD 44 74,081 157,195 450,952 36,025 156,605 487,567 644,172 111,043

ME 5 — 2,352 86,339 195 2,352 86,534 88,886 926

MI 8 4,301 10,900 63,388 6,630 10,900 70,018 80,918 13,061

19 unchanged sentences

WA 14 4,874 51,011 147,943 13,780 51,013 161,720 212,733 19,542

WI 1 — 1,076 16,054 70 1,076 16,123 17,199 173

DC 1 7,540 14,394 18,172 634 14,394 18,806 33,200 3,904

33 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