What changed in this filing

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Item 1A. Risk Factors

2025-02-28 compared with 2024-02-29 · 31 added, 42 removed, 224 unchanged (25% of the section changed)

13 unchanged sentences

In addition, lower than expected rental rates upon re-letting could adversely affect our revenues and impede our growth.

Uninsured losses or losses in excess of our insurance coverage could adversely affect our financial condition and our cash flow.

Uninsured losses, losses in excess of our insurance coverage, or increasing insurance deductibles could adversely affect our financial condition and our cash flow.

We maintain comprehensive property and casualty insurance policies, including liability, fire, flood, earthquake, wind (as we deem necessary or as required by our lenders), umbrella coverage and rental loss insurance with respect to our stores.

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In addition, if any such loss is insured, we may be required to pay significant amounts on any claim for recovery of such a loss prior to our insurer being obligated to reimburse us for the loss, or the amount of the loss may exceed our coverage for the loss.

Also, insurance deductibles may continue increasing.

As a result, our operating results may be adversely affected.

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From time to time we have to make monetary settlements or defend actions or arbitration (including class actions) to resolve tenant, employment-related or other claims and disputes.

Settling any such liabilities could negatively impact our operating results and cash available for distribution to stockholders, and could also adversely affect our ability to sell, lease, operate or encumber affected properties.

Settling any such liabilities could negatively impact our

operating results and cash available for distribution to stockholders and could also adversely affect our ability to sell, lease, operate or encumber affected properties.

Our tenant reinsurance business is subject to significant governmental regulation, which may adversely affect our results.

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If one or more of our stores is not in compliance with the ADA or other legislation, then we would be required to incur additional costs to bring the facility into compliance.

We face continuing risks and costs in connection with integrating the Life Storage business following our business combination with Life Storage, Inc.

(“Life Storage”) in July 2023, and we may not be able to successfully realize the synergies and other benefits of the acquisition or do so within the anticipated time frame.

The acquisition of Life Storage involves the combination of two companies that previously operated as independent public companies and their respective operating partnerships.

Although we believe the combined company has benefited from the elimination of duplicative costs associated with supporting a public company platform, we have devoted, and will continue to devote, significant management attention and resources to integrating the operations of Extra Space and Life Storage.

Although much of Life Storage’s business is integrated, we may encounter costs and difficulties in the continuing integration process include the following:

• the inability to fully combine the operations of Life Storage into our business, including the integration of employees, customer records and maintaining cybersecurity protections, in a manner that permits us to achieve the cost savings anticipated to result from the transaction;

• the inability to dispose of former Life Storage assets or operations that we may desire to dispose of;

• the difficulties of operating separate brands and the costs of potentially rebranding Life Storage stores over an extended period of time;

• the complexities associated with managing the combined businesses out of different locations and integrating personnel from the two companies;

• the failure to retain key employees of either of the two companies;

• potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the Life Storage business;

• performance shortfalls as a result of the diversion of management’s attention caused by completing the Life Storage transaction and integrating the companies’ operations.

For all these reasons, it is possible that the continuing integration process could result in the distraction of our management and ongoing business or inconsistencies in our operations, services, standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with customers, vendors and employees or to achieve the anticipated benefits of the Life Storage transaction, or could otherwise adversely affect our business and financial results.

There is significant competition among self-storage operators and from other storage alternatives.

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The costs associated with the investigation, remediation and potential notification of such breaches to counter-parties and data subjects could be material.

We and certain of our service providers are, from time to time, subject to cyberattacks and security incidents.

From time to time, we, and certain of our service providers, are subject to cyberattacks and security incidents.

While to date, we do not believe that we have experienced any significant system failure, accident or security breach, this risk has generally increased as the number, intensity and sophistication of such breaches and attempted breaches from around the world have increased.

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Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence.

operations, damage our reputation, divert significant management attention and resources to remedy any damages that result, subject us to liability and claims or regulatory investigations and enforcement actions, which could result in, among other things, fines and penalties, and have a material adverse effect on our business, financial condition and results of operations.

Any failure to maintain the proper functioning, confidentiality, security and availability of our or our third-party service providers' information technology systems or our Confidential Information could interrupt our operations, damage our reputation, divert significant management attention and resources to remedy any damages that result, subject us to liability and claims or regulatory investigations and enforcement actions, which could result in, among other things, fines and penalties, and have a material adverse effect on our business, financial condition and results of operations.

Further, our insurance coverage may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems.

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In the United States, both federal and various state governments have adopted, or are considering, laws, guidelines or rules for the collection, distribution, use, storage and security of personal information, and we are or may become subject to such obligations with respect to information collected from or about our employees, contractors or customers.

provide certain disclosures to California residents regarding the business’s collection, use, and disclosure of their personal information;

For example, the California Consumer Privacy Act, as amended by the California Privacy Rights Act, requires certain businesses that process personal information of California residents to, among other things, provide certain disclosures to California residents regarding the business’s collection, use, and disclosure of their personal information;

receive and respond to requests from California residents to access, delete, and correct their personal information, or to opt-out of certain disclosures of their personal information;

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If our property taxes we pay increase, our cash flow would be adversely impacted, and our ability to pay any expected dividends to our stockholders and unitholders could be adversely affected.

Public health emergencies, and measures intended to prevent the spread of a public health emergency, could adversely affect our results of operations.

We face risks related to public health emergencies, such as epidemics and pandemics that could materially and adversely impact our results of operations in the future.

The impact of a public health emergency, and measures to prevent the spread of a virus or the underlying causes of a health crisis, could lower demand for storage facilities due to, among other things, stay-at home orders and other restrictions which may lead to lower rental rates, reduced late fee collection and impaired ability to hold auctions resulting in higher accounts receivable and bad debt.

In addition, a public health emergency could cause general economic and market disruptions which could impair our ability to expand our business, raise capital and adversely affect the value of our securities.

Although the self-storage industry has historically been resilient to ordinary market downturns, the impact of pandemics, epidemics or public health emergencies on the U.S.

and world economies generally, and on our future results in particular, could be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted.

State and federal regulations relating to natural disasters, public health emergencies or consumer protection could adversely affect our results of operations.

The impact of natural disasters, public health emergencies and any government responses to such emergencies, or regulations passed in an attempt to protect consumers could lower demand for storage facilities, lead to lower rental rates, inability to raise rents, reduced late fee collection and impaired ability to hold auctions resulting in higher accounts receivable and bad debt.

Although the self-storage industry has historically been resilient to ordinary market downturns, the impact of natural disasters, public health emergencies and related regulations including those that limit our ability to raise rents could materially and adversely affect our results of operations and will largely depend on future developments, which are highly uncertain and cannot be predicted.

Climate change may adversely affect our results of operations.

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In addition, changes in federal, state and local legislation and regulation on climate change could result in increased operating costs (for example, increased utility costs) and/or increased capital expenditures to improve the energy efficiency of our existing stores and could also require us to spend more on our new stores without a corresponding increase in revenue.

Further, the impact of climate change may increase the cost of, or make

unavailable, property insurance or other hazard insurance on terms we find acceptable or necessary to adequately protect our properties.

Further, the impact of climate change may increase the cost of, or make unavailable, property insurance or other hazard insurance on terms we find acceptable or necessary to adequately protect our properties.

Risks Related to Our Organization and Structure

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In addition, we may in certain circumstances be liable for the actions of our third-party partners or co-venturers, which could harm our financial condition.

We may record losses as a result of the bankruptcy, insolvency, or other credit failure of the borrowers under our bridge lending program or other companies in which we have invested.

In that case, our revenues and results of operations may be materially and adversely impacted.

As of December 31, 2024, the total outstanding balance under investments in debt securities and notes receivable was $1.6 billion, including $1.2 billion outstanding under our bridge loan program.

Further, as of December 31, 2024, the total outstanding balance of our investments in unconsolidated real estate entities, net of cash distributions, was $1.3 billion, of which $350 million was invested in the preferred stock of entities affiliated with SmartStop.

Although we conduct due diligence and aim to carefully evaluate the risks associated with these debt and other investments, we could incur losses from our lending and investing decisions, which includes subjective and complex judgments and forecasts of economic conditions and how these economic predictions might impair the ability of our borrowers and unconsolidated real estate entities to operate their business and/or make all required payments.

For example, volatility of the capital and credit markets, increased interest rates, lower demand for storage and general economic conditions may adversely affect the solvency, creditworthiness or operations of our borrowers and entities in which we have invested.

If our forecasts prove incorrect, or if any of our borrowers and unconsolidated real estate entities fail to perform as expected, we may incur losses from these investments which could have a material adverse effect on our operating revenue and results of operations.

Certain provisions of Maryland law and our organizational documents, including the stock ownership limit imposed by our charter, may inhibit market activity in our stock and could prevent or delay a change in control transaction.

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We may incur additional debt in connection with future acquisitions and development.

We may borrow under our Credit Lines or borrow new funds to finance these future stores.

Additionally, we do not anticipate that our internally generated cash flow will be adequate to repay our existing indebtedness upon maturity and, therefore, we expect to repay our indebtedness through refinancings and equity

and/or debt offerings.

We may borrow under our revolving lines of credit and commercial paper program or borrow new funds to finance these future stores.

Further, we may need to borrow funds in order to make cash distributions to maintain our qualification as a REIT or to make our expected distributions.

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federal corporate income tax to the extent that we distribute less than 100% of our REIT taxable income each year, determined without regard to the deduction for dividends paid and including net capital gains.

If we are required to utilize our Credit Lines for purposes other than acquisition activity, this will reduce the amount available for acquisitions and could slow our growth.

If we are required to utilize our revolving lines of credit and commercial paper for purposes other than acquisition activity, this will reduce the amount available for acquisitions and could slow our growth.

Therefore, our level of debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following:

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A breach of any of the covenants or other provisions in our debt agreements could result in an event of default, which if not cured or waived, could result in such debt becoming due and payable, either automatically or after an election to accelerate by the required percentage of the holders of the indebtedness or by an agent for the holders of the indebtedness.

This, in turn, could

cause our other debt, including the notes and our revolving credit facility, to become due and payable as a result of cross-default or cross-acceleration provisions contained in the agreements governing the other debt and permit certain of our lenders to foreclose on our assets, if any, that secure this debt.

This, in turn, could cause our other debt, including the notes and our revolving credit facility, to become due and payable as a result of cross-default or cross-acceleration provisions contained in the agreements governing the other debt and permit certain of our lenders to foreclose on our assets, if any, that secure this debt.

In the event that some or all of our debt is accelerated and becomes immediately due and payable, we may not have the funds to repay or the ability to refinance our debt.

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Moreover, these credit ratings are not recommendations to buy, sell or hold the notes or any other securities.

If any of the credit rating agencies that have rated the outstanding notes or other debt securities of the operating partnership downgrades or lowers its credit rating, or if any credit rating agency indicates that it has placed any such rating on a so-called “watch list” for a possible downgrading or lowering or otherwise indicates that its outlook for that rating is negative, it could have a material adverse effect on our costs and availability of capital, which could in turn have a material adverse effect on our financial condition, results of operations, cash flows and our ability to satisfy our debt service obligations (including payments on the outstanding notes) and to make dividends and other distributions to our security holders and could also have the material adverse effect on the market value of the outstanding notes.

If any credit rating agency that has rated the outstanding notes or other debt securities of the Operating Partnership downgrades or lowers its credit rating, or if any credit rating agency indicates that it has

placed any such rating on a so-called “watch list” for a possible downgrading or lowering or otherwise indicates that its outlook for that rating is negative, it could have a material adverse effect on our costs and availability of capital, which could in turn have a material adverse effect on our financial condition, results of operations, cash flows and our ability to satisfy our debt service obligations (including payments on the outstanding notes) and to make dividends and other distributions to our security holders and could also have the material adverse effect on the market value of the outstanding notes.

Risks Related to Qualification and Operation as a REIT

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federal income tax purposes under the Internal Revenue Code.

If we fail to qualify as a REIT or lose our qualification as a REIT at any time, we will face serious tax consequences that would substantially reduce the funds available for distribution for each of the years involved because:

• we would not be allowed a deduction for distributions to stockholders in computing our taxable income and would be subject to U.S.

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• unless we are entitled to relief under applicable statutory provisions, we could not elect to be taxed as a REIT for four taxable years following a year during which we were disqualified.

In addition, if we fail to qualify as a REIT, we will not be required to make distributions to stockholders, and all distributions to stockholders will be subject to tax as regular corporate dividends to the extent of our current and accumulated

earnings and profits.

This means that our U.S.

7 unchanged sentences

The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify as a REIT.

In order to qualify as a REIT, we must satisfy a number of requirements, including requirements regarding the composition of our assets, the sources of our gross income and the owners of our stock.

In order to qualify as a REIT, we must satisfy a number of requirements, including requirements regarding the composition of our assets, the sources of our gross income and the owners

of our stock.

Our ability to satisfy the asset tests depends upon our analysis of the fair market value of our assets, some of which are not susceptible to precise determination, and for which we will not obtain independent appraisals.

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manages stores for our joint ventures and stores owned by third parties.

We, jointly with certain corporate subsidiaries, including Extra Space Management, Inc., elected to treat each such subsidiary as a taxable REIT subsidiary of our Company for U.S.

We, jointly with certain corporate subsidiaries, including Extra Space Management, Inc., elected to treat each such subsidiary as a taxable REIT subsidiary (a “TRS”) of our Company for U.S.

federal income tax purposes.

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federal income tax and state insurance premiums tax and pays certain insurance royalties to us.

In addition, we will be subject to a 100% penalty tax on certain amounts if the economic arrangements among our tenants, our TRS and us are not comparable to similar arrangements among unrelated parties.

In addition, we will be subject to a 100% penalty tax on certain amounts if the economic arrangements among our tenants, our TRSs and us are not comparable to similar arrangements among unrelated parties.

Also, if we sell property as a dealer (i.e., to customers in the ordinary course of our trade or business), we will be subject to a 100% penalty tax on any gain arising from such sales.

While we do not intend to sell stores as a dealer, the IRS could take a contrary position.

To the extent that we are, or any of our TRSs is, required to pay U.S.

To the extent that we are, or any of our TRSs are, required to pay U.S.

federal, state or local taxes, we will have less cash available for distribution to stockholders.

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 1A. Risk Factors