10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission File Number: 001-32269

EXTRA SPACE STORAGE INC.

(Exact name of registrant as specified in its charter) 

Maryland	20-1076777
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2795 East Cottonwood Parkway, Suite 300

Salt Lake City, Utah 84121

(Address of principal executive offices)

Registrant’s telephone number, including area code: (801) 365-4600

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934

Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	EXR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

1

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  x

The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, as of July 31, 2019, was 128,516,944.

2

EXTRA SPACE STORAGE INC.

TABLE OF CONTENTS

STATEMENT ON FORWARD-LOOKING INFORMATION	4
PART I. FINANCIAL INFORMATION	5
ITEM 1. FINANCIAL STATEMENTS	5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)	12
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	30
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38
ITEM 4. CONTROLS AND PROCEDURES	39
PART II. OTHER INFORMATION	40
ITEM 1. LEGAL PROCEEDINGS	40
ITEM 1A. RISK FACTORS	40
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	40
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	40
ITEM 4. MINE SAFETY DISCLOSURES	40
ITEM 5. OTHER INFORMATION	40
ITEM 6. EXHIBITS	41
SIGNATURES	42

3

STATEMENT ON FORWARD-LOOKING INFORMATION

Certain information presented in this report contains “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions and other information that is not historical information. In some cases, forward-looking statements can be identified by terminology such as “believes,” “expects,” “estimates,” “may,” “will,” “should,” “anticipates” or “intends” or the negative of such terms or other comparable terminology, or by discussions of strategy. We may also make additional forward-looking statements from time to time. All such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary statements.

All forward-looking statements, including without limitation, management’s examination of historical operating trends and estimates of future earnings, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them, but there can be no assurance that management’s expectations, beliefs and projections will result or be achieved. All forward-looking statements apply only as of the date made. We undertake no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this report. Any forward-looking statements should be considered in light of the risks referenced in “Part II. Item 1A. Risk Factors” below and in “Part I. Item 1A. Risk Factors” included in our most recent Annual Report on Form 10-K. Such factors include, but are not limited to:

• adverse changes in general economic conditions, the real estate industry and the markets in which we operate;

• failure to close pending acquisitions and developments on expected terms, or at all;

• the effect of competition from new and existing stores or other storage alternatives, which could cause rents and occupancy rates to decline;

• potential liability for uninsured losses and environmental contamination;

• the impact of the regulatory environment as well as national, state, and local laws and regulations including, without limitation, those governing real estate investment trusts (“REITs”), tenant reinsurance and other aspects of our business, which could adversely affect our results;

• disruptions in credit and financial markets and resulting difficulties in raising capital or obtaining credit at reasonable rates or at all, which could impede our ability to grow;

• increased interest rates;

• reductions in asset valuations and related impairment charges;

• our lack of sole decision-making authority with respect to our joint venture investments;

• the effect of recent or future changes to U.S. tax laws;

• the failure to maintain our REIT status for U.S. federal income tax purposes; and

• economic uncertainty due to the impact of natural disasters, war or terrorism, which could adversely affect our business plan.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. You should carefully consider these risks before you make an investment decision with respect to our securities.

We disclaim any duty or obligation to update or revise any forward-looking statements set forth in this report to reflect new information, future events or otherwise.

4

PART I.     FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Extra Space Storage Inc.

Condensed Consolidated Balance Sheets

(amounts in thousands, except share data)

	June 30, 2019			December 31, 2018
	(Unaudited)
Assets:
Real estate assets, net	$	7,667,033		$	7,491,831
Real estate assets - operating lease right-of-use assets	221,479			—
Investments in unconsolidated real estate ventures	174,480			125,326
Cash and cash equivalents	47,667			57,496
Restricted cash	7,977			15,194
Other assets, net	272,083			158,131
Total assets	$	8,390,719		$	7,847,978
Liabilities, Noncontrolling Interests and Equity:
Notes payable, net	$	4,090,278		$	4,137,213
Exchangeable senior notes, net	565,920			562,374
Notes payable to trusts	—			30,928
Revolving lines of credit	382,000			81,000
Operating lease liabilities	230,816			—
Cash distributions in unconsolidated real estate ventures	45,081			45,197
Accounts payable and accrued expenses	115,056			101,461
Other liabilities	132,757			104,383
Total liabilities	5,561,908			5,062,556
Commitments and contingencies
Noncontrolling Interests and Equity:
Extra Space Storage Inc. stockholders' equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued or outstanding	—			—
Common stock, $0.01 par value, 500,000,000 shares authorized, 128,513,095 and 127,103,750 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively	1,285			1,271
Additional paid-in capital	2,756,799			2,640,705
Accumulated other comprehensive income (loss)	(27,476		)	34,650
Accumulated deficit	(288,399		)	(262,902		)
Total Extra Space Storage Inc. stockholders' equity	2,442,209			2,413,724
Noncontrolling interest represented by Preferred Operating Partnership units, net	176,108			153,096
Noncontrolling interests in Operating Partnership, net and other noncontrolling interests	210,494			218,602
Total noncontrolling interests and equity	2,828,811			2,785,422
Total liabilities, noncontrolling interests and equity	$	8,390,719		$	7,847,978

See accompanying notes to unaudited condensed consolidated financial statements.

5

Extra Space Storage Inc.

Condensed Consolidated Statements of Operations

(amounts in thousands, except share data)

(unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Revenues:
Property rental	$	279,584		$	258,128		$	550,587		$	506,014
Tenant reinsurance	31,701			28,521			61,498			55,555
Management fees and other income	12,317			10,164			23,063			20,729
Total revenues	323,602			296,813			635,148			582,298
Expenses:
Property operations	80,870			73,083			159,635			145,836
Tenant reinsurance	6,982			5,471			13,949			11,078
General and administrative	23,351			21,651			46,029			43,115
Depreciation and amortization	54,406			51,892			109,065			103,641
Total expenses	165,609			152,097			328,678			303,670
Gain on real estate transactions	1,205			—			1,205			—
Income from operations	159,198			144,716			307,675			278,628
Interest expense	(47,448		)	(43,347		)	(94,808		)	(84,313		)
Non-cash interest expense related to amortization of discount on equity component of exchangeable senior notes	(1,185		)	(1,176		)	(2,347		)	(2,385		)
Interest income	1,718			1,188			3,106			2,626
Income before equity in earnings of unconsolidated real estate ventures and income tax expense	112,283			101,381			213,626			194,556
Equity in earnings of unconsolidated real estate ventures	3,121			3,429			5,751			7,026
Income tax expense	(2,715		)	(2,097		)	(4,528		)	(3,439		)
Net income	112,689			102,713			214,849			198,143
Net income allocated to Preferred Operating Partnership noncontrolling interests	(3,128		)	(3,492		)	(6,291		)	(6,882		)
Net income allocated to Operating Partnership and other noncontrolling interests	(4,733		)	(4,068		)	(8,960		)	(7,852		)
Net income attributable to common stockholders	$	104,828		$	95,153		$	199,598		$	183,409
Earnings per common share
Basic	$	0.82		$	0.75		$	1.56		$	1.45
Diluted	$	0.81		$	0.75		$	1.55		$	1.45
Weighted average number of shares
Basic	127,585,436			125,874,130			127,349,299			125,823,581
Diluted	135,654,761			132,772,772			135,166,456			132,992,734
Cash dividends paid per common share	$	0.90		$	0.86		$	1.76		$	1.64

See accompanying notes to unaudited condensed consolidated financial statements.

6

Extra Space Storage Inc.

Condensed Consolidated Statements of Comprehensive Income

(amounts in thousands)

(unaudited)

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019			2018		2019			2018
Net income	$	112,689		$	102,713	$	214,849		$	198,143
Other comprehensive income (loss):
Change in fair value of interest rate swaps	(41,302		)	8,033		(65,295		)	31,096
Total comprehensive income	71,387			110,746		149,554			229,239
Less: comprehensive income attributable to noncontrolling interests	5,842			7,934		12,082			16,190
Comprehensive income attributable to common stockholders	$	65,545		$	102,812	$	137,472		$	213,049

See accompanying notes to unaudited condensed consolidated financial statements.

7

Extra Space Storage Inc.

Condensed Consolidated Statement of Noncontrolling Interests and Equity

(amounts in thousands, except share data)

(unaudited)

	Noncontrolling Interests									Extra Space Storage Inc. Stockholders' Equity
		Preferred Operating Partnership			Operating Partnership			Other		Shares		Par Value		Additional Paid-in Capital			Accumulated Other Comprehensive Income		Accumulated Deficit			Total Noncontrolling Interests and Equity
Balances at December 31, 2017		$	159,636		$	213,301		$	119	126,007,091		$	1,260	$	2,569,485		$	33,290	$	(253,284	)	$	2,723,807
Issuance of common stock upon the exercise of options		—			—			—		31,525		—		799			—		—			799
Restricted stock grants issued		—			—			—		31,136		—		—			—		—			—
Restricted stock grants cancelled		—			—			—		(770	)	—		—			—		—			—
Compensation expense related to stock-based awards		—			—			—		—		—		2,726			—		—			2,726
Repayment of receivable for preferred operating units pledged as collateral on loan		495			—			—		—		—		—			—		—			495
Redemption of Operating Partnership units for cash		—			(1,126		)	—		—		—		(1,432		)	—		—			(2,558		)
Noncontrolling interest in consolidated joint venture		—			—			120		—		—		—			—		—			120
Repurchase of equity portion of 2013 exchangeable senior notes		—			—			—		—		—		(21,000		)	—		—			(21,000		)
Net income		3,390			3,784			—		—		—		—			—		88,256			95,430
Other comprehensive income		144			938			—		—		—		—			21,981		—			23,063
Distributions to Operating Partnership units held by noncontrolling interests		(3,488		)	(4,421		)	—		—		—		—			—		—			(7,909		)
Dividends paid on common stock at $0.78 per share		—			—			—		—		—		—			—		(98,327		)	(98,327		)
Balances at March 31, 2018		$	160,177		$	212,476		$	239	126,068,982		$	1,260	$	2,550,578		$	55,271	$	(263,355	)	$	2,716,646
Issuance of common stock upon the exercise of options		—			—			—		23,050		1		370			—		—			371
Restricted stock grants issued		—			—			—		50,334		—		—			—		—			—
Restricted stock grants cancelled		—			—			—		(6,311	)	—		—			—		—			—
Compensation expense related to stock-based awards		—			—			—		—		—		3,116			—		—			3,116
Issuance of Operating Partnership units in conjunction with acquisitions		—			1,877			—		—		—		—			—		—			1,877
Redemption of Operating Partnership units for stock		—			(383		)	—		10,000		—		383			—		—			—
Net income		3,492			4,068			—		—		—		—			—		95,153			102,713
Other comprehensive income		50			324			—		—		—		—			7,659		—			8,033
Distributions to Operating Partnership units held by noncontrolling interests		(3,615		)	(4,853		)	—		—		—		—			—		—			(8,468		)
Dividends paid on common stock at $0.86 per share		—			—			—		—		—		—			—		(108,486		)	(108,486		)
Balances at June 30, 2018		$	160,104		$	213,509		$	239	126,146,055		$	1,261	$	2,554,447		$	62,930	$	(276,688	)	$	2,715,802

8

Extra Space Storage Inc.

Condensed Consolidated Statement of Noncontrolling Interests and Equity

(amounts in thousands, except share data)

(unaudited)

	Noncontrolling Interests									Extra Space Storage Inc. Stockholders' Equity
	Preferred Operating Partnership			Operating Partnership			Other			Shares		Par Value		Additional Paid-in Capital		Accumulated Other Comprehensive Income			Accumulated Deficit			Total Noncontrolling Interests and Equity
Balances at December 31, 2018	$	153,096		$	218,362		$	240		127,103,750		$	1,271	$	2,640,705	$	34,650		$	(262,902	)	$	2,785,422
Issuance of common stock upon the exercise of options	—			—			—			169,021		3		1,754		—			—			1,757
Restricted stock grants issued	—			—			—			35,022		—		—		—			—			—
Restricted stock grants cancelled	—			—			—			(1,244	)	—		—		—			—			—
Compensation expense related to stock-based awards	—			—			—			—		—		2,954		—			—			2,954
Redemption of Operating Partnership units for stock	—			(3,310		)	—			85,501		—		3,310		—			—			—
Issuance of Preferred D Units in the Operating Partnership in conjunction with acquisitions	23,447			—			—			—		—		—		—			—			23,447
Net income (loss)	3,164			4,235			(9		)	—		—		—		—			94,770			102,160
Other comprehensive loss	(147		)	(1,003		)	—			—		—		—		(22,843		)	—			(23,993		)
Distributions to Operating Partnership units held by noncontrolling interests	(3,296		)	(5,116		)	—			—		—		—		—			—			(8,412		)
Dividends paid on common stock at $0.86 per share	—			—			—			—		—		—		—			(109,523		)	(109,523		)
Balances at March 31, 2019	$	176,264		$	213,168		$	231		127,392,050		$	1,274	$	2,648,723	$	11,807		$	(277,655	)	$	2,773,812
Issuance of common stock upon the exercise of options	—			—			—			17,042		—		468		—			—			468
Restricted stock grants issued	—			—			—			53,789		2		—		—			—			2
Restricted stock grants cancelled	—			—			—			(4,786	)	—		—		—			—			—
Issuance of common stock, net of offering costs	—			—			—			930,000		9		98,787		—			—			98,796
Compensation expense related to stock-based awards	—			—			—			—		—		3,998		—			—			3,998
Redemption of Operating Partnership units for stock	—			(4,823		)	—			125,000		—		4,823		—			—			—
Issuance of Preferred D Units in the Operating Partnership in conjunction with acquisitions	4,575			—			—			—		—		—		—			—			4,575
Noncontrolling interest in consolidated joint venture	—			—			50			—		—		—		—			—			50
Conversion of Preferred C Units in the Operating Partnership for Common Operating Partnership Units	(4,374		)	4,374			—			—		—		—		—			—			—
Net income (loss)	3,129			4,754			(22		)	—		—		—		—			104,828			112,689
Other comprehensive loss	(254		)	(1,765		)	—			—		—		—		(39,283		)				(41,302		)
Distributions to Operating Partnership units held by noncontrolling interests	(3,232		)	(5,473		)	—			—		—		—		—			—			(8,705		)
Dividends paid on common stock at $0.90 per share	—			—			—			—		—		—		—			(115,572		)	(115,572		)
Balances at June 30, 2019	$	176,108		$	210,235		$	259		128,513,095		$	1,285	$	2,756,799	$	(27,476	)	$	(288,399	)	$	2,828,811

See accompanying notes to unaudited condensed consolidated financial statements.

9

Extra Space Storage Inc.

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited) 

	For the Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income	$	214,849		$	198,143
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	109,065			103,641
Amortization of deferred financing costs	6,006			6,064
Non-cash interest expense related to amortization of discount on equity component of exchangeable senior notes	2,347			2,385
Compensation expense related to stock-based awards	6,952			5,842
Gain on real estate transactions	(1,205		)	—
Distributions from unconsolidated real estate ventures in excess of earnings	3,334			3,615
Changes in operating assets and liabilities:
Other assets, net	1,890			7,269
Accounts payable and accrued expenses	21,632			7,888
Other liabilities	(1,463		)	4,895
Net cash provided by operating activities	363,407			339,742
Cash flows from investing activities:
Acquisition of real estate assets	(248,808		)	(238,153		)
Development and redevelopment of real estate assets	(20,891		)	(27,893		)
Proceeds from sale of real estate assets, investments in real estate ventures and other assets	11,254			753
Investment in unconsolidated real estate ventures	(31,344		)	(34,752		)
Return of investment in unconsolidated real estate ventures	3,982			47,944
Issuance of notes receivable	(152,599		)	—
Principal payments received from notes receivable	—			25,226
Purchase of equipment and fixtures	(2,023		)	(2,220		)
Net cash used in investing activities	(440,429		)	(229,095		)
Cash flows from financing activities:
Proceeds from the sale of common stock, net of offering costs	98,796			—
Proceeds from notes payable and revolving lines of credit	757,000			645,386
Principal payments on notes payable and revolving lines of credit	(524,370		)	(487,016		)
Principal payments on notes payable to trusts	(30,928		)	—
Deferred financing costs	(587		)	(3,028		)
Repurchase of exchangeable senior notes	—			(58,469		)
Net proceeds from exercise of stock options	2,227			1,170
Redemption of Operating Partnership units held by noncontrolling interests	—			(2,558		)
Contributions from noncontrolling interests	50			120
Dividends paid on common stock	(225,095		)	(206,813		)
Distributions to noncontrolling interests	(17,117		)	(16,377		)
Net cash provided by (used in) financing activities	59,976			(127,585		)
Net decrease in cash, cash equivalents, and restricted cash	(17,046		)	(16,938		)
Cash, cash equivalents, and restricted cash, beginning of the period	72,690			86,044
Cash, cash equivalents, and restricted cash, end of the period	$	55,644		$	69,106

10

Extra Space Storage Inc.

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited) 

	For the Six Months Ended June 30,
	2019			2018
Supplemental schedule of cash flow information
Interest paid	$	88,455		$	78,602
Income taxes paid	4,095			1,836
Supplemental schedule of noncash investing and financing activities:
Redemption of Operating Partnership units held by noncontrolling interests for common stock
Noncontrolling interests in Operating Partnership	$	(8,133	)	$	(383	)
Common stock and paid-in capital	8,133			383
Establishment of operating lease right of use assets and lease liabilities
Real estate assets - operating lease right-of-use assets	$	225,017		$	—
Operating lease liabilities	(234,374		)	—
Accounts payable and accrued expenses	9,357			—
Acquisitions of real estate assets
Real estate assets, net	$	19,937		$	88,842
Value of Operating Partnership units issued	—			(1,877		)
Notes payable assumed	(17,157		)	(87,500		)
Investment in unconsolidated real estate ventures	(2,780		)	535
Accrued construction costs and capital expenditures
Acquisition of real estate assets	$	1,368		$	1,184
Development and redevelopment of real estate assets	—			1,558
Accounts payable and accrued expenses	(1,368		)	(2,742		)
Contribution of Preferred Operating Partnership Units to unconsolidated real estate venture
Investments in unconsolidated real estate ventures	$	(28,022	)	$	—
Value of Preferred Operating Partnership units issued	28,022			—
Conversion of Preferred Operating Partnership Units to common Operating Partnership Units
Preferred Operating Partnership Units	$	4,374		$	—
Common Operating Partnership Units	(4,374		)	—

See accompanying notes to unaudited condensed consolidated financial statements.

11

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

1. ORGANIZATION

Extra Space Storage Inc. (the “Company”) is a fully integrated, self-administered and self-managed real estate investment trust (“REIT”), formed as a Maryland corporation on April 30, 2004, to own, operate, manage, acquire, develop and redevelop professionally managed self-storage properties ("stores") located throughout the United States. The Company was formed to continue the business of Extra Space Storage LLC and its subsidiaries, which had engaged in the self-storage business since 1977. The Company’s interest in its stores is held through its operating partnership, Extra Space Storage LP (the “Operating Partnership”), which was formed on May 5, 2004. The Company’s primary assets are general partner and limited partner interests in the Operating Partnership. This structure is commonly referred to as an umbrella partnership REIT, or UPREIT.

The Company invests in stores by acquiring wholly-owned stores or by acquiring an equity interest in real estate entities. At June 30, 2019, the Company had direct and indirect equity interests in 1,157 stores. In addition, the Company managed 595 stores for third parties, bringing the total number of stores which it owns and/or manages to 1,752. These stores are located in 40 states, Washington, D.C. and Puerto Rico. The Company also offers tenant reinsurance at its owned and managed stores that insures the value of goods in the storage units.

2. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of the Company are presented on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they may not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of results that may be expected for the year ending December 31, 2019. The condensed consolidated balance sheet as of December 31, 2018 has been derived from the Company’s audited financial statements as of that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission.

Recently Issued Accounting Standards

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, “Leases (Topic 842),” which modifies the accounting for leases, intending to increase transparency and comparability of organizations by requiring balance sheet presentation of leased assets and increased financial statement disclosure of leasing arrangements. ASU 2016-02 requires entities to recognize a liability for their lease obligations and a corresponding asset representing the right to use the underlying asset over the lease term. Lease obligations are measured at their present value and accounted for using the effective interest method. The accounting for the leased asset differs slightly depending on whether the agreement is deemed to be a financing or operating lease. For financing leases, the leased asset is depreciated on a straight-line basis and is recorded separately from the interest expense in the statements of operations, resulting in higher expense in the earlier part of the lease term. For operating leases, the depreciation and interest expense components are combined, recognized evenly over the term of the lease, and presented as a reduction to operating income. ASU 2016-02 requires that assets and liabilities be presented or disclosed separately, and requires additional disclosure of certain qualitative and quantitative information related to these lease agreements. ASU 2016-02 became effective for annual and interim periods beginning after December 15, 2018. The Company adopted the standard using the modified retrospective approach as of January 1, 2019. The Company elected the package of practical expedients upon adoption, which allows for the application of the standard solely to the transition period in 2019 but does not require application to prior fiscal comparative periods presented. The Company also elected the practical expedient provided in a subsequent amendment to the standard that removed the requirement to separate lease and nonlease components. The Company did not record a significant cumulative catch-up adjustment to retained earnings upon adoption of ASU 2016-02. The primary impact was related to the Company's 21 operating ground leases and two corporate facility leases under which it serves as lessee. The Company recognized lease liabilities of $104,863 and right-of-use assets related to operating leases totaling $95,506 as of the adoption date. Refer to footnote 13 for further discussion of the Company's leases.

12

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

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

In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract." ASU 2018-15 amends the accounting for implementation costs incurred in a hosting arrangement that is a service contract, and aligns them with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 also requires that entities amortize the capitalized implementation costs over the term of the hosting arrangement. ASU 2018-15 is effective for annual periods beginning after December 15, 2020, with early adoption permitted, including early adoption in any interim period. The Company adopted this standard on a prospective basis as of October 1, 2018. The adoption of this standard did not have a material impact on the Company's financial statements.

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. The Company is evaluating the impact this new standard will have on its consolidated financial statements.

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). This new standard will be effective for the Company on January 1, 2020. The Company is evaluating the impact this new standard will have on its consolidated financial statements.

3. FAIR VALUE DISCLOSURES

Derivative Financial Instruments

Currently, the Company uses interest rate swaps to manage its interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate forward curves.

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. In conjunction with the FASB’s fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of June 30, 2019, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety were classified in Level 2 of the fair value hierarchy.

13

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

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

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2019, aggregated by the level in the fair value hierarchy within which those measurements fall. 

	Fair Value Measurements at Reporting Date Using
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other assets - Cash flow hedge swap agreements	$	—	$	7,300	$	—
Other liabilities - Cash flow hedge swap agreements	$	—	$	30,894	$	—

The Company did not have any significant assets or liabilities that are re-measured on a recurring basis using significant unobservable inputs as of June 30, 2019 or December 31, 2018.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Long-lived assets held for use are evaluated for impairment when events or circumstances indicate there may be impairment. The Company reviews each store at least annually to determine if any such events or circumstances have occurred or exist. The Company focuses on stores where occupancy and/or rental income have decreased by a significant amount. For these stores, the Company determines whether the decrease is temporary or permanent, and whether the store will likely recover the lost occupancy and/or revenue in the short term. In addition, the Company reviews stores in the lease-up stage and compares actual operating results to original projections.

When the Company determines that an event that may indicate impairment has occurred, the Company compares the carrying value of the related long-lived assets to the undiscounted future net operating cash flows attributable to the assets. An impairment loss is recorded if the net carrying value of the assets exceeds the undiscounted future net operating cash flows attributable to the assets. The impairment loss recognized equals the excess of net carrying value over the related fair value of the assets.

When real estate assets are identified by management as held for sale, the Company discontinues depreciating the assets and estimates the fair value of the assets, net of selling costs. If the estimated fair value, net of selling costs, of the assets that have been identified as held for sale is less than the net carrying value of the assets, the Company would recognize an impairment loss on the assets held for sale. The operations of assets held for sale or sold during the period are presented as part of normal operations for all periods presented. As of June 30, 2019, the Company had one parcel of land classified as held for sale which is included in real estate assets, net. The estimated fair value less selling costs for this asset is greater than the carrying value of the asset, and therefore no loss has been recorded.

The Company assesses annually whether there are any indicators that the value of the Company’s investments in unconsolidated real estate ventures may be impaired annually and when events or circumstances indicate that there may be impairment. An investment is impaired if management’s estimate of the fair value of the investment is less than its carrying value. To the extent impairment has occurred, and is considered to be other than temporary, the loss is measured as the excess of the carrying amount of the investment over the fair value of the investment.

In connection with the Company’s acquisition of stores, the purchase price is allocated to the tangible and intangible assets and liabilities acquired based on their relative fair values, which are estimated using significant unobservable inputs. The value of the tangible assets, consisting of land and buildings, is determined as if vacant. Intangible assets, which represent the value of existing tenant relationships, are recorded at their fair values based on the avoided cost to replace the current leases. The Company measures the value of tenant relationships based on the rent lost due to the amount of time required to replace existing customers, which is based on the Company’s historical experience with turnover in its stores. Any debt assumed as part of an acquisition is recorded at fair value based on current interest rates compared to contractual rates. Acquisition-related transaction costs are capitalized as part of the purchase price.

14

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

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

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, restricted cash, receivables, other financial instruments included in other assets, accounts payable and accrued expenses, variable-rate notes payable, lines of credit and other liabilities reflected in the condensed consolidated balance sheets at June 30, 2019 and December 31, 2018 approximate fair value. Restricted cash is comprised of letters of credit and escrowed funds deposited with financial institutions located throughout the United States relating to earnest money deposits on potential acquisitions, real estate taxes, insurance and capital expenditures.

The fair values of the Company’s notes receivable from Preferred Operating Partnership unit holders and other fixed rate notes receivable, which are recorded in other assets, net were based on the discounted estimated future cash flows of the notes (categorized within Level 3 of the fair value hierarchy); the discount rate used approximated the current market rate for loans with similar maturities and credit quality. The fair values of the Company’s fixed-rate notes payable and notes payable to trusts were estimated using the discounted estimated future cash payments to be made on such debt (categorized within Level 3 of the fair value hierarchy); the discount rates used approximated current market rates for loans, or groups of loans, with similar maturities and credit quality. The fair value of the Company’s exchangeable senior notes was estimated using an average market price for similar securities obtained from a third party.

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

	June 30, 2019				December 31, 2018
	Fair Value		Carrying Value		Fair Value		Carrying Value
Notes receivable from Preferred and Common Operating Partnership unit holders	$	118,997	$	119,735	$	115,467	$	119,735
Fixed rate notes payable and notes payable to trusts	$	3,323,109	$	3,252,865	$	2,985,731	$	3,022,414
Exchangeable senior notes	$	697,188	$	575,000	$	620,149	$	575,000

4. EARNINGS PER COMMON SHARE

Basic earnings per common share is computed using the two-class method by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during the period. All outstanding unvested restricted stock awards contain rights to non-forfeitable dividends and participate in undistributed earnings with common stockholders; accordingly, they are considered participating securities that are included in the two-class method. Diluted earnings per common share measures the performance of the Company over the reporting period while giving effect to all potential common shares that were dilutive and outstanding during the period. The denominator includes the weighted average number of basic shares and the number of additional common shares that would have been outstanding if the potential common shares that were dilutive had been issued, and is calculated using either the two-class, treasury stock or as if-converted method, whichever is most dilutive. Potential common shares are securities (such as options, convertible debt, Series A Participating Redeemable Preferred Units (“Series A Units”), Series B Redeemable Preferred Units (“Series B Units”), Series C Convertible Redeemable Preferred Units (“Series C Units”), Series D Redeemable Preferred Units (“Series D Units” and, together with

the Series A Units, Series B Units and Series C Units, the “Preferred OP Units”) and common Operating Partnership units (“OP Units”)) that do not have a current right to participate in earnings of the Company but could do so in the future by virtue of their option, redemption or conversion right.

In computing the dilutive effect of convertible securities, net income is adjusted to add back any changes in earnings in the period associated with the convertible security. The numerator also is adjusted for the effects of any other non-discretionary changes in income or loss that would result from the assumed conversion of those potential common shares. In computing diluted earnings per common share, only potential common shares that are dilutive (i.e. those that reduce earnings per common share) are included. For the three and six months ended June 30, 2019, and for the three months ended June 30, 2018, there were no anti-dilutive options. For the six months ended June 30, 2018, options to purchase an aggregate of approximately 37,113 shares of common stock were excluded from the computation of earnings per share as their effect would have been anti-dilutive.

15

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

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

For the purposes of computing the diluted impact of the potential exchange of the Preferred Operating Partnership units for common shares upon redemption, where the Company has the option to redeem in cash or shares and where the Company has stated the intent and ability to settle the redemption in shares, the Company divided the total value of the Preferred Operating Partnership units by the average share price for the period presented. The average share price for the three months ended June 30, 2019 and 2018 was $105.06 and $93.10, respectively. The average share price for the six months ended June 30, 2019 and 2018 was $100.63 and $88.71, respectively.

The following table presents the number of Preferred Operating Partnership units, and the potential common shares, that were excluded from the computation of earnings per share as their effect would have been anti-dilutive.

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2019	2018	2019	2018
	Equivalent Shares (if converted)	Equivalent Shares (if converted)	Equivalent Shares (if converted)	Equivalent Shares (if converted)
Series B Units	398,840	450,077	416,398	472,350
Series C Units(1)	—	318,357	—	334,112
Series D Units	1,109,048	988,862	1,096,259	1,037,798
	1,507,888	1,757,296	1,512,657	1,844,260

(1)    The remainder of the Series C Units were converted to OP Units on April 25, 2019.

The Operating Partnership had no amounts issued and outstanding of its 2.375% Exchangeable Senior Notes due 2033 (the “2013 Notes”) as of June 30, 2019, as the remaining principal balance had been redeemed in July 2018. Prior to their redemption, the 2013 Notes could potentially have had a dilutive impact on the Company’s earnings per share calculations. The 2013 Notes were exchangeable by holders into shares of the Company’s common stock under certain circumstances per the terms of the indenture governing the 2013 Notes. The Company had irrevocably agreed to pay only cash for the accreted principal amount of the 2013 Notes relative to its exchange obligations, but retained the right to satisfy the exchange obligation in excess of the accreted principal amount in cash and/or common stock.

The Operating Partnership had $575,000 of its 3.125% Exchangeable Senior Notes due 2035 (the “2015 Notes”) issued and outstanding as of June 30, 2019. The 2015 Notes could potentially have a dilutive impact on the Company’s earnings per share calculations. The 2015 Notes are exchangeable by holders into shares of the Company’s common stock under certain circumstances per the terms of the indenture governing the 2015 Notes. The exchange price of the 2015 Notes was $92.28 per share as of June 30, 2019, and could change over time as described in the indenture. The Company has irrevocably agreed to pay only cash for the accreted principal amount of the 2015 Notes relative to its exchange obligations, but retained the right to satisfy the exchange obligation in excess of the accreted principal amount in cash and/or common stock.

Although the Company has retained the right to satisfy the exchange obligation in excess of the accreted principal amount of the 2013 Notes and 2015 Notes in cash and/or common stock, Accounting Standards Codification (“ASC”) 260, “Earnings per Share,” requires an assumption that shares would be used to pay the exchange obligation in excess of the accreted principal amount, and requires that those shares be included in the Company’s calculation of weighted average common shares outstanding for the diluted earnings per share computation. For the three and six months ended June 30, 2019 and 2018, zero and 95,690 shares, respectively, related to the 2013 Notes were included in the computation for diluted earnings per share. For the three and six months ended June 30, 2019 and 2018, 757,811 and zero shares, respectively, related to the 2015 Notes were included in the computation for diluted earnings per share. The exchange price exceeded the average per share price of the Company’s common stock during the three and six months ended June 30, 2019.

For the purposes of computing the diluted impact on earnings per share of the potential exchange of Series A Units for common shares upon redemption, where the Company has the option to redeem in cash or shares and where the Company has stated the positive intent and ability to settle at least $101,700 of the instrument in cash (or net settle a portion of the Series A Units against the related outstanding note receivable), only the amount of the instrument in excess of $101,700 is considered in the calculation of shares contingently issuable for the purposes of computing diluted earnings per share as allowed by ASC 260-10-45-46. Accordingly, the number of shares included in the computation for diluted earnings per share related to the Series A Units is equal to the number of Series A Units outstanding, with no additional shares included related to the fixed $101,700 amount.

16

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

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

The computation of earnings per common share is as follows for the periods presented:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Net income attributable to common stockholders	$	104,828		$	95,153		$	199,598		$	183,409
Earnings and dividends allocated to participating securities	(176		)	(193		)	(343		)	(371		)
Earnings for basic computations	104,652			94,960			199,255			183,038
Earnings and dividends allocated to participating securities	176			—			—			371
Income allocated to noncontrolling interest - Preferred Operating Partnership Units and Operating Partnership Units	6,010			5,271			11,439			10,211
Fixed component of income allocated to noncontrolling interest - Preferred Operating Partnership (Series A Units)	(572		)	(572		)	(1,144		)	(1,144		)
Net income for diluted computations	$	110,266		$	99,659		$	209,550		$	192,476
Weighted average common shares outstanding:
Average number of common shares outstanding - basic	127,585,436			125,874,130			127,349,299			125,823,581
OP Units	6,085,976			5,651,878			6,023,822			5,657,592
Series A Units	875,480			875,480			875,480			875,480
Unvested restricted stock awards included for treasury stock method	218,686			—			—			256,733
Shares related to exchangeable senior notes and dilutive stock options	889,183			371,284			917,855			379,348
Average number of common shares outstanding - diluted	135,654,761			132,772,772			135,166,456			132,992,734
Earnings per common share
Basic	$	0.82		$	0.75		$	1.56		$	1.45
Diluted	$	0.81		$	0.75		$	1.55		$	1.45

5. STORE ACQUISITIONS AND DISPOSITIONS

The following table shows the Company’s acquisitions of stores for the three and six months ended June 30, 2019 and 2018. The table excludes purchases of raw land and improvements made to existing assets. All acquisitions are considered asset acquisitions under ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business."

			Consideration Paid														Total
Quarter	Number of Stores		Total		Cash Paid		Loan Assumed		Investments in Real Estate Ventures			Net Liabilities/ (Assets) Assumed		Value of OP Units Issued		Number of OP Units Issued	Real estate assets
Q2 2019	1		$	8,424	$	8,424	$	—	$	—		$	—	$	—	—	$	8,424
Q1 2019	14	(1)	223,740		202,890		17,157		2,780			913		—		—	223,740
	15		$	232,164	$	211,314	$	17,157	$	2,780		$	913	$	—	—	$	232,164
Q2 2018	17	(2)	$	237,284	$	148,648	$	87,500	$	(1,024	)	$	283	$	1,877	21,768	$	237,284
Q1 2018	5	(2)	70,787		70,171		—		489			127		—		—	70,787
	22		$	308,071	$	218,819	$	87,500	$	(535	)	$	410	$	1,877	21,768	$	308,071

⁽¹⁾ Store acquisitions during the three months ended March 31, 2019 include the purchase of 12 stores previously held in joint ventures where the Company held a noncontrolling interest. The Company purchased its partners' remaining equity interests in the joint ventures, and the properties owned by the joint ventures became wholly owned by the Company. No gain or loss was recognized as a result of these acquisitions.

17

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

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

⁽²⁾ Store acquisitions during the three and six months ended June 30, 2018 include the acquisition of one and 14 stores, respectively, that had been owned by a joint venture in which the Company held a noncontrolling interest. No gain or loss was recognized as a result of these acquisitions.

6. INVESTMENTS IN UNCONSOLIDATED REAL ESTATE VENTURES

Investments in unconsolidated real estate ventures represent the Company's noncontrolling interests in properties. The Company accounts for these investments 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.

In these joint ventures, the Company and the joint venture partner generally receive a preferred return on their invested capital. To the extent that cash or profits in excess of these preferred returns are generated through operations or capital transactions, the Company would receive a higher percentage of the excess cash or profits than its equity interest.

The Company separately reports investments with net equity less than zero in cash distributions in unconsolidated real estate ventures in the condensed consolidated balance sheets. The net equity of certain joint ventures is less than zero because distributions have exceeded the Company's investment in and share of income from these joint ventures. This is generally the result of 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.

During May 2019, the Company entered into a new joint venture, ESS-NYFL JV LP with two joint venture partners. The Company contributed a total of $13,936 to this joint venture for the purchase of 11 operating stores and four annex sites and received a 16.0% interest in the joint venture.

During the six months ended June 30, 2019, the Company contributed a total of $54,779 to its joint ventures for the purchase of 16 operating stores and six stores acquired at the issuance of certificate of occupancy.

Net investments in unconsolidated real estate ventures and cash distributions in unconsolidated real estate ventures consist of the following:

	Number of Stores	Equity Ownership %	Excess Profit % (1)	June 30,			December 31,
				2019			2018
PRISA Self Storage LLC	85	4%	4%	$	9,213		$	9,334
Storage Portfolio II JV LLC	36	10%	30%	(4,774		)	(4,233		)
Storage Portfolio I LLC	24	34%	49%	(38,400		)	(38,129		)
VRS Self Storage, LLC	16	45%	54%	17,704			18,281
ESS-NYFL JV LP	15	16%	24%	14,231			—
Extra Space Northern Properties Six LLC	10	10%	35%	(1,903		)	(1,700		)
WICNN JV LLC	9	10%	25%	32,635			26,885
Alan Jathoo JV LLC	9	10%	10%	8,086			8,180
ESS Bristol Investments LLC	8	10%	28%	2,936			2,331
GFN JV, LLC	5	10%	25%	12,324			10,586
Extra Space West Two LLC (2)	—	5%	40%	—			3,818
Extra Space West One LLC (2)	—	5%	40%	—			(1,038		)
Other minority owned stores	22	10-50%	19-50%	77,347			45,814
Net Investments in and Cash distributions in unconsolidated real estate ventures	239			$	129,399		$	80,129

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

18

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

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

⁽²⁾ In January 2019, the Company purchased its joint venture partners' 95% interests in the Extra Space West One LLC and Extra Space West Two LLC joint ventures, which owned a total of 12 stores. The Company paid $172,505 of cash to acquire the equity interests, and subsequent to this acquisition, the Company owned 100% of the joint ventures and the related stores.

7. VARIABLE INTERESTS

The Operating Partnership had three wholly-owned unconsolidated subsidiaries (“Trust,” “Trust II” and “Trust III,” together, the “Trusts”) that had issued trust preferred securities to third parties and common securities to the Operating Partnership. The proceeds from the sale of the preferred and common securities were loaned in the form of notes to the Operating Partnership. The Trusts were variable interest entities ("VIEs") because the holders of the equity investment at risk (the trust preferred securities) did not have the power to direct the activities of the entities that most significantly affect the entities’ economic performance because of their lack of voting or similar rights. Because the Operating Partnership’s investment in the Trusts’ common securities was financed directly by the Trusts as a result of its loan of the proceeds to the Operating Partnership, that investment was not considered an equity investment at risk. The Operating Partnership’s investment in the Trusts was not a variable interest because equity interests are variable interests only to the extent that the investment is considered to be at risk, and therefore the Operating Partnership cannot be the primary beneficiary of the Trusts. Since the Company was not the primary beneficiary of the Trusts, they were not consolidated. A debt obligation was recorded in the form of notes for the proceeds as discussed above, which were owed to the Trusts. The Company had also included its investment in the Trusts’ common securities in other assets on the condensed consolidated balance sheets.

During the year ended December 31, 2018, the Company repaid a total principal amount of $88,662, representing all of the notes payable to Trust III, all of the notes payable to Trust II, and all but $30,928 of the notes payable to Trust. The Trusts used the proceeds from these repayments to redeem their preferred and common securities. In January 2019, the Company repaid the remaining balance of $30,928 of notes payable to Trust.

During the time they were outstanding, the Company did not provide financing or other support during the periods presented to the Trusts that it was not previously contractually obligated to provide. The Company’s maximum exposure to loss as a result of its involvement with the Trusts was equal to the total amount of the notes discussed above less the amounts of the Company’s investments in the Trusts’ common securities. The net amount was equal to the notes payable that the Trusts owed to third parties for their investments in the Trusts’ preferred securities.

The Company had no consolidated VIEs during the three and six months ended June 30, 2019.

8. DERIVATIVES

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its debt funding and by using derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposure that arises from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

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

19

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

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

as it is allocated to noncontrolling interests. During the three and six months ended June 30, 2019 and 2018, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. In the coming 12 months, the Company estimates that $1,821 will be reclassified and reduce interest expense.

The Company held 29 derivative financial instruments which had a total combined notional amount of $2,489,338 as of June 30, 2019.

Fair Values of Derivative Instruments

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the condensed consolidated balance sheets:

	Asset / Liability Derivatives
	June 30, 2019		December 31, 2018
Derivatives designated as hedging instruments:	Fair Value
Other assets	$	7,300	$	42,324
Other liabilities	$	30,894	$	2,131

Effect of Derivative Instruments

The table below presents the effect of the Company’s derivative financial instruments on the condensed consolidated statements of operations for the periods presented. No tax effect has been presented as the derivative instruments are held by the Company:

	Gain (loss) recognized in OCI For the Three Months Ended June 30,					Location of amounts reclassified from OCI into income	Gain (loss) reclassified from OCI For the Three Months Ended June 30,
Type	2019			2018			2019		2018
Swap Agreements	$	(36,294	)	$	9,967	Interest Expense	$	4,338	$	1,883

	Gain (loss) recognized in OCI For the Six Months Ended June 30,					Location of amounts reclassified from OCI into income	Gain reclassified from OCI For the Six Months Ended June 30,
Type	2019			2018			2019		2018
Swap Agreements	$	(55,870	)	$	33,285	Interest expense	$	8,799	$	2,124

Credit-risk-related Contingent Features

The Company has agreements with some of its derivative counterparties that contain provisions pursuant to which the Company could be declared in default of its derivative obligations if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender.

The Company also has an agreement with some of its derivative counterparties that incorporates the loan covenant provisions of the Company’s indebtedness with a lender affiliate of the derivative counterparty. Failure to comply with the loan covenant provisions would result in the Company being in default on any derivative instrument obligations covered by the agreement.

As of June 30, 2019, 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 $31,786. As of June 30, 2019, the Company had not posted any collateral related to these agreements. If the Company had breached any of these provisions as of June 30, 2019, it could have been required to cash settle its obligations under the agreements at their termination value of $31,786, including accrued interest.

20

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

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

9. 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 are being amortized as an adjustment to interest expense over five years, which represents the estimated term based on the first available redemption date, and are included in exchangeable senior notes, net, in the condensed consolidated balance sheets. The 2015 Notes are general unsecured senior obligations of the Operating Partnership and are fully guaranteed by the Company. Interest is payable on April 1 and October 1 of each year beginning April 1, 2016, until the maturity date of October 1, 2035. The 2015 Notes bear interest at 3.125% per annum and contain an exchange settlement feature, which provides that the 2015 Notes may, 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 exchange rate of the 2015 Notes as of June 30, 2019 was approximately 10.84 shares of the Company’s common stock per $1,000 principal amount of the 2015 Notes.

The Operating Partnership may 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 may 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 have 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 has 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. Certain events are considered “Events of Default,” as defined in the indenture governing the 2015 Notes, which may result in the accelerated maturity of

the 2015 Notes.

Additionally, the 2015 Notes can be exchanged during any calendar quarter, if the last reported sale price of the common stock of the Company is 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 price of the Company’s common stock did not exceed 130% of the exchange price for the required time period for the 2015 Notes during the quarter ended June 30, 2019.

On June 21, 2013, the Operating Partnership issued $250,000 of its 2.375% Exchangeable Senior Notes due 2033 at a 1.5% discount, or $3,750, and costs incurred to issue the 2013 Notes were approximately $1,672. 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. The 2013 Notes bore interest at 2.375% per annum and contained an exchange settlement feature. During the three months ended March 31, 2018, the Company repurchased a total principal amount of $37,709 of the 2013 Notes. The Company paid cash of $58,469 for the total of the principal amount and the exchange value in excess of the principal amount. The Operating Partnership redeemed all remaining outstanding 2013 Notes on July 5, 2018.

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 accounts for the liability and equity components of the 2013 Notes and 2015 Notes separately. The equity components are included in paid-in capital in stockholders’ equity in the condensed consolidated balance sheets, and the value of the equity components are treated as original issue discount for purposes of accounting for the debt components. The discounts are amortized as interest expense over the remaining period of the debt through its first redemption date: July 1, 2018 for the 2013 Notes, and October 1, 2020 for the 2015 Notes. The effective interest rate on the liability components of the 2013 Notes and the 2015 Notes is 4.0%, which approximated the market rate of interest of similar debt without exchange features (i.e. nonconvertible debt) at the time of issuance.

21

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

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

Information about the Company’s 2015 Notes, including the total carrying amount of the equity component, the principal amount of the liability component, the unamortized discount and the net carrying amount was as follows for the periods indicated:

	June 30, 2019			December 31, 2018
Carrying amount of equity component	$	22,597		$	22,597
Principal amount of liability component	575,000			575,000
Unamortized discount - equity component	(6,070		)	(8,417		)
Unamortized debt issuance costs	(3,010		)	(4,209		)
Net carrying amount of liability components	$	565,920		$	562,374

The amount of interest cost recognized relating to the contractual interest rate and the amortization of the discount on the liability component of the 2015 Notes were as follows for the periods indicated:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Contractual interest	$	4,492	$	4,561	$	8,984	$	9,122
Amortization of discount	1,185		1,176		2,347		2,385
Total interest expense recognized	$	5,677	$	5,737	$	11,331	$	11,507

10. STOCKHOLDERS’ EQUITY

On May 15, 2019, the Company filed its $500,000 "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 nine sales agents.

During the three months ended June 30, 2019, the Company sold 930,000 shares of common stock under its "at the market" equity program at an average sales price of $107.61 per share, resulting in net proceeds of $98,796. As of June 30, 2019, the Company had $399,927 available for issuance under the equity distribution agreements.

11. NONCONTROLLING INTEREST REPRESENTED BY PREFERRED OPERATING PARTNERSHIP UNITS

Classification of Noncontrolling Interests

GAAP requires a company to present ownership interests in subsidiaries held by parties other than the company in the consolidated financial statements within the equity section, but separate from the company’s equity. It also requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations and requires changes in ownership interest to be accounted for similarly as equity transactions. If noncontrolling interests are determined to be redeemable, they are to be carried at their redemption value as of the balance sheet date and reported as temporary equity.

The Company has evaluated the terms of the Operating Partnership’s preferred units and classifies the noncontrolling interest represented by such preferred units as stockholders’ equity in the accompanying condensed consolidated balance sheets. The Company will periodically evaluate individual noncontrolling interests for the ability to continue to recognize the noncontrolling interest as permanent equity in the condensed consolidated balance sheets. Any noncontrolling interests that fail to qualify as permanent equity will be reclassified as temporary equity and adjusted to the greater of (1) the carrying amount and (2) the redemption value as of the end of the period in which the determination is made.

At June 30, 2019 and December 31, 2018, the noncontrolling interests represented by the Preferred OP Units qualified for classification as permanent equity on the Company's condensed consolidated balance sheets. The partnership agreement of the Operating Partnership (as amended, the "Partnership Agreement") provides for the designation and issuance of the OP Units.

22

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

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

As of June 30, 2019 and December 31, 2018, noncontrolling interests in Preferred OP Units were presented net of notes receivable from Preferred OP Unit holders of $100,000 and $108,644, respectfully, as more fully described below.

Series A Participating Redeemable Preferred Units

The Partnership Agreement provides for the designation and issuance of the Series A Units. The Series A Units have priority over all other partnership interests of the Operating Partnership with respect to distributions and liquidation.

The Series A Units were issued in June 2007. Series A Units in the amount of $101,700 bear a fixed priority return of 2.3% and originally had a fixed liquidation value of $115,000. The remaining balance participates in distributions with, and has a liquidation value equal to that of the OP Units. The Series A Units are redeemable at the option of the holder, which redemption obligation may be satisfied, at the Company’s option, in cash or shares of its common stock. As a result of the redemption of 114,500 Series A Units in October 2014, the remaining fixed liquidation value was reduced to $101,700, which represents 875,480 Series A Units. On April 18, 2017, the holder of the Series A Units and the Operating Partnership agreed to reduce the fixed priority return on the Series A Units from 5.0% to 2.3% in exchange for a reduction in the interest rate of the related loan, as more fully described below.

On June 25, 2007, the Operating Partnership loaned the holder of the Series A Units $100,000. On April 18, 2017, a loan amendment was signed modifying the maturity date of the loan to the later of the death of the Series A Unit holder or his spouse and also lowering the interest rate of the loan from 4.9% to 2.1%. The loan amendment was determined to be a loan modification under GAAP, and therefore no change in value was recognized. The loan is secured by the borrower’s Series A Units. No future redemption of Series A Units can be made unless the loan secured by the Series A Units is also repaid. The Series A Units are shown on the balance sheet net of the $100,000 loan because the borrower under the loan receivable is also the holder of the Series A Units.

Series B Redeemable Preferred Units

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

The Series B Units were issued in 2013 and 2014 and have a liquidation value of $25.00 per unit for a fixed liquidation value of $41,902, which represents 1,676,087 Series B Units. Holders of the Series B Units receive distributions at an annual rate of 6.0%. These distributions are cumulative. The Series B Units became redeemable at the option of the holder on the first anniversary of the date of issuance, which redemption obligation may be satisfied at the Company’s option in cash or shares of its common stock.

Series C Convertible Redeemable Preferred Units

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

The Series C Units were issued in 2013 and 2014 and had a liquidation value of $42.10 per unit. The Series C Units became redeemable at the option of the holder one year from the date of issuance, which redemption obligation could be satisfied at the Company’s option in cash or shares of its common stock. The Series C Units were convertible into OP Units at the option of the holder at a rate of 0.9145 OP Units per Series C Unit converted. This conversion option expired upon the fifth anniversary of the date of issuance.

In December 2014, the Operating Partnership loaned certain holders of the Series C Units $20,230. The loan receivable, which was collateralized by the Series C Units, bears interest at 5.0% per annum and matures on December 15, 2024. The Series C Units were shown on the balance sheet net of the loan balance because the borrower under the loan receivable is also the holder of the Series C Units.

On December 1, 2018, certain holders of the Series C Units converted their Series C Units into OP Units, with a total of 407,996 Series C Units being converted into a total of 373,113 OP Units. As part of this conversion, the holders of the Series C Units agreed to pledge the OP Units received in the conversion as collateral on the loan receivable to replace the Series C Units

23

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

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

that were converted. As of December 31, 2018, the total outstanding balance of the loan receivable was $19,735, of which $8,644 is shown as a reduction of the noncontrolling interests related to the Series C Units and $11,091 is shown as a reduction of the noncontrolling interests related to the OP Units on the Company's consolidated balance sheets. On April 25, 2019, the remaining 296,020 Series C Units were converted into 270,709 OP Units. The outstanding balance of the loan receivable is shown as a reduction of the noncontrolling interests related to the OP Units as of June 30, 2019. See footnote 12 for further discussion of noncontrolling interests.

Series D Redeemable Preferred Units

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

The Series D Units have been issued at various times from 2014 to 2019. In addition, during the six months ended June 30, 2019, the Operating Partnership issued 1,120,924 Series D Units valued at $28,022 in conjunction with joint venture acquisitions.

The Series D Units have a liquidation value of $25.00 per unit, for a fixed liquidation value of $115,511, which represents 4,803,445 Series D Units. Holders of the Series D Units receive distributions at an annual rate between 3.0% and 5.0%. These distributions are cumulative. The Series D Units become redeemable at the option of the holder on the first anniversary of the date of issuance, which redemption obligation may be satisfied at the Company’s option in cash or shares of its common stock. In addition, certain of the Series D Units are exchangeable for OP Units at the option of the holder until the tenth anniversary of the date of issuance, with the number of 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.

12. NONCONTROLLING INTEREST IN OPERATING PARTNERSHIP AND OTHER NONCONTROLLING INTERESTS

Noncontrolling Interest in Operating Partnership

The Company’s interest in its stores is held through the Operating Partnership. Between its general partner and limited partner interests, the Company held a 90.6% ownership interest in the Operating Partnership as of June 30, 2019. The remaining ownership interests in the Operating Partnership (including Preferred OP Units) of 9.4% are held by certain former owners of assets acquired by the Operating Partnership. As of June 30, 2019, and December 31, 2018 the noncontrolling interests in the Operating Partnership are shown on the balance sheet net of notes receivable of $19,735 and $11,091, respectively, because the borrowers under the loan receivable are also holders of OP Units. This loan receivable bears interest at 5.0% per annum and matures on December 15, 2024.

The noncontrolling interest in the Operating Partnership represents OP Units that are not owned by the Company. OP Units are redeemable at the option of the holder, which redemption may be satisfied at the Company's option in cash, based upon the fair market value of an equivalent number of shares of the Company’s common stock (based on the ten-day average trading price) at the time of the redemption, or shares of the Company's common stock on a one-for-one basis, subject to anti-dilution adjustments provided in the Partnership Agreement. As of June 30, 2019, the ten-day average closing price of the Company's common stock was $107.34 and there were 6,054,459 OP Units outstanding. Assuming that all of the OP Unit holders exercised their right to redeem all of their OP Units on June 30, 2019 and the Company elected to pay the OP Unit holders cash, the Company would have paid $649,886 in cash consideration to redeem the units.

24

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

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

OP Unit activity is summarized as follows for the periods presented:

	For the Six Months Ended June 30,
	2019		2018
OP Units redeemed for common stock	210,501		10,000
OP Units redeemed for cash	—		30,000
Cash paid for OP Units redeemed	$	—	$	2,558
OP Units issued in conjunction with acquisitions	—		21,768
Value of OP Units issued in conjunction with acquisitions	$	—	$	1,877
OP Units issued upon redemption of Series C Units	270,709		—

GAAP requires a company to present ownership interests in subsidiaries held by parties other than the company in the consolidated financial statements within the equity section, but separate from the company’s equity. It also requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations, and requires changes in ownership interest to be accounted for similarly as equity transactions. If noncontrolling interests are determined to be redeemable, they are to be carried at their redemption value as of the balance sheet date and reported as temporary equity.

The Company has evaluated the terms of the OP Units and classifies the noncontrolling interest represented by the OP Units as stockholders’ equity in the accompanying condensed consolidated balance sheets. The Company will periodically evaluate individual noncontrolling interests for the ability to continue to recognize the noncontrolling amount as permanent equity in the condensed consolidated balance sheets. Any noncontrolling interests that fail to qualify as permanent equity will be reclassified as temporary equity and adjusted to the greater of (1) the carrying amount and (2) the redemption value as of the end of the period in which the determination is made.

Other Noncontrolling Interests

Other noncontrolling interests represent the ownership interests of third parties in two consolidated joint ventures as of June 30, 2019. One joint venture owns two operating stores in Texas, one operating store and one development store in Colorado, and the other joint venture owns one operating store in Pennsylvania and one development property in New Jersey. The voting interests of the third-party owners are between 5.0% and 20.0%.

13. LEASES

The Company adopted ASC 842, "Leases," effective January 1, 2019 on a modified retrospective basis as allowed under the standard and prior periods have not been restated. The Company elected the package of transition practical expedients, and has therefore (1) not reassessed whether any expired or existing contracts are or contain leases, (2) not reassessed the lease classification for any expired or existing leases, and (3) not reassessed initial direct costs for any expired or existing leases.

Lessee Accounting

The Company recognized lease liabilities of $104,863 and right-of-use assets related to operating leases totaling $95,506 as of the adoption date. These are presented as “Operating lease liabilities” and “Real estate assets-operating lease right-of-use assets” on the Company’s consolidated balance sheets.

In June 2019, the Company entered into new triple-net lease agreements to lease land and buildings at 22 operating stores. These leases are categorized as operating leases, and have contractual lease terms of 25 years, but have termination options after 10 years that result in lease terms of 10 years under ASC 842. The Company recorded new operating lease right-of-use assets and operating lease liabilities of $127,532 in conjunction with these new lease agreements.

The Company is lessee under several types of lease agreements. Generally, these leases fall into the following categories:

• Leases of real estate at 44 stores classified as wholly-owned. These leases generally have original lease terms between 10-67 years. Under these leases, the Company typically has the option to extend the lease term for additional terms of 5-35 years.

25

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

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

• Leases of its corporate offices and call center. These leases have original lease terms between 5.3 and 12.1 years, with no extension options.

• Leases of 12 regional offices. These leases have original lease terms between three and five years. The Company has the option on five of these leases to extend the lease term for three additional years.

• Leases of small district offices. These leases generally have terms of 12 months or less. The Company has made an accounting election to account for these under the short-term lease exception outlined under ASC 842. Therefore, no lease assets or liabilities are recorded related to these leases, and the Company will recognize lease payments as expense on a straight-line basis over the related lease terms.

The Company has included lease extension options in the lease term for calculations of its right-of-use assets and liabilities related to the real estate asset leases at its stores when it is reasonably certain that the Company plans to extend these leases when the options arise.

Several of the leases of real estate at the Company’s stores include escalation clauses based on an index or rate, such as the Consumer Price Index (CPI). The Company included these lease payments in its calculations of right-of-use assets and liabilities based on the prevailing index or rate as of the adoption date. The Company will recognize changes to these variable lease payments in earnings in the period of the change.

One of the real estate leases includes variable lease payments that are based upon a percentage of gross revenues. Certain other leases include additional variable payments relating to a percentage of sales in excess of a specified amount, common area maintenance, property taxes, etc. These payments are variable lease payments that do not depend on an index or rate and are excluded from the measurement of the lease liabilities and right-of-use-assets for these leases. The Company will recognize costs from these variable lease payments in the period in which the obligation for those payments is incurred.

The Company has signed a lease agreement for a store in New Jersey. The store is currently under construction by the lessor, and the Company will take possession of the leased asset upon completion of construction, which is estimated to be completed before the end of 2019. The lease term is 75 years from the lease commencement date, with three 10-year extension options. The Company has also signed a lease agreement for a store in California. The store is under construction by the lessor, and the Company will take possession of the leased asset upon completion of construction, which is estimated to be completed in mid-2020. The lease term is 15 years from the lease commencement date, with three 10-year extension options and one 5-year extension option. The Company has not recorded right-of-use assets or lease liabilities related to these leases as of June 30, 2019 as the lease term has not yet commenced for either lease. The lease commencement date will occur when the Company takes possession of the leased asset, and the Company will recognize a lease liability and right-of-use asset relating to the leases at that time.

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

26

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

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

Following is information on our total lease costs as of the period(s) indicated:

	For the Three Months Ended June 30,			For the Six Months Ended June 30,
	2019			2019
Lease cost
Finance lease cost:
Amortization of finance lease right-of-use assets	$	42		$	84
Interest expense related to finance lease liabilities	73			143
Operating lease cost	3,339			5,677
Variable lease cost	1,149			1,802
Short-term lease cost	55			110
Total lease cost	$	4,658		$	7,816
Cash paid for amounts included in the measurement of lease liabilities
Operating cash outflows for finance lease payments	$	58		$	115
Operating cash outflows for operating lease payments	4,084			7,351
Total cash paid for lease liability measurement	$	4,142		$	7,466
Right-of-use assets obtained in exchange for new operating lease liabilities	$	129,511		$	225,017
Right-of-use assets obtained in exchange for new finance lease liabilities	$	—		$	8,050
Weighted average remaining lease term - finance leases (years)	47.3
Weighted average remaining lease term - operating leases (years)	15.9
Weighted average discount rate - finance leases	6.07		%
Weighted average discount rate - operating leases	3.68		%

Following is information about the Company’s undiscounted cash flows on an annual basis for operating and finance leases, including a reconciliation of the undiscounted cash flows to the finance lease and operating lease liabilities recognized in the Company’s consolidated balance sheets:

	Operating			Finance			Total
2019	$	10,981		$	116		$	11,097
2020	22,336			232			22,568
2021	22,531			237			22,768
2022	22,494			255			22,749
2023	22,520			255			22,775
Thereafter	217,489			16,777			234,266
Total	$	318,351		$	17,872		$	336,223
Present value adjustments	(87,535		)	(13,064		)	(100,599		)
Lease liabilities	$	230,816		$	4,808		$	235,624

27

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

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

Lessor Accounting

The Company's property rental revenue is primarily related to rents received from tenants at its operating stores. The Company's leases with its self-storage tenants are generally on month-to-month terms, include automatic monthly renewals, allow flexibility to increase rental rates over time as market conditions permit, and provide for the collection of contingent fees such as late fees. These leases do not include any terms or conditions that allow the tenants to purchase the leased space. All self-storage leases for which the Company acts as lessor have been classified as operating leases. The real estate assets related to the Company's stores are included in Real estate assets, net on the Company's condensed consolidated balance sheets and are presented at historical cost less accumulated depreciation and impairment, if any. Rental income related to these operating leases is included in Property rental revenue on the Company's condensed consolidated statements of operations, and is recognized each month during the month-to-month terms at the rental rate in place during each month.

14. SEGMENT INFORMATION

The Company’s segment disclosures present the measure used by the chief operating decision makers ("CODMs") for purposes of assessing each segment’s performance. The Company’s CODMs are comprised of several members of its executive management team who use net operating income ("NOI") to assess the performance of the business for the Company’s reportable operating segments. NOI for the Company's self-storage operations represents total property revenue less direct property operating expenses. NOI for the Company's tenant reinsurance segment represents tenant reinsurance revenues less tenant reinsurance expense.

The Company has two reportable segments: (1) self-storage operations and (2) tenant reinsurance. The self-storage operations activities include rental operations of wholly-owned stores. The Company's consolidated revenues equal total segment revenues plus property management fees and other income. Tenant reinsurance activities include the reinsurance of risks relating to the loss of goods stored by tenants in the stores operated by the Company. Excluded from segment revenues and net operating income is property management fees and other income.

For all periods presented, substantially all of the Company's real estate assets, intangible assets, other assets, and accrued and other liabilities are associated with the self-storage operations segment. The prior periods have been restated to conform to the current presentation. Financial information for the Company’s business segments is set forth below:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Revenues:
Self-Storage Operations	$	279,584		$	258,128		$	550,587		$	506,014
Tenant Reinsurance	31,701			28,521			61,498			55,555
Total segment revenues	$	311,285		$	286,649		$	612,085		$	561,569
Operating expenses:
Self-Storage Operations	$	80,870		$	73,083		$	159,635		$	145,836
Tenant Reinsurance	6,982			5,471			13,949			11,078
Total segment operating expenses	$	87,852		$	78,554		$	173,584		$	156,914
Net operating income:
Self-Storage Operations	$	198,714		$	185,045		$	390,952		$	360,178
Tenant Reinsurance	24,719			23,050			47,549			44,477
Total segment net operating income:	$	223,433		$	208,095		$	438,501		$	404,655
Other components of net income (loss):
Property management fees and other income	$	12,317		$	10,164		23,063			20,729
General and administrative expense	(23,351		)	(21,651		)	(46,029		)	(43,115		)
Depreciation and amortization expense	(54,406		)	(51,892		)	(109,065		)	(103,641		)
Gain on real estate transactions	1,205			—			1,205			—
Interest expense	(47,448		)	(43,347		)	(94,808		)	(84,313		)
Non-cash interest expense related to the amortization of discount on equity component of exchangeable senior notes	(1,185		)	(1,176		)	(2,347		)	(2,385		)
Interest income	1,718			1,188			3,106			2,626
Equity in earnings of unconsolidated real estate ventures	3,121			3,429			5,751			7,026
Income tax expense	(2,715		)	(2,097		)	(4,528		)	(3,439		)
Net income	$	112,689		$	102,713		$	214,849		$	198,143

15. COMMITMENTS AND CONTINGENCIES

As of June 30, 2019, the Company was involved in various legal proceedings and was subject to various claims and complaints arising in the ordinary course of business. Because litigation is inherently unpredictable, the outcome of these matters cannot presently be determined with any degree of certainty. In accordance with applicable accounting guidance, management establishes an accrued liability for litigation when those matters present loss contingencies that are both probable and reasonably estimable. 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 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.

28

EXTRA SPACE STORAGE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

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

As of June 30, 2019, the Company was under agreement to acquire five stores at a total purchase price of $58,628. Of these stores, one is scheduled to close in 2019 at a purchase price of $16,800, and four are scheduled to close in 2020 at a purchase price of $41,828. Additionally, the Company is under agreement to acquire eight stores with joint venture partners, for a total investment of $25,616. Seven of these stores are scheduled to close in 2019 and the remaining store is expected to close in 2020.

Although there can be no assurance, the Company is not aware of any material environmental liability, for which it believes it will be ultimately responsible, that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s stores, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to its stores could result in future material environmental liabilities.

16. SUBSEQUENT EVENTS

On July 1, 2019, the Operating Partnership amended its existing credit agreement, dated December 7, 2018, by exercising an accordion option under the credit agreement to increase the amount of the commitments available by an additional $500,000.

29

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Amounts in thousands, except store and share data

CAUTIONARY LANGUAGE

The following discussion and analysis should be read in conjunction with our unaudited “Condensed Consolidated Financial Statements” and the “Notes to Condensed Consolidated Financial Statements (unaudited)” appearing elsewhere in this report and the “Consolidated Financial Statements,” “Notes to Consolidated Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Form 10-K for the year ended December 31, 2018. We make statements in this section that are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section in this Form 10-Q entitled “Statement on Forward-Looking Information.”

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations are based on our unaudited condensed consolidated financial statements contained elsewhere in this report, which have been prepared in accordance with GAAP. Our notes to the unaudited condensed consolidated financial statements contained elsewhere in this report and the audited financial statements contained in our Form 10-K for the year ended December 31, 2018 describe the significant accounting policies essential to our unaudited condensed consolidated financial statements. Preparation of our financial statements requires estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions that we have used are appropriate and correct based on information available at the time they were made. These estimates, judgments and assumptions can affect our reported assets and liabilities as of the date of the financial statements, as well as the reported revenues and expenses during the period presented. If there are material differences between these estimates, judgments and assumptions and actual facts, our financial statements may be affected.

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require our judgment in its application. There are areas in which our judgment in selecting among available alternatives would not produce a materially different result, but there are some areas in which our judgment in selecting among available alternatives would produce a materially different result. See the notes to the unaudited condensed consolidated financial statements that contain additional information regarding our accounting policies and other disclosures.

OVERVIEW

We are a fully integrated, self-administered and self-managed real estate investment trust (“REIT”), formed to own, operate, manage, acquire, develop and redevelop self-storage properties (“stores”). We derive substantially all of our revenues from our two segments: storage operations and tenant reinsurance. Primary sources of revenue for our storage operations segment include rents received from tenants under leases at each of our wholly-owned stores. Our operating results depend materially on our ability to lease available self-storage units, to actively manage unit rental rates, and on the ability of our tenants to make required rental payments. Consequently, management spends a significant portion of their time maximizing cash flows from our diverse portfolio of stores. Revenue from our tenant reinsurance segment consists of insurance revenues from the reinsurance of risks relating to the loss of goods stored by tenants in our stores.

Our stores are generally situated in highly visible locations clustered around large population centers. These areas enjoy above average population growth and income levels. The clustering of our assets around these population centers enables us to reduce our operating costs through economies of scale. To maximize the performance of our stores, we employ industry-leading revenue management systems. Developed internally, these systems enable us to analyze, set and adjust rental rates in real time across our portfolio in order to respond to changing market conditions. We believe our systems and processes allow us to more pro-actively manage revenues.

We operate in competitive markets, often where consumers have multiple stores from which to choose. Competition has impacted, and will continue to impact, our store results. We experience seasonal fluctuations in occupancy levels, with occupancy levels generally higher in the summer months due to increased moving activity. We believe that we are able to respond quickly and effectively to changes in local, regional and national economic conditions by adjusting rental rates through

30

the combination of our revenue management team and our proprietary pricing systems. We consider a store to be in the lease-up stage after it has been issued a certificate of occupancy, but before it has achieved stabilization. We consider a store to be stabilized once it has achieved either an 80% occupancy rate for a full year measured as of January 1 of the current year, or has been open for three years prior to January 1 of the current year.

PROPERTIES

As of June 30, 2019, we owned or had ownership interests in 1,157 operating stores. Of these stores, 914 are wholly-owned, four are in consolidated joint ventures, and 239 are in unconsolidated joint ventures. In addition, we managed an additional 595 stores for third parties bringing the total number of stores which we own and/or manage to 1,752. These stores are located in 40 states, Washington, D.C. and Puerto Rico. The majority of our stores are clustered around large population centers. The clustering of assets around these population centers enables us to reduce our operating costs through economies of scale. Our acquisitions have given us an increased scale in many core markets as well as a foothold in many markets where we had no previous presence.

As of June 30, 2019, approximately 995,000 tenants were leasing storage units at the operating stores that we own and/or manage, primarily on a month-to-month basis, providing the flexibility to increase rental rates over time as market conditions permit. Existing tenants generally receive rate increases at least annually, for which no direct correlation has been drawn to our vacancy trends. Although leases are short-term in duration, the typical tenant tends to remain at our stores for an extended period of time. For stores that were stabilized as of June 30, 2019, the average length of stay was approximately 15.4 months.

The average annual rent per square foot for our existing customers at stabilized stores, net of discounts and bad debt, was $16.39 for the three months ended June 30, 2019, compared to $15.73 for the three months ended June 30, 2018. Average annual rent per square foot for new leases was $19.50 for the three months ended June 30, 2019, compared to $18.79 for the three months ended June 30, 2018. The average discounts, as a percentage of rental revenues, at all stabilized properties during these periods were 3.7% and 4.6%, respectively.

Our store portfolio is made up of different types of construction and building configurations. Most often sites are what we consider “hybrid” stores, a mix of drive-up and multi-floor buildings. We have a number of multi-floor buildings with elevator access only, and a number of stores featuring ground-floor access only.

31

The following table presents additional information regarding net rentable square feet and the number of stores by state.

	June 30, 2019
	REIT Owned		Joint Venture Owned		Managed		Total
Location	Property Count(1)	Net Rentable Square Feet	Property Count	Net Rentable Square Feet	Property Count	Net Rentable Square Feet	Property Count	Net Rentable Square Feet
Alabama	8	557,143	1	75,681	13	829,382	22	1,462,206
Arizona	23	1,623,210	7	467,260	15	1,199,646	45	3,290,116
California	165	12,677,512	41	3,025,576	57	5,399,102	263	21,102,190
Colorado	15	1,001,380	2	186,693	26	1,863,446	43	3,051,519
Connecticut	7	529,038	7	626,027	4	222,608	18	1,377,673
Delaware	—	—	1	76,945	1	70,701	2	147,646
Florida	91	6,942,237	34	2,543,637	75	5,804,120	200	15,289,994
Georgia	59	4,563,928	5	431,177	16	1,225,460	80	6,220,565
Hawaii	13	842,726	—	—	4	209,215	17	1,051,941
Idaho	—	—	—	—	4	419,256	4	419,256
Illinois	36	2,724,410	7	570,567	27	1,914,018	70	5,208,995
Indiana	15	950,404	1	57,286	13	840,365	29	1,848,055
Kansas	1	50,142	2	108,570	1	70,420	4	229,132
Kentucky	11	928,287	1	51,128	4	311,438	16	1,290,853
Louisiana	2	150,555	—	—	2	211,120	4	361,675
Maryland	32	2,588,681	8	618,568	24	1,618,288	64	4,825,537
Massachusetts	45	2,887,516	10	640,891	8	592,800	63	4,121,207
Michigan	7	561,476	4	314,131	1	102,207	12	977,814
Minnesota	5	382,022	—	—	9	611,826	14	993,848
Mississippi	3	216,112	—	—	4	256,550	7	472,662
Missouri	5	333,580	2	119,275	10	729,763	17	1,182,618
Nebraska	—	—	—	—	2	164,494	2	164,494
Nevada	14	1,034,647	4	472,891	7	859,487	25	2,367,025
New Hampshire	2	136,135	2	84,325	1	61,535	5	281,995
New Jersey	59	4,644,043	17	1,245,626	9	715,618	85	6,605,287
New Mexico	11	721,755	3	163,710	9	736,138	23	1,621,603
New York	22	1,621,848	16	1,401,625	18	1,068,335	56	4,091,808
North Carolina	19	1,409,579	5	374,010	20	1,475,124	44	3,258,713
Ohio	17	1,314,030	5	327,527	5	335,280	27	1,976,837
Oklahoma	—	—	—	—	19	1,576,612	19	1,576,612
Oregon	6	399,742	4	281,378	8	510,618	18	1,191,738
Pennsylvania	18	1,349,561	7	510,209	19	1,366,675	44	3,226,445
Rhode Island	2	130,846	—	—	1	84,665	3	215,511
South Carolina	23	1,756,612	7	497,488	18	1,348,593	48	3,602,693
Tennessee	17	1,409,891	12	803,711	14	1,016,991	43	3,230,593
Texas	100	8,606,436	10	706,934	74	5,993,037	184	15,306,407
Utah	10	709,918	—	—	16	1,151,372	26	1,861,290
Virginia	46	3,676,024	7	564,858	15	1,089,159	68	5,330,041
Washington	8	589,634	1	57,340	7	404,156	16	1,051,130
Washington, DC	1	99,664	1	104,070	2	139,173	4	342,907
Wisconsin	—	—	5	509,306	5	445,174	10	954,480
Puerto Rico	—	—	—	—	8	916,596	8	916,596
Totals	918	70,120,724	239	18,018,420	595	45,960,563	1,752	134,099,707

(1)    Includes four consolidated joint venture stores.

32

RESULTS OF OPERATIONS

Comparison of the three and six months ended June 30, 2019 and 2018

Overview

Results for the three and six months ended June 30, 2019 included the operations of 1,157 stores (914 wholly-owned, four in consolidated joint ventures, and 239 in joint ventures accounted for using the equity method) compared to the results for the three and six months ended June 30, 2018, which included the operations of 1,082 stores (868 wholly-owned, three in consolidated joint ventures, and 211 in joint ventures accounted for using the equity method).

Revenues

The following table presents information on revenues earned for the periods indicated: 

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2019		2018		$ Change		% Change		2019		2018		$ Change		% Change
Revenues:
Property rental	$	279,584	$	258,128	$	21,456	8.3	%	$	550,587	$	506,014	$	44,573	8.8	%
Tenant reinsurance	31,701		28,521		3,180		11.1	%	61,498		55,555		5,943		10.7	%
Management fees and other income	12,317		10,164		2,153		21.2	%	23,063		20,729		2,334		11.3	%
Total revenues	$	323,602	$	296,813	$	26,789	9.0	%	$	635,148	$	582,298	$	52,850	9.1	%

Property Rental—The increase in property rental revenues for the three and six months ended June 30, 2019 was primarily the result of revenues from newly-acquired stores and increases in rental rates at our stabilized stores. Increases of $11,476 and $23,648, respectively, were attributable to store acquisitions completed in 2019 and 2018. We acquired 15 wholly-owned stores and 22 leased properties (as part of a new net lease agreement signed) during the six months ended June 30, 2019. We acquired 34 stores during the year ended December 31, 2018. Increases of $9,426 and $19,147 for the three and six months ended June 30, 2019, respectively, were due to higher net rental rates for new and existing customers at our stabilized stores.

Tenant Reinsurance—The increase in our tenant reinsurance revenues was due primarily to an increase in the number of stores operated. We operated 1,752 stores at June 30, 2019 compared to 1,568 stores at June 30, 2018.

Management Fees and Other Income—Management fees and other income primarily represent the fee collected for our management of stores owned by third parties and unconsolidated joint ventures and other transaction fee income.

Expenses

The following table presents information on expenses for the periods indicated:

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2019		2018		$ Change		% Change		2019		2018		$ Change		% Change
Expenses:
Property operations	$	80,870	$	73,083	$	7,787	10.7	%	$	159,635	$	145,836	$	13,799	9.5	%
Tenant reinsurance	6,982		5,471		1,511		27.6	%	13,949		11,078		2,871		25.9	%
General and administrative	23,351		21,651		1,700		7.9	%	46,029		43,115		2,914		6.8	%
Depreciation and amortization	54,406		51,892		2,514		4.8	%	109,065		103,641		5,424		5.2	%
Total expenses	$	165,609	$	152,097	$	13,512	8.9	%	$	328,678	$	303,670	$	25,008	8.2	%

33

Property Operations—The increases in property operations expense during the three and six months ended June 30, 2019 were due primarily to increases of $5,382 and $9,082, respectively, attributable to store acquisitions completed in 2019 and 2018. We acquired 15 wholly-owned stores and 22 leased properties (as part of a new net lease agreement signed) during the six months ended June 30, 2019. We acquired 34 stores during the year ended December 31, 2018. Additional increases of $2,221 and $4,316 for the three and six months ended June 30, 2019, respectively, were related to an increase in expenses from property taxes, marketing and insurance at stabilized stores.

Tenant Reinsurance—Tenant reinsurance expense represents the costs that are incurred to provide tenant reinsurance. The

change was due primarily to an increase in the number of stores we owned and/or managed and an increase in the overall average payout on claims.

General and Administrative—General and administrative expenses primarily include all expenses not directly related to our stores, including corporate payroll, office expense, office rent, travel and professional fees. We did not observe any material trends in specific payroll, travel or other expenses apart from the increase due to the management of additional stores.

Depreciation and Amortization—Depreciation and amortization expense increased as a result of the acquisition of new stores. We acquired 15 stores during the six months ended June 30, 2019. We acquired 34 stores during the year ended December 31, 2018.

Other Revenues and Expenses

The following table presents information about other revenues and expenses for the periods indicated:

	For the Three Months Ended June 30,											For the Six Months Ended June 30,
	2019			2018			$ Change			% Change		2019			2018			$ Change			% Change
Other income and expenses:
Gain on real estate transactions	$	1,205		$	—		$	1,205		100.0	%	$	1,205		$	—		$	1,205		100.0	%
Interest expense	(47,448		)	(43,347		)	(4,101		)	9.5	%	(94,808		)	(84,313		)	(10,495		)	12.4	%
Non-cash interest expense related to amortization of discount on equity component of exchangeable senior notes	(1,185		)	(1,176		)	(9		)	0.8	%	(2,347		)	(2,385		)	38			(1.6	)%
Interest income	1,718			1,188			530			44.6	%	3,106			2,626			480			18.3	%
Equity in earnings of unconsolidated real estate ventures	3,121			3,429			(308		)	(9.0	)%	5,751			7,026			(1,275		)	(18.1	)%
Income tax expense	(2,715		)	(2,097		)	(618		)	29.5	%	(4,528		)	(3,439		)	(1,089		)	31.7	%
Total other income (expense), net	$	(45,304	)	$	(42,003	)	$	(3,301	)	7.9	%	$	(91,621	)	$	(80,485	)	$	(11,136	)	13.8	%

Gain on Real Estate Transactions— The gain of $1,205 is a result of the sale of one property in New York for $11,781.

Interest Expense—The increase in interest expense during the three and six months ended June 30, 2019 was primarily the result of an overall increase in total debt and interest rates when compared to the same period in the prior year. The total face value of our debt, including our lines of credit, was $5,072,936 at June 30, 2019 compared to $4,809,483 at June 30, 2018. Additionally, the average interest rate on our total fixed- and variable-rate debt at June 30, 2019 was 3.5%, compared to 3.4% as of June 30, 2018.

Non-cash Interest Expense Related to Amortization of Discount on Equity Component of Exchangeable Senior Notes—Represents the amortization of the discounts related to the equity components of the exchangeable senior notes issued by our Operating Partnership. The 2013 Notes and 2015 Notes both had an effective interest rate of 4.0% relative to the carrying amount of the liability.

34

Interest Income—Interest income represents amounts earned on cash and cash equivalents deposited with financial institutions, interest earned on notes receivable and income earned on note receivable from Preferred Operating Partnership unit holders.

Equity in Earnings of Unconsolidated Real Estate Ventures—Equity in earnings of unconsolidated real estate ventures represents the income earned through our ownership interests in unconsolidated joint ventures. In these joint ventures, we and our joint venture partners generally receive a preferred return on our invested capital. To the extent that cash or profits in excess of these preferred returns are generated, we receive a higher percentage of the excess cash or profits. The decrease in earnings for the three and six months ended June 30, 2019 relates to 12 properties that we purchased out of a joint venture in January 2019.

Income Tax Expense—For the three and six months ended June 30, 2019, the increase in income tax expense was the result of an increase in income earned by our taxable REIT subsidiary when compared to the same period in the prior year.

FUNDS FROM OPERATIONS

Funds from operations (“FFO”) provides relevant and meaningful information about our operating performance that is necessary, along with net income and cash flows, for an understanding of our operating results. We believe FFO is a meaningful disclosure as a supplement to net earnings. Net earnings assume that the values of real estate assets diminish predictably over time as reflected through depreciation and amortization expenses. The values of real estate assets fluctuate due to market conditions and we believe FFO more accurately reflects the value of our real estate assets. FFO is defined by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) as net income computed in accordance with GAAP, excluding gains or losses on sales of operating stores and impairment write downs of depreciable real estate assets, plus real estate related depreciation and amortization and after adjustments to record unconsolidated partnerships and joint ventures on the same basis. We believe that to further understand our performance, FFO should be considered along with the reported net income and cash flows in accordance with GAAP, as presented in our condensed consolidated financial statements. FFO should not be considered a replacement of net income computed in accordance with GAAP.

The computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to net income as an indication of our performance, as an alternative to net cash flow from operating activities, as a measure of our liquidity, or as an indicator of our ability to make cash distributions.

The following table presents the calculation of FFO for the periods indicated:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Net income attributable to common stockholders	$	104,828		$	95,153		$	199,598		$	183,409
Adjustments:
Real estate depreciation	51,144			48,107			101,917			95,345
Amortization of intangibles	1,809			1,953			4,097			4,592
Gain on real estate transactions	(1,205		)	—			(1,205		)	—
Unconsolidated joint venture real estate depreciation and amortization	1,912			1,638			3,784			3,150
Distributions paid on Series A Preferred Operating Partnership units	(572		)	(572		)	(1,144		)	(1,144		)
Income allocated to Operating Partnership noncontrolling interests	7,861			7,560			15,251			14,734
Funds from operations attributable to common stockholders and unit holders	$	165,777		$	153,839		$	322,298		$	300,086

35

SAME-STORE RESULTS

Our same-store pool for the periods presented consists of 821 stores that are wholly-owned and operated and that were stabilized by the first day of the earliest calendar year presented. We consider a store to be stabilized once it has been open for three years or has sustained average square foot occupancy of 80% or more for one calendar year. We believe that by providing same-store results from a stabilized pool of stores, with accompanying operating metrics including, but not limited to: occupancy, rental revenue growth, operating expense growth, net operating income growth, etc., stockholders and potential investors are able to evaluate operating performance without the effects of non-stabilized occupancy levels, rent levels, expense levels, acquisitions or completed developments.  Same-store results should not be used as a basis for future same-store performance or for the performance of our stores as a whole. The following table presents operating data for our same-store portfolio.

	For the Three Months Ended June 30,						Percent		For the Six Months Ended June 30,				Percent
	2019			2018			Change		2019		2018		Change
Same-store rental revenues	$	258,259		$	248,565		3.9	%	$	510,585	$	490,795	4.0	%
Same-store operating expenses	72,000			69,332			3.8	%	143,814		139,378		3.2	%
Same-store net operating income	$	186,259		$	179,233		3.9	%	$	366,771	$	351,417	4.4	%
Same-store square foot occupancy as of quarter end	93.6		%	94.2		%			93.6%		94.2%
Properties included in same-store	821			821					821		821

Same-store revenues for the three and six months ended June 30, 2019 increased due to higher net rental rates for both new and existing customers. Same-store expenses were higher for the three and six months ended June 30, 2019, primarily due to increases in marketing, property taxes and insurance, which were partially offset by decreases in payroll and benefits and utilities expense.

The following table presents a reconciliation of same-store net operating income to net income as presented on our condensed consolidated statements of operations for the periods indicated:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Net Income	$	112,689		$	102,713		$	214,849		$	198,143
Adjusted to exclude:
Gain on real estate transactions	(1,205		)	—			(1,205		)	—
Equity in earnings of unconsolidated joint ventures	(3,121		)	(3,429		)	(5,751		)	(7,026		)
Interest expense	48,633			44,523			97,155			86,698
Depreciation and amortization	54,406			51,892			109,065			103,641
Income tax expense	2,715			2,097			4,528			3,439
General and administrative	23,351			21,651			46,029			43,115
Management fees, other income and interest income	(14,035		)	(11,352		)	(26,169		)	(23,355		)
Net tenant insurance	(24,719		)	(23,050		)	(47,549		)	(44,477		)
Non same store revenue	(21,325		)	(9,563		)	(40,002		)	(15,219		)
Non same store expense	8,870			3,751			15,821			6,458
Total Same Store NOI	$	186,259		$	179,233		$	366,771		$	351,417
Same-store rental revenues	$	258,259		$	248,565		$	510,585		$	490,795
Same-store operating expenses	72,000			69,332			143,814			139,378
Same-store net operating income	$	186,259		$	179,233		$	366,771		$	351,417

36

CASH FLOWS

Cash flows from operating activities increased as expected from our continued growth in revenues through increased rental rates along with the increase in the number of stores we own and operate. Cash flows used in investing activities relate primarily to our acquisition and development of REIT and joint venture assets, and fluctuate depending on our actions in those areas. Cash flows from financing activities depend primarily on our debt and equity financing activities. A summary of cash flows along with significant components are as follows:

	For the Six Months Ended June 30,
	2019			2018
Net cash provided by operating activities	$	363,407		$	339,742
Net cash used in investing activities	(440,429		)	(229,095		)
Net cash provided by (used in) financing activities	59,976			(127,585		)
Significant components of net cash flow included:
Net income	$	214,849		$	198,143
Depreciation and amortization	109,065			103,641
Acquisition and development of new stores	(269,699		)	(266,046		)
Investment in unconsolidated real estate ventures	(31,344		)	(34,752		)
Issuance of notes receivable	(152,599		)	—
Proceeds from the sale of common stock, net of offering costs	98,796			—
Net proceeds (payments) from our debt financing	201,702			99,901
Dividends paid on common stock	(225,095		)	(206,813		)

We believe that cash flows generated by operations, along with our existing cash and cash equivalents, the availability of funds under our existing lines of credit, and our access to capital markets will be sufficient to meet all of our reasonably anticipated cash needs during the next 12 months. These cash needs include operating expenses, monthly debt service payments, recurring capital expenditures, acquisitions, redevelopments and expansions, distributions to unit holders and dividends to stockholders necessary to maintain our REIT qualification.

We expect to generate positive cash flow from operations in 2019, and we consider these projected cash flows in our sources and uses of cash. These cash flows are principally derived from rents paid by our tenants. A significant deterioration in projected cash flows from operations could cause us to increase our reliance on available funds under our existing lines of credit, curtail planned capital expenditures, or seek other additional sources of financing.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2019, we had $47,667 available in cash and cash equivalents. Our cash and cash equivalents are held in accounts managed by third party financial institutions and consist of invested cash and cash in our operating accounts. During 2019 and 2018, we experienced no loss or lack of access to our cash or cash equivalents; however, there can be no assurance that access to our cash and cash equivalents will not be impacted by adverse conditions in the financial markets.

As of June 30, 2019, we had $5,072,936 face value of debt, resulting in a debt to total enterprise value ratio of 25.7%. As of June 30, 2019, the ratio of total fixed-rate debt and other instruments to total debt was 75.5% (including $2,424,139 on which we have interest rate swaps that have been included as fixed-rate debt). The weighted average interest rate of the total of fixed- and variable-rate debt at June 30, 2019 was 3.5%. Certain of our real estate assets are pledged as collateral for our debt. We are subject to certain restrictive covenants relating to our outstanding debt. We were in compliance with all financial covenants at June 30, 2019.

We expect to fund our short-term liquidity requirements, including operating expenses, recurring capital expenditures, dividends to stockholders, distributions to holders of Operating Partnership units and interest on our outstanding indebtedness,

37

out of our operating cash flow, cash on hand and borrowings under our revolving lines of credit. In addition, we are pursuing additional sources of financing based on anticipated funding needs.

Our liquidity needs consist primarily of operating expenses, monthly debt service payments, recurring capital expenditures, dividends to stockholders and distributions to unit holders necessary to maintain our REIT qualification. We may from time to time seek to repurchase our outstanding debt, shares of common stock or other securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. In addition, we evaluate, on an ongoing basis, the merits of strategic acquisitions and other relationships, which may require us to raise additional funds. We may also use Operating Partnership units as currency to fund acquisitions from self-storage owners.

OFF-BALANCE SHEET ARRANGEMENTS

Except as disclosed in the notes to our consolidated financial statements of our most recently filed Annual Report on Form 10-K, we do not currently have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purposes entities, which typically are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, except as disclosed in the notes to our condensed consolidated financial statements, we have not guaranteed any obligations of unconsolidated entities, nor do we have any commitments or intent to provide funding to any such entities. Accordingly, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

SEASONALITY

The self-storage business is subject to seasonal fluctuations. A greater portion of revenues and profits are realized from May through September. Historically, our highest level of occupancy has been at the end of July, while our lowest level of occupancy has been in late February and early March. Results for any quarter may not be indicative of the results that may be achieved for the full fiscal year.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

Market risk refers to the risk of loss from adverse changes in market prices and interest rates. Our future income, cash flows and fair values of financial instruments are dependent upon prevailing market interest rates.

Interest Rate Risk

Interest rate risk is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control.

As of June 30, 2019, we had approximately $5.1 billion in total face value of debt, of which approximately $1.2 billion was subject to variable interest rates (excluding debt with interest rate swaps). If LIBOR were to increase or decrease by 100 basis points, the increase or decrease in interest expense on the variable-rate debt would increase or decrease future earnings and cash flows by approximately $12.5 million annually.

Interest rate risk amounts were determined by considering the impact of hypothetical interest rates on our financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.

38

ITEM 4. CONTROLS AND PROCEDURES

(1) Disclosure Controls and Procedures

We maintain disclosure controls and procedures to ensure that information required to be disclosed in the reports we file pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” in Rule 13a-15(e) of the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide a reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

We have a disclosure committee that is responsible for considering the materiality of information and determining our disclosure obligations on a timely basis. The disclosure committee meets quarterly and reports directly to our Chief Executive Officer and Chief Financial Officer.

We carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report.

(2) Changes in internal control over financial reporting

There were no changes in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) that occurred during our most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

39

PART II.     OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in various legal proceedings and are subject to various claims and complaints arising in the ordinary course of business. Because litigation is inherently unpredictable, the outcome of these matters cannot presently be determined with any degree of certainty. In accordance with applicable accounting guidance, management establishes an accrued liability for litigation when those matters present loss contingencies that are both probable and reasonably estimable. 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. We could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on our results of operations in any particular period, notwithstanding the fact that we are currently vigorously defending any legal proceedings against us.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018, which could materially affect our business, financial condition and results of operations. There have been no material changes to the risk factors described in the “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2018. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On June 11, 2019, our Operating Partnership issued an additional 183,000 Series D Units, which represented the remaining portion of consideration in connection with the acquisition of two stores in New York. The stores were initially acquired by a joint venture in February and March 2019, at which time we contributed cash of $6.3 million as well as 937,924 Series D Units, valued at $23.4 million. On June 11, 2019, following satisfaction of certain conditions, the additional 183,000 Series D Units were issued, valued at $4.6 million.

The terms of the Series D Units are governed by the Operating Partnership's Fourth Amended and Restated Agreement of Limited Partnership. The Series D Units will be redeemable at the option of the holders on the first anniversary of the date of issuance, which redemption obligation may be satisfied, at our option, in cash or shares of our common stock.

The Series D Units were issued to accredited investors in private placements in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

40

ITEM 6. EXHIBITS

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101 The following materials from Extra Space Storage Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, are formatted in XBRL (eXtensible Business Reporting Language): (1) the Condensed Consolidated Balance Sheets, (2) the Condensed Consolidated Statements of Operations, (3) the Condensed Consolidated Statements of Comprehensive Income (4) the Condensed Consolidated Statement of Noncontrolling Interests and Equity, (5) the Condensed Consolidated Statements of Cash Flows and (6) notes to these financial statements.

41

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	EXTRA SPACE STORAGE INC.
	Registrant
Date: August 6, 2019	/s/ Joseph D. Margolis
	Joseph D. Margolis
	Chief Executive Officer (Principal Executive Officer)
Date: August 6, 2019	/s/ P. Scott Stubbs
	P. Scott Stubbs
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

42

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Joseph D. Margolis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Extra Space Storage Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2019	By:	/s/ Joseph D. Margolis
	Name:	Joseph D. Margolis
	Title:	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, P. Scott Stubbs, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Extra Space Storage Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2019	By:	/s/ P. Scott Stubbs
	Name:	P. Scott Stubbs
	Title:	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to

18 U.S.C. Section 1350,

as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned, the Chief Executive Officer of Extra Space Storage Inc. (the “Company”), hereby certifies to his knowledge on the date hereof, pursuant to 18 U.S.C. 1350(a), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 (the “Form 10-Q”), filed concurrently herewith by the Company, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Joseph D. Margolis
Name:	Joseph D. Margolis
Title:	Chief Executive Officer
Date:	August 6, 2019

The undersigned, the Chief Financial Officer of Extra Space Storage Inc. (the “Company”), hereby certifies to his knowledge on the date hereof, pursuant to 18 U.S.C. 1350(a), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 (the “Form 10-Q”), filed concurrently herewith by the Company, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ P. Scott Stubbs
Name:	P. Scott Stubbs
Title:	Executive Vice President and Chief Financial Officer
Date:	August 6, 2019

XML

Cover - shares	6 Months Ended
	Jun. 30, 2019	Jul. 31, 2019
Cover page.
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2019
Document Transition Report	false
Entity File Number	001-32269
Entity Registrant Name	EXTRA SPACE STORAGE INC.
Entity Central Index Key	0001289490
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	20-1076777
Entity Address, Address Line One	2795 East Cottonwood Parkway, Suite 300
Entity Address, City or Town	Salt Lake City
Entity Address, State or Province	UT
Entity Address, Postal Zip Code	84121
City Area Code	801
Local Phone Number	365-4600
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	EXR
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		128,516,944

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Assets:
Real estate assets, net	$ 7,667,033	$ 7,491,831
Real estate assets - operating lease right-of-use assets	221,479	0
Investments in unconsolidated real estate ventures	174,480	125,326
Cash and cash equivalents	47,667	57,496
Restricted cash	7,977	15,194
Other assets, net	272,083	158,131
Total assets	8,390,719	7,847,978
Liabilities, Noncontrolling Interests and Equity:
Notes payable, net	4,090,278	4,137,213
Exchangeable senior notes, net	565,920	562,374
Notes payable to trusts	0	30,928
Revolving lines of credit	382,000	81,000
Operating lease liabilities	230,816	0
Cash distributions in unconsolidated real estate ventures	45,081	45,197
Accounts payable and accrued expenses	115,056	101,461
Other liabilities	132,757	104,383
Total liabilities	5,561,908	5,062,556
Commitments and contingencies
Extra Space Storage Inc. stockholders' equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued or outstanding	0	0
Common stock, $0.01 par value, 500,000,000 shares authorized, 128,513,095 and 127,103,750 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively	1,285	1,271
Additional paid-in capital	2,756,799	2,640,705
Accumulated other comprehensive income (loss)	(27,476)	34,650
Accumulated deficit	(288,399)	(262,902)
Total Extra Space Storage Inc. stockholders' equity	2,442,209	2,413,724
Noncontrolling interest represented by Preferred Operating Partnership units, net	176,108	153,096
Noncontrolling interests in Operating Partnership, net and other noncontrolling interests	210,494	218,602
Total noncontrolling interests and equity	2,828,811	2,785,422
Total liabilities, noncontrolling interests and equity	$ 8,390,719	$ 7,847,978

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized (in shares)	50,000,000	50,000,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized (in shares)	500,000,000	500,000,000
Common stock, issued (in shares)	128,513,095	127,103,750
Common stock, outstanding (in shares)	128,513,095	127,103,750

XML

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues:
Property rental	$ 279,584	$ 258,128	$ 550,587	$ 506,014
Tenant reinsurance	31,701	28,521	61,498	55,555
Management fees and other income	12,317	10,164	23,063	20,729
Total revenues	323,602	296,813	635,148	582,298
Expenses:
Property operations	80,870	73,083	159,635	145,836
Tenant reinsurance	6,982	5,471	13,949	11,078
General and administrative	23,351	21,651	46,029	43,115
Depreciation and amortization	54,406	51,892	109,065	103,641
Total expenses	165,609	152,097	328,678	303,670
Gain on real estate transactions	1,205	0	1,205	0
Income from operations	159,198	144,716	307,675	278,628
Interest expense	(47,448)	(43,347)	(94,808)	(84,313)
Non-cash interest expense related to amortization of discount on equity component of exchangeable senior notes	(1,185)	(1,176)	(2,347)	(2,385)
Interest income	1,718	1,188	3,106	2,626
Income before equity in earnings of unconsolidated real estate ventures and income tax expense	112,283	101,381	213,626	194,556
Equity in earnings of unconsolidated real estate ventures	3,121	3,429	5,751	7,026
Income tax expense	(2,715)	(2,097)	(4,528)	(3,439)
Net income	112,689	102,713	214,849	198,143
Net income allocated to Preferred Operating Partnership noncontrolling interests	(3,128)	(3,492)	(6,291)	(6,882)
Net income allocated to Operating Partnership and other noncontrolling interests	(4,733)	(4,068)	(8,960)	(7,852)
Net income attributable to common stockholders	$ 104,828	$ 95,153	$ 199,598	$ 183,409
Earnings per common share
Basic (in dollars per share)	$ 0.82	$ 0.75	$ 1.56	$ 1.45
Diluted (in dollars per share)	$ 0.81	$ 0.75	$ 1.55	$ 1.45
Weighted average number of shares
Basic (in shares)	127,585,436	125,874,130	127,349,299	125,823,581
Diluted (in shares)	135,654,761	132,772,772	135,166,456	132,992,734
Cash dividends paid per common share (in dollars per share)	$ 0.90	$ 0.86	$ 1.76	$ 1.64

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Net income	$ 112,689	$ 102,713	$ 214,849	$ 198,143
Other comprehensive income (loss):
Change in fair value of interest rate swaps	(41,302)	8,033	(65,295)	31,096
Total comprehensive income	71,387	110,746	149,554	229,239
Less: comprehensive income attributable to noncontrolling interests	5,842	7,934	12,082	16,190
Comprehensive income attributable to common stockholders	$ 65,545	$ 102,812	$ 137,472	$ 213,049

XML

Condensed Consolidated Statement of Noncontrolling Interests and Equity - USD ($) $ in Thousands	Total	Redemption of Operating Partnership units for cash	Preferred Operating Partnership	Operating Partnership	Operating Partnership Redemption of Operating Partnership units for stock	Operating Partnership Redemption of Operating Partnership units for cash	Other	Common Stock	Common Stock Redemption of Operating Partnership units for stock	Additional Paid-in Capital	Additional Paid-in Capital Redemption of Operating Partnership units for stock	Additional Paid-in Capital Redemption of Operating Partnership units for cash	Accumulated Other Comprehensive Income	Accumulated Deficit
Balance, beginning of period (in shares) at Dec. 31, 2017								126,007,091
Balance, beginning of period at Dec. 31, 2017	$ 2,723,807		$ 159,636	$ 213,301			$ 119	$ 1,260		$ 2,569,485			$ 33,290	$ (253,284)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon the exercise of options (in shares)								31,525
Issuance of common stock upon the exercise of options	799									799
Restricted stock grants issued (in shares)								31,136
Restricted stock grants canceled (in shares)								(770)
Compensation expense related to stock-based awards	2,726									2,726
Repayment of receivable for preferred operating units pledged as collateral on loan	495		495
Redemption of Operating Partnership units		$ (2,558)				$ (1,126)						$ (1,432)
Noncontrolling interest in consolidated joint venture	120						120
Repurchase of equity portion of 2013 exchangeable senior notes	(21,000)									(21,000)
Net income	95,430		3,390	3,784										88,256
Other comprehensive income (loss)	23,063		144	938									21,981
Distributions to Operating Partnership units held by noncontrolling interests	(7,909)		(3,488)	(4,421)
Dividends paid on common stock	(98,327)													(98,327)
Balance, end of period (in shares) at Mar. 31, 2018								126,068,982
Balance, end of period at Mar. 31, 2018	2,716,646		160,177	212,476			239	$ 1,260		2,550,578			55,271	(263,355)
Balance, beginning of period (in shares) at Dec. 31, 2017								126,007,091
Balance, beginning of period at Dec. 31, 2017	2,723,807		159,636	213,301			119	$ 1,260		2,569,485			33,290	(253,284)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	198,143
Balance, end of period (in shares) at Jun. 30, 2018								126,146,055
Balance, end of period at Jun. 30, 2018	2,715,802		160,104	213,509			239	$ 1,261		2,554,447			62,930	(276,688)
Balance, beginning of period (in shares) at Mar. 31, 2018								126,068,982
Balance, beginning of period at Mar. 31, 2018	2,716,646		160,177	212,476			239	$ 1,260		2,550,578			55,271	(263,355)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon the exercise of options (in shares)								23,050
Issuance of common stock upon the exercise of options	371							$ 1		370
Restricted stock grants issued (in shares)								50,334
Restricted stock grants canceled (in shares)								(6,311)
Compensation expense related to stock-based awards	3,116									3,116
Redemption of Operating Partnership units (in shares)									10,000
Redemption of Operating Partnership units					$ (383)						$ 383
Issuance of Operating Partnership units in conjunction with acquisitions	1,877			1,877
Net income	102,713		3,492	4,068										95,153
Other comprehensive income (loss)	8,033		50	324									7,659
Distributions to Operating Partnership units held by noncontrolling interests	(8,468)		(3,615)	(4,853)
Dividends paid on common stock	(108,486)													(108,486)
Balance, end of period (in shares) at Jun. 30, 2018								126,146,055
Balance, end of period at Jun. 30, 2018	$ 2,715,802		160,104	213,509			239	$ 1,261		2,554,447			62,930	(276,688)
Balance, beginning of period (in shares) at Dec. 31, 2018	127,103,750							127,103,750
Balance, beginning of period at Dec. 31, 2018	$ 2,785,422		153,096	218,362			240	$ 1,271		2,640,705			34,650	(262,902)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon the exercise of options (in shares)								169,021
Issuance of common stock upon the exercise of options	1,757							$ 3		1,754
Restricted stock grants issued (in shares)								35,022
Restricted stock grants canceled (in shares)								(1,244)
Compensation expense related to stock-based awards	2,954									2,954
Redemption of Operating Partnership units (in shares)									85,501
Redemption of Operating Partnership units					(3,310)					3,310
Issuance of Operating Partnership units in conjunction with acquisitions	23,447		23,447
Net income	102,160		3,164	4,235			(9)							94,770
Other comprehensive income (loss)	(23,993)		(147)	(1,003)									(22,843)
Distributions to Operating Partnership units held by noncontrolling interests	(8,412)		(3,296)	(5,116)
Dividends paid on common stock	(109,523)													(109,523)
Balance, end of period (in shares) at Mar. 31, 2019								127,392,050
Balance, end of period at Mar. 31, 2019	$ 2,773,812		176,264	213,168			231	$ 1,274		2,648,723			11,807	(277,655)
Balance, beginning of period (in shares) at Dec. 31, 2018	127,103,750							127,103,750
Balance, beginning of period at Dec. 31, 2018	$ 2,785,422		153,096	218,362			240	$ 1,271		2,640,705			34,650	(262,902)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	$ 214,849
Balance, end of period (in shares) at Jun. 30, 2019	128,513,095							128,513,095
Balance, end of period at Jun. 30, 2019	$ 2,828,811		176,108	210,235			259	$ 1,285		2,756,799			(27,476)	(288,399)
Balance, beginning of period (in shares) at Mar. 31, 2019								127,392,050
Balance, beginning of period at Mar. 31, 2019	2,773,812		176,264	213,168			231	$ 1,274		2,648,723			11,807	(277,655)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon the exercise of options (in shares)								17,042
Issuance of common stock upon the exercise of options	468									468
Restricted stock grants issued (in shares)								53,789
Restricted stock grants issued	2							$ 2
Restricted stock grants canceled (in shares)								(4,786)
Issuance of common stock, net of offering costs (in shares)								930,000
Issuance of common stock, net of offering costs	98,796							$ 9		98,787
Compensation expense related to stock-based awards	3,998									3,998
Redemption of Operating Partnership units (in shares)									125,000
Redemption of Operating Partnership units					$ (4,823)					4,823
Issuance of Operating Partnership units in conjunction with acquisitions	4,575		4,575
Noncontrolling interest in consolidated joint venture	50						50
Conversion of Preferred C Units in the Operating Partnership for Common Operating Partnership Units			(4,374)	4,374
Net income	112,689		3,129	4,754			(22)							104,828
Other comprehensive income (loss)	(41,302)		(254)	(1,765)									(39,283)
Distributions to Operating Partnership units held by noncontrolling interests	(8,705)		(3,232)	(5,473)
Dividends paid on common stock	$ (115,572)													(115,572)
Balance, end of period (in shares) at Jun. 30, 2019	128,513,095							128,513,095
Balance, end of period at Jun. 30, 2019	$ 2,828,811		$ 176,108	$ 210,235			$ 259	$ 1,285		$ 2,756,799			$ (27,476)	$ (288,399)

XML

Condensed Consolidated Statement of Noncontrolling Interests and Equity (Parenthetical) - $ / shares	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Stockholders' Equity [Abstract]
Dividends paid on common stock, per share (in dollars per share)	$ 0.90	$ 0.86	$ 0.86	$ 0.78	$ 1.76	$ 1.64

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended				6 Months Ended		12 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Cash flows from operating activities:
Net income	$ 112,689	$ 102,160	$ 102,713	$ 95,430	$ 214,849	$ 198,143
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	54,406		51,892		109,065	103,641
Amortization of deferred financing costs					6,006	6,064
Non-cash interest expense related to amortization of discount on equity component of exchangeable senior notes					2,347	2,385
Compensation expense related to stock-based awards					6,952	5,842
Gain on real estate transactions					(1,205)	0
Distributions from unconsolidated real estate ventures in excess of earnings					3,334	3,615
Changes in operating assets and liabilities:
Other assets					1,890	7,269
Accounts payable and accrued expenses					21,632	7,888
Other liabilities					(1,463)	4,895
Net cash provided by operating activities					363,407	339,742
Cash flows from investing activities:
Acquisition of real estate assets					(248,808)	(238,153)
Development and redevelopment of real estate assets					(20,891)	(27,893)
Proceeds from sale of real estate assets, investments in real estate ventures and other assets					11,254	753
Investment in unconsolidated real estate ventures					(31,344)	(34,752)
Return of investment in unconsolidated real estate ventures					3,982	47,944
Issuance of notes receivable					(152,599)	0
Principal payments received from notes receivable					0	25,226
Purchase of equipment and fixtures					(2,023)	(2,220)
Net cash used in investing activities					(440,429)	(229,095)
Cash flows from financing activities:
Proceeds from the sale of common stock, net of offering costs					98,796	0
Proceeds from notes payable and revolving lines of credit					757,000	645,386
Principal payments on notes payable and revolving lines of credit					(524,370)	(487,016)
Principal payments on notes payable to trusts					(30,928)	0
Deferred financing costs					(587)	(3,028)
Repurchase of exchangeable senior notes					0	(58,469)
Net proceeds from exercise of stock options					2,227	1,170
Redemption of Operating Partnership units held by noncontrolling interests					0	(2,558)
Contributions from noncontrolling interests					50	120
Dividends paid on common stock					(225,095)	(206,813)
Distributions to noncontrolling interests					(17,117)	(16,377)
Net cash provided by (used in) financing activities					59,976	(127,585)
Net decrease in cash, cash equivalents, and restricted cash					(17,046)	(16,938)
Cash, cash equivalents, and restricted cash, beginning of the period		72,690		86,044	72,690	86,044	$ 86,044
Cash, cash equivalents, and restricted cash, end of the period	55,644		69,106		55,644	69,106	$ 72,690
Supplemental schedule of cash flow information
Interest paid					88,455	78,602
Income taxes paid					4,095	1,836
Redemption of Operating Partnership units held by noncontrolling interests for common stock
Common stock and paid-in capital					8,133	383
Establishment of operating lease right of use assets and lease liabilities
Real estate assets - operating lease right-of-use assets	129,511				225,017	0
Operating lease liabilities					(234,374)	0
Accounts payable and accrued expenses					9,357	0
Acquisitions of real estate assets
Real estate assets, net	8,424	223,740	237,284	70,787	232,164	308,071
Notes payable assumed	$ 0	$ (17,157)	$ (87,500)	$ 0	(17,157)	(87,500)
Accrued construction costs and capital expenditures
Acquisition of real estate assets					1,368	1,184
Development and redevelopment of real estate assets					0	1,558
Accounts payable and accrued expenses					(1,368)	(2,742)
Conversion of Preferred Operating Partnership Units to common Operating Partnership Units
Preferred Operating Partnership Units					4,374	0
Common Operating Partnership Units					(4,374)	0
Redemption of Operating Partnership units held by noncontrolling interests for common stock
Redemption of Operating Partnership units held by noncontrolling interests for common stock
Noncontrolling interests in Operating Partnership					(8,133)	(383)
Acquisitions of real estate assets
Acquisitions of real estate assets
Real estate assets, net					19,937	88,842
Value of Operating Partnership units issued					0	(1,877)
Notes payable assumed					(17,157)	(87,500)
Investment in unconsolidated real estate ventures					(2,780)	535
Contribution of Preferred Operating Partnership Units to unconsolidated real estate venture
Contribution of Preferred Operating Partnership Units to unconsolidated real estate venture
Investments in unconsolidated real estate ventures					(28,022)	0
Value of Preferred Operating Partnership units issued					$ 28,022	$ 0

XML

Organization

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

ORGANIZATION

Extra Space Storage Inc. (the “Company”) is a fully integrated, self-administered and self-managed real estate investment trust (“REIT”), formed as a Maryland corporation on April 30, 2004, to own, operate, manage, acquire, develop and redevelop professionally managed self-storage properties ("stores") located throughout the United States. The Company was formed to continue the business of Extra Space Storage LLC and its subsidiaries, which had engaged in the self-storage business since 1977. The Company’s interest in its stores is held through its operating partnership, Extra Space Storage LP (the “Operating Partnership”), which was formed on May 5, 2004. The Company’s primary assets are general partner and limited partner interests in the Operating Partnership. This structure is commonly referred to as an umbrella partnership REIT, or UPREIT.

The Company invests in stores by acquiring wholly-owned stores or by acquiring an equity interest in real estate entities. At June 30, 2019, the Company had direct and indirect equity interests in 1,157 stores. In addition, the Company managed 595 stores for third parties, bringing the total number of stores which it owns and/or manages to 1,752. These stores are located in 40 states, Washington, D.C. and Puerto Rico. The Company also offers tenant reinsurance at its owned and managed stores that insures the value of goods in the storage units.

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of the Company are presented on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they may not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of results that may be expected for the year ending December 31, 2019. The condensed consolidated balance sheet as of December 31, 2018 has been derived from the Company’s audited financial statements as of that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission.

Recently Issued Accounting Standards

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, “Leases (Topic 842),” which modifies the accounting for leases, intending to increase transparency and comparability of organizations by requiring balance sheet presentation of leased assets and increased financial statement disclosure of leasing arrangements. ASU 2016-02 requires entities to recognize a liability for their lease obligations and a corresponding asset representing the right to use the underlying asset over the lease term. Lease obligations are measured at their present value and accounted for using the effective interest method. The accounting for the leased asset differs slightly depending on whether the agreement is deemed to be a financing or operating lease. For financing leases, the leased asset is depreciated on a straight-line basis and is recorded separately from the interest expense in the statements of operations, resulting in higher expense in the earlier part of the lease term. For operating leases, the depreciation and interest expense components are combined, recognized evenly over the term of the lease, and presented as a reduction to operating income. ASU 2016-02 requires that assets and liabilities be presented or disclosed separately, and requires additional disclosure of certain qualitative and quantitative information related to these lease agreements. ASU 2016-02 became effective for annual and interim periods beginning after December 15, 2018. The Company adopted the standard using the modified retrospective approach as of January 1, 2019. The Company elected the package of practical expedients upon adoption, which allows for the application of the standard solely to the transition period in 2019 but does not require application to prior fiscal comparative periods presented. The Company also elected the practical expedient provided in a subsequent amendment to the standard that removed the requirement to separate lease and nonlease components. The Company did not record a significant cumulative catch-up adjustment to retained earnings upon adoption of ASU 2016-02. The primary impact was related to the Company's 21 operating ground leases and two corporate facility leases under which it serves as lessee. The Company recognized lease liabilities of $104,863 and right-of-use assets related to operating leases totaling $95,506 as of the adoption date. Refer to footnote 13 for further discussion of the Company's leases.

In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract." ASU 2018-15 amends the accounting for implementation costs incurred in a hosting arrangement that is a service contract, and aligns them with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 also requires that entities amortize the capitalized implementation costs over the term of the hosting arrangement. ASU 2018-15 is effective for annual periods beginning after December 15, 2020, with early adoption permitted, including early adoption in any interim period. The Company adopted this standard on a prospective basis as of October 1, 2018. The adoption of this standard did not have a material impact on the Company's financial statements.

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. The Company is evaluating the impact this new standard will have on its consolidated financial statements.

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). This new standard will be effective for the Company on January 1, 2020. The Company is evaluating the impact this new standard will have on its consolidated financial statements.

XML

Fair Value Disclosures

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Disclosures

FAIR VALUE DISCLOSURES

Derivative Financial Instruments

Currently, the Company uses interest rate swaps to manage its interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate forward curves.

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. In conjunction with the FASB’s fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of June 30, 2019, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety were classified in Level 2 of the fair value hierarchy.

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2019, aggregated by the level in the fair value hierarchy within which those measurements fall. 

	Fair Value Measurements at Reporting Date Using
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other assets - Cash flow hedge swap agreements	$	—	$	7,300	$	—
Other liabilities - Cash flow hedge swap agreements	$	—	$	30,894	$	—

The Company did not have any significant assets or liabilities that are re-measured on a recurring basis using significant unobservable inputs as of June 30, 2019 or December 31, 2018.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Long-lived assets held for use are evaluated for impairment when events or circumstances indicate there may be impairment. The Company reviews each store at least annually to determine if any such events or circumstances have occurred or exist. The Company focuses on stores where occupancy and/or rental income have decreased by a significant amount. For these stores, the Company determines whether the decrease is temporary or permanent, and whether the store will likely recover the lost occupancy and/or revenue in the short term. In addition, the Company reviews stores in the lease-up stage and compares actual operating results to original projections.

When the Company determines that an event that may indicate impairment has occurred, the Company compares the carrying value of the related long-lived assets to the undiscounted future net operating cash flows attributable to the assets. An impairment loss is recorded if the net carrying value of the assets exceeds the undiscounted future net operating cash flows attributable to the assets. The impairment loss recognized equals the excess of net carrying value over the related fair value of the assets.

When real estate assets are identified by management as held for sale, the Company discontinues depreciating the assets and estimates the fair value of the assets, net of selling costs. If the estimated fair value, net of selling costs, of the assets that have been identified as held for sale is less than the net carrying value of the assets, the Company would recognize an impairment loss on the assets held for sale. The operations of assets held for sale or sold during the period are presented as part of normal operations for all periods presented. As of June 30, 2019, the Company had one parcel of land classified as held for sale which is included in real estate assets, net. The estimated fair value less selling costs for this asset is greater than the carrying value of the asset, and therefore no loss has been recorded.

The Company assesses annually whether there are any indicators that the value of the Company’s investments in unconsolidated real estate ventures may be impaired annually and when events or circumstances indicate that there may be impairment. An investment is impaired if management’s estimate of the fair value of the investment is less than its carrying value. To the extent impairment has occurred, and is considered to be other than temporary, the loss is measured as the excess of the carrying amount of the investment over the fair value of the investment.

In connection with the Company’s acquisition of stores, the purchase price is allocated to the tangible and intangible assets and liabilities acquired based on their relative fair values, which are estimated using significant unobservable inputs. The value of the tangible assets, consisting of land and buildings, is determined as if vacant. Intangible assets, which represent the value of existing tenant relationships, are recorded at their fair values based on the avoided cost to replace the current leases. The Company measures the value of tenant relationships based on the rent lost due to the amount of time required to replace existing customers, which is based on the Company’s historical experience with turnover in its stores. Any debt assumed as part of an acquisition is recorded at fair value based on current interest rates compared to contractual rates. Acquisition-related transaction costs are capitalized as part of the purchase price.

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, restricted cash, receivables, other financial instruments included in other assets, accounts payable and accrued expenses, variable-rate notes payable, lines of credit and other liabilities reflected in the condensed consolidated balance sheets at June 30, 2019 and December 31, 2018 approximate fair value. Restricted cash is comprised of letters of credit and escrowed funds deposited with financial institutions located throughout the United States relating to earnest money deposits on potential acquisitions, real estate taxes, insurance and capital expenditures.

The fair values of the Company’s notes receivable from Preferred Operating Partnership unit holders and other fixed rate notes receivable, which are recorded in other assets, net were based on the discounted estimated future cash flows of the notes (categorized within Level 3 of the fair value hierarchy); the discount rate used approximated the current market rate for loans with similar maturities and credit quality. The fair values of the Company’s fixed-rate notes payable and notes payable to trusts were estimated using the discounted estimated future cash payments to be made on such debt (categorized within Level 3 of the fair value hierarchy); the discount rates used approximated current market rates for loans, or groups of loans, with similar maturities and credit quality. The fair value of the Company’s exchangeable senior notes was estimated using an average market price for similar securities obtained from a third party.

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

	June 30, 2019				December 31, 2018
	Fair Value		Carrying Value		Fair Value		Carrying Value
Notes receivable from Preferred and Common Operating Partnership unit holders	$	118,997	$	119,735	$	115,467	$	119,735
Fixed rate notes payable and notes payable to trusts	$	3,323,109	$	3,252,865	$	2,985,731	$	3,022,414
Exchangeable senior notes	$	697,188	$	575,000	$	620,149	$	575,000

XML

Earnings Per Common Share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Common Share

EARNINGS PER COMMON SHARE

Basic earnings per common share is computed using the two-class method by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during the period. All outstanding unvested restricted stock awards contain rights to non-forfeitable dividends and participate in undistributed earnings with common stockholders; accordingly, they are considered participating securities that are included in the two-class method. Diluted earnings per common share measures the performance of the Company over the reporting period while giving effect to all potential common shares that were dilutive and outstanding during the period. The denominator includes the weighted average number of basic shares and the number of additional common shares that would have been outstanding if the potential common shares that were dilutive had been issued, and is calculated using either the two-class, treasury stock or as if-converted method, whichever is most dilutive. Potential common shares are securities (such as options, convertible debt, Series A Participating Redeemable Preferred Units (“Series A Units”), Series B Redeemable Preferred Units (“Series B Units”), Series C Convertible Redeemable Preferred Units (“Series C Units”), Series D Redeemable Preferred Units (“Series D Units” and, together with

the Series A Units, Series B Units and Series C Units, the “Preferred OP Units”) and common Operating Partnership units (“OP Units”)) that do not have a current right to participate in earnings of the Company but could do so in the future by virtue of their option, redemption or conversion right.

In computing the dilutive effect of convertible securities, net income is adjusted to add back any changes in earnings in the period associated with the convertible security. The numerator also is adjusted for the effects of any other non-discretionary changes in income or loss that would result from the assumed conversion of those potential common shares. In computing diluted earnings per common share, only potential common shares that are dilutive (i.e. those that reduce earnings per common share) are included. For the three and six months ended June 30, 2019, and for the three months ended June 30, 2018, there were no anti-dilutive options. For the six months ended June 30, 2018, options to purchase an aggregate of approximately 37,113 shares of common stock were excluded from the computation of earnings per share as their effect would have been anti-dilutive.

For the purposes of computing the diluted impact of the potential exchange of the Preferred Operating Partnership units for common shares upon redemption, where the Company has the option to redeem in cash or shares and where the Company has stated the intent and ability to settle the redemption in shares, the Company divided the total value of the Preferred Operating Partnership units by the average share price for the period presented. The average share price for the three months ended June 30, 2019 and 2018 was $105.06 and $93.10, respectively. The average share price for the six months ended June 30, 2019 and 2018 was $100.63 and $88.71, respectively.

The following table presents the number of Preferred Operating Partnership units, and the potential common shares, that were excluded from the computation of earnings per share as their effect would have been anti-dilutive.

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2019	2018	2019	2018
	Equivalent Shares (if converted)	Equivalent Shares (if converted)	Equivalent Shares (if converted)	Equivalent Shares (if converted)
Series B Units	398,840	450,077	416,398	472,350
Series C Units(1)	—	318,357	—	334,112
Series D Units	1,109,048	988,862	1,096,259	1,037,798
	1,507,888	1,757,296	1,512,657	1,844,260

(1)    The remainder of the Series C Units were converted to OP Units on April 25, 2019.

The Operating Partnership had no amounts issued and outstanding of its 2.375% Exchangeable Senior Notes due 2033 (the “2013 Notes”) as of June 30, 2019, as the remaining principal balance had been redeemed in July 2018. Prior to their redemption, the 2013 Notes could potentially have had a dilutive impact on the Company’s earnings per share calculations. The 2013 Notes were exchangeable by holders into shares of the Company’s common stock under certain circumstances per the terms of the indenture governing the 2013 Notes. The Company had irrevocably agreed to pay only cash for the accreted principal amount of the 2013 Notes relative to its exchange obligations, but retained the right to satisfy the exchange obligation in excess of the accreted principal amount in cash and/or common stock.

The Operating Partnership had $575,000 of its 3.125% Exchangeable Senior Notes due 2035 (the “2015 Notes”) issued and outstanding as of June 30, 2019. The 2015 Notes could potentially have a dilutive impact on the Company’s earnings per share calculations. The 2015 Notes are exchangeable by holders into shares of the Company’s common stock under certain circumstances per the terms of the indenture governing the 2015 Notes. The exchange price of the 2015 Notes was $92.28 per share as of June 30, 2019, and could change over time as described in the indenture. The Company has irrevocably agreed to pay only cash for the accreted principal amount of the 2015 Notes relative to its exchange obligations, but retained the right to satisfy the exchange obligation in excess of the accreted principal amount in cash and/or common stock.

Although the Company has retained the right to satisfy the exchange obligation in excess of the accreted principal amount of the 2013 Notes and 2015 Notes in cash and/or common stock, Accounting Standards Codification (“ASC”) 260, “Earnings per Share,” requires an assumption that shares would be used to pay the exchange obligation in excess of the accreted principal amount, and requires that those shares be included in the Company’s calculation of weighted average common shares outstanding for the diluted earnings per share computation. For the three and six months ended June 30, 2019 and 2018, zero and 95,690 shares, respectively, related to the 2013 Notes were included in the computation for diluted earnings per share. For the three and six months ended June 30, 2019 and 2018, 757,811 and zero shares, respectively, related to the 2015 Notes were included in the computation for diluted earnings per share. The exchange price exceeded the average per share price of the Company’s common stock during the three and six months ended June 30, 2019.

For the purposes of computing the diluted impact on earnings per share of the potential exchange of Series A Units for common shares upon redemption, where the Company has the option to redeem in cash or shares and where the Company has stated the positive intent and ability to settle at least $101,700 of the instrument in cash (or net settle a portion of the Series A Units against the related outstanding note receivable), only the amount of the instrument in excess of $101,700 is considered in the calculation of shares contingently issuable for the purposes of computing diluted earnings per share as allowed by ASC 260-10-45-46. Accordingly, the number of shares included in the computation for diluted earnings per share related to the Series A Units is equal to the number of Series A Units outstanding, with no additional shares included related to the fixed $101,700 amount.

The computation of earnings per common share is as follows for the periods presented:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Net income attributable to common stockholders	$	104,828		$	95,153		$	199,598		$	183,409
Earnings and dividends allocated to participating securities	(176		)	(193		)	(343		)	(371		)
Earnings for basic computations	104,652			94,960			199,255			183,038
Earnings and dividends allocated to participating securities	176			—			—			371
Income allocated to noncontrolling interest - Preferred Operating Partnership Units and Operating Partnership Units	6,010			5,271			11,439			10,211
Fixed component of income allocated to noncontrolling interest - Preferred Operating Partnership (Series A Units)	(572		)	(572		)	(1,144		)	(1,144		)
Net income for diluted computations	$	110,266		$	99,659		$	209,550		$	192,476
Weighted average common shares outstanding:
Average number of common shares outstanding - basic	127,585,436			125,874,130			127,349,299			125,823,581
OP Units	6,085,976			5,651,878			6,023,822			5,657,592
Series A Units	875,480			875,480			875,480			875,480
Unvested restricted stock awards included for treasury stock method	218,686			—			—			256,733
Shares related to exchangeable senior notes and dilutive stock options	889,183			371,284			917,855			379,348
Average number of common shares outstanding - diluted	135,654,761			132,772,772			135,166,456			132,992,734
Earnings per common share
Basic	$	0.82		$	0.75		$	1.56		$	1.45
Diluted	$	0.81		$	0.75		$	1.55		$	1.45

XML

Store Acquisitions and Dispositions

6 Months Ended

Jun. 30, 2019

Real Estate [Abstract]

Store Acquisitions and Dispositions

STORE ACQUISITIONS AND DISPOSITIONS

The following table shows the Company’s acquisitions of stores for the three and six months ended June 30, 2019 and 2018. The table excludes purchases of raw land and improvements made to existing assets. All acquisitions are considered asset acquisitions under ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business."

			Consideration Paid														Total
Quarter	Number of Stores		Total		Cash Paid		Loan Assumed		Investments in Real Estate Ventures			Net Liabilities/ (Assets) Assumed		Value of OP Units Issued		Number of OP Units Issued	Real estate assets
Q2 2019	1		$	8,424	$	8,424	$	—	$	—		$	—	$	—	—	$	8,424
Q1 2019	14	(1)	223,740		202,890		17,157		2,780			913		—		—	223,740
	15		$	232,164	$	211,314	$	17,157	$	2,780		$	913	$	—	—	$	232,164
Q2 2018	17	(2)	$	237,284	$	148,648	$	87,500	$	(1,024	)	$	283	$	1,877	21,768	$	237,284
Q1 2018	5	(2)	70,787		70,171		—		489			127		—		—	70,787
	22		$	308,071	$	218,819	$	87,500	$	(535	)	$	410	$	1,877	21,768	$	308,071

⁽¹⁾ Store acquisitions during the three months ended March 31, 2019 include the purchase of 12 stores previously held in joint ventures where the Company held a noncontrolling interest. The Company purchased its partners' remaining equity interests in the joint ventures, and the properties owned by the joint ventures became wholly owned by the Company. No gain or loss was recognized as a result of these acquisitions.

⁽²⁾ Store acquisitions during the three and six months ended June 30, 2018 include the acquisition of one and 14 stores, respectively, that had been owned by a joint venture in which the Company held a noncontrolling interest. No gain or loss was recognized as a result of these acquisitions.

XML

Investments in Unconsolidated Real Estate Ventures

6 Months Ended

Jun. 30, 2019

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Real Estate Ventures

INVESTMENTS IN UNCONSOLIDATED REAL ESTATE VENTURES

Investments in unconsolidated real estate ventures represent the Company's noncontrolling interests in properties. The Company accounts for these investments 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.

In these joint ventures, the Company and the joint venture partner generally receive a preferred return on their invested capital. To the extent that cash or profits in excess of these preferred returns are generated through operations or capital transactions, the Company would receive a higher percentage of the excess cash or profits than its equity interest.

The Company separately reports investments with net equity less than zero in cash distributions in unconsolidated real estate ventures in the condensed consolidated balance sheets. The net equity of certain joint ventures is less than zero because distributions have exceeded the Company's investment in and share of income from these joint ventures. This is generally the result of 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.

During May 2019, the Company entered into a new joint venture, ESS-NYFL JV LP with two joint venture partners. The Company contributed a total of $13,936 to this joint venture for the purchase of 11 operating stores and four annex sites and received a 16.0% interest in the joint venture.

During the six months ended June 30, 2019, the Company contributed a total of $54,779 to its joint ventures for the purchase of 16 operating stores and six stores acquired at the issuance of certificate of occupancy.

Net investments in unconsolidated real estate ventures and cash distributions in unconsolidated real estate ventures consist of the following:

	Number of Stores	Equity Ownership %	Excess Profit % (1)	June 30,			December 31,
				2019			2018
PRISA Self Storage LLC	85	4%	4%	$	9,213		$	9,334
Storage Portfolio II JV LLC	36	10%	30%	(4,774		)	(4,233		)
Storage Portfolio I LLC	24	34%	49%	(38,400		)	(38,129		)
VRS Self Storage, LLC	16	45%	54%	17,704			18,281
ESS-NYFL JV LP	15	16%	24%	14,231			—
Extra Space Northern Properties Six LLC	10	10%	35%	(1,903		)	(1,700		)
WICNN JV LLC	9	10%	25%	32,635			26,885
Alan Jathoo JV LLC	9	10%	10%	8,086			8,180
ESS Bristol Investments LLC	8	10%	28%	2,936			2,331
GFN JV, LLC	5	10%	25%	12,324			10,586
Extra Space West Two LLC (2)	—	5%	40%	—			3,818
Extra Space West One LLC (2)	—	5%	40%	—			(1,038		)
Other minority owned stores	22	10-50%	19-50%	77,347			45,814
Net Investments in and Cash distributions in unconsolidated real estate ventures	239			$	129,399		$	80,129

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

⁽²⁾ In January 2019, the Company purchased its joint venture partners' 95% interests in the Extra Space West One LLC and Extra Space West Two LLC joint ventures, which owned a total of 12 stores. The Company paid $172,505 of cash to acquire the equity interests, and subsequent to this acquisition, the Company owned 100% of the joint ventures and the related stores.

XML

Variable Interests

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable Interests

VARIABLE INTERESTS

The Operating Partnership had three wholly-owned unconsolidated subsidiaries (“Trust,” “Trust II” and “Trust III,” together, the “Trusts”) that had issued trust preferred securities to third parties and common securities to the Operating Partnership. The proceeds from the sale of the preferred and common securities were loaned in the form of notes to the Operating Partnership. The Trusts were variable interest entities ("VIEs") because the holders of the equity investment at risk (the trust preferred securities) did not have the power to direct the activities of the entities that most significantly affect the entities’ economic performance because of their lack of voting or similar rights. Because the Operating Partnership’s investment in the Trusts’ common securities was financed directly by the Trusts as a result of its loan of the proceeds to the Operating Partnership, that investment was not considered an equity investment at risk. The Operating Partnership’s investment in the Trusts was not a variable interest because equity interests are variable interests only to the extent that the investment is considered to be at risk, and therefore the Operating Partnership cannot be the primary beneficiary of the Trusts. Since the Company was not the primary beneficiary of the Trusts, they were not consolidated. A debt obligation was recorded in the form of notes for the proceeds as discussed above, which were owed to the Trusts. The Company had also included its investment in the Trusts’ common securities in other assets on the condensed consolidated balance sheets.

During the year ended December 31, 2018, the Company repaid a total principal amount of $88,662, representing all of the notes payable to Trust III, all of the notes payable to Trust II, and all but $30,928 of the notes payable to Trust. The Trusts used the proceeds from these repayments to redeem their preferred and common securities. In January 2019, the Company repaid the remaining balance of $30,928 of notes payable to Trust.

During the time they were outstanding, the Company did not provide financing or other support during the periods presented to the Trusts that it was not previously contractually obligated to provide. The Company’s maximum exposure to loss as a result of its involvement with the Trusts was equal to the total amount of the notes discussed above less the amounts of the Company’s investments in the Trusts’ common securities. The net amount was equal to the notes payable that the Trusts owed to third parties for their investments in the Trusts’ preferred securities.

The Company had no consolidated VIEs during the three and six months ended June 30, 2019.

XML

Derivatives

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

DERIVATIVES

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its debt funding and by using derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposure that arises from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

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

as it is allocated to noncontrolling interests. During the three and six months ended June 30, 2019 and 2018, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. In the coming 12 months, the Company estimates that $1,821 will be reclassified and reduce interest expense.

The Company held 29 derivative financial instruments which had a total combined notional amount of $2,489,338 as of June 30, 2019.

Fair Values of Derivative Instruments

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the condensed consolidated balance sheets:

	Asset / Liability Derivatives
	June 30, 2019		December 31, 2018
Derivatives designated as hedging instruments:	Fair Value
Other assets	$	7,300	$	42,324
Other liabilities	$	30,894	$	2,131

Effect of Derivative Instruments

The table below presents the effect of the Company’s derivative financial instruments on the condensed consolidated statements of operations for the periods presented. No tax effect has been presented as the derivative instruments are held by the Company:

	Gain (loss) recognized in OCI For the Three Months Ended June 30,					Location of amounts reclassified from OCI into income	Gain (loss) reclassified from OCI For the Three Months Ended June 30,
Type	2019			2018			2019		2018
Swap Agreements	$	(36,294	)	$	9,967	Interest Expense	$	4,338	$	1,883

	Gain (loss) recognized in OCI For the Six Months Ended June 30,					Location of amounts reclassified from OCI into income	Gain reclassified from OCI For the Six Months Ended June 30,
Type	2019			2018			2019		2018
Swap Agreements	$	(55,870	)	$	33,285	Interest expense	$	8,799	$	2,124

Credit-risk-related Contingent Features

The Company has agreements with some of its derivative counterparties that contain provisions pursuant to which the Company could be declared in default of its derivative obligations if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender.

The Company also has an agreement with some of its derivative counterparties that incorporates the loan covenant provisions of the Company’s indebtedness with a lender affiliate of the derivative counterparty. Failure to comply with the loan covenant provisions would result in the Company being in default on any derivative instrument obligations covered by the agreement.

As of June 30, 2019, 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 $31,786. As of June 30, 2019, the Company had not posted any collateral related to these agreements. If the Company had breached any of these provisions as of June 30, 2019, it could have been required to cash settle its obligations under the agreements at their termination value of $31,786, including accrued interest.

XML

Exchangeable Senior Notes

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Exchangeable Senior Notes

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 are being amortized as an adjustment to interest expense over five years, which represents the estimated term based on the first available redemption date, and are included in exchangeable senior notes, net, in the condensed consolidated balance sheets. The 2015 Notes are general unsecured senior obligations of the Operating Partnership and are fully guaranteed by the Company. Interest is payable on April 1 and October 1 of each year beginning April 1, 2016, until the maturity date of October 1, 2035. The 2015 Notes bear interest at 3.125% per annum and contain an exchange settlement feature, which provides that the 2015 Notes may, 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 exchange rate of the 2015 Notes as of June 30, 2019 was approximately 10.84 shares of the Company’s common stock per $1,000 principal amount of the 2015 Notes.

The Operating Partnership may 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 may 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 have 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 has 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. Certain events are considered “Events of Default,” as defined in the indenture governing the 2015 Notes, which may result in the accelerated maturity of

the 2015 Notes.

Additionally, the 2015 Notes can be exchanged during any calendar quarter, if the last reported sale price of the common stock of the Company is 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 price of the Company’s common stock did not exceed 130% of the exchange price for the required time period for the 2015 Notes during the quarter ended June 30, 2019.

On June 21, 2013, the Operating Partnership issued $250,000 of its 2.375% Exchangeable Senior Notes due 2033 at a 1.5% discount, or $3,750, and costs incurred to issue the 2013 Notes were approximately $1,672. 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. The 2013 Notes bore interest at 2.375% per annum and contained an exchange settlement feature. During the three months ended March 31, 2018, the Company repurchased a total principal amount of $37,709 of the 2013 Notes. The Company paid cash of $58,469 for the total of the principal amount and the exchange value in excess of the principal amount. The Operating Partnership redeemed all remaining outstanding 2013 Notes on July 5, 2018.

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 accounts for the liability and equity components of the 2013 Notes and 2015 Notes separately. The equity components are included in paid-in capital in stockholders’ equity in the condensed consolidated balance sheets, and the value of the equity components are treated as original issue discount for purposes of accounting for the debt components. The discounts are amortized as interest expense over the remaining period of the debt through its first redemption date: July 1, 2018 for the 2013 Notes, and October 1, 2020 for the 2015 Notes. The effective interest rate on the liability components of the 2013 Notes and the 2015 Notes is 4.0%, which approximated the market rate of interest of similar debt without exchange features (i.e. nonconvertible debt) at the time of issuance.

Information about the Company’s 2015 Notes, including the total carrying amount of the equity component, the principal amount of the liability component, the unamortized discount and the net carrying amount was as follows for the periods indicated:

	June 30, 2019			December 31, 2018
Carrying amount of equity component	$	22,597		$	22,597
Principal amount of liability component	575,000			575,000
Unamortized discount - equity component	(6,070		)	(8,417		)
Unamortized debt issuance costs	(3,010		)	(4,209		)
Net carrying amount of liability components	$	565,920		$	562,374

The amount of interest cost recognized relating to the contractual interest rate and the amortization of the discount on the liability component of the 2015 Notes were as follows for the periods indicated:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Contractual interest	$	4,492	$	4,561	$	8,984	$	9,122
Amortization of discount	1,185		1,176		2,347		2,385
Total interest expense recognized	$	5,677	$	5,737	$	11,331	$	11,507

XML

Stockholders' Equity

6 Months Ended

Jun. 30, 2019

Stockholders' Equity Note [Abstract]

Stockholders' Equity

STOCKHOLDERS’ EQUITY

On May 15, 2019, the Company filed its $500,000 "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 nine sales agents.

During the three months ended June 30, 2019, the Company sold 930,000 shares of common stock under its "at the market" equity program at an average sales price of $107.61 per share, resulting in net proceeds of $98,796. As of June 30, 2019, the Company had $399,927 available for issuance under the equity distribution agreements.

XML

Noncontrolling Interest Represented by Preferred Operating Partnership Units

6 Months Ended

Jun. 30, 2019

Noncontrolling Interest [Abstract]

Noncontrolling Interest Represented by Preferred Operating Partnership Units

NONCONTROLLING INTEREST REPRESENTED BY PREFERRED OPERATING PARTNERSHIP UNITS

Classification of Noncontrolling Interests

GAAP requires a company to present ownership interests in subsidiaries held by parties other than the company in the consolidated financial statements within the equity section, but separate from the company’s equity. It also requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations and requires changes in ownership interest to be accounted for similarly as equity transactions. If noncontrolling interests are determined to be redeemable, they are to be carried at their redemption value as of the balance sheet date and reported as temporary equity.

The Company has evaluated the terms of the Operating Partnership’s preferred units and classifies the noncontrolling interest represented by such preferred units as stockholders’ equity in the accompanying condensed consolidated balance sheets. The Company will periodically evaluate individual noncontrolling interests for the ability to continue to recognize the noncontrolling interest as permanent equity in the condensed consolidated balance sheets. Any noncontrolling interests that fail to qualify as permanent equity will be reclassified as temporary equity and adjusted to the greater of (1) the carrying amount and (2) the redemption value as of the end of the period in which the determination is made.

At June 30, 2019 and December 31, 2018, the noncontrolling interests represented by the Preferred OP Units qualified for classification as permanent equity on the Company's condensed consolidated balance sheets. The partnership agreement of the Operating Partnership (as amended, the "Partnership Agreement") provides for the designation and issuance of the OP Units.

As of June 30, 2019 and December 31, 2018, noncontrolling interests in Preferred OP Units were presented net of notes receivable from Preferred OP Unit holders of $100,000 and $108,644, respectfully, as more fully described below.

Series A Participating Redeemable Preferred Units

The Partnership Agreement provides for the designation and issuance of the Series A Units. The Series A Units have priority over all other partnership interests of the Operating Partnership with respect to distributions and liquidation.

The Series A Units were issued in June 2007. Series A Units in the amount of $101,700 bear a fixed priority return of 2.3% and originally had a fixed liquidation value of $115,000. The remaining balance participates in distributions with, and has a liquidation value equal to that of the OP Units. The Series A Units are redeemable at the option of the holder, which redemption obligation may be satisfied, at the Company’s option, in cash or shares of its common stock. As a result of the redemption of 114,500 Series A Units in October 2014, the remaining fixed liquidation value was reduced to $101,700, which represents 875,480 Series A Units. On April 18, 2017, the holder of the Series A Units and the Operating Partnership agreed to reduce the fixed priority return on the Series A Units from 5.0% to 2.3% in exchange for a reduction in the interest rate of the related loan, as more fully described below.

On June 25, 2007, the Operating Partnership loaned the holder of the Series A Units $100,000. On April 18, 2017, a loan amendment was signed modifying the maturity date of the loan to the later of the death of the Series A Unit holder or his spouse and also lowering the interest rate of the loan from 4.9% to 2.1%. The loan amendment was determined to be a loan modification under GAAP, and therefore no change in value was recognized. The loan is secured by the borrower’s Series A Units. No future redemption of Series A Units can be made unless the loan secured by the Series A Units is also repaid. The Series A Units are shown on the balance sheet net of the $100,000 loan because the borrower under the loan receivable is also the holder of the Series A Units.

Series B Redeemable Preferred Units

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

The Series B Units were issued in 2013 and 2014 and have a liquidation value of $25.00 per unit for a fixed liquidation value of $41,902, which represents 1,676,087 Series B Units. Holders of the Series B Units receive distributions at an annual rate of 6.0%. These distributions are cumulative. The Series B Units became redeemable at the option of the holder on the first anniversary of the date of issuance, which redemption obligation may be satisfied at the Company’s option in cash or shares of its common stock.

Series C Convertible Redeemable Preferred Units

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

The Series C Units were issued in 2013 and 2014 and had a liquidation value of $42.10 per unit. The Series C Units became redeemable at the option of the holder one year from the date of issuance, which redemption obligation could be satisfied at the Company’s option in cash or shares of its common stock. The Series C Units were convertible into OP Units at the option of the holder at a rate of 0.9145 OP Units per Series C Unit converted. This conversion option expired upon the fifth anniversary of the date of issuance.

In December 2014, the Operating Partnership loaned certain holders of the Series C Units $20,230. The loan receivable, which was collateralized by the Series C Units, bears interest at 5.0% per annum and matures on December 15, 2024. The Series C Units were shown on the balance sheet net of the loan balance because the borrower under the loan receivable is also the holder of the Series C Units.

On December 1, 2018, certain holders of the Series C Units converted their Series C Units into OP Units, with a total of 407,996 Series C Units being converted into a total of 373,113 OP Units. As part of this conversion, the holders of the Series C Units agreed to pledge the OP Units received in the conversion as collateral on the loan receivable to replace the Series C Units

that were converted. As of December 31, 2018, the total outstanding balance of the loan receivable was $19,735, of which $8,644 is shown as a reduction of the noncontrolling interests related to the Series C Units and $11,091 is shown as a reduction of the noncontrolling interests related to the OP Units on the Company's consolidated balance sheets. On April 25, 2019, the remaining 296,020 Series C Units were converted into 270,709 OP Units. The outstanding balance of the loan receivable is shown as a reduction of the noncontrolling interests related to the OP Units as of June 30, 2019. See footnote 12 for further discussion of noncontrolling interests.

Series D Redeemable Preferred Units

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

The Series D Units have been issued at various times from 2014 to 2019. In addition, during the six months ended June 30, 2019, the Operating Partnership issued 1,120,924 Series D Units valued at $28,022 in conjunction with joint venture acquisitions.

The Series D Units have a liquidation value of $25.00 per unit, for a fixed liquidation value of $115,511, which represents 4,803,445 Series D Units. Holders of the Series D Units receive distributions at an annual rate between 3.0% and 5.0%. These distributions are cumulative. The Series D Units become redeemable at the option of the holder on the first anniversary of the date of issuance, which redemption obligation may be satisfied at the Company’s option in cash or shares of its common stock. In addition, certain of the Series D Units are exchangeable for OP Units at the option of the holder until the tenth anniversary of the date of issuance, with the number of 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.

NONCONTROLLING INTEREST IN OPERATING PARTNERSHIP AND OTHER NONCONTROLLING INTERESTS

Noncontrolling Interest in Operating Partnership

The Company’s interest in its stores is held through the Operating Partnership. Between its general partner and limited partner interests, the Company held a 90.6% ownership interest in the Operating Partnership as of June 30, 2019. The remaining ownership interests in the Operating Partnership (including Preferred OP Units) of 9.4% are held by certain former owners of assets acquired by the Operating Partnership. As of June 30, 2019, and December 31, 2018 the noncontrolling interests in the Operating Partnership are shown on the balance sheet net of notes receivable of $19,735 and $11,091, respectively, because the borrowers under the loan receivable are also holders of OP Units. This loan receivable bears interest at 5.0% per annum and matures on December 15, 2024.

The noncontrolling interest in the Operating Partnership represents OP Units that are not owned by the Company. OP Units are redeemable at the option of the holder, which redemption may be satisfied at the Company's option in cash, based upon the fair market value of an equivalent number of shares of the Company’s common stock (based on the ten-day average trading price) at the time of the redemption, or shares of the Company's common stock on a one-for-one basis, subject to anti-dilution adjustments provided in the Partnership Agreement. As of June 30, 2019, the ten-day average closing price of the Company's common stock was $107.34 and there were 6,054,459 OP Units outstanding. Assuming that all of the OP Unit holders exercised their right to redeem all of their OP Units on June 30, 2019 and the Company elected to pay the OP Unit holders cash, the Company would have paid $649,886 in cash consideration to redeem the units.

OP Unit activity is summarized as follows for the periods presented:

	For the Six Months Ended June 30,
	2019		2018
OP Units redeemed for common stock	210,501		10,000
OP Units redeemed for cash	—		30,000
Cash paid for OP Units redeemed	$	—	$	2,558
OP Units issued in conjunction with acquisitions	—		21,768
Value of OP Units issued in conjunction with acquisitions	$	—	$	1,877
OP Units issued upon redemption of Series C Units	270,709		—

GAAP requires a company to present ownership interests in subsidiaries held by parties other than the company in the consolidated financial statements within the equity section, but separate from the company’s equity. It also requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations, and requires changes in ownership interest to be accounted for similarly as equity transactions. If noncontrolling interests are determined to be redeemable, they are to be carried at their redemption value as of the balance sheet date and reported as temporary equity.

The Company has evaluated the terms of the OP Units and classifies the noncontrolling interest represented by the OP Units as stockholders’ equity in the accompanying condensed consolidated balance sheets. The Company will periodically evaluate individual noncontrolling interests for the ability to continue to recognize the noncontrolling amount as permanent equity in the condensed consolidated balance sheets. Any noncontrolling interests that fail to qualify as permanent equity will be reclassified as temporary equity and adjusted to the greater of (1) the carrying amount and (2) the redemption value as of the end of the period in which the determination is made.

Other Noncontrolling Interests

Other noncontrolling interests represent the ownership interests of third parties in two consolidated joint ventures as of June 30, 2019. One joint venture owns two operating stores in Texas, one operating store and one development store in Colorado, and the other joint venture owns one operating store in Pennsylvania and one development property in New Jersey. The voting interests of the third-party owners are between 5.0% and 20.0%.

XML

Noncontrolling Interest in Operating Partnership and Other Noncontrolling Interests

6 Months Ended

Jun. 30, 2019

Noncontrolling Interest [Abstract]

Noncontrolling Interest in Operating Partnership and Other Noncontrolling Interests

NONCONTROLLING INTEREST REPRESENTED BY PREFERRED OPERATING PARTNERSHIP UNITS

Classification of Noncontrolling Interests

GAAP requires a company to present ownership interests in subsidiaries held by parties other than the company in the consolidated financial statements within the equity section, but separate from the company’s equity. It also requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations and requires changes in ownership interest to be accounted for similarly as equity transactions. If noncontrolling interests are determined to be redeemable, they are to be carried at their redemption value as of the balance sheet date and reported as temporary equity.

The Company has evaluated the terms of the Operating Partnership’s preferred units and classifies the noncontrolling interest represented by such preferred units as stockholders’ equity in the accompanying condensed consolidated balance sheets. The Company will periodically evaluate individual noncontrolling interests for the ability to continue to recognize the noncontrolling interest as permanent equity in the condensed consolidated balance sheets. Any noncontrolling interests that fail to qualify as permanent equity will be reclassified as temporary equity and adjusted to the greater of (1) the carrying amount and (2) the redemption value as of the end of the period in which the determination is made.

At June 30, 2019 and December 31, 2018, the noncontrolling interests represented by the Preferred OP Units qualified for classification as permanent equity on the Company's condensed consolidated balance sheets. The partnership agreement of the Operating Partnership (as amended, the "Partnership Agreement") provides for the designation and issuance of the OP Units.

As of June 30, 2019 and December 31, 2018, noncontrolling interests in Preferred OP Units were presented net of notes receivable from Preferred OP Unit holders of $100,000 and $108,644, respectfully, as more fully described below.

Series A Participating Redeemable Preferred Units

The Partnership Agreement provides for the designation and issuance of the Series A Units. The Series A Units have priority over all other partnership interests of the Operating Partnership with respect to distributions and liquidation.

The Series A Units were issued in June 2007. Series A Units in the amount of $101,700 bear a fixed priority return of 2.3% and originally had a fixed liquidation value of $115,000. The remaining balance participates in distributions with, and has a liquidation value equal to that of the OP Units. The Series A Units are redeemable at the option of the holder, which redemption obligation may be satisfied, at the Company’s option, in cash or shares of its common stock. As a result of the redemption of 114,500 Series A Units in October 2014, the remaining fixed liquidation value was reduced to $101,700, which represents 875,480 Series A Units. On April 18, 2017, the holder of the Series A Units and the Operating Partnership agreed to reduce the fixed priority return on the Series A Units from 5.0% to 2.3% in exchange for a reduction in the interest rate of the related loan, as more fully described below.

On June 25, 2007, the Operating Partnership loaned the holder of the Series A Units $100,000. On April 18, 2017, a loan amendment was signed modifying the maturity date of the loan to the later of the death of the Series A Unit holder or his spouse and also lowering the interest rate of the loan from 4.9% to 2.1%. The loan amendment was determined to be a loan modification under GAAP, and therefore no change in value was recognized. The loan is secured by the borrower’s Series A Units. No future redemption of Series A Units can be made unless the loan secured by the Series A Units is also repaid. The Series A Units are shown on the balance sheet net of the $100,000 loan because the borrower under the loan receivable is also the holder of the Series A Units.

Series B Redeemable Preferred Units

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

The Series B Units were issued in 2013 and 2014 and have a liquidation value of $25.00 per unit for a fixed liquidation value of $41,902, which represents 1,676,087 Series B Units. Holders of the Series B Units receive distributions at an annual rate of 6.0%. These distributions are cumulative. The Series B Units became redeemable at the option of the holder on the first anniversary of the date of issuance, which redemption obligation may be satisfied at the Company’s option in cash or shares of its common stock.

Series C Convertible Redeemable Preferred Units

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

The Series C Units were issued in 2013 and 2014 and had a liquidation value of $42.10 per unit. The Series C Units became redeemable at the option of the holder one year from the date of issuance, which redemption obligation could be satisfied at the Company’s option in cash or shares of its common stock. The Series C Units were convertible into OP Units at the option of the holder at a rate of 0.9145 OP Units per Series C Unit converted. This conversion option expired upon the fifth anniversary of the date of issuance.

In December 2014, the Operating Partnership loaned certain holders of the Series C Units $20,230. The loan receivable, which was collateralized by the Series C Units, bears interest at 5.0% per annum and matures on December 15, 2024. The Series C Units were shown on the balance sheet net of the loan balance because the borrower under the loan receivable is also the holder of the Series C Units.

On December 1, 2018, certain holders of the Series C Units converted their Series C Units into OP Units, with a total of 407,996 Series C Units being converted into a total of 373,113 OP Units. As part of this conversion, the holders of the Series C Units agreed to pledge the OP Units received in the conversion as collateral on the loan receivable to replace the Series C Units

that were converted. As of December 31, 2018, the total outstanding balance of the loan receivable was $19,735, of which $8,644 is shown as a reduction of the noncontrolling interests related to the Series C Units and $11,091 is shown as a reduction of the noncontrolling interests related to the OP Units on the Company's consolidated balance sheets. On April 25, 2019, the remaining 296,020 Series C Units were converted into 270,709 OP Units. The outstanding balance of the loan receivable is shown as a reduction of the noncontrolling interests related to the OP Units as of June 30, 2019. See footnote 12 for further discussion of noncontrolling interests.

Series D Redeemable Preferred Units

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

The Series D Units have been issued at various times from 2014 to 2019. In addition, during the six months ended June 30, 2019, the Operating Partnership issued 1,120,924 Series D Units valued at $28,022 in conjunction with joint venture acquisitions.

The Series D Units have a liquidation value of $25.00 per unit, for a fixed liquidation value of $115,511, which represents 4,803,445 Series D Units. Holders of the Series D Units receive distributions at an annual rate between 3.0% and 5.0%. These distributions are cumulative. The Series D Units become redeemable at the option of the holder on the first anniversary of the date of issuance, which redemption obligation may be satisfied at the Company’s option in cash or shares of its common stock. In addition, certain of the Series D Units are exchangeable for OP Units at the option of the holder until the tenth anniversary of the date of issuance, with the number of 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.

NONCONTROLLING INTEREST IN OPERATING PARTNERSHIP AND OTHER NONCONTROLLING INTERESTS

Noncontrolling Interest in Operating Partnership

The Company’s interest in its stores is held through the Operating Partnership. Between its general partner and limited partner interests, the Company held a 90.6% ownership interest in the Operating Partnership as of June 30, 2019. The remaining ownership interests in the Operating Partnership (including Preferred OP Units) of 9.4% are held by certain former owners of assets acquired by the Operating Partnership. As of June 30, 2019, and December 31, 2018 the noncontrolling interests in the Operating Partnership are shown on the balance sheet net of notes receivable of $19,735 and $11,091, respectively, because the borrowers under the loan receivable are also holders of OP Units. This loan receivable bears interest at 5.0% per annum and matures on December 15, 2024.

The noncontrolling interest in the Operating Partnership represents OP Units that are not owned by the Company. OP Units are redeemable at the option of the holder, which redemption may be satisfied at the Company's option in cash, based upon the fair market value of an equivalent number of shares of the Company’s common stock (based on the ten-day average trading price) at the time of the redemption, or shares of the Company's common stock on a one-for-one basis, subject to anti-dilution adjustments provided in the Partnership Agreement. As of June 30, 2019, the ten-day average closing price of the Company's common stock was $107.34 and there were 6,054,459 OP Units outstanding. Assuming that all of the OP Unit holders exercised their right to redeem all of their OP Units on June 30, 2019 and the Company elected to pay the OP Unit holders cash, the Company would have paid $649,886 in cash consideration to redeem the units.

OP Unit activity is summarized as follows for the periods presented:

	For the Six Months Ended June 30,
	2019		2018
OP Units redeemed for common stock	210,501		10,000
OP Units redeemed for cash	—		30,000
Cash paid for OP Units redeemed	$	—	$	2,558
OP Units issued in conjunction with acquisitions	—		21,768
Value of OP Units issued in conjunction with acquisitions	$	—	$	1,877
OP Units issued upon redemption of Series C Units	270,709		—

GAAP requires a company to present ownership interests in subsidiaries held by parties other than the company in the consolidated financial statements within the equity section, but separate from the company’s equity. It also requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations, and requires changes in ownership interest to be accounted for similarly as equity transactions. If noncontrolling interests are determined to be redeemable, they are to be carried at their redemption value as of the balance sheet date and reported as temporary equity.

The Company has evaluated the terms of the OP Units and classifies the noncontrolling interest represented by the OP Units as stockholders’ equity in the accompanying condensed consolidated balance sheets. The Company will periodically evaluate individual noncontrolling interests for the ability to continue to recognize the noncontrolling amount as permanent equity in the condensed consolidated balance sheets. Any noncontrolling interests that fail to qualify as permanent equity will be reclassified as temporary equity and adjusted to the greater of (1) the carrying amount and (2) the redemption value as of the end of the period in which the determination is made.

Other Noncontrolling Interests

Other noncontrolling interests represent the ownership interests of third parties in two consolidated joint ventures as of June 30, 2019. One joint venture owns two operating stores in Texas, one operating store and one development store in Colorado, and the other joint venture owns one operating store in Pennsylvania and one development property in New Jersey. The voting interests of the third-party owners are between 5.0% and 20.0%.

XML

Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

LEASES

The Company adopted ASC 842, "Leases," effective January 1, 2019 on a modified retrospective basis as allowed under the standard and prior periods have not been restated. The Company elected the package of transition practical expedients, and has therefore (1) not reassessed whether any expired or existing contracts are or contain leases, (2) not reassessed the lease classification for any expired or existing leases, and (3) not reassessed initial direct costs for any expired or existing leases.

Lessee Accounting

The Company recognized lease liabilities of $104,863 and right-of-use assets related to operating leases totaling $95,506 as of the adoption date. These are presented as “Operating lease liabilities” and “Real estate assets-operating lease right-of-use assets” on the Company’s consolidated balance sheets.

In June 2019, the Company entered into new triple-net lease agreements to lease land and buildings at 22 operating stores. These leases are categorized as operating leases, and have contractual lease terms of 25 years, but have termination options after 10 years that result in lease terms of 10 years under ASC 842. The Company recorded new operating lease right-of-use assets and operating lease liabilities of $127,532 in conjunction with these new lease agreements.

The Company is lessee under several types of lease agreements. Generally, these leases fall into the following categories:

• Leases of real estate at 44 stores classified as wholly-owned. These leases generally have original lease terms between 10-67 years. Under these leases, the Company typically has the option to extend the lease term for additional terms of 5-35 years.

• Leases of its corporate offices and call center. These leases have original lease terms between 5.3 and 12.1 years, with no extension options.

• Leases of 12 regional offices. These leases have original lease terms between three and five years. The Company has the option on five of these leases to extend the lease term for three additional years.

• Leases of small district offices. These leases generally have terms of 12 months or less. The Company has made an accounting election to account for these under the short-term lease exception outlined under ASC 842. Therefore, no lease assets or liabilities are recorded related to these leases, and the Company will recognize lease payments as expense on a straight-line basis over the related lease terms.

The Company has included lease extension options in the lease term for calculations of its right-of-use assets and liabilities related to the real estate asset leases at its stores when it is reasonably certain that the Company plans to extend these leases when the options arise.

Several of the leases of real estate at the Company’s stores include escalation clauses based on an index or rate, such as the Consumer Price Index (CPI). The Company included these lease payments in its calculations of right-of-use assets and liabilities based on the prevailing index or rate as of the adoption date. The Company will recognize changes to these variable lease payments in earnings in the period of the change.

One of the real estate leases includes variable lease payments that are based upon a percentage of gross revenues. Certain other leases include additional variable payments relating to a percentage of sales in excess of a specified amount, common area maintenance, property taxes, etc. These payments are variable lease payments that do not depend on an index or rate and are excluded from the measurement of the lease liabilities and right-of-use-assets for these leases. The Company will recognize costs from these variable lease payments in the period in which the obligation for those payments is incurred.

The Company has signed a lease agreement for a store in New Jersey. The store is currently under construction by the lessor, and the Company will take possession of the leased asset upon completion of construction, which is estimated to be completed before the end of 2019. The lease term is 75 years from the lease commencement date, with three 10-year extension options. The Company has also signed a lease agreement for a store in California. The store is under construction by the lessor, and the Company will take possession of the leased asset upon completion of construction, which is estimated to be completed in mid-2020. The lease term is 15 years from the lease commencement date, with three 10-year extension options and one 5-year extension option. The Company has not recorded right-of-use assets or lease liabilities related to these leases as of June 30, 2019 as the lease term has not yet commenced for either lease. The lease commencement date will occur when the Company takes possession of the leased asset, and the Company will recognize a lease liability and right-of-use asset relating to the leases at that time.

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

Following is information on our total lease costs as of the period(s) indicated:

	For the Three Months Ended June 30,			For the Six Months Ended June 30,
	2019			2019
Lease cost
Finance lease cost:
Amortization of finance lease right-of-use assets	$	42		$	84
Interest expense related to finance lease liabilities	73			143
Operating lease cost	3,339			5,677
Variable lease cost	1,149			1,802
Short-term lease cost	55			110
Total lease cost	$	4,658		$	7,816
Cash paid for amounts included in the measurement of lease liabilities
Operating cash outflows for finance lease payments	$	58		$	115
Operating cash outflows for operating lease payments	4,084			7,351
Total cash paid for lease liability measurement	$	4,142		$	7,466
Right-of-use assets obtained in exchange for new operating lease liabilities	$	129,511		$	225,017
Right-of-use assets obtained in exchange for new finance lease liabilities	$	—		$	8,050
Weighted average remaining lease term - finance leases (years)	47.3
Weighted average remaining lease term - operating leases (years)	15.9
Weighted average discount rate - finance leases	6.07		%
Weighted average discount rate - operating leases	3.68		%

Following is information about the Company’s undiscounted cash flows on an annual basis for operating and finance leases, including a reconciliation of the undiscounted cash flows to the finance lease and operating lease liabilities recognized in the Company’s consolidated balance sheets:

	Operating			Finance			Total
2019	$	10,981		$	116		$	11,097
2020	22,336			232			22,568
2021	22,531			237			22,768
2022	22,494			255			22,749
2023	22,520			255			22,775
Thereafter	217,489			16,777			234,266
Total	$	318,351		$	17,872		$	336,223
Present value adjustments	(87,535		)	(13,064		)	(100,599		)
Lease liabilities	$	230,816		$	4,808		$	235,624

Lessor Accounting

The Company's property rental revenue is primarily related to rents received from tenants at its operating stores. The Company's leases with its self-storage tenants are generally on month-to-month terms, include automatic monthly renewals, allow flexibility to increase rental rates over time as market conditions permit, and provide for the collection of contingent fees such as late fees. These leases do not include any terms or conditions that allow the tenants to purchase the leased space. All self-storage leases for which the Company acts as lessor have been classified as operating leases. The real estate assets related to the Company's stores are included in Real estate assets, net on the Company's condensed consolidated balance sheets and are presented at historical cost less accumulated depreciation and impairment, if any. Rental income related to these operating leases is included in Property rental revenue on the Company's condensed consolidated statements of operations, and is recognized each month during the month-to-month terms at the rental rate in place during each month.

Leases

LEASES

The Company adopted ASC 842, "Leases," effective January 1, 2019 on a modified retrospective basis as allowed under the standard and prior periods have not been restated. The Company elected the package of transition practical expedients, and has therefore (1) not reassessed whether any expired or existing contracts are or contain leases, (2) not reassessed the lease classification for any expired or existing leases, and (3) not reassessed initial direct costs for any expired or existing leases.

Lessee Accounting

The Company recognized lease liabilities of $104,863 and right-of-use assets related to operating leases totaling $95,506 as of the adoption date. These are presented as “Operating lease liabilities” and “Real estate assets-operating lease right-of-use assets” on the Company’s consolidated balance sheets.

In June 2019, the Company entered into new triple-net lease agreements to lease land and buildings at 22 operating stores. These leases are categorized as operating leases, and have contractual lease terms of 25 years, but have termination options after 10 years that result in lease terms of 10 years under ASC 842. The Company recorded new operating lease right-of-use assets and operating lease liabilities of $127,532 in conjunction with these new lease agreements.

The Company is lessee under several types of lease agreements. Generally, these leases fall into the following categories:

• Leases of real estate at 44 stores classified as wholly-owned. These leases generally have original lease terms between 10-67 years. Under these leases, the Company typically has the option to extend the lease term for additional terms of 5-35 years.

• Leases of its corporate offices and call center. These leases have original lease terms between 5.3 and 12.1 years, with no extension options.

• Leases of 12 regional offices. These leases have original lease terms between three and five years. The Company has the option on five of these leases to extend the lease term for three additional years.

• Leases of small district offices. These leases generally have terms of 12 months or less. The Company has made an accounting election to account for these under the short-term lease exception outlined under ASC 842. Therefore, no lease assets or liabilities are recorded related to these leases, and the Company will recognize lease payments as expense on a straight-line basis over the related lease terms.

The Company has included lease extension options in the lease term for calculations of its right-of-use assets and liabilities related to the real estate asset leases at its stores when it is reasonably certain that the Company plans to extend these leases when the options arise.

Several of the leases of real estate at the Company’s stores include escalation clauses based on an index or rate, such as the Consumer Price Index (CPI). The Company included these lease payments in its calculations of right-of-use assets and liabilities based on the prevailing index or rate as of the adoption date. The Company will recognize changes to these variable lease payments in earnings in the period of the change.

One of the real estate leases includes variable lease payments that are based upon a percentage of gross revenues. Certain other leases include additional variable payments relating to a percentage of sales in excess of a specified amount, common area maintenance, property taxes, etc. These payments are variable lease payments that do not depend on an index or rate and are excluded from the measurement of the lease liabilities and right-of-use-assets for these leases. The Company will recognize costs from these variable lease payments in the period in which the obligation for those payments is incurred.

The Company has signed a lease agreement for a store in New Jersey. The store is currently under construction by the lessor, and the Company will take possession of the leased asset upon completion of construction, which is estimated to be completed before the end of 2019. The lease term is 75 years from the lease commencement date, with three 10-year extension options. The Company has also signed a lease agreement for a store in California. The store is under construction by the lessor, and the Company will take possession of the leased asset upon completion of construction, which is estimated to be completed in mid-2020. The lease term is 15 years from the lease commencement date, with three 10-year extension options and one 5-year extension option. The Company has not recorded right-of-use assets or lease liabilities related to these leases as of June 30, 2019 as the lease term has not yet commenced for either lease. The lease commencement date will occur when the Company takes possession of the leased asset, and the Company will recognize a lease liability and right-of-use asset relating to the leases at that time.

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

Following is information on our total lease costs as of the period(s) indicated:

	For the Three Months Ended June 30,			For the Six Months Ended June 30,
	2019			2019
Lease cost
Finance lease cost:
Amortization of finance lease right-of-use assets	$	42		$	84
Interest expense related to finance lease liabilities	73			143
Operating lease cost	3,339			5,677
Variable lease cost	1,149			1,802
Short-term lease cost	55			110
Total lease cost	$	4,658		$	7,816
Cash paid for amounts included in the measurement of lease liabilities
Operating cash outflows for finance lease payments	$	58		$	115
Operating cash outflows for operating lease payments	4,084			7,351
Total cash paid for lease liability measurement	$	4,142		$	7,466
Right-of-use assets obtained in exchange for new operating lease liabilities	$	129,511		$	225,017
Right-of-use assets obtained in exchange for new finance lease liabilities	$	—		$	8,050
Weighted average remaining lease term - finance leases (years)	47.3
Weighted average remaining lease term - operating leases (years)	15.9
Weighted average discount rate - finance leases	6.07		%
Weighted average discount rate - operating leases	3.68		%

Following is information about the Company’s undiscounted cash flows on an annual basis for operating and finance leases, including a reconciliation of the undiscounted cash flows to the finance lease and operating lease liabilities recognized in the Company’s consolidated balance sheets:

	Operating			Finance			Total
2019	$	10,981		$	116		$	11,097
2020	22,336			232			22,568
2021	22,531			237			22,768
2022	22,494			255			22,749
2023	22,520			255			22,775
Thereafter	217,489			16,777			234,266
Total	$	318,351		$	17,872		$	336,223
Present value adjustments	(87,535		)	(13,064		)	(100,599		)
Lease liabilities	$	230,816		$	4,808		$	235,624

Lessor Accounting

The Company's property rental revenue is primarily related to rents received from tenants at its operating stores. The Company's leases with its self-storage tenants are generally on month-to-month terms, include automatic monthly renewals, allow flexibility to increase rental rates over time as market conditions permit, and provide for the collection of contingent fees such as late fees. These leases do not include any terms or conditions that allow the tenants to purchase the leased space. All self-storage leases for which the Company acts as lessor have been classified as operating leases. The real estate assets related to the Company's stores are included in Real estate assets, net on the Company's condensed consolidated balance sheets and are presented at historical cost less accumulated depreciation and impairment, if any. Rental income related to these operating leases is included in Property rental revenue on the Company's condensed consolidated statements of operations, and is recognized each month during the month-to-month terms at the rental rate in place during each month.

Leases

LEASES

The Company adopted ASC 842, "Leases," effective January 1, 2019 on a modified retrospective basis as allowed under the standard and prior periods have not been restated. The Company elected the package of transition practical expedients, and has therefore (1) not reassessed whether any expired or existing contracts are or contain leases, (2) not reassessed the lease classification for any expired or existing leases, and (3) not reassessed initial direct costs for any expired or existing leases.

Lessee Accounting

The Company recognized lease liabilities of $104,863 and right-of-use assets related to operating leases totaling $95,506 as of the adoption date. These are presented as “Operating lease liabilities” and “Real estate assets-operating lease right-of-use assets” on the Company’s consolidated balance sheets.

In June 2019, the Company entered into new triple-net lease agreements to lease land and buildings at 22 operating stores. These leases are categorized as operating leases, and have contractual lease terms of 25 years, but have termination options after 10 years that result in lease terms of 10 years under ASC 842. The Company recorded new operating lease right-of-use assets and operating lease liabilities of $127,532 in conjunction with these new lease agreements.

The Company is lessee under several types of lease agreements. Generally, these leases fall into the following categories:

• Leases of real estate at 44 stores classified as wholly-owned. These leases generally have original lease terms between 10-67 years. Under these leases, the Company typically has the option to extend the lease term for additional terms of 5-35 years.

• Leases of its corporate offices and call center. These leases have original lease terms between 5.3 and 12.1 years, with no extension options.

• Leases of 12 regional offices. These leases have original lease terms between three and five years. The Company has the option on five of these leases to extend the lease term for three additional years.

• Leases of small district offices. These leases generally have terms of 12 months or less. The Company has made an accounting election to account for these under the short-term lease exception outlined under ASC 842. Therefore, no lease assets or liabilities are recorded related to these leases, and the Company will recognize lease payments as expense on a straight-line basis over the related lease terms.

The Company has included lease extension options in the lease term for calculations of its right-of-use assets and liabilities related to the real estate asset leases at its stores when it is reasonably certain that the Company plans to extend these leases when the options arise.

Several of the leases of real estate at the Company’s stores include escalation clauses based on an index or rate, such as the Consumer Price Index (CPI). The Company included these lease payments in its calculations of right-of-use assets and liabilities based on the prevailing index or rate as of the adoption date. The Company will recognize changes to these variable lease payments in earnings in the period of the change.

One of the real estate leases includes variable lease payments that are based upon a percentage of gross revenues. Certain other leases include additional variable payments relating to a percentage of sales in excess of a specified amount, common area maintenance, property taxes, etc. These payments are variable lease payments that do not depend on an index or rate and are excluded from the measurement of the lease liabilities and right-of-use-assets for these leases. The Company will recognize costs from these variable lease payments in the period in which the obligation for those payments is incurred.

The Company has signed a lease agreement for a store in New Jersey. The store is currently under construction by the lessor, and the Company will take possession of the leased asset upon completion of construction, which is estimated to be completed before the end of 2019. The lease term is 75 years from the lease commencement date, with three 10-year extension options. The Company has also signed a lease agreement for a store in California. The store is under construction by the lessor, and the Company will take possession of the leased asset upon completion of construction, which is estimated to be completed in mid-2020. The lease term is 15 years from the lease commencement date, with three 10-year extension options and one 5-year extension option. The Company has not recorded right-of-use assets or lease liabilities related to these leases as of June 30, 2019 as the lease term has not yet commenced for either lease. The lease commencement date will occur when the Company takes possession of the leased asset, and the Company will recognize a lease liability and right-of-use asset relating to the leases at that time.

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

Following is information on our total lease costs as of the period(s) indicated:

	For the Three Months Ended June 30,			For the Six Months Ended June 30,
	2019			2019
Lease cost
Finance lease cost:
Amortization of finance lease right-of-use assets	$	42		$	84
Interest expense related to finance lease liabilities	73			143
Operating lease cost	3,339			5,677
Variable lease cost	1,149			1,802
Short-term lease cost	55			110
Total lease cost	$	4,658		$	7,816
Cash paid for amounts included in the measurement of lease liabilities
Operating cash outflows for finance lease payments	$	58		$	115
Operating cash outflows for operating lease payments	4,084			7,351
Total cash paid for lease liability measurement	$	4,142		$	7,466
Right-of-use assets obtained in exchange for new operating lease liabilities	$	129,511		$	225,017
Right-of-use assets obtained in exchange for new finance lease liabilities	$	—		$	8,050
Weighted average remaining lease term - finance leases (years)	47.3
Weighted average remaining lease term - operating leases (years)	15.9
Weighted average discount rate - finance leases	6.07		%
Weighted average discount rate - operating leases	3.68		%

Following is information about the Company’s undiscounted cash flows on an annual basis for operating and finance leases, including a reconciliation of the undiscounted cash flows to the finance lease and operating lease liabilities recognized in the Company’s consolidated balance sheets:

	Operating			Finance			Total
2019	$	10,981		$	116		$	11,097
2020	22,336			232			22,568
2021	22,531			237			22,768
2022	22,494			255			22,749
2023	22,520			255			22,775
Thereafter	217,489			16,777			234,266
Total	$	318,351		$	17,872		$	336,223
Present value adjustments	(87,535		)	(13,064		)	(100,599		)
Lease liabilities	$	230,816		$	4,808		$	235,624

Lessor Accounting

The Company's property rental revenue is primarily related to rents received from tenants at its operating stores. The Company's leases with its self-storage tenants are generally on month-to-month terms, include automatic monthly renewals, allow flexibility to increase rental rates over time as market conditions permit, and provide for the collection of contingent fees such as late fees. These leases do not include any terms or conditions that allow the tenants to purchase the leased space. All self-storage leases for which the Company acts as lessor have been classified as operating leases. The real estate assets related to the Company's stores are included in Real estate assets, net on the Company's condensed consolidated balance sheets and are presented at historical cost less accumulated depreciation and impairment, if any. Rental income related to these operating leases is included in Property rental revenue on the Company's condensed consolidated statements of operations, and is recognized each month during the month-to-month terms at the rental rate in place during each month.

XML

Segment Information

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

The Company’s segment disclosures present the measure used by the chief operating decision makers ("CODMs") for purposes of assessing each segment’s performance. The Company’s CODMs are comprised of several members of its executive management team who use net operating income ("NOI") to assess the performance of the business for the Company’s reportable operating segments. NOI for the Company's self-storage operations represents total property revenue less direct property operating expenses. NOI for the Company's tenant reinsurance segment represents tenant reinsurance revenues less tenant reinsurance expense.

The Company has two reportable segments: (1) self-storage operations and (2) tenant reinsurance. The self-storage operations activities include rental operations of wholly-owned stores. The Company's consolidated revenues equal total segment revenues plus property management fees and other income. Tenant reinsurance activities include the reinsurance of risks relating to the loss of goods stored by tenants in the stores operated by the Company. Excluded from segment revenues and net operating income is property management fees and other income.

For all periods presented, substantially all of the Company's real estate assets, intangible assets, other assets, and accrued and other liabilities are associated with the self-storage operations segment. The prior periods have been restated to conform to the current presentation. Financial information for the Company’s business segments is set forth below:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Revenues:
Self-Storage Operations	$	279,584		$	258,128		$	550,587		$	506,014
Tenant Reinsurance	31,701			28,521			61,498			55,555
Total segment revenues	$	311,285		$	286,649		$	612,085		$	561,569
Operating expenses:
Self-Storage Operations	$	80,870		$	73,083		$	159,635		$	145,836
Tenant Reinsurance	6,982			5,471			13,949			11,078
Total segment operating expenses	$	87,852		$	78,554		$	173,584		$	156,914
Net operating income:
Self-Storage Operations	$	198,714		$	185,045		$	390,952		$	360,178
Tenant Reinsurance	24,719			23,050			47,549			44,477
Total segment net operating income:	$	223,433		$	208,095		$	438,501		$	404,655
Other components of net income (loss):
Property management fees and other income	$	12,317		$	10,164		23,063			20,729
General and administrative expense	(23,351		)	(21,651		)	(46,029		)	(43,115		)
Depreciation and amortization expense	(54,406		)	(51,892		)	(109,065		)	(103,641		)
Gain on real estate transactions	1,205			—			1,205			—
Interest expense	(47,448		)	(43,347		)	(94,808		)	(84,313		)
Non-cash interest expense related to the amortization of discount on equity component of exchangeable senior notes	(1,185		)	(1,176		)	(2,347		)	(2,385		)
Interest income	1,718			1,188			3,106			2,626
Equity in earnings of unconsolidated real estate ventures	3,121			3,429			5,751			7,026
Income tax expense	(2,715		)	(2,097		)	(4,528		)	(3,439		)
Net income	$	112,689		$	102,713		$	214,849		$	198,143

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

As of June 30, 2019, the Company was involved in various legal proceedings and was subject to various claims and complaints arising in the ordinary course of business. Because litigation is inherently unpredictable, the outcome of these matters cannot presently be determined with any degree of certainty. In accordance with applicable accounting guidance, management establishes an accrued liability for litigation when those matters present loss contingencies that are both probable and reasonably estimable. 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 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 June 30, 2019, the Company was under agreement to acquire five stores at a total purchase price of $58,628. Of these stores, one is scheduled to close in 2019 at a purchase price of $16,800, and four are scheduled to close in 2020 at a purchase price of $41,828. Additionally, the Company is under agreement to acquire eight stores with joint venture partners, for a total investment of $25,616. Seven of these stores are scheduled to close in 2019 and the remaining store is expected to close in 2020.

Although there can be no assurance, the Company is not aware of any material environmental liability, for which it believes it will be ultimately responsible, that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s stores, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to its stores could result in future material environmental liabilities.

XML

Subsequent Events

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

SUBSEQUENT EVENTS

On July 1, 2019, the Operating Partnership amended its existing credit agreement, dated December 7, 2018, by exercising an accordion option under the credit agreement to increase the amount of the commitments available by an additional $500,000.

XML

Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company are presented on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they may not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of results that may be expected for the year ending December 31, 2019. The condensed consolidated balance sheet as of December 31, 2018 has been derived from the Company’s audited financial statements as of that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission.

Recently Issued Accounting Standards

Recently Issued Accounting Standards

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, “Leases (Topic 842),” which modifies the accounting for leases, intending to increase transparency and comparability of organizations by requiring balance sheet presentation of leased assets and increased financial statement disclosure of leasing arrangements. ASU 2016-02 requires entities to recognize a liability for their lease obligations and a corresponding asset representing the right to use the underlying asset over the lease term. Lease obligations are measured at their present value and accounted for using the effective interest method. The accounting for the leased asset differs slightly depending on whether the agreement is deemed to be a financing or operating lease. For financing leases, the leased asset is depreciated on a straight-line basis and is recorded separately from the interest expense in the statements of operations, resulting in higher expense in the earlier part of the lease term. For operating leases, the depreciation and interest expense components are combined, recognized evenly over the term of the lease, and presented as a reduction to operating income. ASU 2016-02 requires that assets and liabilities be presented or disclosed separately, and requires additional disclosure of certain qualitative and quantitative information related to these lease agreements. ASU 2016-02 became effective for annual and interim periods beginning after December 15, 2018. The Company adopted the standard using the modified retrospective approach as of January 1, 2019. The Company elected the package of practical expedients upon adoption, which allows for the application of the standard solely to the transition period in 2019 but does not require application to prior fiscal comparative periods presented. The Company also elected the practical expedient provided in a subsequent amendment to the standard that removed the requirement to separate lease and nonlease components. The Company did not record a significant cumulative catch-up adjustment to retained earnings upon adoption of ASU 2016-02. The primary impact was related to the Company's 21 operating ground leases and two corporate facility leases under which it serves as lessee. The Company recognized lease liabilities of $104,863 and right-of-use assets related to operating leases totaling $95,506 as of the adoption date. Refer to footnote 13 for further discussion of the Company's leases.

In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract." ASU 2018-15 amends the accounting for implementation costs incurred in a hosting arrangement that is a service contract, and aligns them with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 also requires that entities amortize the capitalized implementation costs over the term of the hosting arrangement. ASU 2018-15 is effective for annual periods beginning after December 15, 2020, with early adoption permitted, including early adoption in any interim period. The Company adopted this standard on a prospective basis as of October 1, 2018. The adoption of this standard did not have a material impact on the Company's financial statements.

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. The Company is evaluating the impact this new standard will have on its consolidated financial statements.

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). This new standard will be effective for the Company on January 1, 2020. The Company is evaluating the impact this new standard will have on its consolidated financial statements.

Fair Value Disclosures

Derivative Financial Instruments

Currently, the Company uses interest rate swaps to manage its interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate forward curves.

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. In conjunction with the FASB’s fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of June 30, 2019, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety were classified in Level 2 of the fair value hierarchy.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Long-lived assets held for use are evaluated for impairment when events or circumstances indicate there may be impairment. The Company reviews each store at least annually to determine if any such events or circumstances have occurred or exist. The Company focuses on stores where occupancy and/or rental income have decreased by a significant amount. For these stores, the Company determines whether the decrease is temporary or permanent, and whether the store will likely recover the lost occupancy and/or revenue in the short term. In addition, the Company reviews stores in the lease-up stage and compares actual operating results to original projections.

When the Company determines that an event that may indicate impairment has occurred, the Company compares the carrying value of the related long-lived assets to the undiscounted future net operating cash flows attributable to the assets. An impairment loss is recorded if the net carrying value of the assets exceeds the undiscounted future net operating cash flows attributable to the assets. The impairment loss recognized equals the excess of net carrying value over the related fair value of the assets.

When real estate assets are identified by management as held for sale, the Company discontinues depreciating the assets and estimates the fair value of the assets, net of selling costs. If the estimated fair value, net of selling costs, of the assets that have been identified as held for sale is less than the net carrying value of the assets, the Company would recognize an impairment loss on the assets held for sale. The operations of assets held for sale or sold during the period are presented as part of normal operations for all periods presented. As of June 30, 2019, the Company had one parcel of land classified as held for sale which is included in real estate assets, net. The estimated fair value less selling costs for this asset is greater than the carrying value of the asset, and therefore no loss has been recorded.

The Company assesses annually whether there are any indicators that the value of the Company’s investments in unconsolidated real estate ventures may be impaired annually and when events or circumstances indicate that there may be impairment. An investment is impaired if management’s estimate of the fair value of the investment is less than its carrying value. To the extent impairment has occurred, and is considered to be other than temporary, the loss is measured as the excess of the carrying amount of the investment over the fair value of the investment.

In connection with the Company’s acquisition of stores, the purchase price is allocated to the tangible and intangible assets and liabilities acquired based on their relative fair values, which are estimated using significant unobservable inputs. The value of the tangible assets, consisting of land and buildings, is determined as if vacant. Intangible assets, which represent the value of existing tenant relationships, are recorded at their fair values based on the avoided cost to replace the current leases. The Company measures the value of tenant relationships based on the rent lost due to the amount of time required to replace existing customers, which is based on the Company’s historical experience with turnover in its stores. Any debt assumed as part of an acquisition is recorded at fair value based on current interest rates compared to contractual rates. Acquisition-related transaction costs are capitalized as part of the purchase price.

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, restricted cash, receivables, other financial instruments included in other assets, accounts payable and accrued expenses, variable-rate notes payable, lines of credit and other liabilities reflected in the condensed consolidated balance sheets at June 30, 2019 and December 31, 2018 approximate fair value. Restricted cash is comprised of letters of credit and escrowed funds deposited with financial institutions located throughout the United States relating to earnest money deposits on potential acquisitions, real estate taxes, insurance and capital expenditures.

The fair values of the Company’s notes receivable from Preferred Operating Partnership unit holders and other fixed rate notes receivable, which are recorded in other assets, net were based on the discounted estimated future cash flows of the notes (categorized within Level 3 of the fair value hierarchy); the discount rate used approximated the current market rate for loans with similar maturities and credit quality. The fair values of the Company’s fixed-rate notes payable and notes payable to trusts were estimated using the discounted estimated future cash payments to be made on such debt (categorized within Level 3 of the fair value hierarchy); the discount rates used approximated current market rates for loans, or groups of loans, with similar maturities and credit quality. The fair value of the Company’s exchangeable senior notes was estimated using an average market price for similar securities obtained from a third party.

Earnings Per Common Share

Basic earnings per common share is computed using the two-class method by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during the period. All outstanding unvested restricted stock awards contain rights to non-forfeitable dividends and participate in undistributed earnings with common stockholders; accordingly, they are considered participating securities that are included in the two-class method. Diluted earnings per common share measures the performance of the Company over the reporting period while giving effect to all potential common shares that were dilutive and outstanding during the period. The denominator includes the weighted average number of basic shares and the number of additional common shares that would have been outstanding if the potential common shares that were dilutive had been issued, and is calculated using either the two-class, treasury stock or as if-converted method, whichever is most dilutive. Potential common shares are securities (such as options, convertible debt, Series A Participating Redeemable Preferred Units (“Series A Units”), Series B Redeemable Preferred Units (“Series B Units”), Series C Convertible Redeemable Preferred Units (“Series C Units”), Series D Redeemable Preferred Units (“Series D Units” and, together with

the Series A Units, Series B Units and Series C Units, the “Preferred OP Units”) and common Operating Partnership units (“OP Units”)) that do not have a current right to participate in earnings of the Company but could do so in the future by virtue of their option, redemption or conversion right.

In computing the dilutive effect of convertible securities, net income is adjusted to add back any changes in earnings in the period associated with the convertible security. The numerator also is adjusted for the effects of any other non-discretionary changes in income or loss that would result from the assumed conversion of those potential common shares. In computing diluted earnings per common share, only potential common shares that are dilutive (i.e. those that reduce earnings per common share) are included.

Derivatives

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

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

as it is allocated to noncontrolling interests.

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its debt funding and by using derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposure that arises from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

Convertible Debt

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 accounts for the liability and equity components of the 2013 Notes and 2015 Notes separately. The equity components are included in paid-in capital in stockholders’ equity in the condensed consolidated balance sheets, and the value of the equity components are treated as original issue discount for purposes of accounting for the debt components. The discounts are amortized as interest expense over the remaining period of the debt through its first redemption date: July 1, 2018 for the 2013 Notes, and October 1, 2020 for the 2015 Notes.

XML

Fair Value Disclosures (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2019, aggregated by the level in the fair value hierarchy within which those measurements fall. 

	Fair Value Measurements at Reporting Date Using
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other assets - Cash flow hedge swap agreements	$	—	$	7,300	$	—
Other liabilities - Cash flow hedge swap agreements	$	—	$	30,894	$	—

Schedule of Fair Value of Financial Instruments

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

	June 30, 2019				December 31, 2018
	Fair Value		Carrying Value		Fair Value		Carrying Value
Notes receivable from Preferred and Common Operating Partnership unit holders	$	118,997	$	119,735	$	115,467	$	119,735
Fixed rate notes payable and notes payable to trusts	$	3,323,109	$	3,252,865	$	2,985,731	$	3,022,414
Exchangeable senior notes	$	697,188	$	575,000	$	620,149	$	575,000

XML

Earnings Per Common Share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Schedule of Antidilutive Shares Excluded from Computation of Earnings Per Share

The following table presents the number of Preferred Operating Partnership units, and the potential common shares, that were excluded from the computation of earnings per share as their effect would have been anti-dilutive.

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2019	2018	2019	2018
	Equivalent Shares (if converted)	Equivalent Shares (if converted)	Equivalent Shares (if converted)	Equivalent Shares (if converted)
Series B Units	398,840	450,077	416,398	472,350
Series C Units(1)	—	318,357	—	334,112
Series D Units	1,109,048	988,862	1,096,259	1,037,798
	1,507,888	1,757,296	1,512,657	1,844,260

(1)    The remainder of the Series C Units were converted to OP Units on April 25, 2019.

Schedule of Computation of Earnings Per Common Share

The computation of earnings per common share is as follows for the periods presented:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Net income attributable to common stockholders	$	104,828		$	95,153		$	199,598		$	183,409
Earnings and dividends allocated to participating securities	(176		)	(193		)	(343		)	(371		)
Earnings for basic computations	104,652			94,960			199,255			183,038
Earnings and dividends allocated to participating securities	176			—			—			371
Income allocated to noncontrolling interest - Preferred Operating Partnership Units and Operating Partnership Units	6,010			5,271			11,439			10,211
Fixed component of income allocated to noncontrolling interest - Preferred Operating Partnership (Series A Units)	(572		)	(572		)	(1,144		)	(1,144		)
Net income for diluted computations	$	110,266		$	99,659		$	209,550		$	192,476
Weighted average common shares outstanding:
Average number of common shares outstanding - basic	127,585,436			125,874,130			127,349,299			125,823,581
OP Units	6,085,976			5,651,878			6,023,822			5,657,592
Series A Units	875,480			875,480			875,480			875,480
Unvested restricted stock awards included for treasury stock method	218,686			—			—			256,733
Shares related to exchangeable senior notes and dilutive stock options	889,183			371,284			917,855			379,348
Average number of common shares outstanding - diluted	135,654,761			132,772,772			135,166,456			132,992,734
Earnings per common share
Basic	$	0.82		$	0.75		$	1.56		$	1.45
Diluted	$	0.81		$	0.75		$	1.55		$	1.45

XML

Store Acquisitions and Dispositions (Tables)

6 Months Ended

Jun. 30, 2019

Real Estate [Abstract]

Schedule of Operating Properties Acquired

The following table shows the Company’s acquisitions of stores for the three and six months ended June 30, 2019 and 2018. The table excludes purchases of raw land and improvements made to existing assets. All acquisitions are considered asset acquisitions under ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business."

			Consideration Paid														Total
Quarter	Number of Stores		Total		Cash Paid		Loan Assumed		Investments in Real Estate Ventures			Net Liabilities/ (Assets) Assumed		Value of OP Units Issued		Number of OP Units Issued	Real estate assets
Q2 2019	1		$	8,424	$	8,424	$	—	$	—		$	—	$	—	—	$	8,424
Q1 2019	14	(1)	223,740		202,890		17,157		2,780			913		—		—	223,740
	15		$	232,164	$	211,314	$	17,157	$	2,780		$	913	$	—	—	$	232,164
Q2 2018	17	(2)	$	237,284	$	148,648	$	87,500	$	(1,024	)	$	283	$	1,877	21,768	$	237,284
Q1 2018	5	(2)	70,787		70,171		—		489			127		—		—	70,787
	22		$	308,071	$	218,819	$	87,500	$	(535	)	$	410	$	1,877	21,768	$	308,071

⁽¹⁾ Store acquisitions during the three months ended March 31, 2019 include the purchase of 12 stores previously held in joint ventures where the Company held a noncontrolling interest. The Company purchased its partners' remaining equity interests in the joint ventures, and the properties owned by the joint ventures became wholly owned by the Company. No gain or loss was recognized as a result of these acquisitions.

⁽²⁾ Store acquisitions during the three and six months ended June 30, 2018 include the acquisition of one and 14 stores, respectively, that had been owned by a joint venture in which the Company held a noncontrolling interest. No gain or loss was recognized as a result of these acquisitions.

XML

Investments in Unconsolidated Real Estate Ventures - (Tables)

6 Months Ended

Jun. 30, 2019

Equity Method Investments and Joint Ventures [Abstract]

Schedule of investments in unconsolidated real estate ventures

Net investments in unconsolidated real estate ventures and cash distributions in unconsolidated real estate ventures consist of the following:

	Number of Stores	Equity Ownership %	Excess Profit % (1)	June 30,			December 31,
				2019			2018
PRISA Self Storage LLC	85	4%	4%	$	9,213		$	9,334
Storage Portfolio II JV LLC	36	10%	30%	(4,774		)	(4,233		)
Storage Portfolio I LLC	24	34%	49%	(38,400		)	(38,129		)
VRS Self Storage, LLC	16	45%	54%	17,704			18,281
ESS-NYFL JV LP	15	16%	24%	14,231			—
Extra Space Northern Properties Six LLC	10	10%	35%	(1,903		)	(1,700		)
WICNN JV LLC	9	10%	25%	32,635			26,885
Alan Jathoo JV LLC	9	10%	10%	8,086			8,180
ESS Bristol Investments LLC	8	10%	28%	2,936			2,331
GFN JV, LLC	5	10%	25%	12,324			10,586
Extra Space West Two LLC (2)	—	5%	40%	—			3,818
Extra Space West One LLC (2)	—	5%	40%	—			(1,038		)
Other minority owned stores	22	10-50%	19-50%	77,347			45,814
Net Investments in and Cash distributions in unconsolidated real estate ventures	239			$	129,399		$	80,129

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

⁽²⁾ In January 2019, the Company purchased its joint venture partners' 95% interests in the Extra Space West One LLC and Extra Space West Two LLC joint ventures, which owned a total of 12 stores. The Company paid $172,505 of cash to acquire the equity interests, and subsequent to this acquisition, the Company owned 100% of the joint ventures and the related stores.

XML

Derivatives (Tables)

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of balance sheet classification and fair value of entity's derivative financial instruments

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the condensed consolidated balance sheets:

	Asset / Liability Derivatives
	June 30, 2019		December 31, 2018
Derivatives designated as hedging instruments:	Fair Value
Other assets	$	7,300	$	42,324
Other liabilities	$	30,894	$	2,131

Schedule of information relating to gain (loss) recognized on swap agreements

The table below presents the effect of the Company’s derivative financial instruments on the condensed consolidated statements of operations for the periods presented. No tax effect has been presented as the derivative instruments are held by the Company:

	Gain (loss) recognized in OCI For the Three Months Ended June 30,					Location of amounts reclassified from OCI into income	Gain (loss) reclassified from OCI For the Three Months Ended June 30,
Type	2019			2018			2019		2018
Swap Agreements	$	(36,294	)	$	9,967	Interest Expense	$	4,338	$	1,883

	Gain (loss) recognized in OCI For the Six Months Ended June 30,					Location of amounts reclassified from OCI into income	Gain reclassified from OCI For the Six Months Ended June 30,
Type	2019			2018			2019		2018
Swap Agreements	$	(55,870	)	$	33,285	Interest expense	$	8,799	$	2,124

XML

Exchangeable Senior Notes (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of information about total carrying amounts of equity components, principal amounts of liability components, unamortized discounts and net carrying amounts for notes

Information about the Company’s 2015 Notes, including the total carrying amount of the equity component, the principal amount of the liability component, the unamortized discount and the net carrying amount was as follows for the periods indicated:

	June 30, 2019			December 31, 2018
Carrying amount of equity component	$	22,597		$	22,597
Principal amount of liability component	575,000			575,000
Unamortized discount - equity component	(6,070		)	(8,417		)
Unamortized debt issuance costs	(3,010		)	(4,209		)
Net carrying amount of liability components	$	565,920		$	562,374

Summary of amount of interest cost recognized relating to contractual interest rates and amortization of discounts on liability components of notes

The amount of interest cost recognized relating to the contractual interest rate and the amortization of the discount on the liability component of the 2015 Notes were as follows for the periods indicated:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Contractual interest	$	4,492	$	4,561	$	8,984	$	9,122
Amortization of discount	1,185		1,176		2,347		2,385
Total interest expense recognized	$	5,677	$	5,737	$	11,331	$	11,507

XML

Noncontrolling Interest in Operating Partnership (Tables)

6 Months Ended

Jun. 30, 2019

Noncontrolling Interest [Abstract]

Redeemable Noncontrolling Interest

OP Unit activity is summarized as follows for the periods presented:

	For the Six Months Ended June 30,
	2019		2018
OP Units redeemed for common stock	210,501		10,000
OP Units redeemed for cash	—		30,000
Cash paid for OP Units redeemed	$	—	$	2,558
OP Units issued in conjunction with acquisitions	—		21,768
Value of OP Units issued in conjunction with acquisitions	$	—	$	1,877
OP Units issued upon redemption of Series C Units	270,709		—

XML

Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Lease costs

Following is information on our total lease costs as of the period(s) indicated:

	For the Three Months Ended June 30,			For the Six Months Ended June 30,
	2019			2019
Lease cost
Finance lease cost:
Amortization of finance lease right-of-use assets	$	42		$	84
Interest expense related to finance lease liabilities	73			143
Operating lease cost	3,339			5,677
Variable lease cost	1,149			1,802
Short-term lease cost	55			110
Total lease cost	$	4,658		$	7,816
Cash paid for amounts included in the measurement of lease liabilities
Operating cash outflows for finance lease payments	$	58		$	115
Operating cash outflows for operating lease payments	4,084			7,351
Total cash paid for lease liability measurement	$	4,142		$	7,466
Right-of-use assets obtained in exchange for new operating lease liabilities	$	129,511		$	225,017
Right-of-use assets obtained in exchange for new finance lease liabilities	$	—		$	8,050
Weighted average remaining lease term - finance leases (years)	47.3
Weighted average remaining lease term - operating leases (years)	15.9
Weighted average discount rate - finance leases	6.07		%
Weighted average discount rate - operating leases	3.68		%

Undiscounted cash flows on an annual basis, operating leases

Following is information about the Company’s undiscounted cash flows on an annual basis for operating and finance leases, including a reconciliation of the undiscounted cash flows to the finance lease and operating lease liabilities recognized in the Company’s consolidated balance sheets:

	Operating			Finance			Total
2019	$	10,981		$	116		$	11,097
2020	22,336			232			22,568
2021	22,531			237			22,768
2022	22,494			255			22,749
2023	22,520			255			22,775
Thereafter	217,489			16,777			234,266
Total	$	318,351		$	17,872		$	336,223
Present value adjustments	(87,535		)	(13,064		)	(100,599		)
Lease liabilities	$	230,816		$	4,808		$	235,624

Undiscounted cash flows on an annual basis, finance leases

Following is information about the Company’s undiscounted cash flows on an annual basis for operating and finance leases, including a reconciliation of the undiscounted cash flows to the finance lease and operating lease liabilities recognized in the Company’s consolidated balance sheets:

	Operating			Finance			Total
2019	$	10,981		$	116		$	11,097
2020	22,336			232			22,568
2021	22,531			237			22,768
2022	22,494			255			22,749
2023	22,520			255			22,775
Thereafter	217,489			16,777			234,266
Total	$	318,351		$	17,872		$	336,223
Present value adjustments	(87,535		)	(13,064		)	(100,599		)
Lease liabilities	$	230,816		$	4,808		$	235,624

XML

Segment Information (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Schedule of Financial Information of Business Segments

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

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Revenues:
Self-Storage Operations	$	279,584		$	258,128		$	550,587		$	506,014
Tenant Reinsurance	31,701			28,521			61,498			55,555
Total segment revenues	$	311,285		$	286,649		$	612,085		$	561,569
Operating expenses:
Self-Storage Operations	$	80,870		$	73,083		$	159,635		$	145,836
Tenant Reinsurance	6,982			5,471			13,949			11,078
Total segment operating expenses	$	87,852		$	78,554		$	173,584		$	156,914
Net operating income:
Self-Storage Operations	$	198,714		$	185,045		$	390,952		$	360,178
Tenant Reinsurance	24,719			23,050			47,549			44,477
Total segment net operating income:	$	223,433		$	208,095		$	438,501		$	404,655
Other components of net income (loss):
Property management fees and other income	$	12,317		$	10,164		23,063			20,729
General and administrative expense	(23,351		)	(21,651		)	(46,029		)	(43,115		)
Depreciation and amortization expense	(54,406		)	(51,892		)	(109,065		)	(103,641		)
Gain on real estate transactions	1,205			—			1,205			—
Interest expense	(47,448		)	(43,347		)	(94,808		)	(84,313		)
Non-cash interest expense related to the amortization of discount on equity component of exchangeable senior notes	(1,185		)	(1,176		)	(2,347		)	(2,385		)
Interest income	1,718			1,188			3,106			2,626
Equity in earnings of unconsolidated real estate ventures	3,121			3,429			5,751			7,026
Income tax expense	(2,715		)	(2,097		)	(4,528		)	(3,439		)
Net income	$	112,689		$	102,713		$	214,849		$	198,143

XML

Organization (Detail)	Jun. 30, 2019 store state
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of operating storage facilities in which the entity has equity interests (in stores)	1,157
Number of stores owned by franchisees and third parties	595
Number of operating stores owned and/or managed	1,752
Number of states in which operating storage facilities are located | state	40

XML

Basis of Presentation (Details) $ in Thousands	Jun. 30, 2019 USD ($)	Jan. 01, 2019 USD ($)	Dec. 31, 2018 USD ($) lease
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease liabilities	$ 230,816		$ 0
Operating lease right-of-use assets	$ 221,479		$ 0
Operating ground leases
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of leases | lease			21
Corporate facility leases
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of leases | lease			2
ASU 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease liabilities		$ 104,863
Operating lease right-of-use assets		$ 95,506

XML

Fair Value Disclosures - Assets and Liabilities on a Recurring Basis (Detail) - Recurring Basis $ in Thousands	Jun. 30, 2019 USD ($)
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other assets - Cash flow hedge swap agreements	$ 0
Other liabilities - Cash flow hedge swap agreements	0
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other assets - Cash flow hedge swap agreements	7,300
Other liabilities - Cash flow hedge swap agreements	30,894
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other assets - Cash flow hedge swap agreements	0
Other liabilities - Cash flow hedge swap agreements	$ 0

XML

Fair Value Disclosures - Additional Information (Detail)	Jun. 30, 2019 land_parcel
Fair Value Disclosures [Abstract]
Number of parcels of land held-for-sale	1

XML

Fair Value Disclosures - Schedule of Financial Instruments (Detail) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value
Fair Value of Financial Instruments [Line Items]
Notes receivable from Preferred and Common Operating Partnership unit holders	$ 118,997	$ 115,467
Fixed rate notes payable and notes payable to trusts	3,323,109	2,985,731
Exchangeable senior notes	697,188	620,149
Carrying Value
Fair Value of Financial Instruments [Line Items]
Notes receivable from Preferred and Common Operating Partnership unit holders	119,735	119,735
Fixed rate notes payable and notes payable to trusts	3,252,865	3,022,414
Exchangeable senior notes	$ 575,000	$ 575,000

XML

Earnings Per Common Share - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Sep. 30, 2015	Jun. 21, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Average share price (in dollars per share)	$ 105.06	$ 93.10	$ 100.63	$ 88.71
Principal amount of notes outstanding	$ 565,920,000		$ 565,920,000		$ 562,374,000
Exchangeable Senior Notes 2.375% due 2033 (the 2013 Notes)
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Principal amount of notes outstanding	$ 0		$ 0
Debt stated interest rate	2.375%		2.375%				2.375%
Shares related to the Notes included in the computation for diluted earnings per share (in shares)	0	95,690
Exchangeable Senior Notes 3.125% due 2035 (the 2015 Notes)
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Principal amount of notes outstanding	$ 575,000,000		$ 575,000,000
Debt stated interest rate	3.125%		3.125%			3.125%
Exchange price (in dollars per share)	$ 92.28		$ 92.28
Shares related to the Notes included in the computation for diluted earnings per share (in shares)	757,811	0
Series A Units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Exchangeable preferred operating partnership units settled in cash, minimum	$ 101,700,000		$ 101,700,000
Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per common share (in shares)	0	0	0	37,113

XML

Earnings Per Common Share - Antidilutive Shares (Detail) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Equivalent Shares (if converted)	1,507,888	1,757,296	1,512,657	1,844,260
Series B Units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Equivalent Shares (if converted)	398,840	450,077	416,398	472,350
Series C Units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Equivalent Shares (if converted)	0	318,357	0	334,112
Series D Units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Equivalent Shares (if converted)	1,109,048	988,862	1,096,259	1,037,798

XML

Earnings Per Common Share - Schedule of Computation (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Class of Stock [Line Items]
Net income attributable to common stockholders	$ 104,828	$ 95,153	$ 199,598	$ 183,409
Earnings and dividends allocated to participating securities	(176)	(193)	(343)	(371)
Earnings for basic computations	104,652	94,960	199,255	183,038
Earnings and dividends allocated to participating securities	176	0	0	371
Income allocated to noncontrolling interest - Preferred Operating Partnership Units and Operating Partnership Units	6,010	5,271	11,439	10,211
Fixed component of income allocated to noncontrolling interest - Preferred Operating Partnership (Series A Units)	(572)	(572)	(1,144)	(1,144)
Net income for diluted computations	$ 110,266	$ 99,659	$ 209,550	$ 192,476
Weighted average common shares outstanding:
Average number of common shares outstanding - basic (in shares)	127,585,436	125,874,130	127,349,299	125,823,581
OP Units (in shares)	6,085,976	5,651,878	6,023,822	5,657,592
Unvested restricted stock awards included for treasury stock method (in shares)	218,686	0	0	256,733
Shares related to exchangeable senior notes and dilutive stock options (in shares)	889,183	371,284	917,855	379,348
Average number of common shares outstanding - diluted (in shares)	135,654,761	132,772,772	135,166,456	132,992,734
Earnings per common share
Basic (in dollars per share)	$ 0.82	$ 0.75	$ 1.56	$ 1.45
Diluted (in dollars per share)	$ 0.81	$ 0.75	$ 1.55	$ 1.45
Series A Units
Weighted average common shares outstanding:
Preferred series units (in shares)	875,480	875,480	875,480	875,480

XML

Store Acquisitions and Dispositions (Detail) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019 USD ($) store shares	Mar. 31, 2019 USD ($) store shares	Jun. 30, 2018 USD ($) store shares	Mar. 31, 2018 USD ($) store shares	Jun. 30, 2019 USD ($) store shares	Jun. 30, 2018 USD ($) store shares
Real Estate [Abstract]
Number of Stores | store	1	14	17	5	15	22
Total Consideration Paid	$ 8,424	$ 223,740	$ 237,284	$ 70,787	$ 232,164	$ 308,071
Cash Paid	8,424	202,890	148,648	70,171	211,314	218,819
Loan Assumed	0	17,157	87,500	0	17,157	87,500
Investments in Real Estate Ventures	0	2,780	(1,024)	489	2,780	(535)
Net Liabilities/ (Assets) Assumed	0	913	283	127	913	410
Value of OP Units Issued	$ 0	$ 0	$ 1,877	$ 0	$ 0	$ 1,877
Number of OP Units Issued | shares	0	0	21,768	0	0	21,768
Real estate assets	$ 8,424	$ 223,740	$ 237,284	$ 70,787	$ 232,164	$ 308,071
Number of stores acquired, previously held noncontrolling interest | store		12	1			14

XML

Investments in Unconsolidated Real Estate Ventures - Schedule of Investments (Details) $ in Thousands	1 Months Ended	3 Months Ended				6 Months Ended
	Jan. 31, 2019 USD ($) store	Jun. 30, 2019 USD ($) property store	Mar. 31, 2019 USD ($) store	Jun. 30, 2018 USD ($) store	Mar. 31, 2018 USD ($) store	Jun. 30, 2019 USD ($) property store	Jun. 30, 2018 USD ($) store	May 31, 2019	Jan. 01, 2019	Dec. 31, 2018 USD ($)
Schedule of Equity Method Investments [Line Items]
Number of Stores | store		1	14	17	5	15	22
Cash Paid		$ 8,424	$ 202,890	$ 148,648	$ 70,171	$ 211,314	$ 218,819
Number of Stores | property		239				239
Investment balance		$ 129,399				$ 129,399				$ 80,129
PRISA Self Storage LLC
Schedule of Equity Method Investments [Line Items]
Number of Stores | property		85				85
Equity Ownership %		4.00%				4.00%
Excess Profit %		4.00%				4.00%
Investment balance		$ 9,213				$ 9,213				9,334
Storage Portfolio II JV LLC
Schedule of Equity Method Investments [Line Items]
Number of Stores | property		36				36
Equity Ownership %		10.00%				10.00%
Excess Profit %		30.00%				30.00%
Investment balance		$ (4,774)				$ (4,774)				(4,233)
Storage Portfolio I LLC
Schedule of Equity Method Investments [Line Items]
Number of Stores | property		24				24
Equity Ownership %		34.00%				34.00%
Excess Profit %		49.00%				49.00%
Investment balance		$ (38,400)				$ (38,400)				(38,129)
VRS Self Storage, LLC
Schedule of Equity Method Investments [Line Items]
Number of Stores | property		16				16
Equity Ownership %		45.00%				45.00%
Excess Profit %		54.00%				54.00%
Investment balance		$ 17,704				$ 17,704				18,281
ESS-NYFL JV LP
Schedule of Equity Method Investments [Line Items]
Number of Stores | property		15				15
Equity Ownership %		16.00%				16.00%		16.00%
Excess Profit %		24.00%				24.00%
Investment balance		$ 14,231				$ 14,231				0
Extra Space Northern Properties Six LLC
Schedule of Equity Method Investments [Line Items]
Number of Stores | property		10				10
Equity Ownership %		10.00%				10.00%
Excess Profit %		35.00%				35.00%
Investment balance		$ (1,903)				$ (1,903)				(1,700)
WICNN JV LLC
Schedule of Equity Method Investments [Line Items]
Number of Stores | property		9				9
Equity Ownership %		10.00%				10.00%
Excess Profit %		25.00%				25.00%
Investment balance		$ 32,635				$ 32,635				26,885
Alan Jathoo JV LLC
Schedule of Equity Method Investments [Line Items]
Number of Stores | property		9				9
Equity Ownership %		10.00%				10.00%
Excess Profit %		10.00%				10.00%
Investment balance		$ 8,086				$ 8,086				8,180
ESS Bristol Investments LLC
Schedule of Equity Method Investments [Line Items]
Number of Stores | property		8				8
Equity Ownership %		10.00%				10.00%
Excess Profit %		28.00%				28.00%
Investment balance		$ 2,936				$ 2,936				2,331
GFN JV, LLC
Schedule of Equity Method Investments [Line Items]
Number of Stores | property		5				5
Equity Ownership %		10.00%				10.00%
Excess Profit %		25.00%				25.00%
Investment balance		$ 12,324				$ 12,324				10,586
Extra Space West Two LLC
Schedule of Equity Method Investments [Line Items]
Number of Stores | property		0				0
Equity Ownership %		5.00%				5.00%
Excess Profit %		40.00%				40.00%
Investment balance		$ 0				$ 0				3,818
Extra Space West One LLC
Schedule of Equity Method Investments [Line Items]
Number of Stores | property		0				0
Equity Ownership %		5.00%				5.00%
Excess Profit %		40.00%				40.00%
Investment balance		$ 0				$ 0				(1,038)
Other minority owned stores
Schedule of Equity Method Investments [Line Items]
Number of Stores | property		22				22
Investment balance		$ 77,347				$ 77,347				$ 45,814
Other minority owned stores | Minimum
Schedule of Equity Method Investments [Line Items]
Equity Ownership %		10.00%				10.00%
Excess Profit %		19.00%				19.00%
Other minority owned stores | Maximum
Schedule of Equity Method Investments [Line Items]
Equity Ownership %		50.00%				50.00%
Excess Profit %		50.00%				50.00%
Extra Space West One and Two LLC
Schedule of Equity Method Investments [Line Items]
Number of Stores | store	12
Cash Paid	$ 172,505
Equity Ownership %									100.00%
Percentage interest purchased	95.00%

XML

Investments in Unconsolidated Real Estate Ventures - Narrative (Details) $ in Thousands	1 Months Ended	6 Months Ended
	May 31, 2019 USD ($) annex_site store joint_venture_partner	Jun. 30, 2019 USD ($) store
Schedule of Equity Method Investments [Line Items]
Contributions to joint ventures | $		$ 54,779
ESS-NYFL JV LP
Schedule of Equity Method Investments [Line Items]
Number of joint venture partners | joint_venture_partner	2
Contributions to joint ventures | $	$ 13,936
Number of operating stores acquired | store	11	16
Number of annex sites acquired | annex_site	4
Equity method ownership percentage	16.00%	16.00%
Number of stores acquired at certificate of occupancy | store		6

XML

Variable Interests (Detail) $ in Thousands	1 Months Ended	6 Months Ended		12 Months Ended
	Jan. 31, 2019 USD ($)	Jun. 30, 2019 USD ($) joint_venture subsidiary	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Variable Interest Entity [Line Items]
Number of wholly-owned unconsolidated subsidiaries | subsidiary		3
Repayments of debt		$ 30,928	$ 0
Number of interests in consolidated VIE joint ventures | joint_venture		0
Notes payable to Trusts | Variable Interest Entity, Not Primary Beneficiary
Variable Interest Entity [Line Items]
Repayments of debt	$ 30,928			$ 88,662
Notes payable to Trusts				$ 30,928

XML

Derivatives - Additional Information (Detail) $ in Thousands	Jun. 30, 2019 USD ($) derivative
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Estimated amount of unrealized gains (losses) expected to be reclassified as interest expense in next fiscal year	$ 1,821
Number of derivative financial instruments | derivative	29
Combined notional amount	$ 2,489,338
Fair value, net liability position	31,786
Contingent cash settlement value	$ 31,786

XML

Derivatives - Schedule of Balance Sheet Classification and Fair Value of Instruments (Detail) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Other assets
Derivative [Line Items]
Other assets	$ 7,300	$ 42,324
Other liabilities
Derivative [Line Items]
Other liabilities	$ 30,894	$ 2,131

XML

Derivatives - Gain (Loss) Recognized on Swap Agreements (Detail) - Swap Agreements - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Derivative [Line Items]
Gain (loss) recognized in OCI	$ (36,294)	$ 9,967	$ (55,870)	$ 33,285
Gain reclassified from OCI	$ 4,338	$ 1,883	$ 8,799	$ 2,124

XML

Exchangeable Senior Notes - Additional Information (Detail)		1 Months Ended	3 Months Ended		6 Months Ended
	Jun. 21, 2013 USD ($)	Sep. 30, 2015 USD ($)	Jun. 30, 2019 day	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)
Debt Instrument [Line Items]
Total consideration paid for repurchase					$ 524,370,000	$ 487,016,000
Exchangeable Senior Notes 3.125% due 2035 (the 2015 Notes)
Debt Instrument [Line Items]
Principal amount of notes issued		$ 575,000,000
Debt stated interest rate		3.125%	3.125%		3.125%
Related debt issuance costs		$ 11,992,000
Underwriting fee percentage		2.00%
Amortization period		5 years
Conversion ratio					0.01084
Redemption price as percentage of principal amount of notes plus accrued and unpaid interest		100.00%
Redemption price as percentage of principal amount of notes at request of debt holders and upon occurrence of designated event		100.00%
Effective interest rate on the liability component			4.00%		4.00%
Exchangeable Senior Notes 3.125% due 2035 (the 2015 Notes) | Minimum
Debt Instrument [Line Items]
Number of days of written notice to holders of notes required for redemption		30 days
Exchangeable Senior Notes 3.125% due 2035 (the 2015 Notes) | Maximum
Debt Instrument [Line Items]
Number of days of written notice to holders of notes required for redemption		60 days
Exchangeable Senior Notes 2.375% due 2033 (the 2013 Notes)
Debt Instrument [Line Items]
Principal amount of notes issued	$ 250,000,000
Debt stated interest rate	2.375%		2.375%		2.375%
Related debt issuance costs	$ 1,672,000
Notes exchange, threshold percentage			130.00%
Notes exchange, threshold trading days | day			20
Notes exchange, threshold consecutive trading days | day			30
Discount rate	1.50%
Unamortized cash discount	$ 3,750,000
Amortization period	5 years
Effective interest rate on the liability component			4.00%		4.00%
Principal amount repurchased				$ 37,709,000		$ 37,709,000
Total consideration paid for repurchase				$ 58,469,000

XML

Exchangeable Senior Notes - Schedule of Information about Total Carrying Amounts of Equity Components, Principal Amounts of Liability Components, Unamortized Discounts and Net Carrying Amounts for Notes (Detail) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018	Sep. 30, 2015
Debt Instrument [Line Items]
Principal amount of liability component	$ 565,920	$ 562,374
Exchangeable Senior Notes 3.125% due 2035 (the 2015 Notes)
Debt Instrument [Line Items]
Principal amount of liability component	575,000
Unamortized debt issuance costs			$ (11,992)
Senior Notes | Exchangeable Senior Notes 3.125% due 2035 (the 2015 Notes)
Debt Instrument [Line Items]
Carrying amount of equity component	22,597	22,597
Principal amount of liability component	575,000	575,000
Unamortized discount - equity component	(6,070)	(8,417)
Unamortized debt issuance costs	(3,010)	(4,209)
Net carrying amount of liability components	$ 565,920	$ 562,374

XML

Exchangeable Senior Notes - Summary of Amount of Interest Cost Recognized Relating to Contractual Interest Rates and Amortization of Discounts on Liability Components of Notes (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Debt Disclosure [Abstract]
Contractual interest	$ 4,492	$ 4,561	$ 8,984	$ 9,122
Amortization of discount	1,185	1,176	2,347	2,385
Total interest expense recognized	$ 5,677	$ 5,737	$ 11,331	$ 11,507

XML

Stockholders' Equity (Detail) $ / shares in Units, $ in Thousands		3 Months Ended
	May 15, 2019 USD ($) sales_agent	Jun. 30, 2019 USD ($) $ / shares shares
Class of Stock [Line Items]
Number of sales agents | sales_agent	9
At the Market Equity Distribution Agreement
Class of Stock [Line Items]
Aggregate offering price of common shares	$ 500,000
Shares, issued (in shares) | shares		930,000
Sale of Stock, Price Per Share | $ / shares		$ 107.61
Sale of Stock, Consideration Received on Transaction		$ 98,796
Value of stock available for issuance under ATM		$ 399,927

XML

Noncontrolling Interest Represented by Preferred Operating Partnership Units (Details)					1 Months Ended			3 Months Ended				6 Months Ended
	Apr. 25, 2019 shares	Dec. 01, 2018 shares	Apr. 18, 2017	Jun. 25, 2007 USD ($)	Dec. 31, 2014 USD ($)	Oct. 31, 2014 USD ($) shares	Jun. 30, 2007 USD ($)	Jun. 30, 2019 USD ($) $ / shares shares	Mar. 31, 2019 USD ($) shares	Jun. 30, 2018 USD ($) shares	Mar. 31, 2018 USD ($) shares	Jun. 30, 2019 USD ($) $ / shares shares	Jun. 30, 2018 USD ($) shares	Dec. 31, 2018 USD ($)
Noncontrolling Interest [Line Items]
Note receivable from noncontrolling interest represented by Preferred Operating Partnership units								$ 100,000,000				$ 100,000,000		$ 108,644,000
Number of OP Units Issued | shares								0	0	21,768	0	0	21,768
Value of OP Units Issued								$ 0	$ 0	$ 1,877,000	$ 0	$ 0	$ 1,877,000
Series A Units
Noncontrolling Interest [Line Items]
Fixed priority return on preferred OP units, amount						$ 101,700,000
Fixed priority return on preferred OP units, stated return rate			2.30%				5.00%
Fixed priority return on preferred OP units, liquidation value							$ 115,000,000
Preferred units outstanding (in units) | shares						875,480
Series B Units
Noncontrolling Interest [Line Items]
Preferred units outstanding (in units) | shares								1,676,087				1,676,087
Liquidation value (in dollars per share) | $ / shares								$ 25.00				$ 25.00
Fixed liquidation value								$ 41,902,000				$ 41,902,000
Annual rate of return percentage								6.00%
Series C Units
Noncontrolling Interest [Line Items]
Note receivable from noncontrolling interest represented by Preferred Operating Partnership units					$ 20,230,000			$ 19,735,000				$ 19,735,000		$ 11,091,000
Note receivable interest rate					5.00%
Liquidation value (in dollars per share) | $ / shares								$ 42.10				$ 42.10
Period from date of issuance after which preferred OP units will become redeemable at the option of the holder												1 year
Preferred OP units conversion ratio (in shares)												0.9145
Units converted (in units) | shares	296,020	407,996
Series D Units
Noncontrolling Interest [Line Items]
Preferred units outstanding (in units) | shares								4,803,445				4,803,445
Liquidation value (in dollars per share) | $ / shares								$ 25.00				$ 25.00
Fixed liquidation value								$ 115,511,000				$ 115,511,000
Value of OP Units Issued												$ 28,022,000
Series D Units | Minimum
Noncontrolling Interest [Line Items]
Annual rate of return percentage								3.00%
Series D Units | Maximum
Noncontrolling Interest [Line Items]
Annual rate of return percentage								5.00%
Operating Partnership Holders of A Units | Series A Units
Noncontrolling Interest [Line Items]
Note receivable from noncontrolling interest represented by Preferred Operating Partnership units				$ 100,000,000
Maximum number of preferred OP units converted prior to the maturity date of the loan (in units) | shares						114,500
Note receivable interest rate			2.10%	4.90%
Extra Space Storage LP [Member] | Series D Units
Noncontrolling Interest [Line Items]
Number of OP Units Issued | shares												1,120,924
Operating Partnership
Noncontrolling Interest [Line Items]
Issuance of units upon conversion (in units) | shares	270,709	373,113
Series C Preferred Operating Partnership
Noncontrolling Interest [Line Items]
Note receivable, reduction of noncontrolling interests								$ 8,644,000				$ 8,644,000

XML

Noncontrolling Interest in Operating Partnership - Additional Information (Details) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended
	Dec. 31, 2014 USD ($)	Jun. 30, 2019 USD ($) property joint_venture store $ / shares shares	Dec. 31, 2018 USD ($)
Noncontrolling Interest [Line Items]
Note receivable from noncontrolling interest represented by Preferred Operating Partnership units | $		$ 100,000	$ 108,644
Period used as a denomination to determine the average closing price of common stock		10 days
Ten day average closing stock price (in dollars per share) | $ / shares		$ 107.34
OP units outstanding (in units) | shares		6,054,459
Consideration to be paid on redemption of common OP units | $		$ 649,886
Common Stock
Noncontrolling Interest [Line Items]
OP units conversion ratio		1
Other noncontrolling interests
Noncontrolling Interest [Line Items]
Number of consolidated joint ventures | joint_venture		2
Operating Partnership
Noncontrolling Interest [Line Items]
Ownership interest held by entity		90.60%
Ownership percentage in joint venture by joint venture partner		9.40%
Minimum | Other noncontrolling interests
Noncontrolling Interest [Line Items]
Ownership percentage in joint venture by joint venture partner		5.00%
Maximum | Other noncontrolling interests
Noncontrolling Interest [Line Items]
Ownership percentage in joint venture by joint venture partner		20.00%
Texas | Joint Venture 1
Noncontrolling Interest [Line Items]
Number of operating stores owned | store		2
Colorado | Joint Venture 1
Noncontrolling Interest [Line Items]
Number of operating stores owned | store		1
Number of development stores owned | property		1
Pennsylvania | Joint Venture 2
Noncontrolling Interest [Line Items]
Number of operating stores owned | property		1
New Jersey | Joint Venture 2
Noncontrolling Interest [Line Items]
Number of development stores owned | property		1
Series C Units
Noncontrolling Interest [Line Items]
Note receivable from noncontrolling interest represented by Preferred Operating Partnership units | $	$ 20,230	$ 19,735	$ 11,091
Note receivable interest rate	5.00%

XML

Noncontrolling Interest in Operating Partnership - Schedule of OP Unit Activity (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Noncontrolling Interest [Abstract]
OP Units redeemed for common stock (in units)	210,501	10,000
OP Units redeemed for cash (in units)	0	30,000
Cash paid for OP Units redeemed	$ 0	$ 2,558
OP Units issued in conjunction with acquisitions (in units)	0	21,768
Value of OP Units issued in conjunction with acquisitions	$ 0	$ 1,877
OP Units issued upon redemption of Series C Units (in units)	270,709	0

XML

Leases - Lease Costs (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2018
Finance lease cost:
Amortization of finance lease right-of-use assets	$ 42	$ 84
Interest expense related to finance lease liabilities	73	143
Operating lease cost	3,339	5,677
Variable lease cost	1,149	1,802
Short-term lease cost	55	110
Total lease cost	4,658	7,816
Cash paid for amounts included in the measurement of lease liabilities
Operating cash outflows for finance lease payments	58	115
Operating cash outflows for operating lease payments	4,084	7,351
Total cash paid for lease liability measurement	4,142	7,466
Right-of-use assets obtained in exchange for new operating lease liabilities	129,511	225,017	$ 0
Right-of-use assets obtained in exchange for new finance lease liabilities	$ 0	$ 8,050
Weighted average remaining lease term - finance leases	47 years 3 months 18 days	47 years 3 months 18 days
Weighted average remaining lease term - operating leases	15 years 10 months 24 days	15 years 10 months 24 days
Weighted average discount rate - operating leases	6.07%	6.07%
Weighted average discount rate - finance leases	3.68%	3.68%

XML

Leases - Undiscounted Cash Flows on an Annual Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Operating
2019	$ 10,981
2020	22,336
2021	22,531
2022	22,494
2023	22,520
Thereafter	217,489
Total	318,351
Present value adjustments	(87,535)
Lease liabilities	230,816	$ 0
Finance
2019	116
2020	232
2021	237
2022	255
2023	255
Thereafter	16,777
Total	17,872
Present value adjustments	(13,064)
Lease liabilities	4,808
Total
2019	11,097
2020	22,568
2021	22,768
2022	22,749
2023	22,775
Thereafter	234,266
Total	336,223
Present value adjustments	(100,599)
Lease liabilities	$ 235,624

XML

Leases - Narrative (Details) $ in Thousands	1 Months Ended	6 Months Ended
	Jun. 30, 2019 USD ($) lease store extension	Jun. 30, 2019 USD ($) lease extension	Jan. 01, 2019 USD ($)	Dec. 31, 2018 USD ($)
Lessee, Lease, Description [Line Items]
Operating lease liabilities	$ 230,816	$ 230,816		$ 0
Operating lease right-of-use assets	$ 221,479	$ 221,479		$ 0
Number of stores added under new operating leases | store	22
Operating lease, term	25 years	25 years
Operating lease, termination option, term		10 years
Increase in right-of-use assets under new operating leases	$ 127,532
Increase in operating lease liabilities under new operating leases	$ 134,846
Store leases
Lessee, Lease, Description [Line Items]
Number of leases | lease	44	44
Store leases | Minimum
Lessee, Lease, Description [Line Items]
Operating and finance lease, original lease term		10 years
Operating and finance lease, extension term		5 years
Store leases | Maximum
Lessee, Lease, Description [Line Items]
Operating and finance lease, original lease term		67 years
Operating and finance lease, extension term		35 years
Corporate offices and call center leases | Minimum
Lessee, Lease, Description [Line Items]
Operating lease, original lease term	5 years 3 months 18 days	5 years 3 months 18 days
Corporate offices and call center leases | Maximum
Lessee, Lease, Description [Line Items]
Operating lease, original lease term	12 years 1 month 6 days	12 years 1 month 6 days
Regional office leases
Lessee, Lease, Description [Line Items]
Number of leases | lease	12	12
Operating lease, number of options to extend | extension	5,000	5,000
Operating lease, extension term	3 years	3 years
Regional office leases | Minimum
Lessee, Lease, Description [Line Items]
Operating lease, original lease term	3 years	3 years
Regional office leases | Maximum
Lessee, Lease, Description [Line Items]
Operating lease, original lease term	5 years	5 years
District office leases
Lessee, Lease, Description [Line Items]
Operating lease, original lease term	12 months	12 months
New Jersey store lease
Lessee, Lease, Description [Line Items]
Lease not yet commenced, lease term		75 years
Lease not yet commenced, number of extension options | extension	3	3
Lease not yet commenced, term of extension options		10 years
California store lease
Lessee, Lease, Description [Line Items]
Lease not yet commenced, lease term		15 years
California store lease | Lease option one
Lessee, Lease, Description [Line Items]
Lease not yet commenced, number of extension options | extension	3	3
Lease not yet commenced, term of extension options		10 years
California store lease | Lease option two
Lessee, Lease, Description [Line Items]
Lease not yet commenced, number of extension options | extension	1	1
Lease not yet commenced, term of extension options		5 years
ASU 2016-02
Lessee, Lease, Description [Line Items]
Operating lease liabilities			$ 104,863
Operating lease right-of-use assets			$ 95,506

XML

Segment Information - Additional Information (Detail)	3 Months Ended
	Jun. 30, 2019 segment
Segment Reporting [Abstract]
Number of reportable segments	2

XML

Segment Information - Schedule of Financial Information (Detail) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Segment Reporting Information [Line Items]
Revenues:	$ 323,602		$ 296,813		$ 635,148	$ 582,298
Operating expenses:	165,609		152,097		328,678	303,670
Income from operations	159,198		144,716		307,675	278,628
Management fees and other income	12,317		10,164		23,063	20,729
General and administrative expense	(23,351)		(21,651)		(46,029)	(43,115)
Depreciation and amortization expense	(54,406)		(51,892)		(109,065)	(103,641)
Gain on real estate transactions	1,205		0		1,205	0
Interest expense	(47,448)		(43,347)		(94,808)	(84,313)
Non-cash interest expense related to amortization of discount on equity component of exchangeable senior notes	(1,185)		(1,176)		(2,347)	(2,385)
Interest income	1,718		1,188		3,106	2,626
Equity in earnings of unconsolidated real estate ventures	3,121		3,429		5,751	7,026
Income tax expense	(2,715)		(2,097)		(4,528)	(3,439)
Net income	112,689	$ 102,160	102,713	$ 95,430	214,849	198,143
Operating Segments
Segment Reporting Information [Line Items]
Revenues:	311,285		286,649		612,085	561,569
Operating expenses:	87,852		78,554		173,584	156,914
Income from operations	223,433		208,095		438,501	404,655
Operating Segments | Self-Storage Operations
Segment Reporting Information [Line Items]
Revenues:	279,584		258,128		550,587	506,014
Operating expenses:	80,870		73,083		159,635	145,836
Income from operations	198,714		185,045		390,952	360,178
Operating Segments | Tenant Reinsurance
Segment Reporting Information [Line Items]
Revenues:	31,701		28,521		61,498	55,555
Operating expenses:	6,982		5,471		13,949	11,078
Income from operations	$ 24,719		$ 23,050		$ 47,549	$ 44,477

XML

Commitments and Contingencies (Detail) $ in Thousands	Jun. 30, 2019 USD ($) store
Commitment To Acquire Retail Space
Other Commitments [Line Items]
Number of real estate properties to be acquired	5
Purchase price | $	$ 58,628
Commitment To Acquire Retail Space, Closing In 2019
Other Commitments [Line Items]
Purchase price | $	$ 16,800
Number of stores scheduled to be closed	1
Commitment To Acquire Retail Space, Closing in 2020
Other Commitments [Line Items]
Purchase price | $	$ 41,828
Number of stores scheduled to be closed	4
Commitment To Acquire Retail Space With Joint Venture Partners
Other Commitments [Line Items]
Number of real estate properties to be acquired	8
Purchase price | $	$ 25,616
Commitment To Acquire Retail Space With Joint Venture Partners, Scheduled To Close in 2019
Other Commitments [Line Items]
Number of stores scheduled to be closed	7

XML

Subsequent Events (Details)	Jul. 01, 2019 USD ($)
Subsequent Event
Subsequent Event [Line Items]
Increase in borrowing capacity	$ 500,000,000