Slides presented by Third Place team in Utah CFA Research Challenge.

1. Extra Space Storage
Salt Lake City, February 2014

2. Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
Main Features
• 2nd largest self-storage operator
• Largest self-storage management company
Introduction
Wholly-
Owned,
51%
Joint
Venture,
25%
Managed,
24%
Market Profile
52-week Price Range 36.50-49.29
Avg. Daily Volume
(3mths)
922,567
Shares Outstanding 111.25M
Market Capitalization 4.85B
% Held by Insiders 5%
% Held by Institutions 95%
FFO Multiple 2013E 23.539

3. Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
30
35
40
45
50
55
60
1/31/13
2/28/13
3/31/13
4/30/13
5/31/13
6/30/13
7/31/13
8/31/13
9/30/13
10/31/13
11/30/13
12/31/13
29.2%
upside
Target price: $54.44 Upside: 29.2% BUY
Recommendation
Target Price
Current Price
Closing Price

4. Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
Tenant Insurance
• 80% profit margin
• $10 or $35 for $2,000 or $10,000
coverage, respectively
Management
Lease-up Properties
• Avg. sq. ft. occupancy at 82.5% as
of Sept. 2013, up from 73.5%
• Redeveloping properties
Big Data

5. Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
• Signs of continual aggressive acquisitions
• January 8, 2014 announced acquisition of 17 properties in Virginia for
$200 million
Acquisitions

6. Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion

7. Industry & Competitors

8. Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
Industry & Competitors
Key self storage market
characteristics:
• High barriers to entry
• Low product differentiation
• Lack of substitute products
• Internet enables both buyer and seller

9. Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
Industry & Competitors
Source: FTSE NAREIT U.S. Real Estate Index Series
Source: Cushman & Wakerfield Storage Business Briefing – August 2013
High returns compared to other
REITs
Market resilience & increasing
rental rates

10. Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
EXR vs. Competitors
Competitive Advantage:
•Management Team •Extensive stats & analytics

11. Risk Analysis

12. Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
Risk Analysis Market Economic
Operational Political
IMPACT
PROBABILITY

13. Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
Conditional Upside Drivers
• Constant upward trend of rental prices
• EXR’s occupancy rates for same-store properties were at 88.6
percent compared to the national average of 79.7 percent,
according to EXR’s 2012 10k filing
• More acquisitions mean more revenue from tenant insurance

14. Financial Analysis

15. • EXR’s stock price follows the SPY with a 67% coefficient of
determination.
Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
EXR’s Stock Growth Compared to S&P

16. • Over the last two years, the 100-day stock price moving average is
below the 50-day stock price moving average until the effects of
the November stock price drop become dominant.
• Long-term the stock has shown strong growth in price.
• The stock price is still recovering from the November drop.
Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
Technical Analysis

17. • The six month chart shows the possible rebounding from that
November drop.
• The 10-day moving average shows that there may be a possibility of
a short-term holding profit.
Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
Moving Averages

18. Year 31-Dec-08 31-Dec-09 31-Dec-10 31-Dec-11 31-Dec-12 31-Dec-13
Assets:
Real estate assets, net $ 1,938,922 $ 2,015,432 $ 1,935,319 $ 2,263,795 $ 2,991,722 $ 3,265,292
Investments in real estate ventures $ 136,791 $ 130,449 $ 140,560 $ 130,410 $ 106,313 $ 116,035
Cash and Cash equivalents $ 63,972 $ 131,950 $ 46,750 $ 26,484 $ 30,785 $ 33,600
Restricted Cash $ 38,678 $ 39,208 $ 30,498 $ 25,768 $ 16,976 $ 18,528
Receivables from related parties and affiliated real estate
joint ventures $ 11,335 $ 5,114 $ 10,061 $ 18,517 $ 11,078 $ 12,091
Other assets, net $ 42,576 $ 50,976 $ 49,549 $ 52,550 $ 66,603 $ 72,693
Total Assets $ 2,291,008 $ 2,407,556 $ 2,249,820 $ 2,517,524 $ 3,223,477 $ 3,518,239
Growth 11.5% 5.1% -6.6% 11.9% 28.0% 9.1%
Historical data was taken from SEC filings and Internet resources, run
through statistical software, and used for forecasting.
became
Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
Data Conversion

19. • Total Assets = 20983 + (Years Since IPO x 257534)
• Total Revenue = -50060 + (Total Assets x 0.143243)
• Net Income = -84716 + (Total Assets x 0.059286)
Asset Regression Coefficients Standard Error t Stat P-value
Intercept 20983.16 243118.3 0.086308 0.933342
Year 257533.7 27096.91 9.504174 1.24E-05
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
TotalAssets
(thousands)
Year
Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
Regression Equations for Forecasting

20. Valuation

21. Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
Valuation Using FFO
• Constant FFO growth
• Market cap projected at 5.619 billion
Years 2013 2014
FFO 199.356 M 239.117 M
FFO Multiple 23.539 23.5
Market Cap 4,687 M 5,619 M
Shares Outstanding 111.250 M 113.750 M
Price Per Share 42.13
49.40

22. Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
Valuation Using FFO
• Arbitrage Opportunities
• Historically low cap rates
• Increasing interest rates

23. Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
NAV Valuation
• Historically low cap rates
• Strong rental revenue growth
Year 2013 2014
Rental Revenue 426.841 M 239.117 M
Cap Rates 6.4% 23.5
NAV 5,243 M 6,335 M
Price Per Share 47.13
55.70

24. Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
Target Price
Target = 54.44
Holding period return = 29%
NAV Valuation FFO Valuation
$55.70 $49.40
80% 20%

25. Company
Overview
Industry &
Competitors
Risk
Analysis
Financial
Analysis
Valuation Conclusion
30
35
40
45
50
55
60
1/31/13
2/28/13
3/31/13
4/30/13
5/31/13
6/30/13
7/31/13
8/31/13
9/30/13
10/31/13
11/30/13
12/31/13
29.2%
upside
Target price: $54.44 Upside: 29.2% BUY
Conclusion
Target Price
Current Price
Closing Price

26. Questions?

27. Data Source: Cushman & Wakefield Storage Business Briefing – August 2013
Average Demand per Person

28. Virtually No New Supply

29. Source: Adelante Capital Management, Wilshire Associates, and
FactSet
Annual Returns: Ranked By Property Sector
Wilshire US REIT Index

30. Rental Trends

32. $-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
1 2 3 4 5 6 7 8 9 10
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Total Assets Forecast
Since EXR’s IPO, there has been a steady
increase of total assets. In all the
regressions run, time showed the most
direct correlation with an R Squared of
0.919, t Statistic of 9.5, and P-value of
less than 0.0001.
By using the regression model,
we were able to forecast total
assets using the following
equation:
Total Assets = 20983 + (257534 x
Years since IPO)
Total Assets Since IPO

33. The correlation between revenue
and assets proved exceptionally
high for past periods with an R
Squared of 0.99, a t Statistic of
28.34, and a P-Value lower than
0.000000003. $-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
Revenue Forecast
We were able to forecast
Revenue for upcoming
years by using the
following equation: Total
Revenue = -50060 + (Total
Assets x 0.143243).
Revenue and Asset Correlation

34. Net Income’s Correlation
Coefficient in regards to Assets for
historical data was 0.9226, t
Statistic is 9.766, and P-Value is
than 0.00001.
$(50,000)
$-
$50,000
$100,000
$150,000
$200,000
$250,000
Net Income Forecasted
$(40,000)
$(20,000)
$-
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
Net Income = -84716 + (Total
Assets x 0.059286)
Net Income and Asset Correlation

35. • Regression models similar to the one used for assets
were used to forecast liabilities and equity.
• Growth rates were calculated each year, including
forecasted years, for assets, liabilities and equity.
• Those growth rates were used to forecast individual
accounts within each section of the balance sheet.
• Example: Cash and Cash Equivalents historical data was
input, the last reported number was then multiplied by
1+calculated growth rate for assets.
Balance Sheet Equations

36. • The correlation coefficient for historic operational
cash flows and net income is 0.923, t Statistic of
6.9, and P-Value of 0.002.
• Thus, forecasted net income was used to forecast
operational cash flows.
• Those forecasted values were used to determine
the growth rate for operational cash flows.
• Those growth rates were applied to individual
accounts within the operational cash flows
section of the Summary of Cash Flows Statement.
Operational Cash Flow Calculations

37. • The regression process used to forecast revenue
was also used to expenses and income from
operations.
• The calculated growth rates from those
forecasted accounts was again used to forecast
the relevant subordinate accounts.
• Example: 2015 Acquisition Related Expense =
forecasted 2014 Acquisition Related Expense x
Calculated growth rate for 2015 Total Expenses.
Statement of Operations Calculations