UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
(Mark One)
x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20172022
or
o☐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
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 classTrading symbolName of each exchange on which registered
Common Stock, $0.01 par valueEXRNew 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  o☐


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x☒    No  o☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company;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. (Check one):
Act:
Large accelerated filerx☒Accelerated filero☐
Non-accelerated filer
o  (Do not check if a smaller reporting company)
☐		Smaller reporting companyo☐
Emerging growth companyo☐


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. o☐


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





The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, as of October 31, 2017,August 1, 2022, was 126,007,803.133,912,036.

2

Table of Contents
EXTRA SPACE STORAGE INC.


TABLE OF CONTENTS
4
4
PART I. FINANCIAL INFORMATION
56
ITEM 1. FINANCIAL STATEMENTS (unaudited)
56
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1113
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2730
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
4339
ITEM 4. CONTROLS AND PROCEDURES
4440
4541
ITEM 1. LEGAL PROCEEDINGS
4541
ITEM 1A. RISK FACTORS
4541
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
4541
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
4541
ITEM 4. MINE SAFETY DISCLOSURES
4541
ITEM 5. OTHER INFORMATION
4541
ITEM 6. EXHIBITS
4642
SIGNATURES
4743




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,”“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;
difficulties in our ability to evaluate, finance, complete and integrate acquisitions and developments successfully and to lease up those stores, which could adversely affect our profitability;
•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;
•impacts from the COVID-19 pandemic or the future outbreak of other highly infectious or contagious diseases, including reduced demand for self-storage space and ancillary products and services such as tenant reinsurance, and potential decreases in occupancy and rental rates and staffing levels, which could adversely affect our results;
•our reliance on information technologies, which are vulnerable to, among other things, attack from computer viruses and malware, hacking, cyberattacks and other unauthorized access or misuse, any of which could adversely affect our business and results;
•increased interest rates and operating costs;rates;
the failure to effectively manage our growth and expansion into new markets or to successfully operate acquired properties and operations;
•reductions in asset valuations and related impairment charges;
the failure•our lack of sole decision-making authority with respect to our joint venture partnersinvestments;
•the effect of recent or future changes to fulfill their obligations to us or their pursuit of actions that are inconsistent with our objectives;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;plan.
The forward-looking statements are based on our beliefs, assumptions and
difficulties 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 abilityforward-looking statements. You should carefully consider these risks before you make an investment decision with respect to attract and retain qualified personnel and management members.our securities.




4

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.
5

PART I.     FINANCIAL INFORMATION


ITEM 1.
ITEM 1.    FINANCIAL STATEMENTS


Extra Space Storage Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands, except share data)
June 30, 2022December 31, 2021
(unaudited)
Assets:
Real estate assets, net$9,135,464 $8,834,649 
Real estate assets - operating lease right-of-use assets232,045 227,949 
Investments in unconsolidated real estate entities544,771 457,326 
Investments in debt securities and notes receivable702,354 719,187 
Cash and cash equivalents58,729 71,126 
Restricted cash11,437 5,068 
Other assets, net353,967 159,172 
Total assets$11,038,767 $10,474,477 
Liabilities, Noncontrolling Interests and Equity:
Notes payable, net$1,288,487 $1,320,755 
Unsecured term loans, net1,742,995 1,741,926 
Unsecured senior notes, net2,757,158 2,360,066 
Revolving lines of credit599,000 535,000 
Operating lease liabilities238,392 233,356 
Cash distributions in unconsolidated real estate ventures65,377 63,582 
Accounts payable and accrued expenses171,918 142,285 
Other liabilities282,200 291,531 
Total liabilities7,145,527 6,688,501 
Commitments and contingencies00
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, 133,900,184 and 133,922,305 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively1,339 1,339 
Additional paid-in capital3,334,317 3,285,948 
Accumulated other comprehensive income (loss)25,555 (42,546)
Accumulated deficit(159,091)(128,245)
Total Extra Space Storage Inc. stockholders' equity3,202,120 3,116,496 
Noncontrolling interest represented by Preferred Operating Partnership units, net261,231 259,110 
Noncontrolling interests in Operating Partnership, net and other noncontrolling interests429,889 410,370 
Total noncontrolling interests and equity3,893,240 3,785,976 
Total liabilities, noncontrolling interests and equity$11,038,767 $10,474,477 
 September 30, 2017 December 31, 2016
 (Unaudited)  
Assets:   
Real estate assets, net$6,770,086
 $6,770,447
Investments in unconsolidated real estate ventures78,512
 79,570
Cash and cash equivalents63,732
 43,858
Restricted cash17,277
 13,884
Receivables from related parties and affiliated real estate joint ventures4,618
 16,611
Other assets, net152,730
 167,076
Total assets$7,086,955
 $7,091,446
Liabilities, Noncontrolling Interests and Equity:   
Notes payable, net$3,568,113
 $3,213,588
Exchangeable senior notes, net602,485
 610,314
Notes payable to trusts, net117,414
 117,321
Revolving lines of credit25,000
 365,000
Accounts payable and accrued expenses114,247
 101,388
Other liabilities85,971
 87,669
Total liabilities4,513,230
 4,495,280
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, 126,007,207 and 125,881,460 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively1,260
 1,259
Additional paid-in capital2,567,234
 2,566,120
Accumulated other comprehensive income17,731
 16,770
Accumulated deficit(370,959) (339,257)
Total Extra Space Storage Inc. stockholders' equity2,215,266
 2,244,892
Noncontrolling interest represented by Preferred Operating Partnership units, net of $120,230 notes receivable154,432
 147,920
Noncontrolling interests in Operating Partnership202,232
 203,354
Other noncontrolling interests1,795
 —
Total noncontrolling interests and equity2,573,725
 2,596,166
Total liabilities, noncontrolling interests and equity$7,086,955
 $7,091,446


See accompanying notes to unaudited condensed consolidated financial statements.

6


Extra Space Storage Inc.
Condensed Consolidated Statements of Operations
(amounts in thousands, except share data)
(unaudited)
For the Three Months Ended September 30, For the Nine Months Ended September 30, For the Three Months Ended June 30,For the Six Months Ended June 30,
2017 2016 2017 2016 2022202120222021
Revenues:    
  Revenues:
Property rental$248,589
 $224,451
 $720,878
 $635,730
Property rental$408,044 $321,500 $787,852 $625,093 
Tenant reinsurance25,882
 22,727
 73,050
 64,936
Tenant reinsurance46,427 42,334 90,224 81,953 
Management fees and other income9,685
 10,005
 29,239
 30,193
Management fees and other income20,517 14,796 40,474 30,441 
Total revenues284,156
 257,183
 823,167
 730,859
Total revenues474,988 378,630 918,550 737,487 
Expenses:       Expenses:
Property operations70,430
 62,341
 204,370
 185,883
Property operations104,252 89,155 207,794 181,522 
Tenant reinsurance6,272
 4,093
 13,996
 12,345
Tenant reinsurance7,537 6,735 14,579 13,896 
Acquisition related costs and other—
 1,933
 —
 9,124
Transaction related costsTransaction related costs1,465 — 1,465 — 
General and administrative19,498
 19,537
 60,171
 63,451
General and administrative31,251 26,341 61,013 49,881 
Depreciation and amortization48,075
 46,555
 144,139
 133,402
Depreciation and amortization69,067 59,570 136,973 118,169 
Total expenses144,275
 134,459
 422,676
 404,205
Total expenses213,572 181,801 421,824 363,468 
Gain on real estate transactionsGain on real estate transactions14,249 — 14,249 63,883 
Income from operations139,881
 122,724
 400,491
 326,654
Income from operations275,665 196,829 510,975 437,902 
Gain (loss) on real estate transactions, earnout from prior acquisition and impairment of real estate—
 —
 (6,019) 9,814
Interest expense(39,766) (33,494) (113,192) (97,655)Interest expense(47,466)(40,240)(90,004)(80,935)
Non-cash interest expense related to amortization of discount on equity component of exchangeable senior notes(1,268) (1,243) (3,827) (3,716)
Interest income869
 1,358
 2,797
 4,697
Interest income15,060 12,838 34,049 25,142 
Interest income on note receivable from Preferred Operating Partnership unit holder532
 1,213
 2,404
 3,638
Income before equity in earnings of unconsolidated real estate ventures and income tax expense100,248
 90,558
 282,654
 243,432
Equity in earnings of unconsolidated real estate ventures3,990
 3,625
 11,407
 9,813
Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partners' interests—
 37,509
 —
 64,432
Income before equity in earnings and dividend income from unconsolidated real estate ventures and income tax expenseIncome before equity in earnings and dividend income from unconsolidated real estate ventures and income tax expense243,259 169,427 455,020 382,109 
Equity in earnings and dividend income from unconsolidated real estate entitiesEquity in earnings and dividend income from unconsolidated real estate entities10,190 8,322 19,287 15,278 
Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partner's interestEquity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partner's interest— 6,251 — 6,251 
Income tax expense(3,163) (4,466) (9,154) (11,004)Income tax expense(5,615)(5,421)(8,756)(9,558)
Net income101,075
 127,226
 284,907
 306,673
Net income247,834 178,579 465,551 394,080 
Net income allocated to Preferred Operating Partnership noncontrolling interests(3,394) (4,144) (10,775) (10,758)Net income allocated to Preferred Operating Partnership noncontrolling interests(4,491)(3,438)(8,824)(7,118)
Net income allocated to Operating Partnership and other noncontrolling interests(3,917) (4,994) (11,080) (12,191)Net income allocated to Operating Partnership and other noncontrolling interests(11,213)(7,193)(21,018)(16,016)
Net income attributable to common stockholders$93,764
 $118,088
 $263,052
 $283,724
Net income attributable to common stockholders$232,130 $167,948 $435,709 $370,946 
Earnings per common share       Earnings per common share
Basic$0.74
 $0.94
 $2.09
 $2.26
Basic$1.73 $1.25 $3.24 $2.79 
Diluted$0.74
 $0.93
 $2.07
 $2.24
Diluted$1.73 $1.25 $3.24 $2.79 
Weighted average number of shares       Weighted average number of shares
Basic125,717,517
 125,752,291
 125,665,787
 125,244,761
Basic134,192,540 133,756,610 134,186,426 132,886,933 
Diluted133,044,473
 133,763,472
 133,008,622
 132,476,691
Diluted142,737,909 140,407,195 141,600,206 140,428,558 
Cash dividends paid per common share$0.78
 $0.78
 $2.34
 $2.15
Cash dividends paid per common share$1.50 $1.00 $3.00 $2.00 


See accompanying notes to unaudited condensed consolidated financial statements.

7

Extra Space Storage Inc.
Condensed Consolidated Statements of Comprehensive Income
(amounts in thousands)
(unaudited)
For the Three Months Ended September 30, For the Nine Months Ended September 30, For the Three Months Ended June 30,For the Six Months Ended June 30,
2017 2016 2017 2016 2022202120222021
Net income$101,075
 $127,226
 $284,907
 $306,673
Net income$247,834 $178,579 $465,551 $394,080 
Other comprehensive income (loss):       
Other comprehensive income:Other comprehensive income:
Change in fair value of interest rate swaps759
 13,374
 992
 (36,571) Change in fair value of interest rate swaps20,113 5,617 71,762 28,630 
Total comprehensive income101,834
 140,600
 285,899
 270,102
Total comprehensive income267,947 184,196 537,313 422,710 
Less: comprehensive income attributable to noncontrolling interests7,342
 9,761
 21,886
 21,120
 Less: comprehensive income attributable to noncontrolling interests16,719 10,898 33,503 24,501 
Comprehensive income attributable to common stockholders$94,492
 $130,839
 $264,013
 $248,982
Comprehensive income attributable to common stockholders$251,228 $173,298 $503,810 $398,209 




See accompanying notes to unaudited condensed consolidated financial statements.

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                
 Series A Series B Series C Series D 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, 2016$14,385
 $41,902
 $10,730
 $80,903
 $203,354
 $—
 125,881,460
 $1,259
 $2,566,120
 $16,770
 $(339,257) $2,596,166
Issuance of common stock upon the exercise of options—
 —
 —
 —
 —
 —
 38,418
 —
 1,266
 —
 —
 1,266
Restricted stock grants issued—
 —
 —
 —
 —
 —
 93,796
 1
 (1) —
 —
 —
Restricted stock grants cancelled—
 —
 —
 —
 —
 —
 (6,467) —
 —
 —
 —
 —
Compensation expense related to stock-based awards—
 —
 —
 —
 —
 —
 —
 —
 7,244
 —
 —
 7,244
Issuance of Operating Partnership units in conjunction with acquisitions—
 —
 —
 —
 2,000
 —
 —
 —
 —
 —
 —
 2,000
Redemption of Operating Partnership units for cash—
 —
 —
 —
 (1,238) —
 —
 —
 (1,272) —
 —
 (2,510)
Issuance of Preferred D Units in the Operating Partnership in conjunction with acquisitions—
 —
 —
 6,810
 —
 —
 —
 —
 —
 —
 —
 6,810
Noncontrolling Interest in consolidated joint venture—
 —
 —
 —
 —
 1,868
 —
 —
 —
 —
 —
 1,868
Repurchase of equity portion of 2013 exchangeable senior notes—
 —
 —
 —
 —
 —
 —
 —
 (6,123) —
 —
 (6,123)
Net income (loss)4,294
 1,886
 2,028
 2,567
 11,153
 (73) —
 —
 —
 —
 263,052
 284,907
Other comprehensive income4
 —
 —
 —
 27
 —
 —
 —
 —
 961
 —
 992
Distributions to Operating Partnership units held by noncontrolling interests(4,596) (1,886) (2,028) (2,567) (13,064) —
 —
 —
 —
 —
 —
 (24,141)
Dividends paid on common stock at $2.34 per share—
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (294,754) (294,754)
Balances at September 30, 2017$14,087
 $41,902
 $10,730
 $87,713
 $202,232
 $1,795
 126,007,207
 $1,260
 $2,567,234
 $17,731
 $(370,959) $2,573,725


Noncontrolling InterestExtra Space Storage Inc. Stockholders' Equity
Preferred Operating PartnershipOperating PartnershipOtherSharesPar ValueAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Noncontrolling Interests and Equity
Balances at December 31, 2020$172,052 $215,892 $401 131,357,961 $1,314 $3,000,458 $(99,093)$(354,900)$2,936,124 
Issuance of common stock upon the exercise of options— — — 56,722 — 4,254 — — 4,254 
Issuance of common stock in connection with share based compensation— — — 89,793 — 3,652 — — 3,652 
Restricted stock grants cancelled— — — (2,499)— — — — — 
Issuance of common stock, net of offering costs— — — 2,185,685 22 273,698 — — 273,720 
Redemption of Operating Partnership units for stock— (193)— 5,000 — 193 — — — 
Noncontrolling interest in consolidated joint venture— — (50)— — — — — (50)
Net income (loss)3,680 8,828 (5)— — — — 202,998 215,501 
Other comprehensive income144 956 — — — — 21,913 — 23,013 
Distributions to Operating Partnership units held by noncontrolling interests(3,224)(5,801)— — — — — — (9,025)
Dividends paid on common stock at $1.00 per share— — — — — — — (132,540)(132,540)
Balances at March 31, 2021$172,652 $219,682 $346 133,692,662 $1,336 $3,282,255 $(77,180)$(284,442)$3,314,649 
Issuance of common stock upon the exercise of options— — — — — — — — — 
Issuance of common stock in connection with share based compensation— — — 44,990 — 4,983 — — 4,983 
Restricted stock grants cancelled— — — (4,972)— — — — — 
Offering costs associated with previous stock issuance— — — — — (211)— — (211)
Redemption of Operating Partnership units for stock— (2,185)— 58,429 1 2,184 — — — 
Redemption of Operating Partnership units for cash— (113)— — — (359)— — (472)
Repayment of receivable with Operating Partnership units pledged as collateral— 411 — — — — — — 411 
Noncontrolling interest in consolidated joint venture— — 150 — — — — — 150 
Net income3,438 7,190 3 — — — — 167,948 178,579 
Other comprehensive income35 232 — — — — 5,350 — 5,617 
Distributions to Operating Partnership units held by noncontrolling interests(3,223)(5,751)— — — — — — (8,974)
Dividends paid on common stock at $1.00 per share— — — — — — — (133,777)(133,777)
Balances at June 30, 2021$172,902 $219,466 $499 133,791,109 $1,337 $3,288,852 $(71,830)$(250,271)$3,360,955 
9
Extra Space Storage Inc.
Condensed Consolidated Statement of Noncontrolling Interests and Equity
(amounts in thousands, except share data)
(unaudited)

Noncontrolling InterestExtra Space Storage Inc. Stockholders' Equity
Preferred Operating PartnershipOperating PartnershipOtherSharesPar ValueAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Noncontrolling Interests and Equity
Balances at December 31, 2021$259,110 $410,053 $317 133,922,305 $1,339 $3,285,948 $(42,546)$(128,245)$3,785,976 
Issuance of common stock in connection with share based compensation— — — 142,784 — 4,542 — — 4,542 
Restricted stock grants cancelled— — — (779)— — — — — 
Redemption of Operating Partnership units for cash— (829)— — — (1,843)— — (2,672)
Redemption of Preferred B Units in the Operating Partnership for cash(3,375)— — — — — — — (3,375)
Issuance of common stock in conjunction with acquisitions— — — 186,766 4 40,961 — — 40,965 
Net income4,333 9,805 — — — — 203,579 217,717 
Other comprehensive income313 2,333 — — — — 49,003 — 51,649 
Distributions to Operating Partnership units held by noncontrolling interests(4,330)(9,781)— — — — — — (14,111)
Dividends paid on common stock at $1.50 per share— — — — — — — (202,527)(202,527)
Balances at March 31, 2022$256,051 $411,581 $317 134,251,076 $1,343 $3,329,608 $6,457 $(127,193)$3,878,164 
Issuance of common stock in connection with share based compensation— — — 38,016 — 5,245 — — 5,245 
Restricted stock grants cancelled— — — (7,122)— — — — — 
Redemption of Operating Partnership units for cash— (296)— — — (536)— — (832)
Redemption of Preferred B Units in the Operating Partnership for cash(1,125)— — — — — — — (1,125)
Issuance of Operating Partnership units in conjunction with business combinations— 16,000 — — — — — — 16,000 
Issuance of Preferred D units in the Operating Partnership in conjunction with business combinations6,000 — — — — — — — 6,000 
Buyback of common stock, net of offering costs— — — (381,786)(4)— — (63,004)(63,008)
Net income4,491 11,213 — — — — 232,130 247,834 
Other comprehensive income120 895 — — — — 19,098 — 20,113 
Distributions to Operating Partnership units held by noncontrolling interests(4,306)(9,821)— — — — — — (14,127)
Dividends paid on common stock at $1.50 per share— — — — — — — (201,024)(201,024)
Balances at June 30, 2022$261,231 $429,572 $317 133,900,184 $1,339 $3,334,317 $25,555 $(159,091)$3,893,240 

See accompanying notes to unaudited condensed consolidated financial statements.

10
8




Extra Space Storage Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)

 For the Six Months Ended June 30,
 20222021
Cash flows from operating activities:
Net income$465,551 $394,080 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization136,973 118,169 
Amortization of deferred financing costs3,933 4,869 
Non-cash lease expense939 945 
Compensation expense related to stock-based awards9,787 8,635 
Accrual of interest income added to principal of debt securities and notes receivable(19,235)(17,312)
Gain on real estate transactions(14,249)(63,883)
Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partner's interest— (6,251)
Distributions from unconsolidated real estate ventures in excess of earnings6,204 3,026 
Changes in operating assets and liabilities:
Other assets15,789 5,519 
Accounts payable and accrued expenses28,646 19,063 
Other liabilities6,049 (3,172)
Net cash provided by operating activities640,387 463,688 
Cash flows from investing activities:
Acquisition of real estate assets(438,287)(375,209)
Cash paid for business combination(157,301)— 
Development and redevelopment of real estate assets(29,256)(25,782)
Proceeds from sale of real estate assets and investments in real estate ventures39,367 194,205 
Investment in unconsolidated real estate entities(76,339)(7,174)
Return of investment in unconsolidated real estate ventures342 31,534 
Issuance and purchase of notes receivable(204,930)(68,523)
Principal payments received from notes receivable223,773 20,426 
Proceeds from sale of notes receivable82,115 87,298 
Purchase of equipment and fixtures(9,512)(2,077)
Net cash used in investing activities(570,028)(145,302)
Cash flows from financing activities:
Proceeds from the sale of common stock, net of offering costs— 273,509 
Proceeds from notes payable and revolving lines of credit1,948,657 2,372,000 
Principal payments on notes payable and revolving lines of credit(1,915,531)(3,193,025)
Proceeds from issuance of public bonds, net400,000 446,396 
Deferred financing costs(6,713)(5,403)
Net proceeds from exercise of stock options— 4,254 
Repurchase of common stock(63,008)— 
Redemption of Operating Partnership units held by noncontrolling interests(3,504)(472)
Redemption of Preferred B Units for cash(4,500)— 
Proceeds from principal payments on note receivable collateralized by OP Units— 411 
Dividends paid on common stock(403,551)(266,317)
Distributions to noncontrolling interests(28,237)(17,999)
Net cash used in financing activities(76,387)(386,646)
Net decrease in cash, cash equivalents, and restricted cash(6,028)(68,260)
Cash, cash equivalents, and restricted cash, beginning of the period76,194 128,009 
Cash, cash equivalents, and restricted cash, end of the period$70,166 $59,749 
11
 For the Nine Months Ended September 30,
 2017 2016
Cash flows from operating activities:   
Net income$284,907
 $306,673
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization144,139
 133,402
Amortization of deferred financing costs9,246
 9,388
Non-cash interest expense related to amortization of discount on equity component of exchangeable senior notes3,827
 3,716
Non-cash interest expense related to amortization of premium on notes payable—
 (828)
Compensation expense related to stock-based awards7,244
 6,008
Gain on sale of real estate assets and purchase of joint venture partner's interest—
 (64,432)
(Gain) loss on real estate transactions, earnout from prior acquisition and impairment of real estate6,019
 (9,814)
Distributions from unconsolidated real estate ventures in excess of earnings3,498
 3,071
Changes in operating assets and liabilities:   
Receivables from related parties and affiliated real estate joint ventures195
 923
Other assets(15,498) (16,059)
Accounts payable and accrued expenses6,425
 10,938
Other liabilities(373) 3,173
Net cash provided by operating activities449,629
 386,159
Cash flows from investing activities:   
Acquisition of real estate assets(119,040) (763,246)
Development and redevelopment of real estate assets(20,670) (18,492)
Proceeds from sale of real estate assets, investments in real estate ventures and other assets18,565
 56,786
Change in restricted cash(3,393) 14,296
Investment in unconsolidated real estate ventures(3,021) (25,690)
Return of investment in unconsolidated real estate ventures581
 11,991
Purchase/issuance of notes receivable—
 (18,530)
Principal payments received from notes receivable44,869
 41,393
Purchase of equipment and fixtures(5,635) (2,818)
Net cash used in investing activities(87,744) (704,310)
Cash flows from financing activities:   
Proceeds from the sale of common stock, net of offering costs—
 123,423
Repurchase of exchangeable senior notes(19,726) (22,192)
Proceeds from notes payable and revolving lines of credit1,023,170
 1,026,975
Principal payments on notes payable and revolving lines of credit(1,020,144) (565,541)
Deferred financing costs(5,172) (6,700)
Net proceeds from exercise of stock options1,266
 312
Proceeds from termination of interest rate cap—
 1,650
Payment of earnout from prior acquisition—
 (4,600)
Redemption of Operating Partnership units held by noncontrolling interests(2,510) —
Dividends paid on common stock(294,754) (269,630)
Distributions to noncontrolling interests(24,141) (22,653)
Net cash provided by (used in) financing activities(342,011) 261,044
Net increase in cash and cash equivalents19,874
 (57,107)
Cash and cash equivalents, beginning of the period43,858
 75,799
Cash and cash equivalents, end of the period$63,732
 $18,692
    

9




Extra Space Storage Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)

 For the Six Months Ended June 30,
 20222021
Supplemental schedule of cash flow information
Interest paid$82,381 $76,289 
Income taxes paid9,116 16,749 
Supplemental schedule of noncash investing and financing activities:
Redemption of Operating Partnership units held by noncontrolling interests for common stock
Noncontrolling interests in Operating Partnership$— $(2,378)
Common stock and paid-in capital— 2,378 
Acquisition and establishment of operating lease right of use assets and lease liabilities
Real estate assets - operating lease right-of-use assets$1,689 $2,493 
Operating lease liabilities(1,689)(2,493)
Acquisitions of real estate assets
Real estate assets, net$48,535 $43,666 
Value of equity issued(40,965)— 
Investment in unconsolidated real estate ventures(747)(2,673)
Finance lease liability(6,823)(40,993)
Accrued construction costs and capital expenditures
Acquisition of real estate assets$987 $1,016 
Accounts payable and accrued expenses(987)(1,016)
Issuance of OP and Preferred OP units in conjunction with business combinations
Preferred OP Units issued$(6,000)$— 
OP Units Issued(16,000)— 
Investment in unconsolidated real estate ventures received on sale of stores to joint venture
Investment in unconsolidated real estate ventures$— $33,878 
Real estate assets— (33,878)
 For the Nine Months Ended September 30,
 2017 2016
Supplemental schedule of cash flow information   
Interest paid$107,144
 $94,585
Income taxes paid8,086
 10,813
Supplemental schedule of noncash investing and financing activities:   
Redemption of Operating Partnership units held by noncontrolling interests for common stock:   
Noncontrolling interests in Operating Partnership$—
 $(839)
Common stock and paid-in capital—
 839
Tax effect from vesting of restricted stock grants and option exercises   
Other assets$—
 $1,322
Additional paid-in capital—
 (1,322)
Acquisitions of real estate assets   
Real estate assets, net$20,100
 $65,960
Value of Operating Partnership units issued(8,810) (56,237)
Notes payable assumed(9,463) (9,723)
Other noncontrolling interests(1,827) —
Accrued construction costs and capital expenditures   
Acquisition of real estate assets$4,874
 $8,839
Development and redevelopment of real estate assets1,558
 —
Other liabilities(6,432) (8,839)
Distribution of real estate from investments in unconsolidated real estate ventures   
    Real estate assets, net$—
 $21,587
    Investments in unconsolidated real estate ventures—
 (21,587)
Disposition of real estate assets   
    Real estate assets, net$—
 $(7,689)
Operating Partnership units redeemed—
 7,689
Acquisition of noncontrolling interests   
Operating Partnership units issued$—
 $(800)
Other noncontrolling interests—
 162
Additional paid-in capital—
 638


See accompanying notes to unaudited condensed consolidated financial statements.



10
12


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Amounts in thousands, except store and share data, unless otherwise stated





 
1.
1.    ORGANIZATION

Extra Space Storage Inc. (the “Company”) is a fully-integrated,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”("stores") located throughout the United States. The Company continueswas 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 interestsinterest 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 has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. To the extent the Company continues to qualify as a REIT, it will not be subject to tax, with certain limited exceptions, on the taxable income that is distributed to its stockholders.


The Company invests in stores by acquiring wholly-owned stores or by acquiring an equity interest in real estate entities. At SeptemberJune 30, 2017,2022, the Company had direct and indirect equity interests in 1,0281,313 stores. In addition, the Company managed 485864 stores for third parties, bringing the total number of stores which it owns and/or manages to 1,513.2,177. These stores are located in 3841 states and Washington, D.C. and Puerto Rico.

The Company operates in three distinct segments: (1) rental operations; (2)also offers tenant reinsurance;reinsurance at its owned and (3) property management, acquisition and development. The rental operations activities include rental operations ofmanaged stores in which we have an ownership interest. No single tenant accounts for more than 5.0% of rental income. Tenant reinsurance activities includethat insures the reinsurance of risks relating to the lossvalue of goods stored by tenants in the Company’s stores. The Company’s property management, acquisition and development activities include managing, acquiring and developing stores.storage units.

2.    BASIS OF PRESENTATION
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 ninesix months ended SeptemberJune 30, 20172022 are not necessarily indicative of results that may be expected for the year ending December 31, 2017.2022. The condensed consolidated balance sheet as of December 31, 20162021 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, 2016,2021, as filed with the Securities and Exchange Commission.


Recently Issued Accounting Standards

In May 2014,March 2020, the Financial Accounting Standards Board (“FASB”("FASB") issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” which amends the guidance for revenue recognition to replace numerous, industry-specific requirements and converges areas under this topic with thoseASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the InternationalEffects of Reference Rate Reform on Financial Reporting Standards. Reporting" (“ASU 2014-09 outlines2020-04”). ASU 2020-04 provides temporary optional guidance that provides transition relief for reference rate reform, including optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions that reference LIBOR or a five-step processreference rate that is expected to be discontinued as a result of reference rate reform if certain criteria are met. ASU 2020-04 is effective upon issuance, and the provisions generally can be applied prospectively as of January 1, 2020 through December 31, 2024. The Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues andfuture LIBOR-indexed cash flows from contracts with customers. The new standardto assume that the index upon which future hedged transactions will become effective for annual and interim periods beginning after December 15, 2017 with early adoption permitted.be based matches the index on the corresponding derivatives. The Company has determined that its property rental revenuealso elected to apply additional expedients related to contract modifications, changes in critical terms, and tenant reinsurance revenue will not be subjectupdates to the guidance indesignated hedged risks as qualifying changes are made to applicable debt and derivative contracts. Application of these expedients preserves the presentation of derivatives and debt contracts consistent with past presentation. In January 2021, the FASB issued ASU 2014-09, as they qualify as lease contracts and insurance contracts,2021-01, "Reference Rate Reform (Topic 848): Scope", which are excluded from its scope. The Company's management fee revenue will be included inrefines the scope of the standard. However, based on the Company's initial assessment, it appears that revenue recognized under the standard will not differ materially from revenue recognized under existingTopic 848 and clarifies some of its guidance. The Company continues to assessevaluate the potential impactsimpact of ASU 2014-09.the guidance and may apply other elections as applicable as additional changes in the market occur. The Company anticipates adoptinghas begun transitioning debt over to SOFR as part of the standard using the modified retrospective transition method as of January 1, 2018.reference rate reform.



11
13


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated

3.    FAIR VALUE DISCLOSURES
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which modifies the accounting for leases, intending to increase transparency and comparability of organizations by requiring balance sheet presentation of leased assets and increased financial statement disclosure of leasing arrangements. ASU 2016-02 will require 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 to be measured at their present value and accounted for using the effective interest method. The accounting for the leased asset will differ 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 depreciation expense 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 is effective for annual and interim periods beginning after December 15, 2018. The Company is currently assessing the impact of the adoption of ASU 2016-02 on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-05, "Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships." ASU 2016-05 clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument does not, in and of itself, require re-designation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The Company adopted this guidance on January 1, 2017. The adoption of ASU 2016-05 did not have a material impact on the Company's consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, “Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 simplifies several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company adopted this guidance prospectively on January 1, 2017, and prior periods have not
been adjusted. As a result of the adoption of this guidance, the Company no longer presents the tax effects from vesting of restricted stock grants and stock option exercises on its condensed consolidated statement of noncontrolling interests and equity.

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments." ASU 2016-15 provides guidance on several specific cash flow issues, including the classification of debt prepayment or debt extinguishment costs, contingent consideration payments, and distributions received from equity method investees. This guidance is effective for fiscal years beginning after December 15, 2017. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements.

In October 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash," which requires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business," which provides guidance on whether transactions should be accounted for as acquisitions or disposals of assets or businesses. Specifically, when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set of assets is not a business. Additionally, ASU 2017-01 also provides other guidance providing a more robust framework to use in determining whether a set of assets and activities is a
business. This guidance is effective for annual periods beginning after December 15, 2017. Early adoption is permitted for transactions for which the acquisition or disposition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued. The Company adopted ASU 2017-01 for new acquisitions beginning on January 1, 2017. The costs related to the acquisitions of stores that qualify as asset acquisitions will be capitalized as part of the purchase.

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements for Accounting for Hedging Activities," which amends and simplifies existing guidance for the financial reporting of hedging relationships to

12

EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated

allow companies to better portray the economic effects of risk management activities in their financial statements. ASU 2017-12 is effective for annual periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the new guidance to determine the impact it may 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 SeptemberJune 30, 2017,2022, the Company had 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 SeptemberJune 30, 2017,2022, aggregated by the level in the fair value hierarchy within which those measurements fall. 
Fair Value Measurements at Reporting Date Using
DescriptionQuoted 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$— $31,336 $— 
Other liabilities - Cash flow hedge swap agreements$— $— $— 
   Fair Value Measurements at Reporting Date Using
DescriptionSeptember 30, 2017 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$23,584
 $—
 $23,584
 $—
Other liabilities - Cash Flow Hedge Swap Agreements$(1,430) $—
 $(1,430) $—


The Company did not have any significant assets or liabilities that are re-measured on a recurring basis using significant unobservable inputs as of SeptemberJune 30, 20172022 or December 31, 2016.2021.


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 carefully 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

13

EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated

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.


14

EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
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 areis presented as part of normal operations for all periods presented. As of SeptemberJune 30, 2017,2022, the Company had one parcel of undeveloped land and 36no operating stores classified as held for sale. The estimated fair value less selling costs of each of these operating stores is greater than the carrying value of thesale which are included in real estate assets, and therefore no loss has been recorded related to the operating stores held for sale. For the nine months ended September 30, 2017, the Company recorded an impairment loss of $6,100 relating to one parcel of land held for sale and an additional two parcels of undeveloped land where the carrying value was greater than the fair value.net.


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. DebtAny 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 for those qualifying as asset acquisitions, are capitalized as a componentpart of the costpurchase price. For acquisitions that meet the definition of a business, the Company estimates the fair value of the identifiable assets acquired.and liabilities of the acquired entity on the acquisition date. We measure goodwill as the excess of consideration transferred over the net of the acquisition date fair values of the identifiable assets acquired and liabilities assumed. Acquisition-related expenses arising from the transaction are expensed as incurred. The Company includes the results of operations of the businesses that it acquires beginning on the acquisition date.


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 SeptemberJune 30, 20172022 and December 31, 20162021 approximate fair value. Restricted cash is comprised of funds deposited with financial institutions located throughout the United States primarily relating to earnest money deposits on potential acquisitions.


The fair values of the Company’s notes receivable from Preferred and Common Operating Partnership unit holders and other fixed rate notes receivable 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, 2022December 31, 2021
Fair
Value		Carrying
Value		Fair
Value		Carrying
Value
Notes receivable from Preferred and Common Operating Partnership unit holders$97,212 $101,900 $101,824 $101,900 
Fixed rate notes receivable$4,265 $4,298 $105,954 $104,251 
Fixed rate debt$4,516,854 $4,799,288 $4,643,072 $4,506,435 

15
 September 30, 2017 December 31, 2016
 Fair
Value		 Carrying
Value		 Fair
Value		 Carrying
Value
Notes receivable from Preferred Operating Partnership unit holders$114,506
 $120,230
 $125,642
 $120,230
Fixed rate notes receivable$21,285
 $20,608
 $53,450
 $52,201
Fixed rate notes payable and notes payable to trusts$2,882,709
 $2,900,822
 $2,404,996
 $2,417,558
Exchangeable senior notes$702,118
 $624,384
 $706,827
 $638,170


14


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated

4.     REAL ESTATE ASSETS
4.EARNINGS PER COMMON SHARE

The components of real estate assets are summarized as follows:
June 30, 2022December 31, 2021
Land$2,223,174 $2,151,319 
Buildings, improvements and other intangibles8,560,995 8,227,094 
Right of use asset - finance lease136,209 117,718 
Intangible assets - tenant relationships138,994 134,577 
Intangible lease rights12,943 12,443 
11,072,315 10,643,151 
Less: accumulated depreciation and amortization(1,992,922)(1,867,750)
Net operating real estate assets9,079,393 8,775,401 
Real estate under development/redevelopment56,071 59,248 
Real estate assets, net$9,135,464 $8,834,649 
Real estate assets held for sale included in real estate assets, net$— $8,436 
As of June 30, 2022, the Company had no assets classified as held for sale.

5.     OTHER ASSETS
The components of other assets are summarized as follows:
June 30, 2022December 31, 2021
Equipment and fixtures, net$34,782 $29,060 
Deferred line of credit financing costs, net6,699 7,408 
Prepaid expenses and deposits36,356 39,384 
Receivables, net73,983 83,050 
Goodwill170,811 — 
Fair value of interest rate swaps31,336 270 
$353,967 $159,172 
We evaluate goodwill for impairment annually in the fourth quarter and whenever events, circumstances, and other related factors indicate that fair value of the related reporting unit may be less than the carrying value. If we determine that the fair value of the reporting unit exceeds the aggregate carrying amount, no impairment charge is recorded. Otherwise, we record an impairment charge to the extent the carrying amount of the goodwill exceeds the amount that would be allocated to goodwill if the reporting unit were acquired for estimated fair value.
16

EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
6.    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 and Series B Units, the “Preferred OP Units”) and common Operating Partnership units (“OP Units”)) that do not have a current right to participate in earnings of the Company but could do so in the future by virtue of their option, redemption or conversion right.


In computing the dilutive effect of convertible securities, net income is adjusted to add back any changes in earnings in the period associated with the convertible security. The numerator also is adjusted for the effects of any other non-discretionary changes in income or loss that would result from the assumed conversion of those potential common shares. In computing diluted earnings per common share, only potential common shares that are dilutive (those(i.e. those that reduce earnings per common share) are included. For the three months ended September 30, 2017 and 2016, options to purchase approximately 45,438 and 95,031 shares of common stock, respectively, and for the nine months ended September 30, 2017 and 2016, options to purchase approximately 97,697 and 84,919 shares of common stock, respectively, 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 SeptemberJune 30, 20172022 and 20162021 was $77.84$185.25 and $84.41, respectively, and for the nine months ended September 30, 2017 and 2016, the average share price was $76.67 and $87.22,$149.81, 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,
2022202120222021
Equivalent Shares (if converted)Equivalent Shares (if converted)Equivalent Shares (if converted)Equivalent Shares (if converted)
Series B Units183,807 273,027 183,342 301,483 
Series D Units— 783,406 1,074,933 — 
183,807 1,056,433 1,258,275 301,483 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2017 2016 2017 2016
 Equivalent Shares (if converted) Equivalent Shares (if converted) Equivalent Shares (if converted) Equivalent Shares (if converted)
Series B Units538,312
 496,412
 546,526
 480,419
Series C Units380,769
 351,132
 386,580
 339,820
Series D Units1,126,831
 —
 1,091,319
 417,420
 2,045,912
 847,544
 2,024,425
 1,237,659

The Operating Partnership had $49,384 of its 2.375% Exchangeable Senior Notes due 2033 (the “2013 Notes”) issued and outstanding as of September 30, 2017. The 2013 Notes could potentially have a dilutive impact on the Company’s earnings per share calculations. The 2013 Notes are 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 exchange price of the 2013 Notes was $53.28 per share as of September 30, 2017, 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 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 September 30, 2017. 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 $94.01 per

15

EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated

share as of September 30, 2017, 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 such exchange obligation, 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 nine months ended September 30, 2017 and 2016, 292,439 and 413,498 shares, respectively, related to the 2013 Notes were included in the computation for diluted earnings per share. For the three and nine months ended September 30, 2017 and 2016, no shares related to the 2015 Notes were included in the computation for diluted earnings per share as the exchange price exceeded the per share price of the Company’s common stock during these periods.


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 $115,000$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 $115,000$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 $115,000$101,700 amount.



16
17


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 wasis as follows for the periods presented:

For the Three Months Ended June 30,For the Six Months Ended June 30,
2022202120222021
Net income attributable to common stockholders$232,130 $167,948 $435,709 $370,946 
Earnings and dividends allocated to participating securities(313)(232)(601)(541)
Earnings for basic computations231,817 167,716 435,108 370,405 
Income allocated to noncontrolling interest - Preferred Operating Partnership Units and Operating Partnership Units15,201 8,833 24,978 21,889 
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$246,446 $175,977 $458,942 $391,150 
Weighted average common shares outstanding:
Average number of common shares outstanding - basic134,192,540 133,756,610 134,186,426 132,886,933 
OP Units6,545,104 5,767,460 6,533,010 5,784,003 
Series A Units875,480 875,480 875,480 875,480 
Series D Units1,119,641 — — 865,056 
Shares related to dilutive stock options5,144 7,645 5,290 17,086 
Average number of common shares outstanding - diluted142,737,909 140,407,195 141,600,206 140,428,558 
Earnings per common share
Basic$1.73 $1.25 $3.24 $2.79 
Diluted$1.73 $1.25 $3.24 $2.79 

7.    ACQUISITIONS AND DISPOSITIONS
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2017 2016 2017 2016
Net income attributable to common stockholders$93,764
 $118,088
 $263,052
 $283,724
Earnings and dividends allocated to participating securities(191) (248) (595) (616)
Earnings for basic computations93,573
 117,840
 262,457
 283,108
Earnings and dividends allocated to participating securities191
 —
 595
 —
Income allocated to noncontrolling interest - Preferred Operating Partnership (Series A Units) and Operating Partnership5,163
 7,776
 15,448
 17,926
Fixed component of income allocated to noncontrolling interest - Preferred Operating Partnership (Series A Units)(572) (1,271) (2,547) (3,814)
Net income for diluted computations$98,355
 $124,345
 $275,953
 $297,220
        
Weighted average common shares outstanding:       
Average number of common shares outstanding - basic125,717,517
 125,752,291
 125,665,787
 125,244,761
OP Units5,590,231
 5,534,350
 5,586,908
 5,557,723
Series A Units875,480
 875,480
 875,480
 875,480
Series D Units—
 814,435
 —
 —
Unvested restricted stock awards included for treasury stock method280,484
 —
 288,831
 —
Shares related to exchangeable senior notes and dilutive stock options580,761
 786,916
 591,616
 798,727
Average number of common shares outstanding - diluted133,044,473
 133,763,472
 133,008,622
 132,476,691
Earnings per common share       
Basic$0.74
 $0.94
 $2.09
 $2.26
Diluted$0.74
 $0.93
 $2.07
 $2.24


Store Acquisitions


The following table shows the Company’s acquisitions of stores for the three and six months ended June 30, 2022 and 2021. The table excludes purchases of raw land and improvements made to existing assets. All store acquisitions are considered asset acquisitions under ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business."
Total
QuarterNumber of StoresCash PaidFinance Lease LiabilityInvestments in Real Estate VenturesNet Liabilities/ (Assets) AssumedValue of Equity IssuedReal estate assets
Q2 202215$220,933 $6,823 $— $811 $— $228,567 
Q1 202214185,910 — 747 274 40,965 227,896 
Total 202229$406,843 $6,823 $747 $1,085 $40,965 $456,463 
Q2 202115$190,729 $— $2,673 $381 $— $193,783 
Q1 20219148,940 — — 2,944 — 151,884 
Total 202174$339,669 $— $2,673 $3,325 $— $345,667 


17
18


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated

Other Investments

On June 1, 2022 the Company completed the acquisition of Bargold Storage Systems, LLC ("Bargold") for a purchase price of approximately $179.3 million. Bargold leases space in apartment buildings, primarily in New York City and its boroughs, builds out the space as storage units, and subleases the units to tenants. As of June 1, 2022, Bargold had approximately 17,000 storage units with an approximate occupancy of 97%. This acquisition is considered a business combination ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business."

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

5.STORE ACQUISITIONS AND DISPOSITIONS
Total cash paid by the company$157,302 
Fair value of Series D Units issued16,000 
Fair value of OP Units issued6,000 
Total consideration transferred$179,302 



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

The following table showssummarizes the Company’s acquisitionspreliminary estimated fair values of operating storesthe assets acquired and liabilities assumed at the acquisition date.
Cash and cash equivalents$175 
Fixed assets6,411 
Developed technology500 
Trademarks500 
Customer relationships1,870 
Other assets125 
Accounts payables and accrued liabilities assumed(1,090)
Nets asset acquired8,491 
Goodwill170,811 
Total assets acquired$179,302 

The following table summarizes the revenues and earnings related to Bargold since the acquisition date of June 1, 2022, which are included in the Company's consolidated statement of operations for the ninesix months ended SeptemberJune 30, 2017. The table excludes purchases of raw land or improvements made to existing assets.2022:
      Consideration Paid   Total
Property LocationNumber of Stores Date of Acquisition TotalCash PaidLoan AssumedNon- controlling interestsNet Liabilities/(Assets) AssumedValue of OP Units IssuedNumber of OP Units Issued Real estate assets
Georgia1 9/1/2017 $4,246
$4,220
$—
$—
$26
$—
—
 $4,246
Florida1 8/4/2017 9,047
7,058
—
—
(11)2,000
25,520
 9,047
North Carolina1 7/13/2017 8,422
8,426
—
—
(4)—
—
 8,422
Virginia1 7/13/2017 10,251
10,215
—
—
36
—
—
 10,251
Florida1 6/12/2017 11,100
4,270
—
—
20
6,810
272,400
 11,100
Florida1 4/25/2017 7,377
7,400
—
—
(23)—
—
 7,377
Pennsylvania1 4/11/2017 16,164
4,938
9,463
1,827
(64)—
—
 16,164
Illinois1 2/1/2017 9,028
9,020
—
—
8
—
—
 9,028
Georgia1 1/6/2017 16,528
16,521
—
—
7
—
—
 16,528
2017 Totals9 
 $92,163
$72,068
$9,463
$1,827
$(5)$8,810
297,920
 $92,163
Total revenues$1,309 
Net income from operations$321 


Store DispositionsPro Forma Information


On September 13, 2017, the Company closed on the sale of a parcel of land located in New York that had been classified as held for sale for $19,000 in cash. This parcel of land had been written down to its fair value less selling costsAs noted above, during the six months ended June 30, 2017, and therefore no additional gain or loss was recorded related to this sale at the time of closing.

On July 26, 2016, the Company closed on the sale of one operating store located in Indiana that had been classified as held for sale for $4,447 in cash. The Company recognized no gain or loss related to this disposition.

On April 20, 2016, the Company closed on the sale of seven operating stores located in Ohio and Indiana that had been classified as held for sale for $17,555 in cash. The Company recognized a gain of $11,265 related to this disposition.

On April 1, 2016, the Company disposed of a single store in Texas in exchange for 85,452 of our OP Units valued at $7,689. The Operating Partnership has canceled the OP Units received in this disposition. The Company recognized a gain of $93 related to this disposition.

Losses on Earnout from Prior Acquisition

In December 2014,2022, the Company acquired a portfolioBargold. The following pro forma financial information is based on the combined historical financial statements of five stores located in New Jersey and Virginia. As part of this acquisition, the Company agreed to make an additional cash payment toand Bargold, however, only includes revenue and presents the sellersCompany's results as if the acquired stores exceeded a specified amount of net operatingacquisition had occurred on January 1, 2021. Net income for the years ending December 31, 2015 and 2016. At the acquisition date, the Company recorded an estimated liability relatedwas excluded as it was impracticable to this earnout provision. The operating income of these stores during the earnout period was higher than expected, resulting in an increase in the estimate of the amountreport expenses due to the sellers of $1,544, which was recorded as a loss and included in gain (loss) on real estate transactions, earnout from prior acquisition and impairment of real estate in the Company’s condensed consolidated statements of operations for the nine months ended September 30, 2016.

6.VARIABLE INTERESTS

The Operating Partnership has three wholly-owned unconsolidated subsidiaries (“Trust,” “Trust II” and “Trust III,” together, the “Trusts”) that have 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 are VIEs because the holders of the equity investment at risk (the trust preferred securities) do 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 directlyhistorical accrual basis accounting.


For the Six Months Ended June 30, 2022For the Year Ended December 31, 2021
Pro FormaPro Forma
Total revenues$925,196 $1,592,021 
18
19


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated


Dispositions

The Company disposed of 2 previously held for sale stores during the three months ended June 30, 2022, for approximately $38.7 million, resulting in a gain of $14.2 million.
8.    INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES
Investments in unconsolidated real estate entities and cash distributions in unconsolidated real estate ventures represent the Company's interest in preferred stock of SmartStop Self Storage REIT, Inc. ("SmartStop") and the Company's noncontrolling interest in real estate joint ventures that own stores. The Company accounts for its investment in SmartStop preferred stock, which does not have a readily determinable fair value, at the transaction price less impairment, if any. The Company accounts for its investments in joint ventures using the equity method of accounting. The Company initially records these investments at cost and subsequently adjusts for cash contributions, distributions and net equity in income or loss, which is allocated in accordance with the provisions of the applicable partnership or joint venture agreement.
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.
Net investments in unconsolidated real estate ventures and cash distributions in unconsolidated real estate ventures consist of the following:
 Number of StoresEquity Ownership %
Excess Profit % (1)
June 30,December 31,
 20222021
PRISA Self Storage LLC854%4%$8,670 $8,792 
Storage Portfolio II JV LLC3610%30%(6,675)(6,116)
Storage Portfolio IV JV LLC3210%30%49,861 40,174 
Storage Portfolio I LLC2434%49%(40,456)(40,168)
PR II EXR JV LLC2325%25%111,125 70,403 
ESS-CA TIVS JV LP1655%60%31,787 32,288 
VRS Self Storage, LLC1645%54%(15,083)(14,269)
ESS-NYFL JV LP1116%24%11,582 11,796 
Extra Space Northern Properties Six LLC1010%35%(3,162)(3,029)
Alan Jathoo JV LLC910%10%7,506 7,621 
ESS Bristol Investments LLC810%30%2,148 2,628 
ACPF-EXR JV LLC810%30%11,225 — 
PR EXR Self Storage, LLC525%40%58,913 59,393 
Storage Portfolio III JV LLC510%30%5,533 5,596 
Other unconsolidated real estate ventures1620-50%20-50%46,420 18,635 
SmartStop Self Storage REIT, Inc. Preferred Stock (2)
n/an/an/a200,000 200,000 
Net Investments in and Cash distributions in unconsolidated real estate entities304$479,394 $393,744 
(1) Includes pro-rata equity ownership share and maximum potential promoted 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
(2) The Company invested in shares of convertible preferred stock of SmartStop. The dividend rate for the preferred shares is 6.25% per annum, subject to increase after five years. The preferred shares are generally not redeemable for five years, except in the case of a change of control or initial listing of SmartStop. Dividend income from this investment is included on the equity in earnings and dividend income from unconsolidated real estate entities line on the Company's condensed consolidated statements of operations.
During the six months ended June 30, 2022, the Company contributed a total of $76,339 of cash to its joint ventures, for its pro-rata portion of the purchase price of 18 operating stores which includes $11,225 for the purchase of 8 stores for a new joint venture.
9.    INVESTMENTS IN DEBT SECURITIES AND NOTES RECEIVABLE
Investments in debt securities and notes receivable consists of the Company's investment in mandatorily redeemable preferred stock of Jernigan Capital, Inc. ("JCAP") in connection with JCAP's acquisition by affiliates of NexPoint Advisors, L.P. ("NexPoint Investment") and receivables due to the TrustsCompany under its bridge loan program. Information about these balances is as follows:
June 30, 2022December 31, 2021
Debt securities - NexPoint Series A Preferred Stock$200,000 $200,000 
Debt securities - NexPoint Series B Preferred Stock100,000 100,000 
Notes Receivable-Bridge Loans349,056 279,042 
Notes Receivable-Senior Mezzanine Loan, net— 102,079 
Dividends Receivable53,298 38,066 
$702,354 $719,187 
In November 2020, the Company invested $300,000 in the preferred stock of JCAP in connection with the acquisition of JCAP by affiliates of NexPoint Advisors, L.P. This investment consists of 200,000 Series A Preferred Shares valued at a total of $200,000, and 100,000 Series B Preferred Shares valued at a total of $100,000. The JCAP preferred stock is mandatorily redeemable after five years, with 2 one-year extension options. NexPoint may redeem the Preferred Shares at any time, subject to certain prepayment penalties. The Company accounts for the JCAP preferred stock as a held to maturity debt security at amortized cost. The Series A Preferred Shares and the Series B Preferred Shares have initial dividend rates of 10.0% and 12.0%, respectively. If the investment is not retired after five years, the preferred dividends increase annually.

In July 2020, the Company purchased a senior mezzanine note receivable with a principal amount of $103,000. This note receivable bore interest at 5.5%, matured in December 2023 and was collateralized through an equity interest in which it or its subsidiaries wholly own 62 storage facilities. The Company paid cash of $101,142 for the loan receivable and accounted for the discount at amortized cost. The discount was being amortized over the term of the loan receivable. In February 2022, a junior mezzanine lender exercised its right to buy the Company’s position for the full principal balance plus interest due, as a result of itswhich the Company sold this note for a total of $103,315 in cash. The remaining unamortized discount was recognized in the quarter as interest income.

The Company provides bridge loan financing to third-party self-storage operators. These notes receivable consist of mortgage loans receivable, collateralized by self-storage properties. These notes receivable typically have a term of three years with 2 one-year extensions, and have variable interest rates. The Company intends to sell the majority of the proceedsmortgage receivables. During the six months ended June 30, 2022 the Company sold a total principal amount of $83,307 of its mortgage bridge loans receivable to third parties for a total of $82,115 in cash and closed on $204,930 in new mortgage bridge loans.
21

EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
10.    DEBT
In May 2021, the Operating Partnership that investmentexecuted its initial public bond issuance by selling $450.0 million principal amount of 2.550% Senior Notes due 2031 (the "Notes Due 2031"). Interest on the Notes Due 2031 is not considered an equity investment at risk.paid semi-annually in arrears on June 1 and December 1 of each year. The Operating Partnership’s investment in the Trusts is not a variable interest because equity interests are variable interests only to the extent that the investment is considered to be at risk,Notes Due 2031 will mature on June 1, 2031, and therefore the Operating Partnership cannot bemay redeem the primary beneficiary of the Trusts. Since the Company is not the primary beneficiary of the Trusts, they have not been consolidated. A debt obligation has been recorded in the form of notesNotes Due 2031 at its option and sole discretion at any time prior to March 31, 2031 for the proceeds as discussed above, which are owed to the Trusts. The Company has also included its investment in the Trusts’ common securities in other assets on the condensed consolidated balance sheets.

The Company has not provided 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 iscash equal to the totaloutstanding principal amount plus the present value of the remaining scheduled interest payments, plus any accrued but unpaid interest.
In September 2021, the Operating Partnership executed a public bond issuance by selling $600.0 million principal amount of 2.350% Senior Notes due 2032 (the "Notes Due 2032"). Interest on the Notes Due 2032 is paid semi-annually in arrears on March 15 and September 15 of each year. The Notes Due 2032 will mature on March 15, 2032, and the Operating Partnership may redeem the Notes Due 2032 at its option and sole discretion at any time prior to March 15, 2032 for cash equal to the outstanding principal amount plus the present value of the remaining scheduled interest payments, plus any accrued but unpaid interest.
In March 2022, the Operating Partnership executed a public bond issuance by selling $400.0 million principal amount of 3.900% Senior Notes due 2029 (the "Notes Due 2029"). Interest on the Notes Due 2029 is paid semi-annually in arrears on April 1 and October 1 of each year. The Notes Due 2029 will mature on April 1, 2029, and the Operating Partnership may redeem the Notes Due 2029 at its option and sole discretion at any time prior to April 1, 2029 for cash equal to the outstanding principal amount plus the present value of the remaining scheduled interest payments, plus any accrued but unpaid interest.
The Operating Partner may redeem the Notes Due 2029, the Notes Due 2031 and/or the Notes Due 2032 in whole at any time or in part from time to time, at the Operating Partnership’s option and sole discretion, at a redemption price equal to the greater of (i) 100% of the principal amount of the notes discussed above lessbeing redeemed and (ii) a make-whole premium calculated in accordance with the indenture governing the notes, plus, in each case, accrued and unpaid interest thereon to, but not including, the applicable redemption date. Notwithstanding the foregoing, on or after the date three months prior to the maturity date of the applicable notes, the redemption price will be equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest thereon to, but not including, the applicable redemption date.
Certain events are considered events of default, which may result in the accelerated maturity of the Notes Due 2029, the Notes Due 2031 and/or the Notes Due 2032, including, among other things, a default for 30 days in the payment of any installment of interest under the notes or a default in the payment of the principal amount or redemption price due with respect to the notes, when the same become due and payable.
The Notes Due 2029, the Notes Due 2031 and the Notes Due 2032 are unsecured, and are fully and unconditionally guaranteed by the Company, ESS Holdings Business Trust I, and ESS Holdings Business Trust II (the "Guarantors," and together with the Operating Partnership, the "Obligated Group"), on a joint and several basis. The guarantee of the Notes Due 2031 and the Notes Due 2032 will be a senior unsecured obligation of each Guarantor. The Guarantors have no material operations separate from the operation of the Operating Partnership and no material assets, other than their respective investments directly or indirectly in the Operating Partnership, and therefore the assets, liabilities, and results of operations of the Obligated Group are not materially different than those reported in the Company's financial statements.
22

EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
The components of term debt are summarized as follows:
Term DebtJune 30, 2022December 31, 2021Fixed Rate
Variable Rate (2)
Maturity Dates
Secured fixed-rate (1)
$868,912 $930,830 2.27% - 4.50%February 2023 - February 2030
Secured variable-rate (1)
424,328 392,679 2.60% - 3.29%January 2023 - September 2030
Unsecured fixed-rate3,930,376 3,575,000 2.35% - 4.39%February 2024 - March 2032
Unsecured variable-rate594,624 550,000 2.74%February 2024 - October 2026
Total5,818,240 5,448,509 
Less: Unamortized debt issuance costs(29,600)(25,762)
Total$5,788,640 $5,422,747 
(1) The loans are collateralized by mortgages on real estate assets and the assignment of rents.
(2) Basis rates include 30-day USD LIBOR, Term SOFR and Daily Simple SOFR.
The following table summarizes the scheduled maturities of term debt, excluding available extensions, at June 30, 2022:
2022$— 
2023484,444 
2024425,000 
2025611,939 
2026804,380 
Thereafter3,492,477 
$5,818,240 
At June 30, 2022, the terms of the Second Amended and Restated Credit Agreement dated June 22, 2021 (the "Credit Agreement") are as follows:
Debt CapacityMaturity Date
Revolving Credit Facility$1,250,000 June 2025
Tranche 1 Term Loan Facility (1)
400,000 January 2027
Tranche 2 Term Loan Facility (1)
425,000 October 2026
Tranche 3 Term Loan Facility (1)
245,000 January 2025
Tranche 4 Term Loan Facility (1)
255,000 June 2026
Tranche 5 Term Loan Facility (1)
425,000 February 2024
$3,000,000 
(1) The term loan amounts have been fully drawn as of June 30, 2022.

Pursuant to the terms of the Credit Agreement, the Company may request an extension of the term of the revolving credit facility for up to 2 additional periods of six months each, after satisfying certain conditions.

As of June 30, 2022, amounts outstanding under the revolving credit facility bore interest at floating rates, at the Company’s option, equal to either (i) LIBOR plus the applicable Eurodollar rate margin or (ii) the applicable base rate which is the applicable margin plus the highest of (a) 0.0%, (b) the federal funds rate plus 0.50%, (c) U.S. Bank’s prime rate or (d) the Eurodollar rate plus 1.00%. Per the Credit Agreement, the applicable Eurodollar rate margin and applicable base rate margin are based on the Company’s achieved debt rating, with the Eurodollar rate margin ranging from 0.7% to 1.6% per annum and the applicable base rate margin ranging from 0.00% to 0.60% per annum.

23

EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
The Credit Agreement is guaranteed by the Company and is not secured by any assets of the Company. The Company's unsecured debt is subject to certain financial covenants. As of June 30, 2022, the Company was in compliance with all of its financial covenants.

Subsequent to quarter end, on July 29, 2022, the Company completed an accordion transaction in its credit facility, which added a $175.0 million unsecured debt tranche maturing January 2028 and a $425.0 million unsecured debt tranche maturing July 2029. The current interest rates for the tranches are Adjusted Term SOFR/Adjusted Daily Simple SOFR + 0.95% and SOFR + 1.25%, respectively.
All of the Company’s investments inlines of credit are guaranteed by the Trusts’ common securities.Company. The net amount is equalfollowing table presents information on the Company’s lines of credit, the proceeds of which are used to repay debt and for general corporate purposes, for the notes payable that the Trusts owe to third parties for their investments in the Trusts’ preferred securities.periods indicated:

As of June 30, 2022
Revolving Lines of CreditAmount DrawnCapacityInterest RateMaturity
Basis Rate (1)
Credit Line 1 (2)
$71,000 $140,000 2.9%7/1/2023SOFR plus 1.35%
Credit Line 2 (3)(4)
528,000 1,250,000 2.6%6/20/2025LIBOR plus 0.85%
$599,000 $1,390,000 
(1) 30-day USD LIBOR and Daily Simple SOFR
(2) Secured by mortgages on certain real estate assets. No remaining extensions available.
(3) Unsecured. NaN six-month extensions available.
(4) Basis Rate as of June 30, 2022. Rate is subject to change based on the Company's investment grade rating.
Following is a tabular comparison of the assets and liabilities the Company has recorded as a result of its involvement with the Trusts to the maximum exposure to loss the Company is subject to as a result of such involvement as of September 30, 2017:
 Notes payable to Trusts Investment Balance Maximum exposure to loss Difference
Trust$36,083
 $1,083
 $35,000
 $—
Trust II42,269
 1,269
 41,000
 —
Trust III41,238
 1,238
 40,000
 —
 119,590
 $3,590
 $116,000
 —
Unamortized debt issuance costs(2,176) 
 
 
 $117,414
 

 

 

11.    DERIVATIVES

The Company had no consolidated VIEs during the nine months ended September 30, 2017.

7.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 ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, 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 an additional $1,513$14,738 will be reclassified as an increase to interest expense.income.



The Company held 18 derivative financial instruments which had a total combined notional amount of $1,874,699 as of June 30, 2022.
19
24


EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated

The Company held 30 derivative financial instruments which had a total combined notional amount of $2,255,018 as of September 30, 2017.


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
Derivatives designated as hedging instruments:June 30, 2022December 31, 2021
Other assets$31,336 $271 
Other liabilities$— $39,569 
 Asset (Liability) Derivatives
 September 30, 2017 December 31, 2016
Derivatives designated as hedging instruments:Fair Value
Other assets$23,584
 $23,844
Other liabilities$(1,430) $(2,447)


Effect of Derivative Instruments
The tablestable below presentpresents 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 incomeGain (loss) reclassified from OCI For the Three Months Ended June 30,
Type2022202120222021
Swap Agreements$14,358 $(3,124)Interest expense$(5,755)$(8,747)

 Gain (loss) recognized in OCI For the Three Months Ended September 30, Location of amounts reclassified from OCI into income Gain (loss) reclassified from OCI For the Three Months Ended September 30,
Type2017 2016 2017 2016
Swap Agreements$(787) $8,451
 Interest expense $(1,572) $(4,926)

Gain (loss) recognized in OCI For the Nine Months Ended September 30, Location of amounts reclassified from OCI into income Gain (loss) reclassified from OCI For the Nine Months Ended September 30,Gain (loss) recognized in OCI For the Six Months Ended June 30,Location of amounts reclassified from OCI into incomeGain (loss) reclassified from OCI For the Six Months Ended June 30,
Type2017 2016 2017 2016Type2022202120222021
Swap Agreements$(6,474) $(50,165) Interest expense $(7,497) $(14,240)Swap Agreements$57,099 $11,052 Interest expense$(14,667)$(17,592)
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 SeptemberJune 30, 2017,2022, the Company did not have a net liability position in 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 $1,257. As of September 30, 2017,derivatives. 
12.    STOCKHOLDERS’ EQUITY

On January 7, 2022, the Company had not posted any collateral related to these agreements. If the Company had breached any of these provisions as of September 30, 2017, it could have been required to settle its obligations under the agreements at their termination value of $1,620, 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

8.EXCHANGEABLE SENIOR NOTES

In September 2015, the Operating Partnership issued $575,000186,766 shares 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 September 30, 2017 was approximately 10.64 shares of the Company’s common stock per $1,000 principal amount of the 2015 Notes.to acquire 2 stores for $40,965.

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.


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. Costs incurred to issue the 2013 Notes were approximately $1,672. 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 2013 Notes are general unsecured senior obligations of the Operating Partnership and are fully guaranteed by the Company. Interest is payable on January 1 and July 1 of each year beginning January 1, 2014, until the maturity date of July 1, 2033. The 2013 Notes bear interest at 2.375% per annum and contain an exchange settlement feature, which provides that the 2013 Notes may, under certain circumstances, be exchangeable for cash (for the principal amount of the 2013 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 2013 Notes as of September 30, 2017 was approximately 18.77 shares of the Company’s common stock per $1,000 principal amount of the 2013 Notes.

The Operating Partnership may redeem the 2013 Notes at any time to preserve the Company’s status as a REIT. In addition, on or after July 5, 2018, the Operating Partnership may redeem the 2013 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 2013 Notes. The holders of the 2013 Notes have the right to require the Operating Partnership to repurchase the 2013 Notes for cash, in whole or in part, on July 1 of the years 2018, 2023 and 2028, and upon the occurrence of certain designated events, in each case for a repurchase price equal to 100% of the principal amount of the 2013 Notes plus accrued and unpaid interest. Certain events are considered “Events of Default,” as defined in the indenture governing the 2013 Notes, which may result in the accelerated maturity of the 2013 Notes.

Additionally, the 2013 Notes and 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 exceeded 130% of the exchange price for the required time period for the 2013 Notes during the quarter ended September 30, 2017. Therefore, holders of the 2013 Notes may elect to exchange such notes during the quarter ending December 31, 2017. 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 September 30, 2017.

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

21

EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated

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 being 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 both 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 2013 Notes and 2015 Notes, including the total carrying amounts of the equity components, the principal amounts of the liability components, the unamortized discounts and the net carrying amounts was as follows for the periods indicated:
 September 30, 2017 December 31, 2016
Carrying amount of equity component - 2013 Notes$—
 $—
Carrying amount of equity component - 2015 Notes22,597
 22,597
Carrying amount of equity components$22,597
 $22,597
Principal amount of liability component - 2013 Notes$49,384
 $63,170
Principal amount of liability component - 2015 Notes575,000
 575,000
Unamortized discount - equity component - 2013 Notes(475) (1,187)
Unamortized discount - equity component - 2015 Notes(14,091) (17,355)
Unamortized cash discount - 2013 Notes(110) (281)
Unamortized debt issuance costs(7,223) (9,033)
Net carrying amount of liability components$602,485
 $610,314

The amount of interest cost recognized relating to the contractual interest rates and the amortization of the discounts on the liability components of the Notes were as follows for the periods indicated:
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2017 2016 2017 2016
Contractual interest$4,785
 $4,867
 $14,519
 $14,616
Amortization of discount1,268
 1,243
 3,827
 3,716
Total interest expense recognized$6,053
 $6,110
 $18,346
 $18,332

Repurchases of 2013 Notes

During July and August 2017, the Company repurchased a total principal amount of $13,786 of the 2013 Notes. The Company paid cash of $19,853 for the total of the principal amount and the exchange value in excess of the principal amount.
The Company allocated the value of the consideration paid to repurchase the 2013 Notes (1) to the extinguishment of the liability component and (2) to the reacquisition of the equity component. The amount allocated to the extinguishment of the liability component is equal to the fair value of that component immediately prior to extinguishment. The difference between the consideration attributed to the extinguishment of the liability component and the sum of (a) the net carrying amount of the repurchased liability component, and (b) the related unamortized debt issuance costs, is recognized as a gain on debt extinguishment. The remaining settlement consideration is allocated to the reacquisition of the equity component of the repurchased 2013 Notes and recognized as a reduction of stockholders’ equity.

22

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 repurchases is as follows:
 July/August 2017
Principal amount repurchased$13,786
Amount allocated to: 
  Extinguishment of liability component$13,568
  Reacquisition of equity component6,285
Total consideration paid for repurchase$19,853
Exchangeable senior notes repurchased$13,786
Extinguishment of liability component(13,568)
Discount on exchangeable senior notes(183)
Related debt issuance costs(35)
Gain/(loss) on repurchase$—

9.STOCKHOLDERS’ EQUITY

On May 6, 2016,9, 2021, the Company filed its current $400,000$800,000 "at the market" equity program with the Securities and Exchange Commission using a new shelf registration statement on Form S-3, and entered into separate equity distribution agreements with five10 sales agents. Under the terms ofNo shares have been sold under the current "at the market" equity distribution agreements,program. From January 1, 2021, through August 8, 2021, the Company may from time to time offer and sellsold 585,685 shares of common stock under its prior "at the market" equity program resulting in net proceeds of $66,617.

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

25

EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
On October 15, 2020, the Company's board of directors authorized a new share repurchase program allowing for the repurchase of shares with an aggregate value up to $400,000. During the aggregate offeringsix months ended June 30, 2022, the Company repurchased 381,786 shares at an average price of $400,000, through its sales agents.

During the three and nine months ended September$165.03 per share, paying a total of $63,008. As of June 30, 2017,2022, the Company did not issue anyhad remaining authorization to repurchase shares and had $349,375 available for issuance under the existing equity distribution agreements.with an aggregate value up to $336,992.

13.    NONCONTROLLING INTEREST REPRESENTED BY PREFERRED OPERATING PARTNERSHIP UNITS
10.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.


Series A Participating RedeemableAt June 30, 2022 and December 31, 2021, the noncontrolling interests represented by the Preferred OP Units
On June 15, 2007, qualified for classification as permanent equity on the Operating Partnership entered into a Contribution Agreement with various limited partnerships affiliated with AAAAA Rent-A-Space to acquire ten stores in exchange for 989,980 Series A Units of the Operating Partnership. The stores are located in California and Hawaii.

Company's condensed consolidated balance sheets. The partnership agreement of the Operating Partnership (as amended, the “Partnership Agreement”"Partnership Agreement") provides for the designation and issuance of the OP Units. As of June 30, 2022 and December 31, 2021, noncontrolling interests in Preferred OP Units were presented net of notes receivable from Preferred OP Unit holders of $100,000 as more fully described below. The balances for each of the specific Preferred OP Units as presented in the Statement of Noncontrolling Interests and Equity as of the periods indicated is as follows:

June 30, 2022December 31, 2021
Series A Units$16,227 $15,606 
Series B Units33,568 38,068 
Series D Units211,436 205,436 
$261,231 $259,110 


Series A Participating Redeemable Preferred Units

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

Under the Partnership Agreement,The Series A Units were issued in June 2007. Series A Units in the amount of $115,000$101,700 bear a fixed priority return of 2.3% and haveoriginally had a fixed liquidation value of $115,000. The remaining balance participates in distributions with, and has a liquidation value equal

23

EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated

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. On April 18, 2017,As a result of the holdersredemption of the114,500 Series A Units andin October 2014, the Operating Partnership agreedremaining fixed liquidation value was reduced to reduce the fixed priority return on the$101,700, which represents 875,480 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.Units.


On June 25, 2007, the Operating Partnership loaned the holdersholder of the Series A Units $100,000. The note receivableloan bears interest at 2.1%. 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. The loan amendment also lowered 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. The holders of the Series A Units could redeem up to 114,500 Series A Units prior to the maturity date of the loan. If any redemption in excess of 114,500 Series A Units occurs prior to the maturity date, the holder of the Series A Units is required to repay the loan as of the date of that redemption. On October 3, 2014, the holders of the Series A Units redeemed 114,500 Series A Units for $4,794 in cash and 280,331 shares of common stock. No additionalfuture redemption of Series A Units can be made without repayment ofunless the loan.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.

26

EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated

Series B Redeemable Preferred Units
On April 3, 2014, the Operating Partnership completed the purchase of a store located in Georgia. This store was acquired in exchange for $15,158 of cash and 333,360 Series B Units valued at $8,334.

On August 29, 2013, the Operating Partnership completed the purchase of 19 out of 20 stores affiliated with All Aboard Mini Storage, all of which are located in California. On September 26, 2013, the Operating Partnership completed the purchase of the remaining store. These stores were acquired in exchange for $100,876 of cash (including $98,960 of debt assumed and immediately defeased at closing), 1,342,727 Series B Units valued at $33,568, and 1,448,108 OP Units valued at $62,341.


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 outstandingSeries B Units were issued in 2013 and 2014. The Series B Units have a liquidation value of $25.00 per unit for a fixed liquidation value of $41,902.$33,568 which represents 1,342,727 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.


On May 10, 2022, 45,000 Series B Units were redeemed for $1,125 in cash.

Series C Convertible Redeemable Preferred Units
The Company completed the purchase of twelve stores in California between December 2013 and May 2014. The Company previously held 35% interests in five of these stores and a 40% interest in one store through six separate joint ventures. These stores were acquired in exchange for a total of approximately $45,722 of cash, the assumption of $37,532 in existing debt, and the issuance of 704,016 Series C Units valued at $30,960.


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


TheAs of June 30, 2022 and December 31, 2021, there were no outstanding Series C Units have a liquidation value of $42.10 per unit for a fixed liquidation value of $29,639. From issuance to the fifth anniversary of issuance, each Series C Unit holder will receive quarterly distributions equal to the quarterly distribution per OP Unit plus $0.18. Beginning on the fifth anniversary of issuance, each Series C Unit holder will receive a fixed quarterly distribution equal to the aggregate quarterly distribution payable in respect of such Series C Unit during the four quarters immediately preceding the fifth anniversary of issuance, divided by four. These distributions are cumulative. The Series C Units became redeemable at the option of the holder one year from the date of issuance, which redemption obligation may be satisfied at the Company’s option in cash or shares of its common stock. The Series C Units are 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 expires upon the fifth anniversary of the date of issuance.


24

EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated

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


Series D Redeemable Preferred Units
On June 12, 2017, the Operating Partnership completed the acquisition of a store located in Florida. This store was acquired in exchange for $4,270 in cash and 272,400 Series D-5 Preferred Units ("D-5 Units") valued at $6,810.
On November 8, 2016, the Operating Partnership completed the acquisition of a store located in Illinois. This store was acquired in exchange for 486,244 Series D-4 Preferred Units ("D-4 Units") valued at $12,156.
On June 10, 2016, the Operating Partnership completed the acquisition of four stores located in Illinois. These stores were acquired in exchange for 2,201,467 Series D-3 Preferred Units ("D-3 Units") valued at $55,037.
In December 2014, the Operating Partnership completed the acquisition of a store located in Florida. This store was acquired in exchange for $5,621 in cash and 548,390 Series D-1 Preferred Units ("D-1 Units," and together with the D-3 Units, D-4 Units and D-5 Units, "Series D Units") valued at $13,710.


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 a liquidation value of $25.00per unit, for a fixed liquidation value of $87,713.$211,436, which represents 8,457,422 Series D Units. Holders of the Series D Units receive distributions at an annual rate between 3.5% to3.0% 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 D-3Series D Units are convertible intoexchangeable 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 D-3Series D Unit, divided by the value of a share of common stock as of the exchange date.

The Series D Units have been issued at various times from 2014 to 2022. On June 1, 2022, the Operating Partnership issued a total of 240,000 Series D units valued at $6,000 in connection with the acquisition of Bargold.
11.NONCONTROLLING INTEREST IN OPERATING PARTNERSHIP

14.    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. ESS Holding Business Trust I, a wholly-owned subsidiary of the Company, is the sole general partner of the Operating Partnership. ESS Holding Business Trust II, also a wholly-owned subsidiary of the Company, is a limited partner of the Operating Partnership. Between its general partner and limited partner interests, the Company held a 91.1%93.8% ownership interest in the Operating Partnership as of SeptemberJune 30, 2017.2022. The remaining ownership interests in the Operating Partnership (including Preferred Operating Partnership units)OP Units) of 8.9%6.2% are held by certain former owners of assets acquired by the Operating Partnership. As of June 30, 2022 and December 31, 2021, the noncontrolling interests in the Operating Partnership are shown on the balance sheet net of a note receivable of $1,900 because a borrower under the note receivable is also a holder of OP Units. This note receivable originated in December 2014, 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. In conjunction withOP Units are redeemable at the formationoption of the Company, and as a result of subsequent acquisitions, certain persons and entities contributing interestsholder, which redemption may be satisfied at the Company's option in stores to the Operating Partnership received limited partnership interests in the form of OP Units. Limited partners who received OP Units in the formation transactions or in exchange for contributions for interests in stores have the right to require the Operating Partnership to redeem part or all of their OP Units for 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. Alternatively, the Company may, in its sole discretion, elect to acquire those OP Units in exchange forredemption, or shares of itsthe Company's common stock on a one-for-one1-for-one basis, subject to anti-dilutionanti-
27

EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated
dilution adjustments provided in the Partnership Agreement. TheAs of June 30, 2022, the ten-day average closing price of the Company's common stock price at September 30, 2017 was $79.26$167.02 and there were 5,599,6626,602,151 OP Units outstanding. Assuming that all of the OP Unit holders exercised their right to redeem all of their OP Units on SeptemberJune 30, 20172022 and the Company elected to pay the OP Unit holders cash, the Company would have paid $443,829$1,102,691 in cash consideration to redeem the units.


On August 4, 2017,OP Unit activity is summarized as follows for the Company purchased one store located in Florida. As part of the consideration for this acquisition, 25,520 OP Units were issues with a total value of $2,000.periods presented:
For the Six Months Ended June 30,
20222021
OP Units redeemed for common stock— 63,429 
OP Units redeemed for cash18,028 3,000 
Cash paid for OP Units redeemed$3,504 $472 
OP Units issued in conjunction with acquisitions91,743 — 

During the three months ended September 30, 2017, no OP Units were redeemed. During the nine months ended September 30, 2017, 33,896 OP Units were redeemed for $2,510 in cash.

25

EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except store and share data, unless otherwise stated



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
12.OTHER NONCONTROLLING INTERESTS


Other noncontrolling interests represent the ownership interests of a third party in twoa consolidated joint venturesventure as of SeptemberJune 30, 2017. One2022. This joint venture owns an operating store1 property that is under development in Texas, and the other owns a store in Pennsylvania.Florida. The voting interests of the third-party owners are between 20.0% and 27.0%10.0%.

13.EQUITY IN EARNINGS OF UNCONSOLIDATED REAL ESTATE VENTURES—GAIN ON PURCHASE OF JOINT VENTURE PARTNER'S INTEREST

15.    SEGMENT INFORMATION
On September 16, 2016,
The Company’s segment disclosures present the Company acquired 23 stores frommeasure 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 ESS PRISA II LLC joint ventureexecutive management team who use net operating income ("PRISA II"NOI") in a step acquisition. These stores are located in Arizona, California, Connecticut, Florida, Indiana, Kentucky, Massachusetts, Maryland, Michigan, New Jersey, New Mexico, Ohio, Tennessee and Virginia. 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 owned 4.42%has 2 reportable segments: (1) self-storage operations and (2) tenant reinsurance. The self-storage operations activities include rental operations of PRISA II, withwholly-owned stores. The Company's consolidated revenues equal total segment revenues plus property management fees and other income. Tenant reinsurance activities include the other 95.58% owned by affiliatesreinsurance of Prudential Global Investment Management ("Prudential"). PRISA II created a new subsidiary, Extra Space Properties 131 LLC ("ESP 131"), and transferred 23 stores into ESP 131. PRISA II then distributed ESP 131risks relating to the Companyloss of goods stored by tenants in the stores operated by the Company. Excluded from segment revenues and Prudential on a pro rata basis. This distribution was accounted for as a spinoff,net operating income is property management fees and was therefore recorded at the net carrying amountother income.

For all periods presented, substantially all of the properties of $4,326. Immediately after the distribution, the Company acquired Prudential's 95.58% interest in ESP 131 for $238,679, resulting in 100% ownership of ESP 131 and the related 23 stores. Based on the purchase price of Prudential's share of ESP 131, the Company determined that the fair value of its investment in ESP 131 immediately prior to the acquisition of Prudential's share was $10,988, and the Company recorded a gain of $6,662 as a result of re-measuring to fair value its existing equity interest in ESP 131. This gain is included in equity in earnings of unconsolidated real estate ventures - gain on sale ofCompany's real estate assets, and purchase of joint venture partners' interests on the Company's condensed consolidated statements of operations. The Company recorded fixedintangible assets, related to this acquisition of $248,530, which includes total cash paid, the investment in ESP 131, and the step acquisition gain, less net assets acquired. Subsequent to these transactions, PRISA II owned 42 stores. The Company sold its 4.42% interest in PRISA II to Prudential immediately following these transactions for $34,758 in cash. The carrying value of the Company's investment prior to the acquisition was $3,912, and the Company recorded a gain on the sale of $30,846. This gain is included in equity in earnings of unconsolidated real estate ventures - gain on sale of real estateother assets, and purchase of joint venture partners' interests on the Company's condensed consolidated statements of operations.


26

EXTRA SPACE STORAGE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Amounts in thousands, except storeaccrued and share data, unless otherwise stated

On February 2, 2016, the Company acquired six stores from its VRS Self Storage LLC joint venture (“VRS”) in a step acquisition. These storesother liabilities are located in Florida, Maryland, Nevada, New York, and Tennessee. The Company owns 45.0% of VRS,associated with the other 55.0% owned by affiliates of Prudential. VRS created a new subsidiary, Extra Space Properties 122 LLC (“ESP 122”) and transferred six stores into ESP 122. VRS then distributed ESP 122 to the Company and Prudential on a pro rata basis. This distribution was accounted for as a spinoff, and was therefore recorded at the net carrying amount of the stores of $17,261. Immediately after the distribution, the Company acquired Prudential’s 55.0% interest in ESP 122 for $53,940, resulting in 100% ownership of ESP 122 and the related six stores. Based on the purchase price of Prudential’s share of ESP 122, the Company determined that the fair value of its investment in ESP 122 immediately prior to the acquisition of Prudential’s share was $44,184, and the Company recorded a gain of $26,923 during the nine months ended September 30, 2016 as a result of remeasuring to fair value its existing equity interest in ESP 122. This gain is included in equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partners' interests on the Company’s condensed consolidated statements of operations. The Company recorded fixed assets related to this acquisition of $98,082, which includes total cash paid, the investment in ESP 122, and the step acquisition gain, less net assets acquired.

14.    SEGMENT INFORMATION

The Company operates in three distinct segments: (1) rental operations; (2) tenant reinsurance; and (3) property management, acquisition and development. Management fees collected for consolidated joint venture stores are eliminated in consolidation.self-storage operations segment. Financial information for the Company’s business segments is presentedset forth below:

For the Three Months Ended June 30,For the Six Months Ended June 30,
2022202120222021
Revenues:
Self-Storage Operations$408,044 $321,500 $787,852 $625,093 
Tenant Reinsurance46,427 42,334 90,224 81,953 
Total segment revenues$454,471 $363,834 $878,076 $707,046 
Operating expenses:
Self-Storage Operations$104,252 $89,155 $207,794 $181,522 
Tenant Reinsurance7,537 6,735 14,579 13,896 
Total segment operating expenses$111,789 $95,890 $222,373 $195,418 
Net operating income:
Self-Storage Operations$303,792 $232,345 $580,058 $443,571 
Tenant Reinsurance38,890 35,599 75,645 68,057 
Total segment net operating income:$342,682 $267,944 $655,703 $511,628 
Other components of net income:
Management fees and other income$20,517 $14,796 $40,474 $30,441 
Transaction related costs(1,465)— (1,465)— 
General and administrative expense(31,251)(26,341)(61,013)(49,881)
Depreciation and amortization expense(69,067)(59,570)(136,973)(118,169)
Gain on real estate transactions14,249 — 14,249 63,883 
Interest expense(47,466)(40,240)(90,004)(80,935)
Interest income15,060 12,838 34,049 25,142 
Equity in earnings and dividend income from unconsolidated real estate entities10,190 8,322 19,287 15,278 
Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partner's interest— 6,251 — 6,251 
Income tax expense(5,615)(5,421)(8,756)(9,558)
Net income$247,834 $178,579 $465,551 $394,080 

16.    COMMITMENTS AND CONTINGENCIES
 September 30, 2017 December 31, 2016
Balance Sheet   
Investment in unconsolidated real estate ventures   
Rental operations$78,512
 $79,570
Total assets   
Rental operations$6,728,499
 $6,731,292
Tenant reinsurance42,786
 44,524
Property management, acquisition and development315,670
 315,630
 $7,086,955
 $7,091,446

 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2017 2016 2017 2016
Statement of Operations       
Total revenues       
Rental operations$248,589
 $224,451
 $720,878
 $635,730
Tenant reinsurance25,882
 22,727
 73,050
 64,936
Property management, acquisition and development9,685
 10,005
 29,239
 30,193
 284,156
 257,183
 823,167
 730,859
Operating expenses, including depreciation and amortization       
Rental operations115,162
 106,530
 341,191
 312,389
Tenant reinsurance6,272
 4,093
 13,996
 12,345
Property management, acquisition and development22,841
 23,836
 67,489
 79,471
 144,275
 134,459
 422,676
 404,205
Income (loss) from operations       
Rental operations133,427
 117,921
 379,687
 323,341
Tenant reinsurance19,610
 18,634
 59,054
 52,591
Property management, acquisition and development(13,156) (13,831) (38,250) (49,278)
 139,881
 122,724
 400,491
 326,654
Gain (loss) on real estate transactions, earnout from prior acquisition and impairment of real estate       
Property management, acquisition and development—
 —
 (6,019) 9,814
Interest expense       
Rental operations(38,379) (32,619) (109,414) (95,125)
Property management, acquisition and development(1,387) (875) (3,778) (2,530)
 (39,766) (33,494) (113,192) (97,655)
        
Non-cash interest expense related to the amortization of discount on equity component of exchangeable senior notes       
Property management, acquisition and development(1,268) (1,243) (3,827) (3,716)
Interest income       
Property management, acquisition and development869
 1,358
 2,797
 4,697
 

 

 

 

Interest income on note receivable from Preferred Operating Partnership unit holder       
Property management, acquisition and development532
 1,213
 2,404
 3,638
Equity in earnings of unconsolidated real estate ventures       
Rental operations3,990
 3,625
 11,407
 9,813
Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partners' interests       
Property management, acquisition and development—
 37,509
 —
 64,432
Income tax (expense) benefit       
Rental operations(834) (550) (1,759) (1,840)
Tenant reinsurance(3,572) (3,504) (10,701) (9,352)
Property management, acquisition and development1,243
 (412) 3,306
 188
 (3,163) (4,466) (9,154) (11,004)
Net income (loss)       
Rental operations98,204
 88,377
 279,921
 236,189
Tenant reinsurance16,038
 15,130
 48,353
 43,239
Property management, acquisition and development(13,167) 23,719
 (43,367) 27,245
 $101,075
 $127,226
 $284,907
 $306,673

 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2017 2016 2017 2016
Depreciation and amortization expense       
Rental operations$44,732
 $44,189
 $136,821
 $126,506
Property management, acquisition and development3,343
 2,366
 7,318
 6,896
 $48,075
 $46,555
 $144,139
 $133,402
Statement of Cash Flows       
Acquisition of real estate assets       
Property management, acquisition and development

 

 $(119,040) $(763,246)
Development and redevelopment of real estate assets       
Property management, acquisition and development

 

 $(20,670) $(18,492)

15.COMMITMENTS AND CONTINGENCIES


As of SeptemberJune 30, 2017,2022, the Company iswas involved in various legal proceedings and iswas 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 SeptemberJune 30, 2017,2022, the Company was under agreement to acquire 3518 stores at a total purchase price of $462,116. Of these$296,193. NaN stores 23 are scheduled to close in 2017 at a purchase price of $308,225, nine2022 and 9 stores are scheduled to close in 2018 at a purchase price of $118,463,2023 and three are scheduled to close thereafter at a purchase price of $35,428.thereafter. Additionally, the Company is under agreement to acquire 1915 stores with joint venture partners, for a total investment of $96,750. Six of these$43,709. NaN stores are scheduled to close in 2017, while the remaining 132022 and 3 stores are expectedscheduled to close in 2018.2023.

The Company owns and/or operates stores located in Texas, Florida, and Puerto Rico that were impacted by Hurricanes Harvey, Irma, and Maria during the three months ended September 30, 2017. Losses incurred to date by these hurricanes include property damage, net of insurance recoveries, of $2,110, and tenant reinsurance claims of $2,250, which are included in property operations and tenant reinsurance on the Company's condensed consolidated statements of operations.


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
29

Subsequent to September 30, 2017, the Company purchased seven stores located in Georgia, Maryland, Oregon, Virginia and Washington for a total purchase price of $83,125.









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

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, 2016.2021. 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, 20162021 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 REIT,real estate investment trust (“REIT”), formed to continue the business commenced in 1977 by Extra Space Storage LLC and its subsidiaries to own, operate, manage, acquire, develop and redevelop professionally managed self-storage stores.

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;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 program;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 from management fees onincome 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 for joint venture partners and unaffiliated third parties. Our management fee is equal to approximately 6.0% of cash collected from the managed stores.

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. Our operating results depend materially on our ability to lease available self-storage units and actively manage rental rates, and on the ability of our tenants to make required rental payments. We believe that we are able to
30

respond quickly and effectively to changes in local, regional and national economic conditions by centrally adjusting rental rates through the combination of our revenue management team and our industry-leading technologyproprietary pricing systems.

We continue to evaluate a range of new initiatives and opportunities in order to enable us to maximize stockholder value. Our strategies to maximize stockholder value include the following:


Maximize the performance of our stores through strategic, efficient and proactive management. We pursue revenue-generating and expense-minimizing opportunities in our operations. Our revenue management team seeks to maximize revenue by responding to changing market conditions through our advanced technology system’s ability to provide real-time, interactive rental rate and discount management. Our size allows us greater ability than the majority of our competitors to implement more effective online marketing programs, which we believe will attract more customers to our stores at a lower net cost.
Acquire self-storage stores. Our acquisitions team continues to pursue the acquisition of multi-store portfolios and single stores that we believe can provide stockholder value. We have established a reputation as a reliable, ethical buyer, which we believe enhances our ability to negotiate and close acquisitions. In addition, we believe our status as an UPREIT enables flexibility when structuring deals. We continue to review available acquisitions. We remain a disciplined buyer and only execute acquisitions that we believe will strengthen our portfolio and increase stockholder value.
Expand our management business. Our management business enables us to generate increased revenues through management fees and to expand our geographic footprint. We believe this expanded footprint enables us to reduce our operating costs through economies of scale. In addition, we see our management business as a future acquisition pipeline. We pursue strategic relationships with owners whose stores would enhance our portfolio in the event an opportunity arises to acquire such stores.

PROPERTIES

As of September 30, 2017, we owned, had ownership interests in, or managed 1,513 stores in 38 states, Washington, D.C. and Puerto Rico. Of these 1,513 stores, we owned 844 stores, we held joint venture interests in 184 stores, and our taxable REIT subsidiary, Extra Space Management, Inc., operated an additional 485 stores that are owned by third parties. These operating stores contain approximately 114.0 million square feet of rentable space in approximately 1.0 million units.

Our stores are generally situated in convenient, highly visible locations clustered around large population centers such as Atlanta, Baltimore/Washington, D.C., Boston, Chicago, Dallas, Houston, Las Vegas, Los Angeles, Miami, New York City, Orlando, Philadelphia, Phoenix, St. Petersburg/Tampa and San Francisco/Oakland. These markets contain above-average population growth and income demographics. The clustering of assets around these population centers enables us to reduce our operating costs through economies of scale. Our acquisitions and management business have given us an increased scale in many core markets as well as a foothold in many markets where we had no previous presence.

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% average 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.

COVID-19 UPDATE

The United States and other countries around the world continue to navigate the effects of the COVID-19 pandemic. Governmental authorities in impacted regions have taken various actions in an effort to slow the spread of COVID-19, including issuance of varying forms of states of emergency orders. In response to these evolving orders and the COVID-19 pandemic, we implemented a wide range of practices to protect and support our employees and customers. Although most governmental restrictions have lifted and many work practices have returned to normal, our customers may continue to be impacted by the COVID-19 pandemic and related governmental responses. Given the uncertainty resulting from the pandemic, our business may be impacted by the effects of the COVID-19 pandemic.

PROPERTIES

As of SeptemberJune 30, 2017,2022, we owned or had ownership interests in 1,313 operating stores. Of these stores, 1,009 are wholly-owned, none of which are in consolidated joint ventures, and 304 are in unconsolidated joint ventures. In addition, we managed an additional 864 stores for third parties bringing the total number of stores which we own and/or manage to 2,177. These stores are located in 41 states and Washington, D.C. 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, 2022, approximately 920,0001,335,000 tenants were leasing storage units at the 1,513 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 SeptemberJune 30, 2017,2022, the average length of stay was approximately 14.5 months for tenants who have vacated in the last 1215.8 months.


The average annual rent per square foot for our existing customers at stabilized stores, net of discounts and bad debt, was $15.77$21.01 for the three months ended SeptemberJune 30, 2017,2022, compared to $15.24$16.90 for the three months ended SeptemberJune 30, 2016.2021. Average annual rent per square foot for new leases was $16.90$20.47 for the three months ended SeptemberJune 30, 2017,2022, compared to $16.06$20.47 for the three months ended SeptemberJune 30, 2016.2021. The average discount,discounts, as a percentage of rental revenues, at all stabilized properties during these periods was 3.7%were 3.2% and 2.9%3.6%, respectively.


Our store portfolio is made up of different types of construction and building configurations depending on the site and the municipality where it is located.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.

Stabilized Store Data Based on Location


The following table presents additional information regarding net rentable square feet and the occupancynumber of our stabilized stores by state as of September 30, 2017 and 2016. The information as of September 30, 2016 is on a pro forma basis as though allstate.
31

June 30, 2022
REIT OwnedJoint Venture OwnedManagedTotal
Location
Property Count(1)
Net Rentable Square FeetProperty CountNet Rentable Square FeetProperty CountNet Rentable Square FeetProperty CountNet Rentable Square Feet
Alabama8 591,353 1 75,711 6 393,422 15 1,060,486 
Arizona23 1,624,296 10 768,106 22 1,876,590 55 4,268,992 
California176 13,514,112 49 3,594,143 91 8,490,567 316 25,598,822 
Colorado17 1,149,977 7 499,456 25 1,784,837 49 3,434,270 
Connecticut6 469,371 7 575,834 8 554,108 21 1,599,313 
Delaware— — 2 143,615 1 71,704 3 215,319 
Florida111 8,552,981 37 3,056,188 113 9,034,403 261 20,643,572 
Georgia67 5,185,541 14 1,143,011 24 1,842,880 105 8,171,432 
Hawaii13 864,030 — — 3 159,443 16 1,023,473 
Idaho— — — — 3 181,644 3 181,644 
Illinois39 2,979,816 10 741,737 30 2,116,190 79 5,837,743 
Indiana14 930,039 1 58,166 17 1,221,887 32 2,210,092 
Kansas1 50,209 2 108,920 6 452,944 9 612,073 
Kentucky10 829,200 1 51,677 9 754,049 20 1,634,926 
Louisiana5 387,234 — — 10 729,801 15 1,117,035 
Maine— — — — 8 577,166 8 577,166 
Maryland34 2,853,577 10 822,392 38 2,691,083 82 6,367,052 
Massachusetts47 3,011,304 10 640,850 26 1,678,831 83 5,330,985 
Michigan8 666,100 4 305,126 6 455,938 18 1,427,164 
Minnesota7 584,960 4 305,167 16 1,172,160 27 2,062,287 
Mississippi3 234,365 — — — — 3 234,365 
Missouri6 431,961 2 119,750 14 1,038,831 22 1,590,542 
Nebraska— — — — 3 278,236 3 278,236 
Nevada14 1,039,972 4 474,241 7 743,464 25 2,257,677 
New Hampshire2 134,564 2 84,693 5 359,332 9 578,589 
New Jersey63 4,995,463 17 1,227,927 34 2,598,709 114 8,822,099 
New Mexico11 699,907 10 683,470 12 901,844 33 2,285,221 
New York28 2,044,436 18 1,511,528 38 2,361,159 84 5,917,123 
North Carolina23 1,733,936 5 401,437 17 1,292,975 45 3,428,348 
Ohio16 1,246,482 5 325,163 8 614,017 29 2,185,662 
Oklahoma— — — — 18 1,457,102 18 1,457,102 
Oregon8 550,307 1 65,245 10 738,133 19 1,353,685 
Pennsylvania21 1,544,970 9 679,699 34 2,480,867 64 4,705,536 
Rhode Island2 134,802 — — 5 424,123 7 558,925 
South Carolina23 1,713,002 11 709,714 25 2,171,462 59 4,594,178 
Tennessee22 1,855,783 12 810,601 8 573,289 42 3,239,673 
Texas109 8,887,031 25 1,989,885 80 6,933,129 214 17,810,045 
Utah10 698,041 — — 24 1,862,172 34 2,560,213 
Virginia52 4,203,053 9 703,450 30 2,142,011 91 7,048,514 
Washington9 685,061 — — 14 1,083,111 23 1,768,172 
Washington, DC1 100,039 1 103,649 6 540,544 8 744,232 
Wisconsin— — 4 371,454 10 816,125 14 1,187,579 
Totals1,009 77,177,275 304 23,152,005 864 67,650,282 2,177 167,979,562 

(1)    Excludes 17,000 units related to the stores owned and/or managed at September 30, 2017 were under our control as of September 30, 2016.Bargold transaction. See Note 7 in the Notes to the Condensed Consolidated Financial Statements.


32
   Company Pro forma Company Pro forma Company Pro forma
LocationNumber of Stores 
Number of Units as of
September 30, 2017 (1)
 Number of Units as of
September 30, 2016		 
Net Rentable
Square Feet as of
September 30, 2017 (2)
 Net Rentable
Square Feet as of
September 30, 2016		 Square Foot Occupancy % September 30, 2017 Square Foot Occupancy % September 30, 2016
Wholly-Owned Stores             
Alabama8
 4,691
 4,650
 556,216
 556,971
 91.2% 90.1%
Arizona22
 13,773
 13,640
 1,530,770
 1,531,922
 93.6% 91.3%
California143
 110,726
 108,965
 11,395,369
 11,369,700
 95.3% 94.4%
Colorado13
 7,080
 6,656
 852,884
 822,689
 91.6% 91.6%
Connecticut7
 5,101
 4,966
 496,026
 485,247
 94.0% 92.9%
Florida78
 56,628
 55,796
 5,965,751
 5,942,885
 94.4% 93.1%
Georgia49
 30,130
 29,401
 3,811,743
 3,765,111
 94.1% 91.7%
Hawaii9
 8,550
 8,523
 603,411
 603,349
 93.8% 93.2%
Illinois27
 19,152
 18,703
 2,057,271
 2,016,245
 92.6% 92.0%
Indiana15
 7,924
 7,802
 943,029
 940,348
 93.3% 93.2%
Kansas1
 532
 529
 49,989
 49,999
 96.3% 96.2%
Kentucky10
 5,901
 5,876
 767,669
 757,090
 91.9% 91.8%
Louisiana2
 1,407
 1,405
 149,930
 149,880
 95.2% 93.3%
Maryland29
 22,487
 22,337
 2,294,086
 2,291,567
 92.6% 92.5%
Massachusetts38
 23,924
 23,815
 2,363,571
 2,363,819
 94.1% 91.6%
Michigan4
 2,401
 2,388
 324,276
 323,976
 94.8% 94.4%
Minnesota1
 740
 740
 74,550
 74,550
 94.0% 76.7%
Mississippi3
 1,510
 1,511
 217,442
 218,282
 92.5% 89.7%
Missouri6
 3,332
 3,290
 389,411
 385,951
 94.2% 92.4%
Nevada15
 9,191
 9,111
 1,313,933
 1,313,545
 95.3% 92.6%
New Hampshire2
 1,046
 1,043
 125,987
 126,053
 89.8% 94.5%
New Jersey58
 45,967
 45,458
 4,507,390
 4,498,001
 95.3% 93.1%
New Mexico12
 6,656
 6,579
 751,518
 749,053
 94.7% 93.4%
New York21
 19,310
 19,241
 1,553,309
 1,549,618
 93.5% 92.9%
North Carolina12
 7,937
 7,845
 848,649
 847,269
 92.5% 90.8%
Ohio17
 9,545
 9,536
 1,250,475
 1,248,121
 92.8% 92.5%
Oregon4
 2,792
 2,738
 327,487
 326,977
 93.7% 91.6%
Pennsylvania14
 9,832
 9,625
 1,053,644
 1,046,635
 91.8% 91.2%
Rhode Island2
 1,301
 1,274
 131,021
 131,521
 95.7% 95.0%
South Carolina21
 12,082
 11,898
 1,572,859
 1,569,374
 92.6% 89.5%
Tennessee23
 13,041
 12,864
 1,755,104
 1,767,356
 92.9% 92.3%
Texas90
 59,106
 58,661
 7,582,540
 7,526,015
 92.6% 90.0%
Utah7
 3,861
 3,870
 476,999
 477,034
 93.7% 94.2%


   Company Pro forma Company Pro forma Company Pro forma
LocationNumber of Stores 
Number of Units as of
September 30, 2017 (1)
 Number of Units as of
September 30, 2016		 
Net Rentable
Square Feet as of
September 30, 2017 (2)
 Net Rentable
Square Feet as of
September 30, 2016		 Square Foot Occupancy % September 30, 2017 Square Foot Occupancy % September 30, 2016
Virginia41
 31,025
 30,804
 3,288,449
 3,283,976
 93.0% 91.2%
Washington7
 4,330
 4,301
 509,638
 509,358
 96.5% 94.8%
Washington, DC1
 1,219
 1,220
 99,689
 99,739
 92.4% 92.3%
Total Wholly-Owned Stabilized812
 564,230
 557,061
 61,992,085
 61,719,226
 93.8% 92.3%
              
Joint-Venture Stores             
Alabama1
 619
 602
 75,296
 74,856
 96.1% 93.5%
Arizona6
 3,747
 3,725
 429,273
 428,883
 93.6% 92.2%
California47
 34,171
 33,887
 3,279,318
 3,283,061
 94.5% 94.5%
Colorado2
 1,333
 1,315
 160,654
 157,986
 91.6% 93.0%
Connecticut5
 3,770
 3,759
 405,190
 403,910
 91.6% 92.1%
Delaware1
 561
 603
 76,765
 71,910
 88.5% 82.7%
Florida12
 10,047
 9,988
 1,006,891
 1,002,212
 96.0% 93.2%
Georgia1
 614
 608
 81,770
 81,820
 92.5% 88.9%
Illinois4
 2,685
 2,692
 288,399
 288,115
 90.7% 92.0%
Indiana1
 454
 445
 57,010
 56,954
 92.8% 97.1%
Kansas2
 848
 845
 109,170
 109,375
 96.7% 92.2%
Kentucky3
 1,399
 1,374
 158,980
 153,825
 90.5% 94.9%
Maryland7
 5,901
 5,881
 531,126
 529,070
 92.6% 92.2%
Massachusetts9
 5,132
 5,114
 534,378
 534,877
 91.6% 92.5%
Michigan5
 3,228
 3,207
 396,749
 397,059
 94.6% 92.9%
Missouri1
 544
 542
 61,375
 61,075
 93.0% 92.1%
Nevada2
 1,212
 1,205
 123,610
 123,565
 98.3% 93.9%
New Hampshire2
 805
 794
 85,061
 83,845
 91.4% 91.9%
New Jersey13
 10,403
 10,328
 1,029,694
 1,029,588
 94.3% 92.4%
New Mexico2
 1,051
 1,047
 134,403
 134,371
 93.3% 91.5%
New York8
 7,750
 7,677
 653,499
 649,362
 94.0% 93.3%
Ohio5
 2,896
 2,877
 382,178
 381,432
 93.6% 92.7%
Oregon1
 654
 652
 64,970
 64,970
 94.6% 95.5%
Pennsylvania4
 2,728
 2,699
 314,845
 312,995
 93.5% 90.9%
Tennessee6
 3,864
 3,799
 475,155
 474,990
 93.2% 93.4%
Texas10
 5,784
 5,789
 672,110
 672,696
 92.2% 92.0%
Virginia7
 5,093
 5,090
 514,117
 514,172
 80.2% 90.9%
Washington, DC1
 1,691
 1,694
 104,382
 104,454
 87.9% 91.5%
Total Joint-Venture Stabilized168
 118,984
 118,238
 12,206,368
 12,181,428
 93.1% 93.0%
              
Managed Stores             
Alabama9
 4,202
 4,232
 595,551
 602,341
 92.0% 90.7%
Arizona5
 2,619
 2,633
 312,159
 312,407
 90.8% 84.8%
California75
 52,308
 50,511
 6,229,279
 6,054,110
 94.2% 93.5%
Colorado16
 8,853
 8,596
 1,039,790
 1,044,988
 89.7% 88.3%
Connecticut2
 1,423
 1,414
 182,380
 182,149
 94.8% 90.9%

   Company Pro forma Company Pro forma Company Pro forma
LocationNumber of Stores 
Number of Units as of
September 30, 2017 (1)
 Number of Units as of
September 30, 2016		 
Net Rentable
Square Feet as of
September 30, 2017 (2)
 Net Rentable
Square Feet as of
September 30, 2016		 Square Foot Occupancy % September 30, 2017 Square Foot Occupancy % September 30, 2016
Florida49
 33,975
 33,489
 4,026,357
 4,015,636
 94.6% 92.8%
Georgia8
 4,098
 3,962
 578,397
 573,080
 94.4% 93.7%
Hawaii6
 4,801
 4,685
 353,629
 352,278
 93.7% 91.3%
Illinois12
 7,144
 7,159
 743,634
 744,437
 91.0% 90.7%
Indiana4
 2,034
 2,020
 238,358
 238,028
 90.1% 91.8%
Kansas1
 570
 572
 70,480
 70,480
 97.2% 94.4%
Kentucky2
 1,328
 1,332
 218,334
 218,887
 93.9% 92.2%
Louisiana1
 987
 987
 133,360
 133,325
 97.6% 92.2%
Maryland21
 15,214
 15,214
 1,477,429
 1,475,581
 93.5% 91.2%
Massachusetts3
 1,543
 1,540
 182,945
 182,945
 90.2% 92.1%
Michigan6
 3,364
 3,352
 417,754
 416,650
 96.2% 92.7%
Mississippi1
 371
 371
 50,325
 50,325
 89.9% 66.3%
Missouri3
 1,663
 1,582
 186,319
 182,910
 93.2% 92.8%
Nevada11
 9,451
 9,398
 1,142,141
 1,142,571
 96.1% 90.6%
New Jersey6
 4,528
 4,514
 388,799
 391,541
 93.8% 87.9%
New Mexico2
 1,267
 1,261
 164,525
 163,245
 89.9% 84.0%
New York13
 11,028
 11,012
 676,752
 676,510
 89.4% 80.6%
North Carolina20
 8,599
 8,440
 1,176,243
 1,181,578
 91.5% 85.4%
Ohio5
 2,291
 2,249
 274,670
 274,870
 91.4% 94.3%
Oklahoma11
 5,864
 5,823
 970,694
 953,385
 88.8% 80.6%
Oregon1
 445
 447
 39,300
 39,430
 92.4% 93.7%
Pennsylvania18
 10,859
 10,715
 1,253,565
 1,244,635
 91.8% 92.4%
South Carolina5
 3,629
 3,624
 448,567
 450,659
 94.2% 92.2%
Tennessee4
 2,282
 2,151
 287,694
 282,263
 92.4% 94.1%
Texas26
 15,576
 15,592
 2,224,973
 2,217,402
 89.6% 90.6%
Utah5
 2,767
 2,781
 400,207
 408,122
 93.1% 90.4%
Virginia7
 4,209
 4,209
 425,899
 426,299
 90.6% 90.7%
Washington3
 1,557
 1,564
 194,327
 181,897
 93.2% 94.3%
Wisconsin1
 680
 680
 90,926
 90,926
 90.1% 74.3%
Puerto Rico4
 2,728
 2,725
 288,258
 289,620
 91.1% 86.6%
Total Managed Stabilized366
 234,257
 230,836
 27,484,020
 27,265,510
 92.8% 90.8%
              
Total Stabilized Stores1,346
 917,471
 906,135
 101,682,473
 101,166,164
 93.5% 92.0%

(1)Represents unit count as of September 30, 2017, which may differ from unit count as of September 30, 2016 due to unit conversions or expansions.
(2)Represents net rentable square feet as of September 30, 2017, which may differ from rentable square feet as of September 30, 2016 due to unit conversions or expansions.



Lease-up Store Data Based on Location

The following table presents additional information regarding the occupancy of our lease-up stores by state as of September 30, 2017 and 2016. The information as of September 30, 2016 is on a pro forma basis as though all the stores owned and/or managed at September 30, 2017 were under our control as of September 30, 2016.

   Company Pro forma Company Pro forma Company Pro forma
LocationNumber of Stores 
Number of Units as of
September 30, 2017 (1)
 Number of Units as of
September 30, 2016		 
Net Rentable
Square Feet as of
September 30, 2017 (2)
 Net Rentable
Square Feet as of
September 30, 2016		 Square Foot Occupancy % September 30, 2017 Square Foot Occupancy % September 30, 2016
Wholly-Owned Stores             
Arizona1 606
 609
 63,395
 63,395
 98.5% 88.1%
California4 2,662
 2,606
 258,633
 253,638
 87.9% 60.0%
Florida4 2,889
 1,056
 287,310
 113,163
 62.2% 92.3%
Georgia6 3,695
 3,667
 442,453
 442,273
 84.9% 53.6%
Illinois3 2,724
 2,659
 252,854
 238,754
 69.9% 19.4%
Massachusetts2 2,013
 1,971
 139,918
 138,931
 80.9% 54.6%
New York1 822
 820
 100,470
 100,480
 58.3% 58.3%
North Carolina3 2,277
 1,797
 204,254
 163,919
 79.3% 73.0%
South Carolina1 695
 695
 78,680
 78,680
 86.2% 77.9%
Texas5 2,989
 2,981
 411,226
 411,396
 90.0% 81.8%
Utah2 1,211
 998
 143,244
 110,875
 84.7% 39.1%
Total Wholly-Owned in Lease-up32 22,583
 19,859
 2,382,437
 2,115,504
 80.3% 61.0%
              
Joint-Venture Stores             
Arizona1 606
 602
 62,200
 62,200
 94.5% 87.4%
Colorado1 816
 815
 84,855
 84,640
 82.2% 32.5%
Florida3 1,951
 —
 202,718
 —
 55.4% —%
Massachusetts1 487
 —
 50,330
 —
 37.8% —%
New Jersey1 868
 872
 74,131
 74,152
 95.0% 90.9%
New York3 3,856
 3,855
 209,157
 209,387
 75.0% 40.6%
Pennsylvania1 780
 —
 76,666
 —
 32.4% —%
Oregon2 792
 796
 71,465
 71,670
 78.3% 31.5%
Texas1 527
 533
 55,325
 55,275
 88.7% 43.1%
South Carolina1 686
 669
 83,826
 78,085
 91.5% 68.1%
Washington1 623
 637
 82,301
 82,345
 86.0% 46.5%
Total Joint-Venture in Lease-up16 11,992
 8,779
 1,052,974
 717,754
 72.6% 51.9%
              
Managed Stores             
Arizona2 1,848
 1,842
 211,839
 212,789
 67.1% 47.8%
California4 3,692
 2,887
 460,356
 350,486
 71.8% 44.1%
Colorado5 3,375
 1,232
 418,254
 147,604
 45.6% 81.1%
Connecticut2 861
 —
 112,282
 —
 35.0% —%
Florida13 8,667
 595
 842,555
 70,870
 36.3% 85.1%
Georgia4 2,893
 639
 301,880
 78,305
 41.8% —%
Hawaii1 641
 —
 51,552
 —
 3.8% —%

   Company Pro forma Company Pro forma Company Pro forma
LocationNumber of Stores 
Number of Units as of
September 30, 2017 (1)
 Number of Units as of
September 30, 2016		 
Net Rentable
Square Feet as of
September 30, 2017 (2)
 Net Rentable
Square Feet as of
September 30, 2016		 Square Foot Occupancy % September 30, 2017 Square Foot Occupancy % September 30, 2016
Illinois10 6,717
 3,159
 676,862
 335,645
 45.5% 30.6%
Indiana5 3,025
 1,995
 361,154
 237,586
 74.2% 51.1%
Kentucky2 955
 522
 94,410
 43,235
 24.9% 0.1%
Maryland3 1,604
 399
 180,444
 28,280
 56.3% 83.8%
Massachusetts2 1,921
 1,922
 153,592
 153,603
 72.2% 44.0%
Minnesota5 3,135
 644
 324,652
 62,389
 74.0% 80.3%
Missouri1 704
 —
 68,042
 —
 17.4% —%
Nevada1 764
 764
 153,571
 153,571
 85.0% 61.6%
New Hampshire3 1,098
 372
 109,948
 35,196
 48.7% 45.0%
New Jersey3 2,208
 754
 239,725
 109,877
 67.9% 44.5%
New Mexico2 797
 393
 162,369
 79,019
 40.9% 45.0%
North Carolina9 6,044
 2,499
 648,738
 297,221
 62.0% 64.1%
Ohio2 996
 538
 111,254
 67,860
 77.7% 82.3%
Oklahoma4 1,896
 293
 271,336
 67,750
 30.3% 1.4%
Pennsylvania2 1,474
 —
 133,766
 —
 34.3% —%
Rhode Island1 692
 692
 83,865
 83,865
 64.7% 56.0%
South Carolina5 3,246
 627
 381,081
 67,375
 62.8% 84.9%
Texas19 14,241
 6,055
 1,582,841
 702,663
 43.0% 26.4%
Utah1 386
 405
 44,199
 44,149
 90.2% 48.2%
Virginia3 2,630
 —
 274,796
 —
 44.3% —%
Washington, DC1 882
 —
 73,237
 —
 44.6% —%
Wisconsin4 3,386
 1,154
 391,641
 153,775
 34.6% 31.7%
Total Managed in Lease-up119 80,778
 30,382
 8,920,241
 3,583,113
 50.8% 50.8%
              
Total Lease-up Stores167 115,353
 59,020
 12,355,652
 6,416,371
 50.9% 58.4%

(1)Represents unit count as of September 30, 2017, which may differ from unit count as of September 30, 2016 due to unit conversions or expansions.
(2)Represents net rentable square feet as of September 30, 2017, which may differ from rentable square feet as of September 30, 2016 due to unit conversions or expansions.

RESULTS OF OPERATIONS


Comparison of the three and ninesix months ended SeptemberJune 30, 20172022 and 20162021


Overview
Results for the three and ninesix months ended SeptemberJune 30, 20172022 included the operations of 1,0281,313 stores (844(1,009 wholly-owned, two inno consolidated joint ventures, and 182304 in joint ventures accounted for using the equity method) compared to the results for the three and ninesix months ended SeptemberJune 30, 2016,2021, which included the operations of 9991,205 stores (810(952 wholly-owned, onesix in a consolidated joint venture,ventures, and 188247 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,
20222021$ Change% Change20222021$ Change% Change
Revenues:
Property rental$408,044 $321,500 $86,544 26.9 %$787,852 $625,093 $162,759 26.0 %
Tenant reinsurance46,427 42,334 4,093 9.7 %90,224 81,953 8,271 10.1 %
Management fees and other income20,517 14,796 5,721 38.7 %40,474 30,441 10,033 33.0 %
Total revenues$474,988 $378,630 $96,358 25.4 %$918,550 $737,487 $181,063 24.6 %
 For the Three Months Ended September 30,     For the Nine Months Ended September 30, 
 
 2017 2016 $ Change % Change 2017 2016 $ Change % Change
Revenues:               
Property rental$248,589
 $224,451
 $24,138
 10.8 % $720,878
 $635,730
 $85,148
 13.4 %
Tenant reinsurance25,882
 22,727
 3,155
 13.9 % 73,050
 64,936
 8,114
 12.5 %
Management fees and other income9,685
 10,005
 (320) (3.2)% 29,239
 30,193
 (954) (3.2)%
Total revenues$284,156
 $257,183
 $26,973
 10.5 % $823,167
 $730,859
 $92,308
 12.6 %


Property Rental—The increase in property rental revenues for the three and ninesix months ended SeptemberJune 30, 20172022 was primarily the result of an increase of $14,506$66,688 and $52,487, respectively,$129,334 at our stabilized stores related to higher average rates to new and existing customers. Property rental revenue also increased by $21,584 and $40,481 associated with acquisitions completed in 20172022 and 2016.2021. We acquired nine29 wholly-owned stores during the ninesix months ended SeptemberJune 30, 20172022 and 99a total of 74 stores during the year ended December 31, 2016.2021. Property rental revenue also increased by $9,990 and $31,727, respectively,$1,450 during the three and ninesix months ended SeptemberJune 30, 2017,2022 as a result of increasesincrease in occupancy and rental rates to new and existing customers at our stabilizedlease-up stores. Occupancy at our wholly-owned stabilizedThese increases were offset by approximately $4,444 and $11,017 related to the sale of 19 stores increased to 93.8% at September 30, 2017, as compared to 92.3% at September 30, 2016. The rental rate to new tenants on wholly-owned storesthird parties for the three and six months ended SeptemberJune 30, 2017 increased an average of approximately 4.8% over the same period in the prior year.2022.


Tenant Reinsurance—The increase in our tenant reinsurance revenues was due primarily to thean increase in the number of stores operated. We operated 1,5132,177 stores at SeptemberJune 30, 20172022 compared to 1,4211,973 stores at SeptemberJune 30, 2016. Additionally,2021.

Management Fees and Other Income—Management fees and other income primarily represent the average dollar per policy was higher duringfees collected for our management of stores owned by third parties and unconsolidated joint ventures and other transaction fee income. The increase for the three and ninesix months ended SeptemberJune 30, 20172022 was primarily due to an increase in the number of stores managed and an increase in revenue of previously managed stores when compared to the same period in the priorlast year.

Management Fees and Other Income—Our taxable REIT subsidiary (“TRS”), Extra Space Management, Inc., manages As of June 30, 2022, we managed 1,168 stores owned by ourfor joint ventures and third parties. Management fees generally represent approximately 6.0%parties, compared to 1,021 stores as of cash collected from these stores.June 30, 2021. Additionally, for the three and six months ended June 30, 2022, the Company earned an additional $1,095 and $1,483 of other transaction fee income.


33

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,
20222021$ Change% Change20222021$ Change% Change
Expenses:
Property operations$104,252 $89,155 $15,097 16.9 %$207,794 $181,522 $26,272 14.5 %
Tenant reinsurance7,537 6,735 802 11.9 %14,579 13,896 683 4.9 %
Transaction related costs1,465 — 1,465 — %1,465 — 1,465 — %
General and administrative31,251 26,341 4,910 18.6 %61,013 49,881 11,132 22.3 %
Depreciation and amortization69,067 59,570 9,497 15.9 %136,973 118,169 18,804 15.9 %
Total expenses$213,572 $181,801 $31,771 17.5 %$421,824 $363,468 $58,356 16.1 %

 For the Three Months Ended September 30,     For the Nine Months Ended September 30, 
 
 2017 2016 $ Change % Change 2017 2016 $ Change % Change
Expenses:               
Property operations$70,430
 $62,341
 $8,089
 13.0 % $204,370
 $185,883
 $18,487
 9.9 %
Tenant reinsurance6,272
 4,093
 2,179
 53.2 % 13,996
 12,345
 1,651
 13.4 %
Acquisition related costs and other—
 1,933
 (1,933) (100.0)% —
 9,124
 (9,124) (100.0)%
General and administrative19,498
 19,537
 (39) (0.2)% 60,171
 63,451
 (3,280) (5.2)%
Depreciation and amortization48,075
 46,555
 1,520
 3.3 % 144,139
 133,402
 10,737
 8.0 %
Total expenses$144,275
 $134,459
 $9,816
 7.3 % $422,676
 $404,205
 $18,471
 4.6 %

Property Operations—The increase in property operations expense during the three and ninesix months ended SeptemberJune 30, 2017 was due2022 consists primarily toof an increase of $4,460$7,552 and $16,943, respectively,$14,598 related to store acquisitions completed in 20172022 and 2016.2021. We acquired nine operating29 wholly-owned stores during the ninesix months ended SeptemberJune 30, 2017,2022 and 99 operatinga total of 74 stores during the year ended December 31, 2016. In addition, a loss of $2,110,000, net of reinsurance proceeds, was recorded for the three and ninesix months ended SeptemberJune 30, 20172021. There was also an increase of $8,162 at stabilized stores, which was partially offset by a decrease in expense of $1,279 related to the recent hurricanes.property sales.




Tenant Reinsurance—Tenant reinsurance expense represents the costs that are incurred to provide tenant reinsurance. We operated 2,177 stores at June 30, 2022 compared to 1,973 stores at June 30, 2021.

Transaction related costs— The increase$1,465 in tenant reinsurance expense is primarily due toacquisition costs represents the additional claims from recent hurricanes Harvey, Irma and Maria as well as an increasecosts that were incurred in the total number of properties covered when compared to the prior year.

Acquisition Related Costs and Other—For the three and nine months ended September 30, 2016, these costs represented closing and other transaction costs incurred in connection with our acquisition of operating stores, which were accountedBargold Storage Systems, LLC ("Bargold"). See footnote 7, Acquisitions and Dispositions, for as business combinations. On January 1, 2017, we adopted the guidance in ASU 2017-01, "Business Combinations (Topic 805) - Clarifying the Definition of a Business," which provides that when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of assets is not a business. As a result of the adoption of this guidance, acquisitions of operating stores are now considered asset acquisitions, under which transaction costs are capitalized as a component of the cost of the assets acquired, rather than being expensed as incurred as required with business combinations.additional details.


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. These expenses are recognizedPayroll has continued to increase as incurred. General and administrative expenses for the nine months ended September 30, 2017 decreased when compared to the same period in the prior year primarily as a result of an expense of $4,000 that was recorded during the nine months ended September 30, 2016 related to the accrual of a legal settlement. There were no such expenses during the three and nine months ended September 30, 2017. During the three months ended June 30, 2017, this legal proceeding was settled and a payment was made against the related accrued liability.we have seen wages nationwide grow faster than inflation. We did not observe any other material trends in specific payroll, travel or other expenses that contributedapart from the increase due to the decrease in general and administrative expenses.management of additional stores.


Depreciation and Amortization—Depreciation and amortization expense increased as a result of the acquisition of new stores. We acquired nine operating29 wholly-owned stores during the ninesix months ended SeptemberJune 30, 20172022 and 99 operatinga total of 74 stores during the yearsix months ended December 31, 2016.June 30, 2021.

34


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,
20222021$ Change% Change20222021$ Change% Change
Gain on real estate transactions$14,249 $— $14,249 — %$14,249 $63,883 $(49,634)(77.7)%
Interest expense(47,466)(40,240)(7,226)18.0 %(90,004)(80,935)(9,069)11.2 %
Interest income15,060 12,838 2,222 17.3 %34,049 25,142 8,907 35.4 %
Equity in earnings and dividend income from unconsolidated real estate entities10,190 8,322 1,868 22.4 %19,287 15,278 4,009 26.2 %
Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partner's interest— 6,251 (6,251)— %— 6,251 (6,251)100.0 %
Income tax expense(5,615)(5,421)(194)3.6 %(8,756)(9,558)802 (8.4)%
Total other revenues & expenses, net$(13,582)$(18,250)$4,668 (25.6)%$(31,175)$20,061 $(51,236)(255.4)%

 For the Three Months Ended September 30,     For the Nine Months Ended September 30, 
 
 2017 2016 $ Change % Change 2017 2016 $ Change % Change
Other income and expenses:               
Gain (loss) on real estate transactions, earnout from prior acquisition and impairment of real estate$—
 $—
 $—
 — % $(6,019) $9,814
 $(15,833) (161.3)%
Interest expense(39,766) (33,494) (6,272) 18.7 % (113,192) (97,655) (15,537) 15.9 %
Non-cash interest expense related to amortization of discount on equity component of exchangeable senior notes(1,268) (1,243) (25) 2.0 % (3,827) (3,716) (111) 3.0 %
Interest income869
 1,358
 (489) (36.0)% 2,797
 4,697
 (1,900) (40.5)%
Interest income on note receivable from Preferred Operating Partnership unit holder532
 1,213
 (681) (56.1)% 2,404
 3,638
 (1,234) (33.9)%
Equity in earnings of unconsolidated real estate ventures3,990
 3,625
 365
 10.1 % 11,407
 9,813
 1,594
 16.2 %
Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partners' interests—
 37,509
 (37,509) 0.0 % —
 64,432
 (64,432) (100.0)%
Income tax expense(3,163) (4,466) 1,303
 (29.2)% (9,154) (11,004) 1,850
 (16.8)%
Total other expense, net$(38,806) $4,502
 $(43,308) (962.0)% $(115,584) $(19,981) $(95,603) 478.5 %



Gain (Loss) on Real Estate Transactions, Earnout from Prior Acquisition and Impairment of Real Estate — Transactions—During the ninethree months ended SeptemberJune 30, 2017,2022, we recorded an impairment losssold two stores. We recognized a total gain of $6,019 relating$14,249 related to one parcelthe sale of land held for sale and an additional two parcels of undeveloped land where the carrying value was greater than the fair value.these assets. During the ninesix months ended SeptemberJune 30, 2016,2021, we recordedsold 16 stores to a newly established unconsolidated joint venture. We recognized a total gain of $9,814. This amount was comprised of a gain of $11,358 on the disposition of seven stores in April 2016, and a loss of $1,544,$64,424 related to an earnout provision fromthis transaction. This gain was partially offset by losses related to the acquisitionsale of a small portfolio of stores that were acquired in 2014.notes receivable and solar assets.


Interest Expense—The increase in interest expense during the three and ninesix months ended SeptemberJune 30, 20172022 was primarily the result of an overall increase ina higher weighted average interest rate and debt this period whenbalance compared to the same period in the prior year. The total face value of our debt, including our lines of credit, was $4,362,400 at September 30, 2017 compared to $4,047,217 at September 30, 2016. Additionally, the average interest rate on the total of our fixed- and variable-rate debt at September 30, 2017 was 3.3%, compared to 3.1% as of September 30, 2016.


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 have an effective interest rate of 4.0% relative to the carrying amount of the liability. 

Interest Income—Interest income represents amounts earned on cash and cash equivalents deposited with financial institutions and interest earned on bridge loans, notes receivable.receivable and debt securities and income earned on notes receivable from Common and Preferred Operating Partnership unit holders. The decrease forincrease in interest income during the three and ninesix months ended SeptemberJune 30, 2017 related2022 was primarily to the decrease in notes receivable when compared to the same period in the prior year. We had $28,005 of notes receivable included in assets on the condensed consolidated balance sheets as of September 30, 2017, compared to $67,098 as of September 30, 2016. 

Interest Income on Note Receivable from Preferred Operating Partnership Unit Holders—Represents interest on a $100,000 loan to the holders of the Series A Participating Redeemable Preferred Units of our Operating Partnership (“Series A Units”). The decreases for the three and nine months ended September 30, 2017 are a result of an amendment signedincrease in April 2017 that decreased the interest rate of the note receivable for the Company's bridge loan program. The loan receivable balance increased to $349,056 as of June 30, 2022 compared to $247,411 as of June 30, 2021. The increase also relates to interest earned from 4.9% to 2.1%.the repayment of the senior mezzanine note receivable which was paid off in February 2022 and included recording the remaining balance of unamortized discount into interest income.


Equity in Earnings ofand Dividend Income from Unconsolidated Real Estate Ventures—Entities—Equity in earnings of unconsolidated real estate venturesentities 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/cash or profits in excess of these preferred returns are generated, we receive a higher percentage of the excess cash/cash or profits. The increaseDividend income represents dividends from our investment in preferred stock of SmartStop, which was purchased in October 2019 for the three and nine months ended September 30, 2017 compared to the same period$150,000 with another $50,000 invested in the prior year was primarily the result of three of our joint ventures generating cash in excess of the preferred returns, resulting in increased distributions and equity in earnings. This increase was slightly offset by a decrease in the number of stores owned by our joint ventures as a result of transactions, including the acquisition of 40 stores from joint ventures during the year ended December 31, 2016.October 2020.


Equity in Earnings of Unconsolidated Real Estate Ventures—Ventures - Gain on Sale of Real Estate Assets and Purchase of Joint Venture Partners' Interests—On February 2, 2016, we acquired six stores from our VRS Self Storage LLCPartner's Interest - In June 2021, the Company sold its interest in two unconsolidated joint ventures to its joint venture (“VRS”)partner. The Company received proceeds of $1,888 in a step acquisition. Wecash, and recorded a gain of $26,923 as$525. Also in June 2021, the WICNN JV LLC and GFN JV, LLC joint ventures sold all 17 of the stores owned by the joint ventures to a third party. Subsequent to the sales, these joint ventures were dissolved. As a result of re-measuring to fair value our existing equity interest.

On September 16, 2016, we acquired 23 stores from our ESS PRISA II LLC joint venture ("PRISA II") in a step acquisition. Wethese transactions, the Company recorded a gain of $6,662 as a result of re-measuring to fair value our existing equity interest. We then sold our remaining interest in PRISA II to Prudential for $34,758 in cash. As a result of this sale, we recognized a gain of $30,846.$5,739.


There were no such gains during the three and nine months ended September 30, 2017.

Income Tax Expense—For the three and nine months ended SeptemberJune 30, 2017,2022 we did not observe any material change when compared to the same period in the prior year. For the six months ended June 30, 2022 the decrease in income tax expense was primarily the result of a larger estimated solar tax credits received during the quartercredit for 2022 when compared to the same period in the prior year.



Net Income Allocated to Noncontrolling Interests
The following table presents information on net income allocated to noncontrolling interests for the periods indicated:
35
 For the Three Months Ended September 30,     For the Nine Months Ended September 30, 
 
 2017 2016 $ Change % Change 2017 2016 $ Change % Change
Net income allocated to noncontrolling interests:               
Net income allocated to Preferred Operating Partnership noncontrolling interests$(3,394) $(4,144) $750
 (18.1)% $(10,775) $(10,758) $(17) 0.2 %
Net income allocated to Operating Partnership and other noncontrolling interests(3,917) (4,994) 1,077
 (21.6)% (11,080) (12,191) 1,111
 (9.1)%
Total income allocated to noncontrolling interests:$(7,311) $(9,138) $1,827
 (20.0)% $(21,855) $(22,949) $1,094
 (4.8)%


Net Income Allocated to Preferred Operating Partnership Noncontrolling Interests—Income allocated to the Preferred Operating Partnership noncontrolling interests for the three and nine months ended September 30, 2017 and 2016 represents the fixed distributions paid to holders of the Series A Units, Series B Units, Series C Units and Series D Units, plus approximately 0.6% of the remaining net income allocated to holders of the Series A Units.

Net Income Allocated to Operating Partnership and Other Noncontrolling Interests—Income allocated to the Operating Partnership represents approximately 4.0% of net income after the allocation of the fixed distribution paid to the Preferred Operating Partnership unit holders for each of the three and nine months ended September 30, 2017 and 2016.


FUNDS FROM OPERATIONS


Funds from Operationsoperations (“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,
 2022202120222021
Net income attributable to common stockholders$232,130 $167,948 $435,709 $370,946 
Adjustments:
Real estate depreciation63,765 56,470 126,457 112,285 
Amortization of intangibles2,696 1,008 5,462 1,701 
Gain on real estate transactions(14,249)— (14,249)(63,883)
Unconsolidated joint venture real estate depreciation and amortization4,115 3,079 7,968 5,584 
Unconsolidated joint venture gain on sale of real estate assets and purchase of partner's interest— (6,251)— (6,251)
Distributions paid on Series A Preferred Operating Partnership units(572)(572)(1,144)(1,144)
Income allocated to Operating Partnership noncontrolling interests15,704 10,631 29,842 23,134 
Funds from operations attributable to common stockholders and unit holders$303,589 $232,313 $590,045 $442,372 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2017 2016 2017 2016
Net income attributable to common stockholders$93,764
 $118,088
 $263,052
 $283,724
        
Adjustments:       
Real estate depreciation43,303
 39,971
 127,729
 113,795
Amortization of intangibles2,316
 4,853
 11,164
 14,425
Loss (gain) on real estate transactions, earnout from prior acquisition and impairment of real estate—
 —
 6,019
 (9,814)
Unconsolidated joint venture real estate depreciation and amortization1,429
 1,227
 4,267
 3,481
Unconsolidated joint venture gain on sale of real estate and purchase of partner's interest—
 (37,509) —
 (64,432)
Distributions paid on Series A Preferred Operating Partnership units(572) (1,272) (2,547) (3,814)
Income allocated to Operating Partnership noncontrolling interests7,363
 9,137
 21,928
 22,949
Funds from operations attributable to common stockholders and unit holders$147,603
 $134,495
 $431,612
 $360,314


SAME-STORE RESULTS


Our same-store pool for the periods presented consists of 732870 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.
36

 For the Three Months Ended September 30, Percent For the Nine Months Ended September 30, Percent
 2017 2016 Change 2017 2016 Change
Same-store rental revenues$220,123
 $210,075
 4.8% $640,322
 $608,462
 5.2 %
Same-store operating expenses59,183
 57,507
 2.9% 174,661
 174,820
 (0.1)%
Same-store net operating income$160,940
 $152,568
 5.5% $465,661
 $433,642
 7.4 %
Same-store square foot occupancy as of quarter end93.9% 92.5% 
 93.9% 92.5% 
Properties included in same-store732
 732
 
 732
 732
 

portfolio.
 For the Three Months Ended June 30,PercentFor the Six Months Ended June 30,Percent
 20222021Change20222021Change
Same-store rental revenues$362,192 $297,601 21.7 %$704,081 $578,591 21.7 %
Same-store operating expenses83,471 76,346 9.3 %168,328 155,825 8.0 %
Same-store net operating income$278,721 $221,255 26.0 %$535,753 $422,766 26.7 %
Same-store square foot occupancy as of quarter end95.9%96.9%95.9%96.9%
Properties included in same-store870870870870
Same-store revenues for the three and ninesix months ended SeptemberJune 30, 20172022 increased compared to the same periods in 2021 due to gains in occupancy and higher rentalaverage rates for bothto new and existing customers. Expenses werecustomers and higher other operating income partially offset by lower occupancy.
Same-store expenses increased for the three and six months ended SeptemberJune 30, 20172022 compared to the same period in 2021 due to increases in property taxes, and payroll, and benefits which were partially offset by decreases incredit card processing fees, repairs and maintenance and insurance. Expenses for the nine months ended September 30, 2017 were generally flat with increases ininsurance, partially offset by lower property taxes and marketing expense offset by decreases in repairs and maintenance and insurance.due to successful appeals of prior period taxes.


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,
2022202120222021
Net Income$247,834 $178,579 $465,551 $394,080 
Adjusted to exclude:
Gain on real estate transactions(14,249)— (14,249)(63,883)
Equity in earnings and dividend income from unconsolidated real estate entities(10,190)(8,322)(19,287)(15,278)
Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partner's interest— (6,251)— (6,251)
Interest expense47,466 40,240 90,004 80,935 
Depreciation and amortization69,067 59,570 136,973 118,169 
Income tax expense5,615 5,421 8,756 9,558 
Transaction related costs1,465 — 1,465 — 
General and administrative31,251 26,341 61,013 49,881 
Management fees, other income and interest income(35,577)(27,634)(74,523)(55,583)
Net tenant insurance(38,890)(35,599)(75,645)(68,057)
Non same-store rental revenue(45,852)(23,899)(83,771)(46,502)
Non same-store operating expense20,781 12,809 39,466 25,697 
Total same-store net operating income$278,721 $221,255 $535,753 $422,766 
Same-store rental revenues$362,192 $297,601 $704,081 $578,591 
Same-store operating expenses83,471 76,346 168,328 155,825 
Same-store net operating income$278,721 $221,255 $535,753 $422,766 

37
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2017 2016 2017 2016
Net income$101,075
 $127,226
 $284,907
 $306,673
Adjusted to exclude:       
Loss (gain) on real estate transactions, earnout from prior acquisition and impairment of real estate—
 —
 6,019
 (9,814)
Equity in earnings of unconsolidated real estate joint ventures(3,990) (3,625) (11,407) (9,813)
Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partners interests—
 (37,509) —
 (64,432)
Acquisition related costs and other1
—
 1,933
 —
 9,124
Interest expense41,034
 34,737
 117,019
 101,371
Depreciation and amortization48,075
 46,555
 144,139
 133,402
Income tax expense3,163
 4,466
 9,154
 11,004
General and administrative (includes stock compensation)19,498
 19,537
 60,171
 63,451
Management fees, other income and interest income(11,086) (12,576) (34,440) (38,528)
Net tenant reinsurance(19,610) (18,634) (59,054) (52,591)
Non same-store revenue(28,466) (14,376) (80,556) (27,268)
Non same-store expenses11,247
 4,834
 29,709
 11,063
Total same-store NOI$160,940
 $152,568
 $465,661
 $433,642
        
Same-store rental revenues$220,123
 $210,075
 $640,322
 $608,462
Same-store operating expenses59,183
 57,507
 174,661
 174,820
Total same-store NOI$160,940
 $152,568
 $465,661
 $433,642
(1)Beginning January 1, 2017, acquisition related costs have been capitalized due to a change in accounting literature.


CASH FLOWS


Cash flows provided byfrom operating activities were $449,629 and $386,159, respectively, for the ninesix months ended SeptemberJune 30, 2017 and 2016. The increase was due to a non-cash gain on the purchase of joint venture partners’ interests of $64,432 recorded during the nine months ended September 30, 2016. This gain was related to the two step acquisitions of stores that were previously owned by our VRS and PRISA II joint ventures and the sale of our remaining interest in PRISA II. Additionally, there was a non-cash loss taken related to real estate and land impairments of $6,019 during the nine months ended September 30, 2017. There was also an increase in depreciation and amortization expense of $10,737 when compared with the same period in the prior year.

Cash used in investing activities was $87,744 and $704,310, respectively, for the nine months ended September 30, 2017 and 2016. The decrease was primarily due to a decrease in cash paid for the acquisition of real estate assets of $644,206. We purchased nine stores during the nine months ended September 30, 2017, compared to 72 stores purchased during the nine months ended September 30, 2016.

Cash used in financing activities was $342,011 for the nine months ended September 30, 2017, compared to cash provided by financing activities of $261,044 for the nine months ended September 30, 2016. The change related primarily to an increase in principal payments on notes payable and revolving lines of credit of $454,603 as well as in increase in the dividend paid of $25,124 for the nine months ended September 30, 20172022 increased when compared to the same period in the prior year. Foryear as a result of our continued total revenue growth. Cash flows used in investing activities relates primarily to our acquisition and development of REIT and joint venture assets, as well as activity on our bridge loan program. 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,
20222021
Net cash provided by operating activities$640,387 $463,688 
Net cash used in investing activities(570,028)(145,302)
Net cash used in financing activities(76,387)(386,646)
Significant components of net cash flow included:
Net income$465,551 $394,080 
Depreciation and amortization136,973 118,169 
Gain on real estate transactions(14,249)(63,883)
Acquisition and development of real estate assets(467,543)(400,991)
Proceeds from sale of real estate assets and investments in real estate ventures39,367 194,205 
Investment in unconsolidated real estate entities(76,339)(7,174)
Issuance and purchase of notes receivable(204,930)(68,523)
Proceeds from sale of notes receivable82,115 87,298 
Principal payments received from notes receivable223,773 20,426 
Proceeds from the sale of common stock, net of offering costs— 273,509 
Proceeds from notes payable and revolving lines of credit1,948,657 2,372,000 
Principal payments on notes payable and revolving lines of credit(1,915,531)(3,193,025)
Proceeds from issuance of public bonds, net400,000 446,396 
Repurchase of common stock(63,008)— 
Dividends paid on common stock(403,551)(266,317)

We believe that cash flows generated by operations, along with our existing cash and cash equivalents, the nine months ended September 30, 2016 we received net proceeds from the saleavailability of common stockfunds under our existing lines of $123,423credit, and no similar proceeds were receivedour access to capital markets will be sufficient to meet all of our reasonably anticipated cash needs during the nine months ended September 30, 2017.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 2022, 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 SeptemberJune 30, 2017,2022, we had $63,732$58,729 available in cash and cash equivalents. We are required to distribute at least 90% of our net taxable income, excluding net capital gains, to our stockholders on an annual basis to maintain our qualification as a REIT.

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 20162022 and the first nine months of 2017,2021, 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.

The following table presents information on our lines of credit for the period presented. All of our lines of credit are guaranteed by us.
38
 As of September 30, 2017      
Revolving Lines of CreditAmount Drawn Capacity Interest Rate Origination Date Maturity 
Basis Rate (1)
Credit Line 1 (2)
$25,000
 $100,000
 2.9% 6/4/2010 6/30/2018 LIBOR plus 1.7%
Credit Line 2 (3)(4)
—
 500,000
 2.6% 10/14/2016 10/14/2020 LIBOR plus 1.4%
 $25,000
 $600,000
        


(1)
30-day USD LIBOR
(2)
Secured by mortgages on certain real estate assets. One two-year extension available.
(3)
Unsecured. Two six-month extensions available.
(4)
Basis rate as of September 30, 2017. Rate is subject to change based on a quarterly assessment of our consolidated leverage ratio.

As of SeptemberJune 30, 2017,2022, we had $4,362,400$6,417,240 face value of debt, resulting in a debt to total enterprise value ratio of 28.9%20.9%. As of SeptemberJune 30, 2017,2022, the ratio of total fixed-rate debt and other instruments to total debt was 80.8% (including $2,382,87374.8% ($4,802,885 total fixed-rate debt including $1,878,296 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 SeptemberJune 30, 20172022 was 3.3%3.1%. 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 SeptemberJune 30, 2017.2022.


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


OnWe currently hold a BBB/Stable rating from S&P and a Baa2 rating from Moody's Investors Service. We intend to manage our balance sheet to maintain these ratings. Certain of our real estate assets are pledged as collateral for our debt. As of June 29, 201730, 2022, we had a total of 782 unencumbered stores as defined by our public bonds. Our unencumbered asset value was calculated as $15,523,803 and our total asset value was calculated as $20,406,054 according to the Company's Operating Partnership entered an agreement for the private placement of $300 million ofcalculations as defined by our public bonds.
10-year 3.95% senior notes. The notes were issued on August 24, 2017. The net proceeds have been used to refinance existing indebtedness and for general corporate purposes.


Our liquidity needs consist primarily of cashoperating expenses, monthly debt service payments, recurring capital expenditures, dividends to stockholders and distributions to stockholders, store acquisitions, principal payments underunit holders necessary to maintain our borrowings and non-recurring capital expenditures.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 do not expect that our operating cash flow or cash balances will be sufficient to fund our liquidity needs and instead expect to fund such needs out of additional borrowings of secured or unsecured indebtedness, joint ventures with third parties, and from the proceeds of public and private offerings of equity and debt. Additional capital may not be available on terms favorable to us or at all. Any additional issuance of equity or equity-linked securities may result in dilution to our stockholders. In addition, any new securities we issue could have rights, preferences and privileges senior to holders of our


common stock. We may also use Operating Partnership units as currency to fund acquisitions from self-storage owners who desire tax-deferralowners.

The COVID-19 pandemic has had negative impacts on capital markets and may continue to do so in their exiting transactions.the future. Based upon the current availability of our credit facility and our credit rating, we do not expect such capital market dislocations to have a material impact upon our ability to satisfy obligations and maturities or our growth plans during the year. However, we continue to monitor the potential impact of these trends on our future plans.




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.


FINANCING STRATEGY

We will continue to employ leverage in our capital structure in amounts reviewed from time to time by our board of directors. Although our board of directors has not adopted a policy that limits the total amount of indebtedness that we may incur, we will consider a number of factors in evaluating our level of indebtedness from time to time, as well as the amount of such indebtedness that will be either fixed- or variable-rate. In making financing decisions, we will consider factors including but not limited to:
the interest rate of the proposed financing;
the extent to which the financing impacts flexibility in managing our stores;
prepayment penalties and restrictions on refinancing;
the purchase price of stores acquired with debt financing;
long-term objectives with respect to the financing;
target investment returns;
the ability of particular stores, and our company as a whole, to generate cash flow sufficient to cover expected debt service payments;
overall level of consolidated indebtedness;
timing of debt and lease maturities;
provisions that require recourse and cross-collateralization;
corporate credit ratios including debt service coverage, debt to total capitalization and debt to undepreciated assets; and
the overall ratio of fixed- and variable-rate debt.

Our indebtedness may be recourse, non-recourse or cross-collateralized. If the indebtedness is non-recourse, the collateral will be limited to the particular stores to which the indebtedness relates. In addition, we may invest in stores subject to existing loans collateralized by mortgages or similar liens on our stores, or we may refinance stores acquired on a leveraged basis. We may use the proceeds from any borrowings to refinance existing indebtedness, to refinance investments, including the redevelopment of existing stores, for general working capital or to purchase additional interests in partnerships or joint ventures or for other purposes when we believe it is advisable.

Typically, we invest in or form consolidated special purpose entities to assist us in obtaining secured permanent financing at attractive terms. Permanent financing may be structured as a mortgage loan on a single property, or on a group of properties, and generally requires us to provide a mortgage lien on the store or stores in favor of an institutional third party, as a joint venture with a third party, or as a securitized financing. For securitized financings, we create special purpose entities to own the stores. These special purpose entities, which are common in the real estate industry, are structured so that they would not be consolidated in a bankruptcy proceeding involving a parent company. We decide upon the structure of the financing based upon the best terms then available to us and whether the proposed financing is consistent with our other business objectives. For accounting purposes, we include the outstanding securitized debt of special purpose entities owning consolidated stores as part of our consolidated indebtedness.



We may from time to time seek to retire or repurchase our outstanding debt, as well as 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. The amounts involved may be material.

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.
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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


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
39

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 SeptemberJune 30, 2017,2022, we had $4,362,400approximately $6.4 billion in total face value of debt, of which $837,194approximately $1.6 billion was subject to variable interest rates (excluding debt with interest rate swaps). If LIBOR or SOFR 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 $8,372approximately $16.2 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.


The fair values of our fixed-rate assets and liabilities were as follows for the periods indicated:
 September 30, 2017 December 31, 2016
 Fair
Value		 Carrying
Value		 Fair
Value		 Carrying
Value
Notes receivable from Preferred Operating Partnership unit holders$114,506
 $120,230
 $125,642
 $120,230
Fixed rate notes receivable$21,285
 $20,608
 $53,450
 $52,201
Fixed rate notes payable and notes payable to trusts$2,882,709
 $2,900,822
 $2,404,996
 $2,417,558
Exchangeable senior notes$702,118
 $624,384
 $706,827
 $638,170

The fair value of our note receivable from Preferred Operating Partnership unit holders and other notes receivable was based on the discounted estimated future cash flows of the note (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 our 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 our exchangeable senior notes was estimated using an average market price for similar securities obtained from a third party.



ITEM 4.CONTROLS AND PROCEDURES

ITEM 4.    CONTROLS AND PROCEDURES
(1)Disclosure 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 or the Exchange Act,(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 the 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

(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.




40

PART II.     OTHER INFORMATION


ITEM 1.LEGAL PROCEEDINGS

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

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, 2016,2021, 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, 2016.2021. 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

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

On August 4, 2017, ourJune 1, 2022, we issued a total of 91,743 common Operating Partnership issued 25,520 common units (“OP UnitsUnits”) at an average price of $174.40 per share (a total value of $16.0 million) and 240,000 preferred Operating Partnership units (“Series D Units”) at a stated value of $25.00 per unit (a total value of $6.0 million) in connection with the acquisition of one store in Florida.Bargold. The store was acquired in exchange for the OP Units valued at $2.0 million and approximately $7.1 millionthe Series D Units were issued in a private placement in reliance on Section 4(a)(2) of cash.the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.


The terms of the common OP Units and the Series D Units are governed by the Operating Partnership'sPartnership’s Fourth Amended and Restated Agreement of Limited Partnership.Partnership (the “Partnership Agreement”). The OP Units will be redeemable, at the option of the holders following the expiration of a lock-up period of at least one year from the date of issuance. The redemption obligation may be satisfied, at the Company’s option, in cash or shares of the Company’s common stock. If the Company chooses to satisfy its redemption obligation with respect to the OP Units in its common stock, each OP Unit would receive one share of common stock, subject to adjustment pursuant to the Partnership Agreement. 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 ourthe Company’s option, in cash or common stock. If the Company chooses to satisfy its redemption obligation with respect to the Series D Units in common stock, each Series D Unit would receive a number of shares of our common stock.

The common OP Units were issuedstock equal to accredited investors in private placements in reliance on Section 4(a)(2)$25.00 divided by the value of the Securities Act of 1933, as amended, andcommon stock, calculated pursuant to the rules and regulations promulgated thereunder.Partnership Agreement.


ITEM 3.DEFAULTS UPON SENIOR SECURITIES

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 4.MINE SAFETY DISCLOSURES

ITEM 4.    MINE SAFETY DISCLOSURES

Not Applicable.


ITEM 5.OTHER INFORMATION

ITEM 5.    OTHER INFORMATION

None.




41

ITEM 6.
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.
101The following materials from Extra Space Storage Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, 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.



22.1    Issuer and Guarantors of Guaranteed Securities
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, 2022, 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.
104    Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
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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 5, 2022EXTRA SPACE STORAGE INC.
Registrant
Date: November 3, 2017/s/ Joseph D. Margolis
Joseph D. Margolis
Chief Executive Officer

(Principal Executive Officer)
Date: November 3, 2017August 5, 2022/s/ P. Scott Stubbs
P. Scott Stubbs
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)



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