Investment Overview

Extra Space Storage is a privately-owned, REIT-managed facility located in Carrollton, Texas. The 114,236 rentable-square foot facility fronts Marsh Lane (upon which approximately 28,000 vehicles drive per day), and rests upon two adjacent parcels 7.735-acres and 0.842-acres in size. The facility contains 143 climate-controlled units, 448 drive-up units, eight climate-controlled (multi-door) units, 16 drive-up (multi-door) units, six professional office suites, and 101 uncovered parking spaces. The uncovered parking spaces rest on approximately 3.35-acres of raw land contained within the larger of the two aforementioned parcels, and preliminary estimates suggest an additional 15,000 – 20,000 rentable square feet of climate-controlled space could be developed on this acreage. Although no representations to this effect have been included in the pro-forma operating statement (page 28), this is a legitimate value-creation opportunity for a few reasons. First, no competing facility within a one-mile radius of Extra Space Storage offers climate-controlled units, second, only 4.78 square-feet per capita of climate-controlled storage supply exists within a three-mile radius of the property, third, self-storage is a permitted use by right under the property’s existing Light Industrial zoning designation, and third, the facility’s climate-controlled physical occupancy rate has hovered in the mid-90 percent range for the past decade or so (approximately 96 percent in October 2024). Built in 1996, and expanded in 2001, the property features a contemporary leasing office, a two-bedroom, one-bath manager’s residence, personalized key-pad gated entries, concrete drives, an asphalt parking surface, 24-hour video surveillance, perimeter fencing and lighting, garage-style doors, and standing seam metal roofs. While these attributes have undoubtedly helped the facility maintain its historical 93 percent physical occupancy rate, more than anything else, its impressive operational history is primarily a byproduct of its infill location – perhaps the most compelling aspect of the acquisition opportunity. To be sure, self-storage development in high barrier-to-entry markets like Carrollton gets more challenging with each passing year (as evidenced by the fact that there aren’t any facilities currently under construction within a three-mile radius of the subject property). This (along with the industry-wide, national consolidation trend) is why most of the facilities offered for sale in Texas within the past 12 – 36 months have been located in the proverbial “path of progress” on the outskirts of their respective markets. Consequently, it’s reasonable to assume a new owner will be insulated from many of the destructive supply-side forces that degrade the legitimacy of most other offerings’ value-creation “opportunities”. Substantiating this notion, consider the following: of the 23 facilities operating within a three-mile radius of Extra Space Storage, September 2024 street rates were, on average, 9.7 percent lower than their historical trailing 12-month averages. Despite this, the facility’s trailing 12-month effective gross rental income through September 2024 was 1.8 percent higher than its 2023 counterpart. The significance of this accomplishment becomes illuminated when the data is contextualized against the backdrop of an extremely unique economic environment between 2021 – 2023 that saw consumers significantly reduce discretionary spending in response to intense inflationary pressure. A number of other metrics validate the legitimacy of the Offering Memorandum’s financial projections as well. For example, between October 2023 and September 2024, the facility’s actual monthly effective gross rental income exceeded the operator’s internal projections by an average of almost 1 percent. During that same period, each month roughly 10 percent of the facility’s tenants successfully absorbed a rate increase. Cumulatively, these rate hikes produced monthly incremental revenue gains in excess of $3,000 on average during that same time. Additionally, although a pricing discount was given to, on average, approximately 20 percent of the monthly move-ins between January 2024 – September 2024, that percentage actually declined by an average monthly rate of -5.5 percent during that period – thus highlighting, by extension, the inelastic nature of consumer demand for self-storage within the facility’s local trade area. While these historical operating metrics undoubtedly lend credibility to the attached financial projections, in recent years the market’s unprecedented population growth has made the Dallas-Fort Worth Metroplex one of the most (if not the most) desirable investment markets in the country. In fact, according to the US Census Bureau, in 2023 DFW experienced the largest population growth of any metropolitan area in the country. In addition, apart from New York City, in 2023 the DFW Metroplex created more jobs than any other metro area. In fact, according to the Bureau of Labor Statistics, 4.5 percent of all new US jobs created from August 2022-2023 were located in the Metroplex, even though it accounts for only 2 percent of the country’s total population. At a purchase price of $19,400,000, a new investor will be taking control of an asset that has a long history of strong financial performance. The list price equates to a “going-in” cap rate of 6 percent, and a pro-forma cash-on-cash yield approaching 8 percent by Year 5 (both of which, as mentioned previously, have not taken into account the property’s expansion potential).