Unlocking Extraordinary Returns With Extra Space
In addition to its diverse operating platform, Extra Space is best known for its innovative marketing initiatives that have allowed the Salt Lake City-based REIT to leverage technology to drive consumers to rent storage space.
With a strategic focus on quality and innovation, Extra Space has produced exceptional operating results, as evidenced by an extraordinary year-over-year total return of 73.73%.
A few days ago I had an opportunity to sit down with Spencer Kirk, the CEO and president, at The Street's New York headquarters. During the interview, Kirk talked about the company's leading results and innovatively successful operating platform.
Thomas: Spencer, first off I want to congratulate you and your team on some exceptional and remarkable results. Starting with your most recent results, Extra Space led the sector in both revenue gains (up 6.7%) and net operating income (up 10.2%). What is driving the performance?
Kirk: One of the strongest factors driving the performance of Extra Space Storage has been our use of technology. Technology is the enabler that is driving the results of well-performing operators and is the bane of other operators who have yet to harness its benefits. The Internet was often hyped up as "the great equalizer," but we've found that it's proven to be "the great divider."
We've realized that we have to identify, embrace and embed technology into every aspect of our business. Extra Space has a team of more than 40 people who focus strictly on e-marketing. We're in a need-driven business, so when our customers are looking for convenient, clean, secure and well-priced storage, they turn to the Internet. And when they turn to the Internet, we'll be their top search result.
Thomas: Remarkably, Extra Space has racked up 26 quarters of average same-store outperformance. What is the secret to the highly sustainable income performance?
Kirk: Extra Space Storage has three distinct advantages that drive our operational outperformance:
Our people: Our senior management team has worked together for more than a decade, so we're well-versed on the company and the industry trends. We also hire exceptional team members at the store level. With each customer having a lifetime value to the company of approximately $1,500, it's vital that we close every deal. We hire and train only the best.
Our properties: We have more properties in the top 20 metro areas than any of our competitors. Because we're in larger markets, we attract customers with higher median household incomes. Our properties in these markets are high-quality and extremely well located.