Life Storage Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

lsi-10q_20200630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2020

☐	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:

1-13820 (Life Storage, Inc.)

0-24071 (Life Storage LP)

LIFE STORAGE, INC.

LIFE STORAGE LP

(Exact name of Registrant as specified in its charter)

Maryland (Life Storage, Inc.)	16-1194043 (Life Storage, Inc.)
Delaware (Life Storage LP)	16-1481551 (Life Storage LP)
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

6467 Main Street

Williamsville, NY 14221

(Address of principal executive offices) (Zip code)

(716) 633-1850

(Registrant’s telephone number including area code)

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.

Life Storage, Inc.	Yes ☒	No ☐

Life Storage LP	Yes ☒	No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Life Storage, Inc.	Yes ☒	No ☐
Life Storage LP	Yes ☒	No ☐

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

Life Storage, Inc.:

Large Accelerated Filer	☒	Accelerated Filer	☐

Non-accelerated Filer	☐	Smaller Reporting Company	☐

Emerging Growth Company	☐

Life Storage LP:

Large Accelerated Filer	☐	Accelerated Filer	☐

Non-accelerated Filer	☒	Smaller Reporting Company	☐

Emerging Growth Company	☐

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.

Life Storage, Inc.	☐

Life Storage LP	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Life Storage, Inc.	Yes ☐	No ☒

Life Storage LP	Yes ☐	No ☒

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

Life Storage, Inc.:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $.01 par value		LSI		New York Stock Exchange

Life Storage LP:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered

As of August 3, 2020, 46,918,445 shares of Common Stock, $.01 par value per share, were outstanding.

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended June 30, 2020 of Life Storage, Inc. (the “Parent Company”) and Life Storage LP (the “Operating Partnership”). The Parent Company is a real estate investment trust, or REIT, that owns its assets and conducts its operations through the Operating Partnership, a Delaware limited partnership, and subsidiaries of the Operating Partnership. The Parent Company, the Operating Partnership and their consolidated subsidiaries are collectively referred to in this report as the “Company.” In addition, terms such as “we,” “us,” or “our” used in this report may refer to the Company, the Parent Company and/or the Operating Partnership.

Life Storage Holdings, Inc., a wholly-owned subsidiary of the Parent Company (“Holdings”), is the sole general partner of the Operating Partnership; the Parent Company is a limited partner of the Operating Partnership, and through its ownership of Holdings and its limited partnership interest, controls the operations of the Operating Partnership, holding a 99.5% ownership interest therein as of June 30, 2020. The remaining ownership interests in the Operating Partnership are held by certain former owners of assets acquired by the Operating Partnership. As the owner of the sole general partner of the Operating Partnership, the Parent Company has full and complete authority over the Operating Partnership’s day-to-day operations and management.

Management operates the Parent Company and the Operating Partnership as one enterprise. The management teams of the Parent Company and the Operating Partnership are identical.

There are few differences between the Parent Company and the Operating Partnership, which are reflected in the note disclosures in this report. The Company believes it is important to understand the differences between the Parent Company and the Operating Partnership in the context of how these entities operate as a consolidated enterprise. The Parent Company is a REIT, whose only material asset is its ownership of the partnership interests of the Operating Partnership. As a result, the Parent Company does not conduct business itself, other than acting as the owner of the sole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing the debt obligations of the Operating Partnership. The Operating Partnership holds substantially all the assets of the Company and, directly or indirectly, holds the ownership interests in the Company’s real estate ventures. The Operating Partnership conducts the operations of the Company’s business and is structured as a partnership with no publicly traded equity. Except for net proceeds from equity issuances by the Parent Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations, by the Operating Partnership’s direct or indirect incurrence of indebtedness or through the issuance of partnership units of the Operating Partnership.

The substantive difference between the Parent Company’s filings and the Operating Partnership’s filings is the fact that the Parent Company is a REIT with public equity, while the Operating Partnership is a partnership with no publicly traded equity. In the financial statements, this difference is primarily reflected in the equity (or capital for the Operating Partnership) section of the consolidated balance sheets and in the Shareholders’ Equity and Partners’ Capital notes to the financial statements. Apart from the different equity treatment, the consolidated financial statements of the Parent Company and the Operating Partnership are nearly identical.

The Company believes that combining the quarterly reports on Form 10-Q of the Parent Company and the Operating Partnership into a single report will:

•

facilitate a better understanding by the investors of the Parent Company and the Operating Partnership by enabling them to view the business as a whole in the same manner as management views and operates the business;

•

remove duplicative disclosures and provide a more straightforward presentation in light of the fact that a substantial portion of the disclosure applies to both the Parent Company and the Operating Partnership; and

•

create time and cost efficiencies through the preparation of one combined report instead of two separate reports.

In order to highlight the differences between the Parent Company and the Operating Partnership, the separate sections in this report for the Parent Company and the Operating Partnership specifically refer to the Parent Company and the Operating Partnership. In the sections that combine disclosures of the Parent Company and the Operating Partnership, this report refers to such disclosures as those of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and real estate ventures and holds assets and debt, reference to the Company is appropriate because the business is one enterprise and the Parent Company operates the business through the Operating Partnership.

As the owner of the general partner with control of the Operating Partnership, the Parent Company consolidates the Operating Partnership for financial reporting purposes, and the Parent Company does not have significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities of the Parent Company and the Operating Partnership are the same on their respective financial statements. The separate discussions of the Parent Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company’s operations on a consolidated basis and how management operates the Company.

This report also includes separate Item 4 - Controls and Procedures sections, signature pages and Exhibit 31 and 32 certifications for each of the Parent Company and the Operating Partnership in order to establish that the Chief Executive Officer and the Chief Financial Officer of the Parent Company and the Chief Executive Officer and the Chief Financial Officer of the Operating Partnership have made the requisite certifications and that the Parent Company and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended and 18 U.S.C. §1350.

Part I. Financial Information

Item 1. Financial Statements

LIFE STORAGE, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)	June 30, 2020 (unaudited)			December 31, 2019
Assets
Investment in storage facilities:
Land	$	904,475		$	884,235
Building, equipment, and construction in progress		3,993,901			3,865,238
		4,898,376			4,749,473
Less: accumulated depreciation		(810,709	)		(756,333	)
Investment in storage facilities, net		4,087,667			3,993,140
Cash and cash equivalents		9,518			17,458
Accounts receivable		11,575			12,218
Receivable from unconsolidated joint ventures		797			1,302
Investment in unconsolidated joint ventures		147,749			154,984
Prepaid expenses		9,761			7,771
Trade name		16,500			16,500
Other assets		27,697			29,591
Total Assets	$	4,311,264		$	4,232,964
Liabilities
Line of credit	$	158,000		$	65,000
Term notes, net		1,859,539			1,858,271
Accounts payable and accrued liabilities		89,124			103,942
Deferred revenue		14,433			11,699
Mortgages payable		34,519			34,851
Total Liabilities		2,155,615			2,073,763
Noncontrolling redeemable Operating Partnership Units at redemption value		22,968			26,307
Shareholders’ Equity
Common stock $.01 par value, 100,000,000 shares authorized, 46,918,445 shares outstanding at June 30, 2020 (46,675,933 at December 31, 2019)		469			467
Additional paid-in capital		2,400,382			2,376,723
Dividends in excess of net income		(262,670	)		(238,338	)
Accumulated other comprehensive loss		(5,500	)		(5,958	)
Total Shareholders’ Equity		2,132,681			2,132,894
Noncontrolling interest in consolidated subsidiary		—			—
Total Equity		2,132,681			2,132,894
Total Liabilities and Shareholders’ Equity	$	4,311,264		$	4,232,964

See notes to consolidated financial statements.

LIFE STORAGE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in thousands, except per share data)	2020			2019			2020			2019
Revenues
Rental income	$	128,828		$	128,913		$	257,736		$	253,060
Other operating income		18,185			16,115			36,220			28,492
Total operating revenues		147,013			145,028			293,956			281,552
Expenses
Property operations and maintenance		32,247			33,433			65,097			64,594
Real estate taxes		17,614			16,219			35,022			32,311
General and administrative		12,223			10,510			25,129			22,847
Payments for rent		—			141			—			283
Depreciation and amortization		28,987			26,158			57,317			52,387
Total operating expenses		91,071			86,461			182,565			172,422
Gain on sale of real estate		—			—			302			1,076
Income from operations		55,942			58,567			111,693			110,206
Other income (expenses)
Interest expense		(20,266	)		(18,759	)		(40,513	)		(36,578	)
Interest income		2			46			7			51
Equity in income of joint ventures		970			1,110			2,086			1,921
Net income		36,648			40,964			73,273			75,600
Net income attributable to noncontrolling interest in the Operating Partnership		(191	)		(222	)		(383	)		(404	)
Net loss attributable to noncontrolling interest in consolidated subsidiary		—			—			—			—
Net income attributable to common shareholders	$	36,457		$	40,742		$	72,890		$	75,196
Earnings per common share attributable to common shareholders – basic	$	0.78		$	0.87		$	1.56		$	1.61
Earnings per common share attributable to common shareholders – diluted	$	0.78		$	0.87		$	1.56		$	1.61
Common shares used in basic earnings per share calculation		46,844,888			46,582,235			46,761,063			46,573,541
Common shares used in diluted earnings per share calculation		46,906,138			46,631,214			46,828,517			46,633,957
Dividends declared per common share	$	1.07		$	1.00		$	2.14		$	2.00

See notes to consolidated financial statements.

LIFE STORAGE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in thousands)	2020			2019			2020			2019
Net income	$	36,648		$	40,964		$	73,273		$	75,600
Other comprehensive income:
Effective portion of gain on derivatives net of reclassification to interest expense		229			229			458			458
Total comprehensive income		36,877			41,193			73,731			76,058
Comprehensive income attributable to noncontrolling interest in the Operating Partnership		(192	)		(223	)		(385	)		(407	)
Comprehensive loss attributable to noncontrolling interest in consolidated subsidiary		—			—			—			—
Comprehensive income attributable to common shareholders	$	36,685		$	40,970		$	73,346		$	75,651

See notes to consolidated financial statements.

LIFE STORAGE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)	Six Months Ended June 30, 2020			Six Months Ended June 30, 2019
Operating Activities
Net income	$	73,273		$	75,600
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		57,317			52,387
Amortization of debt issuance costs and bond discount		2,025			1,846
Gain on sale of real estate		(302	)		(1,076	)
Equity in income of joint ventures		(2,086	)		(1,921	)
Distributions from unconsolidated joint ventures		6,086			4,865
Non-vested stock earned		2,273			2,235
Deferred income taxes		1,126			204
Other		(116	)		—
Changes in assets and liabilities (excluding the effects of acquisitions):
Accounts receivable		683			(1,900	)
Prepaid expenses		(2,286	)		(1,941	)
Receipts from (advances to) joint ventures		172			(35	)
Accounts payable and other liabilities		(14,576	)		(11,270	)
Deferred revenue		2,329			(65	)
Net cash provided by operating activities		125,918			118,929
Investing Activities
Acquisition of storage facilities, net of cash acquired		(124,204	)		(95,819	)
Improvements, equipment additions, and construction in progress		(26,103	)		(37,683	)
Return of investment in unconsolidated joint ventures		8,359			—
Investment in unconsolidated joint ventures		(4,953	)		(2,215	)
Property deposits		171			(6,658	)
Net cash used in investing activities		(146,730	)		(142,375	)
Financing Activities
Net proceeds from sale of common stock		21,388			—
Proceeds from line of credit		225,000			183,000
Repayments of line of credit		(132,000	)		(274,000	)
Proceeds from term notes, net of discount		—			348,166
Repayment of term notes		—			(100,000	)
Debt issuance costs		—			(3,099	)
Dividends paid - common stock		(100,155	)		(93,263	)
Distributions to noncontrolling interest holders		(524	)		(497	)
Redemption of Operating Partnership Units		(265	)		(48	)
Mortgage principal payments		(203	)		(195	)
Net cash provided by financing activities		13,241			60,064
Net (decrease) increase in cash and restricted cash		(7,571	)		36,618
Cash and restricted cash at beginning of period		21,556			14,065
Cash and restricted cash at end of period	$	13,985		$	50,683
Supplemental cash flow information
Cash paid for interest, net of interest capitalized	$	39,577		$	34,782
Cash paid for income taxes, net of refunds	$	1,019		$	1,283

See notes to consolidated financial statements.

LIFE STORAGE LP

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)	June 30, 2020 (unaudited)			December 31, 2019
Assets
Investment in storage facilities:
Land	$	904,475		$	884,235
Building, equipment, and construction in progress		3,993,901			3,865,238
		4,898,376			4,749,473
Less: accumulated depreciation		(810,709	)		(756,333	)
Investment in storage facilities, net		4,087,667			3,993,140
Cash and cash equivalents		9,518			17,458
Accounts receivable		11,575			12,218
Receivable from unconsolidated joint ventures		797			1,302
Investment in unconsolidated joint ventures		147,749			154,984
Prepaid expenses		9,761			7,771
Trade name		16,500			16,500
Other assets		27,697			29,591
Total Assets	$	4,311,264		$

Price	96.86	EPS	7
Shares	47	P/E	15
MCap	4,519	P/FCF	23
Net Debt	1,914	EBIT	367
TEV	6,433	TEV/EBIT	18
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-08-10
10-Q	2020-03-31	Filed 2020-05-08
10-K	2019-12-31	Filed 2020-02-25
10-Q	2019-09-30	Filed 2019-10-31
10-Q	2019-06-30	Filed 2019-08-01
10-Q	2019-03-31	Filed 2019-05-02
10-K	2018-12-31	Filed 2019-02-26
10-Q	2018-09-30	Filed 2018-11-01
10-Q	2018-06-30	Filed 2018-08-02
10-Q	2018-03-31	Filed 2018-05-03
10-K	2017-12-31	Filed 2018-02-27
10-Q	2017-09-30	Filed 2017-11-03
10-Q	2017-06-30	Filed 2017-08-04
10-Q	2017-03-31	Filed 2017-05-04
10-K	2016-12-31	Filed 2017-02-27
10-Q	2016-09-30	Filed 2016-11-04
10-Q	2016-06-30	Filed 2016-08-05
10-Q	2016-03-31	Filed 2016-05-04
10-K	2015-12-31	Filed 2016-02-25
10-Q	2015-09-30	Filed 2015-11-04
10-Q	2015-06-30	Filed 2015-08-04
10-Q	2015-03-31	Filed 2015-05-04
10-K	2014-12-31	Filed 2015-02-24
10-Q	2014-09-30	Filed 2014-11-04
10-Q	2014-06-30	Filed 2014-08-05
10-Q	2014-03-31	Filed 2014-05-06
10-K	2013-12-31	Filed 2014-02-27
10-Q	2013-09-30	Filed 2013-11-06
10-Q	2013-06-30	Filed 2013-08-07
10-Q	2013-03-31	Filed 2013-05-08
10-K	2012-12-31	Filed 2013-02-27
10-Q	2012-09-30	Filed 2012-11-06
10-Q	2012-06-30	Filed 2012-08-07
10-Q	2012-03-31	Filed 2012-05-08
10-K	2011-12-31	Filed 2012-02-28
10-Q	2011-09-30	Filed 2011-11-04
10-Q	2011-06-30	Filed 2011-08-08
10-Q	2011-03-31	Filed 2011-05-06
10-K	2010-12-31	Filed 2011-02-25
10-Q	2010-09-30	Filed 2010-11-05
10-Q	2010-06-30	Filed 2010-08-06
10-Q	2010-03-31	Filed 2010-05-07
10-K	2009-12-31	Filed 2010-02-26

8-K	2020-09-09	Other Events
8-K	2020-09-09	Enter Agreement, Exhibits
8-K	2020-08-06	Earnings, Exhibits
8-K	2020-06-02
8-K	2020-05-28
8-K	2020-05-07
8-K	2020-02-19
8-K	2019-12-19
8-K	2019-11-26
8-K	2019-10-30
8-K	2019-07-31
8-K	2019-06-03
8-K	2019-05-30
8-K	2019-05-22
8-K	2019-05-01
8-K	2019-03-14
8-K	2019-03-01
8-K	2019-02-25
8-K	2018-12-31
8-K	2018-12-18
8-K	2018-10-31
8-K	2018-09-12
8-K	2018-08-01
8-K	2018-06-14
8-K	2018-05-31
8-K	2018-05-07
8-K	2018-05-02
8-K	2018-03-17
8-K	2018-02-21
8-K	2017-12-29

EX-31.1	lsi-ex311_10.htm
EX-31.2	lsi-ex312_8.htm
EX-31.3	lsi-ex313_6.htm
EX-31.4	lsi-ex314_9.htm
EX-32	lsi-ex32_11.htm
EX-32.1	lsi-ex321_7.htm

LSI 10Q Quarterly Report

Life Storage Earnings 2020-06-30