LIFE STORAGE, INC. [LSI] Filings

10-Q 1 lsi-20220930.htm 10-Q 10-Q

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 September 30, 2022


☐	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 October 28, 2022, 84,997,556 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 September 30, 2022 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 98.0% ownership interest therein as of September 30, 2022, assuming the conversion of all preferred operating partnership units at that date. 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)	September 30, 2022 (unaudited)			December 31, 2021
Assets
Investment in storage facilities:
Land	$	1,293,597		$	1,185,976
Building, equipment, and construction in progress		6,708,246			5,904,481
		8,001,843			7,090,457
Less: accumulated depreciation		(1,128,083	)		(1,007,650	)
Investment in storage facilities, net		6,873,760			6,082,807
Cash and cash equivalents		22,498			171,865
Accounts receivable		22,829			17,784
Receivable from unconsolidated joint ventures		1,087			333
Investment in unconsolidated joint ventures		254,728			213,003
Prepaid expenses		13,042			9,918
Trade name		16,500			16,500
Other assets		43,957			44,387
Total Assets	$	7,248,401		$	6,556,597
Liabilities
Line of credit	$	456,000		$	—
Term notes, net		2,750,683			2,747,838
Accounts payable and accrued liabilities		153,575			131,778
Deferred revenue		33,646			27,277
Mortgages payable		36,454			37,030
Total Liabilities		3,430,358			2,943,923
Noncontrolling redeemable Preferred Operating Partnership Units at redemption value		89,077			90,783
Noncontrolling redeemable Common Operating Partnership Units at redemption value		116,190			142,892
Shareholders’ Equity
Common stock $.01 par value, 200,000,000 shares authorized, 84,995,100 shares outstanding at September 30, 2022 (83,565,710 at December 31, 2021)		850			836
Additional paid-in capital		3,883,047			3,697,000
Dividends in excess of net income		(272,608	)		(314,713	)
Accumulated other comprehensive loss		(3,437	)		(4,124	)
Total Shareholders’ Equity		3,607,852			3,378,999
Noncontrolling interest in consolidated subsidiary		4,924			—
Total Equity		3,612,776			3,378,999
Total Liabilities and Equity	$	7,248,401		$	6,556,597

See notes to consolidated financial statements.

LIFE STORAGE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands, except per share data)	2022			2021			2022			2021
Revenues
Rental income	$	241,261		$	182,937		$	674,008		$	496,316
Tenant reinsurance		19,042			15,485			54,567			41,810
Other operating income		12,651			9,834			34,914			29,280
Total operating revenues		272,954			208,256			763,489			567,406
Expenses
Property operations and maintenance		47,906			36,410			132,733			103,519
Tenant reinsurance		9,033			6,228			22,361			16,434
Real estate taxes		25,702			21,397			75,581			61,794
General and administrative		18,493			16,141			52,995			45,407
Depreciation and amortization		48,711			37,158			143,187			106,287
Total operating expenses		149,845			117,334			426,857			333,441
Gain on sale of non-real estate assets		2,841			—			4,806			—
Income from operations		125,950			90,922			341,438			233,965
Other income (expenses)
Interest expense		(28,010	)		(21,350	)		(77,755	)		(62,470	)
Interest and dividend income		5			2			24			787
Equity in income of joint ventures		2,799			1,477			6,832			4,126
Net income		100,744			71,051			270,539			176,408
Net income attributable to noncontrolling preferred interests in the Operating Partnership		(999	)		(476	)		(3,002	)		(476	)
Net income attributable to noncontrolling common interests in the Operating Partnership		(1,231	)		(301	)		(3,184	)		(760	)
Net income attributable to noncontrolling interests in consolidated subsidiary		(9	)		—			(9	)		—
Net income attributable to common shareholders	$	98,505		$	70,274		$	264,344		$	175,172
Earnings per common share attributable to common shareholders – basic	$	1.16		$	0.89		$	3.14		$	2.27
Earnings per common share attributable to common shareholders – diluted	$	1.16		$	0.89		$	3.14		$	2.27
Common shares used in basic earnings per share calculation		84,472,979			78,961,434			84,129,261			77,135,429
Common shares used in diluted earnings per share calculation		85,396,539			79,179,816			84,554,165			77,303,339
Dividends declared per common share	$	1.08		$	0.74		$	3.08		$	2.22

See notes to consolidated financial statements.

LIFE STORAGE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2022			2021			2022			2021
Net income	$	100,744		$	71,051		$	270,539		$	176,408
Other comprehensive income:
Effective portion of gain on derivatives net of reclassification to interest expense		229			229			687			687
Total comprehensive income		100,973			71,280			271,226			177,095
Comprehensive income attributable to noncontrolling interests in the Operating Partnership		(2,242	)		(778	)		(6,203	)		(1,239	)
Comprehensive income attributable to common shareholders	$	98,731		$	70,502		$	265,023		$	175,856

See notes to consolidated financial statements.

LIFE STORAGE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


(dollars in thousands)	Nine Months Ended September 30, 2022			Nine Months Ended September 30, 2021
Operating Activities
Net income	$	270,539		$	176,408
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		143,187			106,287
Amortization of debt issuance costs and bond discount		4,187			3,185
Equity in income of joint ventures		(6,832	)		(4,126	)
Distributions from unconsolidated joint ventures		12,710			10,359
Non-vested stock earned		5,226			4,603
Deferred income taxes		18			(43	)
Other		(4,999	)		(236	)
Changes in assets and liabilities (excluding the effects of acquisitions):
Accounts receivable		(5,007	)		(271	)
Prepaid expenses		(3,272	)		(3,562	)
(Advances to) receipts from joint ventures		(753	)		475
Accounts payable and other liabilities		22,488			10,402
Deferred revenue		3,906			4,614
Net cash provided by operating activities		441,398			308,095
Investing Activities
Acquisition of storage facilities, net of cash acquired		(811,622	)		(773,859	)
Improvements, equipment additions, and construction in progress		(66,013	)		(54,310	)
Proceeds from sale of non-real estate assets		6,250			—
Return of investment in unconsolidated joint ventures		—			36,911
Investment in unconsolidated joint ventures		(77,755	)		(57,397	)
Property deposits		(2,220	)		(11,914	)
Net cash used in investing activities		(951,360	)		(860,569	)
Financing Activities
Net proceeds from sale of common stock		181,028			807,185
Proceeds from line of credit		1,017,000			459,000
Repayments of line of credit		(561,000	)		(459,000	)
Debt issuance costs		(5,994	)		(88	)
Dividends paid - common stock		(259,135	)		(170,666	)
Distributions to noncontrolling interest holders		(6,065	)		(740	)
Redemption of operating partnership units		(3,823	)		(256	)
Mortgage principal payments		(383	)		(364	)
Net cash provided by financing activities		361,628			635,071
Net (decrease) increase in cash and restricted cash		(148,334	)		82,597
Cash and restricted cash at beginning of period		176,434			58,771
Cash and restricted cash at end of period	$	28,100		$	141,368
Supplemental cash flow information
Cash paid for interest, net of interest capitalized	$	66,173		$	56,359
Cash paid for income taxes, net of refunds	$	2,526		$	940

See notes to consolidated financial statements.

LIFE STORAGE LP

CONSOLIDATED BALANCE SHEETS


(dollars in thousands)	September 30, 2022 (unaudited)	December 31, 2021
Assets

LIFE STORAGE, INC. [LSI] Filings
10-Q	[2022-11-03]
10-Q	[2022-08-04]
10-Q	[2022-05-05]
10-K	[2022-02-25]
10-Q	[2021-11-03]
10-Q	[2021-08-04]
10-Q	[2021-05-05]
10-K	[2021-02-23]
10-Q	[2020-11-06]
10-Q	[2020-08-07]
10-Q	[2020-05-08]
10-K	[2020-02-25]
10-Q	[2019-10-31]
10-Q	[2019-08-01]
10-Q	[2019-05-02]
10-K	[2019-02-26]
10-Q	[2018-11-01]
10-Q	[2018-08-02]
10-Q	[2018-05-03]
10-K	[2018-02-27]
10-Q	[2017-11-03]
10-Q	[2017-08-04]
10-Q	[2017-05-04]
10-K	[2017-02-27]
10-Q	[2016-11-04]
10-Q	[2016-08-05]
10-Q	[2016-05-04]
10-K	[2016-02-25]
10-Q	[2015-11-04]
10-Q	[2015-08-04]
10-Q	[2015-05-04]
10-K	[2015-02-24]
10-Q	[2014-11-04]
10-Q	[2014-08-05]
10-Q	[2014-05-06]
10-K	[2014-02-27]
10-Q	[2013-11-06]
10-Q	[2013-08-07]
10-Q	[2013-05-08]
10-K	[2013-02-27]
10-Q	[2012-11-06]
10-Q	[2012-08-07]
10-Q	[2012-05-08]
10-K	[2012-02-28]