Life Storage. September 2018 Investor Presentation

Transcription

1 Life Storage September 2018 Investor Presentation

2 SAFE HARBOR STATEMENT FORWARD LOOKING STATEMENTS 2 This presentation may contain forward looking statements as defined in Section 27A of the Securities Act of 1933, and in Section 21E of the Securities Exchange Act of Forward looking statements address matters that are subject to a number of risks and uncertainties. Such factors include, but are not limited to, the effect of competition from new self storage facilities; the Company's ability to evaluate, finance and integrate acquired businesses into the Company's existing operations; the Company s ability to enter new markets where it has little or no operational experience; and other such factors as set forth in the Company's 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission. The Company is under no obligation to update any such forward looking statements.

3 AT A GLANCE 1 LIFE STORAGE 3 Over 700 stores in 28 states More than 400,000 customers 92.4% same store quarter-end occupancy 30+ years in self-storage business 152 properties managed for third party entities Investment Grade Rated Moody s: Baa2 S&P: BBB 5.4x Debt to EBITDA $6.3 Billion enterprise value 89% quarterly dividend increase over past 5 years 276% 10 year total return Notes: (1) Data as of June 30, 2018

4 INVESTMENT HIGHLIGHTS LIFE STORAGE 4 Diversified Portfolio with Increasing Focus on Primary Markets Growth Strategy Driven by Disciplined Capital Allocation Innovative Technology Solutions to Drive Customer Acquisition and Revenue Management Differentiated Corporate Customer Value Proposition Strong Financial Performance, Conservative Balance Sheet and Attractive Valuation

5 DIVERSIFIED PORTFOLIO LIFE STORAGE HAS A COAST TO COAST PRESENCE 5 Life Storage owns and manages properties in 28 states across the United States, and it has a presence in 16 of the top 20 fastest growing markets in the country 1. Its 2016 expansion into the West Coast has enhanced both its demographics and geographic diversity Locations Wholly Owned 98 Joint Venture 54 Managed Major Market Four or few locations Notes: (1) Forbes 2018 Fastest Growing U.S. Cities (2) As of June 30, MM 49.6M 400K + Self Storage Facilities Net Rentable Sq. Ft. Customers

6 DIVERSIFIED PORTFOLIO BIGGER-BETTER-STRONGER 6 Life Storage has grown substantially in recent years, with a particular focus on accessing and building scale in both primary markets as well as secondary markets where the company can leverage scale to drive margin expansion and revenue growth. ($ in '000s, except FFO/Share, Rent/Sq Ft, Median Income) Dec 2015 June 2018 % Inc Stores Owned % Joint Venture % Managed (non-joint Venture) % Total % Top-35 Markets Sq Ft (owned) 55% 63% 14.8% Climate Controlled Sq Ft (owned) 43% 46% 8.5% Demographics 3-Mile Pop Density 78,742 91, % 3-Mile Med HH Income $ 69,517 $ 71, % Financial Avg SS Rent per Square Foot $ (1) $ (2) 9.7% Avg SS Rev per Store (Annualized) $ 808 (1) $ 948 (2) 17.3% Store Revenue $ 360,766 (3) $ 529,941 (4) 46.9% Management Fees $ 5,836 (3) $ 9,807 (4) 68.0% Adj. FFO per Share $ 4.94 (3) $ 5.42 (4) 9.6% Credit Rating BBB-/Baa3 (5) BBB/Baa2 +1 grade Increased scale by >30% Added three primary markets (Los Angeles, Sacramento and Las Vegas) Enhanced store quality Improved demographic profile Increased store operating performance Strengthened corporate financial performance Notes: (1) Data for 4Q15 (4) Data for last twelve months as of June 30, 2018 (2) Data for 2Q18 (5) Prior to 12/1/15 (3) Data for last twelve months as of Dec 31, 2015

7 GROWTH STRATEGY EMBEDDED GROWTH DRIVERS 7 Improved Portfolio NOI and NAV Acquisitions Expansions Third Party Management Joint Ventures Lease-Up Stores One hundred twenty properties from the LifeStorage acquisition and others have experienced an on-boarding benefit from the Company s platforms Three new, dense markets (Los Angeles, Las Vegas, Sacramento) are outperforming core portfolio Significant operating margin gains from platform and scale efficiencies Ongoing success with expanding and enhancing stores in existing portfolio Adding 10-20K sq ft of premium space to successful stores Reduces effective age Competitively repositions properties The Life Storage brand has accelerated the Company s momentum in its third-party management business Increases market share and scales cost sharing opportunities Adds property and management fee income Enhances acquisition pipeline More than 20-year track record of sponsoring and operating jointly owned partnerships Increases market share and scales cost sharing opportunities Adds property and management fee income Enhances acquisition pipeline Preferred alternative to recapitalize non-strategic assets Three stabilized certificate of occupancy ( CofO ) properties were added to the Company s same store pool in 2018 Twenty CofO and other lease-up properties will provide out-sized NOI growth as they move to stabilization

8 GROWTH STRATEGY ACQUISITION PROPERTIES 8 The merits of Life Storage s acquisition strategy and implementation of its business model (e.g., revenue management; marketing; customer care center; store platforms) on acquired properties are evident in the performance of the 102 stores acquired in July 2016 and added to the Same Store pool in Both revenue and NOI growth have accelerated year-over-year in each of the past three quarters. Strength exists in both new markets (e.g., Los Angeles; Sacramento; Las Vegas) and markets where Life Storage expanded its presence to leverage existing scale (e.g., Boston-Cambridge; Orlando). 10.0% Y/Y Revenue Growth 10.0% Y/Y NOI Growth 7.5% 7.5% 5.0% 5.0% 2.5% 2.5% 0.0% 4Q17 1Q18 2Q18 0.0% 4Q17 1Q18 2Q18 Acquired Stores Other Stores Acquired Stores Other Stores Data Rates Specials In-Place Increases Progressive Platforms

9 GROWTH STRATEGY EXPANSION PROPERTIES 9 $50.0 Investment (In $millions) 350 Premium Sq Ft. Added* (in thousands) $5.0 Incremental NOI at Stabilization (in $millions) $45.0 $4.5 $ $4.0 $35.0 $3.5 $ $3.0 $25.0 $2.5 $ ** ** $ ** 2017** 2018** * NRSF = total NRSF after expansion less NRSF removed ** Projected Weighing demand indicators & revenue potential, the Company redevelops properties to add premium space types. Fifteen such projects were completed in 2017, and the Company anticipates approximately10-20 projects per year in 2018 & With an 8%+ yield, these low risk investments in existing properties also upgrade the appearance and customer experience at these stores.

10 GROWTH DRIVERS THIRD-PARTY MANAGEMENT 10 Since rebranding to Life Storage, the Company s third-party management revenues have grown substantially. By year-end, Life Storage expects more than 50% of its managed portfolio to be with properties whereby the Company holds no ownership interest, an approximately 100% increase in just two years. # of Stores Management Fee Income +20% CAGR Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018* Third-Parties (no ownership) Joint Ventures $ Fees $12 $10 $8 $6 $4 $2 $0 Fee Income ($ in MM) * 2018 estimate

11 GROWTH STRATEGY JOINT VENTURES 11 Relationships with joint venture partners allow Life Storage to grow its national footprint, leverage existing resources, and generate additional fee income with limited capital commitment. Joint venture FFO per Share contribution has grown from roughly $0.04 per share in 2010 to an estimated $0.16 per share in Pro-Rata Share of Joint Venture FFO (in $millions) Joint Venture Management Fee Income (in $millions) $9.0 $8.0 $8.0 $7.0 $7.0 $6.0 $6.0 $5.0 $5.0 $4.0 $4.0 $3.0 $3.0 $2.0 $2.0 $1.0 $1.0 $ * $ * *Estimate based on 1H annualized

12 GROWTH STRATEGY LEASE-UP PROPERTIES 12 The Company does not develop new properties, but occasionally purchases newly built properties or properties in the early stages of lease-up. Twenty-two of these lease-up facilities have not yet made their full impact on NOI. In 2018 and over the next few years, these properties will have an outsized contribution to NOI. $19.1M Estimated Stabilized NOI* Incremental NOI Impact per Share** Market Number of Stores Cost Net Rentable Sq. Ft. Occupancy 12/31/18 NOI*** Chicago, IL 9 $ 123, , % $ 5,880 Austin, TX 2 12, , % 1,040 Dallas, TX 2 21, , % (20) Phoenix, AZ 2 17, , % 1,448 Boston, MA 1 10,291 63, % 492 Boulder, CO 1 8,373 44, % 292 Charleston, SC 1 8,620 70, % 160 Los Angeles, CA 1 18,600 79, % 828 Miami, FL 1 11,274 69, % 768 San Marcos, TX 1 8,353 59, % 296 Charlotte, NC 1 12,425 70, % (48) 22 $ 252,448 1,569, % 11,136 * NOI at 85% occupied at stable market rates ** Based on the difference between estimated NOI and current NOI, and assuming 46,576,352 diluted shares. *** Q NOI annualized

13 INNOVATIVE TECHNOLOGY RENT NOW SELF SERVICE RENTAL OPTION 13 In today s market, many customers prefer to self-serve and bypass the traditional sales process at the counter. Life Storage recognizes that self storage is no different. Rent Now allows customers to skip the counter by electronically selecting a storage space, completing the rental agreement and making their payment online via their computer or mobile device. The customer then receives a property access code and step-by-step directions to their specific rental space. Key Attributes: Fully digital transaction process for those who wish to rent a space without call center or store manager engagement. Process is fully integrated with the Company s operating, security and revenue management systems, allowing for real-time, fully automated and accurate inventory and sales management. Early adoption and customer commitment is strong; initial results exceeded expectations. Expect all stores will be fully functional by early-2019.

14 INNOVATIVE TECHNOLOGY / CORPORATE VALUE PROP WAREHOUSE ANYWHERE 14 Corporate and small business customers are an important segment to Life Storage. The Company created a network of more than 10,000 Life Storage and partner facilities across the country to fulfill its business customers nationwide storage needs. Warehouse Anywhere, a subsidiary of Life Storage, launched an intelligent warehouse solution to help solve the final mile delivery challenge of its corporate customers. Warehouse Anywhere provides third-party logistics (3PL) and warehousing services through a forward deployed, unmanned, de-centralized model combining storage asset management with proprietary inventory tracking technology. Key Attributes: Corporate value proposition: As a final mile solution, Warehouse Anywhere places products closer to customers, reduces logistics costs, increases inventory tracking accuracy and improves delivery time. Technology solution successfully deployed in several industries, including retail, service and repair, and healthcare. Differentiated fee-based revenue model with technology implementation and ancillary services (e.g., courier). Customer Storage Spaces 12,500 10,000 7,500 5,000 2,500 0 Dec 2016 Dec 2017 June Storage Spaces Spaces with Technology

15 FINANCIAL STRENGTH GROWING VALUE 15 Life Storage is well positioned to continue cash flow and dividend growth, supported by multiple revenue drivers, a favorable payout ratio, and a solid balance sheet. Robust FFO* Per Share Growth Strong Dividend Growth $6.00 $4.50 $4.00 $5.00 $3.50 $4.00 $3.00 $2.50 $3.00 $2.00 $1.50 $ ** $ *** *** Payout Ratio 73.5% 65.5% 54.9% 52.7% 62.2% 64.8% 71.3% 74.4% 73.4% *As adjusted **Midpoint of guidance ***Projected

16 FINANCIAL STRENGTH WELL POSITIONED BALANCE SHEET 16 Solid, unsecured balance sheet with no debt maturities until December 2019, a 7.3 year weighted average debt tenor, and a virtually 100% unencumbered asset base. $600 Debt Maturity Schedule (in $millions) $ in Millions $500 $400 $300 $200 Line Bank Term Notes Institutions Mortgage $100 Public Bond $

17 FINANCIAL STRENGTH CONSERVATIVE FINANCIAL RATIOS 17 Life Storage s conservative Financial Ratios provide flexibility and a favorable outlook. 6 X Debt Service Coverage 5 X 4 X 3 X 5.4x Debt/EBITDA 4.8x Debt Service Coverage 39% Debt to Gross Assets 2 X Q Debt to Gross Assets Senior Unsecured Note Covenants Required Actual Senior Unsecured Note Covenants* Required Actual 40% Total Consolidated Debt to Total Assets 60% 38.8% Total Secured Debt to Total Assets 40% 0.3% 30% Total Unencumbered Assets to Total Unsecured Debt 150% 250.0% Consolidated Income Available for Debt Service to Total Annual Debt Service Charge 1:5 : 1 4:7 : 1 20% Q *Covenants further defined in the Company s Base indenture as of June 20, 2016

18 ATTRACTIVE VALUATION OUTPERFORMING CURRENT VALUATION 18 Comparatively, important metrics are imbalanced despite the Company's position and performance. The Company is well-positioned financially and has a positive outlook, but is trading at a value price & 2019 FFO Multiple 2018 & 2019 EBITDA Multiple 24X 24 X 20X 20 X 16X 16 X 12X 12 X 8X 8 X 4X 4 X 0X CUBE EXR NSA PSA LSI 0 X CUBE EXR NSA PSA LSI 2018 FFO Multiple 2019 FFO Multiple 2018 EBITDA Multiple 17 FFO Multiple 2018 EBITDA Multiple 2017 EBITDA Multiple 2019 EBITDA Multiple 2018 EBITDA Multiple 5% Dividend Yield 7% Implied Cap Rate 4% 6% 5% 3% 4% 3% 2% CUBE EXR NSA PSA LSI 2% CUBE EXR NSA PSA LSI Sources: FactSet, Wall Street Estimates Priced as of

19 ATTRACTIVE VALUATION 20 YEAR TOTAL RETURN 1 19 LSI ranked 14 th of 81 REITs over last 20 years Indices REIT Index 646% S&P % Dow 426% Life Storage 1,333% Notes: (1) KeyBanc Capital Markets, The Leaderboard, September 14, 2018

20 INVESTMENT HIGHLIGHTS LIFE STORAGE 20 Diversified Portfolio with Increasing Focus on Primary Markets Growth Strategy Driven by Disciplined Capital Allocation Innovative Technology Solutions to Drive Customer Acquisition and Revenue Management Differentiated Corporate Customer Value Proposition Strong Financial Performance, Conservative Balance Sheet and Attractive Valuation