Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. We make statements in this section that are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section in this Form 10-K entitled “Statements Regarding Forward-Looking Information.” Certain risk factors may cause actual results, performance or achievements to differ materially from those expressed or implied by the following discussion. For a discussion of such risk factors, see the section in this Form 10-K entitled “Risk Factors.” Dollar amounts are in thousands, except share and per share data, unless otherwise stated.
OVERVIEW
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We are a fully integrated, self-administered and self-managed REIT that owns, operates, manages, acquires, develops and redevelops self-storage properties (“stores”) and provides lending to owners of stores located throughout the United States. We derive substantially all of our revenues from our two segments: self-storage operations and tenant reinsurance. Primary sources of revenue for our self-storage operations segment include rents received from tenants under leases at stores that are wholly-owned and in consolidated joint ventures. Our operating results depend materially on our ability to lease available self-storage units, to actively manage unit rental rates, and on the ability of our tenants to make required rental payments. Consequently, management spends a significant portion of their time maximizing cash flows from our diverse portfolio of stores. Revenue from our tenant reinsurance segment consists of insurance revenues from the reinsurance of risks relating to the loss of goods stored by tenants in our stores.
Our stores are generally situated in highly visible locations clustered around population centers. The clustering of our assets around these population centers enables us to reduce our operating costs through economies of scale. To maximize the performance of our stores, we employ industry-leading revenue management systems. Developed by our management team, these systems enable us to analyze, set and adjust rental rates daily across our portfolio in order to respond to changing market conditions. We believe our systems and processes allow us to more proactively manage revenues.
We operate in competitive markets, often where consumers have multiple stores from which to choose. Competition has impacted, and will continue to impact, our store results. We experience seasonal fluctuations in occupancy levels, with occupancy levels generally higher in the summer months due to increased moving activity. We believe that we are able to respond quickly and effectively to changes in local, regional and national economic conditions by adjusting rental rates through the combination of our revenue management team and our industry-leading technology systems.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and assumptions, including those that impact our most critical accounting policies. We base our estimates and assumptions on historical experience and on various other factors that we believe are reasonable under the circumstances. A summary of significant accounting policies is also provided in the notes to our consolidated financial statements (see note 2 to our consolidated financial statements). Actual results may differ from these estimates. We believe the following are our most critical accounting policies and estimates:
CONSOLIDATION: Arrangements that are not controlled through voting or similar rights are accounted for as variable interest entities (“VIEs”). An enterprise is required to consolidate a VIE if it is the primary beneficiary of the VIE.
Under certain circumstances when we enter into arrangements for the formation of joint ventures, a VIE may be created. The primary factors that require the most judgment in determining whether the joint venture is a VIE are whether the decisions that most significantly impact the entity’s economic performance were controlled by the equity holders as a group and whether the joint venture has sufficient equity to finance its activities without additional subordinated support.
If the joint venture is determined to be a VIE, we perform a qualitative analysis, including considering which party, if any, has the power to direct the activities most significant to the economic performance of each VIE and whether that party has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. If we are determined to be the primary beneficiary of the VIE, the assets, liabilities and operations of the VIE are consolidated within our financial statements. Otherwise, our investment is generally accounted for under the equity method. Our ability to correctly assess the influence or control over an entity affects the presentation of the investment in our consolidated financial statements.
REAL ESTATE ASSETS: We account for the acquisition of stores, including by merger and other acquisitions of real estate, in accordance with ASC 805-10, “Business Combinations.”We use our judgment to determine if assets acquired meet the definition of a business or if the acquisition should be considered an asset acquisition. We must make significant assumptions and estimates in determining the fair value of the tangible and intangible assets and liabilities acquired and consideration transferred. These fair value estimates are sensitive to price of land per square foot and current replacement cost estimates, including adjustments for the age, class, height, square footage, condition, location, and turnkey factor. These assumptions and estimates require judgment, and therefore others could come to materially different conclusions as to the estimated fair values, which could result in differences in depreciation and amortization expense, gains and losses on the sale of real estate assets, and real estate and intangible asset values.
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EVALUATION OF ASSET IMPAIRMENT: Long lived assets held for use are evaluated for impairment when events or circumstances indicate that there may be impairment. We review each store at least annually to determine if any such events or circumstances have occurred or exist. We focus on stores that do not have positive cash flow. For these stores, we determine whether the negative cash flow is temporary for lease-up stores or caused by other factors. We may not have identified all material facts and circumstances that affect impairment of our stores. No material impairments were recorded in the year ended December 31, 2025.
We evaluate goodwill for impairment at least annually and whenever events, circumstances, and other related factors indicate that fair value of the related reporting unit may be less than the carrying value. If the fair value of the reporting unit is determined to exceed the aggregate carrying amount, no impairment charge is recorded. Otherwise, an impairment charge is recorded for the amount in which the carrying value of the reporting unit exceeds the fair value. No impairments of goodwill were recorded in our evaluations for any period presented herein.
INCOME TAXES: We have elected to be treated as a REIT under Sections 856 through 860 of the Internal Revenue Code. In order to maintain our qualification as a REIT, among other requirements, we are required to distribute annually at least 90% of our REIT taxable income to our stockholders and meet certain tests regarding the nature of our income and assets. As a REIT, we are not subject to U.S. federal income tax with respect to that portion of our income which meets certain criteria and is distributed annually to our stockholders. We plan to continue to operate so that we meet the requirements for taxation as a REIT. Many of these requirements, however, are highly technical and complex. For any taxable year that we fail to qualify as a REIT and for which applicable statutory relief provisions did not apply, we would be subject to U.S. federal corporate income tax on all of our taxable income for at least that year and the ensuing four years. We could also be subject to penalties and interest, and our net income may be materially different from the amounts reported in our financial statements.
We have elected to treat certain corporate subsidiaries, including Extra Space Management, Inc., as a TRS. In general, a TRS may perform additional services for tenants and generally may engage in any real estate or non-real estate related business. A TRS is subject to U.S. federal corporate income tax and may also be subject to state and local income taxes. Interest and penalties relating to uncertain tax positions will be recognized in income tax expense when incurred. If tax authorities determine that amounts paid by any of our TRSs to us are not reasonable compared to similar arrangements among unrelated parties, we could be subject to a penalty tax on the excess payments.
RECENT ACCOUNTING PRONOUNCEMENTS
For a discussion of recent accounting pronouncements affecting our business, see Item 8, “Financial Statements and Supplementary Data–Recently Issued Accounting Standards.”
RESULTS OF OPERATIONS
Amounts in thousands, except store and share data
Comparison of the Year Ended December 31, 2025 to the Year Ended December 31, 2024
Overview
Results for the year ended December 31, 2025 included the operations of 2,425 stores (2,007 wholly-owned, 11 in consolidated joint ventures, and 407 in joint ventures accounted for using the equity method) compared to the results for the year ended December 31, 2024, which included the operations of 2,436 stores (1,967 wholly-owned, nine in consolidated joint ventures, and 460 in joint ventures accounted for using the equity method). Material or unusual changes in the results of our operations are discussed below:
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Revenues
The following table presents information on revenues earned for the years indicated:
For the Year Ended December 31,
Property rental—The increase in property rental revenue for the year ended December 31, 2025 was primarily the result of an increase of $104,706 associated with acquisitions completed in 2024 and 2025. The increase in revenue resulting from these acquisitions was partially offset by a decrease in property rental revenue of $21,728 due to property dispositions over the same period. We acquired 58 wholly-owned stores and disposed of six wholly-owned stores during the year ended December 31, 2024. We acquired 76 wholly-owned stores and disposed of 37 wholly-owned stores during the year ended December 31, 2025. In addition, property rental revenue increased by $8,755 due to improved operating results at our same-store properties.
Tenant reinsurance—The increase in tenant reinsurance revenue was due primarily to an increase in the number of stores operated. We operated 4,281 stores at December 31, 2025, compared to 4,011 stores at December 31, 2024.
Management fees and other income—Management fees and other income primarily represent the fees collected for our management of stores owned by third parties and unconsolidated joint ventures and other transaction fee income. The increase for the year ended December 31, 2025 was primarily due to both an increase in the number of stores managed and an increase in the overall revenue of stores under management when compared to the same period last year. As of December 31, 2025, we managed 1,856 stores for third party owners, compared to 1,575 stores as of December 31, 2024. These increases are offset by a decrease in management fees attributable to stores in unconsolidated joint ventures, where the number of stores decreased from 460 to 407 over the same period.
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Expenses
The following table presents information on expenses for the years indicated:
For the Year Ended December 31,
Property operations—The increase in property operations expense consists primarily of an increase of $50,721 related to acquisitions completed in 2025 and 2024. We acquired 58 wholly-owned stores in 2024 and 76 wholly-owned stores during the year ended December 31, 2025. Additionally, for the year ended December 31, 2025, there was an increase of $35,689 at our same-store properties primarily due to an increase in property taxes, payroll and benefits, marketing, and repairs and maintenance expenses.
Tenant reinsurance—Tenant reinsurance expense represents the costs that are incurred to provide tenant reinsurance and is subject to volatility due to increased claims arising when significant events occur at stores.
General and administrative—General and administrative expenses primarily include all expenses not directly related to our stores, including corporate payroll, office expense, office rent, travel and professional fees. These expenses are recognized as incurred. General and administrative expense increased primarily as a result of stock compensation expense, which includes the acceleration of expense due to an executive officer’s retirement.
Depreciation and amortization—We amortize to expense intangible assets-customer intangibles on a straight-line basis over the average period that a tenant is expected to utilize the facility (currently estimated at 18 months). Depreciation and amortization expense decreased for the year ended December 31, 2025, primarily due to the customer intangibles associated with our merger with Life Storage being fully expensed in January 2025.
Other Revenues and Expenses
The following table presents information on other revenues and expenses for the years indicated:
For the Year Ended December 31,
Loss on real estate assets held for sale and sold, net—During the year ended December 31, 2025, we recognized estimated losses of $115,830 related to properties sold or classified as held for sale given their estimated fair value, net of selling costs, was less than the carrying value of the assets. The estimated losses are offset by net gains totaling $39,520 attributed to the disposition of stores during 2025. The total net amount is shown on our consolidated statements of operations within loss on real estate assets held for sale and sold, net. As of December 31, 2024, we had 18 stores classified as held for sale. Of the 18 stores, 10 had an estimated fair value, net of selling costs, less than the carrying value of the assets. As a result,
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we recorded an estimated loss of $63,250. On our consolidated statements of operations, this amount is shown net of the sale of a property, which generated a gain of $37,344 within loss on real estate assets held for sale and sold, net.
Impairment of Life Storage trade name—During the year ended December 31, 2024, we decided to operate all our stores under a single brand. As a result of that decision, we deemed the Life Storage trade name as an intangible asset to be impaired and recognized a loss for the full value of the asset.
Interest expense—The increase in interest expense during the year ended December 31, 2025 was primarily the result of higher outstanding debt. As of December 31, 2025, we had approximately $13,481,899 in total face value of debt, compared to approximately $12,600,661 as of December 31, 2024.
Non-cash interest expense related to amortization of discount on unsecured senior notes, net—Represents the amortization of the discount assigned to the fair value of the Life Storage unsecured senior notes assumed as part of the Life Storage Merger and net premium from bond offerings, offset by the discount from assumed debt.
Interest income—Interest income represents interest earned on variable interest rate bridge loans, debt securities and on notes receivable from Common Operating Partnership unit holders. The increase in interest income during the year ended December 31, 2025 was primarily the result of an increase in the amount of bridge loans outstanding. The balance of bridge loans outstanding was $1,500,151 as of December 31, 2025, compared to $1,244,575 as of December 31, 2024. The increase is also attributable to interest received on a $50,000 note receivable from a Common Operating Partnership unit holder. This note receivable originated in December 2024, bears interest at 10% per annum and matures on June 30, 2026.
Equity in earnings and dividend income from unconsolidated real estate entities—Equity in earnings of unconsolidated real estate entities represents the income earned through our ownership interests in unconsolidated joint ventures. In these joint ventures, we and our joint venture partners generally receive a preferred return on our invested capital. To the extent that cash or profits in excess of these preferred returns are generated, we receive a higher percentage of the excess cash or profits. The increase for the year ended December 31, 2025 is primarily due to a transaction in November 2024 in which we acquired additional ownership interest in HF1 Sovran HHF Storage Holdings LLC and HF2 Sovran HHF Storage Holdings II LLC from our partner in the unconsolidated joint ventures. The transaction increased our equity ownership percentages from 20% and 15%, respectively, to 49% in each unconsolidated joint venture. This increase is offset by a decrease in equity in earnings due to the transfer and distribution of membership interests in the PR II EXR JV LLC joint venture in March 2025 and the acquisition of our partners’ membership interests in the ESS-NYFL JV LP and ESS CA-TIVS JV LP joint ventures in April 2025. Also contributing to the offset is the sale of our membership interests in both the Extra Space Northern Properties VI LLC and the Life Storage Spacemax LLC joint ventures, which occurred in October and July 2025, respectively. The number of stores in unconsolidated joint ventures in which we have ownership interests was 407 as of December 31, 2025, compared to 460 as of December 31, 2024. Dividend income represents dividends from our investment in preferred stock of SmartStop and its affiliates.
Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and sale of a joint venture interest—The net gain of $54,521 for the year ended December 31, 2025 is due to the sale of our membership interest in nine properties in the Extra Space Northern Properties VI LLC joint venture in October 2025, which held 10 properties. This resulted in a net gain of $45,167. We also recorded a net gain of $9,354 on the sale of our membership interest in the Life Storage Spacemax LLC joint venture in July 2025, which held six properties. During the year ended December 31, 2024, the ESS Bristol Investments LLC joint venture sold five of its eight stores to one of our unconsolidated joint ventures, and we recognized a gain of $10,324 for our pro rata share of the transaction. Additionally, we sold our membership interest in another unconsolidated joint venture to our partner and recognized a gain of $3,406 on the transaction.
Income tax expense—The increase in income tax expense for the year ended December 31, 2025 was primarily the result of an increase in book income and a decrease in permanent tax deductions related to stock awards.
Comparison of the Year Ended December 31, 2024 to the Year Ended December 31, 2023
The results of operations for the years ended December 31, 2024 compared to December 31, 2023 was included in our Annual Report on Form 10-K for the year ended December 31, 2024 on page 23, under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which was filed with the SEC on February 28, 2025.
FUNDS FROM OPERATIONS
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Funds from operations (“FFO”) provides relevant and meaningful information about our operating performance that is necessary, along with net income and cash flows, for an understanding of our operating results. We believe FFO is a meaningful disclosure as a supplement to net earnings. Net earnings assume that the values of real estate assets diminish predictably over time as reflected through depreciation and amortization expenses. The values of real estate assets fluctuate due to market conditions, and we believe FFO more accurately reflects the value of our real estate assets. FFO is defined by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) as net income computed in accordance with U.S. generally accepted accounting principles (“GAAP”), excluding gains or losses on sales of operating stores and impairment write-downs of depreciable real estate assets, plus real estate related depreciation and amortization and after adjustments to record unconsolidated partnerships and joint ventures on the same basis. We believe that to further understand our performance, FFO should be considered along with the reported net income and cash flows in accordance with GAAP, as presented in our consolidated financial statements. FFO should not be considered a replacement of net income computed in accordance with GAAP.
The computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently. FFO does not represent cash generated from operating activities determined in accordance with GAAP and should not be considered as an alternative to net income as an indication of our performance, as an alternative to net cash flow from operating activities, as a measure of our liquidity, or as an indicator of our ability to make cash distributions.
The following table presents the calculation of FFO for the years indicated:
For the Year Ended December 31,
Adjustments:
Loss on real estate assets held for sale and sold, net 76,310 25,906 —
Distributions paid on Series A Preferred Operating Partnership units — — (159)
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SAME-STORE RESULTS
Comparison of the Year Ended December 31, 2025 to the Year Ended December 31, 2024
Our same-store pool for the years presented consists of 1,804 stores that are wholly-owned and operated and that were stabilized by the first day of the earliest calendar year presented. We consider a store to be stabilized once it has been open for three years or has sustained average square foot occupancy of 80% or more for one calendar year. We believe that by providing same-store results from a stabilized pool of stores, with accompanying operating metrics including, but not limited to, occupancy, rental revenue growth, operating expense growth, net operating income growth, etc., stockholders and potential investors are able to evaluate operating performance without the effects of non-stabilized occupancy levels, rent levels, expense levels, acquisitions or completed developments. Same-store results should not be used as a basis for future same-store performance or for the performance of our stores as a whole. The following table presents operating data for our same-store portfolio:
For the Year Ended December 31, Percent
Same-store rental revenues
Same-store operating expenses
Same-store square foot occupancy as of year end 92.6 % 93.3 %
Properties included in same-store 1,804 1,804
The following table presents additional information for our same-store portfolio:
For the Year Ended December 31,
New leases average annual rent per square foot $ 13.16 $ 12.60
Average discounts as a percentage of rental revenues 2.1 % 1.9 %
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The following table presents a reconciliation of same-store net operating income to net income as presented on our consolidated statements of operations for the years indicated:
For the Year Ended December 31,
Adjusted to exclude:
Loss on real estate assets held for sale and sold, net 76,310 25,906
Impairment of Life Storage trade name — 51,763
Management fees, other income and interest income (292,678) (245,277)
Comparison of the Year Ended December 31, 2024 to the Year Ended December 31, 2023
The same-store results for the years endedDecember 31, 2024 compared to December 31, 2023 was included in our Annual Report on Form 10-K for the year ended December 31, 2024 on page 27, under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which was filed with the SEC on February 28, 2025.
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CASH FLOWS
Cash flows from operating activities for the year ended December 31, 2025 were relatively flat when compared to the same period in the prior year. Cash flows used in investing activities relate primarily to our acquisition and development of new stores, sales of stores, investments in unconsolidated real estate entities, and notes receivable from bridge loans and fluctuate depending on our actions in those areas. Cash flows from financing activities depend primarily on our debt and equity financing activities. A summary of cash flows along with significant components are as follows:
For the Year Ended December 31,
Significant components of net cash flow included:
Life Storage Merger, net of cash acquired — — (1,182,411)
Return of investment in unconsolidated real estate ventures 291,312 15,413 —
Repurchase of common stock (149,548) — —
We believe that cash flows generated by operations, along with our existing cash and cash equivalents, the availability of funds under our existing lines of credit, and our access to capital markets will be sufficient to meet all of our reasonably anticipated cash needs during the next twelve months. These cash needs include operating expenses, monthly debt service payments, acquisitions, funding for the bridge loan program, recurring capital expenditures, building redevelopments and expansions, distributions to unit holders and dividends to stockholders necessary to maintain our REIT qualification.
We expect to generate positive cash flow from operations, and we consider projected cash flows in our sources and uses of cash. These cash flows are principally derived from rents paid by our tenants. A significant deterioration in projected cash flows from operations could cause us to increase our reliance on available funds under our existing lines of credit, curtail planned capital expenditures, or seek other additional sources of financing.
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LIQUIDITY AND CAPITAL RESOURCES
Financing Strategy
We will continue to employ leverage in our capital structure in amounts reviewed from time to time by our board of directors. Although our board of directors has not adopted a policy which limits the total amount of indebtedness that we may incur, we will consider a number of factors in evaluating our level of indebtedness from time to time, as well as the amount of such indebtedness that will be either fixed or variable rate. In making financing decisions, we will consider factors including but not limited to the following:
•the interest rate of the proposed financing;
•the extent to which the financing impacts flexibility in managing our stores;
•prepayment penalties and restrictions on refinancing;
•the purchase price of stores acquired with debt financing;
•long-term objectives with respect to the financing;
•target investment returns;
•the ability of particular stores, and our company as a whole, to generate cash flow sufficient to cover expected debt service payments;
•overall level of consolidated indebtedness;
•timing of debt maturities;
•provisions that require recourse and cross-collateralization; and
•corporate credit ratios including fixed charge coverage ratio and max secured/unsecured indebtedness.
Our indebtedness may be recourse, non-recourse, cross-collateralized, cross-defaulted, secured or unsecured. In addition, we may invest in stores subject to existing loans collateralized by mortgages or similar liens, or we may refinance stores acquired on a leveraged basis. We may use the proceeds from any borrowings to refinance existing indebtedness, to refinance investments, including the redevelopment of existing stores, for general working capital or to purchase additional interests in partnerships or joint ventures or for other purposes when we believe it is advisable.
As of December 31, 2025, we had $138,920 available in cash and cash equivalents. Our cash and cash equivalents are held in accounts managed by third party financial institutions and consist of invested cash and cash in our operating accounts. During 2025 and 2024, we experienced no loss or lack of access to our cash and cash equivalents; however, there can be no assurance that access to our cash and cash equivalents will not be impacted by adverse conditions in the financial markets.
The following table presents information relating to our debt:
Total enterprise value ratio 31.9 % 28.4 %
Total fixed-rate debt and other instruments to total debt 82.1% (1) 75.8% (2)
Weighted average interest rate of total debt 4.3 % 4.4 %
Weighted average interest rate for fixed rate debt 4.2 % 4.1 %
Weighted average interest rate for variable rate debt 4.8 % 5.4 %
We expect to fund our short-term and long-term liquidity requirements, including operating expenses, recurring capital expenditures, dividends to stockholders, distributions to holders of Operating Partnership units and interest on our outstanding indebtedness, out of our operating cash flow, cash on hand and borrowings under our revolving lines of credit and commercial paper. In addition, we are pursuing additional sources of financing based on anticipated funding needs and growth assumptions.
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Our commercial paper program provides us the ability to issue, repay and re-issue short-term unsecured commercial paper notes. The aggregate principal amount outstanding under the program at any time cannot exceed $1,000,000, and the net proceeds of the commercial paper notes are expected to be used for general corporate purposes. The maturities of the notes generally range from overnight to three months, with a maximum of up to 13 months. The commercial paper notes are issued under customary terms in the commercial paper market and are issued at a discount from par or, alternatively, can be issued at par and bear varying interest rates on a fixed or floating basis. At any point in time, we expect to maintain available commitments under our Credit Facilities in an amount at least equal to the amount of commercial paper notes outstanding. At December 31, 2025, we had $680,000 in issuances outstanding under the commercial paper program.
We hold a BBB+/Stable rating from S&P, which was upgraded from BBB/Stable in July 2023 in connection with the Life Storage Merger, and a Baa2/Stable rating from Moody’s Investors Service. We intend to manage our balance sheet to maintain these ratings. Certain of our real estate assets are pledged as collateral for our debt. As of December 31, 2025, we had a total of 1,775 unencumbered stores as defined by our public bonds. Our unencumbered asset value was calculated as $30,247,545 and our total asset value was calculated as $35,894,312 according to the calculations as defined by our public bonds. We are subject to certain restrictive covenants relating to our outstanding debt. We were in compliance with all financial covenants at December 31, 2025.
Our liquidity needs consist primarily of operating expenses, monthly debt service payments, recurring capital expenditures, distributions to unit holders and dividends to stockholders necessary to maintain our REIT qualification. We may from time to time seek to repurchase our outstanding debt, shares of common stock or other securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. In addition, we evaluate, on an ongoing basis, the merits of strategic acquisitions and other relationships, which may require us to raise additional funds. We may also use Operating Partnership units as currency to fund acquisitions from self-storage owners who desire tax-deferral in their exiting transactions.
On April 15, 2024, we entered into an equity distribution agreement (the “Equity Distribution Agreement”) with certain sales agents and forward purchasers named therein. Under the terms of the Equity Distribution Agreement, we may issue and sell, and the forward purchasers may sell, from time to time through or to the sales agents, shares of our common stock having an aggregate offering price of up to $800,000. The shares of common stock will be offered pursuant to our effective registration statement on Form S-3 (Registration Statement No. 333-278690) previously filed with and declared effective by the SEC and a prospectus supplement and accompanying prospectus, filed with the SEC. As of December 31, 2025, no shares have been sold under the Equity Distribution Agreement, which we refer to as our “at the market” equity program.
CONTRACTUAL OBLIGATIONS
For more information on our contractual obligations related to real estate acquisitions, refer to our commitments and contingencies footnote in the notes to the consolidated financial statements in Item 8 of this Form 10-K.
SEASONALITY
The self-storage business has been subject to seasonal fluctuations. A greater portion of revenues and profits is typically realized from May through September. Historically, our highest level of occupancy has been at the end of July, while our lowest level of occupancy has been in late February and early March. Results for any quarter may not be indicative of the results that may be achieved for the full fiscal year.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
Market risk refers to the risk of loss from adverse changes in market prices and interest rates. Our future income, cash flows and fair values of financial instruments are dependent upon prevailing market interest rates.
Interest Rate Risk
Interest rate risk is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control.
As of December 31, 2025, we had approximately $13,481,899 in total face value of debt, of which approximately $2,415,341 was subject to variable interest rates (excluding debt with interest rate swaps). If the Daily Simple Secured Overnight Financing Rate (“SOFR”) was to increase or decrease by 100 basis points, the increase or decrease in interest expense on the variable-rate debt would increase or decrease future earnings and cash flows by approximately $24,153 annually.
Interest rate risk amounts were determined by considering the impact of hypothetical interest rates on our financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.
Derivative Instruments
We use derivative instruments to help manage interest rate risk using designated hedge relationships. Interest rate swaps involve the exchange of fixed-rate and variable-rate interest payments between two parties based on a contractual underlying notional amount but do not involve the exchange of the underlying notional amount. See our Derivatives footnote in our notes to consolidated financial statements in Item 8 for additional information about our use of derivative contracts.
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Item 8. Financial Statements and Supplementary Data
EXTRA SPACE STORAGE INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULES
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 36
Consolidated Balance Sheets as of December 31, 2025 and 2024 38
Notes to Consolidated Financial Statements 45
Schedule III - Real Estate and Accumulated Depreciation 76
All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or notes thereto.
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Extra Space Storage Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Extra Space Storage Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and financial statement schedule listed in the Index at Item 8 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 20, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
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Purchase Price Allocation
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2005.
Salt Lake City, Utah
February 20, 2026
37
Extra Space Storage Inc.
Consolidated Balance Sheets
(amounts in thousands, except share data)
Assets:
Real estate assets - operating lease right-of-use assets 732,176 689,803
Investments in debt securities and notes receivable 1,806,526 1,550,950
Liabilities, Noncontrolling Interests and Equity:
Cash distributions in unconsolidated real estate ventures 73,701 75,319
Commitments and contingencies
Noncontrolling Interests and Equity:
Extra Space Storage Inc. stockholders’ equity:
Accumulated other comprehensive income (420) 12,806
See notes to consolidated financial statements.
38
Extra Space Storage Inc.
Consolidated Statements of Operations
(amounts in thousands, except share data)
For the Year Ended December 31,
Revenues:
Expenses:
Life Storage Merger transition costs — — 66,732
Loss on real estate assets held for sale and sold, net (76,310) (25,906) —
Impairment of Life Storage trade name — (51,763) —
Earnings per common share
Weighted average number of shares
See notes to consolidated financial statements.
39
Extra Space Storage Inc.
Consolidated Statements of Comprehensive Income
(amounts in thousands)
For the Year Ended December 31,
Other comprehensive income:
See notes to consolidated financial statements.
40
Extra Space Storage Inc.
Consolidated Statements of Stockholders’ Equity
(amounts in thousands, except share data)
Noncontrolling Interests Extra Space Storage Inc. Stockholders’ Equity
Restricted stock grants canceled — — — (10,084) — — — — —
Redemption of Operating Partnership units for stock — (225) — 2,803 — 225 — — —
Redemption of Operating Partnership units for cash — (89) — — — (19) — — (108)
Noncontrolling interest in consolidated joint ventures — — 7,959 — — — — — 7,959
41
Extra Space Storage Inc.
Consolidated Statements of Stockholders’ Equity
(amounts in thousands, except share data)
Noncontrolling Interests Extra Space Storage Inc. Stockholders’ Equity
Issuance of common stock, net of offering costs — — — 2,310 — 365 — — 365
Offering costs associated with shelf registration — — — — — (522) — — (522)
Noncontrolling interest in consolidated joint ventures — — 3,078 — — — — — 3,078
Other comprehensive loss — (117) — — — — (4,629) — (4,746)
42
Extra Space Storage Inc.
Consolidated Statements of Stockholders’ Equity
(amounts in thousands, except share data)
Noncontrolling Interests Extra Space Storage Inc. Stockholders’ Equity
Noncontrolling interest in consolidated joint ventures — — 3,956 — — — — — 3,956
See notes to consolidated financial statements.
43
Extra Space Storage Inc.
Consolidated Statements of Cash Flows
(amounts in thousands)
For the Year Ended December 31,
Cash flows from operating activities:
Loss on real estate assets held for sale and sold, net 76,310 25,906 —
Impairment of Life Storage trade name — 51,763 —
Changes in operating assets and liabilities:
Cash flows from investing activities:
Life Storage Merger, net of cash acquired — — (1,182,411)
Return of investment in unconsolidated real estate ventures 291,312 15,413 —
Issuance of loan collateralized with OP units — (50,000) —
Cash flows from financing activities:
Proceeds from share issuances — 365 —
Repurchase of common stock (149,548) — —
Redemption of Preferred OP units for cash — — (5,377)
Offering costs associated with shelf registration — (522) —
Redemption of Operating Partnership units for cash (1,453) (2,341) (108)
Net change in cash, cash equivalents, and restricted cash (123) 38,220 7,348
Cash and equivalents, including restricted cash at the beginning of the period:
Cash and equivalents, including restricted cash at the end of the period:
Supplemental schedule of cash flow information
Supplemental schedule of noncash investing and financing activities:
Redemption of Preferred D Units in the Operating Partnership for loans
Preferred OP units redeemed $ — $ (87,696) $ —
Conversion of Preferred OP Units to common OP Units
Preferred OP Units $ — $ 27,518 $ —
Common OP Units — (27,518) —
Real estate assets - operating lease right-of-use assets $ 5,829 $ 486,266 $ 265
Acquisitions of real estate assets
Value of investment in consolidated real estate ventures (135,930) — —
Investment in unconsolidated real estate ventures — 1,853 —
Life Storage Merger real estate assets
Real estate assets, net $ — $ — $ 13,575,501
Value of common stock issued — — (11,353,338)
Unsecured senior notes — — (2,106,866)
Value of OP units issued — — (249,470)
Net liabilities assumed — — (191,077)
Investment in unconsolidated real estate ventures — — 325,250
Accrued construction costs and capital expenditures
See notes to consolidated financial statements.
44
EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amounts in thousands, except store and share data, unless otherwise stated
1. DESCRIPTION OF BUSINESS
Extra Space Storage Inc. (the “Company”) is a fully integrated, self-administered and self-managed real estate investment trust (“REIT”), formed as a Maryland corporation on April 30, 2004 to own, operate, manage, acquire, develop and redevelop self-storage properties (“stores”) and provide lending to owners of stores located throughout the United States. The Company was formed to continue the business of Extra Space Storage LLC and its subsidiaries, which had engaged in the self-storage business since 1977. The Company’s interest in its stores is held through its operating partnership, Extra Space Storage LP (the “Operating Partnership”), which was formed on May 5, 2004. The Company’s primary assets are general partner and limited partner interests in the Operating Partnership, which meets the definition of a variable interest entity and is consolidated. This structure is commonly referred to as an umbrella partnership REIT, or UPREIT.
The Company invests in stores by acquiring wholly-owned stores or by acquiring an equity interest in real estate entities. At December 31, 2025, the Company had direct and indirect equity interests in 2,425 stores. In addition, the Company managed 1,856 stores for third parties bringing the total number of stores which it owns and/or manages to 4,281. These stores are located in 43 states and Washington, D.C. The Company offers tenant reinsurance at its owned and managed stores that insures the value of goods in the storage units and also offers bridge loan financing to certain third-party self-storage owners for whom it manages properties.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements are presented on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of the Company and its wholly- or majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Principles of Consolidation
The Company accounts for arrangements that are not controlled through voting or similar rights as variable interest entities (“VIEs”). An enterprise is required to consolidate a VIE if it is the primary beneficiary of the VIE. A VIE is created when (i) the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, or (ii) the entity’s equity holders as a group either: (a) lack the power, through voting or similar rights, to direct the activities of the entity that most significantly impact the entity’s economic performance, (b) are not obligated to absorb expected losses of the entity if they occur, or (c) do not have the right to receive expected residual returns of the entity if they occur. If an entity is deemed to be a VIE, the enterprise that is deemed to have a variable interest, or combination of variable interests, that provides the enterprise with a controlling financial interest in the VIE, is considered the primary beneficiary and must consolidate the VIE.
The Company has concluded that under certain circumstances when the Company enters into arrangements for the formation of joint ventures or when entering into a new bridge loan agreement, a VIE may be created under condition (i), (ii), (b) or (c) of the previous paragraph. For each VIE created, the Company has performed a qualitative analysis, including considering which party, if any, has the power to direct the activities most significant to the economic performance of each VIE and whether that party has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. If the Company is determined to be the primary beneficiary of the VIE, the assets, liabilities and operations of the VIE are consolidated with the Company’s financial statements.
The Company determined that its operating partnership met the definition of a VIE and is consolidated. Additionally, as of December 31, 2025 the Company determined that in addition to its operating partnership it had one consolidated joint venture VIE, consisting of one store.
Substantially all of the assets and liabilities of the Company are related to the operating partnership VIE. The assets and credit of the VIE can only be used to satisfy the VIE’s own contractual obligations, and the VIE’s creditors have no recourse to the general credit of the Company.
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EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
The Company’s investments in real estate joint ventures, where the Company has significant influence, but not control, and joint ventures which are VIEs in which the Company is not the primary beneficiary, are recorded under the equity method of accounting on the accompanying consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value Disclosures
Derivative financial instruments
Currently, the Company uses interest rate swaps to manage its interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate forward curves.
The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. In conjunction with the fair value measurement guidance by the Financial Accounting Standard Board (the “FASB”), the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.
Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of December 31, 2025, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2025, aggregated by the level in the fair value hierarchy within which those measurements fall:
Fair Value Measurements at Reporting Date Using
Other assets - Cash flow hedge swap agreements $ — $ 3,362 $ —
Other liabilities - Cash flow hedge swap agreements — 2,538 —
There were no transfers of assets and liabilities between Level 1 and Level 2 during the year ended December 31, 2025. The Company did not have any significant assets or liabilities that are re-measured on a recurring basis using significant unobservable inputs as of December 31, 2025 or 2024.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Long-lived assets held for use are evaluated for impairment when events or circumstances, including the Company’s
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EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
assumptions about the use of the asset, indicate there may be impairment. The Company reviews each store at least annually to determine if any such events or circumstances have occurred or exist. The Company focuses on stores that do not have positive net operating cash flows. For these stores, the Company determines whether the decrease is temporary or permanent, and whether the store will likely generate positive net operating cash flows in the short term.
When the Company determines that an event that may indicate impairment has occurred, the Company compares the carrying value of the related long-lived assets to the undiscounted future net operating cash flows attributable to the assets. An impairment loss is recorded if the net carrying value of the assets exceeds the undiscounted future net operating cash flows attributable to the assets. The impairment loss recognized equals the excess of net carrying value over the related fair value of the assets.
When real estate assets are identified by management as held for sale, the Company discontinues depreciating the assets and estimates the fair value of the assets, net of selling costs. The Company compares the carrying value of the related long-lived assets to its estimated fair value, supported by current third-party appraisal or broker market data (categorized within Level 3 of the fair value hierarchy). If the estimated fair value, net of selling costs, is less than the net carrying value of the assets, the Company would recognize a loss on the assets held for sale. The operations of assets held for sale or sold during the period are presented as part of normal operations. As of December 31, 2025, the Company had five stores classified as held for sale which are included in real estate assets, net. Refer to note 5 for additional details on disposition and held for sale activity.
The Company assesses annually whether there are any indicators that the value of the Company’s investments in unconsolidated real estate entities may be impaired and when events or circumstances indicate that there may be impairment. An investment is impaired if management’s estimate of the fair value of the investment is less than its carrying value. To the extent impairment has occurred, and is considered to be other than temporary, the loss is measured as the excess of the carrying amount of the investment over the fair value of the investment.
The Company evaluates goodwill for impairment at least annually and whenever events, circumstances, and other related factors indicate that fair value of the related reporting unit may be less than the carrying value. If the fair value of the reporting unit is determined to exceed the aggregate carrying amount, no impairment charge is recorded. Otherwise, an impairment charge is recorded for the amount in which the carrying value of the reporting unit exceeds the fair value. No impairments of goodwill were recorded for any period presented herein.
As of December 31, 2025 and 2024, the Company did not have any assets or liabilities measured at fair value on a nonrecurring basis.
Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, restricted cash, receivables, investments in debt securities and notes receivable, accounts payable and accrued expenses, variable-rate notes payable, revolving lines of credit and commercial paper and other liabilities reflected in the consolidated balance sheets at December 31, 2025 and 2024 approximate fair value. Restricted cash is comprised of funds deposited with financial institutions located throughout the United States and the Cayman Islands, primarily relating to operating cash reserve for the Company’s captive insurance subsidiary and earnest money deposits on potential acquisitions.
The fair value of the Company’s note receivable from a Common Operating Partnership unit holder was based on the discounted estimated future cash flow of the note (categorized within Level 3 of the fair value hierarchy). The discount rate used approximated the current market rate for loans with similar maturities and credit quality. The fair values of the Company’s fixed rate notes payable were estimated using the discounted estimated future cash payments to be made on such debt (categorized within Level 3 of the fair value hierarchy). The discount rates used approximated current market rates for loans, or groups of loans, with similar maturities and credit quality.
47
EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
The fair values of the Company’s fixed-rate assets and liabilities were as follows for the years indicated:
Fair Value Carrying Value Fair Value Carrying Value
Real Estate Assets
Real estate assets are stated at cost, less accumulated depreciation. Direct and allowable internal costs associated with the development, construction, renovation, and improvement of real estate assets are capitalized. Interest, property taxes, and other costs associated with development incurred during the construction period are capitalized. The construction period begins when expenditures for the real estate assets have been made and activities that are necessary to prepare the asset for its intended use are in progress. The construction period ends when the asset is substantially complete and ready for its intended use.
Expenditures for maintenance and repairs are charged to expense as incurred. Major replacements and betterments that improve or extend the life of the asset are capitalized and depreciated over their estimated useful lives. Depreciation is computed using the straight-line method over the estimated useful lives of the buildings and improvements, which are generally between five and 39 years.
The purchase of stores is considered an asset acquisition. As such, the purchase price is allocated to the real estate assets acquired based on their relative fair values, which are estimated using significant unobservable inputs. The value of the tangible assets, consisting of land and buildings, is determined as if vacant. Intangible assets, which represent the value of existing tenant relationships, are recorded at their relative fair values based on the avoided cost to replace the current leases. The Company measures the value of tenant relationships based on the rent lost due to the amount of time required to replace existing customers, which is based on the Company’s historical experience with turnover in its stores. Any debt assumed as part of the acquisition is recorded at fair value based on current interest rates compared to contractual rates. Acquisition-related transaction costs are capitalized as part of the purchase price.
Intangible lease rights represent intangibles related to ground leases on 10 stores where the leases were assumed by the Company at rates that were lower than the current market rates for similar leases. The values associated with these assumed leases were recorded as intangibles, which will be amortized over the lease terms.
Real Estate Sales
In general, sales of real estate and related profits/losses are recognized when all consideration has changed hands and risks and rewards of ownership have been transferred. Certain types of continuing involvement preclude sale treatment and related profit recognition; other forms of continuing involvement allow for sale recognition but require deferral of profit recognition.
Investments in Unconsolidated Real Estate Entities
Investments in unconsolidated real estate entities and cash distributions in unconsolidated real estate ventures represent the Company’s interest in preferred stock of SmartStop Self Storage REIT, Inc. (“SmartStop”), Strategic Storage Trust VI, Inc. and Strategic Storage Growth Trust III, Inc. (collectively, “Strategic Storage”), affiliates of SmartStop, and the Company’s noncontrolling interest in real estate joint ventures. The Company’s investments in real estate joint ventures, where the Company has significant influence, but not control and joint ventures which are VIEs in which the Company is not the primary beneficiary, are recorded under the equity method of accounting in the accompanying consolidated financial statements.
Under the equity method, the Company’s investment in real estate ventures is stated at cost and adjusted for the Company’s share of net earnings or losses and reduced by distributions. Equity in earnings of real estate ventures is generally recognized based on the Company’s ownership interest in the earnings of each of the unconsolidated real estate ventures. For the purposes of presentation in the statement of cash flows, the Company follows the “nature of distribution” approach for
48
EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
classification of distributions from joint ventures. Under this approach, cash flows are classified on the basis of the nature of the activity or activities of the investee that generated the distribution as either a return on investment (classified as a cash inflow from operating activities) or a return of investment (classified as a cash inflow from investing activities).
The Company evaluated its investment in preferred stock of non-public real estate entities and determined it did not have significant influence over the entities, and the investments do not have a readily determinable fair value and therefore have been recorded at the transaction price. The Company periodically evaluates the investments for impairment. No impairments were recorded in our evaluations for any period presented herein.
Investments in Debt Securities and Notes Receivable
The Company accounts for its investment in debt securities and loans receivable at amortized cost. The Company recognizes interest income related to the debt securities and notes receivable using the effective interest method, with deferred fees and costs amortized over the lives of the related loans as yield adjustment.
Cash and Cash Equivalents
The Company’s cash is deposited with financial institutions located throughout the United States and at times may exceed federally insured limits. The Company considers all highly liquid debt instruments with a maturity date of three months or less to be cash equivalents.
Derivative Instruments and Hedging Activities
The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability or firm commitment attributable to a particular risk are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, such as those subject to interest rate risk, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. The Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. Refer to note 9 for further information regarding the Company’s derivative instruments and hedging activities.
Risk Management and Use of Financial Instruments
In the normal course of its ongoing business operations, the Company encounters economic risk. There are three main components of economic risk: interest rate risk, credit risk and market risk. The Company is subject to interest rate risk on its interest-bearing liabilities. Credit risk is the risk of inability or unwillingness of tenants or bridge loan borrowers to make contractually required payments. Market risk is the risk of declines in the value of stores due to changes in rental rates, interest rates or other market factors affecting the value of stores held by the Company. The Company has entered into interest rate swap agreements and issued variable-rate bridge loans to manage a portion of its interest rate risk.
Redemption of Common Operating Partnership Units
The Company has the option to redeem common Operating Partnership Units in cash or shares of common stock. Redemption of common Operating Partnership units for shares of common stock, when redeemed under the original provisions of the Operating Partnership agreement, is accounted for by reclassifying the underlying net book value of the units from noncontrolling interest to the Company’s equity. Redemption of common Operating Partnership units for cash is accounted for by reducing the underlying net book value of the units from noncontrolling interest.
49
EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
Revenue and Expense Recognition
Rental revenues are recognized as earned based upon amounts that are currently due from tenants. Leases are generally on month-to-month terms. Prepaid rents are recognized on a straight-line basis over the term of the leases. Promotional discounts are recognized as a reduction to rental income over the promotional period. Late charges, administrative fees and merchandise sales are recognized as income when earned.
The Company’s management fees are earned subject to the terms of the related management services agreements (“MSAs”). These MSAs provide that the Company will perform management services, which include leasing and operating the property and providing accounting, marketing, banking, maintenance and other services. These services are provided in exchange for monthly management fees, which are based on a percentage of revenues collected from stores owned by third parties and unconsolidated joint ventures. MSAs generally have original terms from three to five years. Management fees are due on the last day of each calendar month that management services are provided.
The Company accounts for the management services provided to a customer as a single performance obligation which are rendered over time each month. The total amount of consideration from the contract is variable as it is based on monthly revenues, which are influenced by multiple factors, some of which are outside the Company’s control. Therefore, the Company recognizes the revenue at the end of each month once the uncertainty is resolved. Due to the standardized terms of the MSAs, the Company accounts for all MSAs in a similar, consistent manner. Therefore, no disaggregated information relating to MSAs is presented.
Property expenses, including utilities, property taxes, repairs and maintenance and other costs to manage the facilities are recognized as incurred. The Company accrues for property tax expense based upon invoice amounts and estimates. If these estimates are incorrect, the timing of expense recognition could be affected.
Tenant reinsurance premiums are recognized as revenue over the period of insurance coverage. Each tenant chooses the amount of insurance coverage they want through the tenant reinsurance program. Tenants can purchase policies in amounts up to ten thousand dollars of insurance coverage in exchange for a monthly fee. As of December 31, 2025, the total number of tenant insurance policies was approximately 1.8 million, which was an aggregate coverage of approximately $5.7 billion. The Company’s exposure per claim is limited by the maximum amount of coverage chosen by each tenant.
Advertising Costs
The Company incurs advertising costs primarily attributable to digital and other advertising. These costs are expensed as incurred. The Company recognized $56,181, $50,519 and $32,795 in advertising expense for the years ended December 31, 2025, 2024 and 2023, respectively, which are included in property operating expenses on the Company’s consolidated statements of operations.
Income Taxes
The Company has elected to be treated as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). In order to maintain its qualification as a REIT, among other requirements, the Company is required to distribute annually at least 90% of its REIT taxable income to its stockholders and meet certain tests regarding the nature of its income and assets. As a REIT, the Company is not subject to U.S. federal income tax with respect to that portion of its income which meets certain criteria and is distributed annually to stockholders. The Company plans to continue to operate so that it meets the requirements for taxation as a REIT. Many of these requirements, however, are highly technical and complex. For any taxable year that the Company fails to qualify as a REIT and for which applicable statutory relief provisions did not apply, the Company would be subject to U.S. federal corporate income tax on all of its taxable income for at least that year and the ensuing four years. The Company is subject to certain state and local taxes. Provision for such taxes has been included in income tax expense on the Company’s consolidated statements of operations. For the year ended December 31, 2025, 0% (unaudited) of all distributions to stockholders qualified as a return of capital.
The Company owns and may acquire direct or indirect interests in entities that have elected or will elect to be taxed as REITs under the Internal Revenue Code (each, a “Subsidiary REIT”). A Subsidiary REIT is subject to the various REIT qualification requirements and other limitations described herein that are applicable to the Company. If a Subsidiary REIT were to fail to qualify as a REIT, then (i) that Subsidiary REIT would become subject to U.S. federal income tax, (ii) shares in such
50
EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
Subsidiary REIT would cease to be qualifying assets for purposes of the asset tests applicable to REITs, and (iii) it is possible that the Company would fail certain of the asset tests applicable to REITs, in which event the Company would fail to qualify as a REIT unless it could avail itself of certain relief provisions.
The Company has elected to treat certain corporate subsidiaries, including Extra Space Management, Inc. (“ESMI”), as a taxable REIT subsidiary (“TRS”). In general, a TRS may perform additional services for tenants and may engage in any real estate or non-real estate related business. A TRS is subject to U.S. federal corporate income tax and may also be subject to state and local income taxes. ESM Reinsurance Limited, a wholly-owned subsidiary of ESMI, generates income from insurance premiums that is subject to U.S. federal corporate income tax and state insurance premiums tax and pays certain insurance royalties to the Company.
Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities. At December 31, 2025 and 2024, there were no material unrecognized tax benefits. Interest and penalties relating to uncertain tax positions will be recognized in income tax expense when incurred. As of December 31, 2025 and 2024, the Company had no interest or penalties related to uncertain tax positions.
Stock-Based Compensation
The measurement and recognition of compensation expense for all share-based payment awards to employees and directors are based on estimated fair values. Awards granted are valued at fair value, and any compensation expense is recognized over the service and/or performance periods of each award.
Earnings Per Common Share
Basic earnings per common share is computed using the two-class method by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during the period. All outstanding unvested restricted stock awards contain rights to non-forfeitable dividends and participate in undistributed earnings with common stockholders; accordingly, they are considered participating securities that are included in the two-class method. Diluted earnings per common share measures the performance of the Company over the reporting period while giving effect to all potential common shares that were dilutive and outstanding during the period. The denominator includes the weighted average number of basic shares and the number of additional common shares that would have been outstanding if the potential common shares that were dilutive had been issued, and is calculated using the two-class, treasury stock or if-converted method, whichever is most dilutive. Potential common shares are securities (such as options, Series B Redeemable Preferred Units (“Series B Units”), Series D Redeemable Preferred Units (“Series D Units”) and together with the Series B Units, the (“Preferred OP Units"), and common Operating Partnership units (“OP Units”)) that do not have a current right to participate in earnings of the Company but could do so in the future by virtue of their redemption right.
For the purposes of computing the diluted impact of the potential exchange of the Preferred OP Units for common shares upon redemption, where the Company has the option to redeem in cash or shares and where the Company has stated the intent and ability to settle the redemption in shares, the Company divided the total liquidation value of the Preferred OP Units by the average share price of $144.15 for the year ended December 31, 2025.
51
EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
The following table presents the number of weighted OP Units and Preferred OP Units, and the potential common shares that were excluded from the computation of earnings per share as their effect would have been anti-dilutive:
For the Year Ended December 31,
The computation of earnings per common share is as follows for the years presented:
For the Year Ended December 31,
Weighted average common shares outstanding:
Shares related to dilutive stock options — 2,440 3,893
Earnings per common share
Recently Issued Accounting Standards
In November 2024, the FASB issued ASU No. 2024-03 – “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40).” The new standard requires the disclosure of additional information related to certain costs and expenses, including amounts of inventory purchases, employee compensation, and depreciation and amortization included in each income statement line item. For any remaining items within each relevant expense caption, entities must provide a qualitative description of the nature of those expenses. The guidance also requires disclosure of the total amount of selling expenses and the entity’s definition of selling expenses. The new standard does not change the requirements for the presentation of expenses on the face of the statement of operations. The guidance is effective for annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027; therefore, compliance with this ASU will be required beginning with the Company’s annual report on Form 10-K for the year ending December 31, 2027. The guidance may be applied prospectively or retrospectively, and early adoption is permitted. Although the adoption is not expected to have an impact on the Company’s financial statements, it is expected to result in incremental disclosures within the footnotes to the consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09 – “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The amended guidance focuses on providing more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. Pursuant to this ASU, the footnotes to the Company’s consolidated financial statements include incremental disclosures related to income taxes. The Company has adopted this standard as of December 31, 2025. Refer to note 16 for further discussion of the Company’s accounting for income taxes and related disclosures.
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EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
3. REAL ESTATE ASSETS
The components of real estate assets are summarized as follows:
Less: accumulated depreciation and amortization (3,982,125) (3,339,136)
In September 2024, the Company amended existing triple-net lease agreements for land and buildings related to 27 stores that had initially been entered into in June and August 2019. The Company also entered into new triple-net lease agreements for land and buildings related to 12 additional stores. Both the initial 27 stores and the additional 12 stores added to the triple net lease structure are categorized as operating leases and have been presented in real estate assets - operating lease right-of-use assets and operating lease liabilities on the Company’s consolidated balance sheets.
The Company amortizes to expense intangible assets—tenant relationships on a straight-line basis over the average period that a tenant is expected to utilize the facility (currently estimated at 18 months). The Company amortizes to expense the intangible lease rights over the terms of the related leases. Amortization related to the tenant relationships and lease rights was $21,183, $114,614, and $59,807 for the years ended December 31, 2025, 2024 and 2023, respectively. The remaining balance of the unamortized lease rights will be amortized over the next three to 39 years. Accumulated amortization related to intangibles was $404,709 and $363,916 as of December 31, 2025 and 2024, respectively.
4. OTHER ASSETS
The components of other assets are summarized as follows:
Deferred line of credit financing costs, net 15,335 7,548
Fair value of interest rate swaps 3,362 15,733
Depreciation of equipment and fixtures is computed on a straight-line basis over three to five years. The Company capitalizes certain costs during the application development stage when developing software for internal use. As of December 31, 2025 and 2024, unamortized software costs were $25,294 and $16,254. During the years ended December 31, 2025, 2024 and 2023, the Company recorded amortization expense of $4,240, $5,307 and $5,377, respectively, relating to capitalized software costs.
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EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
5. PROPERTY ACQUISITIONS AND DISPOSITIONS
The Life Storage Merger
On July 20, 2023, the Company closed its merger with Life Storage (the “Life Storage Merger”), which included 757 wholly-owned stores and one consolidated joint venture store. Under the terms of the Life Storage Merger, Life Storage stockholders and holders of units of the Life Storage operating partnership received 0.895 of a share of common stock (or OP Unit, as applicable) of the Company for each issued and outstanding share (or operating partnership unit) of Life Storage they owned for total equity consideration of $11,602,808, based on the Company’s closing share price on July 19, 2023. At closing, the Company retired $1,160,000 in balances on Life Storage’s line of credit which included $375,000 that Life Storage used to pay off its private placement notes in connection with the closing of the Life Storage Merger. The Company also paid off $32,000 in secured loans. On July 25, 2023, the Company completed obligor exchange offers and consent solicitations (together the “Exchange Offers”) related to Life Storage’s various senior notes. Upon the closing of the Exchange Offers, a total of $2,351,100 of Life Storage’s senior notes were exchanged for senior notes of the same tenor of Extra Space Storage L.P. The remaining Life Storage senior note balances which were not exchanged total $48,900 and no longer have any financial reporting requirements or covenants.
Consideration and Purchase Price Allocation
The Life Storage Merger was accounted for as an asset acquisition in accordance with ASC Topic 805 which requires that the cost of an acquisition be allocated on a relative fair value basis to the assets acquired and the liabilities assumed. The following table summarizes the fair value of total consideration transferred in the Life Storage Merger:
Consideration Type July 20, 2023
Cash for payoff of Life Storage credit facility and debt 1,192,000
The following table summarizes the estimated fair values assigned to the assets acquired and liabilities assumed:
Equity investment in joint venture partnerships 325,250
Intangible assets - other 82,000
Accounts payable, accrued expenses and other liabilities (191,077)
Noncontrolling interests (4,338)
Fair value of net assets acquired $ 12,850,127
Fair Value Measurement
The estimated fair values of assets acquired and liabilities assumed were primarily based on information that was available as of the closing date of the Life Storage Merger. The methodology used to estimate the fair values to apply purchase accounting and the ongoing financial statement impact, if any, are summarized below:
•Real estate assets – Real estate assets acquired were recorded at fair value using standard valuation methodologies, including the cost and market approaches. The remaining useful lives for real estate assets, excluding land, were reset to 39 years. Tenant relationships for storage leases were recorded at fair value based on estimated costs the Company
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EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
avoided to replace them. Tenant relationships are amortized to expense over 18 months, which is based on the Company’s historical experience with turnover in its stores.
•Equity investment in joint venture partnerships - Equity investment in joint venture partnerships were recorded at fair value based on a direct capitalization of net operating income.
•Intangible assets - other – Customer relationships relating to tenant reinsurance contracts were recorded at fair value based on the income approach which estimates the potential revenue loss the Company avoided to replace them. These assets are amortized to expense over 36 months, which is based on the Company’s historical experience with average length of stay for tenants.
•Trade name – Trade names were recorded at fair value based on royalty payments avoided had the trade name been owned by a third party. This is determined using market royalty rates and a discounted cash flow analysis under the relief-from-royalty method. This method incorporates various assumptions, including projected revenue growth rates, the terminal growth rate, the royalty rate to be applied, and the discount rate utilized. The trade name is an indefinite lived asset and as such is not amortized. During the year ended December 31, 2024, the Company decided to operate all stores under a single brand. As a result of that decision, the Company deemed the Life Storage trade name intangible asset to be impaired and recognized a loss for the full value of the asset. Intangible assets are included in the self-storage operations segment of the Company’s segment information.
•Unsecured senior notes – Unsecured senior notes were recorded at fair value using readily available market data. The below-market value of debt is recorded as a debt discount and reported as a reduction of the unsecured senior notes, net balance on the consolidated balance sheets. The discount is amortized using the effective interest method as an increase to interest expense over the remaining terms of the unsecured senior notes.
•Other assets and liabilities – The carrying values of cash, accounts receivable, prepaids and other assets, accounts payable, accrued expenses and other liabilities represented the fair values.
The Company amortizes to expense intangible assets - other on a straight-line basis. The following table summarizes the accumulated amortization related to intangible assets - other:
Estimated Aggregate Amortization Expense
Intangible Assets: 2026
Intangible assets - other $ 11,569
Store Acquisitions
The following table shows the Company’s acquisitions of stores for the years ended December 31, 2025 and 2024. The table excludes purchases of raw land and improvements made to existing assets. All store acquisitions are considered asset acquisitions under ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.”
Total
On April 30, 2025, the Company acquired all of its partners’ membership interests in the ESS-NYFL JV LP and ESS CA-TIVS JV LP joint ventures. The total value of the real estate was recorded at $436,797, which included $258,000 of assumed debt. The Company now owns 100% of the 27 properties that were held in the two joint ventures.
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EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
On March 31, 2025, the Company closed on the transfer and distribution of membership interests in its PR II EXR JV LLC joint venture. The Company exchanged its 25% ownership interest in 17 properties for its partner’s 75% ownership interest in six properties. The portfolio consisted of 23 properties; therefore, the Company now owns 100% of the six properties, and its partner now owns 100% of the 17 properties, which the Company will continue to manage.
Disposition and Held for Sale Activity
The following table presents the Company’s disposition and held for sale activity for the periods indicated:
Carrying Value of Assets Held for Sale (Gain) / Loss Recognized Number of Stores
Additions — — —
Disposals — — —
Q1 2024 ending balance $ — $ — —
Disposals — — —
Additions — — —
The net losses are shown on the Company’s consolidated statements of operations for the years ended December 31, 2025 and 2024 as loss on real estate assets held for sale and sold, net. Assets held for sale are included in real estate assets, net, as well as in the self-storage operations segment of the Company’s segment information.
6. INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES
Investments in unconsolidated real estate entities and cash distributions in unconsolidated real estate ventures represent the Company’s interest in preferred stock of SmartStop and Strategic Storage, an affiliate of SmartStop, and the Company’s noncontrolling interest in real estate joint ventures. The Company accounts for its investments in SmartStop and Strategic
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EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
Storage preferred stock, which do not have a readily determinable fair value, at the transaction price less impairment, if any. The Company accounts for its investments in joint ventures using the equity method of accounting. The Company initially records these investments at cost and subsequently adjusts for cash contributions, distributions and net equity in income or loss, which is allocated in accordance with the provisions of the applicable partnership or joint venture agreement.
In these joint ventures, the Company and the joint venture partner generally receive a preferred return on their invested capital. To the extent that cash or profits in excess of these preferred returns are generated through operations or capital transactions, the Company would receive a higher percentage of the excess cash or profits, as applicable, than its equity interest.
The Company separately reports investments with net equity less than zero in cash distributions in unconsolidated real estate ventures in the consolidated balance sheets. The net equity of certain joint ventures is less than zero because distributions have exceeded the Company’s investment in and share of income from these joint ventures. This is generally the result of financing distributions, capital events or operating distributions that are usually greater than net income, as net income includes non-cash charges for depreciation and amortization while distributions do not.
Net investments in unconsolidated real estate entities and cash distributions in unconsolidated real estate ventures consist of the following:
Number of Stores Equity Ownership % Excess Profit % (1) December 31,
Strategic Storage Trust VI, Inc. Preferred Stock (7) n/a n/a n/a 150,000 150,000
SmartStop Self Storage REIT, Inc. Preferred Stock (8) n/a n/a n/a — 200,000
Investments in unconsolidated real estate entities $ 1,066,783 $ 1,332,338
Cash distributions in unconsolidated real estate ventures (73,701) (75,319)
(1)Includes pro-rata equity ownership share and promoted interest.
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EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
(2)On October 31, 2025, the Company sold its membership interest in the Extra Space Northern Properties VI LLC joint venture, which held 10 properties. The Company acquired one property from the joint venture, and the joint venture partner acquired the remaining nine properties. The sale resulted in a net gain of $45,167 which has been included in the equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and sale of a joint venture interest line on the Company’s consolidated statements of operations.
(3)On July 8, 2025, the Company sold its membership interest in the Life Storage Spacemax LLC joint venture, which held six properties. The sale resulted in a net gain of $9,354, which has been included in the equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and sale of a joint venture interest line on the Company’s consolidated statements of operations.
(4)On April 30, 2025, the Company acquired all of its partners’ membership interests in the ESS-NYFL JV LP and ESS CA-TIVS JV LP joint ventures. The total value of the real estate was recorded at $436,797, which included $258,000 of assumed debt. The Company now owns 100% of the 27 properties that were held in the two joint ventures.
(5)On March 31, 2025, the Company closed on the transfer and distribution of membership interests in its PR II EXR JV LLC joint venture. The Company exchanged its 25% ownership interest in 17 properties for its partner’s 75% ownership interest in six properties. The portfolio consisted of 23 properties; therefore, the Company now owns 100% of the six properties, and its partner now owns 100% of the 17 properties.
(6)On February 4, 2025, the Company invested $100,000 in shares of newly issued convertible preferred stock of Strategic Storage Growth Trust III, Inc., an affiliate of SmartStop. The dividend rate for the preferred shares is 8.85% per annum, subject to increase after five years. The preferred shares are generally not redeemable for five years, except in the case of a change of control or initial listing, and are redeemable thereafter subject to a redemption premium. Dividend income from this investment is included in the equity in earnings and dividend income from unconsolidated real estate entities line on the Company’s consolidated statements of operations.
(7)In May 2023, the Company invested $150,000 in shares of convertible preferred stock of Strategic Storage Trust VI, Inc. with a dividend rate of 8.35% per annum, subject to increase after five years. The preferred shares are generally not redeemable for three years, except in the case of a change of control or initial listing of Strategic Storage. Dividend income from this investment is included in the equity in earnings and dividend income from unconsolidated real estate entities on the Company’s consolidated statements of operations.
(8)In October 2019, the Company invested $200,000 in shares of convertible preferred stock of SmartStop with a dividend rate of 7.00% per annum as of November 2024. Dividend income from this investment is included in the equity in earnings and dividend income from unconsolidated real estate entities line on the Company’s consolidated statements of operations. On April 4, 2025, the Company was repaid its $200,000 preferred equity investment in SmartStop.
In accordance with ASC 810, the Company reviews all of its joint venture relationships annually to ensure that there are no entities that require consolidation. As of December 31, 2025, there were no previously unconsolidated entities that were required to be consolidated as a result of this review. The Company accounts for its investments in unconsolidated joint ventures under the equity method of accounting.
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EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
Equity in earnings and dividend income from unconsolidated real estate entities consists of the following:
For the Year Ended December 31,
Equity in earnings of PRISA Self Storage LLC $ 3,147 $ 3,212 $ 3,320
Equity in earnings of Storage Portfolio II JV LLC 1,905 2,661 3,094
Equity in earnings of Storage Portfolio IV JV LLC 1,393 1,440 1,319
Equity in earnings of Storage Portfolio I LLC 4,681 4,822 5,182
Equity in earnings of HF5 Life Storage-HIERS Storage LLC (1) 807 761 377
Equity in earnings of HF6 191 V Life Storage Holdings LLC (1) (833) (891) (735)
Equity in earnings of VRS Self Storage, LLC 4,789 5,186 5,253
Equity in earnings of HF10 Life Storage HHF Wasatch Holdings LLC (1) 783 598 40
Equity in earnings of other minority owned stores (1) 8,023 10,847 7,740
Dividend income from Strategic Storage preferred stock 20,550 12,513 8,401
(1)For the year ended December 31, 2023, the earnings of the 16 joint ventures from the Life Storage Merger are from the close of acquisition on July 20, 2023.
(2)In November 2024, the Company acquired additional ownership interest in HF1 Sovran HHF Storage Holdings LLC and HF2 Sovran HHF Storage Holdings II LLC from its partner in the unconsolidated joint ventures for cash consideration of $251,235. The transaction increased the Company’s equity ownership percentages from 20% and 15%, respectively, to 49% in each unconsolidated joint venture.
Equity in earnings of certain of our joint ventures includes the amortization of the Company’s excess purchase price of $59,858 of these equity investments over its original basis. The excess basis is amortized over 39 years.
The Company provides management services to joint ventures for a fee. Management fee revenues for affiliated real estate joint ventures for the years ended December 31, 2025, 2024 and 2023 were $33,964, $38,940 and $31,755, respectively.
7. INVESTMENTS IN DEBT SECURITIES AND NOTES RECEIVABLE
Investments in debt securities and notes receivable consists of the Company’s investment in mandatorily redeemable preferred stock of Jernigan Capital, Inc. (“JCAP”) in connection with JCAP’s acquisition by affiliates of NexPoint Advisors, L.P. (“NexPoint”) and receivables due to the Company under its bridge loan program. Information about these balances is as follows:
Dividends and interest receivable 6,375 6,375
In November 2020, the Company invested $300,000 in the preferred stock of JCAP in connection with the acquisition of JCAP by NexPoint. This investment consisted of 200,000 Series A Preferred Shares valued at a total of $200,000, and 100,000 Series B Preferred Shares valued at a total of $100,000. In December 2022, the Company completed a modification with NexPoint Storage Partners (as successor in interest to JCAP) that exchanged the Series A and Series B Preferred Shares for
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EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
300,000 Series D Preferred Shares, valued at a total of $300,000. The Series D Preferred Shares are mandatorily redeemable after six years from the modification in December 2022, with twoone-year extension options. NexPoint may redeem the Series D Preferred Shares at any time, subject to certain prepayment penalties. The Company accounts for the Series D Preferred Shares as a held to maturity debt security at amortized cost and evaluates whether the fair value is below the amortized cost basis at each reporting period. The Series D Preferred Shares have an initial dividend rate of 8.5%. If the investment is not retired after six years, the preferred dividends increase annually.
The Company offers bridge loan financing to certain third-party self-storage owners for whom it manages
properties. These notes receivable consist of mortgage loans receivable, which are collateralized by self-storage properties that the Company manages, and mezzanine loans receivable, which are secured by equity interest pledges. As of December 31, 2025, 80% of the notes held are mortgage receivables. The Company may sell a portion of the mortgage receivables. These notes receivable typically have a term of three years with twoone-year extensions and have variable interest rates. During the year ended December 31, 2025, the Company sold a total principal amount of $112,564 of its mortgage bridge loans receivable to third parties for par, closed on $406,644 in initial loan draws, and recorded $42,275 of draws for interest payments.
The bridge loans typically have a loan to value ratio between 70% and 80% at origination. As of December 31, 2025, none of the notes receivable are in nonaccrual status, and any notes receivable where the monthly payments are delinquent are immaterial and less than 90 days past due. The allowance for potential credit losses is immaterial.
8. DEBT
The components of term debt are summarized as follows:
Less: Discount on unsecured senior notes, net (2) (187,742) (222,254)
Less: Unamortized debt issuance costs (63,506) (56,391)
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EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
The following table summarizes the scheduled maturities of term debt, excluding available extensions, at December 31, 2025:
In November 2024, the Company established a commercial paper note program. Under the terms of the program, the Company may issue up to $1,000,000 of unsecured commercial paper notes that bear interest at variable rates and have varying maturities (generally 30 days or less, with a maximum of 397 days). The commercial paper notes are issued under customary terms in the commercial paper market and are issued at a discount from par or, alternatively, can be issued at par and bear varying interest rates on a fixed or floating basis. The net proceeds from the issuances of the notes are used for general working capital and other general corporate purposes. General corporate purposes may include, but are not limited to, the repayment of other debt and selective development, redevelopment, or acquisition of properties. Outstanding commercial paper notes have been included in revolving lines of credit and commercial paper on the Company’s consolidated balance sheets. At December 31, 2025, there were $680,000 in issuances outstanding under the commercial paper program with a weighted-average maturity of 21 days.
All of the Company’s lines of credit and commercial paper are guaranteed by the Company. The following table presents information on the Company’s lines of credit and commercial paper:
(1) Daily Simple Secured Overnight Financing Rate (“SOFR”) for credit lines.
On August 21, 2025, the Company entered into the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”), which increased the commitment under the revolving credit facility to $3,000,000, extended the maturity of the credit facility to August 2029, and reduced the interest rate by 10 basis points. In connection with the amendment, the Company also paid off term loans within the credit facility in the amount of $655,000 and increased other term loans within the credit facility by $200,000. The Credit Agreement is guaranteed by the Company and is not secured by any assets of the Company. The Company’s unsecured debt is subject to certain financial covenants. As of December 31, 2025, the Company was in compliance with all of its financial covenants.
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EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
As of December 31, 2025, the Company’s percentage of fixed-rate debt to total debt was 82.1%. The weighted average interest rates of the Company’s fixed and variable-rate debt were 4.2% and 4.8%, respectively. The combined weighted average interest rate was 4.3%.
9. DERIVATIVES
The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash payments principally related to the Company’s borrowings.
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (“OCI”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. A portion of these changes is excluded from accumulated other comprehensive income as it is allocated to noncontrolling interests. During the years ended December 31, 2025, 2024 and 2023, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. During 2026, the Company estimates that $749 will be reclassified as an increase to interest income.
The following table summarizes the terms of the Company’s eight active derivative financial instruments, which had a total current notional amount of $952,000 as of December 31, 2025.
Hedge Product Range of Notional Amounts Strike Effective Dates Maturity Dates
Fair Values of Derivative Instruments
The table below presents the fair values of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets:
Asset / Liability Derivatives
Effect of Derivative Instruments
The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations for the years presented. No tax effect has been presented as the derivative instruments are held by the Company:
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EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
Credit-Risk-Related Contingent Features
The Company has agreements with some of its derivative counterparties that contain provisions pursuant to which the Company could be declared in default of its derivative obligations if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender.
The Company also has an agreement with some of its derivative counterparties that incorporates the loan covenant provisions of the Company’s indebtedness with a lender affiliate of the derivative counterparty. Failure to comply with the loan covenant provisions would result in the Company being in default on any derivative instrument obligations covered by the agreement.
As of December 31, 2025, the Company had not posted any collateral related to these agreements. If the Company had breached any of these provisions as of December 31, 2025, it could have been required to cash settle its obligations under these agreements at their termination value. Refer to note 2 for further information regarding the Company’s derivative instruments and hedging activities.
10. STOCKHOLDERS’ EQUITY
The Company’s charter provides that it can issue up to 500,000,000 shares of common stock, $0.01 par value per share and 50,000,000 shares of preferred stock, $0.01 par value per share. As of December 31, 2025, 211,155,322 shares of common stock were issued and outstanding, and no shares of preferred stock were issued or outstanding.
All holders of the Company’s common stock are entitled to receive dividends and to one vote on all matters submitted to a vote of stockholders. The transfer agent and registrar for the Company’s common stock is Broadridge Corporate Issuer Solutions, LLC.
During the year ended December 31, 2025, the Company sold no shares of common stock.
On April 15, 2024, the Company filed its $800,000 “at the market” equity program with the Securities and Exchange Commission (the “SEC”) using a shelf registration statement on Form S-3, and entered into an equity distribution agreement with nine sales agents. No shares have been sold under the current “at the market” equity program, and no shares were sold under the previous “at the market” equity program, which spanned from August 9, 2021 through April 14, 2024.
On November 13, 2023, the Company’s board of directors authorized a share repurchase program allowing for the repurchase of shares with an aggregate value up to $500,000. During the year ended December 31, 2024, no shares were repurchased. During the year ended December 31, 2025, the Company repurchased 1,158,244 shares at an average price of $129.10 per share, paying a total of $149,525. As of December 31, 2025, the Company had remaining authorization to repurchase shares with an aggregate value up to $350,475.
On July 20, 2023, the Company issued 76,217,359 shares of its common stock at $148.96 for a total value of $11,353,338 as part of the Life Storage Merger. See Property Acquisitions and Dispositions note above.
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EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
11. NONCONTROLLING INTEREST REPRESENTED BY PREFERRED OPERATING PARTNERSHIP UNITS
Classification of Noncontrolling Interests
GAAP requires a company to present ownership interests in subsidiaries held by parties other than the company in the consolidated financial statements within the equity section, but separate from the Company’s equity. It also requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations and requires changes in ownership interest to be accounted for similarly as equity transactions. If noncontrolling interests are determined to be redeemable, they are to be carried at their redemption value as of the balance sheet date and reported as temporary equity.
The Company has evaluated the terms of the Operating Partnership’s preferred units and classifies the noncontrolling interest represented by such preferred units as stockholders’ equity in the accompanying consolidated balance sheets. The Company will periodically evaluate individual noncontrolling interests for the ability to continue to recognize the noncontrolling interest as permanent equity in the consolidated balance sheets. Any noncontrolling interests that fail to qualify as permanent equity will be reclassified as temporary equity and adjusted to the greater of (1) the carrying amount, or (2) its redemption value as of the end of the period in which the determination is made.
At December 31, 2025 and December 31, 2024, the noncontrolling interests represented by the Preferred OP Units qualified for classification as permanent equity on the Company’s consolidated balance sheets. The partnership agreement of the Operating Partnership (as amended, the “Partnership Agreement”) provides for the designation and issuance of the OP Units. The balances for each of the specific Preferred OP Units as presented in the Statement of Noncontrolling Interests and Equity as of the years indicated are as follows:
Series A Participating Redeemable Preferred Units
The Partnership Agreement provides for the designation and issuance of the Series A Units. The Series A Units have priority over all other partnership interests of the Operating Partnership with respect to distributions and liquidation. As of December 31, 2025 and December 31, 2024, there were no outstanding Series A Units.
Series B Redeemable Preferred Units
The Partnership Agreement provides for the designation and issuance of the Series B Units. The Series B Units rank junior to the Series A Units, on parity with the Series C Units (defined below) and Series D Units, and senior to all other partnership interests of the Operating Partnership with respect to distributions and liquidation.
The Series B Units were issued in 2013 and 2014. The Series B Units have a liquidation value of $25.00 per unit for a fixed liquidation value of $33,567 which represents 1,342,727 Series B Units outstanding at December 31, 2025. Holders of the Series B Units receive distributions at an annual rate of 6.0%. These distributions are cumulative. The Series B Units become redeemable at the option of the holder on the first anniversary of the date of issuance, which redemption obligation may be satisfied at the Company’s option in cash or shares of its common stock.
Series C Redeemable Preferred Units
The Partnership Agreement provides for the designation and issuance of the Series C Units. The Series C Units ranked
junior to the Series A Units, on parity with the Series B Units and Series D Units, and senior to all other partnership interests of
the Operating Partnership with respect to distributions and liquidation. As of December 31, 2025 and December 31, 2024, there were no outstanding Series C Units.
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EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
Series D Redeemable Preferred Units
The Partnership Agreement provides for the designation and issuance of the Series D Units. The Series D Units rank junior to the Series A Units, on parity with the Series B Units and Series C Units, and senior to all other partnership interests of the Operating Partnership with respect to distributions and liquidation.
The Series D Units have a liquidation value of $25.00 per unit, for a fixed liquidation value of $20,260, which represents 810,395 Series D Units outstanding at December 31, 2025. Holders of the Series D Units receive distributions at an annual rate between 3.0% and 5.0%. These distributions are cumulative. The Series D Units become redeemable at the option of the holder on the first anniversary of the date of issuance, which redemption obligation may be satisfied at the Company’s option in cash or shares of its common stock. In addition, certain of the Series D Units are exchangeable for OP Units at the option of the holder until the tenth anniversary of the date of issuance, with the number of OP Units to be issued equal to $25.00 per Series D Unit, divided by the value of a share of common stock as of the exchange date.
During the year ended December 31, 2025, 890,594 Series D Units were redeemed for 143,830 shares of common stock.
On October 1, 2024, 3,507,844 Series D Units were liquidated and returned to the Company. In exchange, the former holders of the Series D Units were issued notes totaling $87,696, which represented the total liquidation value of the Units, due on January 1, 2050. Interest is paid to the former Unit holders quarterly, effective December 31, 2024, at the existing rate of 3.35%. The full liquidation value was reclassified from noncontrolling interest represented by preferred operating partnership units to other liabilities on the Company’s consolidated balance sheets.
On December 27, 2024, 1,100,734 Series D Units were converted to 183,398 Common OP Units. As a result $27,518 was moved from noncontrolling interest represented by preferred operating partnership units to noncontrolling interests in operating partnership, net and other noncontrolling interests on the Company’s consolidated balance sheets.
In January 2023, 890,594 Series D units were redeemed for 154,307 shares of common stock. In November 2023, 15,093 Series D units were redeemed for cash of $377.
12. NONCONTROLLING INTEREST IN OPERATING PARTNERSHIP AND OTHER NONCONTROLLING INTERESTS
Noncontrolling Interest in Operating Partnership
The Company’s interest in its stores is held through the Operating Partnership. Between its general partner and limited partner interests, the Company held a 95.6% ownership interest in the Operating Partnership as of December 31, 2025. The remaining ownership interests in the Operating Partnership (including Preferred OP Units) of 4.4% are held by certain former owners of assets acquired by the Operating Partnership. As of December 31, 2025, the noncontrolling interest in the Operating Partnership is shown on the balance sheet net of a note receivable of $50,000 because a borrower under the note receivable is also a holder of OP Units. This note receivable originated in December 2024, bears interest at 10% per annum and matures on June 30, 2026.
The noncontrolling interest in the Operating Partnership represents OP Units that are not owned by the Company. OP Units are redeemable at the option of the holder, which redemption may be satisfied at the Company’s option in cash, based upon the fair market value of an equivalent number of shares of the Company’s common stock (based on the ten-day average trading price) at the time of the redemption, or shares of the Company’s common stock on a one-for-one basis, subject to anti-dilution adjustments provided in the Operating Partnership Agreement. As of December 31, 2025, the ten-day average closing price of the Company’s common stock was $130.66 and there were 9,432,990 OP Units outstanding. Assuming that all of the OP Unit holders exercised their right to redeem all of their OP Units on December 31, 2025 and the Company elected to pay the OP Unit holders cash, the Company would have paid $1,232,514 in cash consideration to redeem the units.
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EXTRA SPACE STORAGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Amounts in thousands, except store and share data, unless otherwise stated
OP Unit activity is summarized as follows for the years presented:
For the Year Ended December 31,
GAAP requires a company to present ownership interests in subsidiaries held by parties other than the company in the consolidated financial statements within the equity section but separate from the Company’s equity. It also requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations and requires changes in ownership interest to be accounted for similarly as equity transactions. If noncontrolling interests are determined to be redeemable, they are to be carried at their redemption value as of the balance sheet date and reported as temporary equity.
The Company has evaluated the terms of the OP Units and classifies the noncontrolling interest represented by the OP Units as stockholders’ equity in the accompanying consolidated balance sheets. The Company will periodically evaluate individual noncontrolling interests for the ability to continue to recognize the noncontrolling amount as permanent equity in the consolidated balance sheets. Any noncontrolling interests that fail to qualify as permanent equity will be reclassified as temporary equity and adjusted to the greater of (1) the carrying amount, or (2) its redemption value as of the end of the period in which the determination is made.
Other Noncontrolling Interests