This August, Extra Space Storage celebrated its 20th year on the New York Stock Exchange. This is a big accomplishment for any company, especially one from the self-storage industry, as back when the company went public, the public wasn’t yet as educated on the product as they are now.
Created by Kenneth M. Woolley in 1977, Extra Space Storage joined the NYSE in 2004. Being publicly traded took the company to new heights; the easier access to money resulted in steady growth, and the company went from being a relatively small business worth $700 million to the largest in the industry, valued at $32.5 billion.
The increase in value is in part due to the growth the company went through since going public, going from 160 properties with a total of 85,000 units in 20 states to having a total of 3,800 facilities and 2,600,000 units in 42 states. According to the acting chief financial officer (CFO) of Extra Space Storage, P. Scott Stubbs, the company had around 10 facilities in Mexico, but found it difficult to grow in size and scale. The REIT eventually decided to focus on the U.S. self-storage market, as within the American market they found success to be much faster. However, Stubbs says, “It doesn't mean we wouldn't go international. It just means we would have to do it at the right size and at the right time. It’s hard to grow internationally, one or two properties at a time.”
Wooley and Stubbs at the celebration of Extra Space's 20 years on the NYSE
Stubbs was involved in Extra Space Storage’s decision to become a public company, but back in 2004 he was the senior vice president of finance and accounting. “I joined the company in December 2000, after meeting Kenneth Woolley, the founder of Extra Space, and Spencer Kirk, who had joined him to grow the company. It has been a great experience.”
The company started to focus on growth in 1998, when Wooley’s efforts to grow the business led him to partner with Prudential Real Estate, which invested $100 million in the company. “When I came over, Extra Space had about 60 properties, and a portion of those were actually just managed. We didn’t even own all of those properties,” he adds.
In the meantime, the self-storage industry changed and evolved into a mainstream asset class. Stubbs recollects going to events and talking to investors of more mainstream asset classes at the time, such as malls, office buildings, and apartments, which didn’t know much about self-storage, and his and his colleagues’ efforts to educate the investors along the way. “It was quite a process. But today, self-storage has become a core asset class, and people accept it more. I mean, if you are going to invest in real estate, you probably need to own some portion of self-storage.”
In the past few years, usage has also increased. “When I first started in the self-storage space back in 2000, we probably had about 5 percent usage in the United States. Today, that number is above 10 percent,” Stubbs adds. “The industry also went from mom-and-pop operators who owned two or three properties to several large companies like Extra Space. Today, there are four publicly traded real estate investment trusts, so a lot has changed in the industry.”
Extra Space Storage started to look into potentially becoming publicly traded at the end of 2003. “The market was pretty good at that time. There was some stability, and volatility was low. A bunch of companies were looking to go public, so we started going through the process in January of 2004 and did not get public until August of 2004,” he adds. “It’s a long process when you go from being a small private company to a public company. You have to go through the registration process with the SEC, and you have to convert your financial statements to be more ready for the Security and Exchange Commission. You have to be public-company-ready.”
Wooley, CEO Joe Margolis, and Stubbs at the NYSE for the company's 20th year.
As many of the companies’ facilities were joint investments, besides taking the time to get their business in order, Extra Space Storage had to roll out many joint venture entities, which involved a long negotiation process to buy out some of their partners. Once it was all done, they began the sales process, which is when they started to market the company. “We were actually within three days of having to wait until the end of the next quarter. This would have made the financial statement stale, so we got it done in the nick of time.”
After just eight months of going public, they were able to raise $300 million, making them, at the time, the largest IPL in the state of Utah. The initial success was met with even more investment, which led to massive growth that continues to this day. “Our ability to access capital and raise money became very different. Now we do bond offerings that are $600 million in a week,” he affirms. “We went from doing $20 million loans for four properties to doing $100 million loans or $200 million equity offerings.”
Extra Space Storage in Utah
Their first big investment after going public happened in 2005, when Extra Space Storage acquired Storage USA, which was owned by GE at the time. The $2.3 billion deal was covered by news outlets such as The New York Times. “At the time, we had 150 stores, and they had 450. So, really, what catapulted our growth after being public was buying Storage USA.”
While the pressure of going public and the record-breaking capital that was now being dealt with didn’t seem to faze Stubbs, he was concerned the company was going to lose the small company culture that made Extra Space a special place to work.
“When we had 150 stores, we knew all of our employees. You could walk around the corporate office in Salt Lake City, or go to any of our stores, and you would know all of them. Today, with 7,500 employees, it’s not realistic to think you are going to know every single person or that you are going to be able to meet personally with them every single year,” he states. “We still do town hall meetings and involve our employees to let them know they are heard. We want to know what is going on at the store level; that’s a core piece of our focus, as well as implementing a lot of their ideas, as we always had a culture of ‘doing things better’ or ‘doing things differently.’”
Stubbs and team at a self-storage roundtable
Stubbs took over the role of CFO after years of shadowing and being mentored by former CFO Kent Christensen in 2011. “Kent did a great job at helping me be prepared to move into the CFO role,” he says. “He allowed me to be involved in things some people might not have, and as a result, it made my transition much easier.”
Stubbs also attributes part of his success to the company’s ability to hire people who are overqualified and can handle more responsibility as time passes by. “You can hire two kinds of employees. You can hire someone that you hope has the ability to grow with the job, or you can hire someone and have the job grow into that person. We have effectively overhired many times, and as a result, we haven’t had to replace people or hire over people. It has really helped.”
Stubbs intends to pay it forward when it comes to mentoring the next CFO of the company, inspired by his own positive experience with Christensen. “I'm always very appreciative of that, and I try to do the same as I execute and grow in my job,” he adds. However, he is not ready to retire just yet. “I enjoy doing what I'm doing here, but I think I realize I won't be here forever. But today, it’s still Extra Space all day, every day.”
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Victória Oliveira is a freelance writer based in Brazil.
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