Spencer Kirk, CEO of Extra Space Storage, Inc. (NYSE: EXR), joined REIT.com for a CEO Spotlight video interview at REITWorld 2015: NAREIT’s Annual Convention for All Things REIT at the Wynn Las Vegas.
In October, Extra Space completed a $1.3 billion acquisition of SmartStop Self Storage, Inc., a public non-listed REIT. Extra Space acquired 122 stores and assumed the property management of 43 stores previously managed by SmartStop.
“It’s a really good strategic play for us. In one transaction, we increased our physical footprint and our digital footprint 15 percent,” Kirk observed.
Extra Space also gets the operational efficiencies from the overlapping geographies of these assets, Kirk noted: “As you look at the upside in occupancy and rate, we think this is a good acquisition that will give us a lot of accretion.”
Meanwhile, Kirk pointed out that fundamentals in the self-storage sector are strong, demand is stable and there is very little new supply.
At the same time, Kirk highlighted the advantage that larger operators enjoy over smaller players with regard to the Internet’s ability to drive customer traffic. The chasm between the larger operators and the mom-and-pop operators is widening, and the rate at which it is widening is accelerating, according to Kirk.
“I think the ultimate outcome is that you’ll see more consolidation, both operationally as well as financially,” he said.
Kirk also said he expects interest rates to rise marginally. However, about 70 percent of Extra Space’s debt is fixed, he said, and the company is looking to increase that amount.