KEY CALLOUTS
Tickers / Companies: EXR
Key Takeaways: Best Idea Short EXR had a good 1Q21 and took numbers up for the full year as expected, but objectively it was a “lower-quality” raise versus PSA. The raise was driven primarily by lower opex, lower G&A expenses and better ancillary revenues namely tenant insurance (TI) and management fees. Of the $0.08 per share Core FFO raise at the midpoint for the full year, $0.02 per share comes on higher TI, another $0.02 on lower G&A expenses, and a penny each on higher management fees and lower interest expense. We estimate that the majority of the remaining $0.02 per share is driven by lower SSExp growth which was taken down 150bp at the midpoint versus a quarter ago. In other words, virtually none of the raise comes on a better top-line for the same store portfolio versus prior expectations, and we wonder if some degree of conservatism was initially built-in to opex guidance to provide flexibility to raise later in the year (that ammo is probably gone now). EXR raised the SSRev range by +65bp at the midpoint, but contrast this with PSA where expectations were for ~2% SSRev growth at best moving up to +5% or higher. EXR continues to perform well and had a good quarter operationally with solid pricing, but (1) it set a high initial bar for FY21 along with 4Q20 results and (2) consensus expectations were high coming into 1Q21. We think at the very least performance will narrow against paired-long PSA, which dovetails with the idea of using a tactical short of EXR to finance the PSA long.
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