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CEO Spotlight: Kirk Sees Unprecedented Times in Self-Storage

12/11/2013 | By Mitch Irzinski

Spencer Kirk, CEO of Extra Space Storage (NYSE: EXR), joined REIT.com for a CEO Spotlight video interview at REITWorld 2013: NAREIT’s Annual Convention for All Things REIT at the San Francisco Marriott Marquis.

The self-storage industry is experiencing unprecedented times in terms of market fundamentals. Kirk was asked his opinion regarding the tailwinds going forward.

“Let’s talk about what the two tailwinds are,” he said. “Number one is there is virtually no new supply, and because of some difficulties in bringing this asset class out of the ground and getting it leased up, we see muted supply for the next two to four years. Secondly, the Internet was the big game changer. We’re a retail play now, and the scale and sophistication to play on the Internet has virtually locked out the smaller operator. So, the Internet has not become the great equalizer as many people thought. It’s the great divider, and so the large publicly traded companies are taking a disproportionate share of customers that are available in the marketplace–and I think those are long-term trends. ”

Kirk described the outlook for his company’s acquisitions.

“There’s a lot of competition for these assets. People like self-storage,” he said. “With the top 10 operators owning, controlling or operating less than 10 percent of the market, we’ve got a very fragmented environment, and I think that although there’s some pricing competition that’s a little stiffer than we would like, the landscape for a number of transactions for financial consolidation appears to be wide open. I actually think we’ll see an acceleration in the acquisitions market.”

Kirk also talked about his company’s balance sheet as it related to his growth plans moving forward.

“Our balance sheet has never been in better shape,” he said. “This past year, we had tremendous access to low-cost debt. We were able to issue a convertible bond, which was well received, and we also just did an equity offering, which was very well received. We think that as long as we’ve got a place to deploy the capital, the capital will be made readily available. And we’re very optimistic about the future on that.”