Trading Places

In February, Extra Space Storage Inc. (NYSE: EXR) announced that Kenneth M. Woolley, the company's chairman and CEO, would be taking a three-year leave of absence to serve a mission in Moscow for the Church of Jesus Christ of Latter-day Saints.
While the news may have appeared out of the ordinary to observers outside the company, it was business as usual for Spencer Kirk, who has taken over as CEO and chairman of the Salt Lake City-based REIT. Kirk, who joined Extra Space at Woolley's request 10 years ago, actually made a similar pilgrimage in 2004. He and his family moved to Virginia for a three-year stint, during which time Kirk served as head of the Church's mission activities in state capital of Richmond.
"We essentially just traded places," Kirk says.
Woolley and Kirk first met in the 1990s, when Woolley served on the board of a computer modem technology company owned by Kirk. Once Kirk decided to retire from the business in 1997, Woolley persuaded him to join him in growing Extra Space into a national storage company.
"You don't know beans about real estate, and I do. But I've never built a company up from three employees to 50," Kirk recalls Woolley telling him when the entrepreneur made his sales pitch. The pair agreed to form an equal partnership, leading to the birth of Extra Space in 1998.
Initially, Kirk and Woolley served as co-chief executives. Kirk oversaw day-to-day operations and organizational management, while Woolley took charge of financing and business development. Then, in 2003, the Church asked Kirk to head up its mission work in Richmond for a three-year term. As a college student, Kirk spent two years doing mission work in South Korea. This time, however, he was put in charge of more than 500 missionaries assigned to work in the Richmond area.
"It was incredible opportunity to mentor and coach young men and women who want to do something extraordinary with their lives," Kirk says.
Kirk says the REIT he returned to in 2007 differed dramatically from the company he left in 2004. In 2005, Extra Space acquired competitor USA Storage. Kirk says the move significantly bolstered the strength of Extra Space as a company. For example, he notes that, on average, each member of Extra Space's management team now boasts more than 20 years of experience in the storage industry.
"When I left in 2004, the company's management team was much less deep and much less experienced than it is now," he says.
These savvy executives have helped Extra Space undertake major initiatives intended to keep the company among the industry leaders in the storage industry. One area where Kirk says the company has thrived is transitioning its operations to leverage online services. Whereas the vast majority of customers used the yellow pages and other such channels to track down storage sites in the past, today referrals from the yellow pages account for less than 10 percent of Extra Space's business. The company has implemented strategies such as search engine optimization techniques to enhance its visibility in cyberspace, according to Kirk.
Extra Space also invested heavily in upgrading its call centers to leverage technological innovation in telecommunications. As a result, Kirk says the company has achieved "best-in-class" levels of customer service.
Kirk points out, however, that despite the firm's attempts to leverage technology and operating processes, tried-and-true industry fundamentals underlie Extra Space's overall company ethos. Best practices like rigorous employee training and vigilant property upkeep remain hallmarks of Extra Space sites.
"We have tried to put the best located properties in the best neighborhoods in the best markets," Kirk says.
Major investors appear to have taken notice of the moves Extra Space has made. While an abundance of capital has remained on the sidelines during the recent financial crisis, Extra Space recently entered a $291 million joint venture with Harrison Street Capital. Under the terms of the agreement, Extra Space has a 20 percent stake in the fund. With REITs facing pressure from the market to de-lever, Kirk says the capital infusion will enable Extra Space to solidify its balance sheet.
Kirk notes, however, that the transaction has a more symbolic value for both his company and the storage sector: "In the worst recession in 80 years, we are holding our own and doing very well."