Extra Space Storage (NYSE:EXR) and National Storage Affiliates Trust (NYSE:NSA): How to Make Billions Storing Other People’s Stuff

April 28, 2023

Extra Space Storage Inc. (NYSE:EXR) and National Storage Affiliates Trust (NYSE:NSA) are two companies that have created billions in shareholder value from storing the endless personal goods of Americans.

Two interviews, exclusive to the Wall Street Transcript, detail the process through which these storage entrepreneurs have built their businessess.

Joseph D. Margolis has served as the Chief Executive Officer of Extra Space Storage (NYSE:EXR) since January 1, 2017.

Joseph D. Margolis, Chief Executive Officer, Extra Space Storage (NYSE:EXR)

Joseph D. Margolis has served as the Chief Executive Officer of Extra Space Storage (NYSE:EXR) since January 1, 2017.

Previously, he served as the company’s Executive Vice President and Chief Investment Officer from July 2015 until December 31, 2016, and as a member of its board of directors from February 2005 until July 2015.

From 2011 until July 2015, Mr. Margolis also was Senior Managing Director and Partner at Penzance Properties, a vertically integrated owner, operator and developer of office and other properties in the Washington, D.C. metro area.

Previously, Mr. Margolis was a co-founding partner of Arsenal Real Estate Funds, a private real estate investment management firm, from 2004 through 2011; held senior positions from 1992 to 2004 at Prudential Real Estate Investors in portfolio management, capital markets and as General Counsel; worked for The Prudential Insurance Company of America as in-house real estate counsel from 1988 through 1992; was a real estate associate at the law firm of Nutter, McClennen & Fish from 1986 through 1988.

Mr. Margolis is a graduate of Harvard College and Columbia University School of Law.

His 2,916 word interview details how he built Extra Space Storage (NYSE:EXR).

“We were founded in 1977 by Ken Woolley, and storage was not a common or accepted product type at the time.

Between 1977 and 1998 he really put in his “10,000 hours,” if you’re familiar with that reference from Malcolm Gladwell, and he built stores, financed them, leased them, kept them clean, and sold them because he had to keep selling the last store to get the capital to build the next one.

By 1998 he was, I would say, an expert in the business, but he wanted to get off the treadmill of having to keep selling the last one to raise money to do the next one.

He realized to grow the company large, he needed two things: He needed capital and expertise.

Extra Space had 12 stores at the time.

So for capital, he did a venture with Prudential Real Estate Investors, and I think that was the first institutional money into self-storage.

For expertise, he partnered with a guy named Spencer Kirk, who had built a tech company in his garage out of college and grew it and took it public and took it international and sold it, so he had that experience of taking a dream to a big company.

And what’s interesting about that is bringing Spencer on really gave us our focus on technology, which has served us well over the years; it’s been part of our DNA.

As has partnerships, and the partnership with Prudential really started us down that road.

So, with the capital and expertise, Ken was able to grow the company large enough that, by 2004, it went public.

He did a major acquisition in 2005 of a company called Storage USA, which was four times larger than Extra Space Storage (NYSE:EXR) at the time, and that accelerated our growth.

In 2008, we started a third-party management business, which is now the largest and fastest growing in the country.

In 2016, we were added to the S&P 500.

End of 2020/beginning of 2021, we got investment-grade bond ratings from Moody’s and S&P.

We’ve grown from 12 stores in 1998 to 2,400 stores today, and we have the highest 10-year return of any storage REIT, and, frankly, any REIT over the past 10 years.

So it’s been a great ride and a great growth story…

We have, as I said, 2,400 stores, which is about 175 million square feet, or 1.6 million storage units.

We’re in 41 states and very broadly diversified, about 1,000 different cities. We’re about 60% in what we would consider primary markets, 30% secondary, 10% tertiary, and that’s a very purposeful portfolio design based on our research of how markets perform over different economic cycles.

What’s great about our portfolio, and storage in general, is that each individual investment is very small, it’s very bite sized, so we’re very granular.

We have 1.3 million tenants.

We’re in almost 1,000 cities.

No MSA contributes more than 13% of our same-store revenue.”

Extra Space Storage Inc. (NYSE:EXR) is just one example of a successful storage space story.

David Cramer was appointed President and Chief Executive Officer of National Storage Affiliates Trust  (NYSE:NSA) in April 2023.

David Cramer, President and CEO of National Storage Affiliates Trust (NYSE:NSA)

David Cramer was appointed President and Chief Executive Officer of National Storage Affiliates Trust (NYSE:NSA) in April 2023.

Before assuming his current role, Mr. Cramer served as National Storage Affiliates Trust (NYSE:NSA)’s President and Chief Operating Officer since July 2022, and Executive Vice President and Chief Operating Officer from April 2020 to July 2022.

In addition, he has served as Chairman of NSA’s Best Practices Committee since its inception.

Mr. Cramer has more than 24 years of experience in the self-storage industry beginning in 1998, when he joined SecurCare Self Storage, the predecessor company to National Storage Affiliates Trust (NYSE:NSA).

At SecurCare he served as Director of Operations from 1998 to 2005, COO from 2005 to 2013, and President and CEO from 2013 to 2020.

Prior to joining SecurCare, he worked for Target (NYSE:TGT) for 12 years where he held several operational and managerial positions.

Mr. Cramer currently serves as a board member for the Storage Business Owners Alliance Tenant Insurance program.

In this 3,948 word interview, David Cramer develops the investment case for National Storage Affiliates Trust (NYSE:NSA) and demonstrates his ability to build a successful storage business.

“If you think about the private world, when you’re dealing with investment groups, there’s always some type of timeline when they want their money back, and so you’re recapitalizing or you’re selling properties or you’re doing something that doesn’t really fulfill the long-term growth goal that you’re trying to achieve.

We spent a lot of time building great operational teams, we were limited to the available industry platforms and we really wanted to continue with the business.

So we were having a lot of brainstorming sessions around, what is it we can develop, and what is it we can build that will give us this long-term sustainability with our portfolio and give us the growth and the tools we needed?

As we were having those conversations, we realized there were probably other people in the self-storage world that had the same problems we had, and so we got to thinking, is there a way to put together a group of operators who could get on common ground and bring their portfolios into a larger group and look to take our company public?

These other operators we’re talking about were in the same boat we were, where you don’t want to sell out, you love the business, you want to stay in the business.

Self-storage has been great to us.

And so we spent time thinking about a vehicle that would allow us to access the public markets and get a group of people to come together and build a better mousetrap. There had been nothing like this.

So, it was a long road of planning and organizing and asking ourselves how we could put this together, and Arlen really started the ball rolling, along with Tammy Fischer who came along early in this part of the NSA journey, and really built a great vehicle to allow us to bring regional operators together — people who had been in the industry a long time, had great histories, had great portfolios, had great teams, and really wanted to do more than what they were doing at the time, and we were able to form NSA.

We were just in New York for the 10-year anniversary of our formation in 2013, so that’s exciting, and we’ve had great success since we IPO’d in 2015.

We started with three founding Participating Regional Operators, or PROs as we call them. We’ve grown to a total of 12 PROs and brands through the years.

And National Storage Affiliates Trust (NYSE:NSA) has just had tremendous success post-IPO overall, in operational performance and platform improvements and the way this team has gotten together and had great best practices and really executed an external growth plan through adding new PROs and acquiring properties.”

The success of National Storage Affiliates Trust (NYSE:NSA) and Extra Space Storage Inc. (NYSE:EXR) demonstrate the ability of American entrepreneurs to develop, build, finance and scale interesting real estate niche businesses in the United States.

Be sure to read the complete interviews with these CEOs and CEOs from other real estate businesses, only in the Wall Street Transcript.