Business Context and Reporting Period
Company: Extra Space Storage Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: October 4, 2004
Event: Creation of a direct financial obligation via a reverse interest rate swap agreement.
Key Financial Metrics and Obligations
This filing details a specific derivative instrument rather than general operating performance. Key figures include:
- Underlying Debt: $61,770,000 senior fixed-rate mortgage due 2009 with Wachovia Bank, N.A.
- Swap Notional Amount: $61,770,000
- Swap Terms: The company receives a fixed rate of 4.30% and pays a variable rate of one-month LIBOR plus 65.5 basis points.
- Counterparty: U.S. Bank National Association.
- Upfront Costs: No origination fees or significant upfront costs were incurred.
Note: The filing does not provide data on revenue, profit, cash flow, margins, or overall liquidity.
Material Changes
The material change reported is the execution of the Swap Agreement on October 4, 2004. This transaction converts the interest rate exposure of the existing $61,770,000 fixed-rate mortgage into a variable-rate obligation, effectively creating a synthetic variable-rate loan.
Outlook, Risks, and Management Commentary
Purpose: The swap was entered into to manage interest rate risk associated with the senior mortgage previously described in the Company's Form S-11/A Registration Statement (filed August 11, 2004).
Risks: By entering this agreement, the Company is now exposed to fluctuations in the one-month LIBOR rate. If LIBOR rises significantly, the Company's interest expense on this portion of its debt will increase.
Investor Verification Checklist
- Verify the current one-month LIBOR rate to estimate the immediate variable interest cost (LIBOR + 65.5 bps).
- Review the Company's Form S-11/A (File No. 333-115436) for the full context of the $61,770,000 mortgage and the rationale for the swap.
- Assess the Company's overall debt portfolio to determine the percentage of total debt now subject to variable rate risk.
- Confirm the maturity date of the underlying mortgage (2009) to understand the duration of this exposure.