Extra Space Storage (EXR) 10-K risk factor changes: FY2017 vs FY2016

We are a real estate company that derives our income from [added: the] operation of our stores.

We maintain comprehensive [added: property and casualty insurance policies, including] liability, fire, flood, earthquake, wind (as [removed: deemed] [added: we deem] necessary or as required by our lenders), [removed: extended] [added: umbrella] coverage and rental loss insurance with respect to our stores.

Certain types of losses, however, may be either [removed: uninsurable or] [added: uninsurable,] not economically insurable, [added: or coverage may be excluded on certain policies,] such as losses due to earthquakes, hurricanes, tornadoes, riots, acts of [removed: war] [added: war, terrorism,] or [removed: terrorism.][added: social engineering.]

Environmental compliance costs and liabilities associated with operating our stores may [added: adversely] affect our results of operations.

Under various U.S. federal, state and local laws, ordinances and regulations, [removed: owners and operators] [added: a current or previous owner, developer or operator] of real estate may be liable for the costs of [removed: investigating and remediating] [added: removal or remediation of] certain hazardous [removed: substances] or [removed: other regulated materials on or in such property.][added: toxic substances, which could be substantial.]

Such laws often impose [removed: such] liability without regard to whether the owner or operator knew of, or was responsible for, the [added: release or] presence of such [removed: substances or materials.][added: hazardous substances.]

Our ability to acquire stores on favorable terms and successfully integrate and operate them may be constrained by the following significant [removed: risks:][added: risks]

| • | the inability to achieve satisfactory completion of due diligence investigations and other customary closing conditions; [added: and] |

We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information, and to manage or support a variety of business processes, including financial transactions and records, personally [added: identifiable information, and tenant and lease data.]

As of December 31, [removed: 2016,] [added: 2017,] we held interests in [removed: 180] [added: 215] operating stores through joint ventures.

The decision-making authority regarding the stores we currently hold through joint ventures is either vested exclusively with our joint venture partners, is subject to a majority vote of the joint venture partners or [added: is] equally shared by us and the joint venture partners.

[added: In addition,] investments in partnerships, joint ventures or other entities may, under certain circumstances, involve risks not present were a third party not involved, including the possibility that partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions.

In addition, our Operating Partnership is required to indemnify us, our affiliates and each of our respective trustees, officers, directors, employees and agents to the fullest extent permitted by applicable law against any and all losses, claims, damages, liabilities (whether joint or several), expenses (including, without limitation, attorneys’ fees and other legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or [removed: proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Operating Partnership, provided that our Operating Partnership will not indemnify for (1) willful misconduct or a knowing violation of the law, (2) any transaction for which such person received an improper personal benefit in violation or breach of any provision of the partnership agreement, or (3) in the case of a criminal proceeding, the person had reasonable cause to believe the act or omission was unlawful.]

As of December 31, [removed: 2016,] [added: 2017,] we had approximately [removed: $4.4] [added: $4.6] billion of outstanding indebtedness.

| • | we may default on our obligations and the lenders or mortgagees may foreclose on our stores that secure their loans and receive an assignment of rents and [removed: leases;] [added: leases and/or enforce our guarantees;] |

Increases in interest rates may increase our interest expense and adversely affect our cash flow and our ability to service [removed: our indebtedness and make cash distributions to our stockholders.]

As of December 31, [removed: 2016,] [added: 2017,] we had approximately [removed: $4.4] [added: $4.6] billion of debt outstanding, of which approximately [removed: $1.3] [added: $1.2] billion, or [removed: 30.0%] [added: 25.3%] was subject to variable interest rates (excluding debt with interest rate swaps).

This variable rate debt had a weighted average interest rate of approximately [removed: 2.3%] [added: 3.1%] per annum.

To qualify as a REIT, we generally must distribute to our stockholders at least 90% of our net taxable income each year, excluding net capital gains, and we are subject to [removed: regular] [added: U.S. federal] corporate income [removed: taxes] [added: tax] to the extent that we distribute less than 100% of our net taxable income each year.

The maximum U.S. federal income tax rate for [added: qualified] dividends paid by domestic [added: non-REIT] corporations to [removed: individual] U.S. stockholders [added: that are individuals, trust or estates] is [added: generally] 20%.

[removed: The more favorable rates applicable to regular corporate dividends could] [added: This may] cause [removed: stockholders who are individuals] [added: investors] to [removed: perceive] [added: view REIT] investments [removed: in REITs to be relatively] [added: as] less attractive than investments in [removed: the stocks of] non-REIT [removed: corporations that pay dividends,] [added: corporations,] which [removed: could] [added: in turn may] adversely affect the value of [removed: the] stock of REITs, including our [removed: securities.][added: stock.]

The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. [removed: Treasury Department.][added: Department of the Treasury.]

Changes to [added: the] tax [removed: laws (which changes may have] [added: laws, with or without] retroactive [removed: application)] [added: application,] could adversely affect our [removed: stockholders.][added: investors or us in ways we cannot predict.]

| • | we would not be allowed a deduction for distributions to stockholders in computing our taxable income and would be subject to U.S. federal [added: corporate] income tax [removed: at regular corporate rates;] [added: on our income;] |

| • | we also could be subject to the U.S. [removed: federal] [added: Federal] alternative minimum [added: income] tax [added: for taxable years prior to 2018] and possibly increased state and local taxes; and |

If we fail to qualify as a REIT for [added: U.S.] federal income tax purposes and are able to avail ourselves of one or more of the relief provisions under the Internal Revenue Code in order to maintain our REIT status, we may nevertheless be required to pay penalty taxes of $50,000 or more for each such failure.

Also, we must make distributions to stockholders aggregating annually at least 90% of our net taxable income, excluding capital gains, and we will be subject to [added: U.S. federal corporate] income tax [removed: at regular corporate rates] to the extent we distribute less than 100% of our net taxable income including capital gains.

A [removed: taxable REIT subsidiary] [added: TRS] is a fully taxable corporation, and may be limited in its ability to deduct interest payments made to us.

ESM Reinsurance Limited, a wholly-owned subsidiary of Extra Space Management, Inc., generates income from insurance premiums that are subject to [added: U.S.] federal income tax and state insurance premiums [removed: tax.][added: tax, and pays certain insurance royalties to us.]

In addition, we will be subject to a 100% penalty tax on certain amounts if the economic arrangements among our tenants, our [removed: taxable REIT subsidiary] [added: TRS] and us are not comparable to similar arrangements among unrelated [removed: parties or if we receive payments for inventory or property held for sale to customers in the][added: parties.]

To the extent that we are, or our [removed: taxable REIT subsidiary] [added: TRS] is, required to pay U.S. federal, state or local taxes, we will have less cash available for distribution to stockholders.

Our revenues and net operating income can be negatively impacted by general economic factors that lead to a reduction in demand for rental space in the markets in which we operate.

Legal disputes, settlement and defense costs could have an adverse effect on our operating results.

From time to time we have to make monetary settlements or defend actions or arbitration (including class actions) to resolve tenant, employment-related or other claims and disputes.

Settling any such liabilities could negatively impact our operating results and cash available for distribution to stockholders, and could also adversely affect our ability to sell, lease, operate or encumber affected properties.

From time to time, we may acquire properties, or interests in properties, with known adverse environmental conditions for which we believe that the environmental liabilities associated with these conditions are quantifiable and that the acquisition will yield a superior risk-adjusted return.

There is significant competition among self-storage operators and from other storage alternatives.

Competition in the local markets in which many of our stores are located is significant and has affected our occupancy levels, rental rates and operating expenses.

Development of self-storage facilities has increased in recent years, which has intensified competition, and we expect it will continue to do so as newly developed facilities are opened.

Development of self-storage facilities by other operators could continue to increase in the future.

Actions by our competitors may decrease or prevent increases in our occupancy and rental rates, while increasing our operating expenses, which could adversely affect our business and results of operations.

proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Operating Partnership, provided that our Operating Partnership will not indemnify for (1) willful misconduct or a knowing violation of the law, (2) any transaction for which such person received an improper personal benefit in violation or breach of any provision of the partnership agreement, or (3) in the case of a criminal proceeding, the person had reasonable cause to believe the act or omission was unlawful.

our indebtedness and make cash distributions to our stockholders.

Dividends payable by REITs may be taxed at higher rates.

Dividends payable by REITs may be taxed at higher rates than dividends of non-REIT corporations.

Dividends paid by REITs to such stockholders are generally not eligible for that rate, but under the 2017 Tax Legislation (defined below), such stockholders may deduct up to 20% of ordinary dividends from a REIT for taxable years beginning after December 31, 2017 and before January 1, 2026.

Although this deduction reduces the effective tax rate applicable to certain dividends paid by REITs, such tax rate may still higher than the tax rate applicable to regular corporate qualified dividends.

New legislation, Treasury Regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify as a REIT, the U.S. federal income tax consequences of such qualification, or the U.S. federal income tax consequences of an investment in us.

Also, the law relating to the tax treatment of other entities, or an investment in other entities, could change, making an investment in such other entities more attractive relative to an investment in a REIT.

Recently enacted U.S. tax legislation (the “2017 Tax Legislation”) has significantly changed the U.S. federal income taxation of U.S. businesses and their owners, including REITs and their stockholders.

Changes made by the 2017 Tax Legislation that could affect us and our stockholders include:

| • | permanently eliminating the progressive corporate tax rate structure, which previously imposed a maximum corporate tax rate of 35%, and replacing it with a corporate tax rate of 21%; |

| • | permitting a deduction for certain pass-through business income, including dividends received by our stockholders from us that are not designated by us as capital gain dividends or qualified dividend income, which will allow individuals, trusts and estates to deduct up to 20% of such amounts for taxable years beginning after December 31, 2017 and before January 1, 2026; |

| • | reducing the highest rate of withholding with respect to our distributions to non-U.S. stockholders that are treated as attributable to gains from the sale or exchange of U.S. real property interests from 35% to 21%; |

| • | limiting our deduction for net operating losses arising in taxable years beginning after December 31, 2017 to 80% of REIT taxable income (determined without regard to the dividends paid deduction); |

| • | generally limiting the deduction for net business interest expense in excess of 30% of a business’s “adjusted taxable income,” except for taxpayers that engage in certain real estate businesses (including most equity REITs) and elect out of this rule (provided that such electing taxpayers must use an alternative depreciation system with longer depreciation periods); and |

| • | eliminating the corporate alternative minimum tax. |

Many of these changes are effective immediately, without any transition periods or grandfathering for existing transactions.

The legislation is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and IRS, any of which could lessen or increase the impact of the legislation.

In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities.

While some of the changes made by the tax legislation may adversely affect us in one or more reporting periods and prospectively, other changes may be beneficial on a going forward basis.

We are continuing to work with our tax advisors to determine the full impact that the recent federal tax reform legislation, which we refer to herein as the 2017 Tax Legislations, as a whole will have on us.

Our ability to satisfy the income tests depends on the sources and amounts of our gross income, which we may not be able to control.

We will pay some taxes, reducing cash available for stockholders.

Our operating results are dependent upon our ability to maximize occupancy levels and rental rates in our stores.

Adverse economic or other conditions in the markets in which we operate may lower our occupancy levels and limit our ability to increase rents or require us to offer rental discounts.

If our stores fail to generate revenues sufficient to meet our cash requirements, including operating and other expenses, debt service and capital expenditures, our net income, funds from operations (“FFO”), cash flow, financial condition, ability to make cash distributions to stockholders and the trading price of our securities could be adversely affected.

The following factors, among others, may adversely affect the operating performance of our stores:

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| • | the national economic climate and the local or regional economic climate in the markets in which we operate, which may be adversely impacted by, among other factors, industry slowdowns, relocation of businesses and changing demographics; |

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| • | periods of economic slowdown or recession, rising interest rates, or declining demand for self-storage or the public perception that any of these events may occur could result in a general decline in rental rates or an increase in tenant defaults; |

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| --- | --- |

| • | a decline of the current economic environment; |

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| --- | --- |

| • | local or regional real estate market conditions, such as competing stores, the oversupply of self-storage or a reduction in demand for self-storage in a particular area; |

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| --- | --- |

| • | perceptions by prospective users of our stores of the safety, convenience and attractiveness of our stores and the neighborhoods in which they are located; |

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| --- | --- |

| • | increased operating costs, including the need for capital improvements, insurance premiums, real estate taxes and utilities; |

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| --- | --- |

| • | the impact of environmental protection laws; |

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| --- | --- |

| • | changes in tax, real estate and zoning laws; and |

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| • | earthquakes, hurricanes and other natural disasters, terrorist acts, civil disturbances or acts of war which may result in uninsured or underinsured losses. |

We depend upon our on-site personnel to maximize tenant satisfaction at each of our stores, and any difficulties we encounter in hiring, training and maintaining skilled field personnel may harm our operating performance.

We had 2,723 field personnel as of February 21, 2017 in the management and operation of our stores.

The general professionalism of our store managers and staff are contributing factors to a store’s ability to successfully secure rentals and retain tenants.

We also rely upon our field personnel to maintain clean and secure stores.

If we are unable to successfully recruit, train and retain qualified field personnel, the quality of service we strive to provide at our stores could be adversely affected which could lead to decreased occupancy levels and reduced operating performance.

Increases in taxes and regulatory compliance costs may reduce our income.

Costs resulting from changes in real estate tax laws generally are not passed through to tenants directly and will affect us.

Increases in income, property or other taxes generally are not passed through to tenants under leases and may reduce our net income, FFO, cash flow, financial condition, ability to pay or refinance our debt obligations, ability to make cash distributions to stockholders, and the trading price of our securities.

Similarly, changes in laws increasing the potential liability for environmental conditions existing on stores or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures, which could similarly adversely affect our business and results of operations.

We are a fully integrated, self-administered and self-managed real estate investment [removed: trust, or REIT,] [added: trust (“REIT”),] formed to [removed: continue the business commenced in 1977 by Extra Space Storage LLC and its subsidiaries to] own, operate, manage, acquire, develop and redevelop [removed: professionally managed stores.][added: self-storage properties (“stores”).]

These areas [removed: all] enjoy above average population growth and income levels.

We consider a store to be stabilized once it has achieved either an 80% occupancy rate for a full year measured as of January 1 of the current year, or has been open for three years prior to [removed: the] January 1 of the current year.

We believe our systems and processes allow us to more [removed: proactively] [added: pro-actively] manage revenues.

Our operating results depend materially on our ability to lease available self-storage units, to actively manage unit rental rates, and on the ability of our [added: tenants to make required rental payments.]

A summary of significant accounting policies is also provided in [added: the notes to our consolidated financial statements (see Note 2 to our consolidated financial statements).]

We believe the following are our most critical accounting [removed: policies:][added: policies and estimates:]

We have concluded that under certain circumstances when we enter into arrangements for the formation of joint ventures, a VIE may be [removed: created under condition (i) or (ii)(b) or (ii)(c) of the previous paragraph.][added: created.]

As of December 31, [removed: 2016,] [added: 2017,] we had no consolidated VIEs.

Additionally, our Operating Partnership has notes payable to three trusts that are [removed: VIEs under condition (ii)(a) above.][added: considered VIEs.]

A TRS is subject to [removed: corporate] federal [added: corporate] income tax.

RECENT [removed: ACCOUNT] [added: ACCOUNTING] PRONOUNCEMENTS: For a discussion of recent accounting pronouncements affecting our business, see Item 8, “Financial Statements and Supplementary Data–Recently Issued Accounting Standards.”

Results for the year ended December 31, [removed: 2016] [added: 2016,] included the operations of 1,016 stores (836 wholly-owned, one in a consolidated joint venture, and 179 in joint ventures accounted for using the equity method) compared to the results for the year ended December 31, 2015, which included the operations of 999 stores (746 wholly-owned, one in a consolidated joint venture, and 252 in joint ventures accounted for using the equity method).

| | For the [removed: Year] [added: Three Months] Ended December 31, | | | | | | | | [added: For the Year Ended December 31,] | | | | | | [added: |]

| | 2016 | | | | 2015 | | | | [removed: $ Change] [added: 2016] | | | | [removed: % Change] [added: 2015] | | [added: |]

Management Fees and Other [removed: Income—Our TRS manages] [added: Income—Management fees represent the fee collected for our management of] stores owned by [removed: our joint ventures and] third [removed: parties.][added: parties and unconsolidated joint ventures.]

Management [added: Fees and Other Income—Management] fees [removed: generally] represent [removed: 6.0% of cash] [added: the fee] collected [removed: from] [added: for our management of] stores owned by third parties and unconsolidated joint ventures.

[removed: The] [added: Tenant Reinsurance—The] increase in [removed: management fees is due] [added: tenant reinsurance revenues was] primarily [added: due] to [removed: an] [added: the] increase in [removed: the revenues at the] stores [removed: we managed.][added: operated.]

| | For the [removed: Year] [added: Three Months] Ended December 31, | | | | | | | | [added: For the Year Ended December 31,] | | | | | | [added: |]

[removed: Acquisition Related Costs and Other—These] [added: These] costs relate primarily to acquisition activities during the periods indicated.

As part of this acquisition, we recorded an expense of [removed: $38,360] [added: $63,121] related to defeasance [removed: costs and] [added: costs,] prepayment [removed: penalties incurred related to the repayment of SmartStop's existing debt as of the] [added: penalties, and other] acquisition [removed: date.][added: related costs.]

General and administrative [removed: expenses] [added: expense] for the year ended December 31, 2016 increased when compared to the same periods in the prior year primarily due to the overall cost associated with the management of additional stores.

| Gain [added: (loss)] on real estate transactions, earnout from prior acquisition and sale of other assets | [removed: $] [added: 1,349] | [removed: 8,465] | | | [removed: $] [added: —] | [removed: 1,501] | | | [removed: $] [added: (8,465] | [removed: 6,964] | [added: )] | | [removed: 464.0] [added: (1,501] | [removed: %] | [added: ) |]

| Interest income on note receivable from Preferred Operating Partnership unit holder | [removed: 4,850] [added: 2,935] | | | | 4,850 | | | | [removed: —] [added: (1,915] | | [added: )] | | [removed: —] [added: (39.5] | [added: )%] |

| Equity in earnings of unconsolidated real estate [removed: ventures - gain] [added: ventures—gain] on sale of real estate assets and purchase of joint venture [removed: partners'] [added: partners’] interests | 69,199 | | | | 2,857 | | | | 66,342 | | | | 2,322.1 | % |

Gain [added: (Loss)] on Real Estate Transactions, Earnout from Prior [removed: Acquisition] [added: Acquisitions] and [removed: Sale] [added: Impairment] of [removed: Other Assets— During] [added: Real Estate—During] the year ended December 31, 2016, through various transactions, we sold a total of nine stores located in Indiana, Ohio and Texas.

[removed: As part of this acquisition,] [added: During 2014,] we [added: acquired five stores where we] agreed to make an additional cash payment to the sellers if the acquired stores exceeded a specified amount of net operating income for the years ending December 31, 2015 and 2016.

[added: |] Equity in [removed: Earnings] [added: earnings] of [removed: Unconsolidated Real Estate Ventures—Gain] [added: unconsolidated real estate ventures - gain] on [removed: Sale] [added: sale] of [removed: Real Estate Assets] [added: real estate assets] and [removed: Purchase] [added: purchase] of [removed: Joint Venture Partners’ Interests—On November 17, 2016, we acquired 11 stores from our ESS WCOT LLC] joint venture [removed: ("WCOT") in a step acquisition.][added: partners' interests | — | | | | 69,199 | | | | (69,199 | | ) | | (100.0 | )% |]

[removed: On September 16, 2016, we] [added: We] acquired [removed: 23] [added: 11] stores from [removed: PRISA II] [added: our WCOT joint venture] in a step acquisition.

[removed: On February 2, 2016,] [added: Lastly,] we acquired six stores from our VRS Self Storage LLC joint venture (“VRS”) in a step [removed: acquisition.][added: acquisition, where we again recorded a gain of $26,923.]

[removed: In] [added: During] March 2015, one of our joint ventures sold a store located in New York to a third party and [removed: recognized] [added: we recorded] a gain of [removed: $60,495.][added: $1,228 on the transaction.]

We recognized a non-cash gain of $1,629 [added: during the three months ended March 31, 2015] as a result of re-measuring the fair value of our [added: 17.6%] equity interest in this joint venture held before the acquisition.

[removed: Net] [added: |] Income [removed: Allocated] [added: allocated] to [removed: Noncontrolling Interests][added: Operating Partnership noncontrolling interests | | 35,306 | | | | 30,962 | | | | 20,064 | | |]

Comparison of the Year Ended December 31, [removed: 2015] [added: 2017] to the Year Ended December 31, [removed: 2014][added: 2016]

Results for the year ended December 31, [removed: 2015,] [added: 2017] included the operations of [removed: 999] [added: 1,061] stores [removed: (747 of which were] [added: (846 wholly-owned, one in a] consolidated [added: joint venture,] and [removed: 252 of which were] [added: 214] in joint ventures accounted for using the equity method) compared to the results for the year ended December 31, [removed: 2014,] [added: 2016,] which included the operations of [removed: 828] [added: 1,016] stores [removed: (576 of which were] [added: (836 wholly-owned, one in a] consolidated [added: joint venture,] and [removed: 252 of which were] [added: 179] in joint ventures accounted for using the equity method).

Property Rental—The [removed: change] [added: increase] in property rental revenues [removed: consists] [added: for the year ended December 31, 2017 was] primarily [added: the result] of an increase of [removed: $69,622] [added: $59,694] associated with acquisitions completed in [removed: 2015] [added: 2017] and [removed: 2014.][added: 2016.]

[removed: In addition, revenues increased] by [removed: $47,560] [added: $40,439 during the year ended December 31, 2017] as a result of increases in [removed: occupancy and] rental rates to new and existing customers at our stabilized stores.

Property Operations—The increase in property operations expense consists primarily of an increase of [removed: $26,236] [added: $19,607] related to acquisitions completed in [removed: 2015] [added: 2017] and [removed: 2014.][added: 2016.]

We acquired [removed: 171] [added: 46] operating stores during the year ended December 31, [removed: 2015] [added: 2017] and [removed: 51] [added: 99] stores during the year ended December 31, [removed: 2014.][added: 2016.]

[removed: Additionally, we] [added: We] acquired [removed: 49 other properties] [added: 46 stores] during the year ended December 31, [removed: 2015.][added: 2017 and 99 stores during the year ended December 31, 2016.]

We derive substantially all of our revenues from our two segments: storage operations and tenant reinsurance.

Primary sources of revenue for our storage operations segment include rents received from tenants under leases at each of our wholly-owned stores.

Consequently, management spends a significant portion of their time maximizing cash flows from our diverse portfolio of stores.

Revenue from our tenant reinsurance segment consists of insurance revenues from the reinsurance of risks relating to the loss of goods stored by tenants in the Company's stores.

Our segment presentation has changed from the prior year, and all applicable information has been reclassified to conform to the current year's segment presentation.

Our stores are generally situated in highly visible locations clustered around large population centers.

Otherwise, our investment is generally accounted for under the equity method.

Our ability to correctly assess the influence or control over an entity affects the presentation of the investment in our consolidated financial statements.

REAL ESTATE ASSETS: We account for the acquisition of stores, including by merger and other acquisitions of real estate, in accordance with ASC 805-10, "Business Combinations." We use our judgment to determine if assets acquired meet the definition of a business or if the acquisition should be considered an asset acquisition subsequent to our January 1, 2017 adoption of ASU 2017-01, "Business Combinations (Topic 805) - Clarifying the Definition of a Business." We must make significant assumptions and estimates in determining the fair value of the tangible and intangible assets and liabilities acquired and consideration transferred.

These assumptions and estimates require judgment, and therefore others could come to materially different conclusions as to the estimated fair values, which could result in differences in depreciation and amortization expense, gains and losses on the purchase and sale of real estate assets, and real estate and intangible asset values.

We may not have identified all material facts and circumstances that affect impairment of our stores.

No material impairments were recorded in the year ended December 31, 2017.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES: We hold a number of derivative instruments which we use to hedge our exposure to variability in expected future cash flows, mainly related to our interest rates on variable interest debt.

We do not use derivatives for trading or speculative purposes.

We assess our derivatives both at inception, and on an ongoing quarterly basis, for whether the derivatives used in hedging transactions are effective.

Any ineffective portion of a derivative financial instrument's change in fair value is immediately recognized in earnings.

The rules and interpretations relating to the accounting for derivatives are complex.

Failure to apply this guidance correctly may require us to recognize all changes in fair value of the hedged derivative in earnings, which may materially impact our results.

For any taxable year that we fail to qualify as a REIT and for which applicable statutory relief provisions did not apply, we would be subject to federal corporate income tax on all of our

taxable income for at least that year and the ensuing four years.

We could also be subject to penalties and interest, and our net income may be materially different from the amounts reported in our financial statements.

If tax authorities determine that amounts paid by our taxable REIT subsidiaries to us are not reasonable compared to similar arrangements among unrelated parties, we could be subject to a penalty tax on the excess payments.

 

Material or unusual changes in the results of our operations are discussed below.

| | 2017 | | | | 2016 | | | | $ Change | | | | % Change | |

| Property rental | $ | 967,229 | | | $ | 864,742 | | | $ | 102,487 | | | 11.9 | % |

| Tenant reinsurance | 98,401 | | | | 87,291 | | | | 11,110 | | | | 12.7 | % |

| Total revenues | $ | 1,105,009 | | | $ | 991,875 | | | $ | 113,134 | | | 11.4 | % |

Property rental revenue also increased

We operated 1,483 stores at December 31, 2017, compared to 1,427 stores at December 31, 2016.

| | 2017 | | | | 2016 | | | | $ Change | | | | % Change | |

| Property operations | $ | 271,974 | | | $ | 250,005 | | | $ | 21,969 | | | 8.8 | % |

| Tenant reinsurance | 19,173 | | | | 15,555 | | | | 3,618 | | | | 23.3 | % |

| General and administrative | 78,961 | | | | 81,806 | | | | (2,845 | | ) | | (3.5 | )% |

| Depreciation and amortization | 193,296 | | | | 182,560 | | | | 10,736 | | | | 5.9 | % |

| Total expenses | $ | 563,404 | | | $ | 542,037 | | | $ | 21,367 | | | 3.9 | % |

Acquisition Related Costs and Other—For the year ended December 31, 2016, acquisition related costs represented closing and other transaction costs incurred in connection with our acquisition of operating stores, which were accounted for as business combinations.

On January 1, 2017, we adopted the guidance in ASU 2017-01, "Business Combinations (Topic 805) - Clarifying the Definition of a Business," which resulted in our acquisition of operating stores being accounted for as asset acquisitions rather than business combinations.

Accordingly, closing and other transactions costs have been capitalized in 2017 as part of the acquisition price for asset acquisitions, rather than being expensed as incurred.

General and administrative expenses for the year ended December 31, 2017 decreased when compared to the same period in the prior year primarily as a result of an expense of $4,000 that was recorded during the year ended December 31, 2016 as the result of a legal settlement.

At December 31, 2016, we owned, had ownership interests in, or managed 1,427 operating stores in 38 states, Washington, D.C. and Puerto Rico.

Of these 1,427 operating stores, we owned 836, we held joint venture interests in 180 stores, and our taxable REIT subsidiary, Extra Space Management, Inc., operated an additional 411 stores that are owned by third parties.

These operating stores contain approximately 107 million square feet of rentable space in approximately 960,000 units and currently serve a customer base of approximately 850,000 tenants.

Our stores are generally situated in convenient, highly visible locations clustered around large population centers such as Atlanta, Baltimore/Washington, D.C., Boston, Chicago, Dallas, Houston, Las Vegas, Los Angeles, Miami, New York City, Orlando, Philadelphia, Phoenix, St. Petersburg/Tampa and San Francisco/Oakland.

We derive substantially all of our revenues from rents received from tenants under leases at each of our wholly-owned stores, from management fees on the stores we manage for joint-venture partners and unaffiliated third parties, and from our tenant reinsurance program.

Our management fee is generally equal to approximately 6.0% of cash collected from total revenues generated by the managed stores.

We also receive an asset management fee of 0.5% of the total asset value from one of our joint ventures.

tenants to make required rental payments.

We continue to evaluate a range of new initiatives and opportunities in order to enable us to maximize stockholder value.

Our strategies to maximize stockholder value include the following:

| | |

| --- | --- |

| • | Maximize the performance of our stores through strategic, efficient and proactive management. We pursue revenue-generating and expense-minimizing opportunities in our operations. Our revenue management team seeks to maximize revenue by responding to changing market conditions through our advanced technology system’s ability to provide real-time, interactive rental rate and discount management. Our size allows us greater ability than the majority of our competitors to implement more effective online marketing programs, which we believe will attract more customers to our stores at a lower net cost. |

| • | Acquire self-storage stores. Our acquisitions team continues to pursue the acquisition of multi-store portfolios and single stores that we believe can provide stockholder value. We have established a reputation as a reliable, ethical buyer, which we believe enhances our ability to negotiate and close acquisitions. In addition, we believe our status as an UPREIT enables flexibility when structuring deals. We continue to review available acquisitions. As interest rates increase, our expectation is that capitalization rates will also increase and that prices will begin to decrease. We remain a disciplined buyer and only execute acquisitions that we believe will strengthen our portfolio and increase stockholder value. |

| • | Expand our management business. Our management business enables us to generate increased revenues through management fees and expand our geographic footprint. We believe this expanded footprint enables us to reduce our operating costs through economies of scale. In addition, we see our management business as a future acquisition pipeline. We pursue strategic relationships with owners whose stores would enhance our portfolio in the event an opportunity arises to acquire such stores. |

the notes to our consolidated financial statements (see Note 2 to our consolidated financial statements).

A VIE is created when (i) the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, or (ii) the entity’s equity holders as a group either: (a) lack the power, through voting or similar rights, to direct the activities of the entity that most significantly impact the entity’s economic performance, (b) are not obligated to absorb expected losses of the entity if they occur, or (c) do not have the right to receive expected residual returns of the entity if they occur.

If an entity is deemed to be a VIE, the enterprise that is deemed to have a variable interest, or combination of variable interests, that provides the enterprise with a controlling financial interest in the VIE is considered the primary beneficiary and must consolidate the VIE.

REAL ESTATE ASSETS: Real estate assets are stated at cost, less accumulated depreciation.

Direct and allowable internal costs associated with the development, construction, renovation, and improvement of real estate assets are capitalized.

Interest, property taxes, and other costs associated with development incurred during the construction period are capitalized.

Expenditures for maintenance and repairs are charged to expense as incurred.

Major replacements and betterments that improve or extend the life of the asset are capitalized and depreciated over their estimated useful lives.

Depreciation is computed using the straight-line method over the estimated useful lives of the buildings and improvements, which are generally between 5 and 39 years.

In connection with our acquisition of operating stores, the purchase price is allocated to the tangible and intangible assets and liabilities acquired based on their fair values, which are estimated using significant unobservable inputs.

The value of the tangible assets, consisting of land and buildings, is determined as if vacant.

Intangible assets, which represent the value of existing tenant relationships, are recorded at their fair values based on the avoided cost to replace the current leases.

We measure the value of tenant relationships based on the rent lost due to the amount of time required to replace existing customers, which is based on our historical experience with turnover in our facilities.

Debt assumed as part of an acquisition is recorded at fair value based on current interest rates compared to contractual rates.

Acquisition-related transaction costs are expensed as incurred.

Stores purchased at the time of certificate of occupancy issuance are considered asset acquisitions.

As such, the purchase price is allocated to the land and buildings acquired based on their fair values.

Any debt assumed as part of the acquisition is recorded at fair value based on current interest rates compared to contractual rates.

Acquisition-related transactions costs are capitalized as part of the purchase price.

Intangible lease rights include: (1) purchase price amounts allocated to leases on three stores that cannot be classified as ground or building leases; these rights are amortized to expense over the term of the leases; and (2) intangibles related to ground leases on eight stores where the ground leases were assumed by us at rates that were different than the current market rates for similar leases.

The value associated with these assumed leases were recorded as intangibles, which will be amortized over the lease terms.

When we determine that an event that may indicate impairment has occurred, we compare the carrying value of the related long-lived assets to the undiscounted future net operating cash flows attributable to the assets.

An impairment loss is recorded if the net carrying value of the assets exceeds the undiscounted future net operating cash flows attributable to the assets.

The impairment loss recognized equals the excess of net carrying value over the related fair value of the assets.

When real estate assets are identified as held for sale, we discontinue depreciating the assets and estimate the fair value of the assets, net of selling costs.

As of December 31, [removed: 2016,] [added: 2017,] we had approximately [removed: $4.4] [added: $4.6] billion in total face value debt, of which approximately [removed: $1.3] [added: $1.2] billion was subject to variable interest rates (excluding debt with interest rate swaps).

If LIBOR were to increase or decrease by 100 basis points, the increase or decrease in interest expense on the variable rate debt would increase or decrease future earnings and cash flows by approximately [removed: $13.1] [added: $11.6] million annually.

Derivative Instruments

We use derivative instruments to help manage interest rate risk using designated hedge relationships.

Interest rate swaps involve the exchange of fixed-rate and variable-rate interest payments between two parties based on a contractual underlying notional amount, but do not involve the exchange of the underlying notional amounts.

See our Derivatives footnote in our Notes to consolidated financial statements in Item 8 for additional information about our use of derivative contracts.

Extra Space Storage Inc. (“we,” “our,” “us” or the “Company”) is a fully integrated, self-administered and self-managed real estate investment trust (“REIT”) formed as a Maryland corporation on April 30, 2004, to own, operate, manage, acquire, develop and redevelop [removed: professionally managed] self-storage properties (“stores”).

Tenant reinsurance activities include the reinsurance of risks relating to the loss of goods stored by tenants in [removed: our] [added: the Company’s] stores.

To the extent we continue to qualify as a REIT we will not be subject to [added: U.S. Federal] tax, with certain exceptions, on our net taxable income that is distributed to our stockholders.

Members of our executive management team have significant experience in all aspects of the self-storage [removed: industry, having acquired and/or developed a significant number of stores since before our IPO.][added: industry.]

Margolis, Chief Executive Officer, [removed: 12] [added: 13] years; Scott Stubbs, Executive Vice President and Chief Financial Officer, [removed: 16] [added: 17] years; Samrat Sondhi, Executive Vice President and Chief Operating Officer, [removed: 13] [added: 14] years; Gwyn McNeal, Executive Vice President and Chief Legal Officer, [removed: 11] [added: 12] years; James Overturf, Executive Vice President and Chief Marketing Officer, [removed: 18] [added: 19] years; and Kenneth M.

Woolley, Executive Chairman, [removed: 36] [added: 39] years.

Our executive management team and board of directors have [removed: a significant] [added: an] ownership position in the Company with executive officers and directors owning approximately [removed: 4,665,566] [added: 4,059,669] shares or [removed: 3.7%] [added: 3.2%] of our outstanding common stock as of February 21, [removed: 2017.][added: 2018.]

Stores offer month-to-month [added: rental of] storage space [removed: rental] for personal or business [removed: use and are a cost-effective and flexible storage alternative.][added: use.]

The mix of residential tenants using a store is determined by a store’s local demographics and often includes people who are [removed: looking to downsize] [added: experiencing life changes such as downsizing] their living space or others who are not yet settled into a permanent residence.

Items that [removed: residential] tenants place in self-storage [removed: range from cars, boats and recreational vehicles, to] [added: are typically] furniture, household items and appliances.

A store’s [added: price,] perceived [removed: security] [added: security, cleanliness,] and the general professionalism of the site managers and staff are also contributing factors to a site’s ability to successfully secure rentals.

According to the Self-Storage Almanac (the “Almanac”), in [removed: 2008,] [added: 2012,] the national average physical occupancy rate was [removed: 80.3%] [added: 85.0%] of net rentable square feet, compared to an average physical occupancy rate of [removed: 91.2%] [added: 92.8%] in [removed: 2016.][added: 2017.]

Recently we have encountered competition when we have sought to acquire [added: existing operating] stores, especially for brokered portfolios.

According to the Almanac, [added: as of] the [added: end of 2017, the] top ten self-storage companies in the United States operated approximately [removed: 19.4%] [added: 15.8%] of the total U.S. stores, and the top 50 self-storage companies operated approximately [removed: 28.6%] [added: 19.2%] of the total U.S. [removed: stores as of December 31, 2016.][added: stores.]

We [removed: also] believe that we are well positioned to compete for acquisitions.

Our primary business objectives are to maximize cash flow available for distribution to our stockholders and to achieve sustainable long-term growth in cash flow per share in order to maximize long-term stockholder [removed: value.][added: value both at acceptable levels of risk.]

We continue to evaluate a range of growth initiatives and [removed: opportunities, including the following:][added: opportunities.]

[removed: | • | Maximize the performance of our stores through strategic, efficient and proactive management. We pursue revenue-generating and expense-minimizing opportunities in our operations.] Our [removed: revenue management team seeks to maximize revenue by responding to changing market conditions through our advanced technology system’s ability to provide real-time, interactive rental rate and discount management. Our] size allows us greater ability than the majority of our competitors to implement more effective online marketing programs, which we believe will attract more customers to our stores at a lower net cost. [removed: |]

[added: We remain] a disciplined buyer and only execute acquisitions that we believe will strengthen our portfolio and increase stockholder value.

[removed: | • | Expand our management business. Our management business enables us to generate increased revenues through management fees and expand our geographic footprint.] We [removed: believe this expanded footprint enables us to reduce our operating costs through economies of scale. In addition, we see our management business as a future acquisition pipeline. We] pursue strategic relationships with owners whose stores would enhance our portfolio in the event an opportunity arises to acquire such stores. [removed: |]

We expect to maintain a flexible approach [removed: in] [added: to] financing [removed: new store acquisitions.][added: growth.]

We plan to finance future acquisitions through a [removed: combination of cash,] [added: diverse capital optimization strategy which includes but is not limited to: cash generated from operations,] borrowings under [removed: the Credit Lines, traditional] [added: our revolving lines of credit (the "Credit Lines"),] secured and unsecured [removed: mortgage] financing, [added: equity offerings,] joint ventures and [removed: additional debt or equity offerings.][added: sale of properties.]

[added: Joint Venture Financing -] As of December 31, [removed: 2016,] [added: 2017,] we [removed: own 180] [added: owned 215] of our stores through joint ventures with third parties.

We generally manage the day-to-day operations of the [removed: underlying] stores owned in these joint ventures and have the right to participate in major decisions relating to sales of stores or financings by the applicable joint venture.

Our joint venture partners typically provide most of the equity capital required for the [removed: operation] [added: acquisition] of [removed: the respective business.][added: stores owned in these joint ventures.]

Generally, stores are subject to various laws, ordinances and regulations, including regulations relating to lien sale rights and [removed: procedures.][added: procedures and the Americans with Disabilities Act of 1990.]

[removed: Noncompliance] [added: In addition, noncompliance] with [removed: the ADA] [added: any of these laws, ordinances or regulations] could result in the imposition of fines or an award of damages to private litigants and also could [removed: result in an order to correct any non-complying feature, thereby requiring] [added: require] substantial capital [removed: expenditures.][added: expenditures to ensure compliance.]

Store management activities [removed: are often] [added: may be] subject to state real estate brokerage laws and regulations as determined by the particular real estate commission for each state.

As of [removed: February 21,] [added: December 31,] 2017, we had [removed: 3,287] [added: 3,380] employees and believe our relationship with our employees is good.

As of December 31, 2017 we owned and/or operated 1,483 stores in 39 states, Washington, D.C. and Puerto Rico, comprising approximately 112 million square feet of net rentable space in approximately 1,020,000 units.

We operate in two distinct segments: (1) self-storage operations; and (2) tenant reinsurance.

Our self-storage operations activities include rental operations of wholly-owned stores.

We previously reported our financial statements in three segments, but based on operational changes and the way our management reviews company performance, we realigned our financial statements into two reportable segments.

For more information and comparative financial and other information on our reportable business segments, refer to the segment information footnote in the notes to the consolidated financial statements in Item 8 of this Form 10-K.

Tenants typically rent fully enclosed spaces that vary in size and typically range from 5 feet by 5 feet to 20 feet by 20 feet, with an interior height of 8 feet to 12 feet.

Our primary strategies include the following:

Maximize the performance of our stores through strategic, efficient and proactive management

We pursue revenue-generating and expense-minimizing opportunities in our operations.

Our revenue management team seeks to maximize revenue by responding to changing market conditions through our advanced technology systems' ability to provide real-time, interactive rental rate and discount management.

We continually analyze our portfolio to look for long-term value-enhancing opportunities.

We proactively redevelop properties to add units or modify existing unit mix to better meet the demand in a given market and to maximize revenue.

We also redevelop properties to reduce their effective useful age, increase visual appeal, enhance security and to improve brand consistency across the portfolio.

Acquire self storage stores

Our acquisitions team continues to pursue the acquisition of multi-store portfolios and single stores that we believe can provide stockholder value.

We have established a reputation as a reliable, ethical buyer, which we believe enhances our ability to negotiate and close acquisitions.

In addition, we believe our status as an UPREIT enables flexibility when structuring deals.

In addition to the pursuit of stabilized stores, we also develop stores from the ground up and provide the construction capital.

We also purchase stores at the completion of construction from third party developers, who build to our specifications.

These stores purchased at completion of construction (a "Certificate of Occupancy store"), create additional long term value for our stockholders.

We are typically able to acquire these assets at a lower price than a stabilized store, and expect greater long term returns on these stores on average.

However, in the short term, these acquisitions cause dilution to our earnings during the two-to-four year period required to lease up the Certificate of Occupancy stores.

We expect that this trend will continue in 2018 as we continue to acquire Certificate of Occupancy stores.

Expand our management business

Our management business enables us to generate increased revenues through management fees as well as expand our geographic footprint, data sophistication and scale with little capital investment.

We believe this expanded footprint enables us to reduce our operating costs through economies of scale.

In addition, we see our management business as a future acquisition pipeline.

As a REIT, we are required to distribute at least 90% of our REIT taxable income to our stockholders.

Consequently, we require access to additional sources of capital to fund our growth.

Credit Lines - We have two credit lines which we primarily use as short term bridge financing until we obtain longer-term financing through either debt or equity.

As of December 31, 2017, our Credit Lines had available capacity of $600.0 million, of which $506.0 million was undrawn.

Secured and Unsecured Debt - Historically, we have primarily used traditional secured mortgage loans to finance store acquisitions and development efforts.

More recently, we obtained unsecured bank term loans and issued unsecured private placement bonds.

We will continue to utilize a combination of secured and unsecured financing for future store acquisitions and development.

As of December 31, 2017, we had $2.8 billion of secured notes payable and $1.7 billion of unsecured notes payable outstanding compared to $2.9 billion secured notes payable and $1.0 billion unsecured notes payable outstanding as of December 31, 2016.

Equity - We have an active "at the market" (ATM) program for selling stock.

We sell stock under the ATM program from time to time to raise capital when we believe conditions are advantageous.

During the year ended December 31, 2016, we issued 1,381,300 shares of common stock through our ATM program and received proceeds of approximately $123.4 million.

No shares were issued under the ATM program during the year ended December 31, 2017.

We view equity interests in our Operating Partnership as a potential source of capital that can also provide attractive tax planning opportunities to sellers of real estate.

As of December 31, 2016, we held ownership interests in 1,016 operating stores.

Of these operating stores, 836 are wholly-owned and 180 are owned in joint venture partnerships.

An additional 411 operating stores are owned by third parties and operated by us in exchange for a management fee, bringing the total number of operating stores which we own and/or manage to 1,427.

These operating stores are located in 38 states, Washington, D.C. and Puerto Rico and contain approximately 107 million square feet of net rentable space in approximately 960,000 units and currently serve a customer base of approximately 850,000 tenants.

We operate in three distinct segments: (1) rental operations; (2) tenant reinsurance; and (3) property management, acquisition and development.

Our rental operations activities include rental operations of stores in which we have an ownership interest.

Our property management, acquisition and development activities include managing, acquiring, developing and selling stores.

Spencer F.

Kirk served as our Chief Executive Officer through December 31, 2016 and continues to serve on the Company's board of directors.

Joseph D.

Margolis succeeded Mr. Kirk as the Company's Chief Executive Officer effective January 1, 2017.

Tenants rent fully enclosed spaces that can vary in size according to their specific needs and to which they have unlimited, exclusive access.

Self-storage unit sizes typically range from 5 feet by 5 feet to 20 feet by 20 feet, with an interior height of 8 feet to 12 feet.

| | |

| --- | --- |

| | |

| --- | --- |

| • | Acquire self storage stores. Our acquisitions team continues to pursue the acquisition of multi-store portfolios and single stores that we believe can provide stockholder value. We have established a reputation as a reliable, ethical buyer, which we believe enhances our ability to negotiate and close acquisitions. In addition, we believe our status as an UPREIT enables flexibility when structuring deals. We continue to review available acquisitions. As interest rates increase, our expectation is that capitalization rates will also increase and that prices will begin to decrease. We remain |

| | |

| --- | --- |

The following table presents information on our revolving lines of credit (the “Credit Lines”) for the periods indicated.

All of our Credit Lines are guaranteed by us (amounts in thousands).

| | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | |

| | As of December 31, 2016 | | | | | | | | | | | | | | |

| Revolving Lines of Credit | Amount Drawn | | | | Capacity | | | | Interest Rate | | Origination Date | | Maturity | | Basis Rate (1) |

| Credit Line 1 (2) | $ | 3,000 | | | $ | 100,000 | | | 2.40% | | 6/4/2010 | | 6/30/2018 | | LIBOR plus 1.7% |

| Credit Line 2 (3)(4) | 362,000 | | | | 500,000 | | | | 2.20% | | 10/14/2016 | | 10/14/2020 | | LIBOR plus 1.4% |

| | $ | 365,000 | | | $ | 600,000 | | | | | | | | | |

| (1) 30-day USD LIBOR | | | | | | | | | | | | | | | |

| (2) Secured by mortgages on certain real estate assets. One two-year extension available. | | | | | | | | | | | | | | | |

| (3) Unsecured. Two six-month extensions available. | | | | | | | | | | | | | | | |

| (4) Basis Rate as of December 31, 2016. Rate is subject to change based on our consolidated leverage ratio. | | | | | | | | | | | | | | | |

Joint Venture Financing

Under the operating agreements for the joint ventures, we maintain the right to receive between 4.0% and 80.0% of the available cash flow from operations after our joint venture partners and the Company have received a predetermined return, and between 4.0% and 75.0% of the available cash flow from capital transactions after our joint venture partners and the Company have received a return of their capital plus such predetermined return.

Disposition of Stores

We will continue to review our portfolio for stores or groups of stores that are underperforming or are not strategically located, and determine whether to dispose of these stores to fund other growth.

As of December 31, 2016, we had two parcels of land that were categorized as held for sale.

Under the Americans with Disabilities Act of 1990 (the “ADA”), places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons.

For more information on our legal accruals, refer to the Commitments and Contingencies footnote in the notes to the consolidated financial statements in Item 8 of this Form 10-K.

Therefore, any estimate(s) of loss disclosed below represents what management believes to be an estimate of loss only for certain matters meeting these criteria and does not represent our maximum loss exposure.

We currently have several legal proceedings pending against us that include causes of action alleging wrongful foreclosure, violations of various state specific self-storage statutes, and violations of various consumer fraud acts.

As a result of these litigation matters, we have recorded a liability of $5.6 million which is included in other liabilities on the consolidated balance sheets.

For the fiscal year ended December 31, [removed: 2016][added: 2017]

2795 East Cottonwood Parkway, Suite [removed: 400][added: 300]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or] a smaller reporting [added: company, or an emerging growth] company.

See the definitions of “large accelerated filer,” “accelerated filer,” [removed: and] “smaller reporting company” [added: and "emerging growth company"] in Rule 12b-2 of the Exchange Act.

The aggregate market value of the common stock held by non-affiliates of the registrant was [removed: $11,138,435,421] [added: $9,468,562,974] based upon the closing price on the New York Stock Exchange on June 30, [removed: 2016,] [added: 2017,] the last business day of the registrant’s most recently completed second fiscal quarter.

The number of shares outstanding of the registrant’s common stock, $0.01 par value per share, as of February 21, [removed: 2017] [added: 2018] was [removed: 125,912,481.][added: 126,037,528.]

Portions of the registrant’s definitive proxy statement to be issued in connection with the registrant’s annual stockholders’ meeting to be held in [removed: 2017] [added: 2018] are incorporated by reference into Part III of this Annual Report on Form 10-K.

For the Year Ended December 31, [removed: 2016][added: 2017]

| Item 1. | [removed: [Business](#sB3745DECAF3259158E760A492D2F2038)] [added: [Business](#s6A1C90C7799056F0946F1D09A9FDCD22)] | [removed: [4](#sB3745DECAF3259158E760A492D2F2038)] [added: [4](#s6A1C90C7799056F0946F1D09A9FDCD22)] |

| Item 1A. | [Risk [removed: Factors](#s9DBD5992507E58168BA13AF9A58E8E07)] [added: Factors](#s5E8BA569AEF057208A1CCC0C80019A24)] | [removed: [7](#s9DBD5992507E58168BA13AF9A58E8E07)] [added: [7](#s5E8BA569AEF057208A1CCC0C80019A24)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#s3C7BBA1810F4526FB259CCA81EF86650)] [added: Comments](#s45B24144CD8555EF9A45DD136B98AC1A)] | [removed: [17](#s3C7BBA1810F4526FB259CCA81EF86650)] [added: [14](#s45B24144CD8555EF9A45DD136B98AC1A)] |

| Item 2. | [removed: [Properties](#s1639BA8F6EF85246ABD1BE82F380FB28)] [added: [Properties](#sB8447985380F5D4793AEFECD0DD3D9AB)] | [removed: [17](#s1639BA8F6EF85246ABD1BE82F380FB28)] [added: [14](#sB8447985380F5D4793AEFECD0DD3D9AB)] |

| Item 3. | [Legal [removed: Proceedings](#s5999FBDC9F4B5AA7905934BC706AA0E5)] [added: Proceedings](#sDB93F103CE0D578AB22DE38D3769EA08)] | [removed: [17](#s5999FBDC9F4B5AA7905934BC706AA0E5)] [added: [15](#sDB93F103CE0D578AB22DE38D3769EA08)] |

| Item 4. | [Mine Safety [removed: Disclosures](#s49AD96BCB7ED5241B05F9D27C242EFE8)] [added: Disclosures](#s299B17993BC25AD0AD6881883B396D60)] | [removed: [17](#s49AD96BCB7ED5241B05F9D27C242EFE8)] [added: [15](#s299B17993BC25AD0AD6881883B396D60)] |

| Item 5. | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#sEA74E83229B255BD9DE5F6A5C15EFA62)] [added: Securities](#s5D378572872353868881F5C62F602EB9)] | [removed: [17](#sEA74E83229B255BD9DE5F6A5C15EFA62)] [added: [15](#s5D378572872353868881F5C62F602EB9)] |

| Item 6. | [Selected Financial [removed: Data](#sA4BD432E8D5653F7B26094CDAA116374)] [added: Data](#sA9E1C520E4DF5D32A7E1AFF50DEBAC44)] | [removed: [18](#sA4BD432E8D5653F7B26094CDAA116374)] [added: [16](#sA9E1C520E4DF5D32A7E1AFF50DEBAC44)] |

| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sB88142CBAD405D58BF76A2D2E142D84F)] [added: Operations](#sBBB3C6A201DC5C59860E53E9F024DED9)] | [removed: [20](#sB88142CBAD405D58BF76A2D2E142D84F)] [added: [17](#sBBB3C6A201DC5C59860E53E9F024DED9)] |

| Item 7A. | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s38E53C8EEA885A83B2A0C266F55ACC26)] [added: Risk](#sBAC0137AB3585720952ACC1D5B791461)] | [removed: [39](#s38E53C8EEA885A83B2A0C266F55ACC26)] [added: [31](#sBAC0137AB3585720952ACC1D5B791461)] |

| Item 8. | [Financial Statements and Supplementary [removed: Data](#sE39A180685265B35BB47E762DA7C12FE)] [added: Data](#s2334B49212C45310A4A17F0E0204C776)] | [removed: [40](#sE39A180685265B35BB47E762DA7C12FE)] [added: [33](#s2334B49212C45310A4A17F0E0204C776)] |

| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s15EFFA54289E58DF93D119F8FAA6FB1D)] [added: Disclosure](#sF44C3E50E3BD529FB6D955D43C09D88B)] | [removed: [95](#s15EFFA54289E58DF93D119F8FAA6FB1D)] [added: [78](#sF44C3E50E3BD529FB6D955D43C09D88B)] |

| Item 9A. | [Controls and [removed: Procedures](#s8B8B7CC44A365B6CAE5E635D3E2368A6)] [added: Procedures](#s78C6DF5EF831564A8E1A9D990060A1B5)] | [removed: [95](#s8B8B7CC44A365B6CAE5E635D3E2368A6)] [added: [78](#s78C6DF5EF831564A8E1A9D990060A1B5)] |

| Item 9B. | [Other [removed: Information](#sCA4DFB37CA165F92BC2E7F81CAC3C802)] [added: Information](#s63FC11F91AD45C6A93582CD8C9CD811E)] | [removed: [96](#sCA4DFB37CA165F92BC2E7F81CAC3C802)] [added: [79](#s63FC11F91AD45C6A93582CD8C9CD811E)] |

| [PART [removed: III](#sF3D46970099F5D448DF2A77B603E170D)] [added: III](#sC80CF6A855075670A45DDD9D922925A8)] | | [removed: [97](#sF3D46970099F5D448DF2A77B603E170D)] [added: [80](#sC80CF6A855075670A45DDD9D922925A8)] |

| Item 10. | [Directors, Executive Officers and Corporate [removed: Governance](#s21D9B9B04B595931866B5628CA1E9D4F)] [added: Governance](#sA4B0822D87665232A79C8A6DE232324F)] | [removed: [97](#s21D9B9B04B595931866B5628CA1E9D4F)] [added: [80](#sA4B0822D87665232A79C8A6DE232324F)] |

| Item 11. | [Executive [removed: Compensation](#sE8FE5F43B5B752F096FF6914529062E0)] [added: Compensation](#sF9E0E5F3599E5B22BC3116FB43F97150)] | [removed: [97](#sE8FE5F43B5B752F096FF6914529062E0)] [added: [80](#sF9E0E5F3599E5B22BC3116FB43F97150)] |

| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s4CDEB061FC165450AD56DC73DFF1D789)] [added: Matters](#s5C546AD985E0502189B6E9C455453D65)] | [removed: [97](#s4CDEB061FC165450AD56DC73DFF1D789)] [added: [80](#s5C546AD985E0502189B6E9C455453D65)] |

| Item 13. | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s0873EDF3FA0D5F89968D379E9451F8C2)] [added: Independence](#sB2B2200529065DC782CEF6111E3C9AFA)] | [removed: [97](#s0873EDF3FA0D5F89968D379E9451F8C2)] [added: [80](#sB2B2200529065DC782CEF6111E3C9AFA)] |

| Item 14. | [Principal Accounting Fees and [removed: Services](#s11C0B1519EBE5CD2829228B15061820A)] [added: Services](#s7CD4F3FE3B9054279B532DBC44804FC6)] | [removed: [97](#s11C0B1519EBE5CD2829228B15061820A)] [added: [80](#s7CD4F3FE3B9054279B532DBC44804FC6)] |

| Item 15. | [Exhibits and Financial Statement [removed: Schedules](#s110D109126E3534A95636847FE5ED4F7)] [added: Schedules](#sBD5C2D6F0289525A8DB8E50BABE60BEC)] | [removed: [98](#s110D109126E3534A95636847FE5ED4F7)] [added: [81](#sBD5C2D6F0289525A8DB8E50BABE60BEC)] |

| • | failure to close pending acquisitions [added: and developments] on expected terms, or at all; |

| • | increased interest [removed: rates and operating costs;] [added: rates;] |

| • | the failure to maintain our REIT status for U.S. federal income tax purposes; [added: and] |

| • | economic uncertainty due to the impact of [added: natural disasters,] war or terrorism, which could adversely affect our business [removed: plan; and] [added: plan.] |

10-K 1 exr-12312017x10k.htm 10-K

| | | | | Emerging growth company | | o |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

| [PART I](#s52FE9A66DF305BE78D4E3D31B1539186) | | [4](#s52FE9A66DF305BE78D4E3D31B1539186) |

| [PART II](#s10923513CFF1520899FA2AEC94510CD0) | | [15](#s10923513CFF1520899FA2AEC94510CD0) |

| [PART IV](#sBEA83E6D88755AC7BA46D72709312045) | | [81](#sBEA83E6D88755AC7BA46D72709312045) |

| [SIGNATURES](#sE8CBD5E0DD7C507BAB2F48B9526F6DCA) | | [84](#sE8CBD5E0DD7C507BAB2F48B9526F6DCA) |

| • | our lack of sole decision-making authority with respect to our joint venture investments; |

| • | the effect of recent or future changes to U.S. tax laws; |

10-K 1 exr-12312016x10k.htm 10-K

| | |

| --- | --- |

| | |

| --- | --- |

| [PART I](#sE5EE2DC3D12D5F0DAA4E09B2AE025A1E) | | [4](#sE5EE2DC3D12D5F0DAA4E09B2AE025A1E) |

| [PART II](#s7D0FD0DD29335D9FA601B350EA7474DF) | | [17](#s7D0FD0DD29335D9FA601B350EA7474DF) |

| [PART IV](#sF96CF5909D8D57C49F3488B5654ADFEC) | | [98](#sF96CF5909D8D57C49F3488B5654ADFEC) |

| [SIGNATURES](#s7F2FD6137C2D5ACFAF133D6BA46D2EAF) | | [101](#s7F2FD6137C2D5ACFAF133D6BA46D2EAF) |

| • | difficulties in our ability to evaluate, finance, complete and integrate acquisitions and developments successfully and to lease up those stores, which could adversely affect our profitability; |

| • | the failure to effectively manage our growth and expansion into new markets or to successfully operate acquired properties and operations; |

| • | the failure of our joint venture partners to fulfill their obligations to us or their pursuit of actions that are inconsistent with our objectives; |

| • | difficulties in our ability to attract and retain qualified personnel and management members. |

As of December 31, [removed: 2016,] [added: 2017,] we owned or had ownership interests in [removed: 1,016] [added: 1,061] operating stores.

Of these stores, [removed: 836] [added: 846] are [removed: wholly-owned] [added: wholly-owned, one is in a consolidated joint venture,] and [removed: 180] [added: 214] are [removed: held] in joint ventures.

In addition, we managed an additional [removed: 411] [added: 422] stores for third parties bringing the total number of stores which we own and/or manage to [removed: 1,427.][added: 1,483.]

These stores are located in [removed: 38] [added: 39] states, Washington, D.C. and Puerto Rico.

As of December 31, [removed: 2016,] [added: 2017,] approximately [removed: 850,000] [added: 835,000] tenants were leasing storage units at the [removed: 1,427] operating stores that we own and/or manage, primarily on a month-to-month basis, providing the flexibility to increase rental rates over time as market conditions permit.

For stores that were stabilized as of December 31, [removed: 2016,] [added: 2017,] the average length of stay was approximately [removed: 14.3] [added: 14.6] months.

The average annual rent per square foot for our existing customers at stabilized stores, net of discounts and bad debt, was [removed: $15.88] [added: $15.98] for the year ended December 31, [removed: 2016,] [added: 2017,] compared to [removed: $14.92] [added: $15.30] for the year ended December 31, [removed: 2015.][added: 2016.]

Average annual rent per square foot for new leases was [removed: $17.02] [added: $16.77] for the year ended December 31, [removed: 2016,] [added: 2017,] compared to [removed: $15.91] [added: $15.96] for the year ended December 31, [removed: 2015.][added: 2016.]

The average discounts, as a percentage of rental revenues, during these periods were [removed: 3.3%] [added: 3.9%] and [removed: 3.2%,] [added: 3.6%,] respectively.

Our store portfolio is made up of different types of construction and building [removed: configurations depending on the site and the municipality where it is located.][added: configurations.]

The following table presents additional information regarding [added: net rentable square feet and] the [removed: occupancy] [added: number] of [removed: our stabilized] stores by [removed: state as of December 31, 2016 and 2015.][added: state.]

The majority of our stores are clustered around large population centers.


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| | | | | | | | | | | | | | | | | |

| | As of December 31, 2017 | | | | | | | | | | | | | | | |

| | REIT Owned | | | | JV Owned | | | | Managed | | | | Total | | | |

| Location | Property Count | | Net Rentable Square Feet | | Property Count | | Net Rentable Square Feet | | Property Count | | Net Rentable Square Feet | | Property Count | | Net Rentable Square Feet | |

| Alabama | 8 | | 557,887 | | 1 | | 75,286 | | 9 | | 468,712 | | 18 | | 1,101,885 | |

| Arizona | 22 | | 1,536,086 | | 8 | | 554,487 | | 6 | | 420,836 | | 36 | | 2,511,409 | |

| California | 145 | | 11,423,633 | | 53 | | 3,752,368 | | 54 | | 5,072,892 | | 252 | | 20,248,893 | |

| Colorado | 13 | | 853,150 | | 3 | | 247,030 | | 16 | | 1,142,138 | | 32 | | 2,242,318 | |

| Connecticut | 7 | | 524,606 | | 6 | | 485,336 | | 3 | | 218,206 | | 16 | | 1,228,148 | |

| Delaware | — | | — | | 1 | | 76,765 | | — | | — | | 1 | | 76,765 | |

| Florida | 82 | | 6,273,792 | | 17 | | 1,333,795 | | 51 | | 3,775,872 | | 150 | | 11,383,459 | |

| Georgia | 55 | | 4,221,218 | | 3 | | 275,370 | | 13 | | 928,430 | | 71 | | 5,425,018 | |

| Hawaii | 9 | | 603,380 | | — | | — | | 7 | | 403,633 | | 16 | | 1,007,013 | |

| Illinois | 31 | | 2,395,802 | | 4 | | 288,168 | | 18 | | 1,108,036 | | 53 | | 3,792,006 | |

| Indiana | 15 | | 943,492 | | 1 | | 57,010 | | 7 | | 486,709 | | 23 | | 1,487,211 | |

| Kansas | 1 | | 49,999 | | 2 | | 108,770 | | 1 | | 70,480 | | 4 | | 229,249 | |

| Kentucky | 10 | | 767,624 | | 2 | | 111,342 | | 5 | | 359,304 | | 17 | | 1,238,270 | |

| Louisiana | 2 | | 150,355 | | — | | — | | 1 | | 133,810 | | 3 | | 284,165 | |

| Maryland | 32 | | 2,558,639 | | 7 | | 530,788 | | 20 | | 1,346,381 | | 59 | | 4,435,808 | |

| Massachusetts | 41 | | 2,558,305 | | 11 | | 663,963 | | 3 | | 200,511 | | 55 | | 3,422,779 | |

| Michigan | 6 | | 477,254 | | 5 | | 396,484 | | — | | — | | 11 | | 873,738 | |

| Minnesota | 1 | | 74,550 | | — | | — | | 5 | | 325,475 | | 6 | | 400,025 | |

| Mississippi | 3 | | 217,442 | | — | | — | | 4 | | 258,690 | | 7 | | 476,132 | |

| Missouri | 5 | | 331,836 | | 2 | | 119,575 | | 5 | | 301,578 | | 12 | | 752,989 | |

| Nebraska | — | | — | | — | | — | | 2 | | 90,742 | | 2 | | 90,742 | |

| Nevada | 14 | | 1,038,922 | | 4 | | 472,911 | | 7 | | 840,292 | | 25 | | 2,352,125 | |

| New Hampshire | 2 | | 135,932 | | 2 | | 83,685 | | 4 | | 145,280 | | 8 | | 364,897 | |

| New Jersey | 55 | | 4,341,854 | | 19 | | 1,415,395 | | 8 | | 624,589 | | 82 | | 6,381,838 | |

| New Mexico | 10 | | 643,186 | | 4 | | 242,503 | | 4 | | 326,294 | | 18 | | 1,211,983 | |

| New York | 22 | | 1,638,327 | | 12 | | 930,426 | | 14 | | 725,050 | | 48 | | 3,293,803 | |

| North Carolina | 16 | | 1,088,452 | | — | | — | | 15 | | 1,038,417 | | 31 | | 2,126,869 | |

| Ohio | 16 | | 1,217,275 | | 6 | | 415,728 | | 2 | | 111,419 | | 24 | | 1,744,422 | |

| Oklahoma | — | | — | | — | | — | | 16 | | 1,336,611 | | 16 | | 1,336,611 | |

| Oregon | 6 | | 399,292 | | 2 | | 138,275 | | 3 | | 183,795 | | 11 | | 721,362 | |

| Pennsylvania | 16 | | 1,203,819 | | 7 | | 505,496 | | 17 | | 1,203,508 | | 40 | | 2,912,823 | |

| Rhode Island | 2 | | 131,021 | | — | | — | | 1 | | 84,665 | | 3 | | 215,686 | |

We receive a management fee generally equal to approximately 6.0% of cash collected from total revenues to manage the joint venture and third party sites.

As of December 31, 2016, we owned and/or managed approximately 107 million square feet of rentable space configured in approximately 960,000 separate storage units.

Approximately 70% of our stores are clustered around large population centers, such as Atlanta, Baltimore/Washington, D.C., Boston, Chicago, Dallas, Houston, Las Vegas, Los Angeles, Miami, New York City, Orlando, Philadelphia, Phoenix, St. Petersburg/Tampa and San Francisco/Oakland.

These markets contain above-average population and income demographics for stores.

We consider a store to be in the lease-up stage after it has been issued a certificate of occupancy, but before it has achieved stabilization.

We consider a store to be stabilized once it has achieved either an 80% occupancy rate for a full year measured as of January 1 of the current year, or has been open for three years prior to the January 1 of the current year.

The information as of December 31, 2015, is on a pro forma basis as though all the stores owned at December 31, 2016, were under our control as of December 31, 2015.

Stabilized Store Data Based on Location

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| | | | | | | | | | | | | | | | | | | | | |

| | | | | Company | | | Pro forma | | | Company | | | Pro forma | | | Company | | | Pro forma | |

| Location | Number of Stores | | | Number of Units as of December 31, 2016 (1) | | | Number of Units as of December 31, 2015 | | | Net Rentable Square Feet as of December 31, 2016 (2) | | | Net Rentable Square Feet as of December 31, 2015 | | | Square Foot Occupancy % December 31, 2016 | | | Square Foot Occupancy % December 31, 2015 | |

| Wholly-Owned Stores | | | | | | | | | | | | | | | | | | | | |

| Alabama | 8 | | | 4,635 | | | 4,585 | | | 556,241 | | | 559,526 | | | 89.3 | % | | 88.3 | % |

| Arizona | 21 | | | 12,795 | | | 12,677 | | | 1,408,358 | | | 1,414,864 | | | 91.7 | % | | 90.4 | % |

| California | 143 | | | 109,771 | | | 108,156 | | | 11,425,653 | | | 11,399,051 | | | 93.8 | % | | 94.8 | % |

| Colorado | 13 | | | 6,685 | | | 6,562 | | | 823,284 | | | 822,499 | | | 89.6 | % | | 89.4 | % |

| Connecticut | 6 | | | 3,856 | | | 3,847 | | | 395,257 | | | 395,411 | | | 91.4 | % | | 92.7 | % |

| Florida | 77 | | | 55,459 | | | 54,612 | | | 5,873,089 | | | 5,848,836 | | | 92.6 | % | | 92.8 | % |

| Georgia | 48 | | | 28,956 | | | 28,281 | | | 3,715,001 | | | 3,698,127 | | | 90.4 | % | | 90.1 | % |

| Hawaii | 9 | | | 8,534 | | | 8,445 | | | 602,171 | | | 599,373 | | | 95.2 | % | | 92.1 | % |

| Illinois | 25 | | | 17,359 | | | 17,139 | | | 1,913,921 | | | 1,930,543 | | | 90.1 | % | | 89.6 | % |

| Indiana | 15 | | | 7,848 | | | 7,718 | | | 940,069 | | | 944,399 | | | 91.2 | % | | 88.5 | % |

| Kansas | 1 | | | 533 | | | 532 | | | 49,999 | | | 49,991 | | | 97.6 | % | | 91.9 | % |

| Kentucky | 10 | | | 5,874 | | | 5,840 | | | 756,870 | | | 755,610 | | | 90.0 | % | | 86.2 | % |

| Louisiana | 2 | | | 1,406 | | | 1,406 | | | 149,930 | | | 150,090 | | | 93.7 | % | | 92.1 | % |

| Maryland | 28 | | | 21,372 | | | 21,271 | | | 2,189,772 | | | 2,191,424 | | | 90.6 | % | | 91.3 | % |

| Massachusetts | 37 | | | 23,124 | | | 22,891 | | | 2,295,634 | | | 2,305,068 | | | 91.0 | % | | 92.2 | % |

| Minnesota | 1 | | | 765 | | | 765 | | | 74,400 | | | 74,400 | | | 73.2 | % | | 76.7 | % |

| Mississippi | 3 | | | 1,510 | | | 1,477 | | | 217,922 | | | 221,482 | | | 87.2 | % | | 81.9 | % |

| Missouri | 6 | | | 3,292 | | | 3,238 | | | 386,161 | | | 385,961 | | | 90.7 | % | | 93.2 | % |

| Nevada | 15 | | | 9,110 | | | 9,132 | | | 1,313,820 | | | 1,314,665 | | | 92.9 | % | | 89.9 | % |

| New Hampshire | 2 | | | 1,045 | | | 1,029 | | | 126,053 | | | 126,133 | | | 91.9 | % | | 93.0 | % |

| New Jersey | 58 | | | 45,721 | | | 45,213 | | | 4,498,968 | | | 4,495,243 | | | 92.6 | % | | 91.5 | % |

| New Mexico | 12 | | | 6,590 | | | 6,575 | | | 748,843 | | | 750,433 | | | 91.7 | % | | 91.9 | % |

| New York | 22 | | | 20,088 | | | 20,022 | | | 1,651,030 | | | 1,648,534 | | | 90.1 | % | | 91.7 | % |

| North Carolina | 11 | | | 6,876 | | | 6,806 | | | 761,677 | | | 761,323 | | | 90.5 | % | | 92.0 | % |

| Ohio | 17 | | | 9,534 | | | 9,460 | | | 1,248,860 | | | 1,246,238 | | | 91.7 | % | | 91.0 | % |

| Oregon | 3 | | | 2,140 | | | 2,156 | | | 250,180 | | | 250,130 | | | 91.2 | % | | 92.7 | % |

| | [added: Range] | | [added: | | | | | | Dividends Declared | | | |] Range | | | | | | | | Dividends Declared | | |

| [removed: Year |] Quarter | [added: High] | [added: | | | Low | | | | |] High | | | | Low | | | | | | | [added: | | |]

| [removed: 2016 |] 1st | [added: $] | [added: 79.82 | | | $ | 71.64 | | | $ | 0.78 | | | $ |] 93.46 | | | [added: $] | 78.42 | | | [added: $] | 0.59 | | [removed: |]

| [removed: |] 2nd | [added: $] | [added: 80.80 | | | $ | 71.79 | | | $ | 0.78 | | | $ |] 94.04 | | | [added: $] | 84.95 | | | [added: $] | 0.78 | | [removed: |]

| [removed: |] 3rd | [added: $] | [added: 82.25 | | | $ | 74.13 | | | $ | 0.78 | | | $ |] 94.38 | | | [added: $] | 76.17 | | | [added: $] | 0.78 | | [removed: |]

| [removed: |] 4th | [added: $] | [added: 87.86 | | | $ | 78.70 | | | $ | 0.78 | | | $ |] 77.66 | | | [added: $] | 68.78 | | | [added: $] | 0.78 | | [removed: |]

On February 21, [removed: 2017,] [added: 2018,] the closing price of our common stock as reported by the NYSE was [removed: $78.37.][added: $81.50.]

At February 21, [removed: 2017,] [added: 2018,] we had [removed: 355] [added: 423] holders of record of our common stock.

[added: As a REIT, we are required to distribute at least 90% of our “REIT taxable] income,” which is generally equivalent to our net taxable ordinary income, determined without regard to the deduction for dividends paid to our [removed: stockholders] [added: stockholders,] annually in order to maintain our REIT qualification for U.S. federal income tax purposes.

On [removed: November 8, 2016,] [added: December 28, 2017,] our Operating Partnership issued [removed: 486,244 Series D-4 Preferred Units in] [added: 64,708 common OP units ("OP Units")in] connection with the acquisition of [removed: a] [added: one] store [removed: located] in [removed: Illinois.][added: Florida.]

[removed: This] [added: The] store was acquired in exchange for the [removed: Series D-4 Preferred] [added: OP] Units, valued at [removed: $12.2 million.][added: $5.6 million, and approximately $4.9 million in cash.]

The [removed: OP Units will be redeemable, at the option of the holders following the expiration of a lock-up period commencing on the date of issuance and ending on August 15, 2018, which] redemption obligation may be satisfied, at our option, in cash or shares of our common stock.

All other unregistered sales of equity securities during the year ended December 31, [removed: 2016] [added: 2017] have previously been disclosed in filings with the SEC.

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| | | | | | | | | | | | | | | | | | | | | | | | |

| | 2017 | | | | | | | | | | | | 2016 | | | | | | | | | | |

Issuer Purchases of Equity Securities

In November 2017, our board of directors authorized a three-year share repurchase program to allow the Company to acquire shares in aggregate up to $400.0 million.

The Company expects to acquire shares through open market or privately negotiated transactions.

There have been no repurchases since the inception of this plan.

On December 6, 2017, our Operating Partnership issued 174,020 Series D-2 Preferred Units in connection with a joint venture's acquisition of one store in New York.

We acquired an ownership interest in the store from the issuance of Preferred D-2 Units that was then contributed to the joint venture as an equity contribution.

The OP Units were valued at $4.3 million.

The OP Units will be redeemable, at the option of the holders following the expiration of a lock-up period of at least one year from the date of issuance.

| | | | | | | | | | | | | | |

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| | | | | | | | | | | | | | |

| 2015 | 1st | | $ | 67.65 | | | $ | 57.11 | | | $ | 0.47 | |

| | 2nd | | 70.50 | | | | 63.54 | | | | 0.59 | | |

| | 3rd | | 77.51 | | | | 65.82 | | | | 0.59 | | |

| | 4th | | 90.22 | | | | 75.55 | | | | 0.59 | | |

| | | | | | | | | | | | | | |

As a REIT, we are required to distribute at least 90% of our “REIT taxable

On November 2, 2016, our Operating Partnership issued 77,575 common OP units ("OP Units") in connection with the acquisition of a store located in Maryland.

The store was acquired in exchange for the OP units, valued at $5.8 million, and approximately $9.0 million in cash.

| | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | |

| Total revenues | [removed: 991,875] [added: $] | [added: 1,105,009] | | | [removed: 782,270] [added: $] | [added: 991,875] | | | [removed: 647,155] [added: $] | [added: 782,270] | | | [removed: 520,613] [added: $] | [added: 647,155] | | | [removed: 409,396] [added: $] | [added: 520,613] | |

| Income from operations [added: (1)] | [removed: 449,838] [added: $] | [added: 541,605] | | | [removed: 294,656] [added: $] | [added: 449,838] | | | [removed: 278,468] [added: $] | [added: 294,656] | | | [removed: 213,483] [added: $] | [added: 278,468] | | | [removed: 157,241] [added: $] | [added: 213,483] | |

| [removed: Basic] [added: Earnings per share basic] | $ | [removed: 2.92] [added: 3.79] | | | $ | [removed: 1.58] [added: 2.92] | | | $ | [removed: 1.54] [added: 1.58] | | | $ | 1.54 | | | $ | [removed: 1.15] [added: 1.54] | |

| [removed: Diluted] [added: Earnings per share diluted] | $ | [removed: 2.91] [added: 3.76] | | | $ | [removed: 1.56] [added: 2.91] | | | $ | [removed: 1.53] [added: 1.56] | | | $ | 1.53 | | | $ | [removed: 1.14] [added: 1.53] | |

| Cash dividends paid per common share | $ | [removed: 2.93] [added: 3.12] | | | $ | [removed: 2.24] [added: 2.93] | | | $ | [removed: 1.81] [added: 2.24] | | | $ | [removed: 1.45] [added: 1.81] | | | $ | [removed: 0.85] [added: 1.45] | |

| | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | |

| Total assets | $ | [removed: 7,091,446] [added: 7,455,137] | | | $ | [removed: 6,071,407] [added: 7,091,446] | | | $ | [removed: 4,381,987] [added: 6,071,407] | | | $ | [removed: 3,977,140] [added: 4,381,987] | | | $ | [removed: 3,223,477] [added: 3,977,140] | |

| Total notes payable, notes payable to trusts, exchangeable senior notes and revolving lines of credit, net [added: (2)] | $ | [removed: 4,306,223] [added: 4,554,217] | | | $ | [removed: 3,535,621] [added: 4,306,223] | | | $ | [removed: 2,349,764] [added: 3,535,621] | | | $ | [removed: 1,946,647] [added: 2,349,764] | | | $ | [removed: 1,577,599] [added: 1,946,647] | |

| Noncontrolling interests | $ | [removed: 351,274] [added: 373,056] | | | $ | [removed: 283,527] [added: 351,274] | | | $ | [removed: 174,558] [added: 283,527] | | | $ | [removed: 173,425] [added: 174,558] | | | $ | [removed: 53,524] [added: 173,425] | |

| Total stockholders' equity | $ | [removed: 2,244,892] [added: 2,350,751] | | | $ | [removed: 2,089,077] [added: 2,244,892] | | | $ | [removed: 1,737,425] [added: 2,089,077] | | | $ | [removed: 1,758,470] [added: 1,737,425] | | | $ | [removed: 1,491,807] [added: 1,758,470] | |

| Net cash provided by operating activities | $ | [removed: 539,263] [added: 597,375] | | | $ | [removed: 367,329] [added: 539,263] | | | $ | [removed: 337,581] [added: 367,329] | | | $ | [removed: 271,259] [added: 337,581] | | | $ | [removed: 215,879] [added: 271,259] | |

| Net cash used in investing activities | $ | [removed: (1,032,035] [added: (369,556] | ) | | $ | [removed: (1,625,664] [added: (1,032,035] | ) | | $ | [removed: (564,948] [added: (1,625,664] | ) | | $ | [removed: (366,976] [added: (564,948] | ) | | $ | [removed: (606,938] [added: (366,976] | ) |

| Net cash provided by [added: (used in)] financing activities | $ | [removed: 460,831] [added: (215,994] | [added: )] | | $ | [removed: 1,286,471] [added: 460,831] | | | $ | [removed: 148,307] [added: 1,286,471] | | | $ | [removed: 191,655] [added: 148,307] | | | $ | [removed: 395,360] [added: 191,655] | |

| Operating Data: | | | | | | | | | | | | | | | | | | | |

| Other Data: | | | | | | | | | | | | | | | | | | | |

| Acquisitions - wholly owned | $ | 627,462 | | | $ | 1,086,645 | | | $ | 1,606,509 | | | $ | 563,670 | | | $ | 704,449 | |

| Acquisitions - investment in joint ventures | 15,094 | | | | 34,199 | | | | 21,529 | | | | — | | | | — | | |

| Total | $ | 642,556 | | | $ | 1,120,844 | | | $ | 1,628,038 | | | $ | 563,670 | | | $ | 704,449 | |

| | |

| --- | --- |

| (1) | The adoption of FASB ASU 2017-01 on January 1, 2017, has resulted in a decrease in acquisition related costs as the Company’s acquisition of operating stores are considered asset acquisitions rather than business combinations. |

| | |

| --- | --- |

| (2) | In connection with our adoption of Financial Accounting Standards Board (“FASB”) ASU 2015-3, "Simplifying the Presentation of Debt Issuance Costs," in fiscal year 2016, debt issuance costs, with the exception of those related to our revolving credit facility, have been reclassified from other assets to a reduction of the carrying amount of the related debt liability. Prior year amounts have been reclassified to conform to the current period’s presentation. |

| | | | | | | | | | | | | | | | | | | | |

| Revenues: | | | | | | | | | | | | | | | | | | | |

| Property rental | $ | 864,742 | | | $ | 676,138 | | | $ | 559,868 | | | $ | 446,682 | | | $ | 346,874 | |

| Tenant reinsurance, management fees and other income | 127,133 | | | | 106,132 | | | | 87,287 | | | | 73,931 | | | | 62,522 | | |

| Expenses: | | | | | | | | | | | | | | | | | | | |

| Property operations | 250,005 | | | | 203,965 | | | | 172,416 | | | | 140,012 | | | | 114,028 | | |

| Tenant reinsurance | 15,555 | | | | 13,033 | | | | 10,427 | | | | 9,022 | | | | 7,869 | | |

| Acquisition related costs and other | 12,111 | | | | 69,401 | | | | 9,826 | | | | 8,618 | | | | 5,351 | | |

| General and administrative | 81,806 | | | | 67,758 | | | | 60,942 | | | | 54,246 | | | | 50,454 | | |

| Depreciation and amortization | 182,560 | | | | 133,457 | | | | 115,076 | | | | 95,232 | | | | 74,453 | | |

| Total expenses | 542,037 | | | | 487,614 | | | | 368,687 | | | | 307,130 | | | | 252,155 | | |

| Interest expense | (138,459 | | ) | | (98,992 | | ) | | (84,013 | | ) | | (73,034 | | ) | | (72,294 | | ) |

| Interest income | 10,998 | | | | 8,311 | | | | 6,457 | | | | 5,599 | | | | 6,666 | | |

| Loss on extinguishment of debt related to portfolio acquisition, gain (loss) on real estate transactions, earnout from prior acquisitions, sale of other assets and property casualty loss, net | 8,465 | | | | 1,501 | | | | (12,009 | | ) | | (8,193 | | ) | | — | | |

| Income before equity in earnings of real estate ventures and income tax expense | 330,842 | | | | 205,476 | | | | 188,903 | | | | 137,855 | | | | 91,613 | | |

| Equity in earnings of unconsolidated real estate ventures | 12,895 | | | | 12,351 | | | | 10,541 | | | | 11,653 | | | | 10,859 | | |

| Equity in earnings of unconsolidated real estate ventures - gain on sale of real estate assets and purchase of joint venture partners' interests | 69,199 | | | | 2,857 | | | | 4,022 | | | | 46,032 | | | | 30,630 | | |

| Income tax expense | (15,847 | | ) | | (11,148 | | ) | | (7,570 | | ) | | (9,984 | | ) | | (5,413 | | ) |

| Net income | 397,089 | | | | 209,536 | | | | 195,896 | | | | 185,556 | | | | 127,689 | | |

| Noncontrolling interests in Operating Partnership and other noncontrolling interests | (30,962 | | ) | | (20,062 | | ) | | (17,541 | | ) | | (13,480 | | ) | | (10,380 | | ) |

| Net income attributable to common stockholders | $ | 366,127 | | | $ | 189,474 | | | $ | 178,355 | | | $ | 172,076 | | | $ | 117,309 | |

| Earnings per common share | | | | | | | | | | | | | | | | | | | |

| Weighted average number of shares | | | | | | | | | | | | | | | | | | | |

| Basic | 125,087,554 | | | | 119,816,743 | | | | 115,713,807 | | | | 111,349,361 | | | | 101,766,385 | | |

| Diluted | 125,948,076 | | | | 126,918,869 | | | | 121,435,267 | | | | 113,105,094 | | | | 103,767,365 | | |

[removed: EXTRA SPACE STORAGE INC.][added: Extra Space Storage Inc. Schedule III (continued)]

| [Report of Independent Registered Public Accounting [removed: Firm](#s792639F35B92555082C526E7CD78590A)] [added: Firm](#s5507E7BCB99750A39D0FDDD592755DD0)] | [removed: [41](#s792639F35B92555082C526E7CD78590A)] [added: [34](#s5507E7BCB99750A39D0FDDD592755DD0)] |

| [Consolidated Balance Sheets as of December 31, [removed: 2016] [added: 2017] and [removed: 2015](#s6484A89BD0C75F5EB9B9106E6D53694F)] [added: 2016](#s358F5123848C5B9882E2E2EF348FED56)] | [removed: [42](#s6484A89BD0C75F5EB9B9106E6D53694F)] [added: [35](#s358F5123848C5B9882E2E2EF348FED56)] |

| [Consolidated Statements of Operations for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014](#s81D82E7CECF05CC7B2839AE91D165EC5)] [added: 2015](#s005F0CD1469953C998A086EAF3BD04E2)] | [removed: [43](#s81D82E7CECF05CC7B2839AE91D165EC5)] [added: [36](#s005F0CD1469953C998A086EAF3BD04E2)] |

| [Consolidated Statements of Comprehensive Income for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014](#s855EA1050BC05205974B618B8125131D)] [added: 2015](#s7116F49439BE5F2EA9BA478A64E1E8CB)] | [removed: [44](#s855EA1050BC05205974B618B8125131D)] [added: [37](#s7116F49439BE5F2EA9BA478A64E1E8CB)] |

| [Consolidated Statements of Stockholders’ Equity for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014](#sC9BAFF439771573A87CB741392F94205)] [added: 2015](#s8DCB4990BE175D898B96700A0A48D32E)] | [removed: [45](#sC9BAFF439771573A87CB741392F94205)] [added: [38](#s8DCB4990BE175D898B96700A0A48D32E)] |

| [Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014](#s22786CA2C3F95312BCA745C522512E86)] [added: 2015](#s3156FB4BCA0B5C868AF5094D083845F8)] | [removed: [48](#s22786CA2C3F95312BCA745C522512E86)] [added: [41](#s3156FB4BCA0B5C868AF5094D083845F8)] |

| [Notes to Consolidated Financial [removed: Statements](#s08C0A26ED4075B4EAD757758EA43EC53)] [added: Statements](#sDEF67C3467F0566681E1B42EA081BEF6)] | [removed: [50](#s08C0A26ED4075B4EAD757758EA43EC53)] [added: [42](#sDEF67C3467F0566681E1B42EA081BEF6)] |

| [Schedule III - Real Estate and Accumulated [removed: Depreciation](#s2F5E97CF5A615DE18B214CEE7A0BA1A7)] [added: Depreciation](#s44EB682D179E52A2B2AB5125E818B3B3)] | [removed: [89](#s2F5E97CF5A615DE18B214CEE7A0BA1A7)] [added: [76](#s44EB682D179E52A2B2AB5125E818B3B3)] |

We have audited the accompanying consolidated balance sheets of Extra Space Storage Inc. [added: (the Company)] as of December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, [removed: 2016.][added: 2017, and the related notes and financial statement schedule listed in the Index at Item 8 (collectively referred to as the “consolidated financial statements”).]

These financial statements [removed: and schedule] are the responsibility of [removed: the Company's] [added: Company’s] management.

Our responsibility is to express an opinion on [removed: these] [added: the Company’s] financial statements [removed: and schedule] based on our audits.

We conducted our audits in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material [removed: misstatement.][added: misstatement, whether due to error or fraud.]

[removed: An audit includes] [added: Such procedures included] examining, on a test basis, evidence [removed: supporting] [added: regarding] the amounts and disclosures in the financial statements.

[removed: An audit] [added: Our audits] also [removed: includes assessing] [added: included evaluating] the accounting principles used and significant estimates made by management, as well as evaluating the overall [added: presentation of the] financial [removed: statement presentation.][added: statements.]

In our opinion, the [added: consolidated] financial statements [removed: referred to above] present fairly, in all material respects, the [removed: consolidated] financial position of [removed: Extra Space Storage Inc.] [added: the Company] at December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] and the [removed: consolidated] results of [removed: their] [added: its] operations and [removed: their] [added: its] cash flows for each of the three years in the period ended December 31, [removed: 2016,] [added: 2017,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United [removed: States), Extra Space Storage Inc.’s] [added: States) (PCAOB), the Company’s] internal control over financial reporting as of December 31, [removed: 2016,] [added: 2017,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated [removed: February 27, 2017] [added: March 1, 2018] expressed an unqualified opinion thereon.

| | [removed: December 31,] 2016 | | | [removed: | December 31,] 2015 | | [removed: |]

| [removed: Real] [added: Net real] estate [removed: assets, net] [added: assets] | $ | [added: 7,132,431 | | | $ |] 6,770,447 | | | $ | 5,689,309 | |

| Investments in unconsolidated real estate ventures | [removed: 79,570] [added: 70,091] | | | | [removed: 103,007] [added: 79,570] | | |

| Cash and cash equivalents | [removed: 43,858] [added: 55,683] | | | | [removed: 75,799] [added: 43,858] | | |

| Restricted cash | [removed: 13,884] [added: 30,361] | | | | [removed: 30,738] [added: 13,884] | | |

| Receivables from related parties and affiliated real estate joint ventures | [removed: 16,611] [added: 2,847] | | | | [removed: 2,205] [added: 16,611] | | |

| Other assets, net | [removed: 167,076] [added: 163,724] | | | | [removed: 170,349] [added: 167,076] | | |

| Total assets | $ | [removed: 7,091,446] [added: 7,455,137] | | | $ | [removed: 6,071,407] [added: 7,091,446] | |

| Notes payable, net | $ | [removed: 3,213,588] [added: 3,738,497] | | | $ | [removed: 2,758,567] [added: 3,213,588] | |

| Exchangeable senior notes, net | [removed: 610,314] [added: 604,276] | | | | [removed: 623,863] [added: 610,314] | | |

| Notes payable to trusts, net | [removed: 117,321] [added: 117,444] | | | | [removed: 117,191] [added: 117,321] | | |

| Revolving lines of credit | [removed: 365,000] [added: 94,000] | | | | [removed: 36,000] [added: 365,000] | | |

| Accounts payable and accrued expenses | [removed: 101,388] [added: 96,087] | | | | [removed: 82,693] [added: 101,388] | | |

| Other liabilities | [removed: 87,669] [added: 81,026] | | | | [removed: 80,489] [added: 87,669] | | |

| Total liabilities | [removed: 4,495,280] [added: 4,731,330] | | | | [removed: 3,698,803] [added: 4,495,280] | | |

| Common stock, $0.01 par value, 500,000,000 shares authorized, [removed: 125,881,460] [added: 126,007,091] and [removed: 124,119,531] [added: 125,881,460] shares issued and outstanding at December 31, [removed: 2016] [added: 2017] and December 31, [removed: 2015,] [added: 2016,] respectively | [removed: 1,259] [added: 1,260] | | | | [removed: 1,241] [added: 1,259] | | |

| Additional paid-in capital | [removed: 2,566,120] [added: 2,569,485] | | | | [removed: 2,431,754] [added: 2,566,120] | | |

| Accumulated other comprehensive income [removed: (loss)] | [removed: 16,770] [added: 33,290] | | | | [removed: (6,352] [added: 16,770] | | [removed: )] |

| Accumulated deficit | [removed: (339,257] [added: (253,284] | | ) | | [removed: (337,566] [added: (339,257] | | ) |

| Total Extra Space Storage Inc. stockholders' equity | [removed: 2,244,892] [added: 2,350,751] | | | | [removed: 2,089,077] [added: 2,244,892] | | |

| Noncontrolling interest represented by Preferred Operating Partnership units, net of $120,230 notes receivable | [removed: 147,920] [added: 159,636] | | | | [removed: 80,531] [added: 147,920] | | |

| Noncontrolling interests in Operating Partnership | [removed: 203,354] [added: 213,301] | | | | [removed: 202,834] [added: 203,354] | | |

Opinion on the Financial Statements

Basis for Opinion

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We have served as the Company’s auditor since 2005.

March 1, 2018

| Balances at Balances at December 31, 2015 | $ | 14,189 | | | $ | 41,902 | | | $ | 10,730 | | | $ | 13,710 | | | $ | 202,834 | | | $ | 162 | | | 124,119,531 | | | $ | 1,241 | | | $ | 2,431,754 | | | $ | (6,352 | ) | | $ | (337,566 | ) | | $ | 2,372,604 | |

| Balances at Balances at December 31, 2016 | $ | 14,385 | | | $ | 41,902 | | | $ | 10,730 | | | $ | 80,903 | | | $ | 203,354 | | | $ | — | | | 125,881,460 | | | $ | 1,259 | | | $ | 2,566,120 | | | $ | 16,770 | | | $ | (339,257 | ) | | $ | 2,596,166 | |

| Issuance of Preferred D Units in the Operating Partnership in conjunction with acquisitions | — | | | | — | | | | — | | | | 11,161 | | | | — | | | | — | | | | — | | | — | | | | — | | | | — | | | | — | | | | 11,161 | | |

| Noncontrolling Interest in consolidated joint venture | — | | | | — | | | | — | | | | — | | | | — | | | | 216 | | | | — | | | — | | | | — | | | | — | | | | — | | | | 216 | | |

| Repurchase of equity portion of 2013 exchangeable senior notes | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | — | | | | (6,189 | | ) | | — | | | | — | | | | (6,189 | | ) |

| Net income (loss) | 6,300 | | | | 2,514 | | | | 2,703 | | | | 3,472 | | | | 20,317 | | | | (97 | | ) | | — | | | — | | | | — | | | | — | | | | 479,013 | | | | 514,222 | | |

| Other comprehensive income | 106 | | | | — | | | | — | | | | — | | | | 682 | | | | — | | | | — | | | — | | | | — | | | | 16,520 | | | | — | | | | 17,308 | | |

| Distributions to Operating Partnership units held by noncontrolling interests | (5,851 | | ) | | (2,514 | | ) | | (2,703 | | ) | | (3,472 | | ) | | (17,432 | | ) | | — | | | | — | | | — | | | | — | | | | — | | | | — | | | | (31,972 | | ) |

| Balances at Balances at December 31, 2017 | $ | 14,940 | | | $ | 41,902 | | | $ | 10,730 | | | $ | 92,064 | | | $ | 213,301 | | | $ | 119 | | | 126,007,091 | | | $ | 1,260 | | | $ | 2,569,485 | | | $ | 33,290 | | | $ | (253,284 | ) | | $ | 2,723,807 | |

| Contributions from noncontrolling interests | 201 | | | | — | | | | — | | |

| Accounts payable and accrued expenses | (5,212 | | ) | | (8,622 | | ) | | (2,332 | | ) |

| Issuance of Preferred OP Units for additional investment in unconsolidated real estate venture | | | | | | | | | | | |

| Preferred OP Units issued | $ | (4,351 | ) | | $ | — | | | $ | — | |

The Company also offers tenant reinsurance at its owned and managed stores that insures the value of goods in the storage units.

In our Segment Information in Note 18, the number of segments has changed from three to two.

The prior years' segment information has been reclassified to conform to the current year's presentation.

The Company compares the carrying value of the related long-lived assets to the undiscounted future net operating cash flows attributable to the assets (categorized within Level 3 of the fair value hierarchy).

Annually, a third party

For any taxable year that the Company fails to qualify as a REIT and for which applicable statutory relief provisions did not apply, we would be taxed at the regular corporate rates on all of our taxable income for at least that year and the ensuing four years.

| | 910,309 | | | 7,846,519 | | | 1,179,291 | |

The Company has irrevocably agreed

| Series D Units | 1,081,561 | | | | — | | | | — | | |

In March 2016, the FASB issued ASU 2016-05, "Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships." ASU 2016-05 clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument does not, in and of itself, require re-designation of that hedging relationship provided that all other hedge accounting criteria continue to be met.

The adoption of ASU 2016-05 did not have a material impact on the Company's consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, “Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 simplifies several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.

This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.

The Company adopted this guidance prospectively on January 1, 2017, and prior periods have not been adjusted.

As a result of the adoption of this guidance, the Company no longer presents the tax effects from vesting of restricted stock grants and stock option exercises on its condensed consolidated statement of noncontrolling interests and equity.

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments." ASU 2016-15 provides guidance on several specific cash flow issues, including the classification of debt prepayment or debt extinguishment costs, contingent consideration payments, and distributions received from equity method investees.

This guidance is effective for fiscal years beginning after December 15, 2017.

The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

In October 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash," which requires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.

Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.

This guidance is effective for fiscal years beginning after

| | |

| --- | --- |

| | |

Our audits also included the financial statement schedule listed in the Index at Item 8.

Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

February 27, 2017

Extra Space Storage Inc.

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | |

| Assets: | | | | | | | |

Extra Space Storage Inc.

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | |

| Property casualty loss, net | — | | | | — | | | | (1,724 | | ) |

Extra Space Storage Inc.

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | |

| Balances at December 31, 2013 | $ | 30,202 | | | $ | 33,568 | | | $ | 17,177 | | | $ | — | | | $ | 91,453 | | | $ | 1,025 | | | 115,755,527 | | | $ | 1,157 | | | $ | 1,973,159 | | | $ | 10,156 | | | $ | (226,002 | ) | | $ | 1,931,895 | |

| Redemption of Operating Partnership units for common stock | (10,240 | | ) | | — | | | | — | | | | — | | | | (398 | | ) | | — | | | | 299,190 | | | 3 | | | | 10,635 | | | | — | | | | — | | | | — | | |

| Issuance of note receivable to Series C unit holders | — | | | | — | | | | (20,230 | | ) | | — | | | | — | | | | — | | | | — | | | — | | | | — | | | | — | | | | — | | | | (20,230 | | ) |

| Net income | 7,036 | | | | 2,387 | | | | 1,551 | | | | 17 | | | | 6,538 | | | | 12 | | | | — | | | — | | | | — | | | | — | | | | 178,355 | | | | 195,896 | | |

| Other comprehensive income | (74 | | ) | | — | | | | — | | | | — | | | | (347 | | ) | | — | | | | — | | | — | | | | — | | | | (11,640 | | ) | | — | | | | (12,061 | | ) |

| Tax effect from vesting of restricted stock grants and stock option exercises | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | — | | | | 3,613 | | | | — | | | | — | | | | 3,613 | | |

Extra Space Storage Inc.

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| Property casualty loss | — | | | | — | | | | 1,724 | | |

| Redemption of Operating Partnership units held by noncontrolling interests | (506 | | ) | | — | | | | (4,794 | | ) |

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| Other liabilities | (8,622 | | ) | | (2,332 | | ) | | (2,799 | | ) |

Amounts in thousands, except store and share data, unless otherwise stated

To the extent the Company continues to qualify as a REIT, it will not be subject to tax, with certain limited exceptions, on the taxable income that is distributed to its stockholders.

The rental operations activities include rental operations of stores in which the Company has an ownership interest.

No single tenant accounts for more than 5.0% of rental income.

Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, [removed: 2016.][added: 2017.]

We have audited Extra Space Storage Inc.’s internal control over financial reporting as of December 31, [removed: 2016,] [added: 2017,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

[removed: Extra Space Storage Inc.’s] [added: The Company’s] management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.

We conducted our audit in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]

In our opinion, Extra Space Storage Inc. [added: (the Company)] maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2016,] [added: 2017,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United [removed: States),] [added: States) (PCAOB),] the consolidated balance sheets of [removed: Extra Space Storage Inc.] [added: the Company] as of December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period [removed: ended December 31, 2016 of Extra Space Storage Inc. and our report dated February 27, 2017 expressed an unqualified opinion thereon.]

Opinion on Internal Control over Financial Reporting

ended December 31, 2017, and the related notes and financial statement schedule listed in the Index at Item 8 and our report dated March 1, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Definition and Limitations of Internal Control Over Financial Reporting

March 1, 2018

February 27, 2017

Information required by this item is incorporated by reference to the information set forth under the captions “Executive Officers,” and “Information About the Board of Directors and its Committees” in our definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after December 31, [removed: 2016.][added: 2017.]

Investors may obtain a free copy of the Code of Business Conduct and Ethics, the Corporate Governance Guidelines and the committee charters by contacting the Investor Relations Department at 2795 East Cottonwood Parkway, Suite [removed: 400,] [added: 300,] Salt Lake City, Utah 84121, Attn: Jeff Norman or by telephoning (801) 365-4600.

Information with respect to executive compensation is incorporated by reference to the information set forth under the caption “Executive Compensation” in our definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after December 31, [removed: 2016.][added: 2017.]

Information with respect to security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference to the information set forth under the captions “Executive Compensation” and “Security Ownership of Directors and Officers” in our definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after December 31, [removed: 2016.][added: 2017.]

Information with respect to certain relationships and related transactions is incorporated by reference to the information set forth under the captions “Information about the Board of Directors and its Committees” and “Certain Relationships and Related Transactions” in our Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after December 31, [removed: 2016.][added: 2017.]

Information with respect to principal accounting fees and services is incorporated by reference to the information set forth under the caption “Ratification of Appointment of Independent Registered Public Accounting Firm” in our Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after December 31, [removed: 2016.][added: 2017.]

| [removed: 2.1] [added: [2.1](http://www.sec.gov/Archives/edgar/data/1289490/000119312505103834/dex21.htm)] | | Purchase and Sale Agreement, dated May 5, 2005 by and among Security Capital Self Storage Incorporated, as seller and Extra Space Storage LLC, PRISA Self Storage LLC, PRISA II Self Storage LLC, PRISA III Self Storage LLC, VRS Self Storage LLC, WCOT Self Storage LLC and Extra Space Storage LP, as purchaser parties and The Prudential Insurance Company of America (incorporated by reference to Exhibit 2.1 of Form 8-K filed on May 11, 2005). |

| [removed: 2.2] [added: [2.2](http://www.sec.gov/Archives/edgar/data/1289490/000119312515223310/d942655dex21.htm)] | | Agreement and Plan of Merger, dated as of June 15, 2015, among Extra Space Storage Inc., Extra Space Storage LP, Edgewater REIT Acquisition (MD) LLC, Edgewater Partnership Acquisition (DE) LLC, SmartStop Self Storage, Inc. and SmartStop Self Storage Operating Partnership, L.P. (incorporated by reference to Exhibit 2.1 of Form 8-K filed on June 15, 2015). |

| [removed: 2.3] [added: [2.3](http://www.sec.gov/Archives/edgar/data/1289490/000119312515254920/d43417dex21.htm)] | | Amendment No. 1 to Agreement and Plan of Merger, dated as of July 16, 2015, among Extra Space Storage Inc., Extra Space Storage LP, Edgewater REIT Acquisition (MD) LLC, Edgewater Partnership Acquisition (DE) LLC, SmartStop Self Storage, Inc. and SmartStop Self Storage Operating Partnership, L.P. (incorporated by reference to Exhibit 2.1 of Form 8-K filed on July 16, 2015). |

| [removed: 3.1] [added: [3.1](http://www.sec.gov/Archives/edgar/data/1289490/000119312504136936/dex31.htm)] | | Amended and Restated Articles of Incorporation of Extra Space Storage Inc.(1) |

| [removed: 3.2] [added: [3.2](http://www.sec.gov/Archives/edgar/data/1289490/000110465907072983/a07-25208_1ex3d1.htm)] | | Articles of Amendment of Extra Space Storage Inc., dated September 28, 2007 (incorporated by reference to Exhibit 3.1 of Form 8-K filed on October 3, 2007). |

| [removed: 3.3] [added: [3.3](http://www.sec.gov/Archives/edgar/data/1289490/000110465913067080/a13-19441_1ex3d1.htm)] | | Articles of Amendment of Extra Space Storage Inc., dated August 29, 2013 (incorporated by reference to Exhibit 3.1 of Form 8-K filed on August 29, 2013). |

| [removed: 3.4] [added: [3.4](http://www.sec.gov/Archives/edgar/data/1289490/000110465909034833/a09-14238_1ex3d1.htm)] | | Amended and Restated Bylaws of Extra Space Storage Inc.(incorporated by reference to Exhibit 3.1 of Form 8-K filed on May 26, 2009) |

| [removed: 3.5] [added: [3.5](http://www.sec.gov/Archives/edgar/data/1289490/000119312514452700/d842499dex31.htm)] | | Amendment No. 1 to Amended and Restated Bylaws of Extra Space Storage Inc. (incorporated by reference to Exhibit 3.1 of Form 8-K filed December 23, 2014). |

| [removed: 3.6] [added: [3.6](http://www.sec.gov/Archives/edgar/data/1289490/000110465913088877/a13-25830_1ex10d1.htm)] | | Fourth Amended and Restated Agreement of Limited Partnership of Extra Space Storage LP (incorporated by reference to Exhibit 10.1 of Form 8-K filed on December 6, 2013). |

| [removed: 3.7] [added: [3.7](http://www.sec.gov/Archives/edgar/data/1289490/000119312504124199/dex35.htm)] | | Declaration of Trust of ESS Holdings Business Trust II.(1) |

| [removed: 4.1] [added: [4.1](http://www.sec.gov/Archives/edgar/data/1289490/000119312505155041/dex41.htm)] | | Junior Subordinated Indenture dated as of July 27, 2005, between Extra Space Storage LP and JPMorgan Chase Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 of Form 8-K filed on August 2, 2005). |

| [removed: 4.2] [added: [4.2](http://www.sec.gov/Archives/edgar/data/1289490/000119312505155041/dex42.htm)] | | Amended and Restated Trust Agreement, dated as of July 27, 2005, among Extra Space Storage LP, as depositor and JPMorgan Chase Bank, National Association, as property trustee, Chase Bank USA, National Association, as Delaware trustee, the Administrative Trustees named therein and the holders of undivided beneficial interest in the assets of ESS Statutory Trust III (incorporated by reference to Exhibit 4.2 of Form 8-K filed on August 2, 2005). |

| [removed: 4.3] [added: [4.3](http://www.sec.gov/Archives/edgar/data/1289490/000104746910001564/a2196671zex-4_3.htm)] | | Junior Subordinated Note (incorporated by reference to Exhibit 4.3 of Form 10-K filed on February 26, 2010) |

| [removed: 4.4] [added: [4.4](http://www.sec.gov/Archives/edgar/data/1289490/000104746910001564/a2196671zex-4_4.htm)] | | Trust Preferred Security Certificates (incorporated by reference to Exhibit 4.4 of Form 10-K filed on February 26, 2010) |

| [removed: 4.6] [added: [4.6](http://www.sec.gov/Archives/edgar/data/1289490/000110465913050813/a13-14469_4ex4d1.htm)] | | Indenture, dated June 21, 2013, among Extra Space Storage LP, Extra Space Storage Inc. and Wells Fargo Bank, National Association, as trustee, including the form of 2.375% Exchangeable Senior Notes due 2033 and form of guarantee (incorporated by reference to Exhibit 4.1 of Form 8-K filed on June 21, 2013). |

| [removed: 4.7] [added: [4.7](http://www.sec.gov/Archives/edgar/data/1289490/000119312515324511/d96928dex41.htm)] | | Indenture, dated September 21, 2015, among Extra Space Storage LP, as issuer, Extra Space Storage Inc., as guarantor, and Wells Fargo Bank, National Association, as trustee, including the form of 3.125% Exchangeable Senior Notes due 2035 and the form of guarantee (incorporated by reference to Exhibit 4.1 of Form 8-K filed on September 21, 2015). |

| [removed: 10.1] [added: [10.1](http://www.sec.gov/Archives/edgar/data/1289490/000119312504136936/dex101.htm)] | | Registration Rights Agreement, by and among Extra Space Storage Inc. and the parties listed on Schedule I thereto.(1) |

| [removed: 10.2] [added: [10.2](http://www.sec.gov/Archives/edgar/data/1289490/000119312504124199/dex1014.htm)] | | Joint Venture Agreement, dated June 1, 2004, by and between Extra Space Storage LLC and Prudential Financial, Inc.(1) |

| [removed: 10.3] [added: [10.3](http://www.sec.gov/Archives/edgar/data/1289490/000119312505131046/dex102.htm)] | | Registration Rights Agreement, dated June 20, 2005, among Extra Space Storage Inc. and the investors named therein (incorporated by reference to Exhibit [removed: 10.1] [added: 10.2] of Form 8-K filed on June 24, 2005). |

| [removed: 10.4] [added: [10.4](http://www.sec.gov/Archives/edgar/data/1289490/000119312505155041/dex101.htm)] | | Purchase Agreement, dated as of July 27, 2005, among Extra Space Storage LP, ESS Statutory Trust III and the Purchaser named therein (incorporated by reference to Exhibit 10.1 of Form 8-K filed on August 2, 2005). |

| [removed: 10.5] [added: [10.5](http://www.sec.gov/Archives/edgar/data/1289490/000110465907023171/a07-9228_2ex10d1.htm)] | | Registration Rights Agreement, dated March 27, 2007, among Extra Space Storage LP, Extra Space Storage Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (incorporated by reference to Exhibit 10.1 of Form 8-K filed on March 28, 2007). |

| [removed: 10.6] [added: [10.6](http://www.sec.gov/Archives/edgar/data/1289490/000110465907050085/a07-17493_1ex10d2.htm)] | | Promissory Note, dated June 25, 2007, among Extra Space Storage LP, H. James Knuppe and Barbara Knuppe (incorporated by reference to Exhibit 10.2 of Form 8-K filed on June 26, 2007). |

| [removed: 10.7] [added: [10.7](http://www.sec.gov/Archives/edgar/data/1289490/000110465907050085/a07-17493_1ex10d3.htm)] | | Pledge Agreement, dated June 25, 2007, among Extra Space Storage LP, H. James Knuppe and Barbara Knuppe (incorporated by reference to Exhibit 10.3 of Form 8-K filed on June 26, 2007). |

| [removed: 10.8] [added: [10.8](http://www.sec.gov/Archives/edgar/data/1289490/000104746910001564/a2196671zex-10_26.htm)] | | Registration Rights Agreement among Extra Space Storage LP, H. James Knuppe and Barbara Knuppe. (incorporated by reference to Exhibit 10.26 of Form 10-K filed on February 26, 2010) |

| [removed: 10.9] [added: [10.9](http://www.sec.gov/Archives/edgar/data/1289490/000110465912025625/a12-9636_1ex10d1.htm)] | | Membership Interest Purchase Agreement, dated as of April 13, 2012, between Extra Space Properties Sixty Three LLC and PRISA III Co-Investment LLC (incorporated by reference to Exhibit 10.1 of Form 8-K filed on April 16, 2012). |

| [removed: 10.10] [added: [10.10](http://www.sec.gov/Archives/edgar/data/1289490/000110465910046708/a10-16596_1ex10d1.htm)] | | Extra Space Storage Inc. Executive Change in Control Plan (incorporated by reference to Exhibit 10.1 of Form 8-K filed on August 31, [removed: 2011).] [added: 2010).] |

| [removed: 10.11] [added: [10.11](http://www.sec.gov/Archives/edgar/data/1289490/000110465913050813/a13-14469_4ex10d1.htm)] | | Registration Rights Agreement, dated June 21, 2013, among Extra Space Storage LP, Extra Space Storage Inc., Citigroup Global Markets Inc. and Wells Fargo Securities, LLC (incorporated by reference to Exhibit 10.1 of Form 8-K filed on June 21, 2013). |

| [removed: 10.12] [added: [10.12](http://www.sec.gov/Archives/edgar/data/1289490/000110465914036162/a14-9641_1ex10d1.htm)] | | Letter Agreement, dated as of November 22, 2013, amending the Contribution Agreement, dated June 15, 2007, among Extra Space Storage LP and various limited partnerships affiliated with AAAAA Rent-A-Space, and the Promissory Note, dated June 25, 2007, among Extra Space Storage LP, H. James Knuppe and Barbara Knuppe (incorporated by reference to Exhibit 10.1 of Form 10-Q filed on May 8, 2014). |

| [removed: 10.13*] [added: [10.14*](http://www.sec.gov/Archives/edgar/data/1289490/000119312515128269/d899582ddef14a.htm)] | | 2015 Incentive Award Plan (incorporated by reference to the Definitive Proxy Statement on Schedule 14A filed on April 14, 2015) |

| [removed: 10.14] [added: [10.15](http://www.sec.gov/Archives/edgar/data/1289490/000119312515324511/d96928dex101.htm)] | | Registration Rights Agreement, dated September 21, 2015, among Extra Space Storage LP, Extra Space Storage Inc., Citigroup Global Markets Inc. and Wells Fargo Securities, LLC, as representatives of the initial purchasers (incorporated by reference to Exhibit 10.1 of Form 8-K filed on September 21, 2015). |

| [removed: 10.15] [added: [10.16](http://www.sec.gov/Archives/edgar/data/1289490/000119312516739701/d272035dex101.htm)] | | Credit Agreement, dated as of October 14, 2016, by and among Extra Space Storage Inc., Extra Space Storage LP, U.S. Bank National Association, as administrative agent, certain other financial institutions acting as syndication agents, documentation agents, senior management agents and lead arrangers and book runners, and certain lenders party thereto (incorporated by reference to Exhibit 10.1 of Form 8-K [added: filed on October 17, 2016).] |

| [removed: 10.16*] [added: [10.17*](http://www.sec.gov/Archives/edgar/data/1289490/000104746908004593/a2184280zdef14a.htm)] | | 2004 Long-Term Compensation Incentive Plan as amended and restated effective March 25, 2008 (incorporated by reference to the Definitive Proxy Statement on Schedule 14A filed on April 14, 2008) |

| [removed: 10.17*] [added: [10.18*](http://www.sec.gov/Archives/edgar/data/1289490/000104746910001564/a2196671zex-10_11.htm)] | | Form of 2004 Long Term Incentive Compensation Plan Option Award Agreement for Employees with employment agreements. (incorporated by reference to Exhibit 10.11 of Form 10-K filed on February 26, 2010) |

| [removed: 10.18*] [added: [10.19*](http://www.sec.gov/Archives/edgar/data/1289490/000104746910001564/a2196671zex-10_12.htm)] | | Form of 2004 Long Term Incentive Compensation Plan Option Award Agreement for employees without employment agreements. (incorporated by reference to Exhibit 10.12 of Form 10-K filed on February 26, 2010) |

| [removed: 10.19*] [added: [10.20*](http://www.sec.gov/Archives/edgar/data/1289490/000104746910001564/a2196671zex-10_13.htm)] | | Form of 2004 Non-Employee Directors Share Plan Option Award Agreement for Directors. (incorporated by reference to Exhibit 10.13 of Form 10-K filed on February 26, 2010) |

| [removed: 10.20*] [added: [10.21*](http://www.sec.gov/Archives/edgar/data/1289490/000110465907080664/a07-25777_1ex10d2.htm)] | | 2004 Long Term Incentive Compensation Plan Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.2 of Form 10-Q filed on November 7, 2007). |

| [removed: 10.21*] [added: [10.22*](http://www.sec.gov/Archives/edgar/data/1289490/000110465907080664/a07-25777_1ex10d4.htm)] | | First Amendment to Extra Space Storage Inc. 2004 Non-Employee Directors’ Share Plan (incorporated by reference to Exhibit 10.4 of Form 10-Q filed on November 7, 2007). |

| [removed: 10.22*] [added: [10.23*](http://www.sec.gov/Archives/edgar/data/1289490/000110465907020726/a07-6564_1ex10d22.htm)] | | Extra Space Storage [added: 2004] Non-Employee Directors’ Share Plan (incorporated by reference to Exhibit 10.22 of Form 10-K/A filed on March [removed: 22,] [added: 20,] 2007). |

| [removed: 31.1] [added: [31.1](https://www.sec.gov/Archives/edgar/data/1289490/000162828018002649/exr-12312017xex311.htm)] | | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(2) |

| [removed: 31.2] [added: [31.2](https://www.sec.gov/Archives/edgar/data/1289490/000162828018002649/exr-12312017xex312.htm)] | | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(2) |

| [10.13](http://www.sec.gov/Archives/edgar/data/1289490/000162828017005050/exr-03312017x10qxex101.htm) | | Letter Agreement, dated April 18, 2017, amending the Promissory Note and Waiving a Portion of the Series A Preferred Priority Return, among Extra Space Storage LP, ESS Holdings Business Trust I, H. James Knuppe and Barbara Knuppe (incorporated by reference to Exhibit 10.1 of Form 10-Q filed on May 5, 2017). |

| [10.24](http://www.sec.gov/Archives/edgar/data/1289490/000162828017006872/exhibit101-exr630178kpriva.htm) | | Note Purchase Agreement, dated as of June 29, 2017, by and among Extra Space Storage Inc., Extra Space Storage LP and the purchasers named therein (incorporated by reference to Exhibit 10.1 of Form 8-K filed on June 30, 2017). |

| [21.1](https://www.sec.gov/Archives/edgar/data/1289490/000162828018002649/exr-12312017xex211.htm) | | Subsidiaries of the Company(2) |

| [23.1](https://www.sec.gov/Archives/edgar/data/1289490/000162828018002649/exr-12312017xex231.htm) | | Consent of Ernst & Young LLP(2) |

| 21.1 | | Subsidiaries of the Company(2) |

| 23.1 | | Consent of Ernst & Young LLP(2) |

| | | | | |

| Date: February 27, 2017 | | By: | | /S/ KARL HAAS |

| | | | | Karl Haas Director |