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Life Storage, Inc.$90.28$.07.08%

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 Life Storage, Inc. Reports Fourth Quarter and Full Year 2016 Results
   Wednesday, February 15, 2017 4:10:02 PM ET

Life Storage, Inc. (LSI ) (formerly Sovran Self Storage, Inc.), a self storage real estate investment trust (REIT), reported operating results for the quarter and year ended December 31, 2016.

The Company had earnings in the fourth quarter of 2016 of $18.2 million or $0.39 per fully diluted common share. This compares to earnings of $30.0 million in the fourth quarter of 2015, or $0.83 per fully diluted common share.

Highlights for the 4th Quarter Included:

-- Increased same store revenue by 4.0% and net operating income ("NOI")(1) by 3.7% as compared to the fourth quarter of 2015.

-- Grew same store average occupancy for the quarter by 50 basis points to 90.9% compared to the same period in 2015 and quarter-end occupancy by 40 basis points to 90.4% at December 31, 2016.



-- Achieved adjusted funds from operations ("FFO")(2) per fully diluted common share of $1.31.

-- Paid a quarterly dividend of $0.95 per share of common stock.

Highlights for the Full Year Included:

-- Increased same store revenue by 5.2% and net operating income ("NOI") by 6.5% as compared to 2015.

-- Achieved adjusted funds from operations ("FFO") per fully diluted common share of $5.19 compared to $4.94 in 2015.

-- Acquired 122 quality stores, significantly upgrading its demographics and national footprint.

-- Changed the Company name from Sovran Self Storage, Inc. to Life Storage, Inc. and rebranded its facilities from Uncle Bob’s Self Storage(R) to Life Storage(R).

-- Increased its credit line capacity by 67% from $300 million to $500 million.

-- Completed an inaugural public debt offering of $600 million of 10 year notes at an interest rate of 3.5%.

David Rogers, the Company’s CEO, commented, "2016 was a remarkable year for us. We acquired 122 stores making our portfolio bigger, better and stronger. We entered the California and Las Vegas markets in scale with high-quality properties, and the name change to our Company and our stores was exciting and well received. The integration of the new stores is complete, and the rebranding is on time and on budget."

Funds from operations for the quarter were $1.28 per fully diluted common share compared to $1.26 for the same period last year. Absent $0.2 million of acquisition related costs and a deposit write-off of $1.8 million, offset by a gain on sale of land of $0.6 million incurred in the fourth quarter of 2016, and $0.6 million of acquisition costs in the fourth quarter of 2015, adjusted FFO per fully diluted common share was $1.31 and $1.28 for the quarters ended December 31, 2016 and 2015, respectively.

In the 3rd quarter of 2016 the Company initiated, and expects to continue to provide on a quarterly basis, a supplemental information package containing detailed operating and financial information. The supplement can be found on the investor relations page of the Company’s website under Financial Information > Quarterly Earnings.

OPERATIONS:

Total revenues increased 35.4% over last year’s fourth quarter while operating costs increased 39.9%, resulting in an NOI increase of 33.3%.

Revenues for the 417 stabilized stores wholly owned by the Company since December 31, 2014 increased 4.0% from those of the fourth quarter of 2015, the result of a 50 basis point increase in average occupancy, a 2.9% increase in rental rates and increases in tenant insurance administrative fees.

Same store operating expenses increased 4.6% for the fourth quarter of 2016 compared to the prior year period. Property taxes, maintenance expenses and internet advertising costs contributed most significantly to the expense growth.

Consequently, same store NOI this period increased 3.7% over the fourth quarter of 2015.

General and administrative expenses increased by approximately $1.4 million over the same period in 2015. Costs associated with the Company’s name change, and higher legal fees related to the New Jersey lawsuit were the primary reasons for the higher than expected expense.

During the fourth quarter of 2016, the Company experienced same store revenue growth in all 29 of its major markets in the same store pool. Overall, the markets with the strongest revenue impact include Atlanta, GA and all Florida markets, particularly Miami and Tampa.

For the full year ended December 31, 2016, revenues at the 417 properties owned since December 31, 2014 increased by 5.2% over those of the full year in 2015. Operating costs increased by 2.6% over those of the prior year, inclusive of a 5.3% increase in property taxes. Net operating income increased by 6.5% in 2016 over 2015.

PROPERTIES:

During the quarter, the Company acquired two properties; a store that it had previously managed in Orlando, FL (71,000 sq. ft.; $9.80 million) and a property in Chicago upon issuance of a certificate of occupancy (68,000 sq. ft.; $8.75 million).

Subsequent to the end of the year, two of the Company’s joint ventures acquired a total of five properties. Four of the properties are in California (Los Angeles and Sacramento) and one is in Long Island City, NY. The Company’s contributions totaled $28.2 million to the ventures; the total cost of the properties was $135.5 million.

While the Company entered into no new purchase agreements during the quarter, it remains in contract on two certificate of occupancy stores anticipated to close in 2017. These properties are located in Chicago, IL and Charlotte, NC and the combined purchase price is approximately $22 million.

As part of the LifeStorage acquisition, the Company assumed contracts for three certificate of occupancy stores in Austin, TX at a cost of $44.8 million. The Company has decided not to pursue two of the contracts and forfeited $1.8 million of non-refundable property deposits. It is currently negotiating a lease on the third property.

CAPITAL TRANSACTIONS:

Illustrated below are key financial ratios at December 31, 2016:

--   Debt to Enterprise Value (at $85.26/share)          29.5%
--                      Debt to Book Cost of Storage Facilities                                                   39.3%
--                      Debt to Recurring Annualized EBITDA                                                        5.5x
--                      Debt Service Coverage                                                                      5.2x

At December 31, 2016, the Company had approximately $23.7 million of cash on hand, and $247 million available on its line of credit.

In October, the Company issued approximately 39,615 shares at a price of $82.23 through its Dividend Reinvestment Plan.

COMMON STOCK DIVIDEND:

Subsequent to quarter-end, the Company’s Board of Directors approved a quarterly dividend of $0.95 per share or $3.80 annualized.

YEAR 2017 EARNINGS GUIDANCE:

The following assumptions covering operations have been utilized in formulating guidance for the first quarter and full year 2017:

                                                                                                              Same Store
                                                                                                                                           Projected Increases Over 2016
                                                                                     ----------------------------------------------------------------------------------------------------------------------------------
                                                                                               1Q 2017                           FY 2017
                                                                                     -------------------------                                                                                     -------------------------
Revenue                                                                              3.00 - 4.00%                                                                                     3.00 - 4.00%
Operating Costs (excluding property taxes)                                           2.50 - 3.50%                                                                                     3.25 - 4.25%
Property Taxes                                                                       5.00 - 6.00%                                                                                     6.50 - 7.50%
                                                                                     -------------------------                                                                                     -------------------------
Total Operating Expenses                                                             3.00 - 4.00%                                                                                     4.25 - 5.25%
Net Operating Income                                                                 3.00 - 4.00%                                                                                     2.75 - 3.75%

The Company’s 2017 same store pool consists of the 435 stabilized stores owned since December 31, 2015. The stores purchased in 2014 and 2015 at certificate of occupancy or that were in the early stages of lease-up are not included, regardless of their current occupancies. The Company believes that occupancy levels achieved during the lease-up period, using discounted rates, are not truly indicative of a new store’s performance, and therefore do not result in a meaningful year-over-year comparison in future years. The Company will include such stores in its same store pool in the first year after the stores achieve 80% sustained occupancy using market rates and incentives.

The Houston market is expected to comprise approximately 8.5% of the 2017 forecasted NOI of the Company’s wholly owned stores. The forecast for the 41 same store pool of properties in the Company’s Houston market includes (1.0%) to 1.0% revenue growth, operating expense increases of 4.0% - 5.0% (inclusive of a 5.0% projected increase in property taxes), resulting in an NOI change of between (2.0%) and 1.0%.

The Company plans to complete $30 - $35 million of expansions in 2017. It also has budgeted $19 million to provide for recurring capitalized expenditures including roofing, paving, and office renovations.

The Company has assumed no accretive acquisitions in 2017. Should any acquisitions occur, they are expected to be funded via draws on its line of credit which carries an interest rate of LIBOR plus 1.10%.

At the conclusion of 2016, the Company operated 11 self storage facilities that it acquired during 2014, 2015 and 2016 upon issuance of certificate of occupancy or in the early stages of lease-up. Further, it is expected to acquire two more such certificate of occupancy facilities in 2017 and is in negotiations to lease a third. Upon acquisition, these properties have insufficient rental revenue to cover operating costs; accordingly, for the first 24 to 36 months of operation, ownership of these facilities is dilutive to earnings and FFO per share. The Company expects that during 2017, it will incur such dilution to the extent of $0.01 to $0.03 per share due to the aforementioned acquisitions.

Annual general and administrative expenses are expected to be approximately $46.0 - $47.0 million. The increase over the prior year is primarily due to the need for additional personnel required for recent acquisitions.

As a result of the above assumptions, management expects adjusted funds from operations for the full year 2017 to be approximately $5.50 to $5.60 per share, and between $1.24 and $1.28 per share for the first quarter of 2017.

Reconciliation of Guidance                                                1Q 2017             FY 2017
                                                                                                            Range or Value                                            Range or Value
                                                                                                           ---------------                                           ---------------
Earnings per share attributable to common shareholders - diluted                                           $ 0.43 - $ 0.47                                           $ 2.84 - $ 2.94
Plus: real estate depreciation and amortization                                                                0.81 - 0.81                                               2.66 - 2.66
                                                                                                           ---------------                                           ---------------
FFO per share                                                                                              $ 1.24 - $ 1.28                                           $ 5.50 - $ 5.60
                                                                                                           ===============                                           ===============

FORWARD LOOKING STATEMENTS:

When used within this news release, the words "intends," "believes," "expects," "anticipates," and similar expressions are intended to identify "forward looking statements" within the meaning of that term in Section 27A of the Securities Act of 1933, and in Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward looking statements. Such factors include, but are not limited to, the effect of competition from new self storage facilities, which could cause rents and occupancy rates to decline; the Company’s ability to evaluate, finance and integrate acquired businesses into the Company’s existing business and operations; the Company’s ability to enter new markets where it has little or no operational experience; the Company’s existing indebtedness may mature in an unfavorable credit environment, preventing refinancing or forcing refinancing of the indebtedness on terms that are not as favorable as the existing terms; interest rates may fluctuate, impacting costs associated with the Company’s outstanding floating rate debt; the Company’s ability to comply with debt covenants; the future ratings on the Company’s debt instruments; the regional concentration of the Company’s business may subject it to economic downturns in the states of Florida and Texas; the Company’s ability to effectively compete in the industries in which it does business; the Company’s reliance on its call center; the Company’s cash flow may be insufficient to meet required payments of principal, interest and dividends; and tax law changes which may change the taxability of future income.

CONFERENCE CALL:

Life Storage will hold its Fourth Quarter Earnings Release Conference Call at 9:00 a.m. Eastern Time on Thursday, February 16, 2017. To help avoid connection delays, participants are encouraged to pre-register using this link. Anyone unable to pre-register may access the conference call at 877.737.7051 (domestic) or 201.689.8878 (international). Management will accept questions from registered financial analysts after prepared remarks; all others are encouraged to listen to the call via webcast by accessing the investor relations tab at lifestorage.com/.

The webcast will be archived for 90 days; a telephone replay will also be available for 72 hours by calling 877.481.4010 and entering conference ID 10203.

ABOUT LIFE STORAGE, INC:

Life Storage, Inc. is a self-administered and self-managed equity REIT that is in the business of acquiring and managing self storage facilities. The Company operates more than 650 self storage facilities in 29 states under the names Life Storage and Uncle Bob’s Self Storage. For more information, visit http://invest.lifestorage.com/ .

Life Storage, Inc. 6467 Main St., Buffalo, NY 14221 (716) 633-1850

Life Storage, Inc.                                                                                                             
Balance Sheet Data
(unaudited)
                                                                                                                                                                                          
                                                                                                               December 31,                                                                                  December 31,
(dollars in thousands)                                                                          2016                                                    2015
--------------------------------------------------------------------- -------------------- ------------------------------------------------------------------------ -------------------- ----------------------------------------------------
Assets
  Investment in storage facilities:
     Land                                                                                                     $   786,764                                                                                   $   480,176
     Building, equipment and construction in progress                                        3,456,544                                               2,011,526  
                                                                                           -------------------- --------- --------------------                                           -------------------- --------- --------------------
                                                                                                                4,243,308                                                                                     2,491,702
     Less: accumulated depreciation                                                           (535,704 )                                                                 (465,195 )
                                                                                           -------------------- --------- --------------------                                           -------------------- --------- --------------------
  Investment in storage facilities, net                                                                         3,707,604                                                                                     2,026,507
  Cash and cash equivalents                                                                                        23,685                                                                                         7,020
  Accounts receivable                                                                                               5,469                                                                                         6,805
  Receivable from joint venture                                                                                     1,223                                                                                           929
  Investment in joint venture                                                                                      67,300                                                                                        62,520
  Prepaid expenses                                                                                                  6,649                                                                                         5,431
  Fair value of interest rate swap agreements                                                                           -                                                                                           550
  Intangible asset - in-place customer leases (net of accumulated
      amortization of $50,782 in 2016 and $21,017 in 2015)                                                         24,830                                                                                         1,303
  Trade name                                                                                                       16,500                                                                                             -
  Other assets                                                                                   4,724                                                   7,757  
                                                                                           -------------------- --------- --------------------                                           -------------------- --------- --------------------
     Total Assets                                                                                             $ 3,857,984                                                                $ 2,118,822  
                                                                                           ==================== ========= ====================                                           ==================== ========= ====================
                                                                                                                                                                                          
Liabilities
  Line of credit                                                                                              $   253,000                                                                                   $    79,000
  Term notes, net                                                                                               1,387,525                                                                                       746,650
  Accounts payable and accrued liabilities                                                                         75,132                                                                                        47,839
  Deferred revenue                                                                                                  9,700                                                                                         7,511
  Fair value of interest rate swap agreements                                                                      13,015                                                                                        15,343
  Mortgages payable                                                                             13,027                                                   1,993  
                                                                                           -------------------- --------- --------------------                                           -------------------- --------- --------------------
     Total Liabilities                                                                                          1,751,399                                                                                       898,336
                                                                                                                                                                                          
  Noncontrolling redeemable Operating Partnership Units at redemption                                              18,091                                                                                        18,171
  value
                                                                                                                                                                                          
Equity
  Common stock                                                                                                        464                                                                                           367
  Additional paid-in capital                                                                                    2,348,567                                                                                     1,388,343
  Accumulated deficit                                                                                            (239,062 )                                                                                    (171,980 )
  Accumulated other comprehensive loss                                                         (21,475 )                                                                  (14,415 )
                                                                                           -------------------- --------- --------------------                                           -------------------- --------- --------------------
     Total Shareholders’ Equity                                                                                 2,088,494                                                                                     1,202,315
Noncontrolling interest in consolidated subsidiary                                                   -                                                       -  
                                                                                           -------------------- --------- --------------------                                           -------------------- --------- --------------------
     Total Equity                                                                            2,088,494                                               1,202,315  
                                                                                           -------------------- --------- --------------------                                           -------------------- --------- --------------------
  Total Liabilities and Equity                                                                                $ 3,857,984                                                                $ 2,118,822  
                                                                                           ==================== ========= ====================                                           ==================== ========= ====================
Life Storage, Inc.                                                                                                                                                                                                                
Consolidated Statements of Operations
(unaudited)
                                                                                                                              October 1, 2016                                                                                                     October 1, 2015                                                                                                     January 1, 2016                                                                                                     January 1, 2015
                                                                                                                                    to                                                                                                                  to                                                                                                                  to                                                                                                                  to
(dollars in thousands, except share data)                                                                                    December 31, 2016                                                                                                   December 31, 2015                                                                                December 31, 2016                                                                                                   December 31, 2015
                                                                                                           -----------------------------------------------------                                                               -----------------------------------------------------                                          -------------------- -----------------------------------------------------                                                               -----------------------------------------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Revenues
  Rental income                                                                                                               $    119,465                                                                                                        $     87,996                                                                                                        $    428,121                                                                                                        $    338,435
  Other operating income                                                                                                             7,611                                                                                                               5,552                                                                                                              28,392                                                                                                              22,331
  Management fee income                                                                                           1,602                                                                         1,492                                                                         6,095                                                                         5,836  
                                                                                                           -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------
     Total operating revenues                                                                                                      128,678                                                                                                              95,040                                                                                                             462,608                                                                                                             366,602
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Expenses
  Property operations and maintenance                                                                                               28,992                                                                                                              20,915                                                                                                             103,388                                                                                                              81,915
  Real estate taxes                                                                                                                 13,206                                                                                                               9,252                                                                                                              47,876                                                                                                              36,563
  General and administrative                                                                                                        11,617                                                                                                              10,201                                                                                                              43,103                                                                                                              38,659
  Write-off of property deposits                                                                                                     1,783                                                                                                                   -                                                                                                               1,783                                                                                                                   -
  Acquisition related costs                                                                                                            244                                                                                                                 576                                                                                                              29,542                                                                                                               2,991
  Operating leases of storage facilities                                                                                                 -                                                                                                                   -                                                                                                                   -                                                                                                                 683
  Depreciation and amortization                                                                                                     27,628                                                                                                              14,349                                                                                                              87,200                                                                                                              55,083
  Amortization of in-place customer leases                                                                       13,371                                                                           719                                                                        29,881                                                                         3,423  
                                                                                                           -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------
     Total operating expenses                                                                                    96,841                                                                        56,012                                                                       342,773                                                                       219,317  
                                                                                                           -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Income from operations                                                                                                              31,837                                                                                                              39,028                                                                                                             119,835                                                                                                             147,285
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Other income (expense)
  Interest expense (A)                                                                                                             (15,151 )                                                                                                            (9,328 )                                                                                                           (47,175 )                                                                                                           (37,124 )
  Interest expense - acquisition bridge loan commitment fee                                                                              -                                                                                                                   -                                                                                                              (7,329 )                                                                                                                 -
  Interest income                                                                                                                       11                                                                                                                   -                                                                                                                  67                                                                                                                   5
  Gain on sale of real estate                                                                                                            -                                                                                                                (487 )                                                                                                            15,270                                                                                                                (494 )
  Gain on land taking                                                                                                                  623                                                                                                                   -                                                                                                                 623                                                                                                                   -
  Equity in income of joint ventures                                                                                870                                                                           970                                                                         3,665                                                                         3,405  
                                                                                                           -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Net income                                                                                                                          18,190                                                                                                              30,183                                                                                                              84,956                                                                                                             113,077
  Noncontrolling interests in the Operating Partnership                                                                                (81 )                                                                                                              (146 )                                                                                                              (398 )                                                                                                              (553 )
  Noncontrolling interests in consolidated subsidiaries                                                              58                                                                             -                                                                           667                                                                             -  
                                                                                                           -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------
Net income attributable to common shareholders                                                                                $     18,167                                                                                     $     30,037                                                                                     $     85,225                                                                                     $    112,524  
                                                                                                           -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Earnings per common share attributable to common
shareholders - basic                                                                                                          $       0.39                                                                                     $       0.83                                                                                     $       1.97                                                                                     $       3.18  
                                                                                                           ==================== ========== ====================                                                                ==================== ========== ====================                                                                ==================== ========== ====================                                                                ==================== ========== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Earnings per common share attributable to common
shareholders - diluted                                                                                                        $       0.39                                                                                     $       0.83                                                                                     $       1.96                                                                                     $       3.16  
                                                                                                           ==================== ========== ====================                                                                ==================== ========== ====================                                                                ==================== ========== ====================                                                                ==================== ========== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Common shares used in basic
    earnings per share calculation                                                                                              46,206,191                                                                                                          36,109,010                                                                                                          43,184,119                                                                                                          35,379,212
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Common shares used in diluted
    earnings per share calculation                                                                                              46,385,984                                                                                                          36,327,085                                                                                                          43,407,463                                                                                                          35,600,520
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Dividends declared per common share                                                                                           $       0.95                                                                                     $       0.85                                                                                     $       3.70                                                                                     $       3.20  
                                                                                                           ==================== ========== ====================                                                                ==================== ========== ====================                                                                ==================== ========== ====================                                                                ==================== ========== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
(A) Interest expense for the period ending December 31 consists
of the following
     Interest expense                                                                                                         $     14,632                                                                                                        $      9,032                                                                                                        $     45,440                                                                                                        $     35,940
     Amortization of debt issuance costs                                                                            519                                                                           296                                                                         1,735                                                                         1,184  
                                                                                                           -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------                                                                -------------------- ---------- --------------------
Total interest expense                                                                                                        $     15,151                                                                                     $      9,328                                                                                     $     47,175                                                                                     $     37,124  
                                                                                                           ==================== ========== ====================                                                                ==================== ========== ====================                                                                ==================== ========== ====================                                                                ==================== ========== ====================
Life Storage, Inc.                                                                                                                                                                                                                     
Computation of Funds From Operations (FFO) (2)
(unaudited)
                                                                                                         October 1, 2016                                                           October 1, 2015                                                           January 1, 2016                                                           January 1, 2015
                                                                                                               to                                                                        to                                                                        to                                                                        to
(dollars in thousands, except share data)                                            December 31, 2016                                      December 31, 2015                                                         December 31, 2016                                                         December 31, 2015
---------------------------------------------------------------- -------------------- ------------------------------------------------------------------------- -----------------------------------------------------                     -----------------------------------------------------                     -----------------------------------------------------
                                                                                                                                                                                                                                                                                                                     
Net income attributable to common shareholders                                                           $     18,167                                                              $     30,037                                                              $     85,225                                                              $    112,524
Noncontrolling interests in the Operating Partnership                                                              81                                                                       146                                                                       398                                                                       553
Depreciation of real estate and amortization of intangible
  assets exclusive of debt issuance costs                                                                      40,618                                                                    14,780                                                                   115,531                                                                    57,429
Depreciation and amortization from unconsolidated joint ventures                                                  703                                                                       590                                                                     2,595                                                                     2,435
Gain on sale of real estate                                                                                         -                                                                       487                                                                   (15,270 )                                                                     494
Funds from operations allocable to noncontrolling
  interest in Operating Partnership                                                           (264 )                                                 (223 )                                                 (857 )                                                 (848 )
                                                                                      -------------------- ---------- --------------------                      -------------------- ---------- --------------------                      -------------------- ---------- --------------------                      -------------------- ---------- --------------------
Funds from operations available to common shareholders                                      59,305                              45,817                             187,622                             172,587  
                                                                                      ==================== ========== ====================                      ==================== ========== ====================                      ==================== ========== ====================                      ==================== ========== ====================
FFO per share - diluted                                                                                  $       1.28                                                              $       1.26                                                              $       4.32                                                              $       4.85
                                                                                                                                                                                                                                                                                                                     
Adjustments to FFO
Acquisition costs expensed                                                                                        244                                                                       576                                                                    29,542                                                                     2,991
Interest expense - acquisition bridge loan commitment fee                                                           -                                                                         -                                                                     7,329                                                                         -
Gain on land taking                                                                                              (623 )                                                                       -                                                                      (623 )                                                                       -
Write-off of property deposits                                                                                  1,783                                                                         -                                                                     1,783                                                                         -
Operating leases straight line rent adjustment                                                                      -                                                                         -                                                                         -                                                                       146
Funds from operations resulting from non-recurring items
  allocable to noncontrolling interest in Operating Partnership                                 (6 )                                                   (3 )                                                 (172 )                                                  (15 )
                                                                                      -------------------- ---------- --------------------                      -------------------- ---------- --------------------                      -------------------- ---------- --------------------                      -------------------- ---------- --------------------
Adjusted funds from operations available to common shareholders                             60,703                              46,390                             225,481                             175,709  
                                                                                      ==================== ========== ====================                      ==================== ========== ====================                      ==================== ========== ====================                      ==================== ========== ====================
Adjusted FFO per share - diluted                                                                         $       1.31                                                              $       1.28                                                              $       5.19                                                              $       4.94
                                                                                                                                                                                                                                                                                                                     
Common shares - diluted                                                                                    46,385,984                                                                36,327,085                                                                43,407,463                                                                35,600,520
Life Storage, Inc.                                                                                                                                                              
Quarterly Same Store Data (3) * 417
mature stores owned since 12/31/14
(unaudited)
                                                                                                                    October 1, 2016                                                                              October 1, 2015
                                                                                                                          to                                                                                           to                                                                                                                                                                                                 Percentage
(dollars in thousands)                                    December 31, 2016                   December 31, 2015                                                                                          Change                                  Change
-------------------------------------------- -------------------- -------------------- -------------------- -------------------------------------------------- -------------------- -------------------- ------------------------------                                                               -------------------------------------------------------------------- -------------------- -------------------- ---------------------
                                                                                                                                                                                                                                                                                                                                                                                                                      
Revenues:
  Rental income                                                                                                                $   85,407                                                                                   $   82,364                                                                                   $ 3,043                                                                                            3.7 %
  Tenant insurance                                                                                                                  3,268                                                                                        2,866                                                                                       402                                                                                           14.0 %
  Other operating income                                                                                         1,299                                                                     1,290                                                                      9                                                                         0.7 %
                                                                                                            -------------------- --------                                                                -------------------- --------                                                                -------------------- ----- --------------------                                                                ---------- ---------
     Total operating revenues                                                                                                      89,974                                                                                       86,520                                                                                     3,454                                                                                            4.0 %
                                                                                                                                                                                                                                                                                                                                                                                                                      
Expenses:
  Payroll and benefits                                                                                                              7,618                                                                                        7,340                                                                                       278                                                                                            3.8 %
  Real estate taxes                                                                                                                 9,014                                                                                        8,540                                                                                       474                                                                                            5.6 %
  Utilities                                                                                                                         2,606                                                                                        2,587                                                                                        19                                                                                            0.7 %
  Repairs and maintenance                                                                                                           3,889                                                                                        3,514                                                                                       375                                                                                           10.7 %
  Office and other operating expense                                                                                                2,929                                                                                        2,993                                                                                       (64 )                                                                                         -2.1 %
  Insurance                                                                                                                           990                                                                                        1,106                                                                                      (116 )                                                                                        -10.5 %
  Advertising & yellow pages                                                                                                          268                                                                                          318                                                                                       (50 )                                                                                        -15.7 %
  Internet marketing                                                                                             1,627                                                                     1,262                                                                    365                                                                        28.9 %
                                                                                                            -------------------- --------                                                                -------------------- --------                                                                -------------------- ----- --------------------                                                                ---------- ---------
     Total operating expenses                                                                                   28,941                                                                    27,660                                                                  1,281                                                                         4.6 %
                                                                                                            -------------------- --------                                                                -------------------- --------                                                                -------------------- ----- --------------------                                                                ---------- ---------
                                                                                                                                                                                                                                                                                                                                                                                                                      
Net operating income (1)                                                                                                       $   61,033                                                                                   $   58,860                                                                                   $ 2,173                                                                         3.7 %
                                                                                                            ==================== ========                                                                ==================== ========                                                                ==================== ===== ====================                                                                ========== =========
                                                                                                                                                                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                                                                                                                                                                      
QTD Same store move ins                                                                                                            36,491                                                                                       36,000                                                                                       491
                                                                                                                                                                                                                                                                                                                                                                                                                      
QTD Same store move outs                                                                                                           40,044                                                                                       39,032                                                                                     1,012
                                                                                                                                                                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                                                                                                                                                                      
Other Comparable Quarterly Same Store Data *
(unaudited)
                                                                                                                    October 1, 2016                                                                              October 1, 2015
                                                                                                                          to                                                                                           to                                                                                                                                                                                                 Percentage
                                                                                                                   December 31, 2016                                                                            December 31, 2015                                                                                          Change                                                                                           Change
                                                                                                            ------------------------------                                                               ------------------------------                                                               ------------------------------------------------                                                               ---------------------
Stores owned since 12/31/13 (389 stores)
Revenues                                                                                                                       $   82,304                                                                                   $   79,236                                                                                   $ 3,068                                                                                            3.9 %
Expenses                                                                                                        26,331                                                                    25,215                                                                  1,116                                                                         4.4 %
                                                                                                            -------------------- --------                                                                -------------------- --------                                                                -------------------- ----- --------------------                                                                ---------- ---------
  Net operating income                                                                                                         $   55,973                                                                                   $   54,021                                                                                   $ 1,952                                                                         3.6 %
                                                                                                            ==================== ========                                                                ==================== ========                                                                ==================== ===== ====================                                                                ========== =========
                                                                                                                                                                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                                                                                                                                                                      
Stores owned since 12/31/12 (374 stores)
Revenues                                                                                                                       $   76,984                                                                                   $   74,062                                                                                   $ 2,922                                                                                            3.9 %
Expenses                                                                                                        24,624                                                                    23,763                                                                    861                                                                         3.6 %
                                                                                                            -------------------- --------                                                                -------------------- --------                                                                -------------------- ----- --------------------                                                                ---------- ---------
  Net operating income                                                                                                         $   52,360                                                                                   $   50,299                                                                                   $ 2,061                                                                         4.1 %
                                                                                                            ==================== ========                                                                ==================== ========                                                                ==================== ===== ====================                                                                ========== =========
                                                                                                                                                                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                                                                                                                                                                      
* See exhibit A for supplemental quarterly same store data.
Life Storage, Inc.                                                                                                                                                                                                                                                          
Year to Date Same Store Data (3) * 417
mature stores owned since 12/31/14
(unaudited)
                                                                                                                                                                      January 1, 2016                                                                                                                          January 1, 2015
                                                                                                                                                                            to                                                                                                                                       to                                                                                                                                                                                                                                                                      Percentage
(dollars in thousands)                                                                   December 31, 2016                                            December 31, 2015                                                                                                                           Change                                                   Change
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- --------------------------------------------------   -------------------- -------------------- -------------------- -------------------- --------------------------------------------------                                                                                       ----------------------------------------------   -------------------- -------------------- -------------------- -------------------- ----------------------------------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
Revenues:
  Rental income                                                                                                                                                       $    339,773                                                                                                                             $    323,664                                                                                                                             $ 16,109                                                                                                                                  5.0 %
  Tenant insurance                                                                                                                                                          12,949                                                                                                                                   11,294                                                                                                                                1,655                                                                                                                                 14.7 %
  Other operating income                                                                                                                                  5,744                                                                                              5,791                                                                                            (47 )                                                                                                            -0.8 %
                                                                                                                                                   -------------------- ---------- --------------------                                                                                     -------------------- ---------- --------------------                                                                                     -------------------- ------ --------------------                                                                                     -------------------- ------ --------------------
     Total operating revenues                                                                                                                                              358,466                                                                                                                                  340,749                                                                                                                               17,717                                                                                                                                  5.2 %
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
Expenses:
  Payroll and benefits                                                                                                                                                      29,754                                                                                                                                   28,843                                                                                                                                  911                                                                                                                                  3.2 %
  Real estate taxes                                                                                                                                                         36,707                                                                                                                                   34,847                                                                                                                                1,860                                                                                                                                  5.3 %
  Utilities                                                                                                                                                                 11,217                                                                                                                                   11,789                                                                                                                                 (572 )                                                                                                                               -4.9 %
  Repairs and maintenance                                                                                                                                                   13,516                                                                                                                                   13,412                                                                                                                                  104                                                                                                                                  0.8 %
  Office and other operating expense                                                                                                                                        11,703                                                                                                                                   11,373                                                                                                                                  330                                                                                                                                  2.9 %
  Insurance                                                                                                                                                                  4,035                                                                                                                                    4,414                                                                                                                                 (379 )                                                                                                                               -8.6 %
  Advertising & yellow pages                                                                                                                                                 1,114                                                                                                                                    1,352                                                                                                                                 (238 )                                                                                                                              -17.6 %
  Internet marketing                                                                                                                                      6,409                                                                                              5,557                                                                                            852                                                                                           15.3 %
                                                                                                                                                   -------------------- ---------- --------------------                                                                                     -------------------- ---------- --------------------                                                                                     -------------------- ------ --------------------                                                                                     -------------------- ------ --------------------
     Total operating expenses                                                                                                                           114,455                                                                                            111,587                                                                                          2,868                                                                                            2.6 %
                                                                                                                                                   -------------------- ---------- --------------------                                                                                     -------------------- ---------- --------------------                                                                                     -------------------- ------ --------------------                                                                                     -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
Net operating income (1)                                                                                                                                              $    244,011                                                                                                          $    229,162                                                                                                          $ 14,849                                                                                            6.5 %
                                                                                                                                                   ==================== ========== ====================                                                                                     ==================== ========== ====================                                                                                     ==================== ====== ====================                                                                                     ==================== ====== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
YTD Same store move ins                                                                                                                                                    162,268                                                                                                                                  166,843                                                                                                                               (4,575 )
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
YTD Same store move outs                                                                                                                                                   159,841                                                                                                                                  162,948                                                                                                                               (3,107 )
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
Other Data - unaudited                                                                                                                                                                                                                     Same Store (3)                                                                                                                                                                                                                                                                All Stores (4)
                                                                                                                                                   ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                                                                                    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                           2016                                                                                                                                     2015                                                                                                                                   2016                                                                                                                                 2015
                                                                                                                                                   --------------------------------------------------                                                                                       --------------------------------------------------                                                                                       ----------------------------------------------                                                                                       ----------------------------------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
Weighted average quarterly occupancy                                                                                                                                          90.9 %                                                                                                                                   90.4 %                                                                                                                               89.2 %                                                                                                                               89.8 %
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
Occupancy at December 31                                                                                                                                                      90.4 %                                                                                                                                   90.0 %                                                                                                                               88.5 %                                                                                                                               89.4 %
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
Rent per occupied square foot                                                                                                                                         $      13.31                                                                                                                             $      12.94                                                                                                                             $  13.63                                                                                                                             $  12.83
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
Investment in Storage Facilities: (unaudited)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The following summarizes activity in storage facilities during the
year ended December 31, 2016:
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
Beginning balance                                                                                                                                                     $  2,491,702
  Property acquisitions                                                                                                                                                  1,714,029
  Improvements and equipment additions:
      Expansions                                                                                                                                                            25,125
      Roofing, paving, and equipment:
          Stabilized stores                                                                                                                                                 27,309
          Recently acquired stores                                                                                                                                          11,261
  Additions to consolidated subsidiary                                                                                                                                       2,165
  Change in construction in progress (Total CIP $14.5 million)                                                                                                               7,525
  Dispositions and Impairments                                                                                                                          (35,808 )
                                                                                                                                                   -------------------- ---------- --------------------
Storage facilities at cost at period end                                                                                                                              $  4,243,308  
                                                                                                                                                   ==================== ========== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
Comparison of Selected G&A Costs (unaudited)                                                                                                                                                                                                Quarter Ended                                                                                                                                                                                                                                                                  Year Ended
--------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                     December 31, 2016                                                                                                                        December 31, 2015                                                                                                                      December 31, 2016                                                                                                                    December 31, 2015
                                                                                                                                                   --------------------------------------------------                                                                                       --------------------------------------------------                                                                                       ----------------------------------------------                                                                                       ----------------------------------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
Management and administrative salaries and benefits                                                                                                                          6,407                                                                                                                                    6,645                                                                                                                               24,631                                                                                                                               23,947
Training                                                                                                                                                                       367                                                                                                                                      351                                                                                                                                1,237                                                                                                                                1,017
Call center                                                                                                                                                                    707                                                                                                                                      491                                                                                                                                2,424                                                                                                                                1,896
Life Storage Solutions costs                                                                                                                                                    45                                                                                                                                      205                                                                                                                                  398                                                                                                                                  496
Income taxes                                                                                                                                                                  (445 )                                                                                                                                   (374 )                                                                                                                                413                                                                                                                                1,251
Legal, accounting and professional                                                                                                                                           1,530                                                                                                                                    1,147                                                                                                                                4,510                                                                                                                                2,853
Name change                                                                                                                                                                    789                                                                                                                                        -                                                                                                                                  865                                                                                                                                    -
Other administrative expenses (5)                                                                                                                         2,217                                                                                              1,736                                                                                          8,625                                                                                          7,199  
                                                                                                                                                   -------------------- ---------- --------------------                                                                                     -------------------- ---------- --------------------                                                                                     -------------------- ------ --------------------                                                                                     -------------------- ------ --------------------
                                                                                                                                                                      $     11,617                                                                                                          $     10,201                                                                                                          $ 43,103                                                                                                          $ 38,659  
                                                                                                                                                   ==================== ========== ====================                                                                                     ==================== ========== ====================                                                                                     ==================== ====== ====================                                                                                     ==================== ====== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
Net rentable square feet                                                                                                                                             December 31, 2016
--------------------------------------------------------------                                                                                     --------------------------------------------------
Wholly owned properties                                                                                                                                                 39,431,008
Joint venture properties                                                                                                                                                 5,199,310
Third party managed properties                                                                                                                        1,536,975  
                                                                                                                                                   -------------------- ---------- --------------------
                                                                                                                                                                        46,167,293
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                     December 31, 2016                                                                                                                        December 31, 2015
                                                                                                                                                   --------------------------------------------------                                                                                       --------------------------------------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
Common shares outstanding                                                                                                                                               46,454,606                                                                                                                               36,710,673
Operating Partnership Units outstanding                                                                                                                                    217,481                                                                                                                                  168,866
(1) Net operating income or "NOI" is a non-GAAP (generally accepted
accounting principles) financial measure that we define as total
continuing revenues less continuing property operating expenses. NOI
also can be calculated by adding back to net income: interest
expense, impairment and casualty losses, depreciation and
amortization expense, acquisition related costs, general and
administrative expense, and deducting from net income: income from
discontinued operations, interest income, gain on sale of real
estate, and equity in income of joint ventures. We believe that NOI
is a meaningful measure to investors in evaluating our operating
performance, because we utilize NOI in making decisions with respect
to capital allocations, in determining current property values, and
comparing period-to-period and market-to-market property operating
results. Additionally, NOI is widely used in the real estate
industry and the self storage industry to measure the performance
and value of real estate assets without regard to various items
included in net income that do not relate to or are not indicative
of operating performance, such as depreciation and amortization,
which can vary depending on accounting methods and book value of
assets. NOI should be considered in addition to, but not as a
substitute for, other measures of financial performance reported in
accordance with GAAP, such as total revenues, operating income and
net income.
 
(2) We believe that Funds from Operations ("FFO") provides relevant
and meaningful information about our operating performance that is
necessary, along with net earnings and cash flows, for an
understanding of our operating results. FFO adds back historical
cost depreciation, which assumes the value of real estate assets
diminishes predictably in the future. In fact, real estate asset
values increase or decrease with market conditions. Consequently, we
believe FFO is a useful supplemental measure in evaluating our
operating performance by disregarding (or adding back) historical
cost depreciation.
                                                              
Funds from operations is defined by the National Association of Real
Estate Investment Trusts, Inc. ("NAREIT") as net income available to
common shareholders computed in accordance with generally accepted
accounting principles ("GAAP"), excluding gains or losses on sales
of properties, plus impairment of real estate assets, plus
depreciation and amortization and after adjustments to record
unconsolidated partnerships and joint ventures on the same basis. We
believe that to further understand our performance, FFO should be
compared with our reported net income and cash flows in accordance
with GAAP, as presented in our consolidated financial statements.
                                                              
Our computation of FFO may not be comparable to FFO reported by
other REITs or real estate companies that do not define the term in
accordance with the current NAREIT definition or that interpret the
current NAREIT definition differently. FFO does not represent cash
generated from operating activities determined in accordance with
GAAP, and should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of our
performance, as an alternative to net cash flows from operating
activities (determined in accordance with GAAP) as a measure of our
liquidity, or as an indicator of our ability to make cash
distributions.
                                                              
(3) Includes the stores owned and/or managed by the Company for the
entire periods presented that are consolidated in our financial
statements. Does not include unconsolidated joint ventures or other
stores managed by the Company.
                                                              
(4) Does not include unconsolidated joint venture stores or other
stores managed by the Company
                                                              
(5) Other administrative expenses include office rent, travel
expense, investor relations and miscellaneous other expenses.

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SOURCE: Life Storage, Inc."> <Property FormalName="PrimaryTwitterHandle" Value="@LifeStorage

Life Storage, Inc. 
Diane Piegza, Vice President 
Investor Relations & Community Affairs 
716-650-6115


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