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Life Storage earnings rise but fall short of analyst expectations

Life Storage's second-quarter earnings rose by 11 percent, but the self storage facility operator's stock fell by 2 percent Thursday morning because the increase wasn't as robust as analysts expected.

Life Storage said its funds from operations – a key measure of profitability for a real estate investment trust – rose to $61.6 million, or $1.33 per share, excluding one-time items. That was up from $55.6 million, or $1.32 per share, a year ago, but less than the $1.35 per share that analysts expected.

The Amherst-based company said it stepped up its online marketing efforts and offered customers more incentives to build occupancy during the spring, ending the quarter with a record high 92.8 percent of the space filled at its self storage facilities that have been open for at least a year.

But those incentives kept a lid on the rent Life Storage could charge at those 435 stores that it has owned since the end of 2015. Average rents at those facilities grew by less than 1 percent, the company said. Life Storage currently operates about 700 self storage facilities in 29 states, either directly or through joint ventures.

With higher marketing costs and bigger incentives expected to remain in place longer than originally anticipated, Life Storage cut its earnings guidance for the second straight quarter. The company said it now expects earnings this year to range between $5.25 and $5.30 per share, down from its previous forecast of about $5.50 per share. Life Storage said it expects to earn between $1.33 and $1.38 during the third quarter.

Funds from operations are calculated by taking a company's net income and adding back items such as amortization and depreciation.

Life Storage's shares fell by $1.48 to $70.93 in mid-morning trading.

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