UPDATE 1-Extra Space Q4 FFO down 33 pct

Mon Feb 22, 2010 5:00pm EST

* Q4 FFO of $0.22 below $0.34/shr year ago

* Q4 net operating income down, occupancy up

* Sees Q1 FFO below Street view

Feb 22 (Reuters) - Real estate investment trust Extra Space Storage Inc (EXR.N) reported a 33 percent drop in quarterly funds from operations, hurt by a drop in tenant reinsurance, and also forecast first-quarter FFO below market expectations.

For the fourth quarter ended Dec 31, the REIT posted FFO of $20.5 million, or 22 cents a share, compared with FFO of $30.8 million, or 34 cents a share, a year earlier.

Excluding severance costs, the company reported FFO of 23 cents a share.

Total operating and tenant reinsurance expenses were $22.9 million, while same-store occupancy climbed to 83.2 percent over the same period.

Net operating income fell nearly 7 percent to $36.7 million, while tenant reinsurance revenue was $56.5 million, down from $58.9 million a year ago.

Analysts on average, were expecting the Salt Lake City, Utah-based REIT to post FFO of 21 cents a share, according to Thomson Reuters I/B/E/S.

Despite the fragile economic recovery gaining momentum, buoyed by an upswing in consumer confidence, storage REITs have been banking on tough cost control measures and customer incentives to beat Wall Street's expectations. [nSGE61E0GA]

Shares of Extra Space closed at $12.00 Monday on the New York Stock Exchange.

(Reporting by Amulya Nagaraj in Bangalore; Editing by Anil D'Silva)

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