National Storage Affiliates Trust ("NSA" or the "Company")
(NYSE: NSA) today reported the Company’s first quarter 2023
results.
First Quarter 2023 Highlights
- Reported net income of $40.4 million for the first quarter of
2023, a decrease of 9.8% compared to the first quarter of 2022.
Reported diluted earnings per share of $0.24 for the first quarter
of 2023 compared to $0.24 for the first quarter of 2022.
- Reported core funds from operations ("Core FFO") of $85.9
million, or $0.66 per share for the first quarter of 2023, a
decrease of 2.9% per share compared to the first quarter of 2022,
driven by same store growth and net operating income (“NOI”)
contribution from non-same store properties, which was more than
offset by elevated interest expense due primarily to higher
interest rates.
- Reported an increase in same store NOI of 4.8% for the first
quarter of 2023 compared to the same period in 2022, driven by a
5.7% increase in same store total revenues partially offset by an
increase of 8.3% in same store property operating expenses.
- Reported same store period-end occupancy of 89.8% as of March
31, 2023, a decrease of 380 basis points compared to March 31,
2022.
- Acquired 16 wholly-owned self storage properties for
approximately $160.5 million during the first quarter of 2023. 15
of the properties were acquired in a portfolio from affiliates of
Personal Mini, one of the Company's PROs, for approximately $144.8
million. Consideration for these acquisitions included the issuance
of $150.5 million of equity, with a new class of preferred shares
representing the majority of equity issued.
- Repurchased 1,622,874 of the Company's common shares for
approximately $69.3 million under the previously announced share
repurchase program.
- As previously announced, one of the Company's participating
regional operators ("PROs"), Move It Self Storage and its
controlled affiliates ("Move It"), retired effective January 1,
2023. As a result of the retirement, on January 1, 2023, management
of the Company's 72 properties in the Move It managed portfolio was
transferred to NSA and the Move It brand name and related
intellectual property were internalized by the Company. In
addition, NSA no longer pays supervisory and administrative fees or
reimbursements to Move It and all subordinated performance units
related to Move It's managed portfolio converted into OP
units.
- As previously announced, the Company increased the total
borrowing capacity under the Company's credit facility by $405.0
million to $1.955 billion, and used incremental borrowings under
the credit facility to retire $300.0 million of its $375.0 million
of debt maturing in 2023.
Highlights Subsequent to Quarter-End
- Kroll Bond Rating Agency affirmed the issuer credit rating of
NSA's operating partnership as BBB+ with a Stable Outlook.
- On April 27, 2023, the operating partnership as issuer, and the
Company entered into a note purchase agreement which provides for
the private placement of $120.0 million of senior unsecured notes
due July 5, 2028, with an effective interest rate of 5.75%, after
taking into account the effect of interest rate swaps. The private
placement closed on the same day.
David Cramer, President and Chief Executive Officer, commented,
“We began the year with a solid quarter of operating results. We
continue to moderate from the record setting levels of 2022,
delivering same store revenue growth of 5.7% which is still above
the long-term historical sector average. The slowing economy and a
muted housing market will continue to apply pressure to demand
levels. Our teams did a good job navigating the changing economic
environment and remain focused on executing strategies to capture
new customers as we progress through the spring leasing season.
Operating trends over the next couple months will be key to
performance for the full year.”
Financial Results
($ in thousands, except per share and unit
data)
Three Months Ended March
31,
2023
2022
Growth
Net income
$
40,392
$
44,786
(9.8
)%
Funds From Operations
("FFO")(1)
$
84,266
$
86,856
(3.0
)%
Add back acquisition costs
844
553
52.6
%
Add loss on early extinguishment of
debt
758
—
—
%
Core FFO(1)
$
85,868
$
87,409
(1.8
)%
Earnings (loss) per share -
basic
$
0.28
$
0.24
16.7
%
Earnings (loss) per share -
diluted
$
0.24
$
0.24
—
%
FFO per share and unit(1)
$
0.64
$
0.67
(4.5
)%
Core FFO per share and unit(1)
$
0.66
$
0.68
(2.9
)%
(1)
Non-GAAP financial measures, including
FFO, Core FFO and NOI, are defined in the Glossary in the
supplemental financial information and, where appropriate,
reconciliations of these measures and other non-GAAP financial
measures to their most directly comparable GAAP measures are
included in the Schedules to this press release and in the
supplemental financial information.
Net income decreased $4.4 million for the first quarter of 2023
as compared to the same period in 2022. Total revenue and NOI
increased by $20.8 million and $13.2 million, respectively,
resulting primarily from additional NOI generated from the 33
wholly-owned self storage properties acquired between April 1, 2022
and December 31, 2022, and 16 wholly-owned self storage properties
acquired during the three months ended March 31, 2023, and same
store NOI growth. These increases in total revenue and NOI were
offset by an increase in interest expense of $15.3 million for the
first quarter of 2023 as compared to the same period in 2022.
The decrease in FFO and Core FFO for the first quarter of 2023
was primarily the result of a decrease in net income of 9.8%,
partially offset by a decrease in distributions on subordinated
performance units, as compared to the same period in 2022.
Same Store Operating Results (834 Stores)
($ in thousands, except per square foot
data)
Three Months Ended March
31,
2023
2022
Growth
Total revenues
$
183,915
$
173,933
5.7
%
Property operating expenses
50,420
46,547
8.3
%
Net Operating Income (NOI)
$
133,495
$
127,386
4.8
%
NOI Margin
72.6
%
73.2
%
(0.6
)%
Average Occupancy
89.7
%
93.5
%
(3.8
)%
Average Annualized Rental Revenue Per
Occupied Square Foot
$
15.13
$
13.74
10.1
%
Year-over-year same store total revenues increased 5.7% for the
first quarter of 2023 as compared to the same period in 2022. The
increase was driven primarily by a 10.1% increase in average
annualized rental revenue per occupied square foot, partially
offset by a 3.8% decrease in average occupancy. Markets which
generated above portfolio average same store total revenue growth
for the first quarter of 2023 include: Riverside, McAllen and
Oklahoma City. Markets which generated below portfolio average same
store total revenue growth for the first quarter of 2023 include:
Las Vegas, Phoenix and Colorado Springs.
Year-over-year same store property operating expenses increased
8.3% for the first quarter of 2023. The increase primarily resulted
from increases in property tax expense, utilities, and marketing
expense. The increase in property tax was partially the result of a
favorable property tax adjustment in the first quarter of 2022.
Investment Activity
During the first quarter, NSA invested $160.5 million in the
acquisition of 16 self storage properties sourced from our captive
pipeline, consisting of approximately 960,000 rentable square feet
configured in approximately 7,900 storage units. Total
consideration for these acquisitions included approximately $9.9
million of net cash, $113.3 million of 6.000% Series B Cumulative
Redeemable Preferred Shares ("Series B Preferred Shares"), and
$37.2 million of subordinated performance units.
Balance Sheet
During the first quarter, NSA repurchased 1,622,874 of the
Company's common shares for approximately $69.3 million under the
previously announced share repurchase program. Under the program,
the Company has remaining capacity of approximately $241.0 million
out of a total of $400.0 million authorized.
Common Share Dividends
On February 22, 2023, NSA's Board of Trustees declared a
quarterly cash dividend of $0.55 per common share, representing a
10.0% increase from the first quarter 2022. The first quarter 2023
dividend was paid on March 30, 2023 to shareholders of record as of
March 15, 2023.
2023 Guidance
NSA reaffirms its previously provided guidance estimates and
related assumptions for the year ended December 31, 2023:
Current Ranges for
Full Year 2023
Actual
Results for
Full Year
2022
Low
High
Core FFO per share(1)
$2.78
$2.86
$2.81
Same store operations(2)
Total revenue growth
3.75%
5.25%
12.1%
Property operating expenses growth
4.50%
6.00%
4.8%
NOI growth
3.00%
5.50%
14.9%
General and administrative expenses
General and administrative expenses
(excluding equity-based compensation), in millions
$53.0
$55.0
$53.1
Equity-based compensation, in millions
$6.5
$7.0
$6.3
Management fees and other revenue, in
millions
$28.0
$30.0
$27.6
Core FFO from unconsolidated real estate
ventures, in millions
$25.0
$26.5
$24.8
Subordinated performance unit
distributions, in millions
$51.0
$53.0
$58.8
Acquisitions of self storage properties,
in millions
$200.0
$400.0
$569.2
Current Ranges for
Full Year 2023
Low
High
Earnings (loss) per share -
diluted
$1.25
$1.31
Impact of the difference in weighted
average number of shares and GAAP accounting for noncontrolling
interests, two-class method and treasury stock method
0.07
0.02
Add real estate depreciation and
amortization, including NSA's share of unconsolidated venture real
estate depreciation and amortization
1.83
1.91
FFO attributable to subordinated
unitholders
(0.38)
(0.41)
Add loss on early extinguishment of
debt
—
0.01
Add acquisition costs and NSA's share of
unconsolidated real estate venture acquisition costs
0.01
0.02
Core FFO per share and unit
$2.78
$2.86
(1)
The table above provides a reconciliation
of the range of estimated earnings (loss) per share - diluted to
estimated Core FFO per share and unit.
(2)
2023 guidance reflects NSA's 2023 same
store pool comprising 834 stores. 2022 actual results reflect NSA's
2022 same store pool comprising 628 stores.
Supplemental Financial Information
The full text of this earnings release and supplemental
financial information, including certain financial information
referenced in this release, are available on NSA's website at
http://ir.nationalstorageaffiliates.com/quarterly-reporting and as
exhibit 99.1 to the Company's Form 8-K furnished to the SEC on May
1, 2023.
Non-GAAP Financial Measures & Glossary
This press release contains certain non-GAAP financial measures.
These non-GAAP measures are presented because NSA's management
believes these measures help investors understand NSA's business,
performance and ability to earn and distribute cash to its
shareholders by providing perspectives not immediately apparent
from net income (loss). These measures are also frequently used by
securities analysts, investors and other interested parties. The
presentations of FFO, Core FFO and NOI in this press release are
not intended to be considered in isolation or as a substitute for,
or superior to, the financial information prepared and presented in
accordance with GAAP. In addition, NSA's method of calculating
these measures may be different from methods used by other
companies, and, accordingly, may not be comparable to similar
measures as calculated by other companies that do not use the same
methodology as NSA. These measures, and other words and phrases
used herein, are defined in the Glossary in the supplemental
financial information and, where appropriate, reconciliations of
these measures and other non-GAAP financial measures to their most
directly comparable GAAP measures are included in the Schedules to
this press release and in the supplemental financial
information.
Quarterly Teleconference and Webcast
The Company will host a conference call at 1:00 pm Eastern Time
on Tuesday, May 2, 2023 to discuss its first quarter 2023 financial
results. At the conclusion of the call, management will accept
questions from certified financial analysts. All other participants
are encouraged to listen to a webcast of the call by accessing the
link found on the Company's website at
www.nationalstorageaffiliates.com.
Conference Call and Webcast:
Date/Time: Tuesday, May 2, 2023, 1:00 pm ET
Webcast available at: www.nationalstorageaffiliates.com
Domestic (Toll Free US & Canada): 877.407.9711
International: 412.902.1014
A replay of the webcast will be available for 30 days on NSA's
website at www.nationalstorageaffiliates.com.
Upcoming Industry Conference
NSA management is scheduled to participate in Nareit's REITweek
2023 Conference on June 6 - 8, 2023 in New York, New York.
About National Storage Affiliates Trust
National Storage Affiliates Trust is a real estate investment
trust headquartered in Greenwood Village, Colorado, focused on the
ownership, operation and acquisition of self storage properties
predominantly located within the top 100 metropolitan statistical
areas throughout the United States. As of March 31, 2023, the
Company held ownership interests in and operated 1,117 self storage
properties located in 42 states and Puerto Rico with approximately
72.8 million rentable square feet. NSA is one of the largest owners
and operators of self storage properties among public and private
companies in the United States. For more information, please visit
the Company’s website at www.nationalstorageaffiliates.com. NSA is
included in the MSCI US REIT Index (RMS/RMZ), the Russell 1000
Index of Companies and the S&P MidCap 400 Index.
NOTE REGARDING FORWARD LOOKING
STATEMENTS
Certain statements contained in this press release constitute
forward-looking statements as such term is defined in Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and such statements
are intended to be covered by the safe harbor provided by the same.
Forward-looking statements are subject to substantial risks and
uncertainties, many of which are difficult to predict and are
generally beyond the Company's control. These forward-looking
statements include information about possible or assumed future
results of the Company's business, financial condition, liquidity,
results of operations, plans and objectives. Changes in any
circumstances may cause the Company's actual results to differ
significantly from those expressed in any forward-looking
statement. When used in this release, the words "believe,"
"expect," "anticipate," "estimate," "plan," "continue," "intend,"
"should," "may" or similar expressions are intended to identify
forward-looking statements. Statements regarding the following
subjects, among others, may be forward-looking: market trends in
the Company's industry, interest rates, inflation, the debt and
lending markets or the general economy; the Company's business and
investment strategy; the acquisition of properties, including those
under contract and the Company's ability to execute on its
acquisition pipeline; the timing of acquisitions under contract;
the internalization of retiring participating regional operators
("PROs") into the Company; and the Company's guidance estimates for
the year ended December 31, 2023. For a further list and
description of such risks and uncertainties, see the Company's most
recent Annual Report on Form 10-K and subsequent Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K filed with the
Securities and Exchange Commission, and the other documents filed
by the Company with the Securities and Exchange Commission. The
forward-looking statements, and other risks, uncertainties and
factors are based on the Company's beliefs, assumptions and
expectations of its future performance, taking into account all
information currently available to the Company. Forward-looking
statements are not predictions of future events. The Company
disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
National Storage Affiliates
Trust
Consolidated Statements of
Operations
(in thousands, except per share
amounts)
(unaudited)
Three Months Ended March
31,
2023
2022
REVENUE
Rental revenue
$
194,129
$
174,469
Other property-related revenue
6,807
6,166
Management fees and other revenue
7,057
6,549
Total revenue
207,993
187,184
OPERATING EXPENSES
Property operating expenses
56,483
49,358
General and administrative expenses
14,821
13,966
Depreciation and amortization
55,458
58,072
Other
1,173
470
Total operating expenses
127,935
121,866
OTHER (EXPENSE) INCOME
Interest expense
(37,948
)
(22,647
)
Loss on early extinguishment of debt
(758
)
—
Equity in earnings of unconsolidated real
estate ventures
1,678
1,494
Acquisition costs
(844
)
(553
)
Non-operating expense
(598
)
(112
)
Gain on sale of self storage
properties
—
2,134
Other expense, net
(38,470
)
(19,684
)
Income before income taxes
41,588
45,634
Income tax expense
(1,196
)
(848
)
Net income
40,392
44,786
Net income attributable to noncontrolling
interests
(11,433
)
(19,558
)
Net income attributable to National
Storage Affiliates Trust
28,959
25,228
Distributions to preferred
shareholders
(3,962
)
(3,279
)
Net income attributable to common
shareholders
$
24,997
$
21,949
Earnings per share - basic
$
0.28
$
0.24
Earnings per share - diluted
$
0.24
$
0.24
Weighted average shares outstanding -
basic
89,499
91,323
Weighted average shares outstanding -
diluted
148,622
91,323
National Storage Affiliates
Trust
Consolidated Balance
Sheets
(dollars in thousands, except per
share amounts)
(unaudited)
March 31,
December 31,
2023
2022
ASSETS
Real estate
Self storage properties
$
6,556,603
$
6,391,572
Less accumulated depreciation
(824,647
)
(772,661
)
Self storage properties, net
5,731,956
5,618,911
Cash and cash equivalents
44,330
35,312
Restricted cash
7,506
6,887
Debt issuance costs, net
10,247
1,393
Investment in unconsolidated real estate
ventures
223,139
227,441
Other assets, net
144,666
156,228
Operating lease right-of-use assets
23,581
23,835
Total assets
$
6,185,425
$
6,070,007
LIABILITIES AND EQUITY
Liabilities
Debt financing
$
3,643,585
$
3,551,179
Accounts payable and accrued
liabilities
78,603
80,377
Interest rate swap liabilities
7,983
483
Operating lease liabilities
25,528
25,741
Deferred revenue
24,652
23,213
Total liabilities
3,780,351
3,680,993
Equity
Series A Preferred shares of beneficial
interest, par value $0.01 per share. 50,000,000 authorized,
9,017,588 and 9,017,588 issued and outstanding at March 31, 2023
and December 31, 2022, respectively, at liquidation preference
225,439
225,439
Series B Preferred shares of beneficial
interest, par value $0.01 per share. 7,000,000 authorized,
5,668,128 issued and outstanding at March 31, 2023
115,212
—
Common shares of beneficial interest, par
value $0.01 per share. 250,000,000 shares authorized, 88,296,142
and 89,842,145 shares issued and outstanding at March 31, 2023 and
December 31, 2022, respectively
883
898
Additional paid-in capital
1,689,136
1,777,984
Distributions in excess of earnings
(420,408
)
(396,650
)
Accumulated other comprehensive income
25,153
40,530
Total shareholders' equity
1,635,415
1,648,201
Noncontrolling interests
769,659
740,813
Total equity
2,405,074
2,389,014
Total liabilities and equity
$
6,185,425
$
6,070,007
Reconciliation of Net Income to FFO and
Core FFO
(in thousands, except per share and unit
amounts) (unaudited)
Three Months Ended March
31,
2023
2022
Net income
$
40,392
$
44,786
Add (subtract):
Real estate depreciation and
amortization
55,152
57,759
Company's share of unconsolidated real
estate venture real estate depreciation and amortization
4,471
3,846
Gain on sale of self storage
properties
—
(2,134
)
Distributions to preferred shareholders
and unitholders
(3,962
)
(3,552
)
FFO attributable to subordinated
performance unitholders(1)
(11,787
)
(13,849
)
FFO attributable to common
shareholders, OP unitholders, and LTIP unitholders
84,266
86,856
Add:
Acquisition costs
844
553
Loss on early extinguishment of debt
758
—
Core FFO attributable to common
shareholders, OP unitholders, and LTIP unitholders
$
85,868
$
87,409
Weighted average shares and units
outstanding - FFO and Core FFO:(2)
Weighted average shares outstanding -
basic
89,499
91,323
Weighted average restricted common shares
outstanding
25
28
Weighted average OP units outstanding
38,736
35,351
Weighted average DownREIT OP unit
equivalents outstanding
2,120
1,925
Weighted average LTIP units
outstanding
551
603
Total weighted average shares and units
outstanding - FFO and Core FFO
130,931
129,230
FFO per share and unit
$
0.64
$
0.67
Core FFO per share and unit
$
0.66
$
0.68
(1)
Amounts represent distributions declared
for subordinated performance unitholders and DownREIT subordinated
performance unitholders for the periods presented.
(2)
NSA combines OP units and DownREIT OP
units with common shares because, after the applicable lock-out
periods, OP units in the Company's operating partnership are
redeemable for cash or, at NSA's option, exchangeable for common
shares on a one-for-one basis and DownREIT OP units are also
redeemable for cash or, at NSA's option, exchangeable for OP units
in the Company's operating partnership on a one-for-one basis,
subject to certain adjustments in each case. Subordinated
performance units, DownREIT subordinated performance units and LTIP
units may also, under certain circumstances, be convertible into or
exchangeable for common shares (or other units that are convertible
into or exchangeable for common shares). See footnote(3) for
additional discussion of subordinated performance units, DownREIT
subordinated performance units, and LTIP units in the calculation
of FFO and Core FFO per share and unit.
Reconciliation of Earnings (Loss) Per
Share - Diluted to FFO and Core FFO Per Share and Unit
(in thousands, except per share and unit
amounts) (unaudited)
Three Months Ended March
31,
2023
2022
Earnings per share - diluted
$
0.24
$
0.24
Impact of the difference in weighted
average number of shares(3)
0.04
(0.07
)
Impact of GAAP accounting for
noncontrolling interests, two-class method and treasury stock
method(4)
—
0.15
Add real estate depreciation and
amortization
0.42
0.45
Add Company's share of unconsolidated real
estate venture real estate depreciation and amortization
0.03
0.03
Subtract gain on sale of self storage
properties
—
(0.02
)
FFO attributable to subordinated
performance unitholders
(0.09
)
(0.11
)
FFO per share and unit
0.64
0.67
Add acquisition costs
0.01
0.01
Add loss on early extinguishment of
debt
0.01
—
Core FFO per share and unit
$
0.66
$
0.68
(3)
Adjustment accounts for the difference
between the weighted average number of shares used to calculate
diluted earnings per share and the weighted average number of
shares used to calculate FFO and Core FFO per share and unit.
Diluted earnings per share is calculated using the two-class method
for the company's restricted common shares and the treasury stock
method for certain unvested LTIP units, and assumes the conversion
of vested LTIP units into OP units on a one-for-one basis and the
hypothetical conversion of subordinated performance units, and
DownREIT subordinated performance units into OP units, even though
such units may only be convertible into OP units (i) after a
lock-out period and (ii) upon certain events or conditions. For
additional information about the conversion of subordinated
performance units and DownREIT subordinated performance units into
OP units, see Note 10 to the Company's most recent Annual Report on
Form 10-K, filed with the Securities and Exchange Commission. The
computation of weighted average shares and units for FFO and Core
FFO per share and unit includes all restricted common shares and
LTIP units that participate in distributions and excludes all
subordinated performance units and DownREIT subordinated
performance units because their effect has been accounted for
through the allocation of FFO to the related unitholders based on
distributions declared.
(4)
Represents the effect of adjusting the
numerator to consolidated net income prior to GAAP allocations for
noncontrolling interests, after deducting preferred share and unit
distributions, and before the application of the two-class method
and treasury stock method, as described in footnote(3).
Net Operating Income
(dollars in thousands) (unaudited)
Three Months Ended March
31,
2023
2022
Net income
$
40,392
$
44,786
(Subtract) add:
Management fees and other revenue
(7,057
)
(6,549
)
General and administrative expenses
14,821
13,966
Other
1,173
470
Depreciation and amortization
55,458
58,072
Interest expense
37,948
22,647
Equity in earnings of unconsolidated real
estate ventures
(1,678
)
(1,494
)
Loss on early extinguishment of debt
758
—
Acquisition costs
844
553
Income tax expense
1,196
848
Gain on sale of self storage
properties
—
(2,134
)
Non-operating expense
598
112
Net Operating Income
$
144,453
$
131,277
EBITDA and Adjusted EBITDA
(dollars in thousands) (unaudited)
Three Months Ended March
31,
2023
2022
Net income
$
40,392
$
44,786
Add:
Depreciation and amortization
55,458
58,072
Company's share of unconsolidated real
estate venture depreciation and amortization
4,471
3,846
Interest expense
37,948
22,647
Income tax expense
1,196
848
Loss on early extinguishment of debt
758
—
EBITDA
140,223
130,199
Add (subtract):
Acquisition costs
844
553
Gain on sale of self storage
properties
—
(2,134
)
Equity-based compensation expense
1,649
1,544
Adjusted EBITDA
$
142,716
$
130,162
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230501005585/en/
National Storage Affiliates Trust
Investor/Media Relations
George Hoglund, CFA Vice President - Investor Relations
720.630.2160 ghoglund@nsareit.net
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