National Storage Affiliates Trust Reports 2018 Fourth Quarter and Full Year Results

GREENWOOD VILLAGE, Colo.–(BUSINESS WIRE)–National Storage Affiliates Trust (“NSA” or the “Company”) (NYSE: NSA)
today reported the Company’s fourth quarter and full year 2018 results.

Fourth Quarter 2018 Highlights

  • Reported loss per share of $0.16 for the fourth quarter of 2018.
  • Reported core funds from operations (“Core FFO”) of $0.37 per share
    for the fourth quarter of 2018, an increase of 15.6% compared to the
    fourth quarter of 2017.
  • Achieved same store net operating income (“NOI”) growth of 5.3% for
    the fourth quarter of 2018 compared to the same period in 2017, driven
    by a 4.2% increase in same store total revenues and a 2.0% increase in
    same store property operating expenses.
  • Acquired seven wholly-owned self storage properties for $51.4 million
    during the fourth quarter of 2018.

Full Year 2018 Highlights

  • Reported earnings per share of $0.07 for full year 2018.
  • Reported Core FFO of $1.38 per share for full year 2018, an increase
    of 11.3% compared to full year 2017.
  • Achieved same store NOI growth of 4.7% for full year 2018 compared to
    full year 2017, driven by a 4.0% increase in same store total revenues
    and a 2.6% increase in same store property operating expenses.
  • Acquired 57 wholly-owned self storage properties for $356.6 million
    and invested in 106 joint venture properties valued at $1.3 billion
    during full year 2018.
  • Completed an offering of 5,900,000 common shares resulting in net
    proceeds of approximately $176 million.
  • Added Southern Self Storage of Palm Beach Gardens, Florida as NSA’s
    ninth Participating Regional Operator (“PRO”), with first properties
    contributed in January 2019.

Highlights Subsequent to Year-End

  • Entered into definitive agreements to add Moove In Self Storage of
    York, Pennsylvania as NSA’s tenth PRO.
  • Acquired 23 wholly-owned self storage properties for approximately
    $147.0 million.

Arlen Nordhagen, Chairman and Chief Executive Officer, commented, “2018
was a banner year for the growth of NSA and our iStorage brand, with the
formation of our 2018 Joint Venture and our investment in nearly $1.7
billion of self storage properties. We’re excited to carry this momentum
into 2019 as we have closed on the addition of our previously announced
ninth PRO, Southern Self Storage, and entered into agreements to add our
tenth PRO, Moove In Self Storage. Moove In is led by John Gilliland, a
past Chairman of the national Self Storage Association, and his team
brings decades of valuable experience in the northeastern U.S. self
storage market to NSA.”

Financial Results

($ in thousands, except per share and unit data)     Three Months Ended December 31,     Year Ended December 31,
2018   2017   Growth 2018   2017   Growth
Net income $ 14,483   $ 12,015   20.5 % $ 56,326   $ 45,998   22.5 %
 
Funds From Operations (“FFO”)(1) $ 32,201 $ 23,482 37.1 % $ 116,378 $ 90,584 28.5 %

Add back acquisition costs and NSA’s share of unconsolidated real
estate venture acquisition costs

192   143   34.3 % 663   615   7.8 %
Core FFO(1) $ 32,393   $ 23,625   37.1 % $ 117,041   $ 91,199   28.3 %
 
Earnings (loss) per share – basic and diluted $ (0.16 ) $ (0.08 ) 100.0 % $ 0.07   $ 0.01   600.0 %
 
FFO per share and unit(1) $ 0.37   $ 0.31   19.4 % $ 1.37   $ 1.23   11.4 %
Core FFO per share and unit(1) $ 0.37   $ 0.32   15.6 % $ 1.38   $ 1.24   11.3 %
(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 increased $2.5 million for the fourth quarter of 2018 and
increased $10.3 million for full year 2018 as compared to the same
periods in 2017. The increase was primarily the result of incremental
NOI generated from 57 wholly-owned self storage properties acquired
during full year 2018 and same store NOI growth, partially offset by
increases in depreciation and amortization and interest expense.

The increases in FFO and Core FFO for the fourth quarter of 2018 and
full year 2018 were primarily the result of incremental NOI from
properties acquired during full year 2018, same store NOI growth, and
incremental FFO from the Company’s unconsolidated real estate ventures,
partially offset by higher interest expense and the payment of dividends
on preferred shares.

Same Store Operating Results (376 Properties)

($ in thousands, except per square foot data)     Three Months Ended December 31,     Year Ended December 31,
2018   2017   Growth     2018   2017   Growth
Total revenues $ 63,951   $ 61,356   4.2 % $ 251,811   $ 242,074   4.0 %
Property operating expenses 19,878   19,484   2.0 % 79,591   77,576   2.6 %
Net Operating Income (NOI) $ 44,073   $ 41,872   5.3 % $ 172,220   $ 164,498   4.7 %
NOI Margin 68.9 % 68.2 % 0.7 % 68.4 % 68.0 % 0.4 %
 
Average Occupancy 88.4 % 88.9 % (0.5 )% 89.0 % 89.2 % (0.2 )%
Average Annualized Rental Revenue Per Occupied Square Foot $ 12.28   $ 11.76   4.4 % $ 12.02   $ 11.55   4.1 %
 
 

Year-over-year same store total revenues increased 4.2% for the fourth
quarter of 2018 and 4.0% for full year 2018 as compared to the same
periods in 2017. The increase in the fourth quarter of 2018 was driven
primarily by a 4.4% increase in average annualized rental revenue per
occupied square foot partially offset by a 50 basis point decrease in
average occupancy. The full year 2018 increase resulted primarily from a
4.1% increase in average annualized rental revenue per occupied square
foot partially offset by a 20 basis point decrease in average occupancy.

Year-over-year same store property operating expenses increased 2.0% for
the fourth quarter of 2018 and 2.6% for full year 2018 as compared to
the same periods in 2017. These increases primarily resulted from
increases in property taxes, personnel costs and repairs and maintenance
expenses.

Investment Activity

NSA acquired seven wholly-owned self storage properties located in four
states consisting of approximately 0.4 million rentable square feet
configured in approximately 3,000 storage units during the fourth
quarter of 2018. Consideration for these acquisitions included
approximately $49.2 million of net cash, the issuance of approximately
$2.0 million of OP equity and the assumption of approximately $0.2
million of other working capital liabilities.

During the year ended December 31, 2018, NSA formed the 2018 Joint
Venture, in which the Company has a 25% ownership interest, with an
affiliate of Heitman America Real Estate REIT LLC. In September 2018,
the 2018 Joint Venture completed the acquisition of a portfolio of 112
self storage properties located across 17 states and Puerto Rico,
consisting of over 8 million rentable square feet configured in over
68,000 storage units for an aggregate purchase price of approximately
$1.325 billion. Immediately following the closing of the acquisition,
the 2018 Joint Venture distributed the six self storage properties in
the portfolio located in Puerto Rico and a single self storage property
located in Ohio to NSA.

Including the seven self storage properties acquired by NSA from the
2018 Joint Venture discussed above, during the full year 2018, NSA
invested $356.6 million in the acquisition of 57 wholly-owned self
storage properties located in 13 states and Puerto Rico consisting of
approximately 3.2 million rentable square feet configured in
approximately 28,000 storage units.

During the year ended December 31, 2018, NSA’s 2016 Joint Venture
invested in three self storage properties and an expansion project at an
existing property for $28.5 million, comprising approximately 0.2
million rentable square feet, configured in approximately 1,300 storage
units.

Subsequent to December 31, 2018, NSA acquired 23 wholly-owned self
storage properties located in six states consisting of approximately 1.3
million rentable square feet configured in approximately 11,000 storage
units for approximately $147.0 million. Consideration for these
acquisitions included approximately $122.9 million of net cash, the
issuance of approximately $23.7 million of OP units, subordinated
performance units and Series A-1 preferred units and the assumption of
approximately $0.4 million of other working capital liabilities.

In addition, in February 2019, NSA entered into definitive agreements to
add Moove In Self Storage of York, Pennsylvania as NSA’s tenth PRO.
Moove In currently owns 19 self storage properties and operates a total
of 23 self storage properties under the Moove In Self Storage brand in
Pennsylvania, Maryland, New Jersey, and New York. Upon closing, Moove In
intends to contribute six self storage properties to NSA as part of the
initial contribution transaction, and Moove In’s remaining properties
will be added to NSA’s captive pipeline. The Company expects the initial
contribution transaction and related closing documentation, including
the entry into a facilities portfolio management agreement, to close
during the first quarter of 2019, subject to customary closing
conditions.

Balance Sheet

NSA entered into an agreement with a lender for a new $75 million term
loan during the fourth quarter of 2018. The term loan matures in ten
years and has an effective interest rate of 4.62%. NSA used the proceeds
from the term loan to repay outstanding amounts under its revolving line
of credit.

Common Share Dividends

On February 21, 2019, NSA’s Board of Trustees declared a quarterly cash
dividend of $0.30 per common share, which will be paid on March 29, 2019
to shareholders of record as of March 15, 2019.

2019 Guidance

Tamara Fischer, President and Chief Financial Officer, commented, “Our
same store pool in 2019 will increase by 63 stores for a total of 439
stores. These newly added stores are geographically diversified across
19 states and we anticipate these stores to have a relatively neutral
impact on our projected 2019 same store revenue growth. In addition,
we’ve already acquired or have under contract to acquire an additional
30 wholly-owned self storage properties for approximately $190 million
during the first quarter of 2019, reflecting our continued commitment to
our growth initiatives as we begin 2019.”

The following table outlines NSA’s FFO guidance estimates and related
assumptions for the year ended December 31, 2019:

    Ranges for Full Year 2019
Low   High
Core FFO per share(1) $1.48 $1.52
 
Same store operations (439 stores)
Total revenue growth 2.5% 3.5%
Property operating expenses growth 2.5% 3.5%
NOI growth 2.5% 3.5%
 
General and administrative expenses (as a percent of revenue) 11.0% 12.0%
General and administrative expenses (excluding equity-based
compensation)
10.0% 10.5%
Equity-based compensation 1.0% 1.5%
 
Management fees and other revenue, in millions $20.0 $21.0
Core FFO from unconsolidated real estate venture, in millions $15.0 $16.0
 
Subordinated performance unit distributions, in millions $32.0 $34.0
 
Wholly-owned acquisitions, in millions $300.0 $500.0
Joint venture acquisitions, in millions $20.0 $100.0
 
 

(1) The following table provides a reconciliation of
the range of estimated earnings (loss) per share – diluted to
estimated Core FFO per share and unit:

    Ranges for Full Year 2019
Low   High
Earnings (loss) per share – diluted $ 0.10 $ 0.20
Impact of the difference in weighted average number of shares and
GAAP accounting for noncontrolling interests, two-class method and
treasury stock method
0.44 0.36
Add real estate depreciation and amortization, including NSA’s share
of unconsolidated venture real estate depreciation and amortization
1.29 1.33
FFO attributable to subordinated unitholders (0.36 ) (0.38 )
Add acquisition costs and NSA’s share of unconsolidated real estate
venture acquisition costs
0.01   0.01  
Core FFO per share and unit $ 1.48 $ 1.52
 
 

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
February 25, 2019.

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 presentation 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 1:00pm Eastern Time on
Monday, February 25, 2019 to discuss its 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:
Monday, February 25, 2019, 1:00pm ET
Webcast available at: www.nationalstorageaffiliates.com
Domestic
(Toll Free US & Canada): 877.407.9711
International:
412.902.1014

Replay:
Domestic (Toll Free US &
Canada): 877.660.6853
International: 201.612.7415
Conference
ID: 13686870

A replay of the call will be available for one week through Monday,
March 4, 2019. A replay of the webcast will be available for 30 days on
NSA’s website at www.nationalstorageaffiliates.com.

Upcoming Industry Conferences

NSA management is scheduled to participate in the 2019 Wells Fargo Real
Estate Forum on February 27, 2019 in New York, New York and in Citi’s
2019 Global Property CEO Conference on March 4 – 6, 2019 in Hollywood,
Florida.

About National Storage Affiliates Trust

National Storage Affiliates Trust is a Maryland real estate investment
trust focused on the ownership, operation and acquisition of self
storage properties located within the top 100 metropolitan statistical
areas throughout the United States. The Company currently holds
ownership interests in and operates 698 self storage properties located
in 34 states and Puerto Rico with approximately 44.3 million rentable
square feet. NSA is one of the largest owners and operators of self
storage properties among public and private companies in the U.S. 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 2000
Index of Companies and the S&P SmallCap 600 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, the debt and lending markets or the general economy; the
Company’s business and investment strategy; the acquisition of
properties, including those under contract, our ability to execute on
our acquisition pipeline; the timing of acquisitions under contract; and
the Company’s guidance estimates for the year ended December 31, 2019.
For a further list and description of such risks and uncertainties, see
the Company’s most recent Annual Report on Form 10-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 December 31,

Year Ended
December 31,

2018   2017 2018   2017
REVENUE
Rental revenue $ 81,826 $ 69,101 $ 308,403 $ 251,814
Other property-related revenue 2,626 2,184 10,183 8,255
Management fees and other revenue 4,846   2,083   12,310   8,061  
Total revenue 89,298   73,368   330,896   268,130  
OPERATING EXPENSES
Property operating expenses 26,913 23,285 103,875 84,455
General and administrative expenses 10,606 7,994 36,220 30,060
Depreciation and amortization 22,921   20,169   89,147   75,115  
Total operating expenses 60,440   51,448   229,242   189,630  
Income from operations 28,858 21,920 101,654 78,500
OTHER (EXPENSE) INCOME
Interest expense (11,961 ) (9,280 ) (42,724 ) (34,068 )
Equity in losses of unconsolidated real estate ventures (1,713 ) (79 ) (1,423 ) (2,339 )
Acquisition costs (192 ) (143 ) (663 ) (593 )
Non-operating (expense) income (160 ) 17 (91 ) (58 )
(Loss) gain on sale of self storage properties   (28 ) 391   5,715  
Other expense (14,026 ) (9,513 ) (44,510 ) (31,343 )
Income before income taxes 14,832 12,407 57,144 47,157
Income tax expense (349 ) (392 ) (818 ) (1,159 )
Net income 14,483 12,015 56,326 45,998
Net income attributable to noncontrolling interests (21,119 ) (13,247 ) (42,217 ) (43,037 )
Net (loss) income attributable to National Storage Affiliates
Trust
(6,636 ) (1,232 ) 14,109 2,961
Distributions to preferred shareholders (2,587 ) (2,300 ) (10,350 ) (2,300 )
Net (loss) income attributable to common shareholders $ (9,223 ) $ (3,532 ) $ 3,759   $ 661  
Earnings (loss) per share – basic and diluted $ (0.16 ) $ (0.08 ) $ 0.07   $ 0.01  
Weighted average shares outstanding – basic and diluted 56,571   45,775   53,293   44,423  
 
 

National Storage Affiliates Trust
Consolidated
Balance Sheets

(dollars in thousands, except per share
amounts)
(unaudited)

   
December 31,
2018   2017
ASSETS
Real estate
Self storage properties $ 2,637,723 $ 2,275,233
Less accumulated depreciation (246,261 ) (170,358 )
Self storage properties, net 2,391,462 2,104,875
Cash and cash equivalents 13,181 13,366
Restricted cash 3,182 3,041
Debt issuance costs, net 1,260 2,185
Investment in unconsolidated real estate ventures 245,125 89,093
Other assets, net 75,053 52,615
Assets held for sale   1,555  
Total assets $ 2,729,263   $ 2,266,730  
LIABILITIES AND EQUITY
Liabilities
Debt financing $ 1,278,102 $ 958,097
Accounts payable and accrued liabilities 33,130 24,459
Deferred revenue 15,732   12,687  
Total liabilities 1,326,964 995,243
Equity

Preferred shares of beneficial interest, par value $0.01 per
share. 50,000,000 authorized, 6,900,000 issued and outstanding at
December 31, 2018 and 2017, at liquidation preference

172,500 172,500

Common shares of beneficial interest, par value $0.01 per share.
250,000,000 shares authorized, 56,654,009 and 50,284,934 shares
issued and outstanding at December 31, 2018 and 2017, respectively

567 503
Additional paid-in capital 844,276 711,467
Distributions in excess of earnings (114,122 ) (55,729 )
Accumulated other comprehensive income 13,618   12,282  
Total shareholders’ equity 916,839 841,023
Noncontrolling interests 485,460   430,464  
Total equity 1,402,299   1,271,487  
Total liabilities and equity $ 2,729,263   $ 2,266,730  
 
 
Reconciliation of Net Income to FFO and Core FFO
(in thousands, except per share and unit amounts) (unaudited)
           

Three Months Ended
December 31,

Year Ended
December 31,

2018 2017 2018 2017
Net income $ 14,483 $ 12,015 $ 56,326 $ 45,998
Add (subtract):
Real estate depreciation and amortization 22,606 19,896 87,938 73,669
Company’s share of unconsolidated real estate venture real estate
depreciation and amortization
5,524 1,464 10,233 7,296
Loss (gain) on sale of self storage properties 28 (391 ) (5,715 )
Company’s share of unconsolidated real estate venture loss on sale
of properties
205
Distributions to preferred shareholders and unitholders (2,716 ) (2,300 ) (10,822 ) (2,300 )
FFO attributable to subordinated performance unitholders (1) (7,696 ) (7,621 ) (27,111 ) (28,364 )
FFO attributable to common shareholders, OP unitholders, and LTIP
unitholders
32,201 23,482 116,378 90,584
Add:
Acquisition costs 192 143 663 593
Company’s share of unconsolidated real estate venture acquisition
costs
      22  
Core FFO attributable to common shareholders, OP unitholders, and
LTIP unitholders
$ 32,393   $ 23,625   $ 117,041   $ 91,199  
 
Weighted average shares and units outstanding – FFO and Core FFO:(2)
Weighted average shares outstanding – basic 56,571 45,775 53,293 44,423
Weighted average restricted common shares outstanding 28 27 29 25
Weighted average OP units outstanding 28,881 26,549 28,977 26,126
Weighted average DownREIT OP unit equivalents outstanding 1,835 1,835 1,835 1,835
Weighted average LTIP units outstanding 708   547   694   957  
Total weighted average shares and units outstanding – FFO and
Core FFO
88,023   74,733   84,828   73,366  
 
FFO per share and unit $ 0.37 $ 0.31 $ 1.37 $ 1.23
Core FFO per share and unit $ 0.37 $ 0.32 $ 1.38 $ 1.24

 

(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.
 
 

Contacts

National Storage Affiliates Trust
Investor/Media Relations
George
Hoglund, CFA
Vice President – Investor Relations
720.630.2160
ghoglund@nsareit.net

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