Business Overview and History

National Storage Affiliates Trust (NSA) is a fully integrated, self-administered and self-managed real estate investment trust (REIT) that focuses on the ownership, operation, and acquisition of self-storage properties across the United States. With a geographically diversified portfolio of over 1,000 self-storage properties spanning 42 states and Puerto Rico, NSA has established itself as a prominent player in the thriving self-storage industry.

NSA was founded in 2013 by Arlen D. Nordhagen, who co-founded SecurCare Self Storage, Inc. in 1988 to invest in and manage self storage properties. As SecurCare grew to over 150 self storage properties, Nordhagen recognized an opportunity to create a differentiated public self storage REIT that would leverage the benefits of national scale by integrating multiple experienced regional self storage operators with local operational focus and expertise.

The company was organized in the state of Maryland on May 16, 2013, and completed its initial public offering in 2015, with its common shares listed on the New York Stock Exchange. NSA serves as the sole general partner of its operating partnership subsidiary, NSA OP, LP, which was formed in 2013 to conduct its business.

One of NSA's key differentiators was its unique "Participating Regional Operator" (PRO) structure, which allowed the company to partner with experienced regional operators and directly benefit from their local market expertise. Over time, NSA has gradually internalized this PRO structure, completing the final phase of the process in July 2024. This strategic move has enabled the company to consolidate its operations, streamline its management platform, and capture additional synergies.

Through its unconsolidated real estate ventures, retirement of participating regional operators (PROs), and internalization of the PRO structure, NSA developed a full-service internally-staffed property management platform. The internalization of the PRO structure involved purchasing the PROs' asset management and property management contracts, certain intellectual property and brands, and certain rights related to tenant insurance programs.

As of December 31, 2024, NSA held ownership interests in and operated a geographically diversified portfolio of 1,077 self-storage properties located across 42 states and Puerto Rico, comprising approximately 70.2 million rentable square feet, configured in approximately 552,000 storage units. The company's consolidated property portfolio consists of 815 self-storage properties, of which 306 were acquired from the Company's former participating regional operators (PROs) and 508 were acquired from unaffiliated third-party sellers. The properties are primarily managed by NSA under various brand names, including iStorage, Move It, Moove In, Northwest, RightSpace, SecurCare, and Southern.

In addition to the consolidated properties, NSA also manages an additional 259 properties through its unconsolidated real estate ventures, in which it holds a 25% ownership interest. These properties, located across 24 states, contain approximately 18 million rentable square feet configured in around 143,000 storage units.

Financial Performance and Ratios

For the fiscal year ended December 31, 2024, NSA reported annual revenue of $770.3 million and net income of $183.3 million. The company's core funds from operations (Core FFO), a key metric for REITs, stood at $308.7 million, or $2.44 per share. NSA's balance sheet remains strong, with a net debt to EBITDA ratio of 6.5x as of December 31, 2024.

In the most recent quarter (Q4 2024), NSA reported revenue of $190.1 million and net income of $16.7 million. The company experienced a 10.2% decrease in total revenue for the full year 2024 compared to 2023, primarily attributable to the sale and contribution of self-storage properties. Additionally, NSA reported a 10.5% decrease in same-store net operating income for the fourth quarter of 2024 compared to the same period in 2023, driven by a 180 basis point decline in average occupancy and a 2.5% decline in rent revenue per square foot.

The company's financial ratios paint a picture of a well-managed and financially stable REIT. As of the latest reporting period, NSA's current ratio stood at 0.16, indicating a sufficient ability to meet short-term obligations. The company's debt-to-equity ratio of 3.23 suggests a moderate level of leverage, while its interest coverage ratio of 2.34 demonstrates an adequate capacity to service its debt.

Liquidity

NSA maintains a strong liquidity position, which is crucial for its ongoing operations and future growth initiatives. The company's liquidity is supported by its cash flow from operations, available cash on hand, and access to credit facilities. As of December 31, 2024, NSA had $50.4 million in cash and cash equivalents and $500 million of available capacity under its $950 million revolving credit facility. This financial flexibility allows NSA to pursue acquisition opportunities and fund its development pipeline while maintaining a conservative balance sheet.

Growth Strategies and Outlook

NSA's growth strategy focuses on both external and internal avenues. Externally, the company continues to pursue strategic acquisitions, leveraging its extensive industry relationships and reputation as a reliable, well-capitalized buyer. The self-storage industry remains highly fragmented, providing ample opportunities for NSA to expand its portfolio through accretive transactions.

Internally, NSA is focused on maximizing the performance of its existing portfolio by implementing centralized initiatives, including enhanced revenue management, cost optimization programs, and the integration of its recently internalized property management platform. The company's strong operating platform and increased scale are expected to drive improved efficiencies and better operational results.

In terms of market outlook, the self-storage industry is poised for continued growth, underpinned by favorable demographic trends and the increasing need for storage solutions. According to industry data, new supply is expected to decline substantially over the next few years, from 3.5% of existing stock in 2024 to just 2% by 2027, which is well below the long-term national average. This favorable supply-demand dynamic, combined with NSA's strategic positioning, suggests a promising outlook for the company's future performance.

For 2025, NSA has provided guidance reflecting a range of scenarios. The company expects same-store revenue growth to be flat at the midpoint, same-store operating expense growth of 3.5% at the midpoint, and same-store NOI growth of -1.4% at the midpoint. Core FFO per share guidance is $2.34 at the midpoint, down from $2.44 in 2024. The decline in core FFO per share is attributed to higher interest expense and negative organic growth, partially offset by accretion from the internalization of the PRO structure. Acquisition and disposition guidance ranges are $100-$300 million each, representing NSA's share of any joint venture activity.

Human Capital and Cybersecurity

As of December 31, 2024, NSA had approximately 1,470 employees, including those in its property management platform. The company demonstrates a commitment to diversity, with approximately 52% of its employees being women, and 33% of its senior management team at the Director level and above being women.

NSA has developed a comprehensive cybersecurity risk management program, which includes integrating cybersecurity risk management into the broader enterprise risk management framework, engaging third-party cybersecurity experts, establishing a cybersecurity sub-committee, implementing employee cybersecurity training, and monitoring information systems. The company has not experienced any material cybersecurity incidents that have significantly affected its business, strategy, results of operations, or financial condition.

Risks and Challenges

While NSA's business model and growth strategies appear well-positioned, the company is not without its risks and challenges. These include competition from other self-storage operators, potential changes in consumer preferences or demand, regulatory challenges, and the impact of macroeconomic conditions on the real estate market.

Additionally, NSA's reliance on debt financing exposes the company to interest rate risk, which could affect its ability to secure favorable financing terms for future acquisitions or refinancing. The company's geographic concentration in certain high-growth markets, such as Texas, California, and Florida, also makes it susceptible to regional economic fluctuations or natural disasters in those areas.

Conclusion

National Storage Affiliates Trust has established itself as a leading player in the self-storage industry, leveraging its national platform, experienced management team, and strategic growth initiatives to drive shareholder value. With a strong financial profile, a diversified portfolio, and a favorable market outlook, NSA appears well-positioned to capitalize on the continued growth of the self-storage sector and deliver long-term returns for its investors. However, the company faces challenges in the near term, as reflected in its guidance for 2025, which anticipates flat revenue growth and a slight decline in core FFO per share. NSA's ability to navigate these challenges while executing its growth strategy will be crucial in determining its future success in the competitive self-storage market.