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Table of Contents
Page
 
 
 
Earnings Release
 
 
Consolidated Statements of Operations
 
 
Consolidated Balance Sheets
 
 
Schedule 1 - Funds From Operations and Core Funds From Operations
 
 
Schedule 2 - Other Non-GAAP Financial Measurements
 
 
Schedule 3 - Portfolio Summary
 
 
Schedule 4 - Debt and Equity Capitalization
 
 
Schedule 5 - Summarized Information for Unconsolidated Real Estate Venture
 
 
Schedule 6 - Same Store Performance Summary
 
 
Schedule 7 - Reconciliation of Same Store Data and Net Operating Income to Net Income
 
 
Schedule 8 - Selected Financial Information
 
 
Glossary
 
 
 
 
 
 
 
 



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August 2, 2017

National Storage Affiliates Trust Reports Second Quarter 2017 Results; Net Income Increases $9.6 million; Core FFO per Share Increases 10.7%; Same Store NOI Increases 8.4%; Acquired 10 Self Storage Properties
GREENWOOD VILLAGE, Colo. - (BUSINESS WIRE) - National Storage Affiliates Trust (“NSA” or the "Company") (NYSE: NSA) today reported the Company’s second quarter 2017 results.
Key Highlights
Net income was $15.6 million for the second quarter of 2017, an increase of $9.6 million compared to $6.0 million for the second quarter of 2016.
Core funds from operations ("Core FFO") was $22.5 million, or $0.31 per share, for the second quarter of 2017, an increase of 10.7% per share compared to $14.7 million, or $0.28 per share, for the second quarter of 2016.
Same store total revenues were $42.7 million for the second quarter of 2017, an increase of 5.8% compared to $40.3 million for the second quarter of 2016.
Same store NOI was $29.7 million for the second quarter of 2017, an increase of 8.4% compared to $27.4 million for the second quarter of 2016.
Acquired 10 self storage properties during the second quarter of 2017 for $70.0 million.
Increased quarterly cash dividend to $0.26 per common share, which represents an 8% increase over the first quarter 2017 quarterly cash dividend of $0.24 per common share.
Arlen Nordhagen, Chief Executive Officer and Chairman, commented, "We are very pleased with our 2017 operating results to date, with second quarter same store revenues and NOI growing 5.8% and 8.4%, respectively, over the same period last year.  Although the slower pace of acquisitions has delayed some of our anticipated growth in FFO, our acquisition pace has recently accelerated and we remain optimistic that we’ll end the year near the midpoint of our original guidance of $350 million invested during 2017. Finally, our iStorage joint venture continues to perform very well and our strong balance sheet provides us with the capital base we need to continue to drive long term shareholder value."

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Financial Results
($ in thousands, except per share and unit data)
Three Months Ended June 30,
 
2017
 
2016
 
Growth
Net income
$
15,576

 
$
6,045

 
157.7
 %
 
 
 
 
 
 
Funds From Operations ("FFO")(1)
$
22,297

 
$
12,830

 
73.8
 %
Add back acquisition costs, NSA's share of unconsolidated real estate venture acquisition costs and loss on early extinguishment of debt
169

 
1,844

 
(90.8
)%
Core FFO(1)
$
22,466

 
$
14,674

 
53.1
 %
 
 
 
 
 
 
Earnings (loss) per share - basic
$
0.05

 
$
0.32

 
(84.4
)%
Earnings (loss) per share - diluted
$
0.05

 
$
0.08

 
(37.5
)%
 
 
 
 
 
 
FFO per share and unit(1)
$
0.31

 
$
0.25

 
24.0
 %
Core FFO per share and unit(1)
$
0.31

 
$
0.28

 
10.7
 %
 
 
 
 
 
 
(1) Non-GAAP financial measures, including FFO, Core FFO and NOI, are reconciled to their most directly comparable GAAP measure and defined (together with other words and phrases used herein) in the Schedules to this press release and in the supplemental financial information. 
Second quarter 2017 net income increased $9.6 million, driven primarily by incremental NOI generated from 80 self storage properties acquired between July 1, 2016 and June 30, 2017, gains from the sale of two self storage properties and same store NOI growth, partially offset by increases in depreciation and amortization, interest expense and general and administrative expenses.
Second quarter 2017 basic earnings per share decreased $0.27 per share and diluted earnings per share decreased $0.03 per share. In addition to the items affecting net income described above, the comparison of earnings per share amounts between periods is affected by the allocation of net income to noncontrolling interests pursuant to GAAP. Additional information on NSA's allocation of net income (loss) can be found in the Glossary to the supplemental financial information under "Hypothetical Liquidation at Book Value Method."
Second quarter 2017 FFO per share increased 24.0% and Core FFO per share increased 10.7%. The increases in FFO and Core FFO were primarily the result of $7.8 million of incremental NOI from 80 self storage properties acquired between July 1, 2016 and June 30, 2017, same store NOI growth of $2.3 million, $2.1 million of management fees and other revenue and $1.2 million of the Company's share of FFO and Core FFO from its unconsolidated real estate venture, partially offset by increases of $2.6 million of general and administrative expenses, $2.3 million of interest expense and $0.8 million of distributions to subordinated performance unitholders.

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Total Consolidated Portfolio Operating Results
($ in thousands, except per square foot data)
Three Months Ended June 30,
 
2017
 
2016
 
Growth
Total rental and other property-related revenue
$
62,199

 
$
47,284

 
31.5
 %
Property operating expenses
19,803

 
15,457

 
28.1
 %
Net Operating Income (NOI)
$
42,396

 
$
31,827

 
33.2
 %
 
 
 
 
 
 
Average Occupancy
89.4
%
 
90.4
%
 
(1.0
)%
Average Annualized Rental Revenue Per Occupied Square Foot
$
11.49

 
$
10.98

 
4.6
 %
Second quarter 2017 total rental and other property-related revenue increased 31.5%, driven by $12.0 million of incremental revenues from 80 self storage properties acquired between July 1, 2016 and June 30, 2017 and a $2.3 million increase in same store total revenues.
Second quarter 2017 total property operating expenses increased 28.1% resulting from $4.2 million of incremental property operating expenses generated by 80 self storage properties acquired between July 1, 2016 and June 30, 2017, and an increase of $0.1 million in same store property operating expenses.
Total consolidated portfolio NOI was $42.4 million for the second quarter of 2017, an increase of 33.2% compared to NOI of $31.8 million for the second quarter of 2016.
NSA's consolidated portfolio included 394 self storage properties, approximately 23.9 million rentable square feet, with period-end occupancy of 90.5% as of June 30, 2017.
Same Store Operating Results (277 Properties)
($ in thousands, except per square foot data)
Three Months Ended June 30,
 
2017
 
2016
 
Growth
Total rental and other property-related revenue
$
42,687

 
$
40,342

 
5.8
 %
Property operating expenses
13,016

 
12,966

 
0.4
 %
Net Operating Income (NOI)
$
29,671

 
$
27,376

 
8.4
 %
NOI Margin
69.5
%
 
67.9
%
 
1.6
 %
 
 
 
 
 
 
Average Occupancy
90.2
%
 
90.8
%
 
(0.6
)%
Average Annualized Rental Revenue Per Occupied Square Foot
$
11.54

 
$
10.86

 
6.3
 %
Investment Activity
During the second quarter of 2017, NSA invested $70.0 million in the acquisition of 10 consolidated self storage properties located in five states, encompassing 0.7 million rentable square feet configured in over 4,900 storage units.
NSA's unconsolidated real estate venture invested $49.8 million in the acquisition of four self storage properties located in two states, encompassing 0.3 million rentable square feet configured in approximately 3,100 storage units. NSA owns a 25% interest in its unconsolidated real estate venture and contributed approximately $12.5 million to the venture to fund the acquisitions.

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Additionally, during the second quarter of 2017, NSA sold two self storage properties to an unrelated third party for gross proceeds of $10.3 million.
Subsequent to June 30, 2017, NSA acquired four additional self storage properties for a total investment of approximately $41 million encompassing approximately 0.3 million rentable square feet configured in approximately 2,500 storage units.
Dividends
On May 25, 2017, NSA's Board of Trustees declared a quarterly cash dividend of $0.26 per common share, which was paid on June 30, 2017 to shareholders of record as of June 15, 2017, and represents an 8% increase over the first quarter 2017 dividend.
2017 Guidance Updates
The following table outlines updates to NSA's guidance estimates for the year ended December 31, 2017:
 
 
Ranges for Full Year 2017
 
 
Low
 
High
Same store operations (277 stores)
 
 
Total rental and other property-related revenue growth
 
5.0%
 
6.0%
Property operating expenses growth
 
1.5%
 
2.5%
NOI growth
 
7.0%
 
8.0%
 
 
 
 
 
General and administrative expenses (as a percent of revenue)
 
10.5%
 
12.0%
General and administrative expenses (excluding equity-based compensation)
 
9.5%
 
10.5%
Equity-based compensation
 
1.0%
 
1.5%
 
 
 
 
 
Management fees and other revenue, in millions
 
$7.5
 
$8.0
Core FFO from unconsolidated real estate venture, in millions
 
$4.5
 
$5.0
 
 
 
 
 
Subordinated performance unit distributions, in millions
 
$28.0
 
$30.0
 
 
 
 
 
Consolidated acquisitions, in millions
 
$250.0
 
$350.0
Unconsolidated real estate venture acquisitions, in millions
 
$50.0
 
$100.0
 
 
 
 
 
Core FFO per share(1)
 
$1.23
 
$1.27
(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. See “Hypothetical Liquidation at Book Value Method” in the Glossary to the supplemental financial information for additional information regarding earnings (loss) per share.
 
 
Ranges for Full Year 2017
 
 
Low
 
High
Earnings (loss) per share - diluted
 
$
0.09

 
$
0.14

Impact of the difference in weighted average number of shares and GAAP accounting for noncontrolling interests, two-class method and treasury stock method
 
0.53

 
0.51

Add real estate depreciation and amortization, including NSA's share of unconsolidated real estate venture real estate depreciation and amortization
 
1.07

 
1.11

Subtract gain on sale of self storage properties
 
(0.08
)
 
(0.08
)
FFO attributable to subordinated performance unitholders
 
(0.38
)
 
(0.41
)
Core FFO per share and unit
 
$
1.23

 
$
1.27


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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 August 2, 2017.
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 Thursday, August 3, 2017 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: Thursday, August 3, 2017, 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: 13646795
A replay of the call will be available for one week through Thursday, August 10, 2017. 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 Self Storage Association 2017 Fall Conference & Trade Show in Las Vegas, Nevada on September 5 - 8, 2017 and the BMO Capital Markets 12th Annual Real Estate Conference in Chicago, Illinois on September 25 - 26, 2017.

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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 468 self storage properties located in 26 states with approximately 29 million rentable square feet. NSA is the sixth largest owner and operator 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; and the acquisition of properties, including the timing of acquisitions. 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.
CONTACT:
National Storage Affiliates Trust
Investor/Media Relations
Marti Dowling
Director - Investor Relations
720.630.2624
mdowling@nsareit.net

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National Storage Affiliates Trust
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
REVENUE
 
 
 
 
 
 
 
Rental revenue
$
60,154

 
$
45,784

 
$
117,998

 
$
84,285

Other property-related revenue
2,045

 
1,500

 
3,926

 
2,648

Management fees and other revenue
2,142

 

 
3,980

 

Total revenue
64,341

 
47,284

 
125,904

 
86,933

OPERATING EXPENSES
 
 
 
 
 
 
 
Property operating expenses
19,803

 
15,457

 
39,552

 
28,734

General and administrative expenses
7,405

 
4,837

 
14,586

 
9,172

Depreciation and amortization
17,800

 
13,088

 
36,483

 
23,980

Total operating expenses
45,008

 
33,382

 
90,621

 
61,886

Income from operations
19,333

 
13,902

 
35,283

 
25,047

OTHER (EXPENSE) INCOME

 

 

 

Interest expense
(8,160
)
 
(5,844
)
 
(15,631
)
 
(10,785
)
Loss on early extinguishment of debt

 
(136
)
 

 
(136
)
Equity in losses of unconsolidated real estate venture
(765
)
 

 
(1,550
)
 

Acquisition costs
(167
)
 
(1,708
)
 
(311
)
 
(2,996
)
Non-operating expense
(14
)
 
(57
)
 
(66
)
 
(62
)
Gain on sale of self storage properties
5,637

 

 
5,637

 

Other expense
(3,469
)
 
(7,745
)
 
(11,921
)
 
(13,979
)
Income before income taxes
15,864

 
6,157

 
23,362

 
11,068

Income tax expense
(288
)
 
(112
)
 
(605
)
 
(221
)
Net income
15,576

 
6,045

 
22,757

 
10,847

Net (income) loss attributable to noncontrolling interests
(13,209
)
 
1,325

 
(19,835
)
 
(1,267
)
Net income attributable to National Storage Affiliates Trust
$
2,367

 
$
7,370

 
$
2,922

 
$
9,580

 
 
 
 
 
 
 
 
Earnings (loss) per share - basic
$
0.05

 
$
0.32

 
$
0.07

 
$
0.42

Earnings (loss) per share - diluted
$
0.05

 
$
0.08

 
$
0.07

 
$
0.15

 
 
 
 
 
 
 
 
Weighted average shares outstanding - basic
44,223

 
23,078

 
43,814

 
23,041

Weighted average shares outstanding - diluted
44,223

 
73,531

 
43,814

 
70,763



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National Storage Affiliates Trust
Consolidated Balance Sheets
(dollars in thousands, except per share amounts)
(unaudited)

 
June 30,
 
December 31,
 
2017
 
2016
ASSETS
 
 
 
Real estate
 
 
 
Self storage properties
$
1,954,056

 
$
1,844,336

Less accumulated depreciation
(138,726
)
 
(110,803
)
Self storage properties, net
1,815,330

 
1,733,533

Cash and cash equivalents
13,591

 
12,570

Restricted cash
13,954

 
2,767

Debt issuance costs, net
2,668

 
3,069

Investment in unconsolidated real estate venture
89,916

 
81,486

Other assets, net
42,083

 
44,730

Assets held for sale

 
13,937

Total assets
$
1,977,542

 
$
1,892,092

LIABILITIES AND EQUITY
 
 
 
Liabilities
 
 
 
Debt financing
$
969,140

 
$
878,954

Accounts payable and accrued liabilities
21,050

 
21,616

Deferred revenue
12,685

 
12,454

Total liabilities
1,002,875

 
913,024

Equity
 
 
 
Common shares of beneficial interest, par value $0.01 per share. 250,000,000 shares authorized, 44,279,824 and 43,110,362 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively
443

 
431

Additional paid-in capital
594,192

 
576,365

Distributions in excess of earnings
(27,870
)
 
(8,719
)
Accumulated other comprehensive income
8,748

 
9,025

Total shareholders' equity
575,513

 
577,102

Noncontrolling interests
399,154

 
401,966

Total equity
974,667

 
979,068

Total liabilities and equity
$
1,977,542

 
$
1,892,092





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Supplemental Schedule 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Funds From Operations and Core Funds From Operations
(in thousands, except per share and unit amounts) (unaudited)
 
 
 
 
 
 
 
 
Reconciliation of Net Income to FFO and Core FFO
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
15,576

 
$
6,045

 
$
22,757

 
$
10,847

Add (subtract):
 
 
 
 
 
 
 
Real estate depreciation and amortization
17,343

 
12,935

 
35,586

 
23,714

Company's share of unconsolidated real estate venture real estate depreciation and amortization
1,918

 

 
3,790

 

Gain on sale of self storage properties
(5,637
)
 

 
(5,637
)
 

FFO attributable to subordinated performance unitholders (1)
(6,903
)
 
(6,150
)
 
(13,044
)
 
(10,493
)
FFO attributable to common shareholders, OP unitholders, and LTIP unitholders
22,297

 
12,830

 
43,452

 
24,068

Add:
 
 
 
 
 
 
 
Acquisition costs
167

 
1,708

 
311

 
2,996

Company's share of unconsolidated real estate venture acquisition costs
2

 

 
21

 

Loss on early extinguishment of debt

 
136

 

 
136

Core FFO attributable to common shareholders, OP unitholders, and LTIP unitholders
$
22,466

 
$
14,674

 
$
43,784

 
$
27,200

 
 
 
 
 
 
 
 
Weighted average shares and units outstanding - FFO and Core FFO:(2)
Weighted average shares outstanding - basic
44,223

 
23,078

 
43,814

 
23,041

Weighted average restricted common shares outstanding
27

 
19

 
22

 
18

Weighted average OP units outstanding
25,628

 
24,733

 
25,793

 
23,484

Weighted average DownREIT OP unit equivalents outstanding
1,835

 
1,835

 
1,835

 
1,835

Weighted average LTIP units outstanding
1,224

 
2,558

 
1,345

 
2,507

Total weighted average shares and units outstanding - FFO and Core FFO
72,937

 
52,223

 
72,809

 
50,885

 
 
 
 
 
 
 
 
FFO per share and unit
$
0.31

 
$
0.25

 
$
0.60

 
$
0.47

Core FFO per share and unit
$
0.31

 
$
0.28

 
$
0.60

 
$
0.53

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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.

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Supplemental Schedule 1 (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Funds From Operations and Core Funds From Operations
(in thousands, except per share and unit amounts) (unaudited)
 
 
 
 
 
 
 
 
Reconciliation of Earnings (Loss) Per Share - Diluted to FFO and Core FFO Per Share and Unit
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Earnings (loss) per share - diluted
$
0.05

 
$
0.08

 
$
0.07

 
$
0.15

Impact of the difference in weighted average number of shares(3)
(0.02
)
 
0.04

 
(0.02
)
 
0.06

Impact of GAAP accounting for noncontrolling interests, two-class method and treasury stock method(4)
0.18

 

 
0.27

 

Add real estate depreciation and amortization
0.24

 
0.25

 
0.49

 
0.47

Add Company's share of unconsolidated real estate venture real estate depreciation and amortization
0.03

 

 
0.05

 

Subtract gain on sale of self storage properties
(0.08
)
 

 
(0.08
)
 

FFO attributable to subordinated performance unitholders
(0.09
)
 
(0.12
)
 
(0.18
)
 
(0.21
)
FFO per share and unit
0.31

 
0.25

 
0.60

 
0.47

Add acquisition costs, Company's share of unconsolidated real estate venture acquisition costs, and loss on early extinguishment of debt

 
0.03

 

 
0.06

Core FFO per share and unit
$
0.31

 
$
0.28

 
$
0.60

 
$
0.53

 
 
 
 
 
 
 
 
(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, the treasury stock method for certain unvested LTIP units, and includes the assumption of a hypothetical conversion of subordinated performance units, DownREIT subordinated performance units and LTIP 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 (loss) prior to GAAP allocations for noncontrolling interests and the application of the two-class method and treasury stock method, as described in footnote (3).

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Supplemental Schedule 2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Non-GAAP Financial Measurements
 
 
 
 
 
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Operating Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
15,576

 
$
6,045

 
$
22,757

 
$
10,847

(Subtract) add:
 
 
 
 
 
 
 
Management fees and other revenue
(2,142
)
 

 
(3,980
)
 

General and administrative expenses
7,405

 
4,837

 
14,586

 
9,172

Depreciation and amortization
17,800

 
13,088

 
36,483

 
23,980

Interest expense
8,160

 
5,844

 
15,631

 
10,785

Equity in losses of unconsolidated real estate venture
765

 

 
1,550

 

Loss on early extinguishment of debt

 
136

 

 
136

Acquisition costs
167

 
1,708

 
311

 
2,996

Income tax expense
288

 
112

 
605

 
221

Gain on sale of self storage properties
(5,637
)
 

 
(5,637
)
 

Non-operating expense
14

 
57

 
66

 
62

Net Operating Income
$
42,396

 
$
31,827

 
$
82,372

 
$
58,199

 
 
 
 
 
 
 
 
EBITDA and Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
15,576

 
$
6,045

 
$
22,757

 
$
10,847

Add:
 
 
 
 
 
 
 
Depreciation and amortization
17,800

 
13,088

 
36,483

 
23,980

Company's share of unconsolidated real estate venture depreciation and amortization
1,918

 

 
3,790

 

Interest expense
8,160

 
5,844

 
15,631

 
10,785

Income tax expense
288

 
112

 
605

 
221

Loss on early extinguishment of debt

 
136

 

 
136

EBITDA
43,742

 
25,225

 
79,266

 
45,969

Add:
 
 
 
 
 
 
 
Acquisition costs
167

 
1,708

 
311

 
2,996

Company's share of unconsolidated real estate venture acquisition costs
2

 

 
21

 

Gain on sale of self storage properties
(5,637
)
 

 
(5,637
)
 

Equity-based compensation expense(1)
940

 
630

 
1,923

 
1,228

Adjusted EBITDA
$
39,214

 
$
27,563

 
$
75,884

 
$
50,193

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Equity-based compensation expense is a non-cash item that is included in general and administrative expenses in NSA's consolidated statements of operations.

11

nsalogoa02a12.jpg

Supplemental Schedule 3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Portfolio Summary
 
 
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Consolidated and Unconsolidated Property Portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stores at Period End June 30,
 
Units at Period End
June 30,
 
Rentable Square Feet at Period End June 30,
 
Occupancy at Period End June 30,
State
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
Growth
California
 
79

 
49

 
47,490

 
28,903

 
5,974,469

 
3,644,040

 
91.4
%
 
93.4
%
 
(2.0
)%
Oregon
 
56

 
52

 
22,724

 
21,240

 
2,865,666

 
2,707,189

 
91.9
%
 
96.0
%
 
(4.1
)%
Texas
 
53

 
51

 
20,645

 
20,022

 
2,958,062

 
2,820,828

 
89.6
%
 
90.0
%
 
(0.4
)%
Oklahoma
 
30

 
29

 
13,968

 
13,593

 
1,903,399

 
1,846,840

 
87.2
%
 
87.9
%
 
(0.7
)%
North Carolina
 
28

 
30

 
12,583

 
13,436

 
1,536,384

 
1,655,181

 
93.5
%
 
89.2
%
 
4.3
 %
Florida
 
28

 
16

 
20,512

 
13,331

 
1,942,014

 
1,126,023

 
86.0
%
 
89.5
%
 
(3.5
)%
Georgia
 
20

 
19

 
6,551

 
6,371

 
871,793

 
837,467

 
95.0
%
 
95.9
%
 
(0.9
)%
Arizona
 
16

 
14

 
9,112

 
7,890

 
1,064,511

 
924,092

 
91.5
%
 
88.8
%
 
2.7
 %
Washington
 
15

 
14

 
5,064

 
4,789

 
644,680

 
602,290

 
93.0
%
 
92.4
%
 
0.6
 %
Indiana
 
14

 
6

 
7,845

 
3,164

 
1,007,445

 
462,366

 
85.3
%
 
86.2
%
 
(0.9
)%
Colorado
 
10

 
9

 
4,635

 
4,131

 
564,334

 
503,696

 
96.9
%
 
98.3
%
 
(1.4
)%
Louisiana
 
10

 
8

 
4,519

 
3,607

 
629,903

 
493,648

 
85.9
%
 
86.2
%
 
(0.3
)%
New Hampshire
 
10

 
9

 
4,038

 
3,675

 
499,025

 
444,400

 
93.0
%
 
93.1
%
 
(0.1
)%
Ohio
 
7

 

 
2,690

 

 
348,838

 

 
85.8
%
 

 
 %
Nevada
 
6

 
3

 
3,130

 
1,732

 
419,427

 
241,991

 
93.3
%
 
89.8
%
 
3.5
 %
South Carolina
 
4

 
4

 
1,211

 
1,210

 
147,530

 
147,530

 
92.4
%
 
94.4
%
 
(2.0
)%
Other(1)
 
8

 
5

 
3,450

 
2,008

 
483,707

 
287,147

 
89.2
%
 
85.4
%
 
3.8
 %
Total Consolidated/Weighted Average
 
394

 
318

 
190,167

 
149,102

 
23,861,187

 
18,744,728

 
90.5
%
 
91.6
%
 
(1.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Unconsolidated/Weighted Average(2)
 
70

 

 
38,682

 

 
4,864,500

 

 
88.7
%
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Consolidated and Unconsolidated/Weighted Average
 
464

 
318

 
228,849

 
149,102

 
28,725,687

 
18,744,728

 
90.2
%
 
91.6
%
 
(1.4
)%




(1) Other states in NSA's consolidated portfolio as of June 30, 2017 include Alabama, Kentucky, Massachusetts, Mississippi and New Mexico.
(2) Refer to Supplemental Schedule 5 for additional information about NSA's unconsolidated real estate venture.

12

nsalogoa02a12.jpg

Supplemental Schedule 3 (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Portfolio Summary
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017 Acquisition & Investment Activity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Self storage properties
acquired during the
quarter ended:
 
 
 
 
 
 
 
Summary of Investment
 
Stores
 
Units
 
Rentable Square Feet
 
Cash and Acquisition Costs
 
Value of OP Equity
 
Other Liabilities
 
Total
 
 
 
 
 
March 31, 2017
 
5
 
2,239
 
267,008

 
$
26,780

 
$
4,964

 
$
183

 
$
31,927

June 30, 2017
 
10
 
4,921
 
668,954

 
60,672

 
8,931

 
387

 
69,990

Total 2017(3)
 
15
 
7,160
 
935,962

 
$
87,452

 
$
13,895

 
$
570

 
$
101,917

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated real estate venture (venture at 100%)(4)
 
 
 
 
 
 
 


 
 
 
 
 
 
June 30, 2017
 
4
 
3,085
 
327,408

 
49,700

 

 
145

 
49,845

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total 2017 Investments(4)
 
19
 
10,245
 
1,263,370

 
$
137,152

 
$
13,895

 
$
715

 
$
151,762


 
2017 Disposition Activity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dispositions Closed During the Quarter Ended:
 
Stores
 
Units
 
Rentable Square Feet
 
Gross Proceeds
 
 
March 31, 2017
 
1
 
360
 
43,935

 
$
5,300

 
June 30, 2017
 
2
 
814
 
114,444

 
10,250

 
Total 2017 Dispositions(5)
 
3
 
1,174
 
158,379

 
$
15,550








(3) NSA acquired self storage properties located in Arizona, California, Florida, Massachusetts, New Hampshire, Oregon, Texas and Washington during 2017.
(4) Values represent entire unconsolidated real estate venture at 100%, not NSA's proportionate share. NSA's ownership in the unconsolidated real estate venture is 25%. Refer to Supplemental Schedule 5 for additional information about NSA's unconsolidated real estate venture.
(5) NSA disposed of self storage properties located in California and North Carolina during 2017.

13

nsalogoa02a12.jpg

Supplemental Schedule 4
 
 
 
 
 
 
 
 
 
 
 
Debt and Equity Capitalization
 
 
 
 
 
As of June 30, 2017
 
 
 
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
Debt Balances and Characteristics
 
 
 
 
 
 
 
 
 
 
 
Effective Interest Rate(1)
 
Weighted Average Maturity (In Years)
 
Balance
Credit Facility:
 
 
 
 
 
Revolving line of credit
2.62%
 
2.85
 
$
181,000

Term loan - 5 year tranche
2.60%
 
3.85
 
235,000

Term loan - 6 year tranche
3.24%
 
4.85
 
155,000

Term loan - 7 year tranche
3.71%
 
6.59
 
105,000

Term loan - 7 year
3.08%
 
6.00
 
100,000

Fixed rate mortgages payable
4.15%
 
7.29
 
188,932

Total Principal/Weighted Average
3.19%
 
5.04
 
964,932

Unamortized debt issuance costs and debt premium, net
 
 
 
 
4,208

Total Debt
 
 
 
 
$
969,140

Debt Maturities
 
 
 
 
 
 
 
 
 
 
 
 
Average Effective Interest Rate on Maturing Debt(1)
 
Maturities as a Percent of Total Principal
 
Maturities
2018 1Q
 
 

2018 2Q
2.97%
 
0.3%
 
3,187

2018 3Q
 
 

2018 4Q
2.88%
 
0.3%
 
2,794

Total 2018
2.93%
 
0.6%
 
5,981

 
 
 
 
 
 
2019
 
 

2020
2.81%
 
22.7%
 
219,386

2021
2.64%
 
24.8%
 
238,947

2022
3.24%
 
16.1%
 
155,000

2023
3.69%
 
18.6%
 
179,484

2024
3.79%
 
13.0%
 
125,490

Thereafter
4.10%
 
4.2%
 
40,644

Total Principal/Weighted Average
3.19%
 
100.0%
 
964,932

Unamortized debt issuance costs and debt premium, net
 
 
 
 
4,208

Total Debt
 
 
 
 
$
969,140

 
 
 
 
 
 
Debt Ratios
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Covenant
 
Amount
Net Debt to Annualized Current Quarter Adjusted EBITDA
 
n/a
 
6.1x
Trailing Twelve Month Fixed Charge Coverage Ratio
 
> 1.5x
 
3.8x
Total Leverage Ratio
 
 
< 60.0%
 
41.3%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Effective interest rate incorporates the stated rate plus the impact of interest rate cash flow hedges and discount and premium amortization, if applicable. For the revolving line of credit, the effective interest rate excludes fees which range from 0.15% to 0.25% for unused borrowings.

14

nsalogoa02a12.jpg

Supplemental Schedule 4 (continued)
 
 
 
 
 
 
 
Debt and Equity Capitalization
 
 
 
As of June 30, 2017
 
 
 
(unaudited)
 
 
 
 
 
 
 
Equity Interests
 
 
 
 
 
 
 
Outstanding
 
If Converted
Common shares of beneficial interest
44,252,739

 
44,252,739

Restricted common shares
27,085

 
27,085

Total shares outstanding
44,279,824

 
44,279,824

Operating partnership units
26,274,340

 
26,274,340

DownREIT operating partnership unit equivalents
1,834,786

 
1,834,786

Total operating partnership units
28,109,126

 
28,109,126

Long-term incentive plan units(2)
698,323

 
698,323

Total shares and Class A equivalents outstanding
73,087,273

 
73,087,273

Subordinated performance units(3)
11,418,815

 
16,100,529

DownREIT subordinated performance unit equivalents(3)
4,386,999

 
6,185,669

Total subordinated partnership units
15,805,814

 
22,286,198

Total shares and units outstanding
88,893,087

 
95,373,471

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Balances exclude 236,000 long-term incentive plan ("LTIP") units which only vest and participate in dividend distributions upon the future contribution of properties from the PROs.
(3) If converted balance assumes that each subordinated performance unit (including each DownREIT subordinated performance unit) is convertible into OP units, notwithstanding the two-year lock-out period on conversions, and that each subordinated performance unit would on average convert on a hypothetical basis into an estimated 1.41 OP units based on historical financial information for the trailing twelve months ended June 30, 2017. The hypothetical conversions are calculated by dividing the average cash available for distribution, or CAD, per subordinated performance unit by 110% of the CAD per OP unit over the same period. The Company anticipates that as CAD grows over time, the conversion ratio will also grow, including to levels that may exceed these amounts.

15

nsalogoa02a12.jpg

Supplemental Schedule 5
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summarized Information for Unconsolidated Real Estate Venture
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated Real Estate Venture Properties as of June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
State
 
Stores at Period End
 
Units at Period End
 
Rentable Square Feet at Period End
 
Occupancy at Period End
 
2Q 2017 Average Occupancy
Florida
 
21

 
11,486

 
1,331,635

 
87.7
%
 
87.3
%
Alabama
 
11

 
4,062

 
610,404

 
88.0
%
 
87.7
%
New Jersey
 
10

 
7,521

 
925,080

 
90.7
%
 
90.3
%
California
 
10

 
6,486

 
867,611

 
85.9
%
 
87.4
%
Other(1)
 
18

 
9,127

 
1,129,770

 
90.5
%
 
89.6
%
Total/Weighted Average
 
70

 
38,682

 
4,864,500

 
88.7
%
 
88.4
%

Balance Sheet Information
 
 
 
 
 Total Venture at 100%(2)
June 30, 2017
 
December 31, 2016
ASSETS
 
 
 
Self storage properties, net
$
655,233

 
$
614,754

Other assets
14,141

 
19,936

Total assets
$
669,374

 
$
634,690

LIABILITIES AND EQUITY
 
 
 
Debt financing
$
317,192

 
$
317,047

Other liabilities
5,764

 
4,498

Equity
346,418

 
313,145

Total liabilities and equity
$
669,374

 
$
634,690

 
 
 
 




















(1) Other states in the unconsolidated real estate venture include Arizona, Delaware, Georgia, New Mexico, Nevada, Pennsylvania, Ohio, Texas and Virginia.
(2) Values represent entire unconsolidated real estate venture at 100%, not NSA's proportionate share. NSA's ownership in the unconsolidated real estate venture is 25%.

16

nsalogoa02a12.jpg

Supplemental Schedule 5 (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summarized Information for Unconsolidated Real Estate Venture
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Information for the Three Months Ended June 30, 2017
 
 
 
 
 
 Total Venture at 100%(2)
 
NSA Proportionate Share (Venture at 25%)
Total revenue
$
13,059

 
$
3,265

Property operating expenses
4,432

 
1,109

Net operating income
8,627

 
2,156

Supervisory, administrative and other expenses
(941
)
 
(235
)
Depreciation and amortization
(7,676
)
 
(1,918
)
Interest expense
(2,802
)
 
(700
)
Acquisition and other expenses
(267
)
 
(68
)
Net loss
$
(3,059
)
 
$
(765
)
 
 
 
 
Operating Information for the Six Months Ended June 30, 2017
 
 
 
 
 
 Total Venture at 100%(2)
 
NSA Proportionate Share (Venture at 25%)
Total revenue
$
25,566

 
$
6,392

Property operating expenses
8,500

 
2,126

Net operating income
17,066

 
4,266

Supervisory, administrative and other expenses
(1,839
)
 
(460
)
Depreciation and amortization
(15,165
)
 
(3,790
)
Interest expense
(5,628
)
 
(1,407
)
Acquisition and other expenses
(633
)
 
(159
)
Net loss
$
(6,199
)
 
$
(1,550
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Values represent entire unconsolidated real estate venture at 100%, not NSA's proportionate share. NSA's ownership in the unconsolidated real estate venture is 25%.

17

nsalogoa02a12.jpg

Supplemental Schedule 6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Store Performance Summary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(dollars in thousands, except per square foot data) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Revenue
 
Operating Expenses
 
Net Operating Income
 
Net Operating Income Margin
State
Stores
2Q 2017
 
2Q 2016
 
Growth
 
2Q 2017
 
2Q 2016
 
Growth
 
2Q 2017
 
2Q 2016