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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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February 26, 2018

National Storage Affiliates Trust Reports Fourth Quarter and Full Year 2017 Results; Full Year Net Income Increases $21.1 million; Core FFO per Share Increases 10.7%, Same Store NOI Increases 7.5%, Acquired 65 Self Storage Properties; Provides Full-Year 2018 Guidance
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 2017 results.
Fourth Quarter 2017 Highlights
Net income was $12.0 million for the fourth quarter of 2017, an increase of $5.9 million compared to $6.1 million for the fourth quarter of 2016.
Core funds from operations ("Core FFO") was $23.6 million, or $0.32 per share, for the fourth quarter of 2017, an increase of 6.7% per share compared to $20.0 million, or $0.30 per share, for the fourth quarter of 2016.
Same store net operating income ("NOI") was $30.0 million for the fourth quarter of 2017, an increase of 5.8% compared to $28.4 million for the fourth quarter of 2016, driven by a 5.0% increase in same store total revenues and a 3.3% increase in same store property operating expenses.
Acquired 31 wholly-owned self storage properties for $201.0 million and one joint venture property for $9.4 million during the fourth quarter of 2017.
Received approximately $319 million of gross proceeds from the sale of 6.9 million of 6.000% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest and 5.75 million of Common Shares of Beneficial Interest ("common shares") during the fourth quarter of 2017.
Full Year 2017 Highlights
Net income was $46.0 million for full year 2017, an increase of $21.1 million compared to $24.9 million for the full year 2016.
Core FFO was $91.2 million, or $1.24 per share, for full year 2017, an increase of 10.7% per share compared to $65.5 million, or $1.12 per share, for full year 2016.
Same store NOI was $118.3 million for full year 2017, an increase of 7.5% compared to $110.1 million for full year 2016, driven by a 5.7% increase in same store total revenues and a 1.9% increase in same store property operating expenses.
Acquired 65 wholly-owned self storage properties for $426.8 million and five joint venture properties totaling $59.3 million during 2017.
Arlen Nordhagen, Chief Executive Officer and Chairman, commented, "2017 was another fantastic year for NSA. We grew our portfolio by adding 65 wholly-owned self storage properties and an additional five properties through our joint venture. We leveraged our revenue management platform to increase rental rates across many of our markets, driving strong revenue growth over last year. During the fourth quarter, we completed both preferred share and common share offerings, followed by an expansion of our credit facility during January 2018. These transactions provide us with the financial flexibility to continue to execute our growth strategy as we begin 2018, which we kicked off by acquiring an additional 18 properties during January and February."

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Financial Results
($ in thousands, except per share and unit data)
Three Months Ended December 31,
 
Year Ended December 31,
 
2017
 
2016
 
Growth
 
2017
 
2016
 
Growth
Net income
$
12,015

 
$
6,075

 
97.8
 %
 
$
45,998

 
$
24,866

 
85.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
Funds From Operations ("FFO")(1)
$
23,482

 
$
17,198

 
36.5
 %
 
$
90,584

 
$
57,776

 
56.8
 %
Add back acquisition costs, NSA's share of unconsolidated real estate venture acquisition costs and loss on early extinguishment of debt
143

 
2,819

 
(94.9
)%
 
615

 
7,688

 
(92.0
)%
Core FFO(1)
$
23,625

 
$
20,017

 
18.0
 %
 
$
91,199

 
$
65,464

 
39.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per share - basic
$
(0.08
)
 
$
0.22

 
(136.4
)%
 
$
0.01

 
$
0.60

 
(98.3
)%
Earnings (loss) per share - diluted
$
(0.08
)
 
$
0.07

 
(214.3
)%
 
$
0.01

 
$
0.31

 
(96.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
FFO per share and unit(1)
$
0.31

 
$
0.26

 
19.2
 %
 
$
1.23

 
$
0.99

 
24.2
 %
Core FFO per share and unit(1)
$
0.32

 
$
0.30

 
6.7
 %
 
$
1.24

 
$
1.12

 
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. 
Fourth Quarter 2017
Fourth quarter 2017 net income increased $5.9 million, driven primarily by incremental NOI generated from 65 self storage properties acquired during 2017 and same store NOI growth, partially offset by increases in depreciation and amortization and interest expense.
Fourth quarter 2017 basic earnings per share decreased $0.30 per share and diluted earnings per share decreased $0.15 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."
Fourth quarter 2017 FFO per share increased 19.2% and Core FFO per share increased 6.7%. The increases in FFO and Core FFO were primarily the result of $5.9 million of incremental NOI from 65 self storage properties acquired during 2017 and same store NOI growth of $1.6 million, partially offset by higher interest expense and the payment of dividends on preferred shares issued during the fourth quarter to fund the Company's growth.
Full Year 2017
Full year 2017 net income increased $21.1 million, driven primarily by additional NOI generated from non-same store self storage properties acquired during 2017 and 2016, same store NOI growth, increases in management fees and other revenue, gains from the sale of self storage properties and decreases in acquisition costs, partially offset by increases in depreciation and amortization, interest expense and general and administrative expenses.
Full year 2017 basic earnings per share decreased $0.59 per share and diluted earnings per share decreased $0.30 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.
Full year 2017 FFO per share increased 24.2% and Core FFO per share increased 10.7%. The increases in FFO and Core FFO were primarily the result of $35.4 million of incremental NOI from non-same store properties acquired in 2017 and 2016, same store NOI growth of $8.2 million and a $6.3 million increase in management fees and other revenue partially offset by increases of $10.0 million of interest expense, $8.5 million of general and administrative expenses and $5.5 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 December 31,
 
Year Ended December 31,
 
2017
 
2016
 
Growth
 
2017
 
2016
 
Growth
Total rental and other property-related revenue
$
71,285

 
$
57,355

 
24.3
 %
 
$
260,069

 
$
197,237

 
31.9
 %
Property operating expenses
23,285

 
18,734

 
24.3
 %
 
84,455

 
64,798

 
30.3
 %
Net Operating Income (NOI)
$
48,000

 
$
38,621

 
24.3
 %
 
$
175,614

 
$
132,439

 
32.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
Average Occupancy
88.2
%
 
89.1
%
 
(0.9
)%
 
88.9
%
 
89.7
%
 
(0.8
)%
Average Annualized Rental Revenue Per Occupied Square Foot
$
11.64

 
$
11.28

 
3.2
 %
 
$
11.52

 
$
11.00

 
4.7
 %
Fourth Quarter 2017
Fourth quarter 2017 total rental and other property-related revenue increased 24.3%, driven by $9.4 million of incremental revenues from 65 self storage properties acquired during 2017 and a $2.1 million increase in same store total revenues.
Fourth quarter 2017 total property operating expenses increased 24.3% resulting from $3.6 million of incremental property operating expenses generated by 65 self storage properties acquired during 2017, and an increase of $0.4 million in same store property operating expenses.
Total consolidated portfolio NOI was $48.0 million for the fourth quarter of 2017, an increase of 24.3% compared to NOI of $38.6 million for the fourth quarter of 2016.
Full Year 2017
Total rental and other property-related revenue was $260.1 million for full year 2017, an increase of 31.9% compared to $197.2 million for full year 2016. The increase primarily resulted from incremental revenues of $15.5 million from 65 self storage properties acquired during 2017, $38.7 million from 107 self storage properties acquired during 2016 and a $9.2 million increase in same store total revenues.
Total property operating expenses were $84.5 million for full year 2017, an increase of 30.3% compared to $64.8 million for full year 2016. The increase primarily resulted from incremental expenses of $5.7 million from 65 self storage properties acquired during 2017, $13.1 million from 107 self storage properties acquired during 2016 and a $1.0 million increase in same store property operating expenses.
Total consolidated portfolio NOI was $175.6 million for full year 2017, an increase of 32.6% compared to NOI of $132.4 million for full year 2016.
NSA's consolidated portfolio included 444 self storage properties, approximately 27.2 million rentable square feet, with period-end occupancy of 87.3% as of December 31, 2017.


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Same Store Operating Results (277 Properties)
($ in thousands, except per square foot data)
Three Months Ended December 31,
 
Year Ended December 31,
 
2017
 
2016
 
Growth
 
2017
 
2016
 
Growth
Total rental and other property-related revenue
$
43,339

 
$
41,269

 
5.0
 %
 
$
171,326

 
$
162,109

 
5.7
 %
Property operating expenses
13,332

 
12,900

 
3.3
 %
 
53,045

 
52,034

 
1.9
 %
Net Operating Income (NOI)
$
30,007

 
$
28,369

 
5.8
 %
 
$
118,281

 
$
110,075

 
7.5
 %
NOI Margin
69.2
%
 
68.7
%
 
0.5
 %
 
69.0
%
 
67.9
%
 
1.1
 %
 
 
 
 
 
 
 
 
 
 
 
 
Average Occupancy
89.0
%
 
89.3
%
 
(0.3
)%
 
89.6
%
 
89.9
%
 
(0.3
)%
Average Annualized Rental Revenue Per Occupied Square Foot
$
11.88

 
$
11.29

 
5.2
 %
 
$
11.66

 
$
11.02

 
5.8
 %
Fourth Quarter 2017
Year-over-year, fourth quarter 2017 same store total revenues increased 5.0%, driven by a 5.2% increase in average annualized rental revenue per occupied square foot partially offset by a 30 basis point decrease in average occupancy. Same store property operating expenses were $13.3 million for the fourth quarter of 2017, an increase of 3.3% compared to $12.9 million for the fourth quarter of 2016 driven primarily by increases in property taxes, personnel costs and advertising.
Full Year 2017
Year-over-year, full year 2017 same store total revenues increased 5.7%, driven by a 5.8% increase in average annualized rental revenue per occupied square foot partially offset by a 30 basis point decrease in average occupancy. Same store property operating expenses were $53.0 million for the full year 2017, an increase of 1.9% compared to $52.0 million for the full year 2016 driven primarily by increases in property taxes and repairs and maintenance expenses.
Investment Activity
Fourth Quarter 2017
During the fourth quarter of 2017, NSA invested $201.0 million in the acquisition of 31 consolidated self storage properties located in 10 states, encompassing approximately 2.0 million rentable square feet configured in approximately 15,000 storage units.
NSA's unconsolidated real estate venture invested $9.4 million in the acquisition of one self storage property located in California, encompassing 0.1 million rentable square feet configured in over 400 storage units. NSA owns a 25% interest in its unconsolidated real estate venture and contributed approximately $2.4 million to the venture to fund the acquisition.
Full Year 2017
For the full year of 2017, NSA invested $426.8 million in the acquisition of 65 consolidated self storage properties located in 19 states, encompassing approximately 4.2 million rentable square feet configured in approximately 32,000 storage units.
NSA's unconsolidated real estate venture invested $59.3 million in the acquisition of five self storage properties located in California and Delaware, encompassing 0.4 million rentable square feet configured in over 3,500 storage units. NSA owns a 25% interest in its unconsolidated real estate venture and contributed approximately $14.9 million to the venture to fund the acquisitions.
Subsequent to December 31, 2017, NSA acquired 18 additional consolidated self storage properties located in four states, for a total investment of approximately $101.8 million encompassing approximately 1.1 million rentable square feet configured in approximately 9,700 storage units. NSA's unconsolidated real estate venture also invested

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approximately $9.3 million in a self storage property encompassing approximately 0.1 million rentable square feet configured in approximately 500 storage units.
Balance Sheet
In October 2017, NSA completed its underwritten public offering of 6,900,000 of its 6.000% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest ("Series A Preferred Shares"), including 900,000 Series A Preferred Shares sold upon the exercise in full by the underwriters of their option to purchase additional Series A Preferred Shares, resulting in gross proceeds of approximately $173 million. Generally, the Series A Preferred Shares become redeemable by the Company beginning in October 2022 for a cash redemption price of $25.00 per share.
In December 2017, NSA completed an underwritten public offering of 5,750,000 common shares, including 750,000 common shares sold upon the exercise in full by the underwriters of their option to purchase additional common shares. The shares were issued at $25.50 per share, resulting in gross proceeds of approximately $147 million.
NSA used the proceeds from the offerings to repay amounts outstanding under its revolving line of credit.
On January 29, 2018, NSA entered into an increase agreement and amendment with a syndicated group of lenders to increase the total borrowing capacity under the Company's credit facility by $125.0 million for a total credit facility of over $1.0 billion, which included entry into a new $125.0 million five-year term loan tranche. NSA has an expansion option under the credit facility, which, if exercised in full, would provide for a total credit facility of $1.3 billion.
Common Share Dividends
On February 22, 2018, NSA's Board of Trustees declared a quarterly cash dividend of $0.28 per common share, which will be paid on March 29, 2018 to shareholders of record as of March 15, 2018.
2018 Guidance
The following tables outline NSA's guidance estimates for the year ended December 31, 2018:
 
 
Ranges for Full Year 2018
 
 
Low
 
High
Same store operations (376 stores)
 
 
Total rental and other property-related revenue growth
 
4.0%
 
5.0%
Property operating expenses growth
 
3.0%
 
4.0%
NOI growth
 
4.0%
 
5.5%
 
 
 
 
 
General and administrative expenses (as a percent of revenue)
 
10.0%
 
11.5%
General and administrative expenses (excluding equity-based compensation)
 
9.0%
 
10.0%
Equity-based compensation
 
1.0%
 
1.5%
 
 
 
 
 
Management fees and other revenue, in millions
 
$8.0
 
$9.0
Core FFO from unconsolidated real estate venture, in millions
 
$5.0
 
$6.0
 
 
 
 
 
Subordinated performance unit distributions, in millions
 
$27.0
 
$29.5
 
 
 
 
 
Wholly-owned acquisitions, in millions
 
$250.0
 
$400.0
Joint venture acquisitions, in millions
 
$50.0
 
$100.0
 
 
 
 
 
Core FFO per share(1)
 
$1.33
 
$1.37

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(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 2018
 
Low
 
High
Earnings (loss) per share - diluted
$
(0.03
)
 
$
0.05

Impact of the difference in weighted average number of shares and GAAP accounting for noncontrolling interests, two-class method and treasury stock method
0.60

 
0.54

Add real estate depreciation and amortization, including NSA's share of unconsolidated venture real estate depreciation and amortization
1.10

 
1.14

Subtract gain on sale of self storage properties
(0.01
)
 
(0.01
)
FFO attributable to subordinated performance unitholders
(0.33
)
 
(0.35
)
Core FFO per share and unit
$
1.33

 
$
1.37

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 26, 2018.
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 26, 2018 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 26, 2018, 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 Monday, March 5, 2018. A replay of the webcast will be available for 30 days on NSA's website at www.nationalstorageaffiliates.com.

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Upcoming Industry Conferences
NSA management is scheduled to participate in the Wells Fargo Securities 21st Annual Real Estate Securities Conference in New York, New York on February 28 - March 1, 2018, and in the Citi 2018 Global Property CEO Conference on March 4 - 7, 2018 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 533 self storage properties located in 29 states with approximately 33 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 December 31,
 
Year Ended
December 31,
 
2017
 
2016
 
2017
 
2016
REVENUE
 
 
 
 
 
 
 
Rental revenue
$
69,101

 
$
55,630

 
$
251,814

 
$
191,178

Other property-related revenue
2,184

 
1,725

 
8,255

 
6,059

Management fees and other revenue
2,083

 
1,809

 
8,061

 
1,809

Total revenue
73,368

 
59,164

 
268,130

 
199,046

OPERATING EXPENSES
 
 
 
 
 
 
 
Property operating expenses
23,285

 
18,734

 
84,455

 
64,798

General and administrative expenses
7,994

 
7,097

 
30,060

 
21,528

Depreciation and amortization
20,169

 
16,765

 
75,115

 
55,064

Total operating expenses
51,448

 
42,596

 
189,630

 
141,390

Income from operations
21,920

 
16,568

 
78,500

 
57,656

OTHER (EXPENSE) INCOME

 

 

 

Interest expense
(9,280
)
 
(7,059
)
 
(34,068
)
 
(24,109
)
Loss on early extinguishment of debt

 

 

 
(136
)
Equity in losses of unconsolidated real estate venture
(79
)
 
(1,484
)
 
(2,339
)
 
(1,484
)
Acquisition costs
(143
)
 
(1,813
)
 
(593
)
 
(6,546
)
Non-operating income (expense)
17

 
(70
)
 
(58
)
 
(147
)
(Loss) gain on sale of self storage properties
(28
)
 

 
5,715

 

Other expense
(9,513
)
 
(10,426
)
 
(31,343
)
 
(32,422
)
Income before income taxes
12,407

 
6,142

 
47,157

 
25,234

Income tax expense
(392
)
 
(67
)
 
(1,159
)
 
(368
)
Net income
12,015

 
6,075

 
45,998

 
24,866

Net (income) loss attributable to noncontrolling interests
(13,247
)
 
2,321

 
(43,037
)
 
(6,901
)
Net (loss) income attributable to National Storage Affiliates Trust
(1,232
)
 
8,396

 
2,961

 
17,965

Distributions to preferred shareholders
(2,300
)
 

 
(2,300
)
 

Net (loss) income attributable to common shareholders
$
(3,532
)
 
$
8,396

 
$
661

 
$
17,965

 
 
 
 
 
 
 
 
Earnings (loss) per share - basic
$
(0.08
)
 
$
0.22

 
$
0.01

 
$
0.60

Earnings (loss) per share - diluted
$
(0.08
)
 
$
0.07

 
$
0.01

 
$
0.31

 
 
 
 
 
 
 
 
Weighted average shares outstanding - basic
45,775

 
38,235

 
44,423

 
29,887

Weighted average shares outstanding - diluted
45,775

 
88,460

 
44,423

 
78,747



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

 
December 31,
 
2017
 
2016
ASSETS
 
 
 
Real estate
 
 
 
Self storage properties
$
2,275,233

 
$
1,844,336

Less accumulated depreciation
(170,358
)
 
(110,803
)
Self storage properties, net
2,104,875

 
1,733,533

Cash and cash equivalents
13,366

 
12,570

Restricted cash
3,041

 
2,767

Debt issuance costs, net
2,185

 
3,069

Investment in unconsolidated real estate venture
89,093

 
81,486

Other assets, net
52,615

 
44,730

Assets held for sale
1,555

 
13,937

Total assets
$
2,266,730

 
$
1,892,092

LIABILITIES AND EQUITY
 
 
 
Liabilities
 
 
 
Debt financing
$
958,097

 
$
878,954

Accounts payable and accrued liabilities
24,459

 
21,616

Deferred revenue
12,687

 
12,454

Total liabilities
995,243

 
913,024

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, 2017, at liquidation preference
172,500

 

Common shares of beneficial interest, par value $0.01 per share. 250,000,000 shares authorized, 50,284,934 and 43,110,362 shares issued and outstanding at December 31, 2017 and 2016, respectively
503

 
431

Additional paid-in capital
711,467

 
576,365

Distributions in excess of earnings
(55,729
)
 
(8,719
)
Accumulated other comprehensive income
12,282

 
9,025

Total shareholders' equity
841,023

 
577,102

Noncontrolling interests
430,464

 
401,966

Total equity
1,271,487

 
979,068

Total liabilities and equity
$
2,266,730

 
$
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 December 31,
 
Year Ended
December 31,
 
2017
 
2016
 
2017
 
2016
Net income
$
12,015

 
$
6,075

 
$
45,998

 
$
24,866

Add (subtract):
 
 
 
 
 
 
 
Real estate depreciation and amortization
19,896

 
16,362

 
73,669

 
54,193

Company's share of unconsolidated real estate venture real estate depreciation and amortization
1,464

 
1,559

 
7,296

 
1,559

Loss (gain) on sale of self storage properties
28

 

 
(5,715
)
 

Distributions to preferred shareholders
(2,300
)
 

 
(2,300
)
 

FFO attributable to subordinated performance unitholders (1)
(7,621
)
 
(6,798
)
 
(28,364
)
 
(22,842
)
FFO attributable to common shareholders, OP unitholders, and LTIP unitholders
23,482

 
17,198

 
90,584

 
57,776

Add:
 
 
 
 
 
 
 
Acquisition costs
143

 
1,813

 
593

 
6,546

Company's share of unconsolidated real estate venture acquisition costs

 
1,006

 
22

 
1,006

Loss on early extinguishment of debt

 

 

 
136

Core FFO attributable to common shareholders, OP unitholders, and LTIP unitholders
$
23,625

 
$
20,017

 
$
91,199

 
$
65,464

 
 
 
 
 
 
 
 
Weighted average shares and units outstanding - FFO and Core FFO:(2)
Weighted average shares outstanding - basic
45,775

 
38,235

 
44,423

 
29,887

Weighted average restricted common shares outstanding
27

 
19

 
25

 
18

Weighted average OP units outstanding
26,549

 
25,771

 
26,126

 
24,262

Weighted average DownREIT OP unit equivalents outstanding
1,835

 
1,835

 
1,835

 
1,835

Weighted average LTIP units outstanding
547

 
1,286

 
957

 
2,212

Total weighted average shares and units outstanding - FFO and Core FFO
74,733

 
67,146

 
73,366

 
58,214

 
 
 
 
 
 
 
 
FFO per share and unit
$
0.31

 
$
0.26

 
$
1.23

 
$
0.99

Core FFO per share and unit
$
0.32

 
$
0.30

 
$
1.24

 
$
1.12

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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.

10

image0a72.jpg

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 December 31,
 
Year Ended
December 31,
 
2017
 
2016
 
2017
 
2016
Earnings (loss) per share - diluted
$
(0.08
)
 
$
0.07

 
$
0.01

 
$
0.31

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

 
0.03

 

 
0.11

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

 

 
0.59

 

Add real estate depreciation and amortization
0.27

 
0.24

 
1.00

 
0.93

Add Company's share of unconsolidated real estate venture real estate depreciation and amortization
0.02

 
0.02

 
0.10

 
0.03

Subtract gain on sale of self storage properties

 

 
(0.08
)
 

FFO attributable to subordinated performance unitholders
(0.10
)
 
(0.10
)
 
(0.39
)
 
(0.39
)
FFO per share and unit
0.31

 
0.26

 
1.23

 
0.99

Add acquisition costs, Company's share of unconsolidated real estate venture acquisition costs, and loss on early extinguishment of debt
0.01

 
0.04

 
0.01

 
0.13

Core FFO per share and unit
$
0.32

 
$
0.30

 
$
1.24

 
$
1.12

 
 
 
 
 
 
 
 
(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, after deducting preferred share distributions, and before the application of the two-class method and treasury stock method, as described in footnote(3).

11

image0a72.jpg

Supplemental Schedule 2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Non-GAAP Financial Measurements
 
 
 
 
 
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Operating Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
Year Ended
December 31,
 
2017
 
2016
 
2017
 
2016
Net income
$
12,015

 
$
6,075

 
$
45,998

 
$
24,866

(Subtract) add:
 
 
 
 
 
 
 
Management fees and other revenue
(2,083
)
 
(1,809
)
 
(8,061
)
 
(1,809
)
General and administrative expenses
7,994

 
7,097

 
30,060

 
21,528

Depreciation and amortization
20,169

 
16,765

 
75,115

 
55,064

Interest expense
9,280

 
7,059

 
34,068

 
24,109

Equity in losses of unconsolidated real estate venture
79

 
1,484

 
2,339

 
1,484

Loss on early extinguishment of debt

 

 

 
136

Acquisition costs
143

 
1,813

 
593

 
6,546

Income tax expense
392

 
67

 
1,159

 
368

Loss (gain) on sale of self storage properties
28

 

 
(5,715
)
 

Non-operating (income) expense
(17
)
 
70

 
58

 
147

Net Operating Income
$
48,000

 
$
38,621

 
$
175,614

 
$
132,439

 
 
 
 
 
 
 
 
EBITDA and Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
Year Ended
December 31,
 
2017
 
2016
 
2017
 
2016
Net income
$
12,015

 
$
6,075

 
$
45,998

 
$
24,866

Add:
 
 
 
 
 
 
 
Depreciation and amortization
20,169

 
16,765

 
75,115

 
55,064

Company's share of unconsolidated real estate venture depreciation and amortization
1,464

 
1,559

 
7,296

 
1,559

Interest expense
9,280

 
7,059

 
34,068

 
24,109

Income tax expense
392

 
67

 
1,159

 
368

Loss on early extinguishment of debt

 

 

 
136

EBITDA
43,320

 
31,525

 
163,636

 
106,102

Add (subtract):
 
 
 
 
 
 
 
Acquisition costs
143

 
1,813

 
593

 
6,546

Company's share of unconsolidated real estate venture acquisition costs

 
1,006

 
22

 
1,006

Loss (gain) on sale of self storage properties
28

 

 
(5,715
)
 

Equity-based compensation expense(1)
920

 
684

 
3,764

 
2,597

Adjusted EBITDA
$
44,411

 
$
35,028

 
$
162,300

 
$
116,251

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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.

12

image0a72.jpg

Supplemental Schedule 3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Portfolio Summary
 
 
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Consolidated and Unconsolidated Property Portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stores at Period End December 31,
 
Units at Period End
December 31,
 
Rentable Square Feet at Period End December 31,
 
Occupancy at Period End December 31,
State
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
Growth
California
 
81

 
78

 
48,634

 
46,821

 
6,123,199

 
5,879,575

 
90.9
%
 
90.8
%
 
0.1
 %
Oregon
 
58

 
55

 
23,541

 
22,458

 
2,966,129

 
2,825,159

 
85.5
%
 
88.2
%
 
(2.7
)%
Texas
 
58

 
51

 
23,133

 
20,003

 
3,290,185

 
2,818,858

 
87.1
%
 
87.4
%
 
(0.3
)%
Georgia
 
33

 
20

 
13,554

 
6,565

 
1,829,965

 
880,100

 
86.2
%
 
92.6
%
 
(6.4
)%
Florida
 
30

 
22

 
21,884

 
16,786

 
2,093,566

 
1,542,685

 
86.8
%
 
84.7
%
 
2.1
 %
Oklahoma
 
30

 
30

 
13,905

 
13,990

 
1,903,079

 
1,902,965

 
83.6
%
 
84.7
%
 
(1.1
)%
North Carolina
 
29

 
30

 
13,103

 
13,436

 
1,599,784

 
1,655,191

 
89.4
%
 
89.2
%
 
0.2
 %
Arizona
 
16

 
15

 
9,099

 
8,401

 
1,061,879

 
981,427

 
86.2
%
 
89.0
%
 
(2.8
)%
Indiana
 
16

 
14

 
8,790

 
7,849

 
1,135,022

 
1,008,695

 
82.8
%
 
84.2
%
 
(1.4
)%
Washington
 
15

 
14

 
5,065

 
4,788

 
644,700

 
601,840

 
88.4
%
 
88.0
%
 
0.4
 %
Louisiana
 
14

 
10

 
6,326

 
4,443

 
859,307

 
614,183

 
82.9
%
 
85.0
%
 
(2.1
)%
Colorado
 
11

 
10

 
5,059

 
4,641

 
615,353

 
564,646

 
89.8
%
 
89.3
%
 
0.5
 %
Nevada
 
11

 
6

 
5,752

 
3,135

 
727,014

 
419,467

 
91.8
%
 
92.9
%
 
(1.1
)%
New Hampshire
 
10

 
9

 
4,190

 
3,668

 
509,475

 
444,225

 
87.8
%
 
94.0
%
 
(6.2
)%
Ohio
 
7

 
7

 
2,690

 
2,688

 
348,838

 
349,088

 
86.2
%
 
87.7
%
 
(1.5
)%
South Carolina
 
4

 
4

 
1,211

 
1,210

 
147,530

 
147,530

 
88.9
%
 
91.7
%
 
(2.8
)%
Illinois
 
4

 

 
1,991

 

 
270,911

 

 
77.7
%
 

 

Other(1)
 
17

 
7

 
7,523

 
3,166

 
1,056,113

 
441,007

 
83.9
%
 
83.7
%
 
0.2
 %
Total Consolidated/Weighted Average
 
444

 
382

 
215,450

 
184,048

 
27,182,049

 
23,076,641

 
87.3
%
 
88.4
%
 
(1.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Unconsolidated/Weighted Average(2)
 
71

 
66

 
39,115

 
35,573

 
4,940,251

 
4,518,968

 
86.3
%
 
86.9
%
 
(0.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Consolidated and Unconsolidated/Weighted Average
 
515

 
448

 
254,565

 
219,621

 
32,122,300

 
27,595,609

 
87.1
%
 
88.2
%
 
(1.1
)%



(1) Other states in NSA's consolidated portfolio as of December 31, 2017 include Alabama, Kansas, Kentucky, Maryland, Massachusetts, Mississippi, Missouri, New Mexico and Virginia.
(2) Refer to Supplemental Schedule 5 for additional information about NSA's unconsolidated real estate venture.

13

image0a72.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

September 30, 2017
 
19
 
10,151
 
1,323,055

 
122,742

 
267

 
826

 
123,835

December 31, 2017
 
31
 
14,881
 
1,963,512

 
181,809

 
17,019

 
2,220

 
201,048

Total 2017(3)
 
65
 
32,192
 
4,222,529

 
$
392,003

 
$
31,181

 
$
3,616

 
$
426,800

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


 
 
 
 
 
 
June 30, 2017
 
4
 
3,085
 
327,408

 
49,700

 

 
145

 
49,845

December 31, 2017
 
1
 
436
 
74,982

 
9,343

 

 
77

 
9,420

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total 2017 Investments(4)
 
70
 
35,713
 
4,624,919

 
$
451,046

 
$
31,181

 
$
3,838

 
$
486,065


 
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, Colorado, Florida, Georgia, Illinois, Indiana, Kansas, Louisiana, Maryland, Massachusetts, Missouri, New Hampshire, Nevada, North Carolina, Oregon, Texas, Virginia 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.

14

image0a72.jpg

Supplemental Schedule 4
 
 
 
 
 
 
 
 
 
 
 
Debt and Equity Capitalization
 
 
 
 
 
As of December 31, 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
2.96%
 
2.35
 
$
88,500

Term loan - 5 year tranche
2.63%
 
3.35
 
235,000

Term loan - 6 year tranche
3.24%
 
4.35
 
155,000

Term loan - 7 year tranche
3.71%
 
6.09
 
105,000

Term loan - 7 year
3.08%
 
5.50
 
100,000

Fixed rate mortgages payable
4.15%
 
7.64
 
271,491

Total Principal/Weighted Average
3.37%
 
5.19
 
954,991

Unamortized debt issuance costs and debt premium, net
 
 
 
 
3,106

Total Debt
 
 
 
 
$
958,097

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%
 
3,127

2018 3Q
 
 

2018 4Q
2.88%
 
0.3%
 
2,770

Total 2018
2.93%
 
0.6%
 
5,897

 
 
 
 
 
 
2019
 
 

2020
3.19%
 
13.2%
 
126,314

2021
2.67%
 
25.0%
 
238,892

2022
3.24%
 
16.2%
 
155,000

2023
3.68%
 
18.7%
 
178,572

2024
3.79%
 
13.1%
 
125,452

Thereafter
4.13%
 
13.2%
 
124,864

Total Principal/Weighted Average
3.37%
 
100.0%
 
954,991

Unamortized debt issuance costs and debt premium, net
 
 
 
 
3,106

Total Debt
 
 
 
 
$
958,097

 
 
 
 
 
 
Debt Ratios
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Covenant
 
Amount
Net Debt to Annualized Current Quarter Adjusted EBITDA
 
n/a
 
5.3x
Trailing Twelve Month Fixed Charge Coverage Ratio
 
> 1.5x
 
3.7x
Total Leverage Ratio
 
 
< 60.0%
 
36.2%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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.

15

image0a72.jpg

Supplemental Schedule 4 (continued)
 
 
 
 
 
 
 
Debt and Equity Capitalization
 
 
 
As of December 31, 2017
 
 
 
(unaudited)
 
 
 
 
 
 
 
Preferred Shares
 
 
 
 
 
 
 
Outstanding
 
 
6.000% Series A perpetual preferred shares of beneficial interest
6,900,000

 
 
 
 
 
 
Common Shares and Units
 
 
 
 
 
 
 
Outstanding
 
If Converted
Common shares of beneficial interest
50,263,349

 
50,263,349

Restricted common shares
21,585

 
21,585

Total shares outstanding
50,284,934

 
50,284,934

Operating partnership units
26,719,607

 
26,719,607

DownREIT operating partnership unit equivalents
1,834,786

 
1,834,786

Total operating partnership units
28,554,393

 
28,554,393

Long-term incentive plan units(2)
547,396

 
547,396

Total shares and Class A equivalents outstanding
79,386,723

 
79,386,723

Subordinated performance units(3)
11,604,738

 
16,942,917

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

 
6,405,019

Total subordinated partnership units
15,991,737

 
23,347,936

Total common shares and units outstanding
95,378,460

 
102,734,659

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Balances exclude 224,000 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 for certain series of subordinated performance units, and that each subordinated performance unit would on average convert on a hypothetical basis into an estimated 1.46 OP units based on historical financial information for the trailing twelve months ended December 31, 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.

16

image0a72.jpg

Supplemental Schedule 5
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summarized Information for Unconsolidated Real Estate Venture
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated Real Estate Venture Properties as of December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
State
 
Stores at Period End
 
Units at Period End
 
Rentable Square Feet at Period End
 
Occupancy at Period End
 
4Q 2017 Average Occupancy
Florida
 
21

 
11,482

 
1,331,230

 
86.5
%
 
87.8
%
Alabama
 
11

 
4,065

 
611,002

 
85.8
%
 
86.4
%
California
 
11

 
6,921

 
942,393

 
85.4
%
 
86.0
%
New Jersey
 
10

 
7,521

 
925,105

 
87.8
%
 
88.4
%
Other(1)
 
18

 
9,126

 
1,130,521

 
86.0
%
 
87.7
%
Total/Weighted Average
 
71