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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 - Same Store Performance Summary
 
 
Schedule 6 - Reconciliation of Same Store Data and Net Operating Income to Net Income
 
 
Schedule 7 - Selected Financial Information
 
 
Glossary
 
 
 
 
 
 
 
 



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November 1, 2018

National Storage Affiliates Trust Reports Third Quarter 2018 Results

GREENWOOD VILLAGE, Colo. - (BUSINESS WIRE) - National Storage Affiliates Trust (“NSA” or the "Company") (NYSE: NSA) today reported the Company’s third quarter 2018 results.
Third Quarter 2018 Highlights
Earnings per share was $0.03 for the third quarter of 2018.
Core funds from operations ("Core FFO") was $0.36 per share for the third quarter of 2018, an increase of 9.1% compared to the third quarter of 2017.
Same store net operating income ("NOI") was $44.4 million for the third quarter of 2018, an increase of 5.0% compared to $42.3 million for the third quarter of 2017, driven by a 4.0% increase in same store total revenues and a 2.0% increase in same store property operating expenses.
Completed an offering of 5,900,000 common shares resulting in net proceeds of approximately $176 million.
Formed a new joint venture (the "2018 Joint Venture"), with NSA as a 25% owner, which acquired a $1.3 billion portfolio of self storage properties from Simply Self Storage, a portfolio company of a private real estate fund managed by Brookfield Asset Management.
Subsequent to quarter end, added Southern Self Storage of Palm Beach Gardens, Florida as NSA’s ninth Participating Regional Operator (“PRO”).
Arlen Nordhagen, Chairman and Chief Executive Officer, commented, "Third quarter 2018 was a transformational growth period for NSA with our new 2018 Joint Venture and its successful acquisition of the Simply Self Storage portfolio. The integration of these new properties under our iStorage brand and management platform is progressing well, and we couldn't be more excited about these properties and team members joining NSA. In addition, the Company invested $107 million in wholly-owned properties in the third quarter, six of which are located in Puerto Rico and seven of which are located in NSA's existing U.S. markets. Finally, we are extremely pleased to announce that we have entered into agreements to add our ninth PRO, Southern Self Storage, which is led by Bob McIntosh and Peter Cowie, who are active real estate operators with more than 30 years of self storage industry experience."
Tamara Fischer, President and Chief Financial Officer, added, "Operating results for the third quarter 2018 were in-line with our expectations with a 5.0% increase in same store NOI driven by solid rental rate increases across several key markets. These operating results combined with the growth of our portfolio over the past year generated a 9.1% increase in third quarter 2018 Core FFO per share. During the third quarter, NSA invested over a quarter of a billion dollars in our joint ventures and wholly-owned self storage property acquisitions. With the completion of our follow-on common share offering in July, we continue to maintain the financial flexibility to successfully finish out 2018 and look ahead to another strong year in 2019."



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Financial Results
($ in thousands, except per share and unit data)
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
Growth
 
2018
 
2017
 
Growth
Net income
$
16,829

 
$
11,226

 
49.9
%
 
$
41,843

 
$
33,983

 
23.1
 %
 
 
 
 
 
 
 
 
 
 
 
 
Funds From Operations ("FFO")(1)
$
31,083

 
$
23,650

 
31.4
%
 
$
84,177

 
$
67,102

 
25.4
 %
Add back acquisition costs and NSA's share of unconsolidated real estate venture acquisition costs
141

 
140

 
0.7
%
 
471

 
472

 
(0.2
)%
Core FFO(1)
$
31,224

 
$
23,790

 
31.2
%
 
$
84,648

 
$
67,574

 
25.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per share - basic and diluted
$
0.03

 
$
0.03

 

 
$
0.25

 
$
0.09

 
177.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
FFO per share and unit(1)
$
0.36

 
$
0.32

 
12.5
%
 
$
1.01

 
$
0.92

 
9.8
 %
Core FFO per share and unit(1)
$
0.36

 
$
0.33

 
9.1
%
 
$
1.01

 
$
0.93

 
8.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
(1) Non-GAAP financial measures, including FFO, Core FFO and NOI, are defined in the Glossary in the supplemental financial information and, where appropriate, reconciliations of these measures and other non-GAAP financial measures to their most directly comparable GAAP measures are included in the Schedules to this press release and in the supplemental financial information. 
Net income increased $5.6 million for the third quarter of 2018 and increased $7.9 million year-to-date as compared to the same periods in 2017. The increase was primarily the result of incremental NOI generated from 81 self storage properties acquired between October 1, 2017 and September 30, 2018 and same store NOI growth, partially offset by increases in depreciation and amortization and interest expense.
Third quarter 2018 basic and diluted earnings per share remained flat at $0.03 per share and for the nine months ended September 30, 2018 ("year-to-date") basic and diluted earnings per share increased $0.16 per share. The increases in year-to-date basic and diluted earnings per share resulted from decreases in net income attributable to noncontrolling interests as compared to the same period in 2017, due to 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."
Third quarter 2018 FFO per share increased 12.5% and Core FFO per share increased 9.1%, and year-to date FFO per share increased 9.8% and Core FFO per share increased 8.6%. The increases in FFO and Core FFO were primarily the result of incremental NOI from 81 self storage properties acquired between October 1, 2017 and September 30, 2018 and same store NOI growth, partially offset by higher interest expense and the payment of dividends on preferred shares issued during the fourth quarter of 2017 to fund the Company's growth.

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Same Store Operating Results (376 Properties)
($ in thousands, except per square foot data)
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
Growth
 
2018
 
2017
 
Growth
Total rental and other property-related revenue
$
64,640

 
$
62,140

 
4.0
 %
 
$
187,860

 
$
180,718

 
4.0
 %
Property operating expenses
20,237

 
19,835

 
2.0
 %
 
59,713

 
58,092

 
2.8
 %
Net Operating Income (NOI)
$
44,403

 
$
42,305

 
5.0
 %
 
$
128,147

 
$
122,626

 
4.5
 %
NOI Margin
68.7
%
 
68.1
%
 
0.6
 %
 
68.2
%
 
67.9
%
 
0.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
Average Occupancy
90.3
%
 
90.4
%
 
(0.1
)%
 
89.3
%
 
89.4
%
 
(0.1
)%
Average Annualized Rental Revenue Per Occupied Square Foot
$
12.15

 
$
11.70

 
3.8
 %
 
$
11.91

 
$
11.47

 
3.8
 %
Year-over-year same store total revenues increased 4.0% for the third quarter of 2018 and year-to-date. The increases in both periods were driven primarily by a 3.8% increase in average annualized rental revenue per occupied square foot partially offset by a 10 basis point decrease in average occupancy.
Year-over-year same store property operating expenses increased 2.0% for the third quarter of 2018 and 2.8% year-to-date. These increases primarily resulted from increases in property taxes and personnel costs.
Investment Activity
During the third quarter of 2018, NSA formed the 2018 Joint Venture with an affiliate of Heitman America Real Estate REIT LLC (the "2018 JV Investor"). The 2018 Joint Venture was capitalized with approximately $639.7 million in equity (approximately $159.9 million from NSA in exchange for a 25% ownership interest and approximately $479.8 million from the 2018 JV Investor in exchange for a 75% ownership interest) and proceeds from a $643.0 million interest-only secured debt financing with an interest rate of 4.34% per annum and a maturity of 10 years.
In September, the 2018 Joint Venture completed the acquisition of a portfolio of 112 self storage properties located across 17 states and Puerto Rico, consisting of over 8 million rentable square feet configured in over 68,000 storage units for an aggregate purchase price of approximately $1.325 billion (the "2018 JV Acquisition"). Immediately following the closing of the 2018 JV Acquisition, the 2018 Joint Venture distributed six self storage properties in the 2018 JV Acquisition located in Puerto Rico and a single self storage property located in Ohio to NSA. Substantially all of the properties that remain in the 2018 Joint Venture are operated by NSA's management platform under the iStorage brand. Additional information about the 2018 Joint Venture and the 2018 JV Acquisition are available on NSA's website at www.nationalstorageaffiliates.com under Investor Relations > Corporate Presentations.
In addition to the seven self storage properties acquired by NSA from the 2018 Joint Venture discussed above, during the third quarter of 2018, NSA also acquired six wholly-owned self storage properties located in six states. In total, these 13 self storage properties consist of approximately 0.9 million rentable square feet configured in approximately 8,000 storage units. Consideration for these acquisitions included approximately $102.0 million of net cash, the issuance of approximately $3.7 million of OP equity and the assumption of approximately $0.9 million of other working capital liabilities.
During the third quarter of 2018, NSA's 2016 Joint Venture acquired two self storage properties and an expansion project adjacent to an existing property, consisting of approximately 0.1 million rentable square feet configured in approximately 900 storage units for $19.0 million. The 2016 Joint Venture financed these acquisitions with capital contributions from the 2016 Joint Venture members, of which NSA contributed approximately $4.9 million for its 25% proportionate share.

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Balance Sheet
NSA completed an offering of 5,900,000 common shares in July 2018. The shares were issued at a price of $29.86 per share, resulting in net proceeds of approximately $176 million. The Company used a portion of the proceeds from this offering to repay borrowings outstanding under its revolving line of credit and to make capital contributions to the 2018 Joint Venture.
Common Share Dividends
On August 23, 2018, NSA's Board of Trustees declared a quarterly cash dividend of $0.29 per common share, which was paid on September 28, 2018 to shareholders of record as of September 14, 2018.
2018 Guidance
Although NSA expects certain assumptions included in its previously provided guidance to be affected by the formation of the 2018 Joint Venture, closing of the 2018 JV Acquisition, and the dilution due to the July 2018 equity issuance, NSA reaffirms its previously provided guidance estimate for Core FFO per share for the year ended December 31, 2018.
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 November 1, 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 11:00am Eastern Time on Friday, November 2, 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: Friday, November 2, 2018, 11:00am ET
Webcast available at: www.nationalstorageaffiliates.com
Domestic (Toll Free US & Canada): 877.407.9711
International: 412.902.1014

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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 Friday, November 9, 2018. 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 Nareit REITworld 2018 Annual Conference on November 7-8, 2018 in San Francisco, California.

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 669 self storage properties located in 34 states and Puerto Rico with approximately 42.5 million rentable square feet. NSA is one of the largest owners and operators of self storage properties among public and private companies in the U.S. For more information, please visit the Company’s website at www.nationalstorageaffiliates.com. NSA is included in the MSCI US REIT Index (RMS/RMZ), the Russell 2000 Index of Companies and the S&P SmallCap 600 Index.
NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements contained in this press release constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the Company's control. These forward-looking statements include information about possible or assumed future results of the Company's business, financial condition, liquidity, results of operations, plans and objectives. Changes in any circumstances may cause the Company's actual results to differ significantly from those expressed in any forward-looking statement. When used in this release, the words "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may" or similar expressions are intended to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: market trends in the Company's industry, interest rates, the debt and lending markets or the general economy; the Company's business and investment strategy; the acquisition of properties, including those under contract, our ability to execute on our acquisition pipeline; the timing of acquisitions under contract; and the Company's guidance estimates for the year ended December 31, 2018. 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 September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
REVENUE
 
 
 
 
 
 
 
Rental revenue
$
79,547

 
$
64,715

 
$
226,577

 
$
182,713

Other property-related revenue
2,687

 
2,145

 
7,557

 
6,071

Management fees and other revenue
3,148

 
1,998

 
7,464

 
5,978

Total revenue
85,382

 
68,858

 
241,598

 
194,762

OPERATING EXPENSES
 
 
 
 
 
 
 
Property operating expenses
26,552

 
21,618

 
76,962

 
61,170

General and administrative expenses
8,848

 
7,480

 
25,614

 
22,066

Depreciation and amortization
22,469

 
18,463

 
66,226

 
54,946

Total operating expenses
57,869

 
47,561

 
168,802

 
138,182

Income from operations
27,513

 
21,297

 
72,796

 
56,580

OTHER (EXPENSE) INCOME

 

 

 

Interest expense
(10,656
)
 
(9,157
)
 
(30,763
)
 
(24,788
)
Equity in earnings (losses) of unconsolidated real estate ventures
242

 
(710
)
 
290

 
(2,260
)
Acquisition costs
(141
)
 
(139
)
 
(471
)
 
(450
)
Non-operating income (expense)
153

 
(9
)
 
69

 
(75
)
Gain on sale of self storage properties

 
106

 
391

 
5,743

Other expense
(10,402
)
 
(9,909
)
 
(30,484
)
 
(21,830
)
Income before income taxes
17,111

 
11,388

 
42,312

 
34,750

Income tax expense
(282
)
 
(162
)
 
(469
)
 
(767
)
Net income
16,829

 
11,226

 
41,843

 
33,983

Net income attributable to noncontrolling interests
(12,435
)
 
(9,955
)
 
(21,098
)
 
(29,790
)
Net income attributable to National Storage Affiliates Trust
4,394

 
1,271

 
20,745

 
4,193

Distributions to preferred shareholders
(2,588
)
 

 
(7,763
)
 

Net income attributable to common shareholders
$
1,806

 
$
1,271

 
$
12,982

 
$
4,193

 
 
 
 
 
 
 
 
Earnings (loss) per share - basic and diluted
$
0.03

 
$
0.03

 
$
0.25

 
$
0.09

 
 
 
 
 
 
 
 
Weighted average shares outstanding - basic and diluted
55,722

 
44,269

 
52,189

 
43,967



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

 
September 30,
 
December 31,
 
2018
 
2017
ASSETS
 
 
 
Real estate
 
 
 
Self storage properties
$
2,584,066

 
$
2,275,233

Less accumulated depreciation
(226,086
)
 
(170,358
)
Self storage properties, net
2,357,980

 
2,104,875

Cash and cash equivalents
15,045

 
13,366

Restricted cash
4,704

 
3,041

Debt issuance costs, net
1,503

 
2,185

Investment in unconsolidated real estate ventures
250,769

 
89,093

Other assets, net
85,417

 
52,615

Assets held for sale

 
1,555

Total assets
$
2,715,418

 
$
2,266,730

LIABILITIES AND EQUITY
 
 
 
Liabilities
 
 
 
Debt financing
$
1,229,241

 
$
958,097

Accounts payable and accrued liabilities
36,036

 
24,459

Deferred revenue
15,787

 
12,687

Total liabilities
1,281,064

 
995,243

Equity
 
 
 
Preferred shares of beneficial interest, par value $0.01 per share. 50,000,000 authorized, 6,900,000 issued and outstanding at September 30, 2018 and December 31, 2017, at liquidation preference
172,500

 
172,500

Common shares of beneficial interest, par value $0.01 per share. 250,000,000 shares authorized, 56,555,690 and 50,284,934 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively
565

 
503

Additional paid-in capital
842,679

 
711,467

Distributions in excess of earnings
(87,903
)
 
(55,729
)
Accumulated other comprehensive income
22,679

 
12,282

Total shareholders' equity
950,520

 
841,023

Noncontrolling interests
483,834

 
430,464

Total equity
1,434,354

 
1,271,487

Total liabilities and equity
$
2,715,418

 
$
2,266,730





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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 September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
16,829

 
$
11,226

 
$
41,843

 
$
33,983

Add (subtract):
 
 
 
 
 
 
 
Real estate depreciation and amortization
22,164

 
18,187

 
65,332

 
53,773

Company's share of unconsolidated real estate venture real estate depreciation and amortization
1,954

 
2,042

 
4,709

 
5,832

Gain on sale of self storage properties

 
(106
)
 
(391
)
 
(5,743
)
Company's share of unconsolidated real estate venture loss on sale of properties
205

 

 
205

 

Distributions to preferred shareholders and unitholders
(2,711
)
 

 
(8,106
)
 

FFO attributable to subordinated performance unitholders (1)
(7,358
)
 
(7,699
)
 
(19,415
)
 
(20,743
)
FFO attributable to common shareholders, OP unitholders, and LTIP unitholders
31,083

 
23,650

 
84,177

 
67,102

Add:
 
 
 
 
 
 
 
Acquisition costs
141

 
139

 
471

 
450

Company's share of unconsolidated real estate venture acquisition costs

 
1

 

 
22

Core FFO attributable to common shareholders, OP unitholders, and LTIP unitholders
$
31,224

 
$
23,790

 
$
84,648

 
$
67,574

 
 
 
 
 
 
 
 
Weighted average shares and units outstanding - FFO and Core FFO:(2)
 
 
 
 
 
 
 
Weighted average shares outstanding - basic
55,722

 
44,269

 
52,189

 
43,967

Weighted average restricted common shares outstanding
29

 
27

 
30

 
24

Weighted average OP units outstanding
28,910

 
26,361

 
29,009

 
25,984

Weighted average DownREIT OP unit equivalents outstanding
1,835

 
1,835

 
1,835

 
1,835

Weighted average LTIP units outstanding
715

 
603

 
689

 
1,095

Total weighted average shares and units outstanding - FFO and Core FFO
87,211

 
73,095

 
83,752

 
72,905

 
 
 
 
 
 
 
 
FFO per share and unit
$
0.36

 
$
0.32

 
$
1.01

 
$
0.92

Core FFO per share and unit
$
0.36

 
$
0.33

 
$
1.01

 
$
0.93

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Earnings (loss) per share - diluted
$
0.03

 
$
0.03

 
$
0.25

 
$
0.09

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

 
(0.02
)
 
(0.10
)
 
(0.04
)
Impact of GAAP accounting for noncontrolling interests, two-class method and treasury stock method(4)
0.14

 
0.14

 
0.25

 
0.41

Add real estate depreciation and amortization
0.25

 
0.25

 
0.78

 
0.74

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

 
0.03

 
0.06

 
0.08

Subtract gain on sale of self storage properties

 

 

 
(0.08
)
FFO attributable to subordinated performance unitholders
(0.08
)
 
(0.11
)
 
(0.23
)
 
(0.28
)
FFO per share and unit
0.36

 
0.32

 
1.01

 
0.92

Add acquisition costs and Company's share of unconsolidated real estate venture acquisition costs

 
0.01

 

 
0.01

Core FFO per share and unit
$
0.36

 
$
0.33

 
$
1.01

 
$
0.93

 
 
 
 
 
 
 
 
(3) Adjustment accounts for the difference between the weighted average number of shares used to calculate diluted earnings per share and the weighted average number of shares used to calculate FFO and Core FFO per share and unit. Diluted earnings per share is calculated using the two-class method for the company's restricted common shares and the treasury stock method for certain unvested LTIP units, and assumes the conversion of vested LTIP units into OP units on a one-for-one basis and the hypothetical conversion of subordinated performance units, and DownREIT subordinated performance units into OP units, even though such units may only be convertible into OP units (i) after a lock-out period and (ii) upon certain events or conditions. For additional information about the conversion of subordinated performance units and DownREIT subordinated performance units into OP units, see Note 10 to the Company's most recent Annual Report on Form 10-K, filed with the Securities and Exchange Commission. The computation of weighted average shares and units for FFO and Core FFO per share and unit includes all restricted common shares and LTIP units that participate in distributions and excludes all subordinated performance units and DownREIT subordinated performance units because their effect has been accounted for through the allocation of FFO to the related unitholders based on distributions declared.
(4) Represents the effect of adjusting the numerator to consolidated net income (loss) prior to GAAP allocations for noncontrolling interests, after deducting preferred share and unit distributions, and before the application of the two-class method and treasury stock method, as described in footnote(3).

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Supplemental Schedule 2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Non-GAAP Financial Measurements
 
 
 
 
 
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Operating Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
16,829

 
$
11,226

 
$
41,843

 
$
33,983

(Subtract) add:
 
 
 
 
 
 
 
Management fees and other revenue
(3,148
)
 
(1,998
)
 
(7,464
)
 
(5,978
)
General and administrative expenses
8,848

 
7,480

 
25,614

 
22,066

Depreciation and amortization
22,469

 
18,463

 
66,226

 
54,946

Interest expense
10,656

 
9,157

 
30,763

 
24,788

Equity in (earnings) losses of unconsolidated real estate ventures
(242
)
 
710

 
(290
)
 
2,260

Acquisition costs
141

 
139

 
471

 
450

Income tax expense
282

 
162

 
469

 
767

Gain on sale of self storage properties

 
(106
)
 
(391
)
 
(5,743
)
Non-operating (income) expense
(153
)
 
9

 
(69
)
 
75

Net Operating Income
$
55,682

 
$
45,242

 
$
157,172

 
$
127,614

 
 
 
 
 
 
 
 
EBITDA and Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
16,829

 
$
11,226

 
$
41,843

 
$
33,983

Add:
 
 
 
 
 
 
 
Depreciation and amortization
22,469

 
18,463

 
66,226

 
54,946

Company's share of unconsolidated real estate venture depreciation and amortization
1,954

 
2,042

 
4,709

 
5,832

Interest expense
10,656

 
9,157

 
30,763

 
24,788

Income tax expense
282

 
162

 
469

 
767

EBITDA
52,190

 
41,050

 
144,010

 
120,316

Add (subtract):
 
 
 
 
 
 
 
Acquisition costs
141

 
139

 
471

 
450

Company's share of unconsolidated real estate venture acquisition costs

 
1

 

 
22

Gain on sale of self storage properties

 
(106
)
 
(391
)
 
(5,743
)
Company's share of unconsolidated real estate venture loss on sale of properties
205

 

 
205

 

Equity-based compensation expense(1)
1,022

 
921

 
2,808

 
2,844

Adjusted EBITDA
$
53,558

 
$
42,005

 
$
147,103

 
$
117,889

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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.

10

image0a83.jpg

Supplemental Schedule 3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Portfolio Summary
 
 
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Consolidated and Unconsolidated Property Portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stores at Period End September 30,
 
Units at Period End
September 30,
 
Rentable Square Feet at Period End September 30,
 
Occupancy at Period End September 30,
State/Territories
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
 
Growth
California
 
83

 
80

 
49,565

 
48,118

 
6,226,537

 
6,071,309

 
90.6
%
 
92.0
%
 
(1.4
)%
Texas
 
60

 
54

 
24,139

 
21,375

 
3,416,598

 
3,069,882

 
89.5
%
 
89.6
%
 
(0.1
)%
Oregon
 
59

 
56

 
23,873

 
22,724

 
3,042,644

 
2,866,738

 
85.8
%
 
89.3
%
 
(3.5
)%
Georgia
 
34

 
21

 
14,069

 
7,381

 
1,898,150

 
985,053

 
87.8
%
 
93.9
%
 
(6.1
)%
Florida
 
32

 
28

 
22,748

 
20,513

 
2,267,969

 
1,942,173

 
87.4
%
 
87.9
%
 
(0.5
)%
Oklahoma
 
30

 
30

 
13,875

 
13,934

 
1,902,947

 
1,903,204

 
86.2
%
 
86.3
%
 
(0.1
)%
North Carolina
 
30

 
29

 
13,340

 
13,104

 
1,642,134

 
1,599,784

 
93.4
%
 
91.8
%
 
1.6
 %
Arizona
 
29

 
16

 
16,060

 
9,101

 
1,825,688

 
1,061,929

 
88.0
%
 
90.1
%
 
(2.1
)%
Indiana
 
16

 
14

 
8,789

 
7,844

 
1,134,980

 
1,007,545

 
91.4
%
 
85.0
%
 
6.4
 %
Kansas
 
16

 

 
5,740

 

 
763,249

 

 
84.4
%
 

 

Washington
 
15

 
15

 
4,950

 
5,065

 
624,046

 
644,700

 
87.9
%
 
91.7
%
 
(3.8
)%
Louisiana
 
14

 
10

 
6,326

 
4,520

 
859,169

 
630,023

 
83.5
%
 
84.4
%
 
(0.9
)%
Nevada
 
12

 
11

 
6,416

 
5,754

 
795,161

 
727,352

 
94.0
%
 
94.2
%
 
(0.2
)%
Colorado
 
11

 
10

 
5,057

 
4,634

 
615,613

 
564,359

 
90.6
%
 
95.0
%
 
(4.4
)%
New Hampshire
 
10

 
10

 
4,188

 
4,187

 
509,720

 
509,125

 
91.3
%
 
88.9
%
 
2.4
 %
Other(1)
 
41

 
29

 
19,947

 
12,113

 
2,435,029

 
1,605,618

 
89.1
%
 
87.0
%
 
2.1
 %
Total Consolidated/Weighted Average
 
492

 
413

 
239,082

 
200,367

 
29,959,634

 
25,188,794

 
88.9
%
 
89.9
%
 
(1.0
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Unconsolidated/Weighted Average(2)
 
176

 
70

 
102,295

 
38,681

 
12,540,361

 
4,865,539

 
89.7
%
 
87.9
%
 
1.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Consolidated and Unconsolidated/Weighted Average
 
668

 
483

 
341,377

 
239,048

 
42,499,995

 
30,054,333

 
89.1
%
 
89.6
%
 
(0.5
)%






(1) Other states and territories in NSA's consolidated portfolio as of September 30, 2018 include Alabama, Illinois, Kentucky, Maryland, Massachusetts, Mississippi, Missouri, New Mexico, Ohio, South Carolina, Virginia and Puerto Rico.
(2) NSA's ownership in each of its unconsolidated real estate ventures is 25%.

11

image0a83.jpg

Supplemental Schedule 3 (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Portfolio Summary
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2018 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
 
Mortgages Assumed
 
Other Liabilities
 
Total
 
 
 
 
 
 
March 31, 2018
 
25
 
12,002
 
1,352,592

 
$
105,135

 
$
22,403

 
$
7,581

 
$
670

 
$
135,789

June 30, 2018
 
12
 
4,485
 
544,466

 
62,470

 

 

 
467

 
62,937

September 30, 2018
 
13
 
8,410
 
906,220

 
102,012

 
3,660

 

 
856

 
106,528

Total Acquisitions(3)
 
50
 
24,897
 
2,803,278

 
$
269,617

 
$
26,063

 
$
7,581

 
$
1,993

 
$
305,254

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated Real Estate Ventures (at 100%)(4)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2018
 
1
 
481
 
64,745

 
9,394

 

 

 
66

 
9,460

September 30, 2018
 
105
 
63,457
 
7,729,273

 
1,278,312

 

 

 
7,028

 
1,285,340

Total Investments(4)
 
156
 
88,835
 
10,597,296

 
$
1,557,323

 
$
26,063

 
$
7,581

 
$
9,087

 
$
1,600,054

 
2018 Disposition & Divestiture Activity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dispositions Closed During the Quarter Ended:
 
Stores
 
Units
 
Rentable Square Feet
 
Gross Proceeds
 
 
March 31, 2018
 
1
 
327
 
44,689

 
$
2,200

 
June 30, 2018
 
1
 
1,152
 
56,000

 
3,300

 
Total Dispositions(5)
 
2
 
1,479
 
100,689

 
$
5,500

 
Unconsolidated Real Estate Ventures (at 100%)(4)
 
 
 
 
 
 
 
 
 
September 30, 2018
 
1
 
777
 
195,400

 
9,250

 
Total 2018 Divestitures(4)
 
3
 
2,256
 
296,089

 
$
14,750





(3) NSA acquired self storage properties located in Arizona, California, Florida, Georgia, Kansas, Maryland, Missouri, Nevada, North Carolina, Ohio, Oregon, Puerto Rico, Texas and Washington during 2018.
(4) Values represent entire unconsolidated real estate ventures at 100%, not NSA's proportionate share. NSA's ownership in each of the unconsolidated real estate ventures is 25%.
(5) NSA disposed of self storage properties located in Florida and Washington during 2018.

12

image0a83.jpg

Supplemental Schedule 4
 
 
 
 
 
 
 
 
 
 
 
Debt and Equity Capitalization
 
 
 
 
 
As of September 30, 2018
 
 
 
 
 
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
Debt Balances and Characteristics (dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Effective Interest Rate(1)
 
Weighted Average Maturity (In Years)
 
Balance
Credit Facility:
 
 
 
 
 
Revolving line of credit
3.66%
 
1.60
 
$
163,500

Term loan - Tranche A
2.91%
 
2.60
 
235,000

Term loan - Tranche B
2.94%
 
3.60
 
155,000

Term loan - Tranche C
3.71%
 
5.34
 
105,000

Term loan - Tranche D
3.79%
 
4.33
 
125,000

Term loan facility
3.03%
 
4.75
 
175,000

Fixed rate mortgages payable
4.18%
 
7.00
 
269,382

Total Principal/Weighted Average
3.47%
 
4.29
 
1,227,882

Unamortized debt issuance costs and debt premium, net
 
 
 
 
1,359

Total Debt
 
 
 
 
$
1,229,241

Debt Maturities (dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
chart-f8f68089ba5a5ddaa29.jpg
Debt Ratios
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Covenant
 
Amount
Net Debt to Annualized Current Quarter Adjusted EBITDA
 
n/a
 
5.7x
Trailing Twelve Month Fixed Charge Coverage Ratio
 
> 1.5x
 
3.3x
Total Leverage Ratio
 
 
< 60.0%
 
41.9%
 
 
 
 
 
 
(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.

13

image0a83.jpg

Supplemental Schedule 4 (continued)
 
 
 
 
 
 
 
Debt and Equity Capitalization
 
 
 
As of September 30, 2018
 
 
 
(unaudited)
 
 
 
 
 
 
 
Preferred Shares and Units
 
 
 
 
 
 
 
Outstanding
 
 
6.000% Series A perpetual preferred shares of beneficial interest
6,900,000

 
 
6.000% Series A-1 cumulative redeemable preferred units
343,719

 
 
 
 
 
 
Common Shares and Units
 
 
 
 
 
 
 
Outstanding
 
If Converted
Common shares of beneficial interest
56,527,697

 
56,527,697

Restricted common shares
27,993

 
27,993

Total shares outstanding
56,555,690

 
56,555,690

Operating partnership units
28,908,984

 
28,908,984

DownREIT operating partnership unit equivalents
1,834,786

 
1,834,786

Total operating partnership units
30,743,770

 
30,743,770

Long-term incentive plan units(2)
707,497

 
707,497

Total shares and Class A equivalents outstanding
88,006,957

 
88,006,957

Subordinated performance units(3)
10,709,774

 
14,458,195

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

 
5,922,449

Total subordinated partnership units
15,096,773

 
20,380,644

Total common shares and units outstanding
103,103,730

 
108,387,601

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 1.35 OP units based on historical financial information for the trailing twelve months ended September 30, 2018. 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.

14

image0a83.jpg

Supplemental Schedule 5
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Store Performance Summary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(dollars in thousands, except per square foot data) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2018 compared to Three Months Ended September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Revenue
 
Property Operating Expenses
 
Net Operating Income
 
Net Operating Income Margin
State
Stores
3Q 2018
 
3Q 2017
 
Growth
 
3Q 2018
 
3Q 2017
 
Growth
 
3Q 2018
 
3Q 2017
 
Growth
 
3Q 2018
 
3Q 2017
 
Growth
California
77

 
$
18,639

 
$
17,579

 
6.0
 %
 
$
5,546

 
$
5,372

 
3.2
 %
 
$
13,093

 
$
12,207

 
7.3
 %
 
70.2
%
 
69.4
%
 
0.8
 %
Oregon
55

 
9,557

 
9,580

 
(0.2
)%
 
2,459

 
2,407

 
2.2
 %
 
7,098

 
7,173

 
(1.0
)%
 
74.3
%
 
74.9
%
 
(0.6
)%
Texas
51

 
6,510

 
6,231

 
4.5
 %
 
2,432

 
2,456

 
(1.0
)%
 
4,078

 
3,775

 
8.0
 %
 
62.6
%
 
60.6
%
 
2.0
 %
Oklahoma
30

 
3,729

 
3,700

 
0.8
 %
 
1,246

 
1,217

 
2.4
 %
 
2,483

 
2,483

 

 
66.6
%
 
67.1
%
 
(0.5
)%
North Carolina
28

 
4,076

 
3,925

 
3.8
 %
 
1,267

 
1,174

 
7.9
 %
 
2,809

 
2,751

 
2.1
 %
 
68.9
%
 
70.1
%
 
(1.2
)%
Florida
20

 
5,049

 
4,794

 
5.3
 %
 
1,555

 
1,493

 
4.2
 %
 
3,494

 
3,301

 
5.8
 %
 
69.2
%
 
68.9
%
 
0.3
 %
Georgia
20

 
2,077

 
1,951

 
6.5
 %
 
753

 
715

 
5.3
 %
 
1,324

 
1,236

 
7.1
 %
 
63.7
%
 
63.4
%
 
0.3
 %
Arizona
15

 
3,093

 
3,010

 
2.8
 %
 
911

 
945

 
(3.6
)%
 
2,182

 
2,065

 
5.7
 %
 
70.5
%
 
68.6
%
 
1.9
 %
Indiana
14

 
2,257

 
2,106

 
7.2
 %
 
761

 
761

 

 
1,496

 
1,345

 
11.2
 %
 
66.3
%
 
63.9
%
 
2.4
 %
Washington
13

 
1,870

 
1,817

 
2.9
 %
 
541

 
497

 
8.9
 %
 
1,329

 
1,320

 
0.7
 %
 
71.1
%
 
72.6
%
 
(1.5
)%
Colorado
10

 
1,742

 
1,691

 
3.0
 %
 
557

 
587

 
(5.1
)%
 
1,185

 
1,104

 
7.3
 %
 
68.0
%
 
65.3
%
 
2.7
 %
Louisiana
10

 
1,446

 
1,450

 
(0.3
)%
 
527

 
565

 
(6.7
)%
 
919

 
885

 
3.8
 %
 
63.6
%
 
61.0
%
 
2.6
 %
Other(1)
33

 
4,595

 
4,306

 
6.7
 %
 
1,682

 
1,646

 
2.2
 %
 
2,913

 
2,660

 
9.5
 %
 
63.4
%
 
61.8
%
 
1.6
 %
Total/Weighted Average
376

 
$
64,640

 
$
62,140

 
4.0
 %
 
$
20,237

 
$
19,835

 
2.0
 %
 
$
44,403

 
$
42,305

 
5.0
 %
 
68.7
%
 
68.1
%
 
0.6
 %















(1) Other states in NSA's same store portfolio include Alabama, Kentucky, Mississippi, Nevada, New Hampshire, New Mexico, Ohio and South Carolina.

15

image0a83.jpg

Supplemental Schedule 5 (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Store Performance Summary
 
 
 
 
 
 
 
 
 
 
 
(dollars in thousands, except per square foot data) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2018 compared to Three Months Ended September 30, 2017