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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 Ventures
 
 
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 25, 2019

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

GREENWOOD VILLAGE, Colo. - (BUSINESS WIRE) - National Storage Affiliates Trust (“NSA” or the "Company") (NYSE: NSA) today reported the Company’s fourth quarter and full year 2018 results.
Fourth Quarter 2018 Highlights
Reported loss per share of $0.16 for the fourth quarter of 2018.
Reported core funds from operations ("Core FFO") of $0.37 per share for the fourth quarter of 2018, an increase of 15.6% compared to the fourth quarter of 2017.
Achieved same store net operating income ("NOI") growth of 5.3% for the fourth quarter of 2018 compared to the same period in 2017, driven by a 4.2% increase in same store total revenues and a 2.0% increase in same store property operating expenses.
Acquired seven wholly-owned self storage properties for $51.4 million during the fourth quarter of 2018.
Full Year 2018 Highlights
Reported earnings per share of $0.07 for full year 2018.
Reported Core FFO of $1.38 per share for full year 2018, an increase of 11.3% compared to full year 2017.
Achieved same store NOI growth of 4.7% for full year 2018 compared to full year 2017, driven by a 4.0% increase in same store total revenues and a 2.6% increase in same store property operating expenses.
Acquired 57 wholly-owned self storage properties for $356.6 million and invested in 106 joint venture properties valued at $1.3 billion during full year 2018.
Completed an offering of 5,900,000 common shares resulting in net proceeds of approximately $176 million.
Added Southern Self Storage of Palm Beach Gardens, Florida as NSA’s ninth Participating Regional Operator (“PRO”), with first properties contributed in January 2019.
Highlights Subsequent to Year-End
Entered into definitive agreements to add Moove In Self Storage of York, Pennsylvania as NSA’s tenth PRO.
Acquired 23 wholly-owned self storage properties for approximately $147.0 million.
Arlen Nordhagen, Chairman and Chief Executive Officer, commented, "2018 was a banner year for the growth of NSA and our iStorage brand, with the formation of our 2018 Joint Venture and our investment in nearly $1.7 billion of self storage properties. We're excited to carry this momentum into 2019 as we have closed on the addition of our previously announced ninth PRO, Southern Self Storage, and entered into agreements to add our tenth PRO, Moove In Self Storage. Moove In is led by John Gilliland, a past Chairman of the national Self Storage Association, and his team brings decades of valuable experience in the northeastern U.S. self storage market to NSA."



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Financial Results
($ in thousands, except per share and unit data)
Three Months Ended December 31,
 
Year Ended December 31,
 
2018
 
2017
 
Growth
 
2018
 
2017
 
Growth
Net income
$
14,483

 
$
12,015

 
20.5
%
 
$
56,326

 
$
45,998

 
22.5
%
 
 
 
 
 
 
 
 
 
 
 
 
Funds From Operations ("FFO")(1)
$
32,201

 
$
23,482

 
37.1
%
 
$
116,378

 
$
90,584

 
28.5
%
Add back acquisition costs and NSA's share of unconsolidated real estate venture acquisition costs
192

 
143

 
34.3
%
 
663

 
615

 
7.8
%
Core FFO(1)
$
32,393

 
$
23,625

 
37.1
%
 
$
117,041

 
$
91,199

 
28.3
%
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per share - basic and diluted
$
(0.16
)
 
$
(0.08
)
 
100.0
%
 
$
0.07

 
$
0.01

 
600.0
%
 
 
 
 
 
 
 
 
 
 
 
 
FFO per share and unit(1)
$
0.37

 
$
0.31

 
19.4
%
 
$
1.37

 
$
1.23

 
11.4
%
Core FFO per share and unit(1)
$
0.37

 
$
0.32

 
15.6
%
 
$
1.38

 
$
1.24

 
11.3
%
 
 
 
 
 
 
 
 
 
 
 
 
(1) Non-GAAP financial measures, including FFO, Core FFO and NOI, are defined in the Glossary in the supplemental financial information and, where appropriate, reconciliations of these measures and other non-GAAP financial measures to their most directly comparable GAAP measures are included in the Schedules to this press release and in the supplemental financial information. 
Net income increased $2.5 million for the fourth quarter of 2018 and increased $10.3 million for full year 2018 as compared to the same periods in 2017. The increase was primarily the result of incremental NOI generated from 57 wholly-owned self storage properties acquired during full year 2018 and same store NOI growth, partially offset by increases in depreciation and amortization and interest expense.
The increases in FFO and Core FFO for the fourth quarter of 2018 and full year 2018 were primarily the result of incremental NOI from properties acquired during full year 2018, same store NOI growth, and incremental FFO from the Company's unconsolidated real estate ventures, partially offset by higher interest expense and the payment of dividends on preferred shares.
Same Store Operating Results (376 Properties)
($ in thousands, except per square foot data)
Three Months Ended December 31,
 
Year Ended December 31,
 
2018
 
2017
 
Growth
 
2018
 
2017
 
Growth
Total revenues
$
63,951

 
$
61,356

 
4.2
 %
 
$
251,811

 
$
242,074

 
4.0
 %
Property operating expenses
19,878

 
19,484

 
2.0
 %
 
79,591

 
77,576

 
2.6
 %
Net Operating Income (NOI)
$
44,073

 
$
41,872

 
5.3
 %
 
$
172,220

 
$
164,498

 
4.7
 %
NOI Margin
68.9
%
 
68.2
%
 
0.7
 %
 
68.4
%
 
68.0
%
 
0.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
Average Occupancy
88.4
%
 
88.9
%
 
(0.5
)%
 
89.0
%
 
89.2
%
 
(0.2
)%
Average Annualized Rental Revenue Per Occupied Square Foot
$
12.28

 
$
11.76

 
4.4
 %
 
$
12.02

 
$
11.55

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

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Year-over-year same store property operating expenses increased 2.0% for the fourth quarter of 2018 and 2.6% for full year 2018 as compared to the same periods in 2017. These increases primarily resulted from increases in property taxes, personnel costs and repairs and maintenance expenses.
Investment Activity
NSA acquired seven wholly-owned self storage properties located in four states consisting of approximately 0.4 million rentable square feet configured in approximately 3,000 storage units during the fourth quarter of 2018. Consideration for these acquisitions included approximately $49.2 million of net cash, the issuance of approximately $2.0 million of OP equity and the assumption of approximately $0.2 million of other working capital liabilities.
During the year ended December 31, 2018, NSA formed the 2018 Joint Venture, in which the Company has a 25% ownership interest, with an affiliate of Heitman America Real Estate REIT LLC. In September 2018, the 2018 Joint Venture completed the acquisition of a portfolio of 112 self storage properties located across 17 states and Puerto Rico, consisting of over 8 million rentable square feet configured in over 68,000 storage units for an aggregate purchase price of approximately $1.325 billion. Immediately following the closing of the acquisition, the 2018 Joint Venture distributed the six self storage properties in the portfolio located in Puerto Rico and a single self storage property located in Ohio to NSA.
Including the seven self storage properties acquired by NSA from the 2018 Joint Venture discussed above, during the full year 2018, NSA invested $356.6 million in the acquisition of 57 wholly-owned self storage properties located in 13 states and Puerto Rico consisting of approximately 3.2 million rentable square feet configured in approximately 28,000 storage units.
During the year ended December 31, 2018, NSA's 2016 Joint Venture invested in three self storage properties and an expansion project at an existing property for $28.5 million, comprising approximately 0.2 million rentable square feet, configured in approximately 1,300 storage units.
Subsequent to December 31, 2018, NSA acquired 23 wholly-owned self storage properties located in six states consisting of approximately 1.3 million rentable square feet configured in approximately 11,000 storage units for approximately $147.0 million. Consideration for these acquisitions included approximately $122.9 million of net cash, the issuance of approximately $23.7 million of OP units, subordinated performance units and Series A-1 preferred units and the assumption of approximately $0.4 million of other working capital liabilities.
In addition, in February 2019, NSA entered into definitive agreements to add Moove In Self Storage of York, Pennsylvania as NSA’s tenth PRO. Moove In currently owns 19 self storage properties and operates a total of 23 self storage properties under the Moove In Self Storage brand in Pennsylvania, Maryland, New Jersey, and New York. Upon closing, Moove In intends to contribute six self storage properties to NSA as part of the initial contribution transaction, and Moove In's remaining properties will be added to NSA's captive pipeline. The Company expects the initial contribution transaction and related closing documentation, including the entry into a facilities portfolio management agreement, to close during the first quarter of 2019, subject to customary closing conditions.
Balance Sheet
NSA entered into an agreement with a lender for a new $75 million term loan during the fourth quarter of 2018. The term loan matures in ten years and has an effective interest rate of 4.62%. NSA used the proceeds from the term loan to repay outstanding amounts under its revolving line of credit.
Common Share Dividends
On February 21, 2019, NSA's Board of Trustees declared a quarterly cash dividend of $0.30 per common share, which will be paid on March 29, 2019 to shareholders of record as of March 15, 2019.

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2019 Guidance
Tamara Fischer, President and Chief Financial Officer, commented, "Our same store pool in 2019 will increase by 63 stores for a total of 439 stores. These newly added stores are geographically diversified across 19 states and we anticipate these stores to have a relatively neutral impact on our projected 2019 same store revenue growth.  In addition, we've already acquired or have under contract to acquire an additional 30 wholly-owned self storage properties for approximately $190 million during the first quarter of 2019, reflecting our continued commitment to our growth initiatives as we begin 2019."
The following table outlines NSA's FFO guidance estimates and related assumptions for the year ended December 31, 2019:
 
 
Ranges for Full Year 2019
 
 
Low
 
High
Core FFO per share(1)
 
$1.48
 
$1.52
 
 
 
 
 
Same store operations (439 stores)
 
 
Total revenue growth
 
2.5%
 
3.5%
Property operating expenses growth
 
2.5%
 
3.5%
NOI growth
 
2.5%
 
3.5%
 
 
 
 
 
General and administrative expenses (as a percent of revenue)
 
11.0%
 
12.0%
General and administrative expenses (excluding equity-based compensation)
 
10.0%
 
10.5%
Equity-based compensation
 
1.0%
 
1.5%
 
 
 
 
 
Management fees and other revenue, in millions
 
$20.0
 
$21.0
Core FFO from unconsolidated real estate venture, in millions
 
$15.0
 
$16.0
 
 
 
 
 
Subordinated performance unit distributions, in millions
 
$32.0
 
$34.0
 
 
 
 
 
Wholly-owned acquisitions, in millions
 
$300.0
 
$500.0
Joint venture acquisitions, in millions
 
$20.0
 
$100.0
(1) The following table provides a reconciliation of the range of estimated earnings (loss) per share - diluted to estimated Core FFO per share and unit:
 
Ranges for Full Year 2019
 
Low
 
High
Earnings (loss) per share - diluted
$
0.10

 
$
0.20

Impact of the difference in weighted average number of shares and GAAP accounting for noncontrolling interests, two-class method and treasury stock method
0.44

 
0.36

Add real estate depreciation and amortization, including NSA's share of unconsolidated venture real estate depreciation and amortization
1.29

 
1.33

FFO attributable to subordinated unitholders
(0.36
)
 
(0.38
)
Add acquisition costs and NSA's share of unconsolidated real estate venture acquisition costs
0.01

 
0.01

Core FFO per share and unit
$
1.48

 
$
1.52

Supplemental Financial Information
The full text of this earnings release and supplemental financial information, including certain financial information referenced in this release, are available on NSA's website at http://ir.nationalstorageaffiliates.com/quarterly-reporting and as exhibit 99.1 to the Company's Form 8-K furnished to the SEC on February 25, 2019.

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Non-GAAP Financial Measures & Glossary
This press release contains certain non-GAAP financial measures. These non-GAAP measures are presented because NSA's management believes these measures help investors understand NSA's business, performance and ability to earn and distribute cash to its shareholders by providing perspectives not immediately apparent from net income (loss). These measures are also frequently used by securities analysts, investors and other interested parties. The presentation of FFO, Core FFO and NOI in this press release are not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. In addition, NSA's method of calculating these measures may be different from methods used by other companies, and, accordingly, may not be comparable to similar measures as calculated by other companies that do not use the same methodology as NSA. These measures, and other words and phrases used herein, are defined in the Glossary in the supplemental financial information and, where appropriate, reconciliations of these measures and other non-GAAP financial measures to their most directly comparable GAAP measures are included in the Schedules to this press release and in the supplemental financial information.
Quarterly Teleconference and Webcast
The Company will host a conference call at 1:00pm Eastern Time on Monday, February 25, 2019 to discuss its financial results. At the conclusion of the call, management will accept questions from certified financial analysts. All other participants are encouraged to listen to a webcast of the call by accessing the link found on the Company's website at www.nationalstorageaffiliates.com.
Conference Call and Webcast:
Date/Time: Monday, February 25, 2019, 1:00pm ET
Webcast available at: www.nationalstorageaffiliates.com
Domestic (Toll Free US & Canada): 877.407.9711
International: 412.902.1014
Replay:
Domestic (Toll Free US & Canada): 877.660.6853
International: 201.612.7415
Conference ID: 13686870
A replay of the call will be available for one week through Monday, March 4, 2019. A replay of the webcast will be available for 30 days on NSA's website at www.nationalstorageaffiliates.com.
Upcoming Industry Conferences
NSA management is scheduled to participate in the 2019 Wells Fargo Real Estate Forum on February 27, 2019 in New York, New York and in Citi’s 2019 Global Property CEO Conference on March 4 – 6, 2019 in Hollywood, Florida.
About National Storage Affiliates Trust
National Storage Affiliates Trust is a Maryland real estate investment trust focused on the ownership, operation and acquisition of self storage properties located within the top 100 metropolitan statistical areas throughout the United States. The Company currently holds ownership interests in and operates 698 self storage properties located in 34 states and Puerto Rico with approximately 44.3 million rentable square feet. NSA is one of the largest owners and operators of self storage properties among public and private companies in the U.S. For more information, please visit the Company’s website at www.nationalstorageaffiliates.com. NSA is included in the MSCI US REIT Index (RMS/RMZ), the Russell 2000 Index of Companies and the S&P SmallCap 600 Index.

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NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements contained in this press release constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the Company's control. These forward-looking statements include information about possible or assumed future results of the Company's business, financial condition, liquidity, results of operations, plans and objectives. Changes in any circumstances may cause the Company's actual results to differ significantly from those expressed in any forward-looking statement. When used in this release, the words "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may" or similar expressions are intended to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: market trends in the Company's industry, interest rates, the debt and lending markets or the general economy; the Company's business and investment strategy; the acquisition of properties, including those under contract, our ability to execute on our acquisition pipeline; the timing of acquisitions under contract; and the Company's guidance estimates for the year ended December 31, 2019. For a further list and description of such risks and uncertainties, see the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, and the other documents filed by the Company with the Securities and Exchange Commission. The forward-looking statements, and other risks, uncertainties and factors are based on the Company's beliefs, assumptions and expectations of its future performance, taking into account all information currently available to the Company. Forward-looking statements are not predictions of future events. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
CONTACT:
National Storage Affiliates Trust
Investor/Media Relations
George Hoglund, CFA
Vice President - Investor Relations
720.630.2160
ghoglund@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,
 
2018
 
2017
 
2018
 
2017
REVENUE
 
 
 
 
 
 
 
Rental revenue
$
81,826

 
$
69,101

 
$
308,403

 
$
251,814

Other property-related revenue
2,626

 
2,184

 
10,183

 
8,255

Management fees and other revenue
4,846

 
2,083

 
12,310

 
8,061

Total revenue
89,298

 
73,368

 
330,896

 
268,130

OPERATING EXPENSES
 
 
 
 
 
 
 
Property operating expenses
26,913

 
23,285

 
103,875

 
84,455

General and administrative expenses
10,606

 
7,994

 
36,220

 
30,060

Depreciation and amortization
22,921

 
20,169

 
89,147

 
75,115

Total operating expenses
60,440

 
51,448

 
229,242

 
189,630

Income from operations
28,858

 
21,920

 
101,654

 
78,500

OTHER (EXPENSE) INCOME

 

 

 

Interest expense
(11,961
)
 
(9,280
)
 
(42,724
)
 
(34,068
)
Equity in losses of unconsolidated real estate ventures
(1,713
)
 
(79
)
 
(1,423
)
 
(2,339
)
Acquisition costs
(192
)
 
(143
)
 
(663
)
 
(593
)
Non-operating (expense) income
(160
)
 
17

 
(91
)
 
(58
)
(Loss) gain on sale of self storage properties

 
(28
)
 
391

 
5,715

Other expense
(14,026
)
 
(9,513
)
 
(44,510
)
 
(31,343
)
Income before income taxes
14,832

 
12,407

 
57,144

 
47,157

Income tax expense
(349
)
 
(392
)
 
(818
)
 
(1,159
)
Net income
14,483

 
12,015

 
56,326

 
45,998

Net income attributable to noncontrolling interests
(21,119
)
 
(13,247
)
 
(42,217
)
 
(43,037
)
Net (loss) income attributable to National Storage Affiliates Trust
(6,636
)
 
(1,232
)
 
14,109

 
2,961

Distributions to preferred shareholders
(2,587
)
 
(2,300
)
 
(10,350
)
 
(2,300
)
Net (loss) income attributable to common shareholders
$
(9,223
)
 
$
(3,532
)
 
$
3,759

 
$
661

Earnings (loss) per share - basic and diluted
$
(0.16
)
 
$
(0.08
)
 
$
0.07

 
$
0.01

Weighted average shares outstanding - basic and diluted
56,571

 
45,775

 
53,293

 
44,423



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

 
December 31,
 
2018
 
2017
ASSETS
 
 
 
Real estate
 
 
 
Self storage properties
$
2,637,723

 
$
2,275,233

Less accumulated depreciation
(246,261
)
 
(170,358
)
Self storage properties, net
2,391,462

 
2,104,875

Cash and cash equivalents
13,181

 
13,366

Restricted cash
3,182

 
3,041

Debt issuance costs, net
1,260

 
2,185

Investment in unconsolidated real estate ventures
245,125

 
89,093

Other assets, net
75,053

 
52,615

Assets held for sale

 
1,555

Total assets
$
2,729,263

 
$
2,266,730

LIABILITIES AND EQUITY
 
 
 
Liabilities
 
 
 
Debt financing
$
1,278,102

 
$
958,097

Accounts payable and accrued liabilities
33,130

 
24,459

Deferred revenue
15,732

 
12,687

Total liabilities
1,326,964

 
995,243

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

 
172,500

Common shares of beneficial interest, par value $0.01 per share. 250,000,000 shares authorized, 56,654,009 and 50,284,934 shares issued and outstanding at December 31, 2018 and 2017, respectively
567

 
503

Additional paid-in capital
844,276

 
711,467

Distributions in excess of earnings
(114,122
)
 
(55,729
)
Accumulated other comprehensive income
13,618

 
12,282

Total shareholders' equity
916,839

 
841,023

Noncontrolling interests
485,460

 
430,464

Total equity
1,402,299

 
1,271,487

Total liabilities and equity
$
2,729,263

 
$
2,266,730





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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,
 
2018
 
2017
 
2018
 
2017
Net income
$
14,483

 
$
12,015

 
$
56,326

 
$
45,998

Add (subtract):
 
 
 
 
 
 
 
Real estate depreciation and amortization
22,606

 
19,896

 
87,938

 
73,669

Company's share of unconsolidated real estate venture real estate depreciation and amortization
5,524

 
1,464

 
10,233

 
7,296

Loss (gain) on sale of self storage properties

 
28

 
(391
)
 
(5,715
)
Company's share of unconsolidated real estate venture loss on sale of properties

 

 
205

 

Distributions to preferred shareholders and unitholders
(2,716
)
 
(2,300
)
 
(10,822
)
 
(2,300
)
FFO attributable to subordinated performance unitholders (1)
(7,696
)
 
(7,621
)
 
(27,111
)
 
(28,364
)
FFO attributable to common shareholders, OP unitholders, and LTIP unitholders
32,201

 
23,482

 
116,378

 
90,584

Add:
 
 
 
 
 
 
 
Acquisition costs
192

 
143

 
663

 
593

Company's share of unconsolidated real estate venture acquisition costs

 

 

 
22

Core FFO attributable to common shareholders, OP unitholders, and LTIP unitholders
$
32,393

 
$
23,625

 
$
117,041

 
$
91,199

 
 
 
 
 
 
 
 
Weighted average shares and units outstanding - FFO and Core FFO:(2)
 
 
 
 
 
 
 
Weighted average shares outstanding - basic
56,571

 
45,775

 
53,293

 
44,423

Weighted average restricted common shares outstanding
28

 
27

 
29

 
25

Weighted average OP units outstanding
28,881

 
26,549

 
28,977

 
26,126

Weighted average DownREIT OP unit equivalents outstanding
1,835

 
1,835

 
1,835

 
1,835

Weighted average LTIP units outstanding
708

 
547

 
694

 
957

Total weighted average shares and units outstanding - FFO and Core FFO
88,023

 
74,733

 
84,828

 
73,366

 
 
 
 
 
 
 
 
FFO per share and unit
$
0.37

 
$
0.31

 
$
1.37

 
$
1.23

Core FFO per share and unit
$
0.37

 
$
0.32

 
$
1.38

 
$
1.24

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Amounts represent distributions declared for subordinated performance unitholders and DownREIT subordinated performance unitholders for the periods presented.
(2) NSA combines OP units and DownREIT OP units with common shares because, after the applicable lock-out periods, OP units in the Company's operating partnership are redeemable for cash or, at NSA's option, exchangeable for common shares on a one-for-one basis and DownREIT OP units are also redeemable for cash or, at NSA's option, exchangeable for OP units in the Company's operating partnership on a one-for-one basis, subject to certain adjustments in each case. Subordinated performance units, DownREIT subordinated performance units, and LTIP units may also, under certain circumstances, be convertible into or exchangeable for common shares (or other units that are convertible into or exchangeable for common shares). See footnote(3) for additional discussion of subordinated performance units, DownREIT subordinated performance units, and LTIP units in the calculation of FFO and Core FFO per share and unit.

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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 December 31,
 
Year Ended
December 31,
 
2018
 
2017
 
2018
 
2017
Earnings (loss) per share - diluted
$
(0.16
)
 
$
(0.08
)
 
$
0.07

 
$
0.01

Impact of the difference in weighted average number of shares(3)
0.06

 
0.02

 
(0.03
)
 

Impact of GAAP accounting for noncontrolling interests, two-class method and treasury stock method(4)
0.24

 
0.18

 
0.49

 
0.59

Add real estate depreciation and amortization
0.26

 
0.27

 
1.04

 
1.00

Add Company's share of unconsolidated real estate venture real estate depreciation and amortization
0.06

 
0.02

 
0.12

 
0.10

Subtract gain on sale of self storage properties

 

 

 
(0.08
)
FFO attributable to subordinated performance unitholders
(0.09
)
 
(0.10
)
 
(0.32
)
 
(0.39
)
FFO per share and unit
0.37

 
0.31

 
1.37

 
1.23

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

 
0.01

 
0.01

 
0.01

Core FFO per share and unit
$
0.37

 
$
0.32

 
$
1.38

 
$
1.24

 
 
 
 
 
 
 
 
(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).

10

image0a85.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,
 
2018
 
2017
 
2018
 
2017
Net income
$
14,483

 
$
12,015

 
$
56,326

 
$
45,998

(Subtract) add:
 
 
 
 
 
 
 
Management fees and other revenue
(4,846
)
 
(2,083
)
 
(12,310
)
 
(8,061
)
General and administrative expenses
10,606

 
7,994

 
36,220

 
30,060

Depreciation and amortization
22,921

 
20,169

 
89,147

 
75,115

Interest expense
11,961

 
9,280

 
42,724

 
34,068

Equity in losses of unconsolidated real estate ventures
1,713

 
79

 
1,423

 
2,339

Acquisition costs
192

 
143

 
663

 
593

Income tax expense
349

 
392

 
818

 
1,159

Loss (gain) on sale of self storage properties

 
28

 
(391
)
 
(5,715
)
Non-operating expense (income)
160

 
(17
)
 
91

 
58

Net Operating Income
$
57,539

 
$
48,000

 
$
214,711

 
$
175,614

 
 
 
 
 
 
 
 
EBITDA and Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
Year Ended
December 31,
 
2018
 
2017
 
2018
 
2017
Net income
$
14,483

 
$
12,015

 
$
56,326

 
$
45,998

Add:
 
 
 
 
 
 
 
Depreciation and amortization
22,921

 
20,169

 
89,147

 
75,115

Company's share of unconsolidated real estate venture depreciation and amortization
5,524

 
1,464

 
10,233

 
7,296

Interest expense
11,961

 
9,280

 
42,724

 
34,068

Income tax expense
349

 
392

 
818

 
1,159

EBITDA
55,238

 
43,320

 
199,248

 
163,636

Add (subtract):
 
 
 
 
 
 
 
Acquisition costs
192

 
143

 
663

 
593

Company's share of unconsolidated real estate venture acquisition costs

 

 

 
22

Loss (gain) on sale of self storage properties

 
28

 
(391
)
 
(5,715
)
Company's share of unconsolidated real estate venture loss on sale of properties

 

 
205

 

Equity-based compensation expense
1,029

 
920

 
3,837

 
3,764

Adjusted EBITDA
$
56,459

 
$
44,411

 
$
203,562

 
$
162,300

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

11

image0a85.jpg

Supplemental Schedule 3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Portfolio Summary
As of December 31, 2018
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Owned Store Data by State
 
Total Operated Store Data by State
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State/Territories
 
Stores
 
Units
 
Rentable Square Feet
 
Occupancy at Period End
 
State/Territories
 
Stores
 
Units
 
Rentable Square Feet
 
Occupancy at Period End
California
 
83

 
49,569

 
6,226,522

 
89.2
%
 
California
 
93

 
55,770

 
6,980,522

 
89.2
%
Texas
 
60

 
24,150

 
3,417,208

 
88.0
%
 
Texas
 
64

 
26,462

 
3,680,357

 
87.5
%
Oregon
 
60

 
24,298

 
3,076,899

 
82.5
%
 
Florida
 
61

 
38,586

 
4,071,545

 
85.6
%
Georgia
 
34

 
14,062

 
1,897,977

 
87.0
%
 
Oregon
 
60

 
24,298

 
3,076,899

 
82.5
%
Florida
 
34

 
23,490

 
2,355,949

 
86.1
%
 
Georgia
 
45

 
20,211

 
2,770,284

 
87.7
%
North Carolina
 
33

 
15,394

 
1,885,559

 
91.8
%
 
Oklahoma
 
36

 
16,118

 
2,196,699

 
85.1
%
Oklahoma
 
30

 
13,875

 
1,902,947

 
85.1
%
 
North Carolina
 
33

 
15,394

 
1,885,559

 
91.8
%
Arizona
 
29

 
16,062

 
1,825,563

 
85.9
%
 
Arizona
 
31

 
17,071

 
1,935,393

 
85.9
%
Indiana
 
16

 
8,790

 
1,135,080

 
88.8
%
 
Michigan
 
24

 
15,483

 
1,963,048

 
87.5
%
Kansas
 
16

 
5,737

 
762,949

 
82.8
%
 
Ohio
 
22

 
12,350

 
1,518,414

 
88.0
%
Washington
 
15

 
4,950

 
623,996

 
83.9
%
 
Nevada
 
17

 
8,225

 
1,088,893

 
90.6
%
Louisiana
 
14

 
6,323

 
858,719

 
83.0
%
 
Indiana
 
16

 
8,790

 
1,135,080

 
88.8
%
Nevada
 
13

 
6,606

 
836,616

 
91.8
%
 
Kansas
 
16

 
5,737

 
762,949

 
82.8
%
Colorado
 
11

 
5,054

 
615,463

 
86.8
%
 
Alabama
 
15

 
6,335

 
940,652

 
88.3
%
New Hampshire
 
10

 
4,186

 
509,720

 
92.7
%
 
Washington
 
15

 
4,950

 
623,996

 
83.9
%
Ohio
 
8

 
3,572

 
454,168

 
88.9
%
 
New Jersey
 
15

 
10,519

 
1,225,270

 
89.8
%
Other(1)
 
33

 
16,371

 
1,980,228

 
85.9
%
 
Louisiana
 
14

 
6,323

 
858,719

 
83.0
%
Total
 
499

 
242,489

 
30,365,563

 
87.1
%
 
Colorado
 
11

 
5,054

 
615,463

 
86.8
%
 
 

 

 

 
 
 
New Hampshire
 
10

 
4,186

 
509,720

 
92.7
%
 
 
 
 
 
 
 
 
 
 
Other(2)
 
77

 
43,601

 
5,141,227

 
84.9
%
 
 

 

 

 
 
 
Total
 
675

 
345,463

 
42,980,689

 
87.0
%





(1) Other states and territories in NSA's owned portfolio as of December 31, 2018 include Alabama, Illinois, Kentucky, Maryland, Massachusetts, Mississippi, Missouri, New Mexico, South Carolina, Virginia and Puerto Rico.
(2) Other states and territories in NSA's operated portfolio as of December 31, 2018 include Delaware, Illinois, Kentucky, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, New Mexico, New York, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia and Puerto Rico.

12

image0a85.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

December 31, 2018
 
7
 
3,263
 
408,485

 
49,221

 
2,000

 

 
174

 
51,395

Total Acquisitions(3)
 
57
 
28,160
 
3,211,763

 
$
318,838

 
$
28,063

 
$
7,581

 
$
2,167

 
$
356,649

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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)
 
163
 
92,098
 
11,005,781

 
$
1,606,544

 
$
28,063

 
$
7,581

 
$
9,261

 
$
1,651,449

 
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.

13

image0a85.jpg

Supplemental Schedule 4
 
 
 
 
 
 
 
 
 
 
 
Debt and Equity Capitalization
 
 
 
 
 
As of December 31, 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
3.90%
 
1.35
 
$
139,500

Term loan - Tranche A
2.91%
 
2.35
 
235,000

Term loan - Tranche B
2.94%
 
3.35
 
155,000

Term loan - Tranche C
3.71%
 
5.09
 
105,000

Term loan - Tranche D
3.79%
 
4.08
 
125,000

Term loan facility - 2023
3.13%
 
4.50
 
175,000

Term loan facility - 2028
4.62%
 
10.00
 
75,000

Fixed rate mortgages payable
4.18%
 
6.76
 
268,138

Total Principal/Weighted Average
3.58%
 
4.44
 
1,277,638

Unamortized debt issuance costs and debt premium, net
 
 
 
 
464

Total Debt
 
 
 
 
$
1,278,102

Debt Maturities (dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
chart-0b4e921ca512532a992.jpg
Debt Ratios
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Covenant
 
Amount
Net Debt to Annualized Current Quarter Adjusted EBITDA
 
n/a
 
5.6x
Trailing Twelve Month Fixed Charge Coverage Ratio
 
> 1.5x
 
3.2x
Total Leverage Ratio
 
 
< 60.0%
 
42.7%
 
 
 
 
 
 
(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

image0a85.jpg

Supplemental Schedule 4 (continued)
 
 
 
 
 
 
 
Debt and Equity Capitalization
 
 
 
As of December 31, 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
56,626,127

 
56,626,127

Restricted common shares
27,882

 
27,882

Total shares outstanding
56,654,009

 
56,654,009

Operating partnership units
28,874,103

 
28,874,103

DownREIT operating partnership unit equivalents
1,834,786

 
1,834,786

Total operating partnership units
30,708,889

 
30,708,889

Long-term incentive plan units(2)
707,671

 
707,671

Total shares and Class A equivalents outstanding
88,070,569

 
88,070,569

Subordinated performance units(3)
10,749,475

 
14,189,307

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

 
5,790,839

Total subordinated partnership units
15,136,474

 
19,980,146

Total common shares and units outstanding
103,207,043

 
108,050,715

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 1.32 OP units based on historical financial information for the trailing twelve months ended December 31, 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.

15

image0a85.jpg

Supplemental Schedule 5
 
 
 
 
 
Summarized Information for Unconsolidated Real Estate Ventures
(dollars in thousands) (unaudited)
 
 
 
Combined Balance Sheet Information
 
 
 
 
 
 Total Venture at 100%(1)
 
December 31, 2018
 
December 31, 2017
ASSETS
 
 
 
 
Self storage properties, net
 
$
1,894,412

 
$
655,973

Other assets
 
50,915

 
8,397

Total assets
 
$
1,945,327

 
$
664,370

LIABILITIES AND EQUITY
 
 
 
 
Debt financing
 
$
956,357

 
$
317,359

Other liabilities
 
16,516

 
4,855

Equity
 
972,454

 
342,156

Total liabilities and equity
 
$
1,945,327

 
$
664,370

 
 
 
 
 
Combined Operating Information
 
 
 
 
 
 
 
Three Months Ended December 31, 2018
 
 
 Total Venture at 100%(1)
 
NSA Proportionate Share (Venture at 25%)(2)
Total revenue
 
$
41,415

 
$
10,354

Property operating expenses
 
13,170

 
3,293

Net operating income
 
28,245

 
7,061

Supervisory, administrative and other expenses
 
(2,674
)
 
(669
)
Depreciation and amortization
 
(22,095
)
 
(5,524
)
Interest expense
 
(10,055
)
 
(2,514
)
Acquisition and other expenses
 
(344
)
 
(86
)
Net loss
 
$
(6,923
)
 
$
(1,732
)
Add (subtract):
 
 
 
 
Company's share of unconsolidated real estate venture real estate depreciation and amortization
 
 
 
5,524

Company's share of FFO and Core FFO from unconsolidated real estate ventures
 
 
 
$
3,792











(1) 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%.
(2) NSA's proportionate share of its unconsolidated real estate venture is derived by applying NSA's 25% ownership interest to each line item in the GAAP financial statements of the unconsolidated real estate venture to calculate NSA's share of that line item. NSA believes this information offers insights into the financial performance of the Company, although the presentation of such information, and its combination with NSA's consolidated results, may not accurately depict the legal and economic implications of holding a noncontrolling interest in the unconsolidated real estate venture. The operating agreement of the unconsolidated real estate venture provides for the distribution of net cash flow to the unconsolidated real estate venture’s investors no less than monthly, generally in proportion to the investors’ respective ownership interests, subject to a promoted distribution to NSA upon the achievement of certain performance benchmarks by the non-NSA investor.

16

image0a85.jpg

Supplemental Schedule 6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Store Performance Summary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(dollars in thousands, except per square foot data) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31, 2018 compared to Three Months Ended December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Revenue
 
Property Operating Expenses
 
Net Operating Income
 
Net Operating Income Margin
State
Stores
4Q 2018
 
4Q 2017
 
Growth
 
4Q 2018
 
4Q 2017
 
Growth
 
4Q 2018
 
4Q 2017
 
Growth
 
4Q 2018
 
4Q 2017
 
Growth
California
77

 
$
18,701

 
$
17,528

 
6.7
 %
 
$
5,383

 
$
5,176

 
4.0
 %
 
$
13,318

 
$
12,352

 
7.8
 %
 
71.2
%
 
70.5
%
 
0.7
 %
Oregon
55

 
9,140

 
9,172

 
(0.3
)%
 
2,429

 
2,424

 
0.2
 %
 
6,711

 
6,748

 
(0.5
)%
 
73.4
%
 
73.6
%
 
(0.2
)%
Texas
51

 
6,404

 
6,158

 
4.0
 %
 
2,273

 
2,363

 
(3.8
)%
 
4,131

 
3,795

 
8.9
 %
 
64.5
%
 
61.6
%
 
2.9
 %
Oklahoma
30

 
3,749

 
3,672

 
2.1
 %
 
1,180

 
1,208

 
(2.3
)%
 
2,569

 
2,464

 
4.3
 %
 
68.5
%
 
67.1
%
 
1.4
 %
North Carolina
28

 
4,016

 
3,845

 
4.4
 %
 
1,470

 
1,149

 
27.9
 %
 
2,546

 
2,696

 
(5.6
)%
 
63.4
%
 
70.1
%
 
(6.7
)%
Florida
20

 
5,035

 
4,879

 
3.2
 %
 
1,507

 
1,537

 
(2.0
)%
 
3,528

 
3,342

 
5.6
 %
 
70.1
%
 
68.5
%
 
1.6
 %
Georgia
20

 
2,063

 
1,938

 
6.4
 %
 
760

 
701

 
8.4
 %
 
1,303

 
1,237

 
5.3
 %
 
63.2
%
 
63.8
%
 
(0.6
)%
Arizona
15

 
3,074