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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-37351
National Storage Affiliates Trust
(Exact name of Registrant as specified in its charter)
 
Maryland46-5053858
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

8400 East Prentice Avenue, 9th Floor
Greenwood Village, Colorado 80111
(Address of principal executive offices) (Zip code)

(720) 630-2600
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolsName of each exchange on which registered
Common Shares of Beneficial Interest, $0.01 par value per shareNSANew York Stock Exchange
Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per shareNSA Pr ANew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated Filer
Non-accelerated FilerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
Yes   No 
As of May 8, 2020, 68,143,770 common shares of beneficial interest, $0.01 par value per share, were outstanding.




NATIONAL STORAGE AFFILIATES TRUST
TABLE OF CONTENTS
FORM 10-Q
Page
PART I. FINANCIAL INFORMATION
ITEM 1.Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019 (Unaudited)
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019 (Unaudited)
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2020 and 2019 (Unaudited)
Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2020 and 2019 (Unaudited)
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 (Unaudited)
Notes to Condensed Consolidated Financial Statements (Unaudited)
ITEM 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
ITEM 3.Quantitative and Qualitative Disclosures About Market Risk
ITEM 4.Controls and Procedures
PART II. OTHER INFORMATION
ITEM 1.Legal Proceedings
ITEM 1A.Risk Factors
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds
ITEM 3.Defaults Upon Senior Securities
ITEM 4.Mine Safety Disclosures
ITEM 5.Other Information
ITEM 6.Exhibits
Signatures


3


PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements

NATIONAL STORAGE AFFILIATES TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)
(Unaudited)

March 31,December 31,
20202019
ASSETS
Real estate
Self storage properties$3,314,849  $3,091,719  
Less accumulated depreciation(363,527) (337,822) 
Self storage properties, net
2,951,322  2,753,897  
Cash and cash equivalents18,689  20,558  
Restricted cash3,997  3,718  
Debt issuance costs, net3,067  3,264  
Investment in unconsolidated real estate ventures213,497  214,061  
Other assets, net64,503  65,441  
Operating lease right-of-use assets23,798  23,306  
Total assets$3,278,873  $3,084,245  
LIABILITIES AND EQUITY
Liabilities
Debt financing$1,731,669  $1,534,047  
Accounts payable and accrued liabilities40,127  37,966  
Interest rate swap liabilities84,703  19,943  
Operating lease liabilities25,243  24,665  
Deferred revenue16,076  15,523  
Total liabilities1,897,818  1,632,144  
Commitments and contingencies (Note 11)
Equity
Preferred shares of beneficial interest, par value $0.01 per share. 50,000,000 authorized, 8,732,719 and 8,727,119 issued and outstanding at March 31, 2020 and December 31, 2019, at liquidation preference
218,318  218,178  
Common shares of beneficial interest, par value $0.01 per share. 250,000,000 authorized, 68,027,212 and 59,659,108 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively
680  597  
Additional paid-in capital970,786  905,763  
Distributions in excess of earnings(213,447) (197,075) 
Accumulated other comprehensive loss(52,855) (7,833) 
Total shareholders' equity923,482  919,630  
Noncontrolling interests457,573  532,471  
Total equity1,381,055  1,452,101  
Total liabilities and equity$3,278,873  $3,084,245  

See notes to condensed consolidated financial statements.

4


NATIONAL STORAGE AFFILIATES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)

Three Months Ended
March 31,
20202019
REVENUE
Rental revenue$95,402  $82,855  
Other property-related revenue3,371  2,824  
Management fees and other revenue5,449  4,893  
Total revenue104,222  90,572  
OPERATING EXPENSES
Property operating expenses30,592  26,457  
General and administrative expenses11,094  10,380  
Depreciation and amortization29,105  24,349  
Other389  386  
Total operating expenses71,180  61,572  
OTHER (EXPENSE) INCOME
Interest expense(15,628) (13,211) 
Equity in losses of unconsolidated real estate ventures
(340) (2,102) 
Acquisition costs(833) (157) 
Non-operating expense(192) (98) 
Other expense(16,993) (15,568) 
Income before income taxes16,049  13,432  
Income tax expense(286) (492) 
Net income15,763  12,940  
Net income attributable to noncontrolling interests
(9,115) (5,529) 
Net income attributable to National Storage Affiliates Trust
6,648  7,411  
Distributions to preferred shareholders
(3,273) (2,588) 
Net income attributable to common shareholders
$3,375  $4,823  
Earnings (loss) per share - basic and diluted$0.06  $0.08  
Weighted average shares outstanding - basic and diluted
59,798  56,655  
Dividends declared per common share$0.33  $0.30  

See notes to condensed consolidated financial statements.

5


NATIONAL STORAGE AFFILIATES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(dollars in thousands)
(Unaudited)

Three Months Ended
March 31,
20202019
Net income$15,763  $12,940  
Other comprehensive (loss) income
Unrealized loss on derivative contracts(66,369) (8,039) 
Reclassification of other comprehensive loss (income) to interest expense
612  (1,276) 
Other comprehensive (loss) income
(65,757) (9,315) 
Comprehensive (loss) income(49,994) 3,625  
Comprehensive loss (income) attributable to noncontrolling interests
14,349  (2,131) 
Comprehensive (loss) income attributable to National Storage Affiliates Trust
$(35,645) $1,494  

See notes to condensed consolidated financial statements.

6


NATIONAL STORAGE AFFILIATES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(dollars in thousands, except share amounts)
(Unaudited)

Accumulated
AdditionalDistributionsOther
Preferred SharesCommon SharesPaid-inIn Excess OfComprehensiveNoncontrollingTotal
NumberAmountNumberAmountCapitalEarnings(Loss) IncomeInterestsEquity
Balances, December 31, 20186,900,000  $172,500  56,654,009  $567  $844,276  $(114,122) $13,618  $485,460  $1,402,299  
OP equity issued for property acquisitions:
Series A-1 preferred units, OP units and subordinated performance units, net of offering costs
—  —  —  —  —  —  —  32,856  32,856  
Redemptions of OP units
—  —  29,910    250  —  7  (257)   
Effect of changes in ownership for consolidated entities
—  —  —  —  (5,385) —  (182) 5,567    
Equity-based compensation expense
—  —  —  —  90  —  —  1,022  1,112  
Issuance of LTIP units for acquisition expenses
—  —  —  —  —  —  —  5  5  
Issuance of restricted common shares
—  —  18,218  —  —  —  —  —    
Vesting and forfeitures of restricted common shares, net
—  —  (3,451) —  (69) —  —  —  (69) 
Reduction in receivables from partners of the operating partnership
—  —  —  —  —  —  —  139  139  
Preferred share dividends
—  —  —  —  —  (2,588) —  —  (2,588) 
Common share dividends
—  —  —  —  —  (17,010) —  —  (17,010) 
Distributions to noncontrolling interests
—  —  —  —  —  —  —  (17,181) (17,181) 
Other comprehensive income
—  —  —  —  —  —  (5,917) (3,398) (9,315) 
Net income
—  —  —  —  —  7,411  —  5,529  12,940  
Balances, March 31, 20196,900,000  $172,500  56,698,686  $567  $839,162  $(126,309) $7,526  $509,742  $1,403,188  
See notes to condensed consolidated financial statements.

7


NATIONAL STORAGE AFFILIATES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(dollars in thousands, except share amounts)
(Unaudited)
Accumulated
AdditionalDistributionsOther
Preferred SharesCommon SharesPaid-inIn Excess OfComprehensiveNoncontrollingTotal
NumberAmountNumberAmountCapitalEarnings(Loss) IncomeInterestsEquity
Balances, December 31, 20198,727,119  $218,178  59,659,108  $597  $905,763  $(197,075) $(7,833) $532,471  $1,452,101  
OP equity issued for property acquisitions:
OP units and subordinated performance units, net of offering costs
—  —  —  —  —  —  —  6,206  6,206  
LTIP units
—  —  —  —  —  —  —  1,011  1,011  
Redemptions of OP units
—  —  118,961  1  1,437  —  (62) (1,376)   
Issuance of common shares, net of offering costs
—  —  125,000  1  4,248  —  —  —  4,249  
Merger and internalization of PRO, net of issuance costs
—  —  8,105,192  81  43,499  —  (402) (33,583) 9,595  
Redemption of Series A-1 preferred units
5,600  140  —  —  —  —  —  (140)   
Effect of changes in ownership for consolidated entities
—  —  —  —  15,857  —  (2,265) (13,592)   
Equity-based compensation expense
—  —  —  —  76  —  —  698  774  
Issuance of LTIP units for acquisition expenses
—  —  —  —  —  —  —  40  40  
Issuance of restricted common shares
—  —  21,861  —  —  —  —  —    
Vesting and forfeitures of restricted common shares, net
—  —  (2,910) —  (94) —  —  —  (94) 
Preferred share dividends
—  —  —  —  —  (3,273) —  —  (3,273) 
Common share dividends
—  —  —  —  —  (19,747) —  —  (19,747) 
Distributions to noncontrolling interests
—  —  —  —  —  —  —  (19,813) (19,813) 
Other comprehensive loss
—  —  —  —  —  —  (42,293) (23,464) (65,757) 
Net income
—  —  —  —  —  6,648  —  9,115  15,763  
Balances, March 31, 20208,732,719  $218,318  68,027,212  $680  $970,786  $(213,447) $(52,855) $457,573  $1,381,055  

See notes to condensed consolidated financial statements.

8


NATIONAL STORAGE AFFILIATES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)

Three Months Ended
March 31,
20202019
OPERATING ACTIVITIES
Net income $15,763  $12,940  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 29,105  24,349  
Amortization of debt issuance costs 754  693  
Amortization of debt discount and premium, net (356) (352) 
Mark-to-market changes in value on equity securities142    
Equity-based compensation expense 774  1,112  
Equity in losses of unconsolidated real estate ventures
340  2,102  
Distributions from unconsolidated real estate ventures
3,325  3,400  
Change in assets and liabilities, net of effects of self storage property acquisitions:
Other assets (118) 2,008  
Accounts payable and accrued liabilities 1,086  607  
Deferred revenue (130) (461) 
Net Cash Provided by Operating Activities 50,685  46,398  
INVESTING ACTIVITIES
Acquisition of self storage properties (209,981) (139,579) 
Capital expenditures(4,909) (4,208) 
Investments in and advances to unconsolidated real estate ventures(3,125)   
Distributions from unconsolidated real estate ventures  1,017  
Deposits and advances for self storage property and other acquisitions (500) (811) 
Proceeds from sale of equity securities
7,560    
Expenditures for corporate furniture, equipment and other(157) (125) 
Net Cash Used In Investing Activities (211,112) (143,706) 
FINANCING ACTIVITIES
Proceeds from issuance of common shares4,249    
Borrowings under debt financings244,000  188,500  
Receipts for OP unit subscriptions  318  
Principal payments under debt financings(46,579) (51,778) 
Payment of dividends to common shareholders(19,747) (17,010) 
Distributions to preferred shareholders(3,273) (2,588) 
Distributions to noncontrolling interests(19,813) (17,002) 
Debt issuance costs  (22) 
Equity offering costs  (50) 
Net Cash Provided By Financing Activities158,837  100,368  
(Decrease) Increase in Cash, Cash Equivalents and Restricted Cash(1,590) 3,060  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Beginning of period24,276  16,363  
End of period$22,686  $19,423  


See notes to condensed consolidated financial statements.

9


NATIONAL STORAGE AFFILIATES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
Supplemental Cash Flow and Noncash Information
Cash paid for interest
$16,502  $12,142  
Operating lease right-of-use assets on balance sheet due to implementation of leases standard
—  23,110  
Operating lease liabilities on balance sheet due to implementation of leases standard
—  24,166  
Merger and internalization of PRO:
Redemptions and conversions of partnership interests
33,583    
Issuance of common shares for management platform
10,301    

See notes to condensed consolidated financial statements.

10


NATIONAL STORAGE AFFILIATES TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(Unaudited)





1. ORGANIZATION AND NATURE OF OPERATIONS
National Storage Affiliates Trust was organized in the state of Maryland on May 16, 2013 and is a fully integrated, self-administered and self-managed real estate investment trust focused on the self storage sector. As used herein, "NSA," the "Company," "we," "our," and "us" refers to National Storage Affiliates Trust and its consolidated subsidiaries, except where the context indicates otherwise. The Company has elected and believes that it has qualified to be taxed as a real estate investment trust for U.S. federal income tax purposes ("REIT") commencing with its taxable year ended December 31, 2015.
Through its controlling interest as the sole general partner of NSA OP, LP (its "operating partnership"), a Delaware limited partnership formed on February 13, 2013, the Company is focused on the ownership, operation, and acquisition of self storage properties located within the top 100 metropolitan statistical areas throughout the United States. Pursuant to the Agreement of Limited Partnership (as amended, the "LP Agreement") of its operating partnership, the Company's operating partnership is authorized to issue preferred units, Class A Units ("OP units"), different series of Class B Units ("subordinated performance units"), and Long-Term Incentive Plan Units ("LTIP units"). The Company also owns certain of its self storage properties through other consolidated limited partnership subsidiaries of its operating partnership, which the Company refers to as "DownREIT partnerships." The DownREIT partnerships issue equity ownership interests that are intended to be economically equivalent to the Company's OP units ("DownREIT OP units") and subordinated performance units ("DownREIT subordinated performance units").
The Company owned 603 consolidated self storage properties in 29 states and Puerto Rico with approximately 36.2 million rentable square feet in approximately 288,000 storage units as of March 31, 2020. These properties are managed with local operational focus and expertise by the Company and its participating regional operators ("PROs"). These PROs are Kevin Howard Real Estate Inc., d/b/a Northwest Self Storage and its controlled affiliates ("Northwest"), Optivest Properties LLC and its controlled affiliates ("Optivest"), Guardian Storage Centers LLC and its controlled affiliates ("Guardian"), Move It Self Storage and its controlled affiliates ("Move It"), Arizona Mini Storage Management Company d/b/a Storage Solutions and its controlled affiliates ("Storage Solutions"), Hide-Away Storage Services, Inc. and its controlled affiliates ("Hide-Away"), an affiliate of Shader Brothers Corporation d/b/a Personal Mini Storage ("Personal Mini"), Southern Storage Management Systems, Inc. d/b/a Southern Self Storage ("Southern") and affiliates of Investment Real Estate Management, LLC d/b/a Moove In Self Storage of York, Pennsylvania ("Moove In").
On March 31, 2020, the Company closed on the mergers of its largest PRO, SecurCare Self Storage, Inc. and its controlled affiliates ("SecurCare"), and DLAN Corporation ("DLAN") with and into wholly-owned subsidiaries of the Company. As a result of the mergers, SecurCare's property management platform and related intellectual property were internalized by the Company, and the Company no longer pays any supervisory and administrative fees or reimbursements to SecurCare. In addition, distributions on the series of subordinated performance units related to SecurCare's managed portfolio were discontinued. As part of the internalization, most of SecurCare's employees and other key persons were offered employment by the Company and continue managing SecurCare's portfolio of properties under the brand SecurCare as members of the Company's existing property management platform.
As of March 31, 2020, the Company also managed through its property management platform an additional portfolio of 177 properties owned by the Company's unconsolidated real estate ventures. These properties contain approximately 12.7 million rentable square feet, configured in approximately 104,000 storage units and located across 21 states. The Company owns a 25% equity interest in each of its unconsolidated real estate ventures.
As of March 31, 2020, in total, the Company operated and held ownership interests in 780 self storage properties located across 35 states and Puerto Rico with approximately 48.9 million rentable square feet in approximately 392,000 storage units.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated financial statements are presented on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles ("GAAP") and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by GAAP for

11


complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the condensed consolidated financial statements have been included. The Company's results of operations for the quarterly period ended March 31, 2020 are not necessarily indicative of the results to be expected for the full year or any other future period.
Principles of Consolidation
The Company's financial statements include the accounts of its operating partnership and its controlled subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidation of entities.
When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed a variable interest entity ("VIE"), and if the Company is deemed to be the primary beneficiary, in accordance with authoritative guidance issued on the consolidation of VIEs. When an entity is not deemed to be a VIE, the Company considers the provisions of additional guidance to determine whether the general partner controls a limited partnership or similar entity when the limited partners have certain rights. The Company consolidates all entities that are VIEs and of which the Company is deemed to be the primary beneficiary. The Company has determined that its operating partnership is a VIE. The sole significant asset of National Storage Affiliates Trust is its investment in its operating partnership, and consequently, substantially all of the Company’s assets and liabilities represent those assets and liabilities of its operating partnership.
As of March 31, 2020 and December 31, 2019, the Company's operating partnership was the primary beneficiary of, and therefore consolidated, 21 DownREIT partnerships that are considered VIEs, which owned 34 self storage properties. The net book value of the real estate owned by these VIEs was $231.1 million and $233.1 million as of March 31, 2020 and December 31, 2019, respectively. For certain DownREIT partnerships which are subject to fixed rate mortgages payable, the carrying value of such fixed rate mortgages payable held by these VIEs was $135.9 million and $136.4 million as of March 31, 2020 and December 31, 2019, respectively. The creditors of the consolidated VIEs do not have recourse to the Company's general credit.
Reclassifications
Certain amounts in the condensed consolidated financial statements and related notes have been reclassified to conform to the current year presentation. Such reclassifications do not impact the Company's previously reported financial position or net income (loss).
Revenue Recognition
Rental revenue
Rental revenue consists of space rentals and related fees. Management has determined that all of the Company's leases are operating leases. Substantially all leases may be terminated on a month-to-month basis and rental income is recognized ratably over the lease term using the straight-line method. Rents received in advance are deferred and recognized on a straight-line basis over the related lease term associated with the prepayment. Promotional discounts and other incentives are recognized as a reduction to rental income over the applicable lease term.
Other property-related revenue
Other property-related revenue primarily consists of ancillary revenues such as tenant insurance and/or tenant warranty protection-related access fees and sales of storage supplies which are recognized in the period earned.
The Company and certain of the Company’s PROs have tenant insurance- and/or tenant warranty protection plan-related arrangements with insurance companies and the Company’s tenants. During the three months ended March 31, 2020 and 2019, the Company recognized $2.6 million and $2.1 million, respectively, of tenant insurance and tenant warranty protection plan revenues.
The Company sells boxes, packing supplies, locks and other retail merchandise at its properties. During the three months ended March 31, 2020 and 2019, the Company recognized retail sales of $0.4 million and $0.4 million, respectively.

12


Management fees and other revenue
Management fees and other revenue consist of property management fees, platform fees, call center fees, acquisition fees, and a portion of tenant warranty protection or tenant insurance proceeds that the Company earns for managing and operating its unconsolidated real estate ventures.
With respect to both the 2018 Joint Venture and the 2016 Joint Venture (as each is defined in Note 5), the Company provides supervisory and administrative property management services, centralized call center services, and technology platform and revenue management services to the properties in the unconsolidated real estate ventures. The property management fees are equal to 6% of monthly gross revenues and net sales revenues from the assets of the unconsolidated real estate ventures, and the platform fees are equal to $1,250 per month per unconsolidated real estate venture property. With respect to the 2016 Joint Venture only, the call center fees are equal to 1% of each of monthly gross revenues and net sales revenues from the 2016 Joint Venture properties. During the three months ended March 31, 2020 and 2019, the Company recognized property management fees, call center fees and platform fees of $3.2 million and $3.2 million, respectively.
For acquisition fees, the Company provides sourcing, underwriting and administration services to the unconsolidated real estate ventures. The 2016 Joint Venture paid the Company a $4.1 million acquisition fee equal to 0.65% of the gross capitalization (including debt and equity) of the original 66-property 2016 Joint Venture portfolio (the "Initial 2016 JV Portfolio") in 2016, at the time of the Initial 2016 JV Portfolio acquisition. The 2018 Joint Venture paid the Company a $4.0 million acquisition fee related to the initial acquisition of properties by the 2018 Joint Venture (the "Initial 2018 JV Portfolio") in 2018, at the time of the Initial 2018 JV Portfolio acquisition. These fees are refundable to the unconsolidated real estate ventures, on a prorated basis, if the Company is removed as the managing member during the initial four year life of the unconsolidated real estate ventures and as such, the Company's performance obligation for these acquisition fees are satisfied over a four year period. As of March 31, 2020 and December 31, 2019, the Company had deferred revenue related to the acquisition fees of $2.4 million and $2.8 million, respectively.
The Company also earns acquisition fees for properties acquired by the unconsolidated real estate ventures subsequent to the Initial 2016 JV Portfolio and the Initial 2018 JV Portfolio. These fees are based on a percentage of the gross capitalization of the acquired assets determined by the members of the 2016 Joint Venture and the 2018 Joint Venture, and are generally earned when the unconsolidated real estate ventures obtain title and control of an acquired property. During the three months ended March 31, 2020 and 2019, the Company recognized acquisition fees of $0.5 million and $0.5 million, respectively.
An affiliate of the Company facilitates tenant warranty protection or tenant insurance programs for tenants of the properties in the unconsolidated real estate ventures in exchange for 50% of all proceeds from such programs at each unconsolidated real estate venture property. During the three months ended March 31, 2020 and 2019, the Company recognized $1.6 million and $1.2 million, respectively, of revenue related to these activities.
Gain on sale of self storage properties
The Company recognizes gains from disposition of facilities only upon closing in accordance with the guidance on sales of nonfinancial assets. Profit on real estate sold is recognized upon closing when all, or substantially all, of the promised consideration has been received and is nonrefundable and the Company has transferred control of the facilities to the purchaser.
Investments in Unconsolidated Real Estate Ventures
The Company’s investments in its unconsolidated real estate ventures are recorded under the equity method of accounting in the accompanying condensed consolidated financial statements. Under the equity method, the Company’s investments in unconsolidated real estate ventures are stated at cost and adjusted for the Company’s share of net earnings or losses and reduced by distributions. Equity in earnings (losses) is recognized based on the Company’s ownership interest in the earnings (losses) of the unconsolidated real estate ventures. The Company follows the "nature of the distribution approach" for classification of distributions from its unconsolidated real estate ventures in its condensed consolidated statements of cash flows. Under this approach, distributions are reported on the basis of the nature of the activity or activities that generated the distributions as either a return on investment, which are classified as operating cash flows, or a return of investment (e.g., proceeds from the unconsolidated real estate ventures' sale of assets) which are reported as investing cash flows.

13


Noncontrolling Interests
All of the limited partner equity interests ("OP equity") in the operating partnership not held by the Company are reflected as noncontrolling interests. Noncontrolling interests also include ownership interests in DownREIT partnerships held by entities other than the operating partnership or its subsidiaries. In the condensed consolidated statements of operations, the Company allocates net income (loss) attributable to noncontrolling interests to arrive at net income (loss) attributable to National Storage Affiliates Trust.
For transactions that result in changes to the Company's ownership interest in its operating partnership, the carrying amount of noncontrolling interests is adjusted to reflect such changes. The difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interest is adjusted is reflected as an adjustment to additional paid-in capital on the condensed consolidated balance sheets.
Allocation of Net Income (Loss)
The distribution rights and priorities set forth in the operating partnership's LP Agreement differ from what is reflected by the underlying percentage ownership interests of the unitholders. Accordingly, the Company allocates GAAP income (loss) utilizing the hypothetical liquidation at book value ("HLBV") method, in which the Company allocates income or loss based on the change in each unitholders’ claim on the net assets of its operating partnership at period end after adjusting for any distributions or contributions made during such period. The HLBV method is commonly applied to equity investments where cash distribution percentages vary at different points in time and are not directly linked to an equity holder’s ownership percentage.
The HLBV method is a balance sheet-focused approach to income (loss) allocation. A calculation is prepared at each balance sheet date to determine the amount that unitholders would receive if the operating partnership were to liquidate all of its assets (at GAAP net book value) and distribute the resulting proceeds to its creditors and unitholders based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is used to derive each unitholder's share of the income (loss) for the period. Due to the stated liquidation priorities and because the HLBV method incorporates non-cash items such as depreciation expense, in any given period, income or loss may be allocated disproportionately to unitholders as compared to their respective ownership percentage in the operating partnership, and net income (loss) attributable to National Storage Affiliates Trust could be more or less net income than actual cash distributions received and more or less income or loss than what may be received in the event of an actual liquidation. Additionally, the HLBV method could result in net income (or net loss) attributable to National Storage Affiliates Trust during a period when the Company reports consolidated net loss (or net income), or net income (or net loss) attributable to National Storage Affiliates Trust in excess of the Company's consolidated net income (or net loss). The computations of basic and diluted earnings (loss) per share may be materially affected by these disproportionate income (loss) allocations, resulting in volatile fluctuations of basic and diluted earnings (loss) per share.
Other Comprehensive Income (Loss)
The Company has cash flow hedge derivative instruments that are measured at fair value with unrealized gains or losses recognized in other comprehensive income (loss) with a corresponding adjustment to accumulated other comprehensive income (loss) within equity, as discussed further in Note 12. Under the HLBV method of allocating income (loss) discussed above, a calculation is prepared at each balance sheet date by applying the HLBV method including, and excluding, the assets and liabilities resulting from the Company's cash flow hedge derivative instruments to determine comprehensive income (loss) attributable to National Storage Affiliates Trust. As a result of the distribution rights and priorities set forth in the operating partnership's LP Agreement, in any given period, other comprehensive income (loss) may be allocated disproportionately to unitholders as compared to their respective ownership percentage in the operating partnership and as compared to their respective allocation of net income (loss).
Restricted Cash
The Company's restricted cash consists of escrowed funds deposited with financial institutions for real estate taxes, insurance and other reserves for capital improvements in accordance with the Company's loan agreements.

14


Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During three months ended March 31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. See Note 12 for additional detail about the Company's derivatives.
3. SHAREHOLDERS' EQUITY AND NONCONTROLLING INTERESTS
Shareholders' Equity
Internalization and Acquisition of PRO
As discussed in Note 1 and further below, on March 31, 2020, the Company closed on the previously announced mergers of SecurCare and DLAN with and into wholly-owned subsidiaries of the Company. In connection with the mergers, the Company issued 8,105,192 common shares to the owners of SecurCare and DLAN, which represented a 1% discount to an aggregate of 8,187,052 OP units that each of SecurCare and DLAN owned or was entitled to receive immediately prior to the mergers (after rounding up to the next whole number of common shares). Of the total number of common shares issued to the owners of SecurCare, 4,063,571 common shares were issued to Arlen Nordhagen, the Company's executive chairman and former chief executive officer, who owned approximately 53% of SecurCare's outstanding shares, and 1,858,737 common shares were issued to David Cramer, the Company's chief operating officer, who owned approximately 24% of SecurCare's outstanding shares. In connection with the mergers and the issuance of the Company's common shares to Mr. Nordhagen and Mr. Cramer, the Company formed a special committee of independent and disinterested trustees (the "Special Committee") to evaluate the merits and terms of the proposed transaction. In analyzing the proposed transaction, the Special Committee engaged an independent third party financial advisor to assist the Special Committee in analyzing and assessing the transaction, and to opine on the fairness to the Company of the consideration to be paid by the Company in the mergers. The Special Committee approved and recommended that the Company's board of trustees approve the proposed transaction. The transaction was approved unanimously by the disinterested trustees of the Company's board of trustees on February 19, 2020.
At the Market ("ATM") Program
On February 27, 2019, the Company entered into a sales agreement with certain sales agents, pursuant to which the Company may sell from time to time up to $250.0 million of the Company's common of beneficial interest, $0.01 par value per share ("common shares") and 6.000% Series A cumulative redeemable preferred shares of beneficial interest ("Series A preferred shares") in sales deemed to be "at the market" offerings. The sales agreement contemplates that, in addition to the issuance and sale by the Company of offered shares to or through the sale agents, the Company may enter into separate forward sale agreements with any forward purchaser. Forward sale agreements, if any, will include only the Company's common shares and will not include any Series A preferred shares. If the Company enters into a forward sale agreement with any forward purchaser, such forward purchaser will attempt to borrow from third parties and sell, through the related agent, acting as sales agent for such forward purchaser (each, a "forward seller"), offered shares, in an amount equal to the offered shares subject to such forward sale agreement, to hedge such forward purchaser’s exposure under such forward sale agreement. The Company may offer the common shares and Series A preferred shares through the agents, as the Company's sales agents, or, as applicable, as forward seller, or directly to the agents or forward sellers, acting as principals, by means of, among

15


others, ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of sale or at negotiated prices.
During the three months ended March 31, 2020, the Company sold 125,000 of its common shares through the ATM program at an average offering price of $36.18 per share, resulting in net proceeds to the Company of approximately $4.2 million, after deducting compensation payable by the Company to such agents and offering expenses.
Noncontrolling Interests
All of the OP equity in the Company's operating partnership not held by the Company are reflected as noncontrolling interests. Noncontrolling interests also include ownership interests in DownREIT partnerships held by entities other than the Company's operating partnership. NSA is the general partner of its operating partnership and is authorized to cause its operating partnership to issue additional partner interests, including OP units and subordinated performance units, at such prices and on such other terms as it determines in its sole discretion.
As of March 31, 2020 and December 31, 2019, units reflecting noncontrolling interests consisted of the following:
March 31, 2020December 31, 2019
Series A-1 preferred units637,382