Overview

National Storage Affiliates Trust is a real estate investment trust (REIT) that owns and operates self-storage properties across the United States. The company was founded in 2013 and has grown to a portfolio of 811 self-storage properties as of September 30, 2024.

The company’s strategy involves partnering with experienced regional self-storage operators, known as “PROs”, to leverage their local expertise while also benefiting from national scale. However, in 2024 the company internalized this PRO structure, bringing the majority of operations in-house.

Financial Performance

For the three months ended September 30, 2024, National Storage Affiliates reported total revenue of $193.6 million, down 11.6% from the same period in 2023. This decrease was primarily due to the sale and contribution of properties to joint ventures over the past year.

Rental revenue, which makes up the majority of total revenue, decreased 13.6% to $174.5 million. This was driven by lower average occupancy across the portfolio, down from 88.6% to 86.0%. However, average rental rates per occupied square foot increased 1.6% to $15.57.

Property operating expenses decreased 10.0% to $52.7 million, also due to the reduction in the size of the portfolio. General and administrative expenses fell 13.2% to $13.1 million, mainly from lower management fees after the PRO internalization.

Overall, net income attributable to common shareholders was $13.6 million for the three months ended September 30, 2024, down from $24.1 million in the prior year period.

For the nine months ended September 30, 2024, total revenue decreased 9.7% to $580.2 million. Rental revenue fell 11.1% to $529.2 million, while property operating expenses declined 7.3% to $159.6 million. Net income attributable to common shareholders was $79.5 million, up from $73.7 million in the prior year period.

The company’s same-store portfolio, consisting of 776 properties, saw rental revenue decrease 2.8% for the nine-month period, driven by lower average occupancy. Same-store property operating expenses increased 3.4% over the same time.

Strengths and Weaknesses

A key strength of National Storage Affiliates is its geographically diversified portfolio of self-storage properties, located across 38 states and Puerto Rico. Many of these properties are situated in markets with barriers to new supply, providing stable cash flows.

The company’s strategy of partnering with experienced regional operators has also been a strength, allowing it to leverage local expertise. However, the internalization of this PRO structure represents a shift in the business model that introduces some uncertainty.

Another weakness is the company’s reliance on acquisitions and joint ventures for external growth. While this has fueled rapid expansion, it also exposes National Storage Affiliates to risks associated with these transactions, such as integration challenges.

The self-storage industry is also subject to seasonal fluctuations, with higher occupancy and revenue typically seen in the summer months. This can create volatility in the company’s quarterly results.

Outlook and Risks

Looking ahead, National Storage Affiliates faces both opportunities and risks. The self-storage sector continues to attract investor interest, providing potential for further joint venture and acquisition activity. However, rising interest rates and economic uncertainty could impact the company’s ability to finance growth.

The internalization of the PRO structure is a significant transition that the company will need to navigate successfully. Integrating operations and retaining key personnel from the former PROs will be critical.

Other risks include competition from new self-storage development, the availability of qualified personnel, and the potential impact of natural disasters, pandemics, or other disruptive events on the company’s markets.

Overall, National Storage Affiliates appears to be a well-positioned self-storage REIT, but it will need to effectively manage the changes to its business model and external growth strategy to drive future performance.