National Storage Still An Inexpensive Play In Storage, Says Baird

Baird said National Storage Affiliates Trust NSA is still the inexpensive way to play storage despite the 30 percent year-to-date rally in shares.

National Storage Affiliates Trust is a Maryland real estate investment trust focused on the self storage properties located within the top 100 metropolitan statistical areas throughout the United States. The company, which is the sixth-largest owner and operator of self storage properties, currently owns and operates 318 self storage properties located in 18 states.

"We now expect NSA to deliver the highest FFO growth among all of the storage names in 2017 and given the company's unique external growth pipeline, we anticipate NSA will continue to deliver outsized FFO growth over the next several years," analyst RJ Milligan wrote in a note.

The brokerage noted NSA's much more attractive multiple, higher projected FFO growth rate and a well-covered 4.1 percent dividend yield. NSA's shares currently trade at a 4-turn 2017 AFFO multiple discount to the peer average (22x).

Late June, National Storage has agreed to acquire 29 self storage properties located across six states, for approximately $190 million. Year-to-date, National Storage has announced acquisitions worth $480 million.

The analyst noted that NSA's unique structure allows the company to play in a different acquisition "sandbox" vs. its storage REIT peers at more attractive going-in cap rates. The company purchased over $300 million in 2015 and Milligan now models over $600 million in 2016.

Milligan maintained 2016 FFO estimate of $1.07 per share and increased 2017 FFO estimates by $0.04 to $1.25 per share, given the faster-than-anticipated acquisition pace.

Baird has an Outperform rating and raised the price target to $25 from $24.