Market Overview

National Storage Affiliates Trust Reports Second Quarter 2018 Results; Earnings Per Share Increases $0.02; Core FFO per Share Increases 9.7%, Same Store NOI Increases 4.2%, Acquired 12 Self Storage Properties

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National Storage Affiliates Trust ("NSA" or the "Company") (NYSE:NSA)
today reported the Company's second quarter 2018 results.

Second Quarter 2018 Highlights

  • Earnings per share was $0.07 for the second quarter of 2018, an
    increase of $0.02 compared to $0.05 for the second quarter of 2017.
  • Core funds from operations ("Core FFO") was $0.34 per share for the
    second quarter of 2018, an increase of 9.7% compared to $0.31 per
    share for the second quarter of 2017.
  • Same store net operating income ("NOI") was $42.9 million for the
    second quarter of 2018, an increase of 4.2% compared to $41.1 million
    for the second quarter of 2017, driven by a 3.6% increase in same
    store total revenues and a 2.4% increase in same store property
    operating expenses.
  • Acquired 12 wholly-owned self storage properties for $62.9 million
    during the second quarter of 2018.

Highlights Subsequent to the End of the Second Quarter

  • NSA formed a new joint venture (the "2018 Joint Venture") slated to
    acquire a $1.325 billion portfolio of 112 self storage properties from
    Simply Self Storage, a portfolio company of a private real estate fund
    managed by Brookfield Asset Management.
  • The 112 property portfolio contains approximately 8.7 million rentable
    square feet, configured in over 68,000 storage units and is located
    across 17 states and Puerto Rico.
  • Completed an offering of 5,900,000 common shares resulting in net
    proceeds of approximately $176 million.

Arlen Nordhagen, Chairman and Chief Executive Officer, commented, "2018
is shaping up to be another exceptional year for NSA. We were very
excited to announce the recent formation of our second joint venture to
acquire a 112 property portfolio for over $1.3 billion. This portfolio
will expand NSA's geographic footprint into five new states and Puerto
Rico and will provide another source of fee income by leveraging our
property management platform to operate the newly acquired properties
under our existing iStorage brand. Upon closing, this acquisition will
represent one of the largest M&A transactions in the history of the self
storage industry. To match the funding required for this acquisition, we
also completed a successful common share offering in July, raising the
proceeds for our investment in the new joint venture and providing the
flexibility to continue to execute on our growth strategy."

Tamara Fischer, President and Chief Financial Officer, added, "Our
second quarter capital investment of nearly $63 million added another 12
properties and half a million square feet of rentable space to our
wholly-owned portfolio. The continued growth in the size of our
portfolio combined with solid second quarter NOI results delivered
year-over-year Core FFO per share growth of 9.7%.

"As expected, the second quarter delivered slower same store results
because of a very difficult comparative quarter in 2017, but we were
pleased with the combination of good rate increases and a moderate
uptick in occupancy. With these results and continued same store expense
moderation, we expect to finish the year with same store results
consistent with our 2018 guidance."

Financial Results

 
($ in thousands, except per share and unit data)     Three Months Ended June 30,     Six Months Ended June 30,
2018   2017   Growth 2018   2017   Growth
Net income $ 13,041   $ 15,576   (16.3 )% $ 25,014   $ 22,757   9.9 %
 
Funds From Operations ("FFO")(1) $ 27,416 $ 22,297 23.0 % $ 53,094 $ 43,452 22.2 %
Add back acquisition costs and NSA's share of unconsolidated real
estate venture acquisition costs
150   169   (11.2 )% 330   332   (0.6 )%
Core FFO(1) $ 27,566   $ 22,466   22.7 % $ 53,424   $ 43,784   22.0 %
 
Earnings (loss) per share - basic $ 0.07   $ 0.05   40.0 % $ 0.22   $ 0.07   214.3 %
Earnings (loss) per share - diluted $ 0.07   $ 0.05   40.0 % $ 0.19   $ 0.07   171.4 %
 
FFO per share and unit(1) $ 0.33   $ 0.31   6.5 % $ 0.65   $ 0.60   8.3 %
Core FFO per share and unit(1) $ 0.34   $ 0.31   9.7 % $ 0.65   $ 0.60   8.3 %
(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 decreased $2.5 million for the second quarter of 2018 and
increased $2.3 million year-to-date as compared to the same periods in
2017. The decrease in net income for the second quarter of 2018 resulted
from a reduction in gains on the sale of properties. Excluding the
effect of gains (losses) on the sales of properties, second quarter 2018
and year-to date net income increased primarily as a result of
incremental NOI generated from 87 self storage properties acquired
between July 1, 2017 and June 30, 2018 and same store NOI growth,
partially offset by increases in depreciation and amortization and
interest expense.

Second quarter 2018 basic and diluted earnings per share increased $0.02
per share and year-to-date basic and diluted earnings per share
increased $0.15 and $0.12, respectively. The increases in basic and
diluted earnings per share resulted from decreases in net income
attributable to noncontrolling interests for the second quarter of 2018
and year-to-date as compared to the same periods 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."

Second quarter 2018 FFO per share increased 6.5% and Core FFO per share
increased 9.7%, and both year-to date FFO and Core FFO per share
increased 8.3%. The increases in FFO and Core FFO were primarily the
result of incremental NOI from 87 self storage properties acquired
between July 1, 2017 and June 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.

Same Store Operating Results (376 Properties)

 
($ in thousands, except per square foot data)     Three Months Ended June 30,     Six Months Ended June 30,
2018   2017   Growth 2018   2017   Growth
Total rental and other property-related revenue $ 62,354 $ 60,175 3.6 % $ 123,220 $ 118,578 3.9 %
Property operating expenses 19,486   19,026   2.4 % 39,476   38,257   3.2 %
Net Operating Income (NOI) $ 42,868   $ 41,149   4.2 % $ 83,744   $ 80,321   4.3 %
NOI Margin 68.7 % 68.4 % 0.3 % 68.0 % 67.7 % 0.3 %
 
Average Occupancy 89.8 % 89.6 % 0.2 % 89.0 % 89.0 %  
Average Annualized Rental Revenue Per Occupied Square Foot $ 11.79   $ 11.43   3.1 % $ 11.77   $ 11.33   3.9 %
 

Year-over-year same store total revenues increased 3.6% for the second
quarter of 2018 and 3.9% year-to-date. The increases were driven
primarily by a 3.1% increase in average annualized rental revenue per
occupied square foot for the second quarter of 2018 and a 3.9% increase
in average annualized rental revenue per occupied square foot
year-to-date. Additionally, second quarter 2018 average occupancy
increased 20 basis points while year-to-date average occupancy remained
flat at 89.0%.

Year-over-year same store property operating expenses increased 2.4% for
the second quarter of 2018 and 3.2% year-to-date. These increases
primarily resulted from increases in property taxes, personnel costs and
advertising.

Investment Activity

During the second quarter of 2018, NSA invested $62.9 million in the
acquisition of 12 consolidated self storage properties and an expansion
project at an existing property located in six states, consisting of
over 0.5 million rentable square feet configured in approximately 4,500
storage units. Consideration for these acquisitions included
approximately $62.5 million of net cash and the assumption of $0.4
million of other working capital liabilities.

Subsequent to June 30, 2018, NSA formed the 2018 Joint Venture to
acquire a portfolio of 112 self storage properties located across 17
states and Puerto Rico, consisting of approximately 8.7 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"). The closing of the 2018 JV Acquisition is expected to
occur during the third quarter of 2018 pending the satisfaction of a
number of customary closing conditions. Following the closing of the
2018 JV Acquisition, NSA expects to rebrand the majority of the self
storage properties acquired by the 2018 Joint Venture under its iStorage
brand and NSA's iStorage management platform will operate the
properties. NSA also expects the 2018 Joint Venture will spin-out to the
Company six self storage properties located in Puerto Rico and a single
self storage property located in Ohio acquired as part of the 2018 JV
Acquisition immediately following the closing of the transaction.

An affiliate of Heitman America Real Estate REIT LLC, NSA's partner in
the 2018 Joint Venture (the "JV Investor"), is currently targeting to
fund approximately $482.3 million in exchange for a 75% ownership
interest in the 2018 Joint Venture. NSA expects to make approximately
$160.8 million in capital contributions to the 2018 Joint Venture,
inclusive of amounts already contributed, in exchange for the remaining
25% ownership interest. NSA has also committed an additional $64.0
million of capital contributions to the 2018 Joint Venture to acquire
the six self storage properties located in Puerto Rico and a single self
storage property located in Ohio.

The 2018 Joint Venture has signed a non-binding term sheet with two
institutional lenders to provide approximately $643.0 million in 10-year
interest-only secured debt financing carrying an interest rate of 4.34%
per annum, to be used by the 2018 Joint Venture to fund a portion of the
purchase price for the 2018 JV Acquisition. Although NSA expects this
debt financing to be obtained and agreed to as outlined in the term
sheet, the term sheet does not represent a binding commitment, and there
can be no assurance that the debt financing needed by the 2018 Joint
Venture to complete the 2018 JV Acquisition will actually be arranged on
the above terms or at all.

Additional information about the 2018 Joint Venture and the 2018 JV
Acquisition will be available on NSA's website at www.nationalstorageaffiliates.com
under Investor Relations > Corporate Presentations.

Capitalization Activity

On May 31, 2018, NSA entered into an agreement with a syndicated group
of lenders to reduce the applicable margins on its $155.0 million
tranche B term loan from a range of LIBOR plus 1.60% to 2.15% to LIBOR
plus 1.30% to 1.70%.

On June 5, 2018, NSA entered into an agreement with lenders to increase
the total borrowing capacity under its term loan facility by $75.0
million for a total term loan facility of $175.0 million. NSA also
increased the term loan facility's remaining expansion option by $200.0
million, for a total expansion option of $225.0 million. If the Company
exercises its remaining expansion option in full, the total expansion
option would provide for a total borrowing capacity under the term loan
facility of $400.0 million. Additionally, the agreement also reduced the
applicable margins on the term loan facility from a range of LIBOR plus
1.75% to 2.35% to LIBOR plus 1.30% to 1.70%.

In addition, NSA completed an offering of 5,900,000 common shares
subsequent to June 30, 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 all
of the borrowings outstanding under its revolving line of credit and
expects to use the additional proceeds, together with amounts it expects
to redraw from its revolving line of credit, to make capital
contributions to the 2018 Joint Venture.

Common Share Dividends

On May 23, 2018, NSA's Board of Trustees declared a quarterly cash
dividend of $0.29 per common share, which was paid on June 29, 2018 to
shareholders of record as of June 15, 2018. This was the sixth common
share dividend increase since the Company's IPO in the second quarter
2015, and represents an annualized dividend rate of $1.16, an 11.5%
increase over the second quarter 2017 annualized dividend rate of $1.04
per share.

2018 Guidance

Although NSA expects certain assumptions included in its previously
provided guidance to be affected by the formation of the 2018 Joint
Venture, the dilution due to equity issuance in July and the expected
closing of the 2018 JV Acquisition, 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
August 6, 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 1:00pm Eastern Time on
Tuesday, August 7, 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:Tuesday, August 7, 2018, 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: 13646795

A replay of the call will be available for one week through Tuesday,
August 14, 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 BMO 13th Annual Real
Estate Conference on September 20 - 21, 2018 in Chicago, Illinois.

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 552 self storage properties located
in 29 states with approximately 34 million rentable square feet. NSA is
the sixth largest owner and operator 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; and the acquisition of
properties, including those under contract to be acquired by the 2018
Joint Venture and our ability to execute on our acquisition pipeline,
the timing of the closing of the portfolio under contract by the 2018
Joint Venture and the timing of other acquisitions under contract; the
timing and ability of the 2018 Joint Venture to secure the debt
financing required by the 2018 Joint Venture to complete the 2018 JV
Acquisition on the terms outlined herein or at all; 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.

 
National Storage Affiliates Trust
Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

 
    Three Months Ended June 30,     Six Months Ended June 30,
2018     2017 2018     2017
REVENUE
Rental revenue $ 75,019 $ 60,154 $ 147,030 $ 117,998
Other property-related revenue 2,549 2,045 4,870 3,926
Management fees and other revenue 2,155   2,142   4,316   3,980  
Total revenue 79,723   64,341   156,216   125,904  
OPERATING EXPENSES
Property operating expenses 25,184 19,803 50,410 39,552
General and administrative expenses 8,460 7,405 16,766 14,586
Depreciation and amortization 22,389   17,800   43,757   36,483  
Total operating expenses 56,033   45,008   110,933   90,621  
Income from operations 23,690 19,333 45,283 35,283
OTHER (EXPENSE) INCOME
Interest expense (10,472 ) (8,160 ) (20,107 ) (15,631 )
Equity in earnings (losses) of unconsolidated real estate venture 100 (765 ) 48 (1,550 )
Acquisition costs (150 ) (167 ) (330 ) (311 )
Non-operating expense (14 ) (84 ) (66 )
(Loss) gain on sale of self storage properties (83 ) 5,637   391   5,637  
Other expense (10,605 ) (3,469 ) (20,082 ) (11,921 )
Income before income taxes 13,085 15,864 25,201 23,362
Income tax expense (44 ) (288 ) (187 ) (605 )
Net income 13,041 15,576 25,014 22,757
Net income attributable to noncontrolling interests (7,150 ) (13,209 ) (8,663 ) (19,835 )
Net income attributable to National Storage Affiliates Trust 5,891 2,367 16,351 2,922
Distributions to preferred shareholders (2,587 )   (5,175 )  
Net income attributable to common shareholders $ 3,304   $ 2,367   $ 11,176   $ 2,922  
 
Earnings (loss) per share - basic $ 0.07   $ 0.05   $ 0.22   $ 0.07  
Earnings (loss) per share - diluted $ 0.07   $ 0.05   $ 0.19   $ 0.07  
 
Weighted average shares outstanding - basic 50,486   44,223   50,393   43,814  
Weighted average shares outstanding - diluted 50,486   44,223   100,492   43,814  
 
 
National Storage Affiliates Trust
Consolidated Balance Sheets

(dollars in thousands, except per share amounts)

(unaudited)

 
        June 30,     December 31,
2018 2017
ASSETS
Real estate
Self storage properties $ 2,475,217 $ 2,275,233
Less accumulated depreciation (206,827 ) (170,358 )
Self storage properties, net 2,268,390 2,104,875
Cash and cash equivalents 16,419 13,366
Restricted cash 7,109 3,041
Debt issuance costs, net 1,746 2,185
Investment in unconsolidated real estate venture 88,725 89,093
Other assets, net 78,166 52,615
Assets held for sale   1,555  
Total assets $ 2,460,555   $ 2,266,730  
LIABILITIES AND EQUITY
Liabilities
Debt financing $ 1,149,789 $ 958,097
Accounts payable and accrued liabilities 26,983 24,459
Deferred revenue 13,546   12,687  
Total liabilities 1,190,318 995,243
Equity
Preferred shares of beneficial interest, par value $0.01 per share.
50,000,000 authorized, 6,900,000 issued and outstanding at June 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, 50,539,575 and 50,284,934 shares
issued and outstanding at June 30, 2018 and December 31, 2017,
respectively
505 503
Additional paid-in capital 701,256 711,467
Distributions in excess of earnings (73,307 ) (55,729 )
Accumulated other comprehensive income 20,211   12,282  
Total shareholders' equity 821,165 841,023
Noncontrolling interests 449,072   430,464  
Total equity 1,270,237   1,271,487  
Total liabilities and equity $ 2,460,555   $ 2,266,730  
 
 
Reconciliation of Net Income to FFO and Core FFO
(in thousands, except per share and unit amounts) (unaudited)
 
    Three Months Ended June 30,     Six Months Ended June 30,
2018     2017 2018     2017
Net income $ 13,041 $ 15,576 $ 25,014 $ 22,757
Add (subtract):
Real estate depreciation and amortization 22,093 17,343 43,168 35,586
Company's share of unconsolidated real estate venture real estate
depreciation and amortization
1,378 1,918 2,755 3,790
Loss (gain) on sale of self storage properties 83 (5,637 ) (391 ) (5,637 )
Distributions to preferred shareholders and unitholders (2,706 ) (5,395 )
FFO attributable to subordinated performance unitholders (1) (6,473 ) (6,903 ) (12,057 ) (13,044 )
FFO attributable to common shareholders, OP unitholders, and LTIP
unitholders
27,416 22,297 53,094 43,452
Add:
Acquisition costs 150 167 330 311
Company's share of unconsolidated real estate venture acquisition
costs
  2     21  
Core FFO attributable to common shareholders, OP unitholders, and
LTIP unitholders
$ 27,566   $ 22,466   $ 53,424   $ 43,784  
 
Weighted average shares and units outstanding - FFO and Core FFO:(2)
Weighted average shares outstanding - basic 50,486 44,223 50,393 43,814
Weighted average restricted common shares outstanding 30 27 30 22
Weighted average OP units outstanding 28,985 25,628 29,059 25,793
Weighted average DownREIT OP unit equivalents outstanding 1,835 1,835 1,835 1,835
Weighted average LTIP units outstanding 687   1,224   676   1,345  
Total weighted average shares and units outstanding - FFO and
Core FFO
82,023   72,937   81,993   72,809  
 
FFO per share and unit $ 0.33 $ 0.31 $ 0.65 $ 0.60
Core FFO per share and unit $ 0.34 $ 0.31 $ 0.65 $ 0.60
(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.
 
 
Reconciliation of Earnings (Loss) Per Share - Diluted to FFO and
Core FFO Per Share and Unit
(in thousands, except per share and unit amounts) (unaudited)
                   
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Earnings (loss) per share - diluted $ 0.07 $ 0.05 $ 0.19 $ 0.07
Impact of the difference in weighted average number of shares(3) (0.03 ) (0.02 ) 0.05 (0.02 )
Impact of GAAP accounting for noncontrolling interests, two-class
method and treasury stock method(4)
0.08 0.18 0.27
Add real estate depreciation and amortization 0.27 0.24 0.53 0.49
Add Company's share of unconsolidated real estate venture real
estate depreciation and amortization
0.02 0.03 0.03 0.05
Subtract gain on sale of self storage properties (0.08 ) (0.08 )
FFO attributable to subordinated performance unitholders (0.08 ) (0.09 ) (0.15 ) (0.18 )
FFO per share and unit 0.33 0.31 0.65 0.60
Add acquisition costs and Company's share of unconsolidated real
estate venture acquisition costs
0.01        
Core FFO per share and unit $ 0.34   $ 0.31   $ 0.65   $ 0.60  
(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).
 
 
Net Operating Income
(dollars in thousands) (unaudited)
 
    Three Months Ended June 30,     Six Months Ended June 30,
2018     2017 2018     2017
Net income $ 13,041 $ 15,576 $ 25,014 $ 22,757
(Subtract) add:
Management fees and other revenue (2,155 ) (2,142 ) (4,316 ) (3,980 )
General and administrative expenses 8,460 7,405 16,766 14,586
Depreciation and amortization 22,389 17,800 43,757 36,483
Interest expense 10,472 8,160 20,107 15,631
Equity in (earnings) losses of unconsolidated real estate venture (100 ) 765 (48 ) 1,550
Acquisition costs 150 167 330 311
Income tax expense 44 288 187 605
Loss (gain) on sale of self storage properties 83 (5,637 ) (391 ) (5,637 )
Non-operating expense   14   84   66  
Net Operating Income $ 52,384   $ 42,396   $ 101,490   $ 82,372  
 
 
EBITDA and Adjusted EBITDA
(dollars in thousands) (unaudited)
               
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Net income $ 13,041 $ 15,576 $ 25,014 $ 22,757
Add:
Depreciation and amortization 22,389 17,800 43,757 36,483
Company's share of unconsolidated real estate venture depreciation
and amortization
1,378 1,918 2,755 3,790
Interest expense 10,472 8,160 20,107 15,631
Income tax expense 44   288   187   605  
EBITDA 47,324 43,742 91,820 79,266
Add (subtract):
Acquisition costs 150 167 330 311
Company's share of unconsolidated real estate venture acquisition
costs
2 21
Loss (gain) on sale of self storage properties 83 (5,637 ) (391 ) (5,637 )
Equity-based compensation expense(1) 919   940   1,786   1,923  
Adjusted EBITDA $ 48,476   $ 39,214   $ 93,545   $ 75,884  
(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.
 
 

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