nsa-20210331

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, 2021

☐ 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)


Maryland						46-5053858
(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 class	Trading symbols	Name of each exchange on which registered
Common Shares of Beneficial Interest, $0.01 par value per share	NSA	New York Stock Exchange
Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per share	NSA Pr A	New 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 Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller 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 4, 2021, 76,606,220 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	4
	Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 (Unaudited)	4
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	6
	Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	9
	Notes to Condensed Consolidated Financial Statements (Unaudited)	11
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	43
ITEM 4.	Controls and Procedures	43
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	44
ITEM 1A.	Risk Factors	44
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
ITEM 3.	Defaults Upon Senior Securities	45
ITEM 4.	Mine Safety Disclosures	45
ITEM 5.	Other Information	45
ITEM 6.	Exhibits	46
Signatures		47

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,
	2021		2020
ASSETS
Real estate
Self storage properties	$	3,807,621	$	3,639,192
Less accumulated depreciation	(473,019)		(443,623)
Self storage properties, net	3,334,602		3,195,569
Cash and cash equivalents	19,513		18,723
Restricted cash	3,297		2,978
Debt issuance costs, net	2,293		2,496
Investment in unconsolidated real estate ventures	199,277		202,533
Other assets, net	69,751		68,149
Operating lease right-of-use assets	22,903		23,129
Total assets	$	3,651,636	$	3,513,577
LIABILITIES AND EQUITY
Liabilities
Debt financing	$	1,932,770	$	1,916,971
Accounts payable and accrued liabilities	42,347		47,043
Interest rate swap liabilities	52,044		77,918
Operating lease liabilities	24,569		24,756
Deferred revenue	18,286		16,414
Total liabilities	2,070,016		2,083,102
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 8,732,719 issued and outstanding at March 31, 2021 and December 31, 2020, respectively, at liquidation preference	218,318		218,318
Common shares of beneficial interest, par value $0.01 per share. 250,000,000 authorized, 75,186,127 and 71,293,117 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	752		713
Additional paid-in capital	1,156,378		1,050,714
Distributions in excess of earnings	(259,155)		(251,704)
Accumulated other comprehensive loss	(31,642)		(49,084)
Total shareholders' equity	1,084,651		968,957
Noncontrolling interests	496,969		461,518
Total equity	1,581,620		1,430,475
Total liabilities and equity	$	3,651,636	$	3,513,577

See notes to condensed consolidated financial statements.

NATIONAL STORAGE AFFILIATES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)


	Three Months Ended March 31,
		2021		2020
REVENUE
Rental revenue		$	113,127	$	95,402
Other property-related revenue		4,137		3,371
Management fees and other revenue		5,728		5,449
Total revenue		122,992		104,222
OPERATING EXPENSES
Property operating expenses		34,604		30,592
General and administrative expenses		11,238		11,094
Depreciation and amortization		32,424		29,105
Other		397		389
Total operating expenses		78,663		71,180

OTHER (EXPENSE) INCOME
Interest expense		(16,792)		(15,628)

Equity in earnings (losses) of unconsolidated real estate ventures		759		(340)
Acquisition costs		(292)		(833)
Non-operating expense		(173)		(192)

Other expense		(16,498)		(16,993)
Income before income taxes		27,831		16,049
Income tax expense		(196)		(286)
Net income		27,635		15,763
Net income attributable to noncontrolling interests		(6,797)		(9,115)
Net income attributable to National Storage Affiliates Trust		20,838		6,648
Distributions to preferred shareholders		(3,275)		(3,273)
Net income attributable to common shareholders		$	17,563	$	3,375

Earnings (loss) per share - basic		$	0.24	$	0.06
Earnings (loss) per share - diluted		$	0.19	$	0.06


Weighted average shares outstanding - basic		71,794		59,798
Weighted average shares outstanding - diluted		123,187		59,798


Dividends declared per common share		$	0.35	$	0.33

See notes to condensed consolidated financial statements.

NATIONAL STORAGE AFFILIATES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(dollars in thousands)

(Unaudited)


	Three Months Ended March 31,
		2021		2020
Net income		$	27,635	$	15,763
Other comprehensive income (loss)
Unrealized gain (loss) on derivative contracts		20,900		(66,369)
Reclassification of other comprehensive loss to interest expense		4,957		612
Other comprehensive income (loss)		25,857		(65,757)
Comprehensive income (loss)		53,492		(49,994)
Comprehensive (income) loss attributable to noncontrolling interests		(14,814)		14,349
Comprehensive income (loss) attributable to National Storage Affiliates Trust		$	38,678	$	(35,645)

See notes to condensed consolidated financial statements.

NATIONAL STORAGE AFFILIATES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(dollars in thousands, except share amounts)

(Unaudited)


											Accumulated
							Additional		Distributions		Other
	Preferred Shares			Common Shares			Paid-in		In Excess Of		Comprehensive		Noncontrolling		Total
	Number	Amount		Number	Amount		Capital		Earnings		(Loss) Income		Interests		Equity
Balances, December 31, 2019	8,727,119	$	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
Redemptions 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, 2020	8,732,719	$	218,318	68,027,212	$	680	$	970,786	$	(213,447)	$	(52,855)	$	457,573	$	1,381,055

See notes to condensed consolidated financial statements.

NATIONAL STORAGE AFFILIATES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(dollars in thousands, except share amounts)

(Unaudited)


											Accumulated
							Additional		Distributions		Other
	Preferred Shares			Common Shares			Paid-in		In Excess Of		Comprehensive		Noncontrolling		Total
	Number	Amount		Number	Amount		Capital		Earnings		(Loss) Income		Interests		Equity
Balances, December 31, 2020	8,732,719	$	218,318	71,293,117	$	713	$	1,050,714	$	(251,704)	$	(49,084)	$	461,518	$	1,430,475

OP equity issued for property acquisitions:
OP units and subordinated performance units, net of offering costs	—	—		—	—		—		—		—		22,897		22,897


Redemptions of OP units	—	—		190,248	2		2,332		—		(108)		(2,226)		—
Issuance of common shares, net of offering costs	—	—		3,692,216	37		122,375		—		—		—		122,412

Contributions from noncontrolling interests	—	—		—	—		—		—		—		103		103


Effect of changes in ownership for consolidated entities	—	—		—	—		(18,983)		—		(290)		19,273		—
Equity-based compensation expense	—	—		—	—		92		—		—		1,194		1,286

Issuance of restricted common shares	—	—		15,369	—		—		—		—		—		—
Vesting and forfeitures of restricted common shares, net	—	—		(4,823)	—		(152)		—		—		—		(152)

Preferred share dividends	—	—		—	—		—		(3,275)		—		—		(3,275)
Common share dividends	—	—		—	—		—		(25,014)		—		—		(25,014)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		(20,604)		(20,604)
Other comprehensive income	—	—		—	—		—		—		17,840		8,017		25,857
Net income	—	—		—	—		—		20,838		—		6,797		27,635
Balances, March 31, 2021	8,732,719	$	218,318	75,186,127	$	752	$	1,156,378	$	(259,155)	$	(31,642)	$	496,969	$	1,581,620

See notes to condensed consolidated financial statements.

NATIONAL STORAGE AFFILIATES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)


	Three Months Ended March 31,
	2021		2020
OPERATING ACTIVITIES
Net income	$	27,635	$	15,763
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	32,424		29,105
Amortization of debt issuance costs	806		754
Amortization of debt discount and premium, net	(177)		(356)


Mark-to-market changes in value on equity securities	—		142


Equity-based compensation expense	1,286		774
Equity in (earnings) losses of unconsolidated real estate ventures	(759)		340
Distributions from unconsolidated real estate ventures	4,015		3,325
Change in assets and liabilities, net of effects of self storage property acquisitions:
Other assets	686		(118)
Accounts payable and accrued liabilities	(3,037)		1,086
Deferred revenue	1,191		(130)
Net Cash Provided by Operating Activities	64,070		50,685
INVESTING ACTIVITIES
Acquisition of self storage properties	(141,175)		(209,981)
Capital expenditures	(5,685)		(4,909)
Investments in and advances to unconsolidated real estate ventures	—		(3,125)

Deposits and advances for self storage property and other acquisitions	(2,530)		(500)
Proceeds from sale of equity securities	—		7,560
Expenditures for corporate furniture, equipment and other	(10)		(157)


Net Cash Used In Investing Activities	(149,400)		(211,112)
FINANCING ACTIVITIES
Proceeds from issuance of common shares	122,412		4,249


Borrowings under debt financings	180,000		244,000


Contributions from noncontrolling interests	103		—

Principal payments under debt financings	(164,564)		(46,579)

Payment of dividends to common shareholders	(25,014)		(19,747)
Distributions to preferred shareholders	(3,275)		(3,273)
Distributions to noncontrolling interests	(20,730)		(19,813)



Debt issuance costs	(332)		—
Equity offering costs	(2,161)		—
Net Cash Provided By Financing Activities	86,439		158,837
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	1,109		(1,590)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Beginning of period	21,701		24,276
End of period	$	22,810	$	22,686

See notes to condensed consolidated financial statements.

NATIONAL STORAGE AFFILIATES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)


Supplemental Cash Flow and Noncash Information
Cash paid for interest	$	18,359	$	16,502


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.

NATIONAL STORAGE AFFILIATES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(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 667 consolidated self storage properties in 33 states and Puerto Rico with approximately 40.8 million rentable square feet in approximately 321,000 storage units as of March 31, 2021. 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"), affiliates of Investment Real Estate Management, LLC d/b/a Moove In Self Storage of York, Pennsylvania ("Moove In") and Blue Sky Self Storage, a strategic partnership between Argus Professional Storage Management and GYS Development LLC ("Blue Sky").

As of March 31, 2021, 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, 2021, in total, the Company operated and held ownership interests in 844 self storage properties located across 36 states and Puerto Rico with approximately 53.5 million rentable square feet in approximately 425,000 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 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 and year to date periods 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, 2021, the Company's operating partnership was the primary beneficiary of, and therefore consolidated, 22 partnerships that are considered VIEs, which owned 40 self storage properties. As of December 31, 2020, the Company's operating partnership was the primary beneficiary of, and therefore consolidated, 21 partnerships that are considered VIEs, which owned 34 self storage properties. The net book value of the real estate owned by these VIEs was $268.5 million and $225.1 million as of March 31, 2021 and December 31, 2020, 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 $100.7 million and $100.7 million as of March 31, 2021 and December 31, 2020, respectively. The creditors of the consolidated VIEs do not have recourse to the Company's general credit.

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, sales of storage supplies and truck rentals 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, 2021 and 2020, the Company recognized $3.1 million and $2.6 million, respectively, of tenant insurance and tenant warranty protection plan revenues.

The Company sells boxes, packing supplies, locks, other retail merchandise and rents moving trucks at its properties. During the three months ended March 31, 2021 and 2020, the Company recognized retail sales of $0.5 million and $0.4 million, respectively.

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, 2021 and 2020, the Company recognized property management fees, call center fees and platform fees of $3.5 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. Accordingly, the Company's performance obligation related to the Initial 2016 JV Portfolio was satisfied during the year ended December 31, 2020. As of March 31, 2021 and December 31, 2020, the Company had deferred revenue related to the acquisition fees of $1.1 million and $1.3 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, 2021 and 2020, the Company recognized acquisition fees of $0.2 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, 2021 and 2020, the Company recognized $1.9 million and $1.6 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.

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.

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.

3. SHAREHOLDERS' EQUITY AND NONCONTROLLING INTERESTS

Shareholders' Equity

Forward Equity Offering

On September 22, 2020, the Company entered into an underwriting agreement, as well as certain forward sale agreements, with a syndicate of banks acting as underwriters, forward sellers, and/or forward purchasers in connection with an underwritten public offering of 4,500,000 common shares of beneficial interest, $0.01 par value per share of the Company ("common shares") at a public offering price of $33.15 per share (the "forward offering"). The underwriters were granted a 30-day option to purchase up to an additional 675,000 common shares at the same price, which they partially exercised for an additional 400,000 common shares on October 6, 2020. Therefore, the forward sellers or their affiliates, at the Company's request, borrowed from third parties and sold to the underwriters an aggregate of 4,900,000 common shares, which the underwriters sold at an offering price of $33.15 per share, for proceeds of approximately $162.4 million. As a result of this forward construct, the Company did not receive any proceeds from the sale of such shares at closing. The Company has determined that the forward sale agreements are not considered to be derivative instruments under the guidance within ASC 815.

On December 30, 2020, the Company settled a portion of the forward offering by physically delivering 1,850,510 common shares to the forward purchasers for net proceeds of approximately $60.0 million. On March 22, 2021, the Company settled the remaining portion of the forward offering by physically delivering 3,049,490 common shares to the forward purchasers for net proceeds of approximately $97.3 million.

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 an aggregate of $250.0 million 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 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, 2021, the Company sold 642,726 common shares through the ATM program at an average offering price of $39.41 per share, resulting in net proceeds to the Company of approximately $25.1 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, 2021 and December 31, 2020, units reflecting noncontrolling interests consisted of the following:


	March 31, 2021	December 31, 2020
Series A-1 preferred units	637,382	637,382
OP units	29,921,057	29,616,809
Subordinated performance units	9,197,259	9,030,872
LTIP units	798,782	734,196
DownREIT units
DownREIT OP units	1,924,918	1,924,918
DownREIT subordinated performance units	4,337,111	4,337,111
Total	46,816,509	46,281,288

Series A-1 Preferred Units

The 6.000% Series A-1 Cumulative Redeemable Preferred Units ("Series A-1 preferred units") rank senior to OP units and subordinated performance units in the Company's operating partnership with respect to distributions and liquidation. The Series A-1 preferred units have a stated value of $25.00 per unit and receive distributions at an annual rate of 6.000%. These distributions are cumulative. The Series A-1 preferred units are redeemable at the option of the holder after the first anniversary of the date of issuance, which redemption obligations may be satisfied at the Company’s option in cash in an amount equal to the market value of an equivalent number of the Series A preferred shares or the issuance of Series A preferred shares on a one-for-one basis, subject to adjustments. The Series A preferred shares are redeemable by the Company for a cash redemption price of $25.00 per share, plus accrued but unpaid dividends.

OP Units and DownREIT OP units

OP units in the Company's operating partnership are redeemable for cash or, at the Company's option, exchangeable for the Company's common shares on a one-for-one basis, and DownREIT OP units are redeemable for cash or, at the Company's option, exchangeable for OP units in its operating partnership on a one-for-one basis, subject to certain adjustments in each case. The holders of OP units are generally not entitled to elect redemption until one year after the issuance of the OP units. The holders of DownREIT OP units are generally not entitled to elect redemption until five years after the date of the contributor's initial contribution.

The increase in OP units outstanding from December 31, 2020 to March 31, 2021 was due to the issuance of 351,457 OP units in connection with the acquisition of self storage properties, 80,006 LTIP units which were converted into an equivalent number of OP units and 63,033 OP units issued upon the conversion of 32,741 subordinated performance units (as discussed further below) partially offset by the redemption of 190,248 OP units for an equal number of common shares.

Subordinated Performance Units and DownREIT Subordinated Performance Units

Subordinated performance units may also, under certain circumstances, be convertible into OP units which are exchangeable for common shares as described above, and DownREIT subordinated performance units may, under certain circumstances, be exchangeable for subordinated performance units on a one-for-one basis. Subordinated performance units are only convertible into OP units after a two year lock-out period and then generally (i) at the holder’s election only upon the achievement of certain performance thresholds relating to the properties to which such subordinated performance units relate or (ii) at the Company's election upon a retirement event of a PRO that holds such subordinated performance units or upon certain qualifying terminations. The holders of DownREIT subordinated performance units are generally not entitled to elect redemption until at least five years after the date of the contributor's initial contribution.

Following such lock-out period, a holder of subordinated performance units in the Company's operating partnership may elect a voluntary conversion one time each year on or prior to December 1st to convert a pre-determined portion of such subordinated performance units into OP units in the Company's operating partnership, with such conversion effective January 1st of the following year, with each subordinated performance unit being converted into the number of OP units determined by dividing the average cash available for distribution, or CAD, per unit on the series of specific subordinated performance units over the one-year period prior to conversion

by 110% of the CAD per unit on the OP units determined over the same period. CAD per unit on the series of specific subordinated performance units and OP units is determined by the Company based generally upon the application of the provisions of the LP Agreement applicable to the distributions of operating cash flow and capital transactions proceeds.

The increase in subordinated performance units outstanding from December 31, 2020 to March 31, 2021 was due to the issuance of 199,128 subordinated performance units for co-investment by the Company's PROs in connection with the acquisition of self storage properties partially offset by the voluntary conversion of 32,741 subordinated performance units into 63,033 OP units.

LTIP Units

LTIP units are a special class of partnership interest in the Company's operating partnership that allow the holder to participate in the ordinary and liquidating distributions received by holders of the OP units (subject to the achievement of specified levels of profitability by the Company's operating partnership or the achievement of certain events). LTIP units may also, under certain circumstances, be convertible into OP units on a one-for-one basis, which are then exchangeable for common shares as described above.

The increase in LTIP units outstanding from December 31, 2020 to March 31, 2021 was due to the issuance of 144,592 compensatory LTIP units to employees and trustees, net of forfeitures, partially offset by the conversion of 80,006 LTIP units into an equivalent number of OP units.

4. SELF STORAGE PROPERTIES

Self storage properties are summarized as follows (dollars in thousands):


	March 31, 2021		December 31, 2020
Land	$	765,453	$	738,863
Buildings and improvements	3,033,932		2,892,490
Furniture and equipment	8,236		7,839
Total self storage properties	3,807,621		3,639,192
Less accumulated depreciation	(473,019)		(443,623)
Self storage properties, net	$	3,334,602	$	3,195,569

Depreciation expense related to self storage properties amounted to $29.4 million and $25.7 million during the three months ended March 31, 2021 and 2020, respectively.

5. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES

2018 Joint Venture

As of March 31, 2021, the Company's unconsolidated real estate venture, formed in September 2018 with an affiliate of Heitman America Real Estate REIT LLC (the "2018 Joint Venture"), owned and operated a portfolio of 103 self storage properties containing approximately 7.8 million rentable square feet, configured in approximately 64,000 storage units and located across 17 states.

2016 Joint Venture

As of March 31, 2021, the Company's unconsolidated real estate venture, formed in September 2016 with a state pension fund advised by Heitman Capital Management LLC (the "2016 Joint Venture"), owned and operated a portfolio of 74 properties containing approximately 4.9 million rentable square feet, configured in approximately 40,000 storage units and located across 13 states.

The following table presents the combined condensed financial position of the Company's unconsolidated real estate ventures as of March 31, 2021 and December 31, 2020 (in thousands):


	March 31, 2021		December 31, 2020
ASSETS
Self storage properties, net	$	1,784,520	$	1,799,522
Other assets	24,981		24,397
Total assets	$	1,809,501	$	1,823,919
LIABILITIES AND EQUITY
Debt financing	$	1,000,686	$	1,000,464
Other liabilities	20,055		21,612
Equity	788,760		801,843
Total liabilities and equity	$	1,809,501	$	1,823,919

The following tables present the combined condensed operating information of the Company's unconsolidated real estate ventures for the three months ended March 31, 2021 and 2020 (in thousands):


	Three Months Ended March 31,
	2021		2020
Total revenue	$	43,695	$	40,238
Property operating expenses	11,788		13,178
Net operating income	31,907		27,060
Supervisory, administrative and other expenses	(2,882)		(2,669)
Depreciation and amortization	(15,522)		(15,146)
Interest expense	(10,405)		(10,264)

Acquisition and other expenses	(121)		(399)
Net income (loss)	$	2,977	$	(1,418)

6. ACQUISITIONS

The Company acquired 23 self storage properties with an estimated fair value of $166.0 million during the three months ended March 31, 2021. Of these acquisitions, seven self storage properties with an estimated fair value of $48.5 million were acquired by the Company from its PROs. The 23 self storage property acquisitions were accounted for as asset acquisitions and accordingly, $1.3 million of transaction costs related to the acquisitions were capitalized as part of the basis of the acquired properties. The Company recognized the estimated fair value of the acquired assets and assumed liabilities on the respective dates of such acquisitions. The Company allocated the total purchase price to the estimated fair value of tangible and intangible assets acquired and liabilities assumed. The Company allocated a portion of the purchase price to identifiable intangible assets consisting of customer in-place leases which were recorded at estimated fair value of $3.9 million, resulting in a total fair value of $162.1 million allocated to real estate.

The following table summarizes the investment in self storage property acquisitions completed by the Company during the three months ended March 31, 2021 (dollars in thousands):


Acquisitions Closed During the Three Months Ended:	Number of Properties	Summary of Investment
		Cash and Acquisition Costs		Value of OP Equity(1)		Other Liabilities		Total

March 31, 2021	23	$	141,928	$	22,897	$	1,138	$	165,963

(1)Value of OP equity represents the fair value of OP units and subordinated performance units.

7. OTHER ASSETS

Other assets consist of the following (dollars in thousands):


	March 31, 2021		December 31, 2020
Customer in-place leases, net of accumulated amortization of $3,219 and $5,322, respectively	$	7,930	$	6,460
Receivables:
Trade, net	2,164		2,734
PROs and other affiliates	2,107		2,974
Receivables from unconsolidated real estate ventures	5,414		5,825
Property acquisition and other deposits	2,530		1,087


Prepaid expenses and other	8,098		7,099
Corporate furniture, equipment and other, net	1,612		1,673
Trade names	6,380		6,380
Management contracts, net of accumulated amortization of $3,476 and $3,222, respectively	11,744		11,998
Tenant reinsurance intangible, net of accumulated amortization of $1,049 and $903, respectively	13,590		13,737
Goodwill	8,182		8,182
Total	$	69,751	$	68,149

Amortization expense related to customer in-place leases amounted to $2.4 million and $2.9 million for the three months ended March 31, 2021 and 2020, respectively. Amortization expense related to management contracts amounted to $0.3 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively. Amortization expense related to the tenant reinsurance intangible amounted to $0.1 million and $0.1 million for the three months ended March 31, 2021 and 2020, respectively.

8. DEBT FINANCING

The Company's outstanding debt as of March 31, 2021 and December 31, 2020 is summarized as follows (dollars in thousands):


	Interest Rate(1)	March 31, 2021		December 31, 2020
Credit Facility:
Revolving line of credit	1.41%	$	190,500	$	174,000
Term loan A	3.74%	125,000		125,000
Term loan B	2.91%	250,000		250,000
Term loan C	2.80%	225,000		225,000
Term loan D	3.57%	175,000		175,000
2023 Term loan facility	2.83%	175,000		175,000
2028 Term loan facility	4.62%	75,000		75,000
2029 Term loan facility	4.27%	100,000		100,000
2029 Senior Unsecured Notes	3.98%	100,000		100,000
2030 Senior Unsecured Notes	2.99%	150,000		150,000
2031 Senior Unsecured Notes	4.08%	50,000		50,000
2032 Senior Unsecured Notes	3.09%	100,000		100,000
Fixed rate mortgages payable	4.26%	222,549		223,614
Total principal		1,938,049		1,922,614
Unamortized debt issuance costs and debt premium, net		(5,279)		(5,643)
Total debt		$	1,932,770	$	1,916,971

(1)Represents the effective interest rate as of March 31, 2021. 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 for unused borrowings.

As of March 31, 2021, the Company's unsecured credit facility provided for total borrowings of $1.275 billion (the "credit facility"). The credit facility consists of the following components: (i) a revolving line of credit (the "Revolver") which provides for a total borrowing commitment up to $500.0 million, under which the Company may borrow, repay and re-borrow amounts, (ii) a $125.0 million tranche A term loan facility (the "Term Loan A"), (iii) a $250.0 million tranche B term loan facility (the "Term Loan B"), (iv) a $225.0 million tranche C term loan facility (the "Term Loan C"), and (v) a $175.0 million tranche D term loan facility (the "Term Loan D"). As of March 31, 2021, the Company had an expansion option under the credit facility, which, if exercised in full, would provide for a total credit facility of $1.750 billion.

As of March 31, 2021, the Company had outstanding letters of credit totaling $