nsa-20220930

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 September 30, 2022

☐ 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 November 2, 2022, 90,865,339 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	3
	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (Unaudited)	3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)	5
	Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (Unaudited)	10
	Notes to Condensed Consolidated Financial Statements (Unaudited)	12
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	50
ITEM 4.	Controls and Procedures	51
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	51
ITEM 1A.	Risk Factors	51
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
ITEM 3.	Defaults Upon Senior Securities	52
ITEM 4.	Mine Safety Disclosures	52
ITEM 5.	Other Information	52
ITEM 6.	Exhibits	53
Signatures		55

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

NATIONAL STORAGE AFFILIATES TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share amounts)

(Unaudited)


	September 30,		December 31,
	2022		2021
ASSETS
Real estate
Self storage properties	$	6,345,448	$	5,798,188
Less accumulated depreciation	(722,010)		(578,717)
Self storage properties, net	5,623,438		5,219,471
Cash and cash equivalents	33,401		25,013
Restricted cash	4,013		2,862
Debt issuance costs, net	1,720		2,433
Investment in unconsolidated real estate ventures	231,696		188,187
Other assets, net	147,969		102,417
Operating lease right-of-use assets	21,501		22,211
Total assets	$	6,063,738	$	5,562,594
LIABILITIES AND EQUITY
Liabilities
Debt financing	$	3,487,724	$	2,940,931
Accounts payable and accrued liabilities	92,466		59,262
Interest rate swap liabilities	—		33,757
Operating lease liabilities	23,362		23,981
Deferred revenue	23,143		22,208
Total liabilities	3,626,695		3,080,139
Commitments and contingencies (Note 11)
Equity
Preferred shares of beneficial interest, par value $0.01 per share. 50,000,000 authorized, 9,017,588 and 8,736,719 issued and outstanding at September 30, 2022 and December 31, 2021, respectively, at liquidation preference	225,439		218,418
Common shares of beneficial interest, par value $0.01 per share. 250,000,000 authorized, 90,861,825 and 91,198,929 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	909		912
Additional paid-in capital	1,804,444		1,866,773
Distributions in excess of earnings	(374,978)		(291,263)
Accumulated other comprehensive income (loss)	42,852		(19,611)
Total shareholders' equity	1,698,666		1,775,229
Noncontrolling interests	738,377		707,226
Total equity	2,437,043		2,482,455
Total liabilities and equity	$	6,063,738	$	5,562,594

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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
REVENUE
Rental revenue	$	193,724	$	139,420	$	552,829	$	379,857
Other property-related revenue	6,400		5,141		18,907		14,107
Management fees and other revenue	6,649		6,282		21,111		18,117
Total revenue	206,773		150,843		592,847		412,081
OPERATING EXPENSES
Property operating expenses	55,132		39,465		157,678		110,723
General and administrative expenses	15,298		13,012		43,966		36,700
Depreciation and amortization	59,631		38,983		175,594		107,458
Other	6,356		994		7,351		1,701
Total operating expenses	136,417		92,454		384,589		256,582

OTHER (EXPENSE) INCOME
Interest expense	(28,871)		(18,144)		(75,966)		(52,275)

Equity in earnings of unconsolidated real estate ventures	2,134		1,682		5,590		3,615
Acquisition costs	(1,142)		(512)		(2,377)		(922)
Non-operating expense	(226)		(241)		(599)		(562)
Gain on sale of self storage properties	—		—		2,134		—
Other expense, net	(28,105)		(17,215)		(71,218)		(50,144)
Income before income taxes	42,251		41,174		137,040		105,355
Income tax expense	(2,074)		(444)		(3,652)		(1,315)
Net income	40,177		40,730		133,388		104,040
Net income attributable to noncontrolling interests	(17,966)		(10,506)		(60,911)		(24,260)
Net income attributable to National Storage Affiliates Trust	22,211		30,224		72,477		79,780
Distributions to preferred shareholders	(3,382)		(3,276)		(10,043)		(9,827)
Net income attributable to common shareholders	$	18,829	$	26,948	$	62,434	$	69,953

Earnings per share - basic	$	0.21	$	0.31	$	0.68	$	0.89
Earnings per share - diluted	$	0.21	$	0.26	$	0.68	$	0.71


Weighted average shares outstanding - basic	91,471		86,257		91,446		78,307
Weighted average shares outstanding - diluted	91,471		140,025		91,446		130,983


Dividends declared per common share	$	0.55	$	0.41	$	1.60	$	1.14

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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	40,177	$	40,730	$	133,388	$	104,040
Other comprehensive income
Unrealized gain on derivative contracts	27,049		243		80,213		14,418
Reclassification of other comprehensive (income) loss to interest expense	(833)		5,242		7,427		15,323
Other comprehensive income	26,216		5,485		87,640		29,741
Comprehensive income	66,393		46,215		221,028		133,781
Comprehensive income attributable to noncontrolling interests	(25,624)		(12,009)		(86,568)		(33,304)
Comprehensive income attributable to National Storage Affiliates Trust	$	40,769	$	34,206	$	134,460	$	100,477

See notes to condensed consolidated financial statements.

NATIONAL STORAGE AFFILIATES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(dollars in thousands, except number of shares)

(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

OP equity issued for property acquisitions:
OP units and subordinated performance units, net of offering costs	—	—		—	—		—		—		—		24,102		24,102


Redemptions of OP units	—	—		121,923	1		1,554		—		(52)		(1,503)		—
Issuance of common shares, net of offering costs	—	—		2,390,000	24		103,646		—		—		—		103,670
Issuance of common shares, share based compensation plans	4,000	100		—	—		—		—		—		(100)		—

See notes to condensed consolidated financial statements.

NATIONAL STORAGE AFFILIATES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(dollars in thousands, except number of shares)

(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
Effect of changes in ownership for consolidated entities	—	—		—	—		(17,420)		—		(227)		17,647		—

Equity-based compensation expense	—	—		—	—		113		—		—		1,235		1,348

Issuance of restricted common shares	—	—		13,255	—		—		—		—		—		—
Vesting and forfeitures of restricted common shares, net	—	—		(2,474)	—		(2)		—		—		—		(2)

Preferred share dividends	—	—		—	—		—		(3,276)		—		—		(3,276)
Common share dividends	—	—		—	—		—		(29,404)		—		—		(29,404)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		(24,606)		(24,606)
Other comprehensive loss	—	—		—	—		—		—		(1,125)		(476)		(1,601)
Net income	—	—		—	—		—		28,718		—		6,957		35,675
Balances, June 30, 2021	8,736,719	$	218,418	77,708,831	$	777	$	1,244,269	$	(263,117)	$	(33,046)	$	520,225	$	1,687,526

OP equity issued for property acquisitions:
OP units and subordinated performance units, net of offering costs	—	—		—	—		—		—		—		31,074		31,074



Redemptions of OP units	—	—		340,349	3		5,556		—		(144)		(5,415)		—
Issuance of common shares, net of offering costs	—	—		10,902,000	109		537,213		—		—		—		537,322

Effect of changes in ownership for consolidated entities	—	—		—	—		(94,670)		—		(1,095)		95,765		—

Equity-based compensation expense	—	—		—	—		113		—		—		1,341		1,454

Issuance of restricted common shares	—	—		370	—		—		—		—		—		—
Vesting and forfeitures of restricted common shares, net	—	—		(5,701)			—		—		—		—		—

Preferred share dividends	—	—		—	—		—		(3,276)		—		—		(3,276)
Common share dividends	—	—		—	—		—		(36,467)		—		—		(36,467)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		(26,184)		(26,184)
Other comprehensive income	—	—		—	—		—		—		3,982		1,503		5,485
Net income	—	—		—	—		—		30,224		—		10,506		40,730
Balances, September 30, 2021	8,736,719	$	218,418	88,945,849	$	889	$	1,692,481	$	(272,636)	$	(30,303)	$	628,815	$	2,237,664

See notes to condensed consolidated financial statements.

NATIONAL STORAGE AFFILIATES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(dollars in thousands, except number of shares)

(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, 2021	8,736,719	$	218,418	91,198,929	$	912	$	1,866,773	$	(291,263)	$	(19,611)	$	707,226	$	2,482,455

OP equity issued:
Internalization of PRO, net of offering costs	—	—		—	—		—		—		—		3,217		3,217
Acquisition of properties	—	—		—	—		—		—		—		16,576		16,576


Redemptions of OP units	—	—		258,477	3		4,601		—		(44)		(4,560)		—




Redemption of Series A-1 preferred units	8,216	205		—	—		—		—		—		(205)		—
Effect of changes in ownership for consolidated entities	—	—		—	—		(40,627)		—		590		40,037		—
Equity-based compensation expense	—	—		—	—		103		—		—		1,441		1,544

Issuance of restricted common shares	—	—		7,913	—		—		—		—		—		—
Vesting and forfeitures of restricted common shares, net	—	—		(3,599)	—		(118)		—		—		—		(118)

Preferred share dividends	—	—		—	—		—		(3,279)		—		—		(3,279)
Common share dividends	—	—		—	—		—		(45,710)		—		—		(45,710)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		(33,009)		(33,009)
Other comprehensive income	—	—		—	—		—		—		30,799		12,783		43,582
Net income	—	—		—	—		—		25,228		—		19,558		44,786
Balances, March 31, 2022	8,744,935	$	218,623	91,461,720	$	915	$	1,830,732	$	(315,024)	$	11,734	$	763,064	$	2,510,044


OP units and subordinated performance units, net of offering costs	—	—		—	—		—		—		—		13,938		13,938


Redemptions of OP units	—	—		294,573	3		5,140		—		59		(5,202)		—

Redemptions of Series A-1 preferred units	272,653	6,816		—	—		—		—		—		(6,816)		—
Effect of changes in ownership for consolidated entities	—	—		—	—		5,924		—		(47)		(5,877)		—

Equity-based compensation expense	—	—		—	—		127		—		—		1,453		1,580

See notes to condensed consolidated financial statements.

NATIONAL STORAGE AFFILIATES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(dollars in thousands, except number of shares)

(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
Issuance of restricted common shares	—	—		630	—		—		—		—		—		—
Vesting and forfeitures of restricted common shares, net	—	—		(1,251)	—		(43)		—		—		—		(43)

Preferred share dividends	—	—		—	—		—		(3,382)		—		—		(3,382)
Common share dividends	—	—		—	—		—		(50,466)		—		—		(50,466)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		(36,625)		(36,625)
Other comprehensive income	—	—		—	—		—		—		12,626		5,216		17,842
Net income	—	—		—	—		—		25,038		—		23,387		48,425
Balances, June 30, 2022	9,017,588	$	225,439	91,755,672	$	918	$	1,841,880	$	(343,834)	$	24,372	$	752,538	$