August 7, 2020 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

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 June 30, 2020

☐ 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 August 6, 2020, 68,789,688 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

Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 (Unaudited)

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)

Condensed Consolidated Statements of Changes in Equity for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 (Unaudited)

Notes to Condensed Consolidated Financial Statements (Unaudited)

ITEM 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

ITEM 4.

Controls and Procedures

PART II. OTHER INFORMATION

ITEM 1.

Legal Proceedings

ITEM 1A.

Risk Factors

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

ITEM 3.

Defaults Upon Senior Securities

ITEM 4.

Mine Safety Disclosures

ITEM 5.

Other Information

ITEM 6.

Exhibits

Signatures

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

NATIONAL STORAGE AFFILIATES TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share amounts)

(Unaudited)


	June 30,		December 31,
	2020		2019
ASSETS
Real estate
Self storage properties	$	3,354,454	$	3,091,719
Less accumulated depreciation	(389,828)		(337,822)
Self storage properties, net	2,964,626		2,753,897
Cash and cash equivalents	17,271		20,558
Restricted cash	5,635		3,718
Debt issuance costs, net	2,900		3,264
Investment in unconsolidated real estate ventures	210,114		214,061
Other assets, net	60,927		65,441
Operating lease right-of-use assets	23,577		23,306
Total assets	$	3,285,050	$	3,084,245
LIABILITIES AND EQUITY
Liabilities
Debt financing	$	1,741,544	$	1,534,047
Accounts payable and accrued liabilities	42,641		37,966
Interest rate swap liabilities	91,175		19,943
Operating lease liabilities	25,095		24,665
Deferred revenue	15,850		15,523
Total liabilities	1,916,305		1,632,144
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 8,727,119 issued and outstanding at June 30, 2020 and December 31, 2019, at liquidation preference	218,318		218,178
Common shares of beneficial interest, par value $0.01 per share. 250,000,000 authorized, 68,703,733 and 59,659,108 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	687		597
Additional paid-in capital	984,950		905,763
Distributions in excess of earnings	(228,924)		(197,075)
Accumulated other comprehensive loss	(57,462)		(7,833)
Total shareholders' equity	917,569		919,630
Noncontrolling interests	451,176		532,471
Total equity	1,368,745		1,452,101
Total liabilities and equity	$	3,285,050	$	3,084,245

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 June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
REVENUE
Rental revenue	$	95,302	$	87,175	$	190,704	$	170,030
Other property-related revenue	3,418		3,128		6,789		5,952
Management fees and other revenue	5,697		5,116		11,146		10,009
Total revenue	104,417		95,419		208,639		185,991
OPERATING EXPENSES
Property operating expenses	30,257		27,190		60,849		53,647
General and administrative expenses	10,329		10,813		21,423		21,193
Depreciation and amortization	29,309		25,829		58,414		50,178
Other	462		357		851		743
Total operating expenses	70,357		64,189		141,537		125,761

OTHER (EXPENSE) INCOME
Interest expense	(15,513)		(13,947)		(31,141)		(27,158)

Equity in earnings (losses) of unconsolidated real estate ventures	52		(1,646)		(288)		(3,748)
Acquisition costs	(252)		(305)		(1,085)		(462)
Non-operating expense	(317)		(169)		(509)		(267)
Gain on sale of self storage properties	—		2,814		—		2,814
Other expense	(16,030)		(13,253)		(33,023)		(28,821)
Income before income taxes	18,030		17,977		34,079		31,409
Income tax expense	(243)		(244)		(529)		(736)
Net income	17,787		17,733		33,550		30,673
Net income attributable to noncontrolling interests	(7,365)		(25,389)		(16,480)		(30,918)
Net income (loss) attributable to National Storage Affiliates Trust	10,422		(7,656)		17,070		(245)
Distributions to preferred shareholders	(3,274)		(3,257)		(6,547)		(5,845)
Net income (loss) attributable to common shareholders	$	7,148	$	(10,913)	$	10,523	$	(6,090)



Earnings (loss) per share - basic and diluted	$	0.10	$	(0.19)	$	0.16	$	(0.11)



Weighted average shares outstanding - basic and diluted	68,210		57,543		64,004		57,101

Dividends declared per common share	$	0.33	$	0.32	$	0.66	$	0.62

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 June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net income	$	17,787	$	17,733	$	33,550	$	30,673
Other comprehensive (loss) income
Unrealized loss on derivative contracts	(10,423)		(19,075)		(76,792)		(27,114)
Reclassification of other comprehensive loss (income) to interest expense	3,934		(1,277)		4,546		(2,553)
Other comprehensive (loss) income	(6,489)		(20,352)		(72,246)		(29,667)
Comprehensive (loss) income	11,298		(2,619)		(38,696)		1,006
Comprehensive (income) loss attributable to noncontrolling interests	(5,172)		(18,029)		9,177		(20,160)
Comprehensive income (loss) attributable to National Storage Affiliates Trust	$	6,126	$	(20,648)	$	(29,519)	$	(19,154)

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, 2018	6,900,000	$	172,500	56,654,009	$	567	$	844,276	$	(114,122)	$	13,618	$	485,460	$	1,402,299

OP equity issued for property acquisitions:
Series A-1 preferred units, OP units and subordinated performance units, net of offering costs	—	—		—	—		—		—		—		32,856		32,856


Redemptions of OP units	—	—		29,910	—		250		—		7		(257)		—


Effect of changes in ownership for consolidated entities	—	—		—	—		(5,385)		—		(182)		5,567		—

Equity-based compensation expense	—	—		—	—		90		—		—		1,022		1,112
Issuance of LTIP units for acquisition expenses	—	—		—	—		—		—		—		5		5
Issuance of restricted common shares	—	—		18,218	—		—		—		—		—		—
Vesting and forfeitures of restricted common shares, net	—	—		(3,451)	—		(69)		—		—		—		(69)
Reduction in receivables from partners of the operating partnership	—	—		—	—		—		—		—		139		139
Preferred share dividends	—	—		—	—		—		(2,588)		—		—		(2,588)
Common share dividends	—	—		—	—		—		(17,010)		—		—		(17,010)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		(17,181)		(17,181)
Other comprehensive loss	—	—		—	—		—		—		(5,917)		(3,398)		(9,315)
Net income	—	—		—	—		—		7,411		—		5,529		12,940
Balances, March 31, 2019	6,900,000	$	172,500	56,698,686	$	567	$	839,162	$	(126,309)	$	7,526	$	509,742	$	1,403,188
Issuance of preferred shares, net of offering costs	1,785,680	44,642		—	—		(1,018)		—		—		—		43,624
OP equity issued for property acquisitions:
Series A-1 preferred units, OP units and subordinated performance units, net of offering costs	—	—		—	—		—		—		—		15,515		15,515


Redemptions of OP units	—	—		224,618	2		1,839		—		28		(1,869)		—

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
Issuance of common shares, net of offering costs	—	—		2,375,000	24		70,613		—		—		—		70,637

Effect of changes in ownership for consolidated entities	—	—		—	—		(9,179)		—		(28)		9,207		—
Issuance of OP units	—	—		—	—		—		—		—		8,540		8,540
Equity-based compensation expense	—	—		—	—		82		—		—		1,026		1,108
Issuance of LTIP units for acquisition expenses	—	—		—	—		—		—		—		56		56

Vesting and forfeitures of restricted common shares, net	—	—		(1,335)	—		—		—		—		—		—

Preferred share dividends	—	—		—	—		—		(3,257)		—		—		(3,257)
Common share dividends	—	—		—	—		—		(18,970)		—		—		(18,970)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		(19,038)		(19,038)
Other comprehensive loss	—	—		—	—		—		—		(12,992)		(7,360)		(20,352)
Net (loss) income	—	—		—	—		—		(7,656)		—		25,389		17,733
Balances, June 30, 2019	8,685,680	$	217,142	59,296,969	$	593	$	901,499	$	(156,192)	$	(5,466)	$	541,208	$	1,498,784

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

Redemption 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	—	—

Form: 10-Q

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