Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

August 7, 2020

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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
OR
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


2


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.

3


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.

4


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.

5


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.

6


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.

7


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
—    —