August 4, 2021 - 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, 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 August 3, 2021, 88,650,615 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 June 30, 2021 and December 31, 2020 (Unaudited)	4
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)	6
	Condensed Consolidated Statements of Changes in Equity for the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 (Unaudited)	11
	Notes to Condensed Consolidated Financial Statements (Unaudited)	13
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	49
ITEM 4.	Controls and Procedures	50
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	50
ITEM 1A.	Risk Factors	50
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
ITEM 3.	Defaults Upon Senior Securities	51
ITEM 4.	Mine Safety Disclosures	51
ITEM 5.	Other Information	51
ITEM 6.	Exhibits	52
Signatures		53

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,
	2021		2020
ASSETS
Real estate
Self storage properties	$	4,077,016	$	3,639,192
Less accumulated depreciation	(504,498)		(443,623)
Self storage properties, net	3,572,518		3,195,569
Cash and cash equivalents	22,410		18,723
Restricted cash	3,565		2,978
Debt issuance costs, net	2,113		2,496
Investment in unconsolidated real estate ventures	195,567		202,533
Other assets, net	72,399		68,149
Operating lease right-of-use assets	22,674		23,129
Total assets	$	3,891,246	$	3,513,577
LIABILITIES AND EQUITY
Liabilities
Debt financing	$	2,058,573	$	1,916,971
Accounts payable and accrued liabilities	48,058		47,043
Interest rate swap liabilities	53,638		77,918
Operating lease liabilities	24,379		24,756
Deferred revenue	19,072		16,414
Total liabilities	2,203,720		2,083,102
Commitments and contingencies (Note 11)
Equity
Preferred shares of beneficial interest, par value $0.01 per share. 50,000,000 authorized, 8,736,719 and 8,732,719 issued and outstanding at June 30, 2021 and December 31, 2020, respectively, at liquidation preference	218,418		218,318
Common shares of beneficial interest, par value $0.01 per share. 250,000,000 authorized, 77,708,831 and 71,293,117 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	777		713
Additional paid-in capital	1,244,269		1,050,714
Distributions in excess of earnings	(263,117)		(251,704)
Accumulated other comprehensive loss	(33,046)		(49,084)
Total shareholders' equity	1,167,301		968,957
Noncontrolling interests	520,225		461,518
Total equity	1,687,526		1,430,475
Total liabilities and equity	$	3,891,246	$	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 June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
REVENUE
Rental revenue	$	127,310	$	95,302	$	240,437	$	190,704
Other property-related revenue	4,829		3,418		8,966		6,789
Management fees and other revenue	6,107		5,697		11,835		11,146
Total revenue	138,246		104,417		261,238		208,639
OPERATING EXPENSES
Property operating expenses	36,654		30,257		71,258		60,849
General and administrative expenses	12,450		10,329		23,688		21,423
Depreciation and amortization	36,051		29,309		68,475		58,414
Other	310		462		707		851
Total operating expenses	85,465		70,357		164,128		141,537

OTHER (EXPENSE) INCOME
Interest expense	(17,339)		(15,513)		(34,131)		(31,141)

Equity in earnings (losses) of unconsolidated real estate ventures	1,174		52		1,933		(288)
Acquisition costs	(118)		(252)		(410)		(1,085)
Non-operating expense	(148)		(317)		(321)		(509)

Other expense	(16,431)		(16,030)		(32,929)		(33,023)
Income before income taxes	36,350		18,030		64,181		34,079
Income tax expense	(675)		(243)		(871)		(529)
Net income	35,675		17,787		63,310		33,550
Net income attributable to noncontrolling interests	(6,957)		(7,365)		(13,754)		(16,480)
Net income attributable to National Storage Affiliates Trust	28,718		10,422		49,556		17,070
Distributions to preferred shareholders	(3,276)		(3,274)		(6,551)		(6,547)
Net income attributable to common shareholders	$	25,442	$	7,148	$	43,005	$	10,523

Earnings (loss) per share - basic	$	0.33	$	0.10	$	0.58	$	0.16
Earnings (loss) per share - diluted	$	0.25	$	0.10	$	0.44	$	0.16


Weighted average shares outstanding - basic	76,712		68,210		74,267		64,004
Weighted average shares outstanding - diluted	129,578		68,210		126,396		64,004


Dividends declared per common share	$	0.38	$	0.33	$	0.73	$	0.66

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,
	2021		2020		2021		2020
Net income	$	35,675	$	17,787	$	63,310	$	33,550
Other comprehensive income (loss)
Unrealized gain (loss) on derivative contracts	(6,725)		(10,423)		14,175		(76,792)
Reclassification of other comprehensive loss to interest expense	5,124		3,934		10,081		4,546
Other comprehensive income (loss)	(1,601)		(6,489)		24,256		(72,246)
Comprehensive income (loss)	34,074		11,298		87,566		(38,696)
Comprehensive (income) loss attributable to noncontrolling interests	(6,481)		(5,172)		(21,295)		9,177
Comprehensive income (loss) attributable to National Storage Affiliates Trust	$	27,593	$	6,126	$	66,271	$	(29,519)

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

OP equity issued for property acquisitions:
OP units and subordinated performance units, net of offering costs	—	—		—	—		—		—		—		5,842		5,842


Redemptions of OP units	—	—		292,291	3		3,438		—		(238)		(3,203)		—

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	—	—		387,000	4		11,912		—		—		—		11,916

Effect of changes in ownership for consolidated entities	—	—		—	—		(1,286)		—		(73)		1,359		—

Equity-based compensation expense	—	—		—	—		100		—		—		1,051		1,151


Vesting and forfeitures of restricted common shares, net	—	—		(2,770)	—		—		—		—		—		—
Reduction in receivables from partners of the operating partnership	—	—		—	—		—		—		—		225		225
Preferred share dividends	—	—		—	—		—		(3,274)		—		—		(3,274)
Common share dividends	—	—		—	—		—		(22,625)		—		—		(22,625)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		(16,843)		(16,843)
Other comprehensive loss	—	—		—	—		—				(4,296)		(2,193)		(6,489)
Net income	—	—		—	—		—		10,422		—		7,365		17,787
Balances, June 30, 2020	8,732,719	$	218,318	68,703,733	$	687	$	984,950	$	(228,924)	$	(57,462)	$	451,176	$	1,368,745

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

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
Redemptions of Series A-1 preferred units	4,000	100		—	—		—		—		—		(100)		—
Effect of changes in ownership for consolidated entities	—	—		—	—		(17,420)		—		(227)		17,647		—

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
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

See notes to condensed consolidated financial statements.

NATIONAL STORAGE AFFILIATES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)


	Six Months Ended June 30,
	2021		2020
OPERATING ACTIVITIES
Net income	$	63,310	$	33,550
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	68,475		58,414
Amortization of debt issuance costs	1,626		1,521
Amortization of debt discount and premium, net	(357)		(711)


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


Equity-based compensation expense	2,634		1,925
Equity in (earnings) losses of unconsolidated real estate ventures	(1,933)		288
Distributions from unconsolidated real estate ventures	8,899		6,761
Change in assets and liabilities, net of effects of self storage property acquisitions:
Other assets	(715)		1,212
Accounts payable and accrued liabilities	1,526		3,093
Deferred revenue	794		(512)
Net Cash Provided by Operating Activities	144,259		105,683
INVESTING ACTIVITIES
Acquisition of self storage properties	(383,702)		(239,138)
Capital expenditures	(13,187)		(8,583)
Investments in and advances to unconsolidated real estate ventures	—		(3,125)

Deposits and advances for self storage property and other acquisitions	(1,100)		(294)
Proceeds from sale of equity securities	—		7,560
Expenditures for corporate furniture, equipment and other	(147)		(318)


Net Cash Used In Investing Activities	(398,136)		(243,898)
FINANCING ACTIVITIES
Proceeds from issuance of common shares	226,082		16,165


Borrowings under debt financings	546,000		311,000


Contributions from noncontrolling interests	103		661

Principal payments under debt financings	(405,073)		(103,911)

Payment of dividends to common shareholders	(54,418)		(42,372)
Distributions to preferred shareholders	(6,551)		(6,547)
Distributions to noncontrolling interests	(45,336)		(36,431)



Debt issuance costs	(495)		(835)
Equity offering costs	(2,161)		(885)
Net Cash Provided By Financing Activities	258,151		136,845
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	4,274		(1,370)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Beginning of period	21,701		24,276
End of period	$	25,975	$	22,906

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	$	31,612	$	30,366

Form: 10-Q

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