The self-storage operators that formed National Storage Affiliates are reaping the benefits of sophistication and scale that come with being part of a larger platform.

In the REIT’s first full quarter since its IPO in April, the company reported same-store revenue growth of 10 percent compared to the same period last year. Same-store NOI grew 13.6 percent during that time.

Same-store occupancy climbed from 87.9 percent to 90.4 percent in the third quarter. Average rent per square foot rose 7 percent to $9.91 during the same period.

“The growth has been driven by leveraging our centralized call center and Internet marketing to generate and convert more leads,” said CEO Arlen Nordhagen during the company’s conference call with financial analysts.

 National Storage Affiliates CEO Arlen Nordhagen.
National Storage Affiliates CEO Arlen Nordhagen.

Combined forces

NSA is made up of six individual self-storage companies that contributed large portions of their portfolios to form the REIT. By creating a larger entity, NSA is able to enjoy similar economies of scales as the other public self-storage companies do.

That scale has enabled NSA to test new platforms to drive revenue—the company is currently beta testing a new revenue management system on 25 percent of its portfolio.

“The system has been designed to help us optimize the blend of occupancy and rate per occupied square foot. I’m optimistic it will help us continue to deliver small revenue improvements,” Nordhagen said.

Nordhagen also noted that the operators of the company enjoy the benefit of cost savings from vendors that NSA is able to negotiate with as a larger organization.

National Storage Affiliates
National Storage Affiliates went public April 24, 2015

Growing bigger

NSA currently has 276 self-storage properties in 16 states. The company acquired 15 stores during the quarter for $106 million, and 15 more stores since the quarter ended for $168 million.

In addition to growth through acquisition, Nordhagen said NSA continues to interview and recruit new operators to join NSA as PROs—the company’s internal term for member operators.

“We are in various stages of due diligence with several private operators that have potential to become new PROs in the next year or two,” Nordhagen said.

Nordhagen said NSA would like to add one to three PROs a year, with an eventual goal of up to 15.

Finding partners

The biggest obstacle to adding new PROs is competing cash offers from the other public self-storage operators.

“Obviously the market is extremely hot. Cap rates and pricing on assets are very aggressive,” Nordhagen said, “When a guy gets to the point where he feels like he can’t turn down the quick buck, that hurts us in the process.”

Nordhagen said some prospective PROs decided to sell their portfolios for cash instead of joining NSA.

“With our model it’s not about the immediate cash gain—it’s about the long-term partnership,” Nordhagen said.

Alexander Harris