National Storage Affiliates Trust had plenty to boast about at its year-end report–revenue jumped about 66 percent and the company expanded its portfolio by more than a third during 2016.
The real estate investment trust also announced another milestone, just before releasing its year-end earnings report on Feb. 28. The company signed up its eighth regional operator, with Personal Mini Storage of Florida joining the REIT as a partner.
Personal Mini Storage operates 36 self-storage facilities in the Greater Orlando and mid-Florida areas.
Read here for more on NSA’s operating structure.
Under this new joint venture, Personal Mini Storage took over operations of four properties for NSA on March 1, and a fifth may follow, said Arlen Nordhagen, CEO of NSA. The REIT refers to its operating partners as PROs: participating regional operators.
“This does two main things,” Nordhagen said. “It strengthens our position in Central Florida because basically, with Marc Smith joining as an NSA PRO, the property he manages and owns become part of our captive pipeline. Over time, we expect most of those properties to come into NSA as NSA-owned properties.”
Smith is president of Personal Mini Storage.
A different way to play the game
“We’ve been in this business a long time,” Smith said. “While we have continued to grow through the years, we’ve missed out on a lot of deals because our capital stack has been more expensive than others. It’s been a bit frustrating, but we only put pressure on ourselves; our investor group did not put pressure on us.”
Smith is very active in the industry, finishing up a six-year term on the national Self Storage Association board of directors, where he is chairman. He also served as past president and national board member of the Southeast Region of the SSA.
“When we were approached by NSA, it became apparent to us that maybe there was a different way to play the game. And we were very impressed with the NSA leadership.” Smith said.
Amid the current challenges facing industry at large, Smith said he is most concerned by the number of new entrants entering the space without a lot of experience.
“I don’t think they have the same due diligence discipline as those that stayed in the business during the downturn,” Smith said, “After the Great Recession, people were cautious, happy and occupancies were improving. I think to some degree, some have forgotten how tough it was.”
For 2016, NSA reported net income of $24.9 million, earnings per share of 60 cents and revenue of $199 million. In comparison, 2015 had net income of $4.8 million, EPS of 80 cents and revenue of $133.9 million.
“It was a very strong year. Our FFO grew almost 22 percent, net operating income grew about 50 percent and same-store NOI grew over 10 percent. All of those are very strong performance metrics,” said Nordhagen.
NSA ended the year with 382 properties, compared with 277 one year ago; 23 million rentable square feet (15.7 million a year ago) and an occupancy rate of 88 percent, down from 89 percent. During the year, NSA bought 107 self-storage properties for $1.3 billion.
During the fourth quarter the REIT earned a net income of $6.1 million, up from $5.4 million one year ago. Core FFO was $20 million, or 30 cents per share, a 25 percent jump from $11.6 million, or 24 cents per share, for Q4 2015.
NSA spent $228 million to buy 31 self-storage properties in Q4 2016. It also formed a joint venture with a state pension fund, which bought the 66-property iStorage portfolio for $630 million