A net income jump of nearly 50 percent, a rise of 70 percent in core funds from operations and the purchase of five self-storage properties helped National Storage Affiliates Trust to deliver a positive Q1 2017 earnings report on May 4.

The Greenwood Village, Colorado-based company spent $31.9 million to buy those self-storage properties, with a combined 300,000 rentable square feet in over 2,200 storage units.

“I’m very happy to report another excellent quarter, with Q1 results ahead of our forecasts and demonstrating continued execution of our strategy,” CEO Arlen Nordhagen said.

“We’re also very pleased with the results from our iStorage joint venture, which is performing consistently with our budget, delivering revenues more than 10 percent ahead of the portfolio results in Q1 2016.”

In the joint venture, NSA and its partner, an unnamed state pension fund, purchased 66 self-storage properties in 12 states for $630 million from Storage Quest Equity Inc.

Balanced fundamentals

Overall, Nordhagen noted that the “fundamentals remain balanced” in this sector.

“We continue to see increasing demand, driven by sustained household and employment growth in many of our core markets,” he said. “We expect to see an increase in overall supply as we move through 2017 and into the first half of 2018. While this increase in supply is nationwide, most of the new supply is being delivered in the top 20 MSAs in the United States.”

Here are some Q1 2017 highlights:

  • Net income was $7.2 million, up $2.4 million (49.5 percent) from the $4.8 million reported for Q1 2016. Basic earnings per share dropped from 9 cents to 1 cent, and diluted EPS fell from 6 cents to 1 cent. Several factors contributed to the drop, including increases in depreciation and amortization, interest expense, and general and administrative expenses.
  • Core funds from operations were $21.3 million, or 29 cents per share, up 16 percent. The year-ago figures were $12.5 million and 25 cents per share.
  • Same-store revenue was $41.2 million, an increase of 6.6 percent from $38.6 million in Q1 2016.
  • Same-store net operating income was $28.1 million, up 9.1 percent from $25.7 million one year ago.
  • Total consolidated portfolio operating results NOI jumped from $26.4 million in Q1 2016 to $40 million (50.6 percent).
  • Average occupancy fell slightly, from 88.7 percent to 88.3 percent.
  • Average annualized rental revenue per occupied square foot rose 6.9 percent, from $10.63 to $11.36.
  • The company also raised its credit facility capacity by $170 million to $895 million. “Our balance sheet is stronger than ever,” Nordhagen said. “Our leverage today remains at the low end of our target range.”

Hungry for acquisitions

“Overall, we expect (our) acquisition pace to pick up materially during the last three quarters of the year, resulting in full-year acquisitions consistent with our guidance,” Nordhagen said. “We’re looking at additional acquisitions for the joint venture in the second quarter.”

NSA also added its eighth “PRO”(Participating Regional Operator), Personal Mini Storage, which operates 36 self-storage facilities in the Greater Orlando and mid-Florida areas.

 

Bruce Goldberg