National Storage Affiliates Trust Q1 FY2024 earnings call

• Completed strategic initiatives to deleverage balance sheet and access growth capital, increasing earnings per share. - Enhanced operating platforms for better customer experience, seeing improvements in rental activity and call center operations. - Experienced 3 months of positive net rentals through April, with occupancy ending at 86% (up 50 basis points from February). - Leases fully executed online increased meaningfully due to improved lease signing experience; call center answered over 30% more calls than last year. - Mixed results in Sunbelt markets due to new supply, housing market, and competitive pricing; working hard to improve customer experience in slower-recovering markets. - Over $25 million under contract and ~$200 million of properties in negotiation for acquisitions, to be funded via 1031 proceeds, joint venture capital, and debt.

During the first quarter, revenue growth declined 1.5% on a same-store basis, driven by a 2.4% growth in rent revenue per square foot but offset by a 380 basis point year-over-year decline in average occupancy. Different Sunbelt markets had mixed results: revenue in Phoenix, Sarasota, and Las Vegas was below portfolio average, while markets like Oklahoma City, Savannah, and Corpus Christi were better than average. Absolute financials included Core FFO per share of $0.60 for the quarter, a 9% decrease year-over-year due to factors like same-store NOI decline, G&A increase, and JV contribution decline.

• Reaffirmed previously provided guidance. - $250 million of interest rate swaps fixing daily simple SOFR at 1.59% mature in Q3, with $145 million relating to a term loan maturing in July, so $250 million of fixed-rate debt will adjust to market rate starting August 1. - Balance sheet had ~$200 million in revolver balance and $750 million remaining availability; leverage was 6.2x net debt to EBITDA at quarter end. - Expect to see more acquisition opportunities in strong-performing markets, with deals improving portfolio quality and operational efficiency.

• Challenges in Sunbelt markets due to absorption of new supply, muted housing market, and competitive pricing. - Floating rate exposure from $250 million of swaps expiring, which will adjust to market rate, affecting debt structure. - Uncertainty around the impact of changing market conditions on forward-looking statements and actual results.

Q: Can you give more color around April?

A: April saw positive net move-in activity, but it got slightly worse than the quarter finish; move-in rate worsened year-over-year partly due to last year's rate increase in April.

Q: Is there more noncore assets to sell?

A: Will continue to look at portfolio, but not expecting large chunks like recent sales, shifting focus to acquisitions.

Q: How are you thinking about leveraging versus buybacks?

A: Completed $275 million share repurchase program, leverage in line with 5.5x to 6.5x range; bias to deploy capital through joint venture platform.

Q: Are you seeing markets bottom out and reaccelerate?

A: First half of year was toughest, with some markets like Phoenix, Sarasota, Las Vegas slower; Midwest and Texas markets performing well.

Q: Where are your targeted yields or cap rates for acquisitions?

A: Targeting mid-6% range for acquisitions, similar to assets sold which were towards 6% cap.

Q: How's the testing of occupancy-based models going?

A: Seeing success in some areas, expanding programs in successful areas, pulling back in unsuccessful ones.

Q: Plan for refinancing term loans?

A: Near term, tranche B ($145 million) has 6-month extension option; base case is to put replacement debt out, either with bank group or private placement market; secured debt can return to 10%-12% range from current 6%.

Q: Status of captive pipeline?

A: ~110-115 properties in captive pipeline, north of $1 billion; preferred tax-deferred transactions via OP units, opportunities still exist but harder to find deals today.

Q: Thoughts on third-party management platform?

A: Platforms upgraded, PROs do third-party management; under discussion, on horizon but no exact date.

Q: Floating rate exposure?

A: ~$200 million drawn on revolver, $250 million swaps expiring, total floating rate exposure could be 10%-20% of total debt stack by end of year.

Q: Tenant credit?

A: Delinquencies in line with historical 2.5% range, customer base healthy.

Q: Focus on internal operations?

A: Upgraded operating platform, data center, call center, web experience; current development cycle nearing end, launching next chapter with solid foundation.

Q: Marketing spending components?

A: Marketing spend includes call center, digital transacting, paid search; comp tougher due to last year's lower digital spend, will annualize spend in future quarters.

Q: Revenue management systems and promotions?

A: Testing lower entry rates and more promotions; finding success with promotions like half off for 2 months, easier for consumers to understand.