x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Maryland | 46-5053858 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large Accelerated Filer | ¨ | Accelerated Filer | ¨ | |
Non-accelerated Filer | x | Smaller Reporting Company | ¨ |
NATIONAL STORAGE AFFILIATES TRUST | ||
TABLE OF CONTENTS | ||
FORM 10-Q | ||
Page | ||
PART I. FINANCIAL INFORMATION | ||
ITEM 1. | Financial Statements | |
Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015 (Unaudited) | ||
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2016 and 2015 (Unaudited) | ||
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2016 and 2015 (Unaudited) | ||
Condensed Consolidated Statement of Changes in Equity for the Three Months Ended March 31, 2016 (Unaudited) | ||
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015 (Unaudited) | ||
Notes to the Condensed Consolidated Financial Statements | ||
ITEM 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |
ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk | |
ITEM 4. | Controls and Procedures | |
PART II. OTHER INFORMATION | ||
ITEM 1. | Legal Proceedings | |
ITEM 1A. | Risk Factors | |
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
ITEM 3. | Defaults Upon Senior Securities | |
ITEM 4. | Mine Safety Disclosures | |
ITEM 5. | Other Information | |
ITEM 6. | Exhibits | |
Signatures |
March 31, | December 31, | ||||||
2016 | 2015 | ||||||
ASSETS | |||||||
Real estate | |||||||
Self storage properties | $ | 1,234,541 | $ | 1,147,201 | |||
Less accumulated depreciation | (76,810 | ) | (68,100 | ) | |||
Self storage properties, net | 1,157,731 | 1,079,101 | |||||
Cash and cash equivalents | 8,489 | 6,665 | |||||
Restricted cash | 2,889 | 2,712 | |||||
Debt issuance costs, net | 1,530 | 1,923 | |||||
Other assets, net | 9,215 | 8,648 | |||||
Total assets | $ | 1,179,854 | $ | 1,099,049 | |||
LIABILITIES AND EQUITY | |||||||
Liabilities | |||||||
Debt financing | $ | 634,312 | $ | 567,795 | |||
Accounts payable and accrued liabilities | 14,380 | 9,694 | |||||
Deferred revenue | 6,058 | 5,513 | |||||
Total liabilities | 654,750 | 583,002 | |||||
Commitments and contingencies (Note 10) | |||||||
Equity | |||||||
Common shares of beneficial interest, par value $0.01 per share. 250,000,000 shares authorized, 23,023,841 and 23,015,751 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively | 230 | 230 | |||||
Additional paid-in capital | 239,014 | 236,392 | |||||
Retained (deficit) earnings | (2,384 | ) | 11 | ||||
Accumulated other comprehensive loss | (693 | ) | — | ||||
Total shareholders' equity | 236,167 | 236,633 | |||||
Noncontrolling interests | 288,937 | 279,414 | |||||
Total equity | 525,104 | 516,047 | |||||
Total liabilities and equity | $ | 1,179,854 | $ | 1,099,049 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
REVENUE | |||||||
Rental revenue | $ | 38,501 | $ | 27,418 | |||
Other property-related revenue | 1,148 | 873 | |||||
Total revenue | 39,649 | 28,291 | |||||
OPERATING EXPENSES | |||||||
Property operating expenses | 13,277 | 9,842 | |||||
General and administrative expenses | 4,335 | 3,613 | |||||
Depreciation and amortization | 10,892 | 9,877 | |||||
Total operating expenses | 28,504 | 23,332 | |||||
Income from operations | 11,145 | 4,959 | |||||
OTHER INCOME (EXPENSE) | |||||||
Interest expense | (4,941 | ) | (6,982 | ) | |||
Acquisition costs | (1,288 | ) | (599 | ) | |||
Organizational and offering expenses | — | (58 | ) | ||||
Non-operating expense | (114 | ) | (91 | ) | |||
Other income (expense) | (6,343 | ) | (7,730 | ) | |||
Net income (loss) | 4,802 | (2,771 | ) | ||||
Net (income) loss attributable to noncontrolling interests | (2,592 | ) | 2,771 | ||||
Net income (loss) attributable to National Storage Affiliates Trust | $ | 2,210 | $ | — | |||
Earnings (loss) per share - basic | $ | 0.10 | $ | — | |||
Earnings (loss) per share - diluted | $ | 0.07 | $ | — | |||
Weighted average shares outstanding - basic | 23,005 | 1 | |||||
Weighted average shares outstanding - diluted | 67,994 | 1 | |||||
Dividends declared per common share | 0.20 | — |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Net income (loss) | $ | 4,802 | $ | (2,771 | ) | ||
Other comprehensive income (loss) | |||||||
Unrealized loss on derivative contracts | (1,895 | ) | (1,166 | ) | |||
Reclassification of other comprehensive loss to interest expense | 403 | 385 | |||||
Other comprehensive loss | (1,492 | ) | (781 | ) | |||
Comprehensive income (loss) | 3,310 | (3,552 | ) | ||||
Comprehensive (income) loss attributable to noncontrolling interests | (1,793 | ) | 3,552 | ||||
Comprehensive income (loss) attributable to National Storage Affiliates Trust | $ | 1,517 | $ | — |
Accumulated | ||||||||||||||||||||||||||
Additional | Retained | Other | ||||||||||||||||||||||||
Common Shares | Paid-in | (Deficit) | Comprehensive | Noncontrolling | Total | |||||||||||||||||||||
Number | Amount | Capital | Earnings | Loss | Interests | Equity | ||||||||||||||||||||
Balances, December 31, 2015 | 23,015,751 | $ | 230 | $ | 236,392 | $ | 11 | $ | — | $ | 279,414 | $ | 516,047 | |||||||||||||
OP equity recorded in business combinations: | ||||||||||||||||||||||||||
OP units and subordinated performance units | — | — | — | — | — | 18,630 | 18,630 | |||||||||||||||||||
LTIP units | — | — | — | — | — | 438 | 438 | |||||||||||||||||||
Effect of changes in ownership for consolidated entities | — | — | 2,592 | — | — | (2,592 | ) | — | ||||||||||||||||||
Equity-based compensation expense | — | — | 30 | — | — | 568 | 598 | |||||||||||||||||||
Issuance of restricted common shares | 8,090 | — | — | — | — | — | — | |||||||||||||||||||
Reduction in receivables from partners of OP | — | — | — | — | — | 353 | 353 | |||||||||||||||||||
Other comprehensive loss | — | — | — | — | (693 | ) | (799 | ) | (1,492 | ) | ||||||||||||||||
Common share dividends | — | — | — | (4,605 | ) | — | — | (4,605 | ) | |||||||||||||||||
Distributions to limited partners of OP | — | — | — | — | — | (9,667 | ) | (9,667 | ) | |||||||||||||||||
Net income | — | — | — | 2,210 | — | 2,592 | 4,802 | |||||||||||||||||||
Balances, March 31, 2016 | 23,023,841 | $ | 230 | $ | 239,014 | $ | (2,384 | ) | $ | (693 | ) | $ | 288,937 | $ | 525,104 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Net income (loss) | $ | 4,802 | $ | (2,771 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 10,892 | 9,877 | |||||
Amortization of debt issuance costs | 587 | 990 | |||||
Amortization of debt discount and premium, net | (467 | ) | (353 | ) | |||
Unrealized loss on fair value of derivatives | — | 126 | |||||
LTIP units issued for acquisition expenses | — | 366 | |||||
Equity-based compensation expense | 598 | 638 | |||||
Change in assets and liabilities, net of effects of business combinations: | |||||||
Restricted cash | 17 | (100 | ) | ||||
Other assets | (1,108 | ) | (559 | ) | |||
Accounts payable and accrued liabilities | 2,189 | 1,147 | |||||
Deferred revenue | 199 | 287 | |||||
Net Cash Provided by Operating Activities | 17,709 | 9,648 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Acquisition of self storage properties | (62,669 | ) | (6,991 | ) | |||
Capital expenditures | (696 | ) | (1,020 | ) | |||
Deposits and advances for self storage property acquisitions | (97 | ) | (381 | ) | |||
Expenditures for corporate furniture, equipment and other | (209 | ) | (33 | ) | |||
Change in restricted cash designated for capital expenditures | (98 | ) | (24 | ) | |||
Net Cash Used In Investing Activities | (63,769 | ) | (8,449 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Borrowings under debt financings | 79,500 | 21,000 | |||||
Receipts for OP unit subscriptions | 265 | 500 | |||||
Collection of receivables from issuance of OP equity | 193 | 372 | |||||
Principal payments under debt financings | (18,572 | ) | (16,489 | ) | |||
Payment of dividends to common shareholders | (4,605 | ) | — | ||||
Distributions to noncontrolling interests | (8,777 | ) | (6,288 | ) | |||
Debt issuance costs | (113 | ) | (584 | ) | |||
Equity offering costs | (7 | ) | (391 | ) | |||
Net Cash Provided by (Used In) Financing Activities | 47,884 | (1,880 | ) | ||||
Increase (Decrease) in Cash and Cash Equivalents | 1,824 | (681 | ) | ||||
CASH AND CASH EQUIVALENTS | |||||||
Beginning of period | 6,665 | 9,009 | |||||
End of period | $ | 8,489 | $ | 8,328 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Supplemental Cash Flow Information | |||||||
Cash paid for interest | $ | 4,717 | $ | 6,241 | |||
Supplemental Disclosure of Non-Cash Investing and Financing Activities | |||||||
Consideration exchanged in business combinations: | |||||||
Issuance of OP units and subordinated performance units | $ | 18,630 | $ | 8,954 | |||
Deposits on acquisitions applied to purchase price | 631 | — | |||||
LTIP units vesting upon acquisition of properties | 438 | — | |||||
Assumption of mortgages payable | 5,861 | 16,442 | |||||
Note payable to related party to settle assumed mortgages | — | 4,054 | |||||
Other net liabilities assumed | 584 | 70 | |||||
Notes receivable settled upon acquisition of properties | — | 1,778 | |||||
Fair value of noncontrolling interests in acquired subsidiaries | — | 6,770 | |||||
Increase in OP unit subscription liability through reduced distributions | 107 | 91 | |||||
Settlement of acquisition receivables through reduced distributions | 160 | 141 | |||||
Accrued distributions to noncontrolling interests | 623 | — |
March 31, | December 31, | ||||
2016 | 2015 | ||||
OP units | 22,528,274 | 21,556,006 | |||
Subordinated performance units | 9,441,708 | 9,302,989 | |||
LTIP units | 2,947,837 | 2,784,761 | |||
DownREIT units | |||||
DownREIT OP units | 1,834,786 | 1,834,786 | |||
DownREIT subordinated performance units | 4,386,999 | 4,386,999 | |||
Total | 41,139,604 | 39,865,541 |
March 31, | December 31, | ||||||
2016 | 2015 | ||||||
Land | $ | 332,912 | $ | 315,867 | |||
Buildings and improvements | 899,272 | 829,093 | |||||
Furniture and equipment | 2,357 | 2,241 | |||||
Total self storage properties | 1,234,541 | 1,147,201 | |||||
Less accumulated depreciation | (76,810 | ) | (68,100 | ) | |||
Self storage properties, net | $ | 1,157,731 | $ | 1,079,101 |
Acquisitions Closed During the Three Months Ended: | Summary of Consideration | |||||||||||||||||||||
Number of Properties | Value of OP Equity(1) | Liabilities Assumed (Assets Acquired) | Total Fair Value | |||||||||||||||||||
Cash | Mortgages | Other | ||||||||||||||||||||
March 31, 2016 | 17 | $ | 63,300 | $ | 19,068 | $ | 5,861 | $ | 584 | $ | 88,813 |
(1) | Value of OP equity represents the fair value of OP units, subordinated performance units and LTIP units. |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Pro forma revenue: | |||||||
Historical results | $ | 39,649 | $ | 28,291 | |||
Acquisitions subsequent to March 31, 2016 | 4,702 | 4,212 | |||||
Acquisitions during the three months ended March 31, 2016(1) | 842 | 1,759 | |||||
Acquisitions during the three months ended March 31, 2015 (excluding those in historical results) | — | 86 | |||||
Total | $ | 45,193 | $ | 34,348 | |||
Pro forma net income (loss):(2) | |||||||
Historical results | $ | 4,802 | $ | (2,771 | ) | ||
Acquisitions subsequent to March 31, 2016 | 1,181 | (741 | ) | ||||
Acquisitions during the three months ended March 31, 2016(1) | 1,592 | (1,708 | ) | ||||
Acquisitions during the three months ended March 31, 2015 (excluding those in historical results) | — | 891 | |||||
Total | $ | 7,575 | $ | (4,329 | ) | ||
(1) | Reflects 15 of the 17 self storage properties acquired during this period because the information required with respect to the two remaining acquisitions during this period is not available to the Company. |
(2) | Significant assumptions and adjustments in preparation of the pro forma information include the following: (i) for the cash portion of the purchase price, the Company assumed borrowings under the Company's revolving line of credit with interest computed based on the effective interest rate of 2.04% as of March 31, 2016; (ii) for assumed debt financing directly associated with the acquisition of specific self storage properties, interest was computed for the entirety of the periods presented using the effective interest rates under such financings; and (iii) for acquisition costs of $1.3 million incurred during the three months ended March 31, 2016, pro forma adjustments give effect to these costs as if they were incurred on January 1, 2015. |
March 31, | December 31, | ||||||
2016 | 2015 | ||||||
Customer in-place leases, net of accumulated amortization of $5,195 and $4,312, respectively | $ | 4,199 | $ | 4,209 | |||
Receivables: | |||||||
Trade, net | 1,013 | 1,093 | |||||
PROs and other affiliates | 165 | 232 | |||||
Property acquisition deposits | 229 | 763 | |||||
Interest rate derivative assets | — | 331 | |||||
Prepaid expenses and other | 2,926 | 1,486 | |||||
Corporate furniture, equipment and other, net | 683 | 534 | |||||
Total | $ | 9,215 | $ | 8,648 |
Interest | March 31, | December 31, | |||||||
Rate (1) | 2016 | 2015 | |||||||
Credit Facility: | |||||||||
Revolving line of credit | 2.04% | $ | 259,475 | $ | 187,975 | ||||
Term loan | 2.74% | 200,000 | 200,000 | ||||||
Fixed rate mortgages payable | 3.97% | 172,201 | 176,911 | ||||||
Total principal | 631,676 | 564,886 | |||||||
Unamortized debt issuance costs and debt premium, net | 2,636 | 2,909 | |||||||
Total debt | $ | 634,312 | $ | 567,795 |
(1) | Represents the effective interest rate as of March 31, 2016. Effective interest rate incorporates the stated rate plus the impact of interest rate cash flow hedges and discount and premium amortization, if applicable. For the revolving line of credit, the effective interest rate excludes fees for unused borrowings. |
• | A senior revolving credit facility (the "revolving line of credit"), which provides for a total borrowing commitment up to $350.0 million, whereby the Company may borrow, repay and re-borrow amounts under the revolving line of credit. The borrowing commitment is subject to a borrowing base calculation, which only includes self storage properties with an occupancy rate of at least 75% on a combined basis. As of March 31, 2016, the Company had the capacity to borrow $90.5 million, subject to the borrowing base calculation. The Company is required to pay a fee which ranges from 0.20% to 0.25% of unused borrowings under the revolving line of credit. As of March 31, 2016, the pricing grid under the revolving line of credit provides for an interest rate equal to one-month London Interbank Offered Rate ("LIBOR") plus 1.60%. The revolving line of credit matures in March 2017 and the Company may elect an extension of the maturity date until March 2018 by paying an extension fee equal to 0.20% of the total borrowing commitment at the time of the extension. |
• | A $200.0 million senior term loan (the "term loan") which provides that amounts borrowed may be repaid at any time but not re-borrowed. As of March 31, 2016, the pricing grid under the term loan provides for an interest rate equal to one-month LIBOR plus 1.50%. No principal payments are required under the term loan until the maturity date in March 2018. |
Year Ending December 31, | Scheduled Principal and Maturity Payments | Premium Amortization and Unamortized Debt Issuance Costs | Total | |||||||||
Remainder of 2016 | $ | 9,420 | $ | 645 | $ | 10,065 | ||||||
2017 | 275,629 | 322 | 275,951 | |||||||||
2018 | 209,191 | 621 | 209,812 | |||||||||
2019 | 3,468 | 713 | 4,181 | |||||||||
2020 | 37,635 | 360 | 37,995 | |||||||||
2021 | 5,798 | 2 | 5,800 | |||||||||
After 2022 | 90,535 | (27 | ) | 90,508 | ||||||||
$ | 631,676 | $ | 2,636 | $ | 634,312 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Earnings (loss) per common share - basic and diluted | |||||||
Numerator | |||||||
Net income (loss) | $ | 4,802 | $ | (2,771 | ) | ||
Net (income) loss attributable to noncontrolling interests | (2,592 | ) | 2,771 | ||||
Net income (loss) attributable to National Storage Affiliates Trust | 2,210 | — | |||||
Distributed and undistributed earnings allocated to participating securities | (4 | ) | — | ||||
Net income (loss) attributable to common shareholders - basic | 2,206 | — | |||||
Effect of assumed conversion of dilutive securities | 2,571 | — | |||||
Net income (loss) attributable to common shareholders - diluted | $ | 4,777 | $ | — | |||
Denominator | |||||||
Weighted average shares outstanding - basic | 23,005 | 1 | |||||
Effect of dilutive securities: | |||||||
Weighted average OP units outstanding | 22,235 | — | |||||
Weighted average DownREIT OP unit equivalents outstanding | 1,835 | — | |||||
Weighted average LTIP units outstanding | 2,151 | — | |||||
Subordinated performance units and DownREIT subordinated performance unit equivalents | 18,768 | — | |||||
Weighted average shares outstanding - diluted | 67,994 | 1 | |||||
Earnings (loss) per share - basic | $ | 0.10 | $ | — | |||
Earnings (loss) per share - diluted | $ | 0.07 | $ | — | |||
Interest Rate Swaps Designated as Cash Flow Hedges | Non-hedge Accounting Interest Rate Swaps | Total | |||||||||
Fair value at December 31, 2014 | $ | (865 | ) | $ | (207 | ) | $ | (1,072 | ) | ||
Unrealized losses included in interest expense | — | (121 | ) | (121 | ) | ||||||
Losses on interest rate swaps reclassified into interest expense from accumulated other comprehensive loss | 385 | — | 385 | ||||||||
Unrealized losses included in accumulated other comprehensive loss | (1,166 | ) | — | (1,166 | ) | ||||||
Fair value at March 31, 2015 | $ | (1,646 | ) | $ | (328 | ) | $ | (1,974 | ) | ||
Fair value at December 31, 2015 | $ | (972 | ) | $ | — | $ | (972 | ) | |||
Swap ineffectiveness | 7 | — | 7 | ||||||||
Losses on interest rate swaps reclassified into interest expense from accumulated other comprehensive loss | 403 | — | 403 | ||||||||
Unrealized losses included in accumulated other comprehensive loss | (1,895 | ) | — | (1,895 | ) | ||||||
Fair value at March 31, 2016 | $ | (2,457 | ) | $ | — | $ | (2,457 | ) |
• | market trends in our industry, interest rates, the debt and lending markets or the general economy; |
• | our business and investment strategy; |
• | the acquisition of properties, including the timing of acquisitions; |
• | our relationships with, and our ability and timing to attract additional, PROs; |
• | our ability to effectively align the interests of our PROs with us and our shareholders; |
• | the integration of our PROs and their contributed portfolios into the Company, including into our financial and operational reporting infrastructure and internal control framework; |
• | our operating performance and projected operating results, including our ability to achieve market rents and occupancy levels, reduce operating expenditures and increase the sale of ancillary products and services; |
• | our ability to access additional off-market acquisitions; |
• | actions and initiatives of the U.S. federal, state and local government and changes to U.S. federal, state and local government policies and the execution and impact of these actions, initiatives and policies; |
• | the state of the U.S. economy generally or in specific geographic regions, states or municipalities; |
• | economic trends and economic recoveries; |
• | our ability to obtain and maintain financing arrangements on favorable terms; |
• | general volatility of the securities markets in which we participate; |
• | changes in the value of our assets; |
• | projected capital expenditures; |
• | the impact of technology on our products, operations, and business; |
• | the implementation of our technology and best practices programs (including our ability to effectively implement our integrated Internet marketing strategy); |
• | changes in interest rates and the degree to which our hedging strategies may or may not protect us from interest rate volatility; |
• | impact of and changes in governmental regulations, tax law and rates, accounting guidance and similar matters; |
• | our ability to qualify, and maintain our qualification, as a REIT for U.S. federal income tax purposes; |
• | availability of qualified personnel; |
• | the timing of conversions of subordinated performance units into OP units and the conversion ratio in effect at such time; |
• | estimates relating to our ability to make distributions to our shareholders in the future; and |
• | our understanding of our competition. |
Three Months Ended March 31, | |||||||||||
2016 | 2015 | Change | |||||||||
Rental revenue | |||||||||||
Same store portfolio | $ | 29,610 | $ | 27,103 | $ | 2,507 | |||||
Non-Same store portfolio | 8,891 | 315 | 8,576 | ||||||||
Total rental revenue | 38,501 | 27,418 | 11,083 | ||||||||
Other property-related revenue | |||||||||||
Same store portfolio | 890 | 863 | 27 | ||||||||
Non-Same store portfolio | 258 | 10 | 248 | ||||||||
Total other property-related revenue | 1,148 | 873 | 275 | ||||||||
Total revenue | 39,649 | 28,291 | 11,358 | ||||||||
Property operating expenses | |||||||||||
Same store portfolio | 10,141 | 9,676 | 465 | ||||||||
Non-Same store portfolio | 3,136 | 166 | 2,970 | ||||||||
Total property operating expenses | 13,277 | 9,842 | 3,435 | ||||||||
General and administrative expenses | 4,335 | 3,613 | 722 | ||||||||
Depreciation and amortization | 10,892 | 9,877 | 1,015 | ||||||||
Total operating expenses | 28,504 | 23,332 | 5,172 | ||||||||
Income from operations | 11,145 | 4,959 | 6,186 | ||||||||
Other (income) expense | |||||||||||
Interest expense | 4,941 | 6,982 | (2,041 | ) | |||||||
Acquisition costs | 1,288 | 599 | 689 | ||||||||
Organizational and offering expenses | — | 58 | (58 | ) | |||||||
Non-operating expense | 114 | 91 | 23 | ||||||||
Other (income) expense | 6,343 | 7,730 | (1,387 | ) | |||||||
Net income (loss) | 4,802 | (2,771 | ) | 7,573 | |||||||
Net (income) loss attributable to noncontrolling interests | (2,592 | ) | 2,771 | (5,363 | ) | ||||||
Net income (loss) attributable to National Storage Affiliates Trust | $ | 2,210 | $ | — | $ | 2,210 | |||||
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Net income (loss) | $ | 4,802 | $ | (2,771 | ) | ||
Add (subtract): | |||||||
Real estate depreciation and amortization | 10,779 | 9,806 | |||||
FFO attributable to subordinated performance unitholders (1) | (4,343 | ) | (3,275 | ) | |||
FFO attributable to common shareholders, OP unitholders, and LTIP unitholders | 11,238 | 3,760 | |||||
Add: | |||||||
Acquisition costs | 1,288 | 599 | |||||
Organizational and offering expenses | — | 58 | |||||
Core FFO attributable to common shareholders, OP unitholders, and LTIP unitholders | $ | 12,526 | $ | 4,417 | |||
Weighted average shares and units outstanding - FFO and Core FFO: (2) | |||||||
Weighted average shares outstanding - basic | 23,005 | 1 | |||||
Weighted average restricted common shares outstanding | 16 | — | |||||
Weighted average OP units outstanding | 22,235 | 19,205 | |||||
Weighted average DownREIT OP unit equivalents outstanding | 1,835 | 1,386 | |||||
Weighted average LTIP units outstanding (3) | 2,456 | — | |||||
Total weighted average shares and units outstanding - FFO and Core FFO | 49,547 | 20,592 | |||||
FFO per share and unit | $ | 0.23 | $ | 0.18 | |||
Core FFO per share and unit | $ | 0.25 | $ | 0.21 |
(1) Amounts represent distributions declared for subordinated performance unitholders and DownREIT subordinated performance unitholders for the periods presented. | |||||||
(2) NSA combines OP units and DownREIT OP units with common shares because, after the applicable lock-out periods, OP units in the Company's operating partnership are redeemable for cash or, at NSA's option, exchangeable for common shares on a one-for-one basis and DownREIT OP units are also redeemable for cash or, at NSA's option, exchangeable for OP units in our operating partnership on a one-for-one basis, subject to certain adjustments in each case. Subordinated performance units, DownREIT subordinated performance units, and LTIP units may also, under certain circumstances, be convertible into or exchangeable for common shares (or other units that are convertible into or exchangeable for common shares). See footnote (2) in the following table for additional discussion of subordinated performance units, DownREIT subordinated performance units, and LTIP units in the calculation of FFO and Core FFO per share and unit. | |||||||
(3) LTIP units have been excluded from the calculations of weighted average shares and units outstanding prior to April 28, 2015 because such units did not participate in distributions prior to the Company’s initial public offering. |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Earnings (loss) per share - diluted | $ | 0.07 | $ | — | |||
Impact of the difference in weighted average number of shares(1) | 0.03 | — | |||||
Impact of GAAP accounting for noncontrolling interests, two-class method and treasury stock method(2) | — | (0.14 | ) | ||||
Add real estate depreciation and amortization | 0.22 | 0.48 | |||||
FFO attributable to subordinated performance unitholders | (0.09 | ) | (0.16 | ) | |||
FFO per share and unit | 0.23 | 0.18 | |||||
Add acquisition costs and organizational and offering expenses | 0.02 | 0.03 | |||||
Core FFO per share and unit | $ | 0.25 | $ | 0.21 | |||
(1) Adjustment accounts for the difference between the weighted average number of shares used to calculate diluted earnings per share and the weighted average number of shares used to calculate FFO and Core FFO per share and unit. Diluted earnings per share is calculated using the two-class method for the company's restricted common shares, the treasury stock method for certain unvested LTIP units, and includes the assumption of a hypothetical conversion of subordinated performance units and DownREIT subordinated performance units into OP units, even though such units may only be convertible into OP units (i) after a lock-out period and (ii) upon certain events or conditions. For additional information around the conversion of subordinated performance units and DownREIT subordinated performance units into OP units, see Note 8 in Item 1. The computation of weighted average shares and units for FFO and Core FFO per share and unit includes all restricted common shares and LTIP units that participate in distributions and excludes all subordinated performance units and DownREIT subordinated performance units because their effect has been accounted for through the allocation of FFO to the related unitholders based on distributions declared. | |||||||
(2) Represents the effect of adjusting the numerator to consolidated net income (loss) prior to GAAP allocations for noncontrolling interests and the application of the two-class method and treasury stock method, as described in footnote (1). |
• | NOI is one of the primary measures used by our management and our PROs to evaluate the economic productivity of our properties, including our ability to lease our properties, increase pricing and occupancy and control our property operating expenses; |
• | NOI is widely used in the real estate industry and the self storage industry to measure the performance and value of real estate assets without regard to various items included in net income that do not relate to or are not indicative of operating performance, such as depreciation and amortization, which can vary depending upon accounting methods, the book value of assets, and the impact of our capital structure; and |
• | We believe NOI helps our investors to meaningfully compare the results of our operating performance from period to period by removing the impact of our capital structure (primarily interest expense on our outstanding indebtedness) and depreciation of the cost basis of our assets from our operating results. |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Net income (loss) | $ | 4,802 | $ | (2,771 | ) | ||
Add: | |||||||
General and administrative expenses | 4,335 | 3,613 | |||||
Depreciation and amortization | 10,892 | 9,877 | |||||
Interest expense | 4,941 | 6,982 | |||||
Acquisition costs | 1,288 | 599 | |||||
Organizational and offering expenses | — | 58 | |||||
Non-operating expense | 114 | 91 | |||||
Net Operating Income | $ | 26,372 | $ | 18,449 |
• | EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements, for capital expenditures, contractual commitments or working capital needs; |
• | EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; |
• | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; |
• | Adjusted EBITDA excludes equity-based compensation expense, which is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period; |
• | EBITDA and Adjusted EBITDA do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and |
• | other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Net income (loss) | $ | 4,802 | $ | (2,771 | ) | ||
Add: | |||||||
Depreciation and amortization | 10,892 | 9,877 | |||||
Interest expense | 4,941 | 6,982 | |||||
EBITDA | 20,635 | 14,088 | |||||
Add: | |||||||
Acquisition costs | 1,288 | 599 | |||||
Organizational and offering expenses | — | 58 | |||||
Equity-based compensation expense (1) | 598 | 638 | |||||
Adjusted EBITDA | $ | 22,521 | $ | 15,383 | |||
(1) Equity-based compensation expense is a non-cash item that is included in general and administrative expenses in our consolidated statements of operations. |
• | Maximum total leverage ratio not to exceed 60% |
• | Minimum fixed charge coverage ratio of at least 1.5x |
• | Minimum net worth of at least $682.6 million plus 75% of future equity issuances |
• | Maximum unsecured debt to unencumbered asset value ratio not to exceed 60% |
• | Unencumbered adjusted net operating income to unsecured interest expense of at least 2.0x |
• | recurring capital expenditures, which represent the portion of capital expenditures that are deemed to replace the consumed portion of acquired capital assets and extend their useful life; |
• | revenue enhancing capital expenditures, which represent the portion of capital expenditures that are made to enhance the revenue and value of an asset from its original purchase condition; and |
• | acquisitions capital expenditures, which represent the portion of capital expenditures capitalized during the current period that were identified and underwritten prior to a property's acquisition. |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Recurring capital expenditures | $ | 512 | $ | 504 | |||
Revenue enhancing capital expenditures | — | 287 | |||||
Acquisitions capital expenditures | 156 | 87 | |||||
Total capital expenditures | 668 | 878 | |||||
Decrease in accrued capital spending | 28 | 142 | |||||
Capital expenditures per statement of cash flows | $ | 696 | $ | 1,020 | |||
(i) | all receipts, including rents and other operating revenues; |
(ii) | any incentive, financing, break-up and other fees paid to us by third parties; |
(iii) | amounts released from previously set aside reserves; and |
(iv) | any other amounts received by us, which we allocate to the particular portfolio of properties. |
(i) | corporate-level general and administrative expenses; |
(ii) | out-of-pocket costs, expenses and fees of our operating partnership, whether or not capitalized; |
(iii) | the costs and expenses of organizing and operating our operating partnership; |
(iv) | amounts paid or due in respect of any loan or other indebtedness of our operating partnership during such period; |
(v) | extraordinary expenses of our operating partnership not previously or otherwise deducted under item (ii) above; |
(vi) | any third-party costs and expenses associated with identifying, analyzing, and presenting a proposed property to us and/or our operating partnership; and |
(vii) | reserves to meet anticipated operating expenditures debt service or other liabilities, as determined by us. |
ITEM 6. Exhibits | |
The following exhibits are filed with this report: | |
Exhibit Number | Exhibit Description |
3.1 | Articles of Amendment and Restatement of National Storage Affiliates Trust (Exhibit 3.1 to the Quarterly Report on Form 10-Q, filed with the SEC on June 5, 2015, is incorporated herein by this reference) |
3.2 | Amended and Restated Bylaws of National Storage Affiliates Trust (Exhibit 3.2 to the Quarterly Report on Form 10-Q, filed with the SEC on June 5, 2015, is incorporated herein by this reference) |
4.1 | Specimen Common Share Certificate of National Storage Affiliates Trust (Exhibit 4.1 to the Registration Statement on Form S-11/A filed with the SEC on April 20, 2015, is incorporated by reference) |
31.1* | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2* | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1* | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101* | XBRL (Extensible Business Reporting Language). The following materials from NSA's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016, tagged in XBRL: ((i) condensed consolidated balance sheets; (ii) condensed consolidated statements of operations; (iii) condensed consolidated statements of comprehensive income (loss); (iv) condensed consolidated statement of changes in equity; (v) condensed consolidated statements of cash flows; and (vi) notes to condensed consolidated financial statements. |
* | Filed herewith. |
National Storage Affiliates Trust | |
By: | /s/ ARLEN D. NORDHAGEN |
Arlen D. Nordhagen | |
chairman of the board of trustees, president | |
and chief executive officer | |
(principal executive officer) | |
By: | /s/ TAMARA D. FISCHER |
Tamara D. Fischer | |
chief financial officer | |
(principal accounting and financial officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of National Storage Affiliates Trust; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [language omitted in accordance with SEC release Nos. 33-8760 and 34-54942] for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | [language omitted in accordance with SEC release Nos. 33-8760 and 34-54942]; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ Arlen D. Nordhagen |
Arlen D. Nordhagen | |
Chairman of the Board of Trustees, President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of National Storage Affiliates Trust; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [language omitted in accordance with SEC release Nos. 33-8760 and 34-54942] for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | [language omitted in accordance with SEC release Nos. 33-8760 and 34-54942]; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ Tamara D. Fischer |
Tamara D. Fischer | |
Executive Vice President and Chief Financial Officer |
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /s/ Arlen D. Nordhagen |
Arlen D. Nordhagen | |
Chairman of the Board of Trustees, President and Chief Executive Officer |
By: | /s/ Tamara D. Fischer |
Tamara D. Fischer | |
Executive Vice President and Chief Financial Officer |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
May. 09, 2016 |
|
Entity [Abstract] | ||
Entity Registrant Name | National Storage Affiliates Trust | |
Entity Central Index Key | 0001618563 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 23,023,841 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common shares of beneficial interest, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common shares of beneficial interest, authorized (in shares) | 250,000,000 | 250,000,000 |
Common shares of beneficial interest, issued (in shares) | 23,023,841 | 23,015,751 |
Common shares of beneficial interest, outstanding (in shares) | 23,023,841 | 23,015,751 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income (loss) | $ 4,802 | $ (2,771) |
Other comprehensive income (loss) | ||
Unrealized loss on derivative contracts | (1,895) | (1,166) |
Reclassification of other comprehensive loss to interest expense | 403 | 385 |
Other comprehensive loss | (1,492) | (781) |
Comprehensive income (loss) | 3,310 | (3,552) |
Comprehensive (income) loss attributable to noncontrolling interests | (1,793) | 3,552 |
Comprehensive income (loss) attributable to National Storage Affiliates Trust | $ 1,517 | $ 0 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited) - 3 months ended Mar. 31, 2016 - USD ($) $ in Thousands |
Total |
Common Shares [Member] |
Additional Paid-in Capital [Member] |
Retained (Deficit) Earnings [Member] |
Accumulated Other Comprehensive Loss [Member] |
Noncontrolling Interests [Member] |
OP Units and Subordinated Performance Units [Member] |
OP Units and Subordinated Performance Units [Member]
Noncontrolling Interests [Member]
|
LTIP units [Member] |
LTIP units [Member]
Noncontrolling Interests [Member]
|
---|---|---|---|---|---|---|---|---|---|---|
Balances (in shares) at Dec. 31, 2015 | 23,015,751 | 23,015,751 | ||||||||
Balances at Dec. 31, 2015 | $ 516,047 | $ 230 | $ 236,392 | $ 11 | $ 0 | $ 279,414 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
OP equity recorded in business combination | $ 18,630 | $ 18,630 | $ 438 | $ 438 | ||||||
Effect of changes in ownership for consolidated entities | 0 | 2,592 | (2,592) | |||||||
Equity-based compensation expense | 598 | 30 | 568 | |||||||
Issuance of restricted common shares (in shares) | 8,090 | |||||||||
Issuance of restricted common shares, value | 0 | |||||||||
Reduction in receivables from partners of OP | 353 | 353 | ||||||||
Other comprehensive loss | (1,492) | (693) | (799) | |||||||
Common share dividends | (4,605) | (4,605) | 0 | |||||||
Distributions to limited partners of OP | (9,667) | (9,667) | ||||||||
Net income (loss) | $ 4,802 | 2,210 | 0 | 2,592 | ||||||
Balances (in shares) at Mar. 31, 2016 | 23,023,841 | 23,023,841 | ||||||||
Balances at Mar. 31, 2016 | $ 525,104 | $ 230 | $ 239,014 | $ (2,384) | $ (693) | $ 288,937 |
ORGANIZATION AND NATURE OF OPERATIONS |
3 Months Ended |
---|---|
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND NATURE OF OPERATIONS | ORGANIZATION AND NATURE OF OPERATIONS National Storage Affiliates Trust was organized in the state of Maryland on May 16, 2013 and is a fully integrated, self-administered and self-managed real estate investment trust focused on the self storage sector. As used herein, "NSA," the "Company," "we," "our," and "us" refers to National Storage Affiliates Trust and its consolidated subsidiaries, except where the context indicates otherwise. The Company intends to elect and qualify as a real estate investment trust ("REIT") for U.S. federal income tax purposes commencing with its taxable year ending December 31, 2015. Through its controlling interest as the sole general partner of NSA OP, LP (its "operating partnership"), a Delaware limited partnership formed on February 13, 2013, the Company is focused on the ownership, operation, and acquisition of self storage properties in the United States. Pursuant to the Agreement of Limited Partnership (as amended, the "LP Agreement") of its operating partnership, the Company's operating partnership is authorized to issue Class A Units ("OP units"), different series of Class B Units ("subordinated performance units"), and Long-Term Incentive Plan Units ("LTIP units"). The Company also owns certain of its self storage properties through other consolidated limited partnership subsidiaries of its operating partnership, which we refer to as "DownREIT partnerships." The DownREIT partnerships issue equity ownership interests that are intended to be economically equivalent to the Company's OP units ("DownREIT OP units") and subordinated performance units ("DownREIT subordinated performance units"). The Company completed its initial public offering on April 28, 2015, pursuant to which it sold 23,000,000 of the Company's common shares of beneficial interest, $0.01 par value per share ("common shares"), at a price of $13.00 per share, which included 3,000,000 common shares sold upon the exercise in full by the underwriters of their option to purchase additional shares. These transactions resulted in net proceeds to the Company of approximately $278.1 million, after deducting the underwriting discount and before additional expenses associated with the offering. The Company contributed the net proceeds from its initial public offering to its operating partnership in exchange for 23,000,000 OP units. OP Units are the economic equivalent of the Company's common shares and for each common share issued by the Company, its operating partnership issues a corresponding OP Unit to NSA in exchange for the contribution of the proceeds from the share issuances. Immediately prior to the completion of the Company's initial public offering on April 28, 2015, the Company redeemed 1,000 common shares held by National Storage Affiliates Holdings, LLC ("Holdings"), an entity formed on February 13, 2013, for no consideration. Prior to this redemption, the Company was 100% owned by Holdings and the only assets of Holdings were 126,400 OP units and 1,000 common shares. The Company owned 293 self storage properties in 17 states with approximately 16.8 million rentable square feet in approximately 130,000 storage units as of March 31, 2016. These properties are managed with local operational focus and expertise by the Company's participating regional operators ("PROs"). These PROs are SecurCare Self Storage, Inc. and its controlled affiliates ("SecurCare"), Kevin Howard Real Estate Inc., d/b/a Northwest Self Storage and its controlled affiliates ("Northwest"), Optivest Properties LLC and its controlled affiliates ("Optivest"), Guardian Storage Centers LLC and its controlled affiliates ("Guardian"), Move It Self Storage and its controlled affiliates ("Move It"), and Arizona Mini Storage Management Company d/b/a Storage Solutions and its controlled affiliates ("Storage Solutions"). As discussed in Note 12, on April 1, 2016, the Company completed its acquisition of a portfolio of self storage properties from parties related to Hide-Away Storage Services, Inc. ("Hide-Away") of Sarasota, Florida, and added Hide-Away as the Company's seventh PRO. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended |
---|---|
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying condensed consolidated financial statements are presented on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles ("GAAP") and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the consolidated financial statements have been included. Principles of Consolidation The Company's financial statements include the accounts of its operating partnership and its controlled subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidation of entities. When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed a variable interest entity ("VIE"), and if the Company is deemed to be the primary beneficiary, in accordance with authoritative guidance issued on the consolidation of VIEs. When an entity is not deemed to be a VIE, the Company considers the provisions of additional guidance to determine whether the general partner controls a limited partnership or similar entity when the limited partners have certain rights. The Company consolidates all entities that are VIEs and of which the Company is deemed to be the primary beneficiary. During the three months ended March 31, 2016, the Company adopted ASU 2015-02 and concluded that although its operating partnership and certain DownREIT partnerships now meet the criteria as a VIE, no change was required to the Company's accounting for any of its interests in less than wholly owned DownREIT partnerships or its operating partnership. The sole significant asset of National Storage Affiliates Trust is its investment in its operating partnership, and consequently, substantially all of the Company’s assets and liabilities represent those assets and liabilities of its operating partnership. Accordingly, there has been no change to the recognized amounts in the Company's consolidated balance sheets and statements of operations or amounts reported in the Company's consolidated statements of cash flows. As of March 31, 2016, the Company's operating partnership was the primary beneficiary of, and therefore consolidated, 21 DownREIT partnerships that are considered VIEs, which owned 34 self storage properties. The net book value of the real estate owned by these VIEs was $260.6 million and $262.6 million as of March 31, 2016 and December 31, 2015, respectively. The carrying value of fixed rate mortgages payable held by these VIEs was $42.8 million and $43.2 million as of March 31, 2016 and December 31, 2015, respectively. The creditors of the consolidated VIEs do not have recourse to the Company's general credit. Noncontrolling Interests All of the limited partner equity interests in the operating partnership not held by the Company are reflected as noncontrolling interests. Noncontrolling interests also include ownership interests in DownREIT partnerships held by entities other than the operating partnership or its subsidiaries. In the consolidated statements of operations, the Company allocates net income (loss) attributable to noncontrolling interests to arrive at net income (loss) attributable to National Storage Affiliates Trust. For transactions that result in changes to the Company's ownership interest in its operating partnership, the carrying amount of noncontrolling interests is adjusted to reflect such changes. The difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interest is adjusted is reflected as an adjustment to additional paid-in capital on the consolidated balance sheets. Allocation of Net Income (Loss) The distribution rights and priorities set forth in the operating partnership's LP Agreement differ from what is reflected by the underlying percentage ownership interests of the unitholders. Accordingly, the Company allocates GAAP income (loss) utilizing the hypothetical liquidation at book value ("HLBV") method, in which the Company allocates income or loss based on the change in each unitholders’ claim on the net assets of its operating partnership at period end after adjusting for any distributions or contributions made during such period. The HLBV method is commonly applied to equity investments where cash distribution percentages vary at different points in time and are not directly linked to an equity holder’s ownership percentage. The HLBV method is a balance sheet-focused approach. A calculation is prepared at each balance sheet date to determine the amount that unitholders would receive if the operating partnership were to liquidate all of its assets (at GAAP net book value) and distribute the resulting proceeds to its creditors and unitholders based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is used to derive each unitholder's share of the income (loss) for the period. Due to the stated liquidation priorities and because the HLBV method incorporates non-cash items such as depreciation expense, in any given period, income or loss may be allocated disproportionately to unitholders as compared to their respective ownership percentage in the operating partnership, and net income (loss) attributable to National Storage Affiliates Trust could be more or less net income than actual cash distributions received and more or less income or loss than what may be received in the event of an actual liquidation. Additionally, the HLBV method could result in net income attributable to National Storage Affiliates Trust during a period when the Company reports a consolidated net loss, or net income attributable to National Storage Affiliates Trust in excess of the Company's consolidated net income. Other Comprehensive Income (Loss) The Company has cash flow hedge derivative instruments that are measured at fair value with unrealized gains or losses recognized in other comprehensive income (loss) with a corresponding adjustment to accumulated other comprehensive loss within equity, as discussed further in Note 11. Under the HLBV method of allocating income (loss) discussed above, a calculation is prepared at each balance sheet date by applying the HLBV method including, and excluding, the assets and liabilities resulting from the Company's cash flow hedge derivative instruments to determine comprehensive income (loss) attributable to National Storage Affiliates Trust. As a result of the distribution rights and priorities set forth in the operating partnership's LP Agreement, in any given period, other comprehensive income (loss) may be allocated disproportionately to unitholders as compared to their respective ownership percentage in the operating partnership and as compared to their respective allocation of net income (loss). Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. ASU 2014-09 is effective for the Company on January 1, 2018, with early application permitted for the Company on January 1, 2017. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis, which modifies the current consolidation guidance. Under this guidance, limited partnerships may no longer be viewed as VIEs if the limited partners hold certain rights over the general partner. Alternatively, limited partnerships not previously viewed as VIEs may now be considered VIEs in the absence of such rights. The Company adopted ASU 2015-02 during the three months ended March 31, 2016, as more fully described above, see "–Principles of Consolidation". In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest, which requires the presentation of debt issuance costs as a direct deduction from the carrying amount of the related debt liabilities. In August 2015, the FASB issued ASU 2015-15 that permits debt issuance costs related to line-of-credit arrangements to be presented as an asset and amortized over the term of the line-of-credit arrangement regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The Company adopted ASUs 2015-03 and 2015-15 during the three months ended March 31, 2016. The adoption resulted in the reclassification of certain debt issuance costs from assets to a reduction in the carrying amount of the Company's debt financings applied retrospectively to all periods. These reclassifications totaled $2.6 million and $2.8 million as of March 31, 2016 and December 31, 2015, respectively. Debt issuance costs related to the Company's senior revolving credit facility (the "revolving line of credit") remain classified within "Debt issuance costs, net" in the Company's consolidated balance sheets. In February 2016, the FASB issued ASU 2016-02, Leases, which amends the existing guidance for accounting for leases, including requiring lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases and lessees to recognize most leases on-balance sheet as lease liabilities with corresponding right-of-use assets. ASU 2016-02 is effective for the Company on January 1, 2019, with early application permitted. ASU 2016-02 requires a modified retrospective approach, with entities applying the new guidance at the beginning of the earliest period presented in the financial statements in which they first apply the new standard, with certain elective transition relief. The Company is evaluating the effect that ASU 2016-02 will have on its operating leases, consolidated financial statements and related disclosures. |
NONCONTROLLING INTERESTS |
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Noncontrolling Interest [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NONCONTROLLING INTERESTS | NONCONTROLLING INTERESTS As of March 31, 2016 and December 31, 2015, units reflecting noncontrolling interests consisted of the following:
While the Company controls its operating partnership and manages the daily operations of its operating partnership's business, the Company did not have an ownership interest or share in its operating partnership's profits and losses prior to the completion of the Company's initial public offering. The increase in OP Units and subordinated performance units outstanding from December 31, 2015 to March 31, 2016 was related to the acquisition of self storage properties. The increase in LTIP units outstanding from December 31, 2015 to March 31, 2016 was due to the issuance of 163,076 compensatory LTIP units to employees during the three months ended March 31, 2016. |
SELF STORAGE PROPERTIES |
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Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SELF STORAGE PROPERTIES | SELF STORAGE PROPERTIES Self storage properties are summarized as follows (dollars in thousands):
Depreciation expense related to self storage properties amounted to $8.6 million and $6.3 million during the three months ended March 31, 2016 and 2015, respectively. |
SELF STORAGE PROPERTY ACQUISITIONS |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SELF STORAGE PROPERTY ACQUISITIONS | SELF STORAGE PROPERTY ACQUISITIONS The Company acquired 17 self storage properties with an estimated fair value of $88.8 million during the three months ended March 31, 2016. Of these acquisitions, four self storage properties with an estimated fair value of $18.4 million were acquired by the Company from its PROs. These self storage property acquisitions were accounted for as business combinations whereby the Company recognized the estimated fair value of the acquired assets and assumed liabilities on the respective dates of such acquisitions. The Company preliminarily allocated the total purchase price to the estimated fair value of tangible and intangible assets acquired, and liabilities assumed. The Company allocated a portion of the purchase price to identifiable intangible assets consisting of customer in-place leases which were recorded at estimated fair value of $2.1 million, resulting in a total fair value of $86.7 million allocated to real estate. The following table summarizes the consideration for the business combinations completed by the Company during the three months ended March 31, 2016 (dollars in thousands):
The results of operations for these business combinations are included in the Company's statements of operations beginning on the respective closing date for each acquisition. For the three months ended March 31, 2016, the accompanying statements of operations includes aggregate total revenue of $1.1 million and an operating loss of less than $0.1 million related to the 17 self storage properties acquired. Acquisition costs in the accompanying statements of operations include consulting fees, transaction expenses, and other costs related to business combinations, which amounted to $1.3 million for the three months ended March 31, 2016. Pro Forma Financial Information The pro forma financial information set forth below reflects adjustments to the historical data of the Company to give effect to the acquisitions and related financing activities for (i) the 22 self storage properties discussed in Note 12 that were acquired subsequent to March 31, 2016, as if each acquisition had occurred on January 1, 2015, (ii) 15 of the 17 self storage properties acquired during the three months ended March 31, 2016, as if the acquisitions had occurred on January 1, 2015 (pro forma financial information is not presented for two of the self storage properties acquired during the three months ended March 31, 2016 since the information required is not available to the Company and (iii) each of the six self storage properties that were acquired during the three months ended March 31, 2015, as if each had occurred on January 1, 2014 (five of the six properties acquired during the three months ended March 31, 2015 were acquired on January 1, 2015 and are therefore included in the historical results for the entirety of the three months ended March 31, 2015). As described in greater detail above, given that certain information with respect to the self storage properties the Company acquired during the three months ended March 31, 2016 and subsequent to March 31, 2016 is not available to the Company, readers of this Form 10-Q and investors are cautioned not to place undue reliance on the Company's pro forma financial information. The pro forma information presented below does not purport to represent what the actual results of operations would have been for the periods indicated, nor does it purport to represent the Company's future results of operations. The following table summarizes on a pro forma basis the results of operations for the three months ended March 31, 2016 and 2015 (dollars in thousands):
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OTHER ASSETS |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER ASSETS | OTHER ASSETS Other assets consist of the following (dollars in thousands):
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DEBT FINANCING |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEBT FINANCING | DEBT FINANCING The Company's outstanding debt as of March 31, 2016 and December 31, 2015 is summarized as follows (dollars in thousands):
Credit Facility On August 13, 2015, the Company entered into an amendment with a syndicated group of lenders consisting of 11 financial institutions to increase the total borrowing capacity under its unsecured credit facility (the "credit facility"), which was originally entered into on April 1, 2014, by $125.0 million for a total credit facility of $550.0 million. The Company has an additional expansion option under the credit facility, which if exercised, would provide for a total borrowing capacity of $700.0 million. The credit facility consists of two components:
The terms of the credit facility limit the Company's ability to make distributions, incur additional debt, and acquire or sell significant assets. The credit facility requires compliance with certain financial and non-financial covenants, including a maximum total leverage ratio, a minimum fixed charge coverage ratio, and minimum net worth, which were not impacted by the increase amendment discussed above. At March 31, 2016, the Company was in compliance with all such covenants. As discussed further in Note 12, on May 6, 2016, the Company amended and restated its credit facility with a syndicated group of lenders. The amendment increased the credit facility's total borrowing capacity, extended the maturity dates, and reallocated borrowings among the term loan tranches and a revolving line of credit. Fixed Rate Mortgages Payable Fixed rate mortgages have scheduled maturities at various dates through November 2024, and have effective interest rates that range from 2.43% to 5.00%. Principal and interest are generally payable monthly or in monthly interest-only payments with balloon payments due at maturity. Future Debt Obligations Based on existing debt agreements in effect as of March 31, 2016, the scheduled principal and maturity payments for outstanding borrowings under the Company's credit facility and fixed rate mortgages are presented in the table below (in thousands):
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EARNINGS PER SHARE |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE | EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings (loss) per common share for the three months ended March 31, 2016 and 2015, respectively (in thousands, except per share amounts):
As discussed in Note 3, the Company did not have an ownership interest or share in its operating partnership's profits and losses prior to the completion of the Company's initial public offering. As a result, all of the operating partnership's profits and losses for the three months ended March 31, 2015 were allocated to noncontrolling interests. Outstanding equity interests of the operating partnership and DownREIT partnerships are considered potential common shares for purposes of calculating diluted earnings (loss) per share as the unitholders may, through the exercise of redemption rights, obtain common shares, subject to various restrictions. Basic earnings per share is calculated based on the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by further adjusting for the dilutive impact using the treasury stock method for unvested LTIP units subject to a service condition outstanding during the period and the if-converted method for any convertible securities outstanding during the period. Generally, following certain lock-out periods, OP units in the operating partnership are redeemable for cash or, at the Company's option, exchangeable for common shares on a one-for-one basis, subject to certain adjustments and DownREIT OP units are redeemable for cash or, at the Company's option, exchangeable for OP units in the operating partnership on a one-for-one basis, subject to certain adjustments in each case. LTIP units may also, under certain circumstances, be convertible into OP units, which are exchangeable for common shares as described above. Certain LTIP units vested prior to or upon the completion of the Company's initial public offering and certain LTIP units will vest upon the satisfaction of a future service condition. Vested LTIP units and unvested LTIP units that vest based on a service condition are allocated income or loss in a similar manner as OP units. Unvested LTIP units subject to a service condition are evaluated for dilution using the treasury stock method. For the three months ended March 31, 2016, 128,087 unvested LTIP units that vest based on a service condition are excluded from the calculation of diluted earnings (loss) per share as they are not dilutive to earnings (loss) per share. In addition, certain LTIP units vest upon the future acquisition of properties sourced by PROs. For the three months ended March 31, 2016, 397,600 unvested LTIP units that vest upon the future acquisition of properties are excluded from the calculation of diluted earnings (loss) per share because the contingency for the units to vest has not been attained as of the end of the reported periods. Subordinated performance units may also, under certain circumstances, be convertible into OP units which are exchangeable for common shares as described above, and DownREIT subordinated performance units may, under certain circumstances, be exchangeable for subordinated performance units on a one-for-one basis. Subordinated performance units are only convertible into OP units, after a two year lock-out period and then generally (i) at the holder’s election only upon the achievement of certain performance thresholds relating to the properties to which such subordinated performance units relate or (ii) at the Company's election upon a retirement event of a PRO that holds such subordinated performance units or upon certain qualifying terminations. Although subordinated performance units may only be convertible after a two year lock-out period, the Company assumes a hypothetical conversion of each subordinated performance unit (including each DownREIT subordinated performance unit) into OP units (with subsequently assumed redemption into common shares) for the purposes of calculating diluted weighted average common shares. This hypothetical conversion is calculated using historical financial information prior to and since the completion of the Company's initial public offering on April 28, 2015, and as a result, is not necessarily indicative of the subsequent results of operations, cash flows or financial position of the Company following the initial public offering or upon expiration of the two-year lock out period on conversions. Participating securities, which consist of unvested restricted common shares, receive dividends equal to those received by common shares. The effect of participating securities for the periods presented above is calculated using the two-class method of allocating distributed and undistributed earnings. |
RELATED PARTY TRANSACTIONS |
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Mar. 31, 2016 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS Supervisory and Administrative Fees The Company has entered into asset management agreements with the PROs to continue providing leasing, operating, supervisory and administrative services related to the self storage properties contributed by and acquired from the PROs. The asset management agreements generally provide for fees ranging from 5% to 6% of gross revenue for the managed self storage properties. During the three months ended March 31, 2016 and 2015, the Company incurred $2.2 million and $1.6 million, respectively, for supervisory and administrative fees to the PROs. Such fees are included in general and administrative expenses in the accompanying consolidated statements of operations. Affiliate Payroll Services The employees responsible for operation of the self storage properties are employees of the PROs who charge the Company for the costs associated with the respective employees. For the three months ended March 31, 2016 and 2015, the Company incurred $4.0 million and $2.9 million, respectively, for payroll and related costs reimbursable to these affiliates. Such costs are included in property operating expenses in the accompanying consolidated statements of operations. Affiliate Call Center Services On April 1, 2015, the Company acquired a centralized call center for 50,000 OP units from SecurCare. Because the Company and SecurCare are under common control, the assets acquired and liabilities assumed were recorded at SecurCare's historical carrying value, which was a nominal amount as of the acquisition date. SecurCare continues to manage call center services to support self storage property operations and the fees paid to SecurCare for these services for the three months ended March 31, 2016 are included in the supervisory and administrative fees discussed above. The call center utilizes approximately 1,500 square feet in one of the Company's self storage properties acquired from SecurCare for annual rent of approximately $25,000. Prior to the acquisition, for the three months ended March 31, 2015, the Company incurred call center charges of $0.2 million. Such call center costs are included in property operating expenses in the accompanying consolidated statements of operations. Due Diligence Costs During the three months ended March 31, 2016, the Company incurred $0.1 million of expenses, payable to certain PROs, related to self storage property acquisitions sourced by the PROs. These expenses, which are based on the volume of transactions sourced by the PROs, are intended to reimburse the PROs for due diligence costs incurred in the sourcing and underwriting process. These expenses are included in acquisition costs in the accompanying statements of operations. There were no such reimbursements during the three months ended March 31, 2015. |
COMMITMENTS AND CONTINGENCIES |
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Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Legal Proceedings The Company is subject to litigation, claims, and assessments that may arise in the ordinary course of its business activities. Such matters include contractual matters, employment related issues, and regulatory proceedings. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters will not have a material adverse effect on the Company's financial position, results of operations, or liquidity. |
FAIR VALUE MEASUREMENTS |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Recurring Fair Value Measurements The Company sometimes limits its exposure to interest rate fluctuations by entering into interest rate swap agreements. The interest rate swap agreements moderate the Company's exposure to interest rate risk by effectively converting the interest on variable rate debt to a fixed rate. The Company measures its interest rate swap derivatives at fair value on a recurring basis. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive loss and are subsequently reclassified into earnings in the period that the hedged transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly into earnings. Information regarding the Company's interest rate swaps measured at fair value, which are classified within Level 2 of the GAAP fair value hierarchy, is presented below (dollars in thousands):
As of March 31, 2016 and December 31, 2015, the Company had outstanding interest rate swaps with aggregate notional amounts of $199.4 million designated as cash flow hedges. As of March 31, 2016, the Company's swaps had a weighted average remaining term of approximately 2.1 years. The fair value of these swaps are presented within accounts payable and accrued liabilities and other assets in the Company's balance sheets, and the Company recognizes any changes in the fair value as an adjustment of accumulated other comprehensive loss within equity to the extent of their effectiveness. If the forward rates at March 31, 2016 remain constant, the Company estimates that during the next 12 months, the Company would reclassify into earnings approximately $1.3 million of the unrealized losses included in accumulated other comprehensive loss. If market interest rates increase above the 1.25% weighted average fixed rate under these interest rate swaps the Company will benefit from net cash payments due to it from the counterparty to the interest rate swaps. There were no transfers between levels during the three months ended March 31, 2016 and 2015. For financial assets and liabilities that utilize Level 2 inputs, the Company utilizes both direct and indirect observable price quotes, including LIBOR yield curves. The Company uses valuation techniques for Level 2 financial assets and liabilities which include LIBOR yield curves at the reporting date as well as assessing counterparty credit risk. Counterparties to these contracts are highly rated financial institutions. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with the Company's derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and the counterparties. As of March 31, 2016, the Company determined that the effect of credit valuation adjustments on the overall valuation of its derivative positions are not significant to the overall valuation of its derivatives. Therefore, the Company has determined that its derivative valuations are appropriately classified in Level 2 of the fair value hierarchy. Fair Value Disclosures The carrying values of cash and cash equivalents, restricted cash, trade receivables, and accounts payable and accrued liabilities reflected in the balance sheets at March 31, 2016 and December 31, 2015, approximate fair value due to the short term nature of these financial assets and liabilities. The carrying value of variable rate debt financing reflected in the balance sheets at March 31, 2016 and December 31, 2015 approximates fair value as the changes in their associated interest rates reflect the current market and credit risk is similar to when the loans were originally obtained. The fair values of fixed rate mortgages were estimated using the discounted estimated future cash payments to be made on such debt; the discount rates used approximated current market rates for loans, or groups of loans, with similar maturities and credit quality (categorized within Level 2 of the fair value hierarchy). The combined principal balance of the Company's fixed rate mortgages payable was approximately $172.2 million as of March 31, 2016 with a fair value of approximately $188.1 million. In determining the fair value, the Company estimated a weighted average market interest rate of approximately 2.96%, compared to the weighted average contractual interest rate of 5.07%. The combined principal balance of the Company's fixed rate mortgages was approximately $176.9 million as of December 31, 2015 with a fair value of approximately $189.3 million. In determining the fair value as of December 31, 2015, the Company estimated a weighted average market interest rate of approximately 3.41%, compared to the weighted average contractual interest rate of 5.10%. |
SUBSEQUENT EVENTS |
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Mar. 31, 2016 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS Self Storage Property Acquisitions In April and May 2016, the Company acquired 22 self storage properties for approximately $173.8 million. This included 14 self storage properties from parties related to Hide-Away, which the Company added as its seventh PRO. Consideration for these acquisitions included approximately $43.3 million of cash (including $6.3 million of debt assumed and repaid in the days immediately following an acquisition), OP equity of approximately $79.9 million (consisting of the issuance of 2,348,464 OP Units and 1,467,386 subordinated performance units) and the assumption of $49.5 million of mortgage indebtedness and $1.1 million of other working capital liabilities. Of these acquisitions, 15 were acquired by the Company from its PROs and seven were acquired by the Company from third-party sellers. In connection with these acquisitions, the Company incurred $0.1 million of expenses, payable to certain PROs, for due diligence costs related to the self storage properties sourced by the PROs. Changes to the Company's Credit Facility On May 6, 2016, the Company entered into an amended and restated credit facility with a syndicated group of lenders. The amendment increased the credit facility's total borrowing capacity, extended the maturity dates, and reallocated borrowings among term loan tranches and a revolving line of credit. The amendment increased the borrowing capacity of the credit facility by $125.0 million for a total credit facility of $675.0 million, consisting of three components: (i) a revolving line of credit which provides for a total borrowing commitment up to $350.0 million (the "Revolver"), whereby the Company may borrow, repay and re-borrow amounts under the revolving line of credit, (ii) a $225.0 million tranche A term loan facility (the "Term Loan A"), and (iii) a $100.0 million tranche B loan facility (the "Term Loan B" and together with the Revolver and the Term Loan A, the "Facilities"). The Revolver matures in four years; provided that the Company may elect to extend the maturity to five years by paying an extension fee of 0.15% of the total borrowing commitment thereunder at the time of extension and meeting other customary conditions with respect to compliance. The Term Loan A matures in five years and the Term Loan B matures in six years. None of the Facilities is subject to any scheduled reduction or amortization payments prior to maturity. Interest rates applicable to loans under the Facilities are determined based on a 1, 2, 3 or 6 month LIBOR period (as elected by the Company at the beginning of any applicable interest period) plus an applicable margin or a base rate, determined by the greatest of the Key Bank prime rate, the federal funds rate plus 0.50% or one month LIBOR plus 1.00%, plus an applicable margin. The applicable margins for the Facilities are leverage based and range from 1.35% to 2.15% for LIBOR loans and 0.35% to 1.15% for base rate loans; provided that after such time as the Company achieves an investment grade rating from at least two rating agencies, the Company may elect (but is not required to elect) that the Facilities are subject to the rating based on applicable margins ranging from 0.85% to 2.30% for LIBOR Loans and 0.00% to 1.30% for base rate loans. The Company is also required to pay the following usage based fees ranging from 0.15% to 0.25% with respect to the unused portion of the Revolver; provided that if the Company makes an investment grade pricing election as described in the preceding sentence, the Company will be required to pay rating based fees ranging from 0.125% to 0.300% with respect to the entire Revolver in lieu of any usage based fees. As of May 6, 2016, $225.0 million was outstanding under the Term Loan A, $100.0 million was outstanding under the Term Loan B, and $181.5 million was outstanding under the Revolver and the Company would have had the capacity to borrow the full remaining Revolver commitments of $168.5 million while remaining in compliance with the Facilities' financial covenants described in the following paragraph. The Company is required to comply with the following financial covenants under the Facilities: •Maximum total leverage ratio not to exceed 60% •Minimum fixed charge coverage ratio of at least 1.5x •Minimum net worth of at least $682.6 million plus 75% of future equity issuances •Maximum unsecured debt to unencumbered asset value ratio not to exceed 60% •Unencumbered adjusted net operating income to unsecured interest expense of at least 2.0x In addition, the terms of the Facilities contain customary affirmative and negative covenants that, among other things, limit the Company's ability to make distributions or certain investments, incur debt, incur liens and enter into certain transactions. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
3 Months Ended |
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Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements are presented on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles ("GAAP") and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the consolidated financial statements have been included. |
Principles of Consolidation and Noncontrolling Interest | Noncontrolling Interests All of the limited partner equity interests in the operating partnership not held by the Company are reflected as noncontrolling interests. Noncontrolling interests also include ownership interests in DownREIT partnerships held by entities other than the operating partnership or its subsidiaries. In the consolidated statements of operations, the Company allocates net income (loss) attributable to noncontrolling interests to arrive at net income (loss) attributable to National Storage Affiliates Trust. For transactions that result in changes to the Company's ownership interest in its operating partnership, the carrying amount of noncontrolling interests is adjusted to reflect such changes. The difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interest is adjusted is reflected as an adjustment to additional paid-in capital on the consolidated balance sheets. Principles of Consolidation The Company's financial statements include the accounts of its operating partnership and its controlled subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidation of entities. |
Variable Interest Entity | When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed a variable interest entity ("VIE"), and if the Company is deemed to be the primary beneficiary, in accordance with authoritative guidance issued on the consolidation of VIEs. When an entity is not deemed to be a VIE, the Company considers the provisions of additional guidance to determine whether the general partner controls a limited partnership or similar entity when the limited partners have certain rights. The Company consolidates all entities that are VIEs and of which the Company is deemed to be the primary beneficiary. During the three months ended March 31, 2016, the Company adopted ASU 2015-02 and concluded that although its operating partnership and certain DownREIT partnerships now meet the criteria as a VIE, no change was required to the Company's accounting for any of its interests in less than wholly owned DownREIT partnerships or its operating partnership. The sole significant asset of National Storage Affiliates Trust is its investment in its operating partnership, and consequently, substantially all of the Company’s assets and liabilities represent those assets and liabilities of its operating partnership. Accordingly, there has been no change to the recognized amounts in the Company's consolidated balance sheets and statements of operations or amounts reported in the Company's consolidated statements of cash flows. |
Allocation of Net Income (Loss) | Allocation of Net Income (Loss) The distribution rights and priorities set forth in the operating partnership's LP Agreement differ from what is reflected by the underlying percentage ownership interests of the unitholders. Accordingly, the Company allocates GAAP income (loss) utilizing the hypothetical liquidation at book value ("HLBV") method, in which the Company allocates income or loss based on the change in each unitholders’ claim on the net assets of its operating partnership at period end after adjusting for any distributions or contributions made during such period. The HLBV method is commonly applied to equity investments where cash distribution percentages vary at different points in time and are not directly linked to an equity holder’s ownership percentage. The HLBV method is a balance sheet-focused approach. A calculation is prepared at each balance sheet date to determine the amount that unitholders would receive if the operating partnership were to liquidate all of its assets (at GAAP net book value) and distribute the resulting proceeds to its creditors and unitholders based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is used to derive each unitholder's share of the income (loss) for the period. Due to the stated liquidation priorities and because the HLBV method incorporates non-cash items such as depreciation expense, in any given period, income or loss may be allocated disproportionately to unitholders as compared to their respective ownership percentage in the operating partnership, and net income (loss) attributable to National Storage Affiliates Trust could be more or less net income than actual cash distributions received and more or less income or loss than what may be received in the event of an actual liquidation. Additionally, the HLBV method could result in net income attributable to National Storage Affiliates Trust during a period when the Company reports a consolidated net loss, or net income attributable to National Storage Affiliates Trust in excess of the Company's consolidated net income. |
Other Comprehensive Income (Loss) | Other Comprehensive Income (Loss) The Company has cash flow hedge derivative instruments that are measured at fair value with unrealized gains or losses recognized in other comprehensive income (loss) with a corresponding adjustment to accumulated other comprehensive loss within equity, as discussed further in Note 11. Under the HLBV method of allocating income (loss) discussed above, a calculation is prepared at each balance sheet date by applying the HLBV method including, and excluding, the assets and liabilities resulting from the Company's cash flow hedge derivative instruments to determine comprehensive income (loss) attributable to National Storage Affiliates Trust. As a result of the distribution rights and priorities set forth in the operating partnership's LP Agreement, in any given period, other comprehensive income (loss) may be allocated disproportionately to unitholders as compared to their respective ownership percentage in the operating partnership and as compared to their respective allocation of net income (loss). |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. ASU 2014-09 is effective for the Company on January 1, 2018, with early application permitted for the Company on January 1, 2017. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis, which modifies the current consolidation guidance. Under this guidance, limited partnerships may no longer be viewed as VIEs if the limited partners hold certain rights over the general partner. Alternatively, limited partnerships not previously viewed as VIEs may now be considered VIEs in the absence of such rights. The Company adopted ASU 2015-02 during the three months ended March 31, 2016, as more fully described above, see "–Principles of Consolidation". In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest, which requires the presentation of debt issuance costs as a direct deduction from the carrying amount of the related debt liabilities. In August 2015, the FASB issued ASU 2015-15 that permits debt issuance costs related to line-of-credit arrangements to be presented as an asset and amortized over the term of the line-of-credit arrangement regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The Company adopted ASUs 2015-03 and 2015-15 during the three months ended March 31, 2016. The adoption resulted in the reclassification of certain debt issuance costs from assets to a reduction in the carrying amount of the Company's debt financings applied retrospectively to all periods. These reclassifications totaled $2.6 million and $2.8 million as of March 31, 2016 and December 31, 2015, respectively. Debt issuance costs related to the Company's senior revolving credit facility (the "revolving line of credit") remain classified within "Debt issuance costs, net" in the Company's consolidated balance sheets. In February 2016, the FASB issued ASU 2016-02, Leases, which amends the existing guidance for accounting for leases, including requiring lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases and lessees to recognize most leases on-balance sheet as lease liabilities with corresponding right-of-use assets. ASU 2016-02 is effective for the Company on January 1, 2019, with early application permitted. ASU 2016-02 requires a modified retrospective approach, with entities applying the new guidance at the beginning of the earliest period presented in the financial statements in which they first apply the new standard, with certain elective transition relief. The Company is evaluating the effect that ASU 2016-02 will have on its operating leases, consolidated financial statements and related disclosures. |
NONCONTROLLING INTERESTS (Tables) |
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Noncontrolling Interest [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of outstanding equity interests | As of March 31, 2016 and December 31, 2015, units reflecting noncontrolling interests consisted of the following:
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SELF STORAGE PROPERTIES (Tables) |
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Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of self storage properties | Self storage properties are summarized as follows (dollars in thousands):
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SELF STORAGE PROPERTY ACQUISITIONS (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of business combinations | The following table summarizes the consideration for the business combinations completed by the Company during the three months ended March 31, 2016 (dollars in thousands):
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Schedule of pro forma information | The following table summarizes on a pro forma basis the results of operations for the three months ended March 31, 2016 and 2015 (dollars in thousands):
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OTHER ASSETS (Tables) |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other assets | Other assets consist of the following (dollars in thousands):
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DEBT FINANCING (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt | The Company's outstanding debt as of March 31, 2016 and December 31, 2015 is summarized as follows (dollars in thousands):
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Schedule of future debt maturities | Based on existing debt agreements in effect as of March 31, 2016, the scheduled principal and maturity payments for outstanding borrowings under the Company's credit facility and fixed rate mortgages are presented in the table below (in thousands):
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EARNINGS PER SHARE (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of elements used in calculating basic and diluted earnings per common share | The following table sets forth the computation of basic and diluted earnings (loss) per common share for the three months ended March 31, 2016 and 2015, respectively (in thousands, except per share amounts):
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FAIR VALUE MEASUREMENTS (Tables) |
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of interest rate swap derivatives fair value | Information regarding the Company's interest rate swaps measured at fair value, which are classified within Level 2 of the GAAP fair value hierarchy, is presented below (dollars in thousands):
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SELF STORAGE PROPERTIES (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
Dec. 31, 2015 |
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Real Estate [Abstract] | |||
Land | $ 332,912 | $ 315,867 | |
Buildings and improvements | 899,272 | 829,093 | |
Furniture and equipment | 2,357 | 2,241 | |
Total self storage properties | 1,234,541 | 1,147,201 | |
Less accumulated depreciation | (76,810) | (68,100) | |
Self storage properties, net | 1,157,731 | $ 1,079,101 | |
Depreciation expense related to self storage properties | $ 8,600 | $ 6,300 |
SELF STORAGE PROPERTY ACQUISITIONS - Business Combination Consideration (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016
USD ($)
property
|
Mar. 31, 2015
property
|
|
Business Combinations [Abstract] | ||
Number of self storage properties acquired | property | 17 | 6 |
Consideration given, cash | $ 63,300 | |
Consideration given, value of OP Equity | 19,068 | |
Liabilities assumed, mortgages | 5,861 | |
Liabilities assumed, other | 584 | |
Total consideration given and liabilities assumed | $ 88,813 |
OTHER ASSETS (Details) - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Customer in-place leases, net of accumulated amortization of $5,195 and $4,312, respectively | $ 4,199 | $ 4,209 |
Receivables: | ||
Trade, net | 1,013 | 1,093 |
PROs and other affiliates | 165 | 232 |
Property acquisition deposits | 229 | 763 |
Interest rate derivative assets | 0 | 331 |
Prepaid expenses and other | 2,926 | 1,486 |
Corporate furniture, equipment and other, net | 683 | 534 |
Total | 9,215 | 8,648 |
Customer in-place leases, accumulated amortization | $ 5,195 | $ 4,312 |
DEBT FINANCING - Debt Summary (Details) - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Debt Instrument [Line Items] | ||
Total principal | $ 631,676 | $ 564,886 |
Unamortized debt issuance costs and debt premium, net | 2,636 | 2,909 |
Total debt | $ 634,312 | $ 567,795 |
Line of Credit [Member] | Credit Facility [Member] | Revolving line of credit [Member] | ||
Debt Instrument [Line Items] | ||
Effective interest rate | 2.04% | 2.04% |
Total principal | $ 259,475 | $ 187,975 |
Line of Credit [Member] | Credit Facility [Member] | Term Loan [Member] | ||
Debt Instrument [Line Items] | ||
Effective interest rate | 2.74% | 2.74% |
Total principal | $ 200,000 | $ 200,000 |
Mortgages [Member] | Fixed Rate Mortgages [Member] | ||
Debt Instrument [Line Items] | ||
Effective interest rate | 3.97% | 3.97% |
Total principal | $ 172,201 | $ 176,911 |
DEBT FINANCING - Future maturities (Details) - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Scheduled Principal and Maturity Payments | ||
Remainder of 2016 | $ 9,420 | |
2017 | 275,629 | |
2018 | 209,191 | |
2019 | 3,468 | |
2020 | 37,635 | |
2021 | 5,798 | |
After 2022 | 90,535 | |
Total contractual principal | 631,676 | |
Premium Amortization and Unamortized Debt Issuance Costs | ||
Remainder of 2016 | 645 | |
2017 | 322 | |
2018 | 621 | |
2019 | 713 | |
2020 | 360 | |
2021 | 2 | |
After 2022 | (27) | |
Total premium amortization and unamortized debt issuance costs | 2,636 | |
Total | ||
Remainder of 2016 | 10,065 | |
2017 | 275,951 | |
2018 | 209,812 | |
2019 | 4,181 | |
2020 | 37,995 | |
2021 | 5,800 | |
After 2022 | 90,508 | |
Total debt | $ 634,312 | $ 567,795 |
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