0001618563-17-000112.txt : 20171107 0001618563-17-000112.hdr.sgml : 20171107 20171106174643 ACCESSION NUMBER: 0001618563-17-000112 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20171106 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20171107 DATE AS OF CHANGE: 20171106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: National Storage Affiliates Trust CENTRAL INDEX KEY: 0001618563 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 465053858 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-37351 FILM NUMBER: 171180482 BUSINESS ADDRESS: STREET 1: 5200 DTC PARKWAY STREET 2: SUITE 200 CITY: GREENWOOD VILLAGE STATE: CO ZIP: 80111 BUSINESS PHONE: 720-630-2600 MAIL ADDRESS: STREET 1: 5200 DTC PARKWAY STREET 2: SUITE 200 CITY: GREENWOOD VILLAGE STATE: CO ZIP: 80111 8-K 1 a8-kq32017erss.htm 8-K Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 6, 2017
National Storage Affiliates Trust
(Exact name of registrant as specified in its charter)
 
Maryland
001-37351
46-5053858
(State or other jurisdiction of
incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)

5200 DTC Parkway
Suite 200
Greenwood Village, Colorado 80111
(Address of principal executive offices)
(720) 630-2600
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))










ITEM 2.02.    Results of Operations and Financial Condition.

On November 6, 2017, National Storage Affiliates Trust (the "Company") issued an earnings release and supplemental schedules announcing its financial results for the quarter ended September 30, 2017. A copy of the earnings release and supplemental schedules are attached hereto as Exhibit 99.1 and is incorporated by reference herein. The Company will hold its third quarter 2017 earnings conference call on Tuesday, November 7, 2017 at 1:00 p.m. Eastern Time. You may join the conference call through an Internet webcast accessed through the Company's website at www.nationalstorageaffiliates.com. Alternatively, you may join the conference call by telephone by dialing 877-407-9711, or 412-902-1014 for international callers. If you wish to participate, please call approximately five minutes before the conference call is scheduled to begin.
If you are unable to join the live conference call, you may access the replay for one week through Tuesday, November 14, 2017, by dialing 877-660-6853, or 201-612-7415 for international callers, and using Conference ID 13646795, or you may access the webcast replay for 30 days through the Company's website at www.nationalstorageaffiliates.com.The full text of the earnings release and supplemental schedules are also available through the Company's website at http://ir.nationalstorageaffiliates.com/quarterly-reporting. The information contained on the Company's website is not incorporated by reference herein.
ITEM 9.01.    Financial Statements and Exhibits.  

The following exhibits are furnished with this report:   






SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 6, 2017
NATIONAL STORAGE AFFILIATES TRUST
 
 
 
 
 
 
By:
/s/ TAMARA D. FISCHER
 
 
 
Tamara D. Fischer
 
 
 
Executive Vice President and Chief Financial Officer
 
 





EX-99.1 2 ex991-q32017erss.htm THIRD QUARTER EARNINGS RELEASE DATED NOVEMBER 6, 2017 Exhibit

nsa17coverpageeditv2.jpg



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Table of Contents
Page
 
 
 
Earnings Release
 
 
Consolidated Statements of Operations
 
 
Consolidated Balance Sheets
 
 
Schedule 1 - Funds From Operations and Core Funds From Operations
 
 
Schedule 2 - Other Non-GAAP Financial Measurements
 
 
Schedule 3 - Portfolio Summary
 
 
Schedule 4 - Debt and Equity Capitalization
 
 
Schedule 5 - Summarized Information for Unconsolidated Real Estate Venture
 
 
Schedule 6 - Same Store Performance Summary
 
 
Schedule 7 - Reconciliation of Same Store Data and Net Operating Income to Net Income
 
 
Schedule 8 - Selected Financial Information
 
 
Glossary
 
 
 
 
 
 
 
 



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November 6, 2017

National Storage Affiliates Trust Reports Third Quarter 2017 Results; Net Income Increases $3.3 million; Core FFO per Share Increases 13.8%; Same Store NOI Increases 6.7%; Acquired 19 Self Storage Properties
GREENWOOD VILLAGE, Colo. - (BUSINESS WIRE) - National Storage Affiliates Trust (“NSA” or the "Company") (NYSE: NSA) today reported the Company’s third quarter 2017 results.
Key Highlights
Net income was $11.2 million for the third quarter of 2017, an increase of $3.3 million compared to $7.9 million for the third quarter of 2016.
Core funds from operations ("Core FFO") was $23.8 million, or $0.33 per share, for the third quarter of 2017, an increase of 13.8% per share compared to $18.2 million, or $0.29 per share, for the third quarter of 2016.
Same store NOI was $30.5 million for the third quarter of 2017, an increase of 6.7% compared to $28.6 million for the third quarter of 2016, driven by an increase of 5.4% in same store total revenues and a 2.4% increase in same store property operating expenses.
Same store average annualized rental revenue per occupied square foot was $11.83 for the third quarter of 2017, an increase of 5.7% compared to $11.19 for the third quarter of 2016.
Acquired 19 self storage properties during the third quarter of 2017 for $123.8 million.
Arlen Nordhagen, Chief Executive Officer and Chairman, commented, "As expected, we had another great quarter with strong year-over-year increases in same store NOI and Core FFO per share. We acquired 19 properties for $124 million during the third quarter and closed on an additional 28 properties for $175 million subsequent to September 30. When combined with the $59 million of joint venture acquisitions we've completed thus far in 2017, we've acquired and made investments in 67 properties totaling nearly $460 million in value. In October we completed our first public perpetual preferred share offering for gross proceeds of $173 million. We were very pleased by how well our first preferred offering was received as we further strengthen our balance sheet by broadening our sources of capital. The preferred offering and the $85 million of secured debt financing that we completed during the third quarter provide us the financial flexibility to continue to execute on our growth strategy as we close out 2017 and look ahead to 2018."

1

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Financial Results
($ in thousands, except per share and unit data)
Three Months Ended September 30,
 
2017
 
2016
 
Growth
Net income
$
11,226

 
$
7,944

 
41.3
 %
 
 
 
 
 
 
Funds From Operations ("FFO")(1)
$
23,650

 
$
16,510

 
43.2
 %
Add back acquisition costs and NSA's share of unconsolidated real estate venture acquisition costs
140

 
1,737

 
(91.9
)%
Core FFO(1)
$
23,790

 
$
18,247

 
30.4
 %
 
 
 
 
 
 
Earnings (loss) per share - basic
$
0.03

 
$

 
 %
Earnings (loss) per share - diluted
$
0.03

 
$

 
 %
 
 
 
 
 
 
FFO per share and unit(1)
$
0.32

 
$
0.26

 
23.1
 %
Core FFO per share and unit(1)
$
0.33

 
$
0.29

 
13.8
 %
 
 
 
 
 
 
(1) Non-GAAP financial measures, including FFO, Core FFO and NOI, are reconciled to their most directly comparable GAAP measure and defined (together with other words and phrases used herein) in the Schedules to this press release and in the supplemental financial information. 
Third quarter 2017 net income increased $3.3 million, driven primarily by incremental NOI generated from 65 self storage properties acquired between October 1, 2016 and September 30, 2017 and same store NOI growth, partially offset by increases in depreciation and amortization, interest expense and general and administrative expenses.
Third quarter 2017 basic earnings per share increased $0.03 per share and diluted earnings per share increased $0.03 per share. In addition to the items affecting net income described above, the comparison of earnings per share amounts between periods is affected by the allocation of net income to noncontrolling interests pursuant to GAAP. Additional information on NSA's allocation of net income (loss) can be found in the Glossary to the supplemental financial information under "Hypothetical Liquidation at Book Value Method."
Third quarter 2017 FFO per share increased 23.1% and Core FFO per share increased 13.8%. The increases in FFO and Core FFO were primarily the result of $6.3 million of incremental NOI from 65 self storage properties acquired between October 1, 2016 and September 30, 2017, same store NOI growth of $1.9 million, $2.0 million of management fees and other revenue and $1.3 million of the Company's share of FFO and Core FFO from its unconsolidated real estate venture, partially offset by increases of $2.2 million of general and administrative expenses, $2.9 million of interest expense and $2.1 million of distributions to subordinated performance unitholders.

2

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Total Consolidated Portfolio Operating Results
($ in thousands, except per square foot data)
Three Months Ended September 30,
 
2017
 
2016
 
Growth
Total rental and other property-related revenue
$
66,860

 
$
52,949

 
26.3
 %
Property operating expenses
21,618

 
17,330

 
24.7
 %
Net Operating Income (NOI)
$
45,242

 
$
35,619

 
27.0
 %
 
 
 
 
 
 
Average Occupancy
90.4
%
 
91.0
%
 
(0.6
)%
Average Annualized Rental Revenue Per Occupied Square Foot
$
11.61

 
$
11.24

 
3.3
 %
Third quarter 2017 total rental and other property-related revenue increased 26.3%, driven by $9.6 million of incremental revenues from 65 self storage properties acquired between October 1, 2016 and September 30, 2017 and a $2.2 million increase in same store total revenues.
Third quarter 2017 total property operating expenses increased 24.7% resulting from $3.3 million of incremental property operating expenses generated by 65 self storage properties acquired between October 1, 2016 and September 30, 2017, and an increase of $0.3 million in same store property operating expenses.
Total consolidated portfolio NOI was $45.2 million for the third quarter of 2017, an increase of 27.0% compared to NOI of $35.6 million for the third quarter of 2016.
NSA's consolidated portfolio included 413 self storage properties, approximately 25.2 million rentable square feet, with period-end occupancy of 89.9% as of September 30, 2017.
Same Store Operating Results (277 Properties)
($ in thousands, except per square foot data)
Three Months Ended September 30,
 
2017
 
2016
 
Growth
Total rental and other property-related revenue
$
44,117

 
$
41,875

 
5.4
 %
Property operating expenses
13,595

 
13,275

 
2.4
 %
Net Operating Income (NOI)
$
30,522

 
$
28,600

 
6.7
 %
NOI Margin
69.2
%
 
68.3
%
 
0.9
 %
 
 
 
 
 
 
Average Occupancy
90.9
%
 
91.4
%
 
(0.5
)%
Average Annualized Rental Revenue Per Occupied Square Foot
$
11.83

 
$
11.19

 
5.7
 %
Year-over-year, third quarter 2017 same store total revenues increased 5.4%, driven by a 5.7% increase in average annualized rental revenue per occupied square foot partially offset by a 50 basis point decrease in average occupancy. Same store property operating expenses were $13.6 million for the third quarter of 2017, an increase of 2.4% compared to $13.3 million for the third quarter of 2016 driven primarily by property tax expense increases.

3

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Investment Activity
During the third quarter of 2017, NSA invested $123.8 million in the acquisition of 19 self storage properties located in nine states, encompassing over 1.3 million rentable square feet configured in approximately 10,200 storage units.
Subsequent to September 30, 2017, NSA acquired 28 additional self storage properties located in eight states, for a total investment of approximately $174.5 million encompassing approximately 1.8 million rentable square feet configured in approximately 13,700 storage units. NSA's unconsolidated real estate venture also invested approximately $9.3 million in a self storage property encompassing approximately 0.1 million rentable square feet configured in approximately 430 storage units.
Balance Sheet
In August 2017, NSA entered into an agreement with a single lender for an $84.9 million debt financing secured by 22 of the Company's self storage properties. This interest-only loan matures in August 2027 and has a fixed interest rate of 4.14%. The net proceeds from the debt financing were used to repay amounts outstanding under NSA's revolving line of credit.
In October 2017, NSA completed an underwritten public offering of 6,900,000 of its 6.000% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest ("Preferred Shares"), which included 900,000 Preferred Shares sold upon the exercise in full by the underwriters of their option to purchase additional Preferred Shares, resulting in gross proceeds to the Company of approximately $173 million. Generally, the Preferred Shares become redeemable by the Company beginning in October 2022 for a cash redemption price of $25.00 per share. NSA used the net proceeds from the offering to repay amounts outstanding under its revolving line of credit, and subsequently redrew under its revolving line of credit to fund the self storage property acquisitions described above.
Dividends
On August 24, 2017, NSA's Board of Trustees declared a quarterly cash dividend of $0.26 per common share, which was paid on September 29, 2017 to shareholders of record as of September 15, 2017.
2017 Guidance
NSA reaffirms its previously provided guidance estimates for the year ended December 31, 2017.
Supplemental Financial Information
The full text of this earnings release and supplemental financial information, including certain financial information referenced in this release, are available on NSA's website at http://ir.nationalstorageaffiliates.com/quarterly-reporting and as exhibit 99.1 to the Company's Form 8-K furnished to the SEC on November 6, 2017.

4

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Non-GAAP Financial Measures & Glossary
This press release contains certain non-GAAP financial measures. These non-GAAP measures are presented because NSA's management believes these measures help investors understand NSA's business, performance and ability to earn and distribute cash to its shareholders by providing perspectives not immediately apparent from net income (loss). These measures are also frequently used by securities analysts, investors and other interested parties. The presentation of FFO, Core FFO and NOI in this press release are not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. In addition, NSA's method of calculating these measures may be different from methods used by other companies, and, accordingly, may not be comparable to similar measures as calculated by other companies that do not use the same methodology as NSA. These measures, and other words and phrases used herein, are defined in the Glossary in the supplemental financial information and, where appropriate, reconciliations of these measures and other non-GAAP financial measures to their most directly comparable GAAP measures are included in the Schedules to this press release and in the supplemental financial information.
Quarterly Teleconference and Webcast
The Company will host a conference call at 1:00pm Eastern Time on Tuesday, November 7, 2017 to discuss its financial results. At the conclusion of the call, management will accept questions from certified financial analysts. All other participants are encouraged to listen to a webcast of the call by accessing the link found on the Company's website at www.nationalstorageaffiliates.com.
Conference Call and Webcast:
Date/Time: Tuesday, November 7, 2017, 1:00pm ET
Webcast available at: www.nationalstorageaffiliates.com
Domestic (Toll Free US & Canada): 877.407.9711
International: 412.902.1014
Replay:
Domestic (Toll Free US & Canada): 877.660.6853
International: 201.612.7415
Conference ID: 13646795
A replay of the call will be available for one week through Tuesday, November 14, 2017. A replay of the webcast will be available for 30 days on NSA's website at www.nationalstorageaffiliates.com.
Upcoming Industry Conferences
NSA management is scheduled to participate in the upcoming NAREIT REITWorld 2017 Annual Convention in Dallas, Texas on November 14 - 16, 2017.

5

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About National Storage Affiliates Trust
National Storage Affiliates Trust is a Maryland real estate investment trust focused on the ownership, operation and acquisition of self storage properties located within the top 100 metropolitan statistical areas throughout the United States. The Company currently holds ownership interests in and operates 512 self storage properties located in 29 states with approximately 32 million rentable square feet. NSA is the sixth largest owner and operator of self storage properties among public and private companies in the U.S. For more information, please visit the Company’s website at www.nationalstorageaffiliates.com. NSA is included in the MSCI US REIT Index (RMS/RMZ), the Russell 2000 Index of Companies and the S&P SmallCap 600 Index.
NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements contained in this press release constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the Company's control. These forward-looking statements include information about possible or assumed future results of the Company's business, financial condition, liquidity, results of operations, plans and objectives. Changes in any circumstances may cause the Company's actual results to differ significantly from those expressed in any forward-looking statement. When used in this release, the words "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may" or similar expressions are intended to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: market trends in the Company's industry, interest rates, the debt and lending markets or the general economy; the Company's business and investment strategy; and the acquisition of properties, including the timing of acquisitions. For a further list and description of such risks and uncertainties, see the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, and the other documents filed by the Company with the Securities and Exchange Commission. The forward-looking statements, and other risks, uncertainties and factors are based on the Company's beliefs, assumptions and expectations of its future performance, taking into account all information currently available to the Company. Forward-looking statements are not predictions of future events. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
CONTACT:
National Storage Affiliates Trust
Investor/Media Relations
Marti Dowling
Director - Investor Relations
720.630.2624
mdowling@nsareit.net

6

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National Storage Affiliates Trust
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
REVENUE
 
 
 
 
 
 
 
Rental revenue
$
64,715

 
$
51,263

 
$
182,713

 
$
135,548

Other property-related revenue
2,145

 
1,686

 
6,071

 
4,334

Management fees and other revenue
1,998

 

 
5,978

 

Total revenue
68,858

 
52,949

 
194,762

 
139,882

OPERATING EXPENSES
 
 
 
 
 
 
 
Property operating expenses
21,618

 
17,330

 
61,170

 
46,064

General and administrative expenses
7,480

 
5,259

 
22,066

 
14,431

Depreciation and amortization
18,463

 
14,319

 
54,946

 
38,299

Total operating expenses
47,561

 
36,908

 
138,182

 
98,794

Income from operations
21,297

 
16,041

 
56,580

 
41,088

OTHER (EXPENSE) INCOME

 

 

 

Interest expense
(9,157
)
 
(6,265
)
 
(24,788
)
 
(17,050
)
Loss on early extinguishment of debt

 

 

 
(136
)
Equity in losses of unconsolidated real estate venture
(710
)
 

 
(2,260
)
 

Acquisition costs
(139
)
 
(1,737
)
 
(450
)
 
(4,733
)
Non-operating expense
(9
)
 
(15
)
 
(75
)
 
(77
)
Gain on sale of self storage properties
106

 

 
5,743

 

Other expense
(9,909
)
 
(8,017
)
 
(21,830
)
 
(21,996
)
Income before income taxes
11,388

 
8,024

 
34,750

 
19,092

Income tax expense
(162
)
 
(80
)
 
(767
)
 
(301
)
Net income
11,226

 
7,944

 
33,983

 
18,791

Net income attributable to noncontrolling interests
(9,955
)
 
(7,955
)
 
(29,790
)
 
(9,222
)
Net income (loss) attributable to National Storage Affiliates Trust
$
1,271

 
$
(11
)
 
$
4,193

 
$
9,569

 
 
 
 
 
 
 
 
Earnings (loss) per share - basic
$
0.03

 
$

 
$
0.09

 
$
0.35

Earnings (loss) per share - diluted
$
0.03

 
$

 
$
0.09

 
$
0.25

 
 
 
 
 
 
 
 
Weighted average shares outstanding - basic
44,269

 
35,080

 
43,967

 
27,084

Weighted average shares outstanding - diluted
44,269

 
35,080

 
43,967

 
75,492



7

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National Storage Affiliates Trust
Consolidated Balance Sheets
(dollars in thousands, except per share amounts)
(unaudited)

 
September 30,
 
December 31,
 
2017
 
2016
ASSETS
 
 
 
Real estate
 
 
 
Self storage properties
$
2,075,845

 
$
1,844,336

Less accumulated depreciation
(153,783
)
 
(110,803
)
Self storage properties, net
1,922,062

 
1,733,533

Cash and cash equivalents
13,673

 
12,570

Restricted cash
4,683

 
2,767

Debt issuance costs, net
2,427

 
3,069

Investment in unconsolidated real estate venture
88,224

 
81,486

Other assets, net
41,928

 
44,730

Assets held for sale

 
13,937

Total assets
$
2,072,997

 
$
1,892,092

LIABILITIES AND EQUITY
 
 
 
Liabilities
 
 
 
Debt financing
$
1,071,854

 
$
878,954

Accounts payable and accrued liabilities
27,894

 
21,616

Deferred revenue
12,711

 
12,454

Total liabilities
1,112,459

 
913,024

Equity
 
 
 
Common shares of beneficial interest, par value $0.01 per share. 250,000,000 shares authorized, 44,316,107 and 43,110,362 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively
443

 
431

Additional paid-in capital
595,354

 
576,365

Distributions in excess of earnings
(38,117
)
 
(8,719
)
Accumulated other comprehensive income
8,724

 
9,025

Total shareholders' equity
566,404

 
577,102

Noncontrolling interests
394,134

 
401,966

Total equity
960,538

 
979,068

Total liabilities and equity
$
2,072,997

 
$
1,892,092





8

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Supplemental Schedule 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Funds From Operations and Core Funds From Operations
(in thousands, except per share and unit amounts) (unaudited)
 
 
 
 
 
 
 
 
Reconciliation of Net Income to FFO and Core FFO
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
11,226

 
$
7,944

 
$
33,983

 
$
18,791

Add (subtract):
 
 
 
 
 
 
 
Real estate depreciation and amortization
18,187

 
14,117

 
53,773

 
37,831

Company's share of unconsolidated real estate venture real estate depreciation and amortization
2,042

 

 
5,832

 

Gain on sale of self storage properties
(106
)
 

 
(5,743
)
 

FFO attributable to subordinated performance unitholders (1)
(7,699
)
 
(5,551
)
 
(20,743
)
 
(16,044
)
FFO attributable to common shareholders, OP unitholders, and LTIP unitholders
23,650

 
16,510

 
67,102

 
40,578

Add:
 
 
 
 
 
 
 
Acquisition costs
139

 
1,737

 
450

 
4,733

Company's share of unconsolidated real estate venture acquisition costs
1

 

 
22

 

Loss on early extinguishment of debt

 

 

 
136

Core FFO attributable to common shareholders, OP unitholders, and LTIP unitholders
$
23,790

 
$
18,247

 
$
67,574

 
$
45,447

 
 
 
 
 
 
 
 
Weighted average shares and units outstanding - FFO and Core FFO:(2)
Weighted average shares outstanding - basic
44,269

 
35,080

 
43,967

 
27,084

Weighted average restricted common shares outstanding
27

 
19

 
24

 
18

Weighted average OP units outstanding
26,361

 
24,310

 
25,984

 
23,761

Weighted average DownREIT OP unit equivalents outstanding
1,835

 
1,835

 
1,835

 
1,835

Weighted average LTIP units outstanding
603

 
2,556

 
1,095

 
2,523

Total weighted average shares and units outstanding - FFO and Core FFO
73,095

 
63,800

 
72,905

 
55,221

 
 
 
 
 
 
 
 
FFO per share and unit
$
0.32

 
$
0.26

 
$
0.92

 
$
0.73

Core FFO per share and unit
$
0.33

 
$
0.29

 
$
0.93

 
$
0.82

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 the Company's 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(3) 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.

9

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Supplemental Schedule 1 (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Funds From Operations and Core Funds From Operations
(in thousands, except per share and unit amounts) (unaudited)
 
 
 
 
 
 
 
 
Reconciliation of Earnings (Loss) Per Share - Diluted to FFO and Core FFO Per Share and Unit
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Earnings (loss) per share - diluted
$
0.03

 
$

 
$
0.09

 
$
0.25

Impact of the difference in weighted average number of shares(3)
(0.02
)
 

 
(0.04
)
 
0.09

Impact of GAAP accounting for noncontrolling interests, two-class method and treasury stock method(4)
0.14

 
0.13

 
0.41

 

Add real estate depreciation and amortization
0.25

 
0.22

 
0.74

 
0.68

Add Company's share of unconsolidated real estate venture real estate depreciation and amortization
0.03

 

 
0.08

 

Subtract gain on sale of self storage properties

 

 
(0.08
)
 

FFO attributable to subordinated performance unitholders
(0.11
)
 
(0.09
)
 
(0.28
)
 
(0.29
)
FFO per share and unit
0.32

 
0.26

 
0.92

 
0.73

Add acquisition costs, Company's share of unconsolidated real estate venture acquisition costs, and loss on early extinguishment of debt
0.01

 
0.03

 
0.01

 
0.09

Core FFO per share and unit
$
0.33

 
$
0.29

 
$
0.93

 
$
0.82

 
 
 
 
 
 
 
 
(3) 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, DownREIT subordinated performance units and LTIP 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 about the conversion of subordinated performance units and DownREIT subordinated performance units into OP units, see Note 10 to the Company's most recent Annual Report on Form 10-K, filed with the Securities and Exchange Commission. 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.
(4) 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 (3).

10

image0a71.jpg

Supplemental Schedule 2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Non-GAAP Financial Measurements
 
 
 
 
 
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Operating Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
11,226

 
$
7,944

 
$
33,983

 
$
18,791

(Subtract) add:
 
 
 
 
 
 
 
Management fees and other revenue
(1,998
)
 

 
(5,978
)
 

General and administrative expenses
7,480

 
5,259

 
22,066

 
14,431

Depreciation and amortization
18,463

 
14,319

 
54,946

 
38,299

Interest expense
9,157

 
6,265

 
24,788

 
17,050

Equity in losses of unconsolidated real estate venture
710

 

 
2,260

 

Loss on early extinguishment of debt

 

 

 
136

Acquisition costs
139

 
1,737

 
450

 
4,733

Income tax expense
162

 
80

 
767

 
301

Gain on sale of self storage properties
(106
)
 

 
(5,743
)
 

Non-operating expense
9

 
15

 
75

 
77

Net Operating Income
$
45,242

 
$
35,619

 
$
127,614

 
$
93,818

 
 
 
 
 
 
 
 
EBITDA and Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
11,226

 
$
7,944

 
$
33,983

 
$
18,791

Add:
 
 
 
 
 
 
 
Depreciation and amortization
18,463

 
14,319

 
54,946

 
38,299

Company's share of unconsolidated real estate venture depreciation and amortization
2,042

 

 
5,832

 

Interest expense
9,157

 
6,265

 
24,788

 
17,050

Income tax expense
162

 
80

 
767

 
301

Loss on early extinguishment of debt

 

 

 
136

EBITDA
41,050

 
28,608

 
120,316

 
74,577

Add (subtract):
 
 
 
 
 
 
 
Acquisition costs
139

 
1,737

 
450

 
4,733

Company's share of unconsolidated real estate venture acquisition costs
1

 

 
22

 

Gain on sale of self storage properties
(106
)
 

 
(5,743
)
 

Equity-based compensation expense(1)
921

 
685

 
2,844

 
1,913

Adjusted EBITDA
$
42,005

 
$
31,030

 
$
117,889

 
$
81,223

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Equity-based compensation expense is a non-cash item that is included in general and administrative expenses in NSA's consolidated statements of operations.

11

image0a71.jpg

Supplemental Schedule 3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Portfolio Summary
 
 
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Consolidated and Unconsolidated Property Portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stores at Period End September 30,
 
Units at Period End
September 30,
 
Rentable Square Feet at Period End September 30,
 
Occupancy at Period End September 30,
State
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
Growth
California
 
80

 
73

 
48,118

 
43,152

 
6,071,309

 
5,369,252

 
92.0
%
 
92.0
%
 

Oregon
 
56

 
53

 
22,724

 
21,456

 
2,866,738

 
2,728,903

 
89.3
%
 
91.8
%
 
(2.5
)%
Texas
 
54

 
51

 
21,375

 
20,019

 
3,069,882

 
2,820,930

 
89.6
%
 
88.1
%
 
1.5
 %
Oklahoma
 
30

 
30

 
13,934

 
14,007

 
1,903,204

 
1,902,990

 
86.3
%
 
86.7
%
 
(0.4
)%
North Carolina
 
29

 
30

 
13,104

 
13,438

 
1,599,784

 
1,655,191

 
91.8
%
 
89.3
%
 
2.5
 %
Florida
 
28

 
16

 
20,513

 
13,332

 
1,942,173

 
1,126,071

 
87.9
%
 
86.5
%
 
1.4
 %
Georgia
 
21

 
20

 
7,381

 
6,578

 
985,053

 
886,567

 
93.9
%
 
94.4
%
 
(0.5
)%
Arizona
 
16

 
15

 
9,101

 
8,405

 
1,061,929

 
981,617

 
90.1
%
 
90.7
%
 
(0.6
)%
Washington
 
15

 
14

 
5,065

 
4,788

 
644,700

 
601,840

 
91.7
%
 
90.6
%
 
0.6
 %
Indiana
 
14

 
6

 
7,844

 
3,164

 
1,007,545

 
462,366

 
85.0
%
 
83.6
%
 
1.4
 %
Nevada
 
11

 
5

 
5,754

 
2,766

 
727,352

 
360,852

 
94.2
%
 
93.9
%
 
0.3
 %
Colorado
 
10

 
9

 
4,634

 
4,131

 
564,359

 
503,746

 
95.0
%
 
95.0
%
 

Louisiana
 
10

 
10

 
4,520

 
4,443

 
630,023

 
614,183

 
84.4
%
 
88.6
%
 
(4.2
)%
New Hampshire
 
10

 
9

 
4,187

 
3,669

 
509,125

 
444,225

 
88.9
%
 
92.9
%
 
(4.0
)%
Ohio
 
7

 

 
2,690

 

 
348,838

 

 
87.3
%
 

 

South Carolina
 
4

 
4

 
1,211

 
1,210

 
147,530

 
147,530

 
91.5
%
 
91.3
%
 
0.2
 %
Illinois
 
4

 

 
1,992

 

 
270,911

 

 
82.0
%
 

 

Other(1)
 
14

 
7

 
6,220

 
3,166

 
838,339

 
441,057

 
87.8
%
 
85.4
%
 
2.4
 %
Total Consolidated/Weighted Average
 
413

 
352

 
200,367

 
167,724

 
25,188,794

 
21,047,320

 
89.9
%
 
90.1
%
 
(0.2
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Unconsolidated/Weighted Average(2)
 
70

 

 
38,681

 

 
4,865,539

 

 
87.9
%
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Consolidated and Unconsolidated/Weighted Average
 
483

 
352

 
239,048

 
167,724

 
30,054,333

 
21,047,320

 
89.6
%
 
90.1
%
 
(0.5
)%



(1) Other states in NSA's consolidated portfolio as of September 30, 2017 include Alabama, Kentucky, Maryland, Massachusetts, Mississippi, Missouri, New Mexico and Virginia.
(2) Refer to Supplemental Schedule 5 for additional information about NSA's unconsolidated real estate venture.

12

image0a71.jpg

Supplemental Schedule 3 (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Portfolio Summary
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017 Acquisition & Investment Activity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Self storage properties
acquired during the
quarter ended:
 
 
 
 
 
 
 
Summary of Investment
 
Stores
 
Units
 
Rentable Square Feet
 
Cash and Acquisition Costs
 
Value of OP Equity
 
Other Liabilities
 
Total
 
 
 
 
 
March 31, 2017
 
5
 
2,239
 
267,008

 
$
26,780

 
$
4,964

 
$
183

 
$
31,927

June 30, 2017
 
10
 
4,921
 
668,954

 
60,672

 
8,931

 
387

 
69,990

September 30, 2017
 
19
 
10,151
 
1,323,055

 
122,742

 
267

 
826

 
123,835

Total 2017(3)
 
34
 
17,311
 
2,259,017

 
$
210,194

 
$
14,162

 
$
1,396

 
$
225,752

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated real estate venture (venture at 100%)(4)
 
 
 
 
 
 
 


 
 
 
 
 
 
June 30, 2017
 
4
 
3,085
 
327,408

 
49,700

 

 
145

 
49,845

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total 2017 Investments(4)
 
38
 
20,396
 
2,586,425

 
$
259,894

 
$
14,162

 
$
1,541

 
$
275,597


 
2017 Disposition Activity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dispositions Closed During the Quarter Ended:
 
Stores
 
Units
 
Rentable Square Feet
 
Gross Proceeds
 
 
March 31, 2017
 
1
 
360
 
43,935

 
$
5,300

 
June 30, 2017
 
2
 
814
 
114,444

 
10,250

 
Total 2017 Dispositions(5)
 
3
 
1,174
 
158,379

 
$
15,550







(3) NSA acquired self storage properties located in Arizona, California, Florida, Georgia, Illinois, Maryland, Massachusetts, Missouri, New Hampshire, Nevada, North Carolina, Oregon, Texas, Virginia and Washington during 2017.
(4) Values represent entire unconsolidated real estate venture at 100%, not NSA's proportionate share. NSA's ownership in the unconsolidated real estate venture is 25%. Refer to Supplemental Schedule 5 for additional information about NSA's unconsolidated real estate venture.
(5) NSA disposed of self storage properties located in California and North Carolina during 2017.

13

image0a71.jpg

Supplemental Schedule 4
 
 
 
 
 
 
 
 
 
 
 
Debt and Equity Capitalization
 
 
 
 
 
As of September 30, 2017
 
 
 
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
Debt Balances and Characteristics
 
 
 
 
 
 
 
 
 
 
 
Effective Interest Rate(1)
 
Weighted Average Maturity (In Years)
 
Balance
Credit Facility:
 
 
 
 
 
Revolving line of credit
2.63%
 
2.60
 
$
201,000

Term loan - 5 year tranche
2.63%
 
3.60
 
235,000

Term loan - 6 year tranche
3.24%
 
4.60
 
155,000

Term loan - 7 year tranche
3.71%
 
6.34
 
105,000

Term loan - 7 year
3.08%
 
5.75
 
100,000

Fixed rate mortgages payable
4.15%
 
7.89
 
272,678

Total Principal/Weighted Average
3.26%
 
5.14
 
1,068,678

Unamortized debt issuance costs and debt premium, net
 
 
 
 
3,176

Total Debt
 
 
 
 
$
1,071,854

Debt Maturities
 
 
 
 
 
 
 
 
 
 
 
 
Average Effective Interest Rate on Maturing Debt(1)
 
Maturities as a Percent of Total Principal
 
Maturities
2018 1Q
 
 
$

2018 2Q
2.97%
 
0.3%
 
3,157

2018 3Q
 
 

2018 4Q
2.88%
 
0.3%
 
2,782

Total 2018
2.93%
 
0.6%
 
5,939

 
 
 
 
 
 
2019
 
 

2020
2.80%
 
22.4%
 
239,105

2021
2.67%
 
22.4%
 
238,920

2022
3.24%
 
14.5%
 
155,000

2023
3.68%
 
16.8%
 
179,036

2024
3.79%
 
11.7%
 
125,471

Thereafter
4.13%
 
11.6%
 
125,207

Total Principal/Weighted Average
3.26%
 
100.0%
 
1,068,678

Unamortized debt issuance costs and debt premium, net
 
 
 
 
3,176

Total Debt
 
 
 
 
$
1,071,854

 
 
 
 
 
 
Debt Ratios
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Covenant
 
Amount
Net Debt to Annualized Current Quarter Adjusted EBITDA
 
n/a
 
6.3x
Trailing Twelve Month Fixed Charge Coverage Ratio
 
> 1.5x
 
3.8x
Total Leverage Ratio
 
 
< 60.0%
 
43.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) 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 which range from 0.15% to 0.25% for unused borrowings.

14

image0a71.jpg

Supplemental Schedule 4 (continued)
 
 
 
 
 
 
 
Debt and Equity Capitalization
 
 
 
As of September 30, 2017
 
 
 
(unaudited)
 
 
 
 
 
 
 
Equity Interests
 
 
 
 
 
 
 
Outstanding
 
If Converted
Common shares of beneficial interest
44,289,022

 
44,289,022

Restricted common shares
27,085

 
27,085

Total shares outstanding
44,316,107

 
44,316,107

Operating partnership units
26,401,386

 
26,401,386

DownREIT operating partnership unit equivalents
1,834,786

 
1,834,786

Total operating partnership units
28,236,172

 
28,236,172

Long-term incentive plan units(2)
547,396

 
547,396

Total shares and Class A equivalents outstanding
73,099,675

 
73,099,675

Subordinated performance units(3)
11,418,815

 
16,557,282

DownREIT subordinated performance unit equivalents(3)
4,386,999

 
6,361,149

Total subordinated partnership units
15,805,814

 
22,918,431

Total shares and units outstanding
88,905,489

 
96,018,106

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Balances exclude 224,000 long-term incentive plan ("LTIP") units which only vest and participate in dividend distributions upon the future contribution of properties from the PROs.
(3) If converted balance assumes that each subordinated performance unit (including each DownREIT subordinated performance unit) is convertible into OP units, notwithstanding the two-year lock-out period on conversions, and that each subordinated performance unit would on average convert on a hypothetical basis into an estimated 1.45 OP units based on historical financial information for the trailing twelve months ended September 30, 2017. The hypothetical conversions are calculated by dividing the average cash available for distribution, or CAD, per subordinated performance unit by 110% of the CAD per OP unit over the same period. The Company anticipates that as CAD grows over time, the conversion ratio will also grow, including to levels that may exceed these amounts.

15

image0a71.jpg

Supplemental Schedule 5
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summarized Information for Unconsolidated Real Estate Venture
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated Real Estate Venture Properties as of September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
State
 
Stores at Period End
 
Units at Period End
 
Rentable Square Feet at Period End
 
Occupancy at Period End
 
3Q 2017 Average Occupancy
Florida
 
21

 
11,485

 
1,331,435

 
88.6
%
 
87.6
%
Alabama
 
11

 
4,065

 
611,002

 
86.5
%
 
87.4
%
New Jersey
 
10

 
7,521

 
925,105

 
88.8
%
 
89.6
%
California
 
10

 
6,485

 
867,411

 
85.4
%
 
85.2
%
Other(1)
 
18

 
9,125

 
1,130,586

 
88.8
%
 
89.3
%
Total/Weighted Average
 
70

 
38,681

 
4,865,539

 
87.9
%
 
87.9
%

Balance Sheet Information
 
 
 
 
 Total Venture at 100%(2)
September 30, 2017
 
December 31, 2016
ASSETS
 
 
 
Self storage properties, net
$
651,024

 
$
614,754

Other assets
10,314

 
19,936

Total assets
$
661,338

 
$
634,690

LIABILITIES AND EQUITY
 
 
 
Debt financing
$
317,277

 
$
317,047

Other liabilities
5,880

 
4,498

Equity
338,181

 
313,145

Total liabilities and equity
$
661,338

 
$
634,690

 
 
 
 




















(1) Other states in the unconsolidated real estate venture include Arizona, Delaware, Georgia, Nevada, New Mexico, Pennsylvania, Ohio, Texas and Virginia.
(2) Values represent entire unconsolidated real estate venture at 100%, not NSA's proportionate share. NSA's ownership in the unconsolidated real estate venture is 25%.

16

image0a71.jpg

Supplemental Schedule 5 (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summarized Information for Unconsolidated Real Estate Venture
 
 
(dollars in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Information for the Three Months Ended September 30, 2017
 
 
 
 
 
 Total Venture at 100%(2)
 
NSA Proportionate Share (Venture at 25%)(3)
Total revenue
$
14,494

 
$
3,623

Property operating expenses
4,989

 
1,246

Net operating income
9,505

 
2,377

Supervisory, administrative and other expenses
(1,034
)
 
(258
)
Depreciation and amortization
(8,168
)
 
(2,042
)
Interest expense
(2,880
)
 
(720
)
Acquisition and other expenses
(269
)
 
(67
)
Net loss
$
(2,846
)
 
$
(710
)
 
 
 
 
Operating Information for the Nine Months Ended September 30, 2017
 
 
 
 
 
 Total Venture at 100%(2)
 
NSA Proportionate Share (Venture at 25%)(3)
Total revenue
$
40,060

 
$
10,015

Property operating expenses
13,489

 
3,372

Net operating income
26,571

 
6,643

Supervisory, administrative and other expenses
(2,873
)
 
(718
)
Depreciation and amortization
(23,333
)
 
(5,832
)
Interest expense
(8,508
)
 
(2,127
)
Acquisition and other expenses
(902
)
 
(226
)
Net loss
$
(9,045
)
 
$
(2,260
)
 
 
 
 
                    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Values represent entire unconsolidated real estate venture at 100%, not NSA's proportionate share. NSA's ownership in the unconsolidated real estate venture is 25%.
(3) NSA's proportionate share of its unconsolidated real estate venture is derived by applying NSA's 25% ownership interest to each line item in the GAAP financial statements of the unconsolidated real estate venture to calculate NSA's share of that line item. NSA believes this information offers insights into the financial performance of the Company, although the presentation of such information, and its combination with NSA's consolidated results, may not accurately depict the legal and economic implications of holding a noncontrolling interest in the unconsolidated real estate venture. The operating agreement of the unconsolidated real estate venture provides for the distribution of net cash flow to the unconsolidated real estate venture’s investors no less than monthly, generally in proportion to the investors’ respective ownership interests, subject to a promoted distribution to NSA upon the achievement of certain performance benchmarks by the non-NSA investor.

17

image0a71.jpg

Supplemental Schedule 6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Store Performance Summary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(dollars in thousands, except per square foot data) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2017 compared to Three Months Ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Revenue
 
Operating Expenses
 
Net Operating Income
 
Net Operating Income Margin
State
Stores
3Q 2017
 
3Q 2016
 
Growth
 
3Q 2017
 
3Q 2016
 
Growth
 
3Q 2017
 
3Q 2016
 
Growth
 
3Q 2017
 
3Q 2016
 
Growth
Oregon
50

 
$
8,755

 
$
8,435

 
3.8
 %
 
$
2,174

 
$
2,090

 
4.0
 %
 
$
6,581

 
$
6,345

 
3.7
 %
 
75.2
%
 
75.2
%
 

Texas
48

 
5,840

 
5,745

 
1.7
 %
 
2,286

 
2,249

 
1.6
 %
 
3,554

 
3,496

 
1.7
 %
 
60.9
%
 
60.9
%
 

California
48

 
11,785

 
10,739

 
9.7
 %
 
3,389

 
3,312

 
2.3
 %
 
8,396

 
7,427

 
13.0
 %
 
71.2
%
 
69.2
%
 
2.0
 %
Oklahoma
29

 
3,567

 
3,600

 
(0.9
)%
 
1,180

 
1,247

 
(5.4
)%
 
2,387

 
2,353

 
1.4
 %
 
66.9
%
 
65.4
%
 
1.5
 %
North Carolina
28

 
3,925

 
3,678

 
6.7
 %
 
1,174

 
1,153

 
1.8
 %
 
2,751

 
2,525

 
9.0
 %
 
70.1
%
 
68.7
%
 
1.4
 %
Georgia
18

 
1,710

 
1,686

 
1.4
 %
 
635

 
624

 
1.8
 %
 
1,075

 
1,062

 
1.2
 %
 
62.9
%
 
63.0
%
 
(0.1
)%
Washington
14

 
1,903

 
1,763

 
7.9
 %
 
539

 
536

 
0.6
 %
 
1,364

 
1,227

 
11.2
 %
 
71.7
%
 
69.6
%
 
2.1
 %
Arizona
13

 
2,560

 
2,389

 
7.2
 %
 
781

 
771

 
1.3
 %
 
1,779

 
1,618

 
10.0
 %
 
69.5
%
 
67.7
%
 
1.8
 %
Colorado
8

 
1,383

 
1,309

 
5.7
 %
 
475

 
375

 
26.7
 %
 
908

 
934

 
(2.8
)%
 
65.7
%
 
71.4
%
 
(5.7
)%
Louisiana
5

 
625

 
589

 
6.1
 %
 
233

 
213

 
9.4
 %
 
392

 
376

 
4.3
 %
 
62.7
%
 
63.8
%
 
(1.1
)%
New Hampshire
4

 
626

 
604

 
3.6
 %
 
201

 
199

 
1.0
 %
 
425

 
405

 
4.9
 %
 
67.9
%
 
67.1
%
 
0.8
 %
South Carolina
4

 
367

 
358

 
2.5
 %
 
144

 
145

 
(0.7
)%
 
223

 
213

 
4.7
 %
 
60.8
%
 
59.5
%
 
1.3
 %
Other(1)
8

 
1,071

 
980

 
9.3
 %
 
384

 
361

 
6.4
 %
 
687

 
619

 
11.0
 %
 
64.1
%
 
63.2
%
 
0.9
 %
Total/Weighted Average
277

 
$
44,117

 
$
41,875

 
5.4
 %
 
$
13,595

 
$
13,275

 
2.4
 %
 
$
30,522

 
$
28,600

 
6.7
 %
 
69.2
%
 
68.3
%
 
0.9
 %















(1) Other states in NSA's same store portfolio include Florida, Kentucky, Mississippi and Nevada.

18

image0a71.jpg

Supplemental Schedule 6 (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Store Performance Summary
 
 
 
 
 
 
 
 
 
 
 
(dollars in thousands, except per square foot data) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2017 compared to Three Months Ended September 30, 2016
 
 
Rentable Square Feet
 
Occupancy at Period End
 
Average Occupancy
 
Average Annualized Rental Revenue per Occupied Square Foot
State
Units
 
3Q 2017
 
3Q 2016
 
Growth
 
3Q 2017
 
3Q 2016
 
Growth
 
3Q 2017
 
3Q 2016
 
Growth
Oregon
20,248

2,527,121

 
89.2
%
 
91.6
%
 
(2.4
)%
 
91.1
%
 
94.1
%
 
(3.0
)%
 
$
14.97

 
$
13.98

 
7.1
 %
Texas
18,476

2,624,996

 
89.8
%
 
88.9
%
 
0.9
 %
 
90.0
%
 
90.3
%
 
(0.3
)%
 
9.63

 
9.41

 
2.3
 %
California
28,062

3,566,745

 
92.0
%
 
91.8
%
 
0.2
 %
 
91.7
%
 
92.9
%
 
(1.2
)%
 
13.73

 
12.32

 
11.4
 %
Oklahoma
13,522

1,847,279

 
86.2
%
 
86.5
%
 
(0.3
)%
 
86.6
%
 
87.1
%
 
(0.5
)%
 
8.68

 
8.73

 
(0.6
)%
North Carolina
12,581

1,536,384

 
91.8
%
 
88.8
%
 
3.0
 %
 
92.8
%
 
88.9
%
 
3.9
 %
 
10.53

 
10.29

 
2.3
 %
Georgia
5,867

770,605

 
93.2
%
 
94.1
%
 
(0.9
)%
 
93.5
%
 
94.9
%
 
(1.4
)%
 
9.19

 
8.89

 
3.4
 %
Washington
4,789

601,860

 
91.7
%
 
90.6
%
 
1.1
 %
 
92.5
%
 
91.5
%
 
1.0
 %
 
13.46

 
12.63

 
6.6
 %
Arizona
7,256

833,120

 
90.5
%
 
90.2
%
 
0.3
 %
 
91.6
%
 
89.7
%
 
1.9
 %
 
12.88

 
12.25

 
5.1
 %
Colorado
3,732

452,929

 
95.5
%
 
94.8
%
 
0.7
 %
 
96.6
%
 
96.7
%
 
(0.1
)%
 
12.34

 
11.68

 
5.7
 %
Louisiana
2,283

319,030

 
82.5
%
 
81.1
%
 
1.4
 %
 
81.6
%
 
82.5
%
 
(0.9
)%
 
9.46

 
9.45

 
0.1
 %
New Hampshire
1,758

209,800

 
92.1
%
 
92.8
%
 
(0.7
)%
 
93.2
%
 
94.4
%
 
(1.2
)%
 
12.40

 
11.79

 
5.2
 %
South Carolina
1,211

147,530

 
91.5
%
 
91.3
%
 
0.2
 %
 
92.1
%
 
92.8
%
 
(0.7
)%
 
10.39

 
10.11

 
2.8
 %
Other(1)
3,190

433,532

 
93.6
%
 
92.9
%
 
0.7
 %
 
93.7
%
 
91.3
%
 
2.4
 %
 
10.20

 
9.51

 
7.3
 %
Total/Weighted Average
122,975

15,870,931

 
90.4
%
 
90.3
%
 
0.1
 %
 
90.9
%
 
91.4
%
 
(0.5
)%
 
$
11.83

 
$
11.19

 
5.7
 %















(1) Other states in NSA's same store portfolio include Florida, Kentucky, Mississippi and Nevada.

19

image0a71.jpg

Supplemental Schedule 6 (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Store Performance Summary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(dollars in thousands, except per square foot data) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2017 compared to Nine Months Ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Revenue
 
Operating Expenses
 
Net Operating Income
 
Net Operating Income Margin
State
Stores
YTD 2017
 
YTD 2016
 
Growth
 
YTD 2017
 
YTD 2016
 
Growth
 
YTD 2017
 
YTD 2016
 
Growth
 
YTD 2017
 
YTD 2016
 
Growth
Oregon
50

 
$
25,092

 
$
23,887

 
5.0
 %
 
$
6,468

 
$
6,272

 
3.1
 %
 
$
18,624

 
$
17,615

 
5.7
 %
 
74.2
%
 
73.7
%
 
0.5
 %
Texas
48

 
17,147

 
16,633

 
3.1
 %
 
6,583

 
6,621

 
(0.6
)%
 
10,564

 
10,012

 
5.5
 %
 
61.6
%
 
60.2
%
 
1.4
 %
California
48

 
34,102

 
30,898

 
10.4
 %
 
9,874

 
9,792

 
0.8
 %
 
24,228

 
21,106

 
14.8
 %
 
71.0
%
 
68.3
%
 
2.7
 %
Oklahoma
29

 
10,542

 
10,670

 
(1.2
)%
 
3,523

 
3,609

 
(2.4
)%
 
7,019

 
7,061

 
(0.6
)%
 
66.6
%
 
66.2
%
 
0.4
 %
North Carolina
28

 
11,363

 
10,594

 
7.3
 %
 
3,480

 
3,356

 
3.7
 %
 
7,883

 
7,238

 
8.9
 %
 
69.4
%
 
68.3
%
 
1.1
 %
Georgia
18

 
5,038

 
4,925

 
2.3
 %
 
1,907

 
1,876

 
1.7
 %
 
3,131

 
3,049

 
2.7
 %
 
62.1
%
 
61.9
%
 
0.2
 %
Washington
14

 
5,477

 
5,146

 
6.4
 %
 
1,600

 
1,550

 
3.2
 %
 
3,877

 
3,596

 
7.8
 %
 
70.8
%
 
69.9
%
 
0.9
 %
Arizona
13

 
7,478

 
6,930

 
7.9
 %
 
2,252

 
2,188

 
2.9
 %
 
5,226

 
4,742

 
10.2
 %
 
69.9
%
 
68.4
%
 
1.5
 %
Colorado
8

 
3,922

 
3,805

 
3.1
 %
 
1,199

 
1,116

 
7.4
 %
 
2,723

 
2,689

 
1.3
 %
 
69.4
%
 
70.7
%
 
(1.3
)%
Louisiana
5

 
1,823

 
1,743

 
4.6
 %
 
675

 
649

 
4.0
 %
 
1,148

 
1,094

 
4.9
 %
 
63.0
%
 
62.8
%
 
0.2
 %
New Hampshire
4

 
1,848

 
1,732

 
6.7
 %
 
636

 
632

 
0.6
 %
 
1,212

 
1,100

 
10.2
 %
 
65.6
%
 
63.5
%
 
2.1
 %
South Carolina
4

 
1,078

 
1,042

 
3.5
 %
 
418

 
409

 
2.2
 %
 
660

 
633

 
4.3
 %
 
61.2
%
 
60.7
%
 
0.5
 %
Other(1)
8

 
3,077

 
2,835

 
8.5
 %
 
1,098

 
1,064

 
3.2
 %
 
1,979

 
1,771

 
11.7
 %
 
64.3
%
 
62.5
%
 
1.8
 %
Total/Weighted Average
277

 
$
127,987

 
$
120,840

 
5.9
 %
 
$
39,713

 
$
39,134

 
1.5
 %
 
$
88,274

 
$
81,706

 
8.0
 %
 
69.0
%
 
67.6
%
 
1.4
 %















(1) Other states in NSA's same store portfolio include Florida, Kentucky, Mississippi and Nevada.

20

image0a71.jpg

Supplemental Schedule 6 (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Store Performance Summary
 
 
 
 
 
 
 
 
 
 
 
(dollars in thousands, except per square foot data) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2017 compared to Nine Months Ended September 30, 2016
 
 
Rentable Square Feet
 
Occupancy at Period End
 
Average Occupancy
 
Average Annualized Rental Revenue per Occupied Square Foot
State
Units
 
YTD 2017
 
YTD 2016
 
Growth
 
YTD 2017
 
YTD 2016
 
Growth
 
YTD 2017
 
YTD 2016
 
Growth
Oregon
20,248

2,527,121

 
89.2
%
 
91.6
%
 
(2.4
)%
 
89.8
%
 
93.1
%
 
(3.3
)%
 
$
14.53

 
$
13.37

 
8.7
%
Texas
18,476

2,624,996

 
89.8
%
 
88.9
%
 
0.9
 %
 
89.0
%
 
89.0
%
 

 
9.52

 
9.20

 
3.5
%
California
28,062

3,566,745

 
92.0
%
 
91.8
%
 
0.2
 %
 
91.2
%
 
91.6
%
 
(0.4
)%
 
13.31

 
12.05

 
10.5
%
Oklahoma
13,522

1,847,279

 
86.2
%
 
86.5
%
 
(0.3
)%
 
85.6
%
 
87.3
%
 
(1.7
)%
 
8.65

 
8.63

 
0.2
%
North Carolina
12,581

1,536,384

 
91.8
%
 
88.8
%
 
3.0
 %
 
91.0
%
 
86.4
%
 
4.6
 %
 
10.37

 
10.19

 
1.8
%
Georgia
5,867

770,605

 
93.2
%
 
94.1
%
 
(0.9
)%
 
92.8
%
 
94.3
%
 
(1.5
)%
 
9.07

 
8.71

 
4.1
%
Washington
4,789

601,860

 
91.7
%
 
90.6
%
 
1.1
 %
 
91.0
%
 
92.1
%
 
(1.1
)%
 
13.13

 
12.12

 
8.3
%
Arizona
7,256

833,120

 
90.5
%
 
90.2
%
 
0.3
 %
 
90.5
%
 
86.7
%
 
3.8
 %
 
12.65

 
12.24

 
3.3
%
Colorado
3,732

452,929

 
95.5
%
 
94.8
%
 
0.7
 %
 
94.4
%
 
95.2
%
 
(0.8
)%
 
11.92

 
11.49

 
3.7
%
Louisiana
2,283

319,030

 
82.5
%
 
81.1
%
 
1.4
 %
 
79.9
%
 
82.0
%
 
(2.1
)%
 
9.52

 
9.38

 
1.5
%
New Hampshire
1,758

209,800

 
92.1
%
 
92.8
%
 
(0.7
)%
 
93.2
%
 
91.9
%
 
1.3
 %
 
12.22

 
11.62

 
5.2
%
South Carolina
1,211

147,530

 
91.5
%
 
91.3
%
 
0.2
 %
 
91.3
%
 
92.8
%
 
(1.5
)%
 
10.29

 
9.83

 
4.7
%
Other(1)
3,190

433,532

 
93.6
%
 
92.9
%
 
0.7
 %
 
92.4
%
 
90.0
%
 
2.4
 %
 
9.90

 
9.33

 
6.1
%
Total/Weighted Average
122,975

15,870,931

 
90.4
%
 
90.3
%
 
0.1
 %
 
89.9
%
 
90.2
%
 
(0.3
)%
 
$
11.58

 
$
10.92

 
6.0
%















(1) Other states in NSA's same store portfolio include Florida, Kentucky, Mississippi and Nevada.

21

image0a71.jpg

Supplemental Schedule 7
 
 
 
 
 
Reconciliation of Same Store Data and Net Operating Income to Net Income
(dollars in thousands) (unaudited)
 


 
 
 
 

 


Three Months Ended September 30,
 
Nine Months Ended September 30,

2017
 
2016
 
2017
 
2016
Rental revenue
 
 
 
 
 
 
 
Same store portfolio
$
42,700

 
$
40,540

 
$
123,866

 
$
117,078

Non-same store portfolio
22,015

 
10,723

 
58,847

 
18,470

Total rental revenue
64,715

 
51,263

 
182,713

 
135,548

 
 
 
 
 
 
 
 
Other property-related revenue
 
 
 
 
 
 
 
Same store portfolio
1,417

 
1,335

 
4,121

 
3,762

Non-same store portfolio
728

 
351

 
1,950

 
572

Total other property-related revenue
2,145


1,686


6,071


4,334

 
 
 
 
 
 
 
 
Property operating expenses
 
 
 
 
 
 
 
Same store portfolio
13,595

 
13,275

 
39,713

 
39,134

Non-same store portfolio
8,023

 
4,055

 
21,457

 
6,930

Total property operating expenses
21,618


17,330


61,170


46,064

 
 
 
 
 
 
 
 
Net operating income
 
 
 
 
 
 
 
Same store properties
30,522

 
28,600

 
88,274

 
81,706

Non-same store properties
14,720

 
7,019

 
39,340

 
12,112

Total net operating income
45,242


35,619


127,614


93,818


 
 
 
 
 
 
 
Management fees and other revenue
1,998

 

 
5,978

 

General and administrative expenses
(7,480
)
 
(5,259
)
 
(22,066
)
 
(14,431
)
Depreciation and amortization
(18,463
)
 
(14,319
)
 
(54,946
)
 
(38,299
)
Income from operations
21,297

 
16,041

 
56,580

 
41,088

 
 
 
 
 
 
 
 
Other (expense) income
 
 
 
 
 
 
 
Interest expense
(9,157
)
 
(6,265
)
 
(24,788
)
 
(17,050
)
Loss on early extinguishment of debt

 

 

 
(136
)
Equity in losses of unconsolidated real estate venture
(710
)
 

 
(2,260
)
 

Acquisition costs
(139
)
 
(1,737
)
 
(450
)
 
(4,733
)
Non-operating expense
(9
)
 
(15
)
 
(75
)
 
(77
)
Gain on sale of self storage properties
106

 

 
5,743

 

Other expense
(9,909
)
 
(8,017
)
 
(21,830
)
 
(21,996
)
Income before income taxes
11,388

 
8,024

 
34,750

 
19,092

Income tax expense
(162
)
 
(80
)
 
(767
)
 
(301
)
Net income
$
11,226

 
$
7,944

 
$
33,983

 
$
18,791



22

image0a71.jpg

Supplemental Schedule 8
 
 
 
Selected Financial Information
(in thousands, except per square foot data) (unaudited)
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Average Annualized Rental Revenue Per Occupied Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
Same store
$
11.83

 
$
11.19

 
$
11.58

 
$
10.92

Total consolidated portfolio
$
11.61

 
$
11.24

 
$
11.46

 
$
10.90

 
 
 
 
 
 
 
 
Total Consolidated Portfolio Capital Expenditures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recurring capital expenditures
$
778

 
$
936

 
$
2,589

 
$
2,442

Revenue enhancing capital expenditures
957

 
1,385

 
1,271

 
2,315

Acquisitions capital expenditures
1,423

 
2,307

 
6,149

 
3,982

Total Consolidated Portfolio Capital Expenditures
$
3,158

 
$
4,628

 
$
10,009

 
$
8,739

 
 
 
 
 
 
 
 
Property Operating Expenses Detail
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Store payroll and related costs
$
6,132

 
$
5,136

 
$
17,840

 
$
13,832

Property tax expense
5,209

 
3,825

 
14,725

 
10,204

Other property operating expenses
10,277

 
8,369

 
28,605

 
22,028

Property operating expenses on the Company's statements of operations
$
21,618

 
$
17,330

 
$
61,170

 
$
46,064

 
 
 
 
 
 
 
 
General and Administrative Expenses Detail
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Supervisory and administrative expenses
$
3,714

 
$
2,959

 
$
10,550

 
$
7,839

Equity-based compensation expense
921

 
685

 
2,844

 
1,913

Other general and administrative expenses
2,845

 
1,615

 
8,672

 
4,679

General and administrative expenses on the Company's statements of operations
$
7,480

 
$
5,259

 
$
22,066

 
$
14,431

 
 
 
 
 
 
 
 




23

image0a71.jpg

Glossary
 
 
 
 
 
This Earnings Release and Supplemental Information include certain financial and operating measures used by NSA management that are not calculated in accordance with accounting principles generally accepted in the United States, or GAAP. NSA's definitions and calculations of these non-GAAP financial and operating measures and other terms may differ from the definitions and methodologies used by other real estate companies and, accordingly, may not be comparable. These non-GAAP financial and operating measures should not be considered an alternative to GAAP net income or any other GAAP measurement of performance and should not be considered an alternative measure of liquidity.
 
 
 
 
 
AVERAGE ANNUALIZED RENTAL REVENUE PER OCCUPIED SQUARE FOOT: Average annualized rental revenue per occupied square foot is computed by dividing annualized rental revenue per our statements of operations (which includes fees and is net of any discounts) by average occupied square feet.
AVERAGE OCCUPANCY: Average occupancy is calculated based on the average of the month-end occupancy immediately preceding the period presented and the month-end occupancies included in the respective period presented.
CAPITAL EXPENDITURES DEFINITIONS
ACQUISITIONS CAPITAL EXPENDITURES: Acquisitions capital expenditures represents the portion of capital expenditures capitalized during the current period that were identified and underwritten prior to a property's acquisition.
RECURRING CAPITAL EXPENDITURES: Recurring capital expenditures represents the portion of capital expenditures that are deemed to replace the consumed portion of acquired capital assets and extend their useful lives.
REVENUE ENHANCING CAPITAL EXPENDITURES: Revenue enhancing capital expenditures represents the portion of capital expenditures that are made to enhance the revenue and value of an asset from its original purchase condition.
EBITDA: NSA defines EBITDA as net income (loss), as determined under GAAP, plus interest expense, loss on early extinguishment of debt, income taxes, depreciation and amortization expense and the Company's share of unconsolidated real estate venture depreciation and amortization. NSA defines ADJUSTED EBITDA as EBITDA plus acquisition costs, the Company's share of unconsolidated real estate venture acquisition costs, organizational and offering expenses, equity-based compensation expense, losses on sale of properties, and impairment of long-lived assets; and by subtracting gains on sale of properties and debt forgiveness. These further adjustments eliminate the impact of items that the Company does not consider indicative of its core operating performance. In evaluating EBITDA and Adjusted EBITDA, you should be aware that in the future the Company may incur expenses that are the same as or similar to some of the adjustments in this presentation. NSA's presentation of EBITDA and Adjusted EBITDA should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items.
NSA presents EBITDA and Adjusted EBITDA because the Company believes they assist investors and analysts in comparing the Company's performance across reporting periods on a consistent basis by excluding items that the Company does not believe are indicative of its core operating performance. EBITDA and Adjusted EBITDA have limitations as an analytical tool. Some of these limitations are:
EBITDA and Adjusted EBITDA do not reflect the Company's 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 the Company's 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;

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Adjusted EBITDA excludes equity-based compensation expense, which is and will remain a key element of the Company's overall long-term incentive compensation package, although the Company excludes it as an expense when evaluating its ongoing operating performance for a particular period;
EBITDA and Adjusted EBITDA do not reflect the impact of certain cash charges resulting from matters the Company considers not to be indicative of its ongoing operations; and
other companies in NSA's industry may calculate EBITDA and Adjusted EBITDA differently than NSA does, limiting its usefulness as a comparative measure.
NSA compensates for these limitations by considering the economic effect of the excluded expense items independently as well as in connection with the Company's analysis of net income (loss). EBITDA and Adjusted EBITDA should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP, such as total revenues, income from operations, and net income (loss).
FUNDS FROM OPERATIONS: Funds from operations, or FFO, is a widely used performance measure for real estate companies and is provided here as a supplemental measure of the Company's operating performance. The April 2002 National Policy Bulletin of NAREIT, which the Company refers to as the White Paper, as amended, defines FFO as net income (as determined under GAAP), excluding gains (or losses) from sales of real estate and related impairment charges, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. NSA includes amortization of customer in-place leases in real estate depreciation and amortization in the calculation of FFO because the Company believes the amortization of customer in-place leases is analogous to real estate depreciation, as the value of such intangibles is inextricably connected to the real estate acquired. Distributions declared on subordinated performance units and DownREIT subordinated performance units represent NSA's allocation of FFO to noncontrolling interests held by subordinated performance unitholders and DownREIT subordinated performance unitholders for the purpose of calculating FFO attributable to common shareholders, OP unitholders, and LTIP unitholders. NSA defines CORE FFO as FFO, as further adjusted to eliminate the impact of certain items that the Company does not consider indicative of its core operating performance. These further adjustments consist of acquisition costs, organizational and offering costs, gains on debt forgiveness, gains (losses) on early extinguishment of debt, and after adjustments for unconsolidated partnerships and joint ventures.
Management uses FFO and Core FFO as key performance indicators in evaluating the operations of NSA's properties. Given the nature of NSA's business as a real estate owner and operator, the Company considers FFO and Core FFO as key supplemental measures of its operating performance that are not specifically defined by GAAP. NSA believes that FFO and Core FFO are useful to management and investors as a starting point in measuring our operational performance because FFO and Core FFO exclude various items included in net income (loss) that do not relate to or are not indicative of the Company's operating performance such as gains (or losses) from sales of self storage properties and depreciation, which can make periodic and peer analyses of operating performance more difficult. NSA's computation of FFO and Core FFO may not be comparable to FFO reported by other REITs or real estate companies.
FFO and Core FFO should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP, such as total revenues, operating income and net income (loss). FFO and Core FFO do not represent cash generated from operating activities determined in accordance with GAAP and are not a measure of liquidity or an indicator of NSA's ability to make cash distributions. NSA believes that to further understand the Company's performance, FFO and Core FFO should be compared with the Company's reported net income (loss) and considered in addition to cash flows computed in accordance with GAAP, as presented in the Company's consolidated financial statements.
HYPOTHETICAL LIQUIDATION AT BOOK VALUE METHOD: In accordance with GAAP, the Company allocates 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 the Company's operating partnership at period end after adjusting for any distributions or contributions made during such period. The Company uses this method because of the difference between the distribution rights and priorities set forth in the operating partnership's Agreement of Limited Partnership and what is reflected by the underlying percentage ownership interests of the unitholders.

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The HLBV method is a balance sheet-focused approach to income (loss) allocation. 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 (or net loss) attributable to National Storage Affiliates Trust during a period when the Company reports consolidated net loss (or net income), or net income (or net loss) attributable to National Storage Affiliates Trust in excess of the Company's consolidated net income (or net loss). The computations of basic and diluted earnings (loss) per share may be materially affected by these disproportionate income (loss) allocations, resulting in volatile fluctuations of basic and diluted earnings (loss) per share. Readers and investors are cautioned not to place undue reliance on NSA's income (loss) allocations or earnings (loss) per share without considering the effects described above, including the effect that depreciation and amortization have on income (loss), net book value and the application of the HLBV method.
LONG-TERM INCENTIVE PLAN UNITS: Long-term incentive plan units, or LTIP units, are a special class of partnership interest in NSA's operating partnership that allow the holder to participate in the ordinary and liquidating distributions received by holders of the operating partnership units (subject to the achievement of specified levels of profitability by our operating partnership or the achievement of certain events). Upon vesting, and after achieving parity with operating partnership units, vested LTIP units may be converted into an equal number of operating partnership units, and thereafter have all the rights of operating partnership units, including redemption rights.
NET DEBT TO ANNUALIZED CURRENT QUARTER ADJUSTED EBITDA: NSA calculates net debt to Adjusted EBITDA as total debt (inclusive of $9.7 million of fair value of debt adjustments and $6.5 million of debt issuance costs) less cash and cash equivalents, divided by annualized current quarter Adjusted EBITDA.
NET OPERATING INCOME:  NSA defines net operating income, or NOI, as net income (loss), as determined under GAAP, plus general and administrative expenses, depreciation and amortization, interest expense, loss on early extinguishment of debt, equity in earnings (losses) of unconsolidated real estate ventures, acquisition costs, organizational and offering expenses, income tax expense, impairment of long-lived assets, losses on the sale of properties and non-operating expense and by subtracting management fees and other revenue, gains on sale of properties, debt forgiveness, and non-operating income. NOI is not a measure of performance calculated in accordance with GAAP.
NSA believes NOI is useful to investors in evaluating the Company's operating performance because:
NOI is one of the primary measures used by NSA's management and the Company's PROs to evaluate the economic productivity of the Company's properties, including the Company's ability to lease its properties, increase pricing and occupancy and control the Company's 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 NSA's capital structure; and
NSA believes NOI helps the Company's investors to meaningfully compare the results of its operating performance from period to period by removing the impact of the Company's capital structure (primarily interest expense on the Company's outstanding indebtedness) and depreciation of the cost basis of NSA's assets from its operating results.
There are material limitations to using a non-GAAP measure such as NOI, including the difficulty associated with comparing results among more than one company and the inability to analyze certain significant items, including depreciation and interest expense, that directly affect the Company's net income (loss). NSA

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compensates for these limitations by considering the economic effect of the excluded expense items independently as well as in connection with the Company's analysis of net income (loss). NOI should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP, such as total revenues, income from operations and net loss.
NET OPERATING INCOME MARGIN: The ratio of NOI divided by total rental and other property-related revenue.
NON-SAME STORE PORTFOLIO: Non-same store portfolio comprises those properties that do not meet the Same Store portfolio property definition. 
OCCUPANCY AT PERIOD END:  Represents total occupied rentable square feet divided by total rentable square feet at period end.
OPERATING PARTNERSHIP UNITS:  Operating partnership units, or OP Units, are Class A common units of limited partner interest in the Company's operating partnership which are economically equivalent to NSA's common shares. NSA also owns certain of the Company's self storage properties through other consolidated limited partnership subsidiaries of the Company's operating partnership, which the Company refers to as "DownREIT partnerships." The DownREIT partnerships issue certain units of limited partner or limited liability company interest that are intended to be economically equivalent to the Company's OP units, which the Company defines as DOWNREIT OPERATING PARTNERSHIP UNIT EQUIVALENTS, or DownREIT OP units.
PROs: Participating regional operators, or "PROs", are NSA's experienced regional self storage operators with local operational focus and expertise. As of September 30, 2017, the Company had eight PROs, SecurCare Self Storage, Northwest Self Storage, Optivest Properties, Guardian Storage Centers, Move It Self Storage, Storage Solutions, Hide-Away and Personal Mini.
RENTABLE SQUARE FEET: Rentable square feet includes all enclosed self storage units but excludes commercial, residential, and covered parking space.
RESTRICTED COMMON SHARES: Restricted common shares are common shares that are subject to restrictions on transferability subject to vesting and such other restrictions. Generally, a participant granted restricted common shares has all of the rights of a shareholder, including, without limitation, the right to vote and the right to receive dividends on the restricted common shares. Holders of restricted common shares are prohibited from selling such shares until they vest.
SAME STORE PORTFOLIO: NSA's same store portfolio is defined as those properties owned and operated for the entirety of the applicable periods presented, excluding any properties sold or expected to be sold or where the Company completed a storage space expansion which caused the property's year-over-year operating results to no longer be comparable.
SUBORDINATED PERFORMANCE UNITS:  Subordinated performance units, or SP Units, are Class B common units of limited partner interest in the Company's operating partnership. SP units, which are linked to the performance of specific contributed portfolios, are intended to incentivize the Company's PROs to drive operating performance and support the sustainability of the operating cash flow generated by the contributed self storage properties that the PROs continue to manage on NSA's behalf. Because subordinated performance unit holders receive distributions only after portfolio-specific minimum performance thresholds are satisfied, the Company believes SP units play a key role in aligning the interests of the Company's PROs with NSA and the Company's shareholders. The DownREIT partnerships also issue units of limited partner interest that are intended to be economically equivalent to the Company's SP units, which the Company defines as DOWNREIT SUBORDINATED PERFORMANCE UNIT EQUIVALENTS, or DownREIT SP units.

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