Release Date: February 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- National Storage Affiliates Trust (NSA, Financial) successfully internalized its PRO structure, consolidating brands and onboarding approximately 250 properties and over 380 employees to its corporate platform.
- The company deployed $150 million of growth capital in a newly formed joint venture and repurchased $275 million of common shares, indicating strong capital management.
- NSA's markets have a higher average percentage of homeowners versus renters, making its portfolio more sensitive to housing market recovery, which is expected to benefit the company.
- The supply of new storage facilities is expected to decline substantially over the next few years, which should improve market conditions for NSA.
- NSA reported core FFO per share of $0.60 for the fourth quarter of 2024 and $2.44 for the full year, at the high end of its guidance range, driven by better-than-expected G&A and management fees.
Negative Points
- The company faces challenging operating conditions due to elevated supply and muted demand from historically low home sales.
- NSA's same-store revenue and NOI growth were down 3% and 5.5% respectively over the prior year, indicating pressure on financial performance.
- Interest expense is expected to contribute to a decline in core FFO per share in 2025, partly due to the expiration of interest rate swaps.
- The company anticipates near-term negative NOI growth, with the first quarter being seasonally the weakest, which will put additional pressure on leverage.
- NSA's guidance for 2025 reflects uncertainty regarding interest rates and their impact on the housing market, which could affect the spring leasing season.
Q & A Highlights
Q: Can you explain the expected improvement in revenue growth for 2025, particularly regarding occupancy and rate growth?
A: David Cramer, President and CEO, explained that 2024 was a transition year with internalization and platform consolidation. For 2025, they anticipate a normal seasonal pattern with occupancy peaking in the summer, expecting a 250 basis point improvement. They also foresee low-single-digit growth in average contract rates due to improved tools and positioning. Brandon Togashi, CFO, added that the negative revenue growth in Q4 2024 was due to occupancy and rent per square foot declines, which they expect to tighten in Q1 2025.
Q: Is your growth being impacted by state restrictions due to the California wildfires?
A: David Cramer stated that the impact is minimal, as only eight stores in their portfolio are in areas with pricing restrictions, representing a small percentage of their total stores.
Q: How do you view the acquisition and disposition environment, and what are your plans for capital recycling?
A: David Cramer mentioned that they plan to recycle capital by selling identified assets to improve operational efficiency. They have $10 million worth of properties under contract for sale and are actively evaluating acquisition opportunities. The acquisition environment remains healthy, with no significant changes in deal flow or cap rates.
Q: How does the current housing market affect your business, and is a recovery factored into your guidance?
A: Brandon Togashi noted that their guidance assumes no worse conditions than 2024, with modest improvement expected. They believe pent-up mobility demand will gradually unlock, benefiting from job-driven mobility and improved supply outlook. The internalization of PROs is also expected to enhance performance.
Q: What are your expectations for supply and its impact on your markets in 2025?
A: David Cramer explained that new supply deliveries are expected to decline, with 2025 seeing about a 50-100 basis point improvement from 2024. While new supply is decreasing, it will take time to absorb existing supply, particularly in markets like Phoenix and Atlanta. They anticipate improved stability as supply pressures ease.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
