Yahoo Finanza National Storage Affiliates Trust (NYSE:NSA) Q1 2024 Earnings Call Transcript
National Storage Affiliates Trust (NYSE:NSA) Q1 2024 Earnings Call Transcript May 2, 2024
National Storage Affiliates Trust isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings. Welcome to National Storage Affiliates First Quarter 2024 Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, George Hoglund, Vice President of Investor Relations for National Storage Affiliates. Thank you, Mr. Hoglund, you may now begin.
George Hoglund: We’d like to thank you for joining us today for the first quarter 2024 earnings conference call of National Storage Affiliates Trust. On the line with me here today are NSA’s President and CEO, Dave Cramer; and CFO, Brandon Togashi. Following prepared remarks, management will accept questions from registered financial analysts. You limit your questions to one question and one follow-up and then return to the queue if you have more questions. In addition to the press release distributed yesterday afternoon, we furnished our supplemental package with additional detail on our results, which may be found in the Investor Relations section on our website at nationalstorageaffiliates.com. On today’s call, management’s prepared remarks and answers to your questions, they contain forward-looking statements that are subject to risks and uncertainties and represent management’s estimates as of today, May 2, 2024.
The company assumes no obligation to revise or update any forward-looking statement because of changing market conditions or other circumstances after the date of this conference call. The company cautions that actual results may differ materially from those projected in any forward-looking statement. For additional details concerning our forward-looking statements, please refer to our public filings with the SEC. We also encourage listeners to review the definitions and reconciliations of non-GAAP financial measures, such as FFO, core FFO, and net operating income contained in the supplemental information package available in the Investor Relations section on our website and in our SEC filings. I will now turn the call over to Dave.
Dave Cramer: Thanks, George, and thanks everyone for joining our call today. During the quarter, we completed many of our strategic initiatives that we’ve been discussing in previous calls. These initiatives enable us to deleverage our balance sheet in access to growth capital, increase earnings per share, and ultimately, position our company for future growth. Continue our focus on enhancing our operating platforms to ensure a better customer experience, these initiatives are still ongoing, but we’re starting to see improvements in rental activity and conversions from our advanced web presence and upgraded call center operations. On the rental front, we experienced three months of positive net rentals through the end of April, contributing to a seasonal uptick in occupancy, which ended April at 86%, up 50 basis points from the end of February.
During the quarter, we experienced a meaningful year-over-year increase in leases being fully executed online, large part due to improvements made to the lease signing experience. Additionally, our call center answered over 30% more calls during the quarter compared to last year. Continue to enhance and simplify our customer journey by leveraging intelligence in our customer acquisition strategies, we expect to see continued improvements in the customer experience we offer and overall performance. We’re also being more aggressive on our pricing strategy. While this is helping to drive rental volume, it is putting pressure on our move-in rates, which averaged down about 14% year-over-year for the quarter. Consumer base remains healthy, with 65% of our tenants having stayed with us over a year, while 49% have been with us over two years.
Our ECRI program remains largely consistent with the past couple of quarters in terms of pregnancy and magnitude. Ultimately, the quarter played out as we expected, but it’s still early in the spring leasing season, with the peak months ahead of us. That said, looking across our different Sunbelt markets, continue to face many challenges due to several factors, including absorption of new supply, unmuted housing market and a very competitive pricing environment. Results are mixed in these markets with revenue in Phoenix, Sarasota and Las Vegas all coming in below portfolio average, while markets like Oklahoma City, Savannah and Corpus Christi were better than average for the quarter. Continue to work hard in these markets to deliver a superior customer experience, recognize some of our markets are going to be slower to recover.
It is important to point out that we have markets that are currently healthy and delivering solid results. We remain very confident in the growth prospects of our Sunbelt markets due to attractive population and migration trends. I’m very pleased with our strategic positioning heading into this next phase of growth. We’re starting to see opportunities on the acquisitions front. We’re finding a variety of deals in many of our strongest performing markets where we have good insights into rental demand and street rates, allowing us to be more precise in our underwriting. These are deals that make sense for us to pursue as they improve our overall portfolio quality, add depth to our existing markets and increase our operational efficiency.
We currently have over $25 million under contract and approximately $200 million of properties in various stages of negotiation. Expect to fund these acquisitions through a combination of 1031 proceeds, joint venture capital and debt. We won’t comment on pricing until the deals are closed. These transactions make economic sense for us and our JV partners. We represent the start of us putting the dry powder to work that was generated from our portfolio optimization strategies. I’ll now turn the call over to Brandon to discuss our financial results.
Brandon Togashi: Thank you, Dave. Yesterday afternoon, we reported core FFO per share of $0.60 for the first quarter of 2024, representing a decrease of approximately 9% over the prior year period, driven primarily by the decline in same-store NOI, an increase in G&A and a decline in contribution from our JVs. Overall, our results for the quarter were in line with our expectations, except for a few casualty events resulting in an aggregate $1 million loss or almost a penny per share. For the quarter, revenue growth declined 1.5% on a same-store basis, driven by growth in rent revenue per square foot of 2.4%, offset by a 380-basis-point year-over-year decline in average occupancy during the quarter. Occupancy ended the quarter at 85.9%, down 350 basis points year-over-year.
Expense growth was 4.5% in the first quarter, similar to the past couple quarters, the main drivers of growth were property tax, marketing and insurance, partially offset by payroll efficiencies that resulted in lower spend versus the prior year period. Marketing expenses remain elevated due to increased competition for customers and a tough comp, while insurance expense growth will moderate going forward for the low-single digits, given our policy renewal that occurred on April 1st. As Dave mentioned earlier, we had a busy start to 2024 on the asset sales and joint venture front. All of which was discussed on our last call. Although we did not complete any acquisitions during the quarter, we remain active underwriting and evaluating potential transactions.
The majority of our revolver available to us today and $1 billion of buying power within our 2023 joint venture, we are encouraged by the opportunities for external growth that lie ahead of us. Turning to the balance sheet, during the quarter we completed just over $200 million of common share buybacks and subsequent quarter end exhausted the remaining $72 million of our program. We believe this strategic initiative is beneficial to our shareholders and will ultimately provide more FFO per share to them over the long run. Our current revolver balance is roughly $200 million, giving us approximately $750 million of remaining availability. Lastly, our leverage was 6.2 times net debt to EBITDA at quarter end. Now moving on to 2024 outlook. As we said earlier, the quarter played out largely as expected and it’s still early in the spring leasing season.
We are reaffirming our previously provided guidance, which is detailed in the earnings release. One item I want to mention on the balance sheet. We have $250 million of interest rate swaps that fixed daily simple SOFR at 1.59%, which mature in Q3. $145 million of this relates to the term loan that matures in July. So effectively $250 million of fixed rate debt will adjust to market rate starting August 1. This impact was factored into the guidance we provided in February, but I wanted to point it out since the swap expirations aren’t exactly aligned with the underlying debt maturities. Thanks again for joining our call today. Let’s now turn it back to the Operator to take your questions. Operator?
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