National Storage Affiliates Trust's Q4 2024: Contradictions in Occupancy Trends, M&A Strategy, and Market Outlook

These are the key contradictions discussed in National Storage Affiliates Trust's latest 2024Q4 earnings call, specifically including: Occupancy and Demand Trends, M&A Strategy and Activity, ECRI (Early Contract Renewal Incentive) strategy, and Market Outlook on New Supply Deliveries:



Operational Trends and Recovery Outlook:
- National Storage Affiliates (NSA) stated that their street rates troughed in October with a decline of 24%, improving to a 13% decrease by December.
- Occupancy delta narrowed from 270 basis points at the end of Q3 to 140 basis points by the end of Q4.
- The recovery outlook is supported by the expectation that the housing market is near a bottom, with NSA benefiting from its higher percentage of homeowners versus renters in its portfolio.
- The expected recovery is also influenced by declining new deliveries, anticipated to decline from 3.5% to 2% of stock by 2027, below the long-term national average.

Capital Recycling and Strategic Disposition:
- NSA completed the internalization of its PRO structure, which included consolidating brands and properties, and announced the sale of 40 non-core facilities for over $270 million.
- The company plans to recycle capital through strategic dispositions, with $10 million worth of properties already under contract, and aims for balanced transactions between acquisitions and dispositions in 2025.
- This strategy is to improve the portfolio’s operational proficiencies and to be more strategic about growth and acquisition targets.

Cost Management and Financial Performance:
- Same-store revenue declined 4.3% driven by a 2.5% decrease in rent revenue per square foot.
- Expense growth was 4.7% in the fourth quarter, with property taxes, marketing, and utilities being key expense drivers.
- Core FFO per share was $0.60 for the fourth quarter, meeting high-end guidance range, driven by G&A and management fees, and despite the decline in same-store revenue and NOI growth.

Guidance and Market Conditions:
- NSA expects same-store revenue growth to be flat in 2025, with same-store operating expense growth of 3.5%.
- Negative NOI growth is anticipated initially, but NSA believes the year-over-year performance has bottomed and organic growth will inflect positively in the back half of the year.
- The midpoint of guidance reflects a modest improvement in demand, with occupancy expected to improve from 150 basis points negative year-over-year in the first couple of months to better levels by the end of the year.