National Storage Affiliates(US:NSA)2020-08-07 22:05Financial Data and Key Metrics Changes - Core FFO per share increased by 7.9% year-over-year to $0.41, driven by strong acquisition volume and internalization of SecurCare [26][10] - Same-store NOI decreased by 1.2% year-over-year, with same-store revenues and property operating expenses both declining by 1.1% [27][10] - Same-store occupancy averaged 88.1%, a decline of 140 basis points compared to the same period in 2019 [27] Business Line Data and Key Metrics Changes - Same-store move-in volume in July was 8% higher than July 2019, while move-outs were down 20% compared to the prior year [30] - Cash collections in July remained healthy at about 99% of normal levels, similar to Q2 [31] - Same-store OpEx growth benefited from cost control measures, with personnel costs down 2.5% and repairs and maintenance down 13% [29] Market Data and Key Metrics Changes - Half of the reported MSAs achieved positive same-store revenue and NOI growth, with Riverside, San Bernardino, and Phoenix performing better than the portfolio average [32] - Portland was negatively impacted by COVID-related restrictions, with average occupancy down 280 basis points during Q2, but improved to a decline of just 140 basis points by the end of the quarter [34] - The company noted a trend of out-migration from urban areas to suburban locations, which is expected to benefit NSA [20] Company Strategy and Development Direction - The company is focused on external growth, having acquired four wholly-owned properties for a total investment of $36 million during Q2 [22] - The acquisition environment slowed significantly in Q2, but activity is picking up as operating fundamentals stabilize [23] - The company aims to continue leveraging its unique PRO structure to align interests and mitigate risks during challenging times [11] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism, stating that the worst of the downturn may be behind them, but uncertainty remains due to COVID-19 [18] - The company is not reinstating 2020 guidance at this time but is monitoring the situation closely [18] - Management believes that the last half of 2020 FFO should come in ahead of the last half of 2019, assuming no additional shutdowns occur [70] Other Important Information - The company executed a $250 million debt private placement transaction with a 2.99% coupon, the lowest for any 10-year public or private notes issued by a self-storage REIT [21] - The balance sheet is well-positioned with $500 million available on the revolver and no debt maturities through 2022 [40] - The weighted average cost of debt at quarter end was 3.3%, with a net debt-to-EBITDA ratio of 6.3 times [41] Q&A Session Summary Question: Can you comment on the transaction market and cap rates? - Management noted that they did not see significant compression in cap rates during the downturn, with an average cap rate for deals closed in Q2 around 6.5% [47] Question: How much demand is related to moving due to work-from-home trends? - Management acknowledged witnessing some demand related to people creating home offices but could not quantify the impact [49] Question: Do you expect to return to a 20% growth rate in asset base? - Management indicated that a more realistic goal would be around 10% growth per year, with a focus on seeking transactions that make sense [54] Question: What is the outlook for property taxes? - Management expects property tax growth to remain around 5.5% for the back half of the year, consistent with prior guidance [96] Question: How has the student population impacted move-ins? - Management observed a decrease in college student activity compared to previous years, with uncertainty about the impact on move-outs [105] Question: What are the trends in new supply and construction? - Management noted that while projects under construction will be completed, new approvals and permits have slowed significantly [108]