National Storage Affiliates(NSA) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported core FFO per share of $0.54 for Q1 2025, a 10% decline from the prior year due to decreased same store NOI and increased interest expense [13] - Same store revenues declined by 3%, driven by a 190 basis point decrease in average occupancy and a 1% year-over-year decrease in average revenue per square foot [13] - Expense growth was 3.7% in Q1, with marketing, repairs and maintenance, and utilities being the main drivers, partially offset by a decrease in personnel costs [13][14] Business Line Data and Key Metrics Changes - The company experienced a sequential improvement in same store revenue growth by 130 basis points year-over-year, with all but three reported same store markets showing improvement [6] - Contract rates increased approximately 5% in April compared to Q1 levels, while occupancy increased by 20 basis points to finish April at 83.8% [8][10] - The ECRI program continues to perform well, with the length of stay above historical averages and bad debt expense within expected ranges [7] Market Data and Key Metrics Changes - Portland and Houston were highlighted as top-performing markets, with Portland delivering positive revenue growth and Houston generating 2.2% revenue growth in the quarter [10][12] - The company noted a steady flow of acquisition opportunities despite broader economic uncertainty, successfully closing on three assets totaling approximately$ 40 million during the quarter [11] Company Strategy and Development Direction - The company is focused on operational improvements following the Pro transition, leveraging consolidated operating platforms and upgraded marketing tools to enhance customer acquisition and pricing strategies [7][12] - The management expressed confidence in the self-storage sector's resilience and noted significant investor interest, as evidenced by the recent IPO of a peer company [12] Management's Comments on Operating Environment and Future Outlook - Management believes they have found a trough in fundamentals, with encouraging trends in contract rents and an improving supply outlook [11] - The company expects to see sequential improvement in same store NOI growth as the year progresses, despite anticipating negative growth in the second quarter [16][30] Other Important Information - The company has no debt maturities in 2025 and a current revolver balance of $444 million, providing approximately$ 500 million of availability [15] - The company is actively managing its portfolio, planning to exit markets where they have single assets and focusing on improving operational efficiencies [97] Q&A Session Summary Question: Can you provide perspective on the recent contract rate increase and occupancy trends? - Management noted that sequential improvements in contract rates and occupancy were observed, with a positive trend in move-in rates as well [20][21] Question: What are the expectations for revenue growth in the second half of the year? - Management indicated that while the second quarter is expected to be negative for revenue and NOI, they anticipate positive growth in the back half of the year [30][31] Question: How are promotions and discounts trending for new tenants? - Management confirmed that while there has been an increase in promotional discounts, they remain within historical ranges and are being used strategically to attract new tenants [60][61] Question: What are the current demand drivers for self-storage? - Management highlighted various demand drivers, including transitions, small businesses, and residential needs, while noting that the lack of home sales is currently impacting occupancy [100][101] Question: How does the company view the impact of tariffs on tenants? - Management stated that while tariffs could potentially impact tenants, they have not yet seen any direct effects or feedback from customers regarding this issue [117]