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

Financial Data and Key Metrics Changes - Core FFO per share for Q1 2025 was reported at $0.54, a 10% decline from the prior year due to decreased same store NOI and increased interest expense [14] - 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 [14] - Expense growth was 3.7% in Q1, primarily due to marketing, repairs and maintenance, and utilities, partially offset by a decrease in personnel costs [14][15] Business Line Data and Key Metrics Changes - The existing customer base remains healthy, with a successful ECRI program and a length of stay above historical averages [9] - Contract rates increased approximately 5% in April compared to Q1 levels, while occupancy increased by 20 basis points to 83.8% [10] - Same store NOI growth was negative 5.7%, but showed sequential improvement from the previous quarter [15] Market Data and Key Metrics Changes - Portland and Houston markets showed positive revenue growth, with Portland being a top performer due to effective marketing and pricing strategies [11][12] - The company closed on three assets totaling approximately $40 million and sold two properties for $10 million during the quarter [12] Company Strategy and Development Direction - The company is focused on operational improvements and realizing benefits from consolidated operating platforms and upgraded marketing tools [9] - There is a disciplined approach to acquisitions amidst broader economic uncertainty, with expectations for more transactions in the coming months [12] - The self-storage sector has shown resilience to various operating environments, with significant investor interest demonstrated by recent IPOs in the sector [13] Management's Comments on Operating Environment and Future Outlook - Management believes they have found a trough in fundamentals and are encouraged by the trajectory of contract rents and improving supply outlook [12] - The company expects to see positive revenue growth in the back half of the year, driven by improved pricing power and occupancy [30][31] - Management noted that while the housing market remains challenging, they do not expect it to worsen and see potential for recovery [108] 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 [16] - Marketing expenses are expected to remain elevated due to competitive pressures, with a year-over-year increase of 20% in Q1 [15][78] Q&A Session Summary Question: Can you provide perspective on the increase in contract rates and occupancy? - Management noted sequential improvement in contract rates and occupancy, with positive trends observed from January through April [20][21] Question: What is the status of revenue growth expectations for the second half of the year? - Management indicated that while Q2 is expected to be negative for revenue and NOI year-over-year, 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 concessions are within expected ranges and have not exceeded historical levels, with a slight increase in promotional usage [58] Question: What are the current demand drivers for self-storage? - Demand is driven by various factors including transitions, small businesses, and residential needs, although the lack of home sales is impacting occupancy [101][102] Question: How does the company view the transaction market for acquisitions and dispositions? - Management is being patient in the acquisition market while actively working on dispositions, with a focus on improving operational efficiencies [46][97]