What’s Special about National Storage? (Part 2/2)


Click here if you have not read part 1.

The lack of a national identity may be an advantage.

One remarkable difference from its REIT peers is a lack of national identity. Each of the PRO’s preserves its own name brand, and continues to be associated with the region it operates within. For instance, the websites of SecurCare and Northwest are different from each other, thereby maintaining their own identity. In addition, each PRO manages their own contributed units promoting their own level of service, pricing, and customer policies, to name a few.

chart07There is a central website https://gostorageunits.com that encompasses National Storage operators and serves as a locating service for their nearest units. The National Storage website http://www.nationalstorageaffiliates.com/ has been built around attracting both investors and potential affiliates.

I am certainly not saying that a lack of a sole identity is a negative factor. When compared to their competitors, National Storage has more conditions to be in sync with their target region. This enables the company to be more flexible and quicker when it comes to making decisions that cater to their local customer base. This may be a competitive advantage.

Capital Structure

chart05In addition to the common shares and OP units, National Storage issues subordinated performance units, which change the way common share and OP unit holders are remunerated.

Once a property’s operating cash flow covers allocated corporate G&A costs, debt service and maintenance capital expenditures, the common share and OP unit holders will receive six percent on their unreturned capital. Once this condition is met, SP unit shareholders will also receive six percent. The excess operating cash flow will be split between the SP and OP unit holders.

When all is said and done, REIT shareholders (common) have a downside protection; however, they do not enjoy as much upside as PRO shareholders (OP and SP units).

The company’s debt to total capitalization of 36% is higher than its peers’, but in line with the REIT industry’s.

Operational Performance

Although National Storage must improve their occupancy metrics, the company has enjoyed a better same store revenue, and net operating income growth rate when compared to their industry peers. They also show a two-digit growth rate in FFO per share. This demonstrates the company’s capacity to make large distributions in the future. The company’s dividend yield of 5% is the highest in the self-storage sector.chart04


National Storage Affiliates most definitely stands out in the five factors that we have analyzed: industry fundamentals, valuation, profile, capital structure, and operational performance. The capital structure is by far the trickiest characteristic related to common shareholders due to the fact that it provides downside protection with a limited upside potential. That being said, this REIT is a potential buy.

Source: National Storage Affiliates Trust (NYSE:NSA), Fast Graphs.

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.

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