National Storage Affiliates Trust

2021 is a banner year across the board for NSA, including record same-store revenue and NOI growth of 15.1% and 19.8% respectively, the highest reported full-year results in the history of self-storage, acquisition volume of $2.2 billion, the highest year in our history, and core FFO per share growth of 32%, also the highest in our history. To cap the year off, in December, our portfolio surpassed the 1,000 property milestone, and NSA delivered total shareholder return of 98% in 2021, including raising our dividends by 29% throughout the year. Our results are driven by the powerful combination of our differentiated pro structure, our concentration in Sunbelt, suburban, and secondary markets, and the remarkable strength and resilience of the self-storage sector. Building off a record 2021, we begin 2022 with another accretive event, the retirement of Northwest Self Storage, one of our founding pros. As a reminder, we've discussed and anticipated pro retirements over time, and we expected at the time of our IPO that as many as half of our six pros at the time would choose to retire within 10 years or less. Northwest will now be the second of our pro retirements, and we expect that this internalization will be even smoother as we implement based on lessons learned from our experience with SecureCare. In terms of the transition, all of our Northwest stores have been migrated onto NSA corporate platforms. Almost all of the Northwest team came on board with us and will continue to operate the stores under the Northwest flag. The internalization of Northwest increases the number of stores managed within our corporate portfolio to 685 stores, or 65% of our total 1,050 stores at the end of the year. We estimate this retirement will be approximately $0.02 per share accretive to Core FFO in 2022. I'd like to thank the Northwest team for their partnership over the years. They've been a key contributor to NSA's success. On the external growth front, We topped off the year in the fourth quarter with the investment of over a billion dollars in 110 properties, bringing our total acquisition volume for the year to 229 properties valued at $2.2 billion. This significantly surpassed our expectations and exceeded the top end of our guidance range. Cap rates on fourth quarter deals averaged 5.1%, but generally ranged from the high threes to the high sixes, based on level of lease-up, location, source of the deal, that is, whether it was marketed off-market or from our captive pipeline, and whether there was a portfolio premium involved. As we talked about over the course of the year, we were more active in 2021 in the acquisition of non-stabilized properties. So about 350 million or 16% of the properties we acquired in 2021 were non-stabilized. We believe this provides significant growth opportunities for 2022 and beyond. The weighted average cap rate on all of our transactions in 2021 was approximately 5.3%. It's also worth noting that over 60% of the deals we closed in 2021 were off market or from our captive pipeline, where we tend to buy at cap rates slightly above market. The strength and resilience of our industry continues to draw attention and increased interest in investing in self-storage. So it's not surprising that we continue to see significant competition for transactions despite the upward movement in the 10-year Treasury and the overall increase in the cost of capital. As a result, we expect a lower volume of acquisitions this year as we remain disciplined in our underwriting and focused on assets that add to the long-term value of our portfolio and are accretive to our shareholders. Year to date, we've closed on properties valued at about $20 million, and we have additional deals valued at between $200 and $300 million under contract or letter of intent. Complementing external growth this year, we have significant opportunity to drive growth and scale efficiencies from the integration of the record number of assets that we acquired in 2021, as well as through the integration of the Northwest stores onto NSA's management platform. Our exceptional fourth quarter results, elevated acquisition volume, and continued tailwinds in the sector give us confidence for 2022. Our guidance once again implies double-digit same-store NOI growth and 20% growth in core FFO per share, which is an impressive encore to 2021. Brandon will provide further details on our guidance in his comments. I'll now turn the call over to Dave to provide color on what we're seeing on the ground and with new supply. Dave?

Thanks, Tammy. On our third quarter earnings call, we said that overall storage fundamentals remained strong. We also noted that we didn't see any near-term signs of changes to the current favorable environment. That's certainly how the fourth quarter played out, and that statement still holds true today. We did experience some normal seasonality at the end of the year, but occupancy levels remained high. As a result, our street rates averaged 25% higher this fourth quarter compared to a year earlier. We're also able to hold discounting concessions well below historical averages at 2% of revenue. We continue to be assertive on rent increases to in-place tenants with the increases averaging in the low to mid-teens. Our rent roll-up in the fourth quarter was a positive 3.5%. This is down from the 7% we realized in the third quarter. It's still well above normal at a time when we're usually experiencing rent roll-downs. The rent roll-up trend remains positive in 2022. Our contact rates improved every month in 2021, and we're up about 12% for the fourth quarter. Keep in mind that we started the year essentially flat year over year, so we are pleased with the momentum of our contract rents. We ended the fourth quarter with occupancy of 94.8%. This was up 310 basis points over the prior year. Occupancy declined just 190 basis points in June. and 210 basis points from the peak occupancy at the end of July, both of which were below historical norms but in line with our expectations. Continue the return toward normal seasonal trends. We will be entering the spring leasing season well-positioned on both occupancy and rate. Having this momentum in these areas helps with our ultimate goal, which is revenue growth. One thing I'd like to put into perspective is that coming off a record 2021, some moderation in growth is expected. Nonetheless, our same-store guidance implies revenue and NOI growth that are double the sector's long-term historical averages. Not too shabby. Turning to new supply, we're starting to see a handful of projects get started in most of the top 20 MSAs. However, we continue to think the impacts of new supply will likely remain muted through 2022 and into 2023. Currently, the unprecedented consumer demand has reduced the competitive impact of the few new facilities that are coming online. There's certainly no shortage of developers who want to build a self-storage, and we do expect development activity to pick up, but construction and land costs remain high, and the entitlement and permitting process still remain very slow and cumbersome. Overall, we expect to continue to face competition from new supply in Portland, Phoenix, certain sub-markets in Dallas, Atlanta, and West Florida, but the strong fundamentals in these markets are offsetting much of the impact. We have not seen a significant change in new competitive landscape within our portfolio. The percentage of stores having a new competitor in a three or five-mile radius are in line with last quarter and flat to slightly down from year-end 2020. I will now turn the call over to Brandon to discuss financial results and balance sheet activity.

Thank you, Dave. This morning, we reported core FFO per share of $0.64 for the fourth quarter of 2021, which represents an increase of 39% over the prior year period. and strong acceleration from the 57 cents we reported in Q3. This sequential increase was due to a combination of factors, including the fact that our Q3 acquisition volume was weighted toward the end of the quarter, we had some dilution in Q3 from our July equity raise, and we had record acquisition volume during the fourth quarter. Game Store NOI increased by 21.7% in the fourth quarter over prior year period, driven by a 17.4% revenue increase combined with a 6.5% increase in property operating expenses. Same-store occupancy averaged 95.5% during the quarter, an increase of 360 basis points compared to Q4 2020. The full year, core FFO per share was $2.26, a 32% increase over 2020, driven by robust same-store growth and healthy acquisition volume in the back half of 2020 and throughout 2021. Full-year same-store NOI grew 19.8%, a record in the history of the self-storage industry, driven by 15.1% revenue growth and 4% growth in OpEx. Same-store NOI growth was near the high end of our guidance range, while core FFO per share results beat the top end, largely due to outsized acquisition volume and better than expected results from our non-same-store pool. Regarding OpEx, same-store growth ticked up in the fourth quarter to 6.5% due to the challenging year-over-year comp and upward pressure on personnel expenses. Specifically, personnel costs increased 8%, with R&M and utilities up by a similar percentage. This expense growth was partially offset by marketing costs that were down 11.8% and property taxes that grew just 1.5%. For the full year, we were pleased that on a combined basis, our two largest OpEx line items, personnel and property tax, only grew 3.2% year over year. Now, moving on to guidance. We expect the elevated acquisition volume in 2021, which was largely back half-weighted, will have a meaningful impact on core FFO per share growth in 2022. Add in the momentum that we're currently experiencing with operating fundamentals, and we expect a very strong 2022, with higher growth levels in the first half of the year, as comps become more challenging in the second half. Taking all of this into consideration, we introduce full-year 2022 guidance as follows. Core FFO per share of $2.68 to $2.74, or 20% growth over prior year at the midpoint. A same-store pool of 631 properties, with revenue growth of 8% to 9.5%, OPEX growth of 5.25% to 6.5%, and NOI growth of 9% to 11%. We expect acquisitions of $400 to $600 million during the year, and we also expect the retirement of Northwest to be accreted by two pennies per share in 2022. Regarding Northwest, I'll offer a reminder on the mechanics of a PRO retirement. The SP units associated with the Northwest PRO were converted to OP units on January 1st at a conversion ratio of 1.88, and therefore distributions to SP units will be reduced accordingly. NSA will no longer pay a management fee to a PRO for the Northwest branded properties, so there will be a reduction in supervisory and administrative expenses within G&A. which will be partially offset by an increase in other G&A as the properties will now be managed by NSA's corporate property management platform. All of these items are factored into our additional guidance assumptions that are detailed in the earnings release. Turning to the balance sheet, we were active in the fourth quarter on the capital front in order to fund our acquisition volume. On the equity side, we issued $138 million of common equity through our ATM program and $120 million of OP equity for acquisitions. On the debt side, we upsized our revolver by $150 million to give us $650 million of capacity, and we priced $450 million of senior unsecured private placement notes, which we discussed on our last call. $325 million of those notes were funded in December, and the remaining $125 million was funded at the end of January, which we used to pay down amounts outstanding on our revolver And with that in mind, today our revolver balance stands at about $370 million. At year end, our reported leverage was 6.1 times net debt to EBITDA in the middle of our targeted range of 5.5 to 6.5 times. However, this number is skewed higher by the fact that our significant Q4 acquisition volume was weighted toward the end of the quarter. Adjusting for a full period effect of the EBITDA from those acquisitions, our leverage would fall to about 5.7 times. or toward the low end of our targeted range. Taking all of that into account, we're very comfortable with how our balance sheet is positioned, with no maturities through 2022 and $280 million of remaining availability on the revolver. We're committed to maintaining a conservative leverage profile and healthy access to multiple sources of capital. Thanks again for joining our call today. Let's now turn it back to the operator to take your questions. Operator?