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?

Thank you. And at this time, we will be conducting our question and answer session. Please note, please ask only one question per each time that you queue. You may queue up again for any follow-up questions. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press the star key followed by the number two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And once again, to ask a question, please press star 1, and please ask only one question for each time that you queue. Thank you. Our first question comes from Elvis Rodriguez with Bank of America Securities. Please state your question.

Good morning out there. Congrats on the quarter and year. Just a quick question on the internalization of Northwest Self Storage. Anything you can share on the dollar amount, the yield that you're bringing in the portfolio in today relative to when you first created the relationship?

Hey, Elvis. This is Brandon. Thanks for the question. A couple of things just to clarify for you and others, because we've only had the one other pro retirement prior to Northwest back in 2020, SecureCare. So, of course, we own all of the assets already. So this transaction is purely related to a couple of things. One, the pro has subordinated performance or SP equity. That gets converted into OP equity. That's what I mentioned in my remarks happened on January 1, the specific unit counts, they are in the supplemental. They're a little, it's fine print, but it's the second page of Supplemental Schedule 4, where we talk about 2.1 million OP units converting into 3.9 million OP units. Sorry, 2.1 million SP units converting into 3.9 million OP units. So that's one thing. And then the SP distributions that were going to the Northwest Pro will no longer happen. And so that's That's a benefit to the FFO number, and then our FFO denominator obviously goes up by that OP unit count. And then the second critical thing is that management fee that we pay to a pro, that's a percentage of revenue number. That goes away. I mentioned that in my opening remarks. We will have some incremental G&A that we absorb. Tammy mentioned we hired the vast majority of those Northwest employees. So that comes into our normal corporate G&A load. But there is a net benefit there, and that's part of the calculus to get to that two pennies of accretion. So that's – I guess I'll offer that up as just a breakdown of the key elements of the pro-retirement. But let me see if you have follow-up, if there's anything I didn't hit.

No, that's very helpful. Thank you. Perhaps moving on to the performance year-to-date on the portfolio – Can you share an update of where, you know, the portfolio is today, street rates versus in place, as well as, you know, any occupancy gains that you can share?

Elvis, thanks. This is Dave. Good question. You know, we're very pleased with where the portfolio started out in 2020, obviously finishing as strong as we did in 2021. We've only lost about 20 to 30 basis points of occupancy through January and into February, so we're pleased with that. We've been able to maintain street rate levels. We're still in a positive rent roll-up situation as far as move-out and move-in tenants. And we still have a spread of about a little over close, probably pretty close to about 2% street rate over contract rent at this point in time. So everything fundamentally is great as we look to the spring season. Rental velocities have remained well, remained good, and move-out velocities have still been a little bit muted for us. So all things positive. Thank you.

Thank you. And just to clarify, it's one question and one follow-up for each time you queue. Thank you. Our next question comes from Neil Malkin with Capital One. Please state your question.

Hey. Good morning, everyone. Great quarter, great year. Congrats on everything. First question for me, Dave, maybe you can elaborate, but given the large amount of acquisitions you guys made in 21 and the relative significant portion of lease of opportunity and not to mention just the overall benefit from being on the MSA corporate or revenue management platform. Can you maybe give us an idea or order of magnitude and what that non-same portfolio NOI would kind of do or should grow relative to the same store this year?

Brandon, we might need just a little more color on the question. So you're asking on the non-same store pool how to think about the performance of that relative same store subset?

Yeah, I mean, you acquired a lot, right? So I'm just trying to, you know, kind of gauge, you know, what kind of upside, you know, from being on your platform, you know, from third parties, you know, all that, you know, kind of, you know, how you think about that in terms of, again, just accretion from not only the acquisitions, you know, from relative to your cost of capital, but just being in the, you know, NSA platform in terms of revenue and expense management and then also, you know, the creation from lease up, just trying to see, you know, maybe how you think that should perform, you know, relative, you know, to your same store. Like, is it 500 basis points, you know, of alpha, just, again, given the lease up? You know, any, you know, way to think about that, because obviously those two portfolios aren't going to grow the same rate. So just any kind of color or view would be great.

Yeah, I think let's approach it in a couple manners. So certainly we acquired a significant amount of properties. And so we had a bucket of those properties that were certainly more mature. And as we look at those properties and look at how we're able to perform, you know, as you think about, you know, really growing rates and growing around, you know, some of the occupancy metrics where maybe they were very, you know, strong physically occupied, but there was an economic spread of 15, 20 points on physical and economic occupancy. That mature portfolio, certainly we, you know, the benefit we'll have bringing them on our portfolios will tighten up that economic occupancy, you know, and really close that 15 to 20 point spread very quickly as we work through our revenue management system, as we work through our, you know, contract rates and our in-place rent changes. And so, you know, you look at that, you know, the opportunity within that portfolio versus our stable portfolio, you certainly have, you know, that occupancy spread is where I would probably tell you is where most of that gain is going to come as we close up that economic to physical occupancy. And so we certainly expect that portfolio to outperform our stable portfolio as you think about how we season that up. I'm not sure I'm prepared to give you probably a hard number on what that spread of points is going to be, but we certainly do expect it to outperform the stable portfolio. And then we had another bucket that Tammy mentioned in her opening comments about this non-season group. And, you know, that non-season group probably has a physical occupancy of around 70% and maybe an economic occupancy of another 15, 20 points below that. And so those will take a little bit longer to season. You know, you may look at our window of maybe 18 to 24 months to season those properties to maybe a little more stable look. And certainly as you season those properties out and stabilize the occupancy and stabilize the revenue and drive some of the rental rates forward, those will certainly perform at a much higher level than what our stable portfolio will perform at.

Yeah, that's great. Thank you for that. The other one, you know, for me is in terms of acquisitions, I mean, I'm sure people are going to ask a lot of, you know, different ways. But, you know, I think, Tammy, you said you have 200 to 300 million, you know, under contract or LOI. I understand that competition continues to increase, but does that 400 to 600 seem a little conservative? I feel like last time we talked, it sounded like if 2021 didn't exist, 2022 theoretically would be a record year as well, just given the amount of transaction activity. you know, can you just maybe kind of speak on, you know, what you're seeing and, you know, how you expect the year to shape up, just given, you know, all the things I mentioned, plus the fact that, you know, you're still a very attractive cost of capital. So, thanks.

Sure. Sure, Neil. Thanks. So, we're still seeing a significant amount of activity in the funnel. So, a lot of transactions coming to market. And we continue to look at every deal that kind of crosses our desk. The issue is that cap rates remain compressed. And while the cost of capital is good, it's not as good as it was. And we frankly are not, we don't like what we're seeing as much as what we were looking at last year. And when you think about that and think about the fact that We've always said we'll be very disciplined in our underwriting. We're buying for the long term. We're improving the quality of our portfolio and very focused on acquiring assets that are accretive to our shareholders. It's just causing us to pause a little bit now. And we acquired $2 billion of assets last year. And that's going to take some time and effort and energy to integrate into our portfolio. We have a lot of upside in those assets that we acquired in the fourth quarter. So I think we're comfortable with the guidance that we're providing now. You know, something might change. We're seeing a handful of small to mid-sized portfolios that might prove interesting. But at least for now, I think our view is to be cautiously optimistic about 2022. Let me put it that way.

Okay, I appreciate it. Thank you, guys. Great quarter. Thank you.

Thank you. Our next question comes from Todd Thomas with KeyBank Capital Markets. Please state your question.

Hi, thanks. Just first question, I guess, following up on that last line of questioning. Dave, I'm curious, you know, how much of the 2021 investment volumes, almost $2.2 billion, how much of that was non-stabilized or non-seasoned where there is outsized growth? And how much yield upside should we assume? 150 basis points during the year, maybe 250 basis points? What's the right way to think about that throughout the year?

Hey, Todd. This is Tammy. Thanks for the question. Good question. The way we're looking at that $2.2 million, about $350 million of it, is what we consider non-stabilized in some phase of stabilization. And the cap rate on those assets was in the low to mid-3% range. The stabilized cap rate, so call it two to three years out, would be about a six.

Okay, great. That's helpful. And then regarding the guidance, can you talk about what's embedded in the guidance for occupancy throughout the year, whether we should expect NSA to maintain a positive year-over-year occupancy spread throughout the year? Are you anticipating an embedding in the guidance occupancy gains to flatten out or turn negative during the year?

Yeah, it's a good question. So certainly we're starting at an elevated level. So, you know, we certainly think we're returning to some normal seasonal trends. We saw it at the back half of 2021, really the back quarter of 2021. We saw some, you know, some seasonal trends that, you know, I saw in Occam see pull off just a little bit. And so we're starting at a higher level 2022. We certainly expect to see the seasonality in the summer months, albeit we're a little fuller now. So we may not see the, you know, significant change in occupancy as you head into June and July but we certainly are going to see improvement in June and July and we expect it to trail off in the back half of the year you know really starting around August around more seasonal normal historical trends and normal that's usually around 300 to 350 basis points from the peak to the end of the year we've modeled that maybe just a little more conservative this year because we are starting at a higher level and we may not have it as many seasonal tenants and so you know we may be thinking If normal history was 300 to 350, we're probably thinking 250 to 300 is what we're thinking about by the end of the year as far as an occupancy landing point.

Great. And can you share where current occupancy is today and what that spread looks like year over year?

So, Todd, end of the year we were 94.8, and Dave, I think, mentioned it earlier. We're about 30 basis points off, which is kind of normal from that December to mid-February, so call it 94.5. Yes. And that's still a healthy 200 basis points above prior year.

Okay, great. Thank you.

Our next question comes from Smeeds Rose with Citi. Please state your question.

Hi, thank you. Kami, I just wanted to ask you, when you say that you don't really like what you're seeing in the market now on the acquisition side, is it a function of quality or You know, you said cap rates remain compressed. And I'm just wondering, are you seeing the same amount of sort of product on the market? It seemed like there was kind of this rush to sell last year. And has that kind of died down a little bit?

I would say that the volume is still high, the volume of potential transactions. And I think what gives us pause is a combination of quality and cap rates. So where you were paying compressed cap rates on markets where we're building scale and want to operate long-term in 2021, the markets are maybe not quite as desirable. And the assets, frankly, maybe not quite as desirable in terms of improving the long-term quality of our portfolio.

Okay. And I wanted to ask you, when the pros retire now that you've had two, is it always the case that their retirement is accretive to NSA, or are there times where it may not be, where it might be neutral or even dilutive?

It will always be modestly accretive. The bigger, obviously, probably obviously, the bigger the pro, the more accretion to NSA. But if you think about it, there's the penalty on the conversion from the SP units to the OP units, which is one component of the accretion. And then the second component is management savings, taking the assets off the pro-management fee and the pro-management platform onto NSA's corporate platforms. And in that regard, we'll save some money on the management fee, but we also expect to get some benefits from the full use of the corporate platforms. Okay. Thank you. Appreciate it.

Sure.

Our next question comes from Kevin Stein with Stifel. Please state your question.

Good morning, everyone. I was just wondering if you've seen any changes in the top of your funnel in terms of demand, maybe searches or any color there would be helpful.

Yeah, great question. You know, the overall activity at the top of the funnel still remains very robust, and we haven't seen a significant change. As far as the amount of activity we were able to drive, what you're starting to see is a return to normal pricing around cost per acquisition. If you think of 2021, particularly the spring of 2021, we had very favorable marketing costs, very favorable demands, which created cheaper rentals, if you want to think about it that way, from a marketing expense. And the teams have done a good job returning to very disciplined practices. But the marketing costs are returning to a more normal cost and a more normal pace. But the top of the funnel remains very robust. Okay, thanks.

Thank you. Our next question comes from Sameer Kunal with Evercore. Please state your question.

Hey, Brandon, I guess just on guidance, can you maybe break down the optics line items, just trying to see where personnel, property taxes, what your views are on kind of the various line items for this year?

Yeah, sure, Sameer. You know, personnel costs, I would tell you, we're estimating kind of right in line with that total OPEX guide of five and a quarter to six and a half. Property taxes baked into the range is a number of 5% to 7% growth. And then outside of that, I would highlight marketing and insurance as two line items that would be above the total OPEX range. Call it double digits, 10% to 15% growth. R and M is one where it would be below the five and a quarter to six and a half range.

Got it. And I guess as a follow-up, just sticking to expenses, your GNA is, um, I think when you do the math, you're up about 15% year over year. And, you know, I know costs are up across the board, but wondering what else is driving that? I know maybe the pro retirement acquisitions or is there something else that's driving that number?

Yeah, I mean, the pro-retirement will actually be a little bit of a benefit to my earlier remarks, but you are right, Samir. I mean, the G&A growth this past year, 21 over 20, was 17%. If you look at the guidance that we gave at the midpoint, it's implied to be a 15% growth. But you're also talking about top-line revenue in 21 grew 36% this past year, and our projection for 2022 is a top-line revenue growth of 32%. So, you know, we're certainly still taking advantage of the scale efficiencies, growing top line at a faster pace than our G&A load. And one of the metrics that we look at internally is G&A as a percentage of revenue. And so that number, if you look at 2020, was 10 percent. It's sub-nine in 21, and I expect that'll be sub-eight in 2022. So those are all good indicators for us and results in even the margin expansion.

Got it. Thanks so much. Yep.

Thank you. Our next question comes from Kebin Kim with Truist. Please state your question.

Good afternoon, everyone. So I'm not sure if I missed this, but can you talk about the street rate trends that you are seeing? I think you said 12% up in 4Q. What does that look like mid-February and what is implicit in your guidance and how you're thinking about that as that progresses through the year?

Yeah, certainly, I'll start off and Brendan can finish here. We're certainly seeing year over year the percentages of street rate increases are still in the low 20s. So things are very positive starting out the year as far as street rates year over year. You know, we're starting to see street rates, you know, you're not seeing the rapid, rapid rise that we saw certainly for parts of 2021, but we're still able to improve, you know, in most of our markets. And so we're happy with that. You know, it'd be in a positive rent roll-up as we talked about earlier. We're still positive in our rent roll-up, which allows us to still, you know, strong street rates, strong, obviously we're still being very assertive on the IPRC, but thus far street rates are still doing very well.

And keep in the 12% you heard was a contract rate for the fourth quarter year over year.

Okay, and so the second part of that question was, what do you expect for the rest of the year? Is it still that 20% range?

No, it won't hold that level. I mean, certainly we had tremendous growth in 2021, and so as you look at the back half of the year comps, that spread of growth year over year will not be in the 20s. As we bring it down towards the end of the year, certainly see that coming into probably more normal historical ranges as you think of the back half of the year as far as street rent growth.

Okay, and in terms of the pro-internalization this quarter, was that pro fully on the NSA platform, or were they operating kind of under their own umbrella, or was it something in between? And if it's the case that it comes onto the NSA platform, are there additional synergies that you think you might be able to extract from that?

Yeah, good question. They were probably more on their own platforms than they were on NSA platforms. And so what I mean by that is they ran their own website. They had their own web team. They used the NSA's revenue management platform, but they had their own decision-making process within their company around that piece of it. So we do think there's efficiencies to be had. We do think there's upside there. We've already transformed them to all the NSA platforms, so they're currently on the CMS and they're currently on the full revenue management platform and all the platforms across. So we do think there's upside there. The team did a wonderful job. They were very good at what they do, so it's a big challenge for us, but we do think there's upside here.

And if I can squeeze in the third one, you mentioned that you're going to keep the same flag that currently exists. You know, but if I think about, you know, what storage companies have done over the past decade has been able to, it's been the drive to increase scale, not just in a physical, you know, means, but from a digital perspective, getting the benefits of scale on Google search and whatnot. So why keep it under his own flag? Or is that an interim decision?

No, it's not an interim decision. And it's a good question, Kiba, but the Northwest brand is very dominant in those markets. You know, our ability to bring it onto our platform and put all the tools in place will certainly make it be better. But the Northwest brand itself has been there for a long time, has been well-represented, well-positioned. They've done a good job building that brand out. And as we evaluate the cost to rebrand every store and the disruption when you rebrand every store, we just don't think it's worth the – we think we can be very good running the Northwest brand up there. And, you know, the digital benefits – With the platforms we have and the tools we have, we can implement everything we do with the Northwest brand. There's no hiccup there at all. It actually gets better. So as we think about it, we just think it's the right decision to keep the brand.

And I think the other thing I would add, Keegan, and we've talked about this over the years, is that this is a very local trade area business. So 80%, 90% of our customers come from within a three-mile. Maybe now it's expanding a little bit up to a five-mile trade area, but The benefit that we would lose by the rebranding, we do not believe that it could be offset by the – I don't know if I'm saying this the right way. The benefit of the local presence would be lost in a rebranding effort, and we don't believe it would be worth the cost of rebranding. We just wouldn't pick up those benefits of digital marketing.

Got it. Thank you.

Our next question comes from Ronald Camden with Morgan Stanley. Please state your question.

Hey, congrats on the great quarter. Just two quick ones from me. One, just on the rent increases, both in terms of the frequency and the magnitude, you know, as you're doing sort of your guidance for 2022, is there any sort of thoughts or changes maybe this year versus last year? How should we think about that? What's the strategy for this year? Thanks.

Yeah, great question. Certainly, we've been able to be more assertive, and we really have been through 2021, really the back half of 2021. The strategy going into 2022 is very much the same. We're not coming off of our assumptions. We're leaving all of the frequencies in place. If you noticed, as we talked earlier, our increases are actually in the low to mid-teens now, where a year ago they may have been high single digits to low teens. So we've certainly been able to be more assertive, and we're going to keep that program running at this point. We're just not seeing significant pushback or changes in the environment. As we model occupancy through the year, we just believe that we've got stuff dialed in and it won't be a significant change.

Got it. That's helpful. And then just another one on the pros. Obviously, second one, internalize. I remember in previous calls, you talked about conversation with new pros coming on. Maybe can you just remind us how those conversations are going and Does the math change at all for a pro coming in today versus, I don't know, 12 to 24 months ago?

Sure. Good question. And we continue to have conversations with high-quality private operators who might be a good fit for the NSA differentiated structure. But as we've talked about before, it's a long and difficult process to It's a big decision for an operator to join NSA. It's a very big decision for us to decide to affiliate with an operator. And so it takes time, and it's unpredictable in terms of the timing. But in terms of the math, no real change to the structure. Our structure has remained consistent basically since formation in 2013. And we're not contemplating any changes to the structure for newer existing pros right now.

Great. Thank you.

Thank you.

Thank you. And just a reminder to ask a question, press star 1 on your telephone keypad. To remove yourself from the queue, press star 2 on your telephone keypad. Our next question comes from Wes Galladay with Baird. Please state your question.

Hi, everyone. I just have a quick question on the balance sheet. It looks like the line balance was up a little to finish the year. I think you mentioned you cleared the line a little bit, but what is the long-term plans for the year on the line of credit?

Yeah, Wes, thanks for the question. This is Brandon. You're right. We did bring that down post-year end with the last tranche that we had yet to fund on the private placement. So it's Um, you know, closer to just over 350 million. We also, uh, up the capacity on our line at the end of December. So we have a total capacity of 650. So we still got a lot of room, uh, in terms of capacity. So, you know, nothing urgent, not feeling under the gun to necessarily address anything. I mentioned no 2022 maturities and you heard Tammy's comments about the deal flow. So, um, you know, we're comfortable with where we're at. We always strive to have optionality and flexibility. And so we're very pleased with the private placement transaction we had late last year. That's certainly an option on the debt side. We also did some things with the bank group last year and could very well do so again this year. So anyway, a lot of opportunities, a lot of options, still plenty of capacity on our ATM as well.

Okay, and then one quick one. You mentioned a normalized debt to EBITDA due to the timing of the fourth quarter acquisitions. Could you provide us with the EBITDA that was not captured in 4Q in the run rate?

Yeah, the math was to get from that 6.1 to the 5.7, it's really adding about $35 million of EBITDA to the annualized number. I mean, that's the number that gets you to that specific math. And then just another point of color, You know, of the little over $1.1 billion of deals that we did in Q4, about half of that was in the month of December, and the majority of that December volume was really in the last two weeks of December, from December 15 through the end of the year. It helps with the modeling.

Yeah, thank you very much for that.

Yep. Our next question comes from Neil Malkin with Capital One. Please go ahead.

Thanks, guys, for letting me take another crack at it. Can you talk about just given historically low turnover and you're getting aggressive or you continue to be aggressive on the IPRC, what percentage of the portfolio is eligible or receiving renewal notices versus like 2019 or pre-COVID? How much more, how much of the portfolio, you know, is eligible and getting that bump? Obviously, that's pretty much your largest driver of growth every year. So can you maybe just quantify that?

I think, you know, as I look at it, I'd say probably an average of 2% to 3% more of our tenants per month are eligible and receiving rate increases versus what maybe 2019 would look like. So that's a pretty significant number given the tenant base that we have. And, you know, again, with the amount of rate increase we're doing and, you know, the way we've removed some caps and really just increased, you know, not only frequency, but the amount, it's adding up to a pretty good number for us. But I would say 2% to 3% more on average is what's coming across.

Yeah, Neil, and also pre-COVID, you know, we were open about the annual number being maybe 75% of the customer base. So if you do the math on what Dave just gave you, that's You're talking about hitting each of the customers or hitting 100% of the case. Pretty close, yeah. Over the course of a year.

Obviously, you're turning customers over every month and new customers are being replaced, so that factors into that as well. Right.

Great, thanks. The other one is in terms of some markets had the eviction moratoriums, I believe, expire. in some form or another, end of the last year, January 1st of this year, some coastal markets. Have you seen any increase in demand in markets where you've had either long-winded or strict protections, moratoriums end? Are you seeing an influx of demand from dislocation or nothing really discernible?

Nothing discernible. Anecdotally, we've certainly heard the stories, and we've seen folks who have gone through the process of being evicted and had to relocate, and so nothing I can really put a hard number to, but yes, as those moratoriums burned off, it has created some more transition in some of our markets, and those folks have used storage and are in a very tough rental market. As you know, transitioning at the time of year to find a new rental home has been tough, so We're hearing stories about it. I can't give you a real number on what it's doing as far as overall impact.

All right, thanks again.

Thank you. Our next question comes from Elvis Rodriguez with Bank of America Securities. Please go ahead.

Just a quick follow-up on supply. I think you mentioned that you're starting to see a little bit of uptake in supply but won't really impact you until 2023. Can you talk about that in more depth? I know your secondary markets traditionally see less supply, so anything that you see is changing given how well your portfolio has performed, any new developers entering your markets. Any information you can share would be helpful. Thank you.

Yeah, great question. You know, as we commented earlier, we just have not seen in most of our markets a lot of new supply coming. We mentioned the top 20 MSAs is where we felt probably the most pressure of new developers coming. If you think about a lot of the older developers were bought out of their properties probably in the last 12 to 18 months. Some of those are retooling and they're building in some of these top 20 markets. But overall, we just haven't seen a significant change due to the things we mentioned, you know, timing, supply chain problems, ability to find contractors, ability to get them zoned. We think as, you know, we listen to outsiders talk a little bit about what we've been studying. It's just the process still remains very slow, very cumbersome, and we just haven't seen a real ramp up in development activity yet.

Great. And then just to follow up on the internalization of the PRO, I think you mentioned opportunities for synergy. But as you bring the portfolio onto your platform, you know, call it, it's been a couple, maybe six to eight weeks now. Can you mention sort of performance of the portfolio on your platform versus when it was externally managed by the pro?

Yeah, great question. We really can't comment at this point in time. As we get in further into the year and get into, obviously, calls later after future quarters, we'll probably be able to speak a little bit more about it. But there's just nothing to report at this time. Great. Thank you.

Thank you. And ladies and gentlemen, that's all the questions we have for today. I'll now turn the call back to Tamara Fisher for closing remarks. Thank you.

Thank you. So I'll close the call today by again thanking our team for their commitment and efforts through an incredibly busy quarter and year of 2021. We're very optimistic about our prospects for 2022 as we continue to deliver outstanding results by executing on our differentiated strategy, including our pro structure, our geographic diversity, and our presence in Sunbelt and secondary markets. Thanks again for joining our call and for your interest and support of NSA. We've said it before, and I'm sure we'll say it again. It's a great time to be in self-storage. Thank you.

Thank you. This concludes today's conference. All parties may disconnect. Have a great day.