National Storage Affiliates Trust

Greetings and welcome to the National Storage Affiliates second quarter 2024 conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, George Hoglund, Vice President of Investor Relations for National Storage Affiliates. Thank you, Mr. Hoagland. You may begin.

We'd like to thank you for joining us today for the second quarter 2024 Earnings Conference Call of National Storage Affiliates Trust. On the line with me here today are NSA's President and CEO, Dave Kramer, and CFO, Brandon Tagashi. Following prepared remarks, management will accept questions from registered financial analysts. Please limit your questions to one question and one follow-up, and then return to the queue if you have more questions. In addition to the press release distributed yesterday afternoon, we furnished our supplemental package with additional detail on our results, which may be found in the investor relations section on our website at NationalStorageAffiliates.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties and represent management's estimates as of today, August 6, 2024. The company assumes no obligation to revise or update any forward-looking statement because of changing market conditions or other circumstances after the date of this conference call. The company cautions that actual results may differ materially from those projected in any forward-looking statement. For additional details concerning our forward-looking statements, please refer to our public filings with the SEC. We also encourage listeners to review the definitions and reconciliations of non-GAAP financial measures such as FFO, core FFO, and net operating income contained in the supplemental information package available in the investor relations section on our website and in our SEC filings. I will now turn the call over to Dave.

Thanks, George, and thanks, everyone, for joining our call today. Our results for the quarter reflect continued pressure from a very competitive operating environment. Similar to other operators, we're seeing reduced customer demand for storage due to a muted housing market and the absorption of new supply, which is being felt most prominently in our Sunbelt markets. Rental activity slowed in the back half of June and into July, with the same store occupancy ending in June at 87% and July at 86.6%. Free rates grew sequentially each month during the second quarter, but declined 1.7% in July and are down 14% from last year. Historically, occupancy rate peaked in July, so the spring leasing season did not play out as a typical season. We continue to be pleased with our existing customer behaviors. Payment activity, length of stay, and ECRIs all remain within our expectations. We believe that the current operating environment will remain throughout the back half of the year. Given these headwinds, we've adjusted our full year expectations accordingly, which Brandon will detail further. We are starting to see more acquisition opportunities in our core markets. We've started to deploy capital from JV 2023, closing on the purchase of a five property portfolio in the Rio Grande Valley for $72 million. These are high quality properties in lease up with an average occupancy in the mid seventies. Portfolio was purchased with a hundred percent equity, and we plan to place long-term financing on the assets following stabilization. We also have a 13 property portfolio totaling $75 million under contract in another attractive core market to be purchased by the same JV. These two deals improve our overall portfolio quality, adapt to our existing markets, and increase our operational efficiencies. We've made significant progress on our strategic initiatives over the past few quarters, culminating with the internalization of our pro structure, which positions us well when the operating environment improves. Transition of the Pro Managed Stores to the NSA's platform is on schedule, and we are encouraged by the opportunities to further enhance the performance of these properties. I'll provide some highlights of our progress to date. Currently out of the 333 Pro Managed Stores, 70% are on the NSA web and operating platforms, with the remaining to be completed by the end of the year. Of the 172 stores to be rebranded, 40% have been completed. The transition is complete, we expect that approximately 94% of our portfolio will be managed by our corporate team, while the remaining 6% of our properties will be managed by former pros due to geographic and future relationship considerations. As previously discussed, we expect accretion related to the pro-internalization in three key areas. Three to four cents of accretion, primarily from G&A savings beginning in 2025, Eliminating the cash flow split from the pro structure effectively adds 50 cents on every dollar of NOI growth, and we expect 2 to 4 cents of accretion from changes in revenue management and operations efficiencies. As an example, currently there is a 300 basis point difference in occupancy between pro managed stores and the corporate managed stores, which we expect to close going forward. Additionally, there are differences in ECRI and marketing strategies, which we are in the process of commonizing. Although we face near-term headwinds, we remain optimistic on the longer-term outlook given all the steps we've taken to improve our platform, optimize our portfolio, and generate access to growth capital via joint ventures. And I'll turn the call over to Brandon to discuss our financial results.