07-05-2025
National Storage Affiliates Trust (NSA) Q1 2025 Earnings Call Highlights: Navigating Challenges ...
Q : Can you provide context on the 5% increase in contract rates from March and the 20 basis points rise in occupancy? Is this typical for April, and how do these rates compare year-over-year? A : David Cramer, CEO: We've seen sequential improvements in our rate scheme throughout the year, with street and contract rates increasing from January through April and into May. Our focus has been on maximizing revenue through occupancy, rate growth, and marketing spend. Our new schedule shows in-place customer rate growth and move-in rate growth, with move-in rates turning positive in March and continuing to improve in April and May.
Core FFO per share declined by 10% from the prior year period due to a decrease in same-store NOI and an increase in interest expense.
NSA's marketing and pricing strategies, including the use of AI, have led to better search rankings and optimized rate decisions.
Net Debt-to-EBITDA: 6.9 times at quarter end, expected to be 6% to 6.5% in the latter half of the year.
Story Continues
Q: How are you progressing with revenue synergies for the PRO properties, and can you update us on the occupancy gap you aimed to close by summer? A: David Cramer, CEO: The transition mainly occurred in the third and fourth quarters of last year. We've seen traction from consolidated pricing and marketing efforts. Initially, there was a 250 to 300 basis point occupancy gap, which we aim to close by mid-summer. We're making good progress, particularly in rate growth, and expect further traction in marketing and occupancy by then.
Q: Can you quantify the expected revenue growth pickup in the second half of the year, given the first quarter's negative 3% revenue growth? A: Brandon Togashi, CFO: We started the year with mid-single-digit negative same-store NOI growth, slightly worse than expected due to OpEx items like winter storm impacts. We expect continued sequential improvement, with revenue and NOI turning positive in the back half of the year, although the exact timing is uncertain.
Q: How much of the month-to-month improvement is due to seasonality versus actual demand improvements? A: David Cramer, CEO: Seasonality plays a role, with activity picking up in the spring leasing season. However, we've also seen success in street rate improvements since late last year, which is atypical for early months. Our ECRI program remains productive, and while occupancy may not rise as strongly as last year, our revenue has improved significantly.
Q: Can you discuss the dynamics of street rates and occupancy, and how you expect these to play out through the spring leasing season? A: David Cramer, CEO: We've had success in improving street and move-in rates, leading to better contract rates. While occupancy is a focus, our marketing and top-of-the-funnel efforts are gaining traction. We're balancing revenue growth with occupancy, and the improved rates reduce pressure on occupancy numbers.
Q: What is the current state of the transaction market, and what are your acquisition and disposition plans? A: David Cramer, CEO: We're seeing deal flow and are patient in matching deals with our cost of capital. We have active JV partners and are making progress on dispositions, aiming for $200 million this year. Acquisitions are lumpy, and we're being selective in our purchases.
Q: What occupancy assumptions are baked into your guidance, and have you seen any signs of a housing market recovery? A: Brandon Togashi, CFO: Our guidance assumes a moderately better demand than last year, with occupancy increases expected. We're seeing encouraging demand in expected markets, but it's still early in the leasing season.
Q: Can you quantify the operating expense savings from the PRO internalization, and will there be additional benefits in 2025? A: Brandon Togashi, CFO: We've realized G&A savings of about $2.5 million annually, with tenant insurance economics and property-level personnel cost savings also contributing. We're at a good run rate, and these benefits are largely reflected in our current numbers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
