National Storage Affiliates Trust Q1 2025 Earnings Report

National Storage Affiliates Trust EPS Results

• Actual EPS: $0.54
• Consensus EPS: $0.56
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: $0.60

National Storage Affiliates Trust Revenue Results

• Actual Revenue: $188.35 million
• Expected Revenue: $184.65 million
• Beat/Miss: Beat by +$3.71 million
• YoY Revenue Growth: -4.00%

National Storage Affiliates Trust Announcement Details

• Quarter: Q1 2025
• Date: 5/5/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, May 6, 2025
• Conference Call Time: 1:00PM ET

National Storage Affiliates Trust (NYSE:NSA) is a real estate investment trust headquartered in Greenwood Village, Colorado, focused on the ownership, operation and acquisition of self storage properties predominantly located within the top 100 metropolitan statistical areas throughout the United States. As of December 31, 2023, the Company held ownership interests in and operated 1,050 self storage properties, located in 42 states and Puerto Rico with approximately 68.6 million rentable square feet, which excludes 39 self storage properties classified as held for sale to be sold to a third party. NSA is one of the largest owners and operators of self storage properties among public and private companies in the United States.

National Storage Affiliates Trust Q1 2025 Earnings Call Transcript

Key Takeaways

• National Storage Affiliates delivered a 130 basis-point sequential improvement in same-store revenue growth year-over-year, with Portland and Houston turning positive in Q1 to build momentum into the spring leasing season.
• Sequential growth in fee and contract rates continued each month, driven by a consolidated platform, upgraded marketing and pricing tools, and AI-optimized call flows, resulting in a 5% contract-rate increase in April and occupancy up 20 basis points to 83.8%.
• The ECRI customer-retention program remains highly effective—length of stay is above historical averages and bad-debt expense is within expected ranges—supporting healthy revenue from the existing customer base.
• In Q1 the company closed on three acquisitions totaling $40 million, sold two properties for $10 million, and plans to use sale proceeds to pay down its $444 million revolver (leaving ~$500 million availability) while maintaining a disciplined pipeline of future transactions.
• Core FFO per share was $0.54 (down 10% y/y) due to lower same-store NOI and higher interest expense; Q2 is expected to remain negative on revenue/NOI with a return to positive growth in the back half of 2025 assuming a moderately improved spring leasing season.

Presentation

[Operator]

Greetings, and welcome to the National Storage Affiliates First Quarter twenty twenty five Conference Call. At this time, participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.

[Operator]

George Hoglund, Vice President of Investor Relations for National Storage Affiliates. Thank you. You may begin.

[George Hoglund, VP - IR at National Storage Affiliates Trust]

We'd like to thank you for joining us today for the first quarter twenty twenty five 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 Tigashi. 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 nsastorage.com.

[George Hoglund, VP - IR at National Storage Affiliates Trust]

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, 05/06/2025. 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.

[George Hoglund, VP - IR at National Storage Affiliates Trust]

I will now turn the call over to Dave.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Thanks, George, and thanks everyone for joining our call today. Our first quarter results were in line with our expectations and we are pleased with the 130 basis points of sequential improvement in same store revenue growth on a year over year basis. All but three of our reported same store markets saw sequential improvement in the level of revenue growth and two of our top three markets, Portland and Houston, inflected positive in the first quarter, giving us momentum into the spring leasing season. Fee rates and contract rates have experienced sequential growth every month this year, which is encouraging. And although occupancy is a bit softer than expected, the rate growth is exceeding expectations and we met our overall revenue goals.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Our existing customer base remains healthy. We continue to be pleased with the success of our ECRI program. The length of stay remains above historical averages and the bad debt expense remains within expected ranges. Now that we've completed the Pro transition, we are laser focused on operations and realizing the benefits from the consolidated operating platforms and upgraded marketing and pricing tools. The benefits are manifesting themselves in better search rankings to drive customers into the top of the funnel, enhanced pricing algorithms to optimize rate decisions and the use of AI to optimize call flows and staffing hours.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

These improvements are reflected in our sequential contract rate growth and declines in personnel expenses. We are in the early stages of showing improvement and are building momentum. In fact, moving contract rates in April increased approximately 5% in the first quarter levels. Meanwhile, occupancy increased 20 basis points in April to finish the month at 83.8% occupied. In markets where we're further along at implementing these strategies, you can see the benefit.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Portland is a great example of a market where we have some runway behind us and a track record of implementing our strategies and the benefits are showing. We continue to authorize our marketing and revenue management efforts leading to better results. We've been very successful with our pricing and ECRI program combined with the benefits of easing supply, Portland is now one of our top performers delivering positive revenue growth in the quarter. Houston is also experiencing similar trends and generated 2.2% revenue growth in the quarter. Moving to the acquisitions environment, while there remains a steady flow of opportunities coming across our desk with the broader economic and capital markets uncertainty, we remain disciplined.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

During the first quarter, we successfully closed on three assets totaling approximately $40,000,000 We also sold two properties totaling $10,000,000 Proceeds from asset sales will be used to pay down the revolver and fund future acquisitions. Our activity is picking up and we expect to announce more transactions over the next few months. In summary, we believe we found a trough in fundamentals. We're encouraged by the trajectory of contract rents and the new supply outlook is improving. While there is plenty of noise around tariffs and economic uncertainty, so far there's been no direct impact on our business.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

And I'll remind all of you that the self storage sector has proven to be resilient to various operating environments. Lastly, there's still significant investor interest in the self storage sector, as demonstrated by the recent successful IPO of our newest public peer, SmartStop Self Storage. I'd like to formally welcome Michael Swartz and his team to the club. I'll now turn the call over to Brandon to discuss our financial results.

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

Thank you, Dave. Yesterday afternoon, we reported core FFO per share of $0.54 for the first quarter, a 10% decline from the prior year period due primarily to a decrease in same store NOI and an increase in interest expense. For the quarter, same store revenues declined 3%, driven by lower average occupancy of 190 basis points and a year over year decrease in average revenue per square foot of 1%. Expense growth was 3.7% in the first quarter. Main drivers of growth were marketing, R and M and utilities, partially offset by a decrease in personnel costs.

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

We expect marketing to remain elevated in the near term given the competitive environment, whereas R and M was higher largely due to severe winter storms during the quarter, which resulted in outsized snow removal costs. Without such impact, our OpEx growth would have been below 3%. These revenue and OpEx results led the same store NOI growth of negative 5.7%, also a sequential improvement from last quarter, which we expect to continue as we progress throughout the year. Also impacting the quarter was interest expense, which was $1,000,000 higher due to the maturity of a swap in the February, that fixed the rate on $225,000,000 of our revolver balance at just under 3%. Upon swap maturity, the notional amount was then subject to the spot rate, which was approximately two seventy five basis points higher.

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

This resulted in a $01 drag on the quarter's results. Now speaking to the balance sheet. We have no maturities in 2025 and our current revolver balance is $444,000,000 giving us approximately $500,000,000 of availability. As Dave referenced earlier, we expect the immediate use of near term asset sale proceeds will pay down the revolver, which in combination with improving fundamentals will help to bring leverage down. Net debt to EBITDA was 6.9 times at quarter end.

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

And as I discussed on our call last quarter, the recent trough in year over year same store growth, along with the first quarter being seasonally the weakest, put additional pressure on that metric. We expect to be in the six to 6.5 range at the back half of the year. Now I'll conclude our opening remarks with a few comments about our reporting package. We added some new disclosure in our supplemental this quarter. At the bottom of Schedule seven, we've provided contract rent per square foot on in place customers and on move ins and move outs to provide better clarity on fundamentals and assist with modeling.

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

With regard to guidance, it is still early in the spring leasing season and thus our assumptions are unchanged and are detailed in the earnings release. I'll remind everyone that the midpoint assumes a moderately better spring leasing season than last year, characterized by improving pricing power and occupancy through the summer months. The high end of our guidance range assumes a better than average spring leasing season fueled by a recovery in the housing market. The low end incorporates no material improvement in the housing market with muted seasonality and pricing power. Thanks again for joining our call today.

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

Let's now turn it back to the operator to take your questions. Operator?

[Operator]

Thank you. At this time, we'll be conducting a question and answer session. Our first question comes from the line of Eric Wolf with Citi. Please proceed with your question.

[Eric Wolfe, Director at Citi]

Thanks for taking my questions. I think you said that contract rates increased 5% from March and occupancy was up 20 basis points. So I was hoping you could just put that increase into perspective. Is that a very good April, normal April? And then how much were contract rates up year over year?

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Eric, thanks for the question. I appreciate you joining the call today. Sequentially, we have seen improvement in our rate scheme throughout really the entire year. We've seen street rate improvements sequentially from January through April and into May. We did see contract rate improvement from January through April and into May as well.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

And so from our seat, as we look to really maximize revenue and really work on all of the tools available from occupancy to rate growth to marketing spend, we were pleased with the progress we made around contract rates. And if you notice in our new schedule, we actually provided in place customer rate growth and move in rate growth. And you can see we improved move in rates sequentially throughout the first quarter and into April. And our move in rates actually inflected positive in March, stayed positive in April and improved in April and improved again in May. And so we've had really good success around the rate program for the first part of the year.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

And as we planned it, that's what we were really looking to do to try to drive more storage revenue and maximize the in place customers through the CRI program and maximize the new move ins that we were getting with improved fee rates and really focused on that.

[Eric Wolfe, Director at Citi]

That's helpful. And you've talked about seeing better revenue and, I guess, margin opportunities for the pro properties that you brought onto your platform. I think you previously said there was like a two sixty basis point occupancy gap that you could maybe close by the end of summer. Maybe you're just getting a little bit more from right now. Could you just talk about where you are in the process of sort of achieving those revenue synergies?

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Yes, good question. Really the transition took place really the third and fourth quarter of last year, the majority of it taking place really in the mid parts of that third and fourth quarter. And so as you think about rebranding stores, moving stores to a new domain name nsastories.com, having consolidated pricing and consolidated marketing efforts, we're really starting to see the transition take place and the team is really starting to see some traction around having everything sit in one place, having a Google bid model that's in one place, having pricing in one place, marketing tools in one place. There was about a two fifty to 300 basis point gap when we started the pro transition. We really didn't expect to close that gap until mid summer months.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

So I would tell you we're making good progress. We're happy with the rate growth in those portfolios. Occupancy, we're still working through and we really look for the mid summer months to really get the traction around the marketing spend and website to really implement the changes around that occupancy spread.

[Eric Wolfe, Director at Citi]

Thank you.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Thanks for joining.

[Operator]

Thank you. Our next question comes from the line of Sameer Kunal with Bank of America. Please proceed with your question.

[Samir Khanal, Director at Bank of America]

Good afternoon, everybody. Dave, maybe tagging along the prior question, just maybe talk about sort of the ramp up. I don't know if you can quantify kind of into the second half. I mean, guys have done minus 3% in the first quarter for revenue growth. I would assume second quarter will also be down from a revenue growth perspective.

[Samir Khanal, Director at Bank of America]

But maybe quantify how much of a pickup we'll see kind of the back half and especially into the fourth quarter?

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

Hey, Sameer, this is Brandon. I'll jump in on it. So, as Dave said, the revenue number for same store was in line with expectations. We hit our goal for the first quarter there. You may recall in February when we introduced guidance, I said we would start the year on same store NOI growth in the mid single digits negative.

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

So slightly worse maybe than expectations really due to the OpEx items that I mentioned. If we didn't have some of the winter storm impact on snow removal as well as utilities, then I think we would have been closer to that negative 5% flat on the NOI number. But you're right, the trajectory and the pace of the growth and the continued sequential improvement is definitely implied in all the ranges of our full year guidance. You are also correct that we still expect to be negative for the second quarter on both revenue and NOI year over year. And then we didn't get real specific because there's a lot of different things that have yet to play out.

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

But we said at some point in the back half of it, we reflect positive on revenue and then eventually NOI follows by the end of the year. When exactly that happens, that's the million dollar question, right? And I think that's what, we're so early in the season. We're only starting to see the early remnants of kind of what the leasing season holds for us.

[Samir Khanal, Director at Bank of America]

And I guess just a follow-up is, I know you guys have talked about sort of this month to month improvement you're seeing. I guess how much of that is really just sort of return to seasonality versus kind improvements in demand right at this point? Thanks.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Yes, good question. I think I'd answer it on a couple of fronts. Certainly seasonality starts to come into play here. You certainly trough usually around that February month and then you start to pick your way up into spring leasing season. So activity wise, we're starting to see more customers at the top of the funnel, more search results and seasonally it's starting to feel improved.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

But I would also tell you, we really had good success really starting in the back half, really the last couple of months of last year around street rate improvement, November and December have carried that street rate improvement all the way through the first quarter in April and May. That's not typical. Typical street rates don't increase like in January and February and March. And so we had good success around street rate improvement, which led to move in rate improvement. And then our ECRI program has remained very productive and we've had good results around the ECRI program.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

So I think we're ahead of schedule on what we thought we would be on rate. Occupancy, the supply and demand pictures haven't really changed much. There's a lot of uncertainty, I think, still around with economic conditions and interest rates and mobility around the country. We did see a tick up in April in occupancy. We've seen a tick up in May so far in occupancy.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

But both rental volume and move out volume are muted compared to last year. They're below last year. I would also add to that. Last year, we did grow occupancy, but what we didn't grow was revenue. We did not grow storage revenue in the first four months of last year.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

This year, we've grown sequentially storage revenue really in the months of March, April and now into May. And so while the occupancy not as picked up as strong as it did last year, our revenue has picked up stronger than what it was last year.

[Samir Khanal, Director at Bank of America]

Thank you. That's it for me.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Thanks, Samir.

[Operator]

Thank you. Our next question comes from the line of Michael Goldsmith with UBS. Please proceed with your question.

[Michael Goldsmith, US REITs Analyst at UBS Securities LLC]

Good afternoon. Thanks a lot for taking my questions. My first question is around the dynamics of street rates. You can see it seems like street rates have shown some improvement, but occupancy took a slight step back in the first quarter. So can you walk through the dynamics of your ability to push rent and then also bringing people in and how you expect that to play out through the decreasing season?

[Michael Goldsmith, US REITs Analyst at UBS Securities LLC]

Thanks.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Yes, Michael, thanks for joining. Good question. Certainly, we did I would agree with you. We certainly had good success around improving street rates, which led to improved move in rates. And all of that with the ECRI program led to improved contract rates sequentially for the last four or five months.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

So we're very pleased with the progress there. The occupancy number, obviously, we're working hard on marketing spend. We're working on top of the funnel. The programs that we implemented with that transitioning, everybody in a single platform are starting to see some traction. So we're seeing improved velocity at the top of the funnel.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

But I would also say that from an expectation in the spring, nothing's really changed a lot around some of the transitory factors that is going to help us drive additional occupancy at the top. So the team has done a really good job balancing revenue, and that's what we're trying to solve for. And so while we'd like to see more occupancy, the more we get better rate improvement, the less pressure we have on the occupancy number. And so I think we're trying to balance all those things as we go through the spring season.

[Michael Goldsmith, US REITs Analyst at UBS Securities LLC]

Got it. Thanks for that, Dave. And as a follow-up, when you're expecting some acquisitions and some dispositions this year, just can you give us a little bit of an update on the transaction market? Where are you looking to buy at? Where are the properties what cap rates are you looking to sell at?

[Michael Goldsmith, US REITs Analyst at UBS Securities LLC]

And just has there been any change in the transaction market over the last month?

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Yes. Good question. As we talked last quarter, transaction market, we're seeing deal flow come across our desk. We're being patient and trying to match deals with our cost of capital and where we think it fits a good market, where we can add and improve our operational efficiencies and our densities. And I think the team has done a good job, and we've underwritten a lot of properties.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

But we're, again, being very patient on where we pick our spots. We have good capital available through our JVs and our JV partner has been very active with us looking at deals. And so we're pleased there. I think on the disposition front, it's we've been very active there. I think we're making good progress there.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

I think we'll have material movement on our dispositions. You remember, we guided to about $200,000,000 of dispositions this year, and the team has worked hard. And we've got some good line of sight on product that we will be in the disposition pipeline. And we'll talk more about that, I think, after we get to the second quarter. But I'd say progress on that front.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Back to the acquisition side. Acquisitions are lumpy. I mean we're seeing deals and we're underwriting deals. I think we're just being patient on where we pick our spots to buy properties.

[Michael Goldsmith, US REITs Analyst at UBS Securities LLC]

Thank you very much. Good luck in the second quarter.

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

Thanks, Michael.

[Operator]

Thank you. Our next question comes from the line of Juan Sanabria with BMO Capital Markets. Please proceed with your question.

[Robin Haneland, Senior Equity Research Associate at BMO Capital Markets]

Hi, this is Robin Hainelen sitting in for Juan. With occupancy a little weaker in the first quarter here, what occupancy assumptions are you baking into guidance? And your guidance expectations had a high end assumption for a housing recovery. Just curious if you have seen any markets with any signs of this yet in the early leasing season?

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

Yes, Robin. So I'd refer you back to what we talked about in February when we introduced guidance. We talked about last year the same store pool seeing occupancy from bottom to top get about 140 basis points of increase. And we did talk about the midpoint of our guide having baked in something that was greater than that, right, something closer to what you'd historically see, up to two fifty basis points, for example. As these first four months have played out and as you heard Dave remark on already, there's always some jockeying between rate and occupancy, right?

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

And so, I don't have like updated numbers to pinpoint you to that specifically at set points in our range. But that being said, in the guide is definitely an expectation and a requirement that we have demand that is, like I said in the opening remarks, moderately better than last year, okay? In terms of your question about markets and housing and what we're seeing, what I can tell you is we're pleased with what we're seeing from a demand perspective in the markets where you would expect it at this point in the year, whether that's housing related, other movements in households, college season activity in our markets that are a little more dependent on that type of rental season. And so that's all encouraging, but I'd also qualify it with it's very early still.

[Robin Haneland, Senior Equity Research Associate at BMO Capital Markets]

Thank you. And on the pro internalization, can you maybe just help us quantify the operating expense savings that are possible there? And more generally, will we see additional benefits throughout 2025? Or is most of potential upside already flowing through numbers?

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

Yes. I'll take that one as well, Robin. So on the pro internalization, there's a few different things to highlight and refresh you on. One is certainly on G and A, that was a clear cut benefit that we started to realize some of that in the back half of last year. You can see it on the year over year face P and L numbers, close to $2,500,000 of savings.

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

That we lap that comp in Q3 of this year. So we've already effectively realized, half of that twelve month benefit in 2024, and we'll get the other half here in 2025. There were some tenant insurance economics that we started to realize from day one of the pro internalization effective date last July 1. So that's kind of been a good run rate these last couple of quarters, including the first quarter of this year. And then at the property level, the savings on personnel costs that I mentioned in my opening remarks on a year over year basis, some of that was due to just the way we staff the stores versus the way the pros previously managing those properties may have staffed them, the way we leverage the call center in lieu of some of those on-site staffing hours, the call center costs are in the marketing line item.

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

So that's also part of the reason for the upward pressure on that marketing expense line item. I think we're fairly good run rates still on a lot of that stuff. That's really started to take place, as Dave said earlier, in the third and fourth quarters. And now we're kind of humming at a pretty good run rate.

[Operator]

Thank you.

[Operator]

Our

[Operator]

next question comes from the line of Michael Griffin with Evercore ISI. Please proceed with your question.

[Michael Griffin, Director at Evercore]

Great, thanks. I'm wondering if you can give us some insights into how promotions or discounts are trending for new tenants? It seems like street rates continue to improve, but I imagine getting that new tenant in there, I think, is important to realize that ECRI increase a couple of months later. Have you been holding firmer on those concessions? Are you trying to get people into the facilities at the expense of maybe a higher concession rate?

[Michael Griffin, Director at Evercore]

How should we think about that?

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Good question. Thanks for joining. I certainly think concessions are well within the ranges of our expectations and haven't jumped above historical levels. We have seen a little bit more increased use of the promotions within the last two or three months. And I think that is consistent with the fact that we are pushing street rates and repositioning ourselves in the market.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

And we've opened up the team to use a temporary discount versus really trying to use a lower rate and then bring that promotional rate up. And so certainly, we're happy with what we're seeing as results there. None of the discounting probably would catch us outside of the boundaries where we think they should be. But yes, I would agree we're seeing a little bit more promotional discount usage at the higher rate.

[Michael Griffin, Director at Evercore]

Thanks. Appreciate the context there. And then the helpful slides you have in your investor deck is just this one on kind of search engine optimization with the new nsastorage.com and how you're seeing improved kind of rankings on Google searches. I'm just curious, you've done a good job of getting that rank up, but I just think about kind of Google searches, people probably usually click on at least the first three that pop up. So getting from, call it, that fifth or sixth slot relative to two to three, is that possible?

[Michael Griffin, Director at Evercore]

And then if you drive more traffic that way, like just walk us through maybe how possible it is to continue to increase that throughput within kind of search engine results and how that leads to demand?

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Yes. It's a great observation and it's very important to us. And to answer your question, it is possible, yes. And so there are several ways to achieve that. Obviously, what where you work within Google My Business and how you work with your SEO functions, those are more of a particularly the SEO side of the house is more of a long term continued work effort and you focus on all of the things that help you allow the search engines to recognize your authority and how you're relevant and where your stores are positioned and what you're trying to get the message across.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

And so the team has been very, very busy with nsastorage.com, making sure from an SEO perspective, we're doing all the work and that work just takes time. And so that's not as flashy. What we can do to impact that ranking and put ourselves in better position is around the paid search element. And you've seen us increase our paid search spend. We've having the all of the stores and all of our brands on one domain name has certainly allowed us to be very efficient in use of that paid search.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

And so I think the team has done a really good job using that lever at this point in time and putting ourselves in a position where we're increasing our visibility scores and our visibility position. Now that we have our stores on nsa.com, all of them and all of the brands there, we have a little bit better visibility. We don't have year over year historical averages, but I can tell you top of the funnel wise, we've seen a significant improvement in how many customers are at the top of the funnel. From really if you look at November timeframe until now, we're up about 25% of the amount of volume that's at the top of our funnel. Now some of that is seasonal too.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

So you have to factor seasonality in that, but we are making strides. I think that's something that will give us improved performance as we continue through not just this year, but years to come. And we really are focused on putting ourselves at the right time in that right search ranking, right? And that's also part of it as well with the right keywords. There's a lot of keywords you're focused on and a lot of things that we think transact better.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

So there's a lot to it, but we are making good progress.

[Michael Griffin, Director at Evercore]

Great. That's it for me. Thanks for the time.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.

[Todd Thomas, Managing Director & Equity Research Analyst at KeyBanc Capital Markets]

Hi, thanks. Good afternoon. I just wanted to go back to the discussion around occupancy and rate. And I'm just curious if you could talk a little bit more about what specifically gave you confidence to raise rates during the quarter despite the softer occupancy trends that you saw early in the year? And does that mean that you felt or your systems were indicating that lower rates would not have stimulated more demand than it did in the quarter.

[Todd Thomas, Managing Director & Equity Research Analyst at KeyBanc Capital Markets]

Is that the right read?

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Todd, thanks for joining. I think you're correct. As modeled and forecast, we didn't think the benefit of a lower rate would drive enough customers through to get the net result we wanted. And so we repositioned ourselves in the market. I would also tell you, coming out of third and fourth quarter last year, I think we were probably a little under on rate just because of the transition and some of the things we're doing around that pro transition.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

So that also allowed us to reset rate in November, December and kind of reposition ourselves in the market. We're still competitive on rate. We're just in a better position. But yes, I think that's part of the formula we're working on is what the lower rate drives and the amount of customer rentals and then how you can recover from that lower entry rate in the lifetime of the customer, the health of the customer and the type of customer you attract with some of these rates when you're out there doing different rate programs. And so again, thought the team did a good job understanding the data, understanding the data points, looking at the conversion rates and positioned ourselves well to have a better entry rate, it led to a better revenue result.

[Todd Thomas, Managing Director & Equity Research Analyst at KeyBanc Capital Markets]

Okay. And then, the change in occupancy, how did vacate activity trend during the quarter? Can you speak to vacate specifically? And any change at all in vacate activity since the April?

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

No. Vacates remain muted compared to last year on a year over year basis. I'd say the ratio of vacates versus move ins has been very consistent. So move ins have been down and vacates have also been less than last year. And so no real change there.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

And I think that also leads to one of the things we talked about is until some of this outside pressures around the supply demand ratios change, we still have markets that have a lot of supply that need to be absorbed. And there's still some pieces in our sector and particularly for our portfolio where we're just not seeing as much customer activity. And so we're managing in the environment we're in.

[Todd Thomas, Managing Director & Equity Research Analyst at KeyBanc Capital Markets]

All right. Thank you.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Saleel Mehta with Green Street. Please proceed with your question.

[Salil Mehta, Equity Research Associate at Green Street Advisors, LLC]

Hi, guys. Good afternoon and thanks for taking my question. I guess looking at the marketing spend numbers here, there seems to be a substantial increase year over year. I think it's about like 20%. Can you guys just kind of walk us through the decision to push this forward when we're seeing from the other REITs a significant pullback in this area and as new top of funnel demand continues to be sustained?

[Salil Mehta, Equity Research Associate at Green Street Advisors, LLC]

And sorry if I missed this part earlier, but is this a run rate that we can expect for the rest of the year?

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Yes. Thanks for joining. I think we look at the marketing spend and the overall marketing cost as we would not deploy it unless we thought we were getting results with it. And so for us, I think the year over year increases is where we started and the starting point from a year ago and previous years. And then also consolidation to a domain name where we can really deploy, on the paid search side and some of the things we're doing around some of the other marketing efforts to really make sure that we get the brand authority and the search engine rankings that we want.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

And so comparing us to the peer group, I don't know that we were starting at the same point year over year basis. And so I think for us, it might look a little bit elevated where theirs might be a little more maybe year over year flat, but it's also where we started from and what we're working on. So to summarize, we're spending it. We think we're getting the right amount of lift and the right amount of top of the funnel activity and the right amount of customer conversions. And we will continue to use that tool as long as it's effective.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Run rate, I think the run rate is probably similar for the rest of the year provided we get the again, it's a tool. We'll use it where it's appropriate. And if we can cut back on it and still get the results we want, we will. If we want to spend more and we get the results we want, we'll spend more. It should lead to revenue though is the key to that.

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

Yes. And the growth rate year over year, 20% that we saw in Q1, that was within expectations. And I think that growth rate is the right type of growth rate year over year to expect throughout the year.

[Salil Mehta, Equity Research Associate at Green Street Advisors, LLC]

Great. Thanks. That's it for me.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Thank you.

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Ronald Kamdem with Morgan Stanley. Please proceed with your question.

[Ronald Kamdem, Managing Director & Head of US REITs and CRE Research at Morgan Stanley]

Hey, just two quick ones. Just going back to the occupancy comment about some of the decel, obviously you're solving for revenue, total revenue here. But just curious on the move outs, is there any sort of common themes or threads? And question really is like how do you guys get comfortable that the product is still at the right affordability in the markets? How do you get comfortable that that risk is mitigated?

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Yes, Ron. Thanks for joining. I think we study all the customers who move out. We look at length of stay. We looked at where they were positioned in the rate compared to entry rate replacement customer to where they were at with our ECRI program and how they were along in their life cycle.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

I would tell you from a move out perspective, we have not seen any change in behaviors. We've certainly bad debt is in check, payment activities where we want it to be. And so from a consumer point, I don't think there's anything from an affordability the way we're attracting new customers or the way we're working through their life cycle that's really changed. And so I don't think there's anything really to report on the move outs that's any different than where we've been over the last six, eight, twelve, eighteen months.

[Ronald Kamdem, Managing Director & Head of US REITs and CRE Research at Morgan Stanley]

Helpful. Second question is just appreciate the additional disclosures on Schedule seven. I guess when I look at the in place customer, I guess they're paying $14.60 dollars so call it $146 on a 10 by 10. How are we supposed to interpret the year over year change? Is that just purely due to the spread of move in and move outs?

[Ronald Kamdem, Managing Director & Head of US REITs and CRE Research at Morgan Stanley]

Or have is there a change in ECRIs as well? Just how do we sort of think about that year over year change? Thanks.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Yes. I think he touched on a couple of points there. We're certainly with the as we continue to work asking rent and new move in rate, we're seeing improvements there. And then the strength of the ECRI program, I think we continue to find better success in our ECRI program than we probably historically have. And we see continued runway with that piece of it.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

I think as we think about it, that's the area we're really trying to work on with the amount of move ins we're getting and we've seen significant improvement. I mean, you look at the April numbers versus where we finished Q1, I mean, our move ins were up to $10.38 coming out of a $9.89 for the quarter average. In place customers are at 14.7 versus an average of $14.64 So we continue to see strength and improvement as we go into the spring season here.

[Ronald Kamdem, Managing Director & Head of US REITs and CRE Research at Morgan Stanley]

Helpful. That's it for me. Thanks.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Ravi Vaidya with Mizuho Securities. Please proceed with your question.

[Ravi Vaidya, Vice President at Mizuho Financial Group]

Hi there. Hope you guys are doing well. I wanted to follow-up on transactions here with some pretty active capital recycling forecasted here in the guide. Is this an opportunity to maybe trim some exposure in terms of exposure to a few markets and maybe increase to a few others? How are guys thinking about that?

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Yes. Thanks for joining. And I think you're right on your observation. We certainly approach the printing of the portfolio, looking at how we can look at markets, our ability to grow in markets, the quality of asset we had in market. We really try to tie it to operational efficiencies and make sure that we can really work margins within markets.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

And so you're going to see us exit as we start to work through the second quarter. We're going to see some dispositions where we're leaving markets where we had a single asset. And I think we're going to have a couple of states that we also leave as well because we only had one asset in the state. So really looking at the portfolio, asking ourselves both sides, where do we want to operate? And if we don't think we can find the economies we want long term, we'll look to exit those markets and that could be from market health to ability to purchase properties to strength of what we already own there.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

And then as we continue to expand and recycle that capital, we are definitely looking to improve our position, improve our portfolio and improve our operational efficiencies.

[Ravi Vaidya, Vice President at Mizuho Financial Group]

Got it. That's helpful. One more here. What are some of the current demand drivers for self storage right now? Being your portfolio, having an outsized exposure to homeowners and being more sensitive to home sales, are you really seeing the growth from and demand from as we enter the peak leasing season here?

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

There's lots of drivers. I mean, we've talked about them from people who transition and transition and creates need and we're a needs based business. And so that could be anything from small businesses to small commercial operators working your way through people who run a landscaping company or a plumber or whatever they use us for their storage of their tools and their equipment, plus they also use it as a small distribution point for that product. So there's a robust amount of small consumers that use our product because we're well located and we're certainly affordable for them to use us as a small warehouse. You work in your way to the residential side, there's a lot of varieties there for people who need additional space because they live in an apartment and they store seasonal items there, they store their bikes there, they store stuff that doesn't fit in their apartments, all the way through people who are using their home for home office now and they're storing the furniture that they took out of that home office or if they put a home gym in, they've taken furniture out and they just use us because we're very affordable and very convenient.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

I think the pressure is we continue to feel a little bit more in our portfolio and it's because of our exposure a little bit more to the suburban and some of our markets is this lack of transition due to existing home sales and new home sales. And that's just missing in the sector because it's we're at all time existing home sale lows, and that piece is missing. It's just a piece that's missing, but for us, it is a piece where we think we're missing some occupancy in our portfolio because of the lack of transition. We think that puts us in a position when the housing market does start to bounce off of its bottoms and start to reignite. We're well positioned to take advantage of that.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

And but at this point in time, we're just using all the other demand factors that want our product and making sure we're visible and we're affordable and able to take advantage of the consumers that need us.

[Ravi Vaidya, Vice President at Mizuho Financial Group]

Appreciate it. Thank you.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Omotayo Hosanya with Deutsche Bank. Please proceed with your question.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Hi, yes. Good afternoon, everyone. A couple of times in the commentary I kind of suggested that fundamentals may be troughing, but yet we still have this backdrop of a very tough housing market. So I guess I'm trying to reconcile those two things. So Dave, if you could just kind of help me a little bit with reconciling those two things and why you have such conviction that fundamentals may have troughed and you have like this kind of better earnings growth profile as the year progresses?

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Yes. Hey, thanks for joining and good point and good observation. I think as we look at where we're positioned, the amount of supply we're absorbing, the amount of new supply that is coming and this pure levels around the demands for our needs based business, we don't think the housing market is going to get worse. We don't think as you look at the markets we study, we had two of our largest markets inflect positive, Houston and Portland. We just see strength around the consumer, how long they're staying, the strength of the ECRI program and then what we're starting to see around Google searches, around the top of the funnel activity.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

It just appears to us that we think we've come through the worst of it. And we started to see it really as we got the pro transition completed, that puts us in a better position to be more operationally productive, which is helpful to us. And then also, would probably weave in there the fundamental back look at the comps. I mean, we had a we've had really as you look at the back half of the year and why we think that the back half of the is going to ramp up for us, we had a transition going on last year. We had a lot of things on our plate that we're moving around.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

We now have better technology. We have a team that's focused on execution and we have easier comps as you go through the rest of this year. So that's, I think, how I would frame it up for you and the fact that we think we have dropped and we're heading in an upwards direction.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

That's helpful. And then as it pertains to marketing, could you just kind of give us a general sense of what's happening in regards to like ad rates, search rates and kind of what the search engines are kind of doing on that front?

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Yes. We just had statistical data from Google from a couple of different sources. You already had some for us and then we had our own Google data where we are seeing an increase in consumers shopping for self storage services. So different types of keywords that Google is tracking. We saw an improvement in February and a pretty significant spike in March.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

And so if you look at folks out looking for self storage, we did see a definite change in the amount of people searching for the product. We're working very hard with our tools. And as we develop better tools and newer tools that we have today, we're making sure that we're appropriately spending and giving ourselves the right visible position so that we're around the keywords at the time we want to be the keywords and positioning ourselves with our stores in the market so that we can have success. But right now, the activity at our top of the funnel has increased, which is encouraging and we're also seeing search engines tell us that there are more people shopping for self storage.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Thank you.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Nathan Guel with Baird. Please proceed with your question.

[Nathan Holje, Investment Banking Analyst at Baird]

Hey, good afternoon guys.

[Nathan Holje, Investment Banking Analyst at Baird]

Can you talk

[Nathan Holje, Investment Banking Analyst at Baird]

about which markets are performing better or worse than expectations so far this year?

[Brandon Togashi, EVP & CFO at National Storage Affiliates Trust]

Yes, I think we've hit on them, Nathan. I mean, certainly, the Portland and Houston markets we talked about, we've got a couple of others across the reported MSAs in Schedule six that have been positive and continue to be positive. As Dave mentioned in his opening remarks, all but three of them sequentially improved in terms of the year over year performance. So broadly, as we said, portfolio performed in line, no major surprises one way or the other. But I think the ones that we've remarked on already have probably been the ones that have had a little bit of modest upside surprise.

[Nathan Holje, Investment Banking Analyst at Baird]

Got it. And do you expect tariffs to have an impact on some of your tenants that may use storage for their small businesses?

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

They certainly could. We have not had any experience around that or had anybody actually call it out to us. I think we're early in the game yet and too soon to tell. But again, I said, I'll leave it at that. Probably too soon to tell.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

We just haven't heard anything yet.

[Nathan Holje, Investment Banking Analyst at Baird]

Great. Thank you.

[David Cramer, President, CEO & Trustee at National Storage Affiliates Trust]

Thank you.

[Operator]

Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Hoglund for any final comments.

[George Hoglund, VP - IR at National Storage Affiliates Trust]

Well, thank you all for joining our call today. We appreciate your continued interest in NSA. We look forward to seeing many of you at the REIT Week Conference in June. And in the meantime, we will look forward to the Warriors Nuggets Western Conference finals.

[Operator]

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• George Hoglund, VP - IR
• David Cramer, President, CEO & Trustee
• Brandon Togashi, EVP & CFO

Analysts

• Eric Wolfe, Director at Citi
• Samir Khanal, Director at Bank of America
• Michael Goldsmith, US REITs Analyst at UBS Securities LLC
• Robin Haneland, Senior Equity Research Associate at BMO Capital Markets
• Michael Griffin, Director at Evercore
• Todd Thomas, Managing Director & Equity Research Analyst at KeyBanc Capital Markets
• Salil Mehta, Equity Research Associate at Green Street Advisors, LLC
• Ronald Kamdem, Managing Director & Head of US REITs and CRE Research at Morgan Stanley
• Ravi Vaidya, Vice President at Mizuho Financial Group
• Omotayo Okusanya, Managing Director at Deutsche Bank
• Nathan Holje, Investment Banking Analyst at Baird