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Edited Transcript of NSA earnings conference call or presentation 2-Aug-19 5:00pm GMT

Q2 2019 National Storage Affiliates Trust Earnings Call

Greenwood Village Aug 22, 2019 (Thomson StreetEvents) -- Edited Transcript of National Storage Affiliates Trust earnings conference call or presentation Friday, August 2, 2019 at 5:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Arlen Dale Nordhagen

National Storage Affiliates Trust - Chairman of the Board of Trustees & CEO

* Brandon S. Togashi

National Storage Affiliates Trust - Senior VP & CAO

* George Andrew Hoglund

National Storage Affiliates Trust - VP of IR

* Steven B. Treadwell

National Storage Affiliates Trust - Executive VP & COO

* Tamara D. Fischer

National Storage Affiliates Trust - President, CFO, Treasurer & Secretary

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Conference Call Participants

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* Jonathan Michael Petersen

Jefferies LLC, Research Division - Equity Analyst

* Ronald Kamdem

Morgan Stanley, Research Division - Research Associate

* Smedes Rose

Citigroup Inc, Research Division - Director & Senior Analyst

* Todd Jakobsen Stender

Wells Fargo Securities, LLC, Research Division - Director & Senior Analyst

* Todd Michael Thomas

KeyBanc Capital Markets Inc., Research Division - MD and Senior Equity Research Analyst

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Presentation

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Operator [1]

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Greetings, and welcome to the National Storage Affiliates Trust Second Quarter 2019 Conference Call. (Operator Instructions) 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. Hoglund. You may begin.

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George Andrew Hoglund, National Storage Affiliates Trust - VP of IR [2]

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Hello, everyone. We'd like to thank you for joining us today for the second quarter 2019 earnings conference call of National Storage Affiliates Trust. In addition to the press release distributed yesterday, we filed an 8-K with the SEC containing 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. 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 on the Investor Relations section on our website and in our SEC filings.

Today's conference call is hosted by National Storage Affiliates Chairman and Chief Executive Officer, Arlen Nordhagen; President and Chief Financial Officer, Tamara Fischer; Chief Operating Officer, Steve Treadwell; and Chief Accounting Officer, Brandon Togashi. Following prepared remarks, management will accept questions from registered financial analysts. I will now turn the call over to Arlen.

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Arlen Dale Nordhagen, National Storage Affiliates Trust - Chairman of the Board of Trustees & CEO [3]

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Thanks, George, and thank you all for joining our call today.

Before we address our results for another excellent quarter, I'd like to remind everyone of the planned management transition that we announced at the end of May. Effective January 1, 2020, I'll assume the role of Executive Chairman of the Board and Tammy will become President and CEO.

Additionally, Brandon Togashi, our current Chief Accounting Officer will be promoted to CFO. Although, my day-to-day role will be reduced, I'll remain very active in guiding and executing on the overall vision and strategy of the company, especially with respect to significant growth strategies, including acquisitions and PRO recruitment.

I'm happy the Board and I share the same conference in Tammy and Brandon, and I look forward to continuing our successes together. Now onto our second quarter results.

We're happy to report that we continue to lead this sector once again in the year-over-year same store revenue, NOI and core FFO per share growth, facilitated by our differentiated PRO structure and portfolio.

The self storage industry continues to benefit from the growing economy, which is helping to fuel demand growth and partially offset the impact from new supply. Although, recent market data suggests that the pace of new deliveries nationwide is declining, it's not declining quickly, which is continuing to provide headwinds for the sector as a whole, especially in the primary MSAs.

That said, we'd like to highlight a few key points about our portfolio which gives us confidence in the outlook for MSA. First, we have greater exposure to the secondary markets than our peers, and those secondary markets have experienced significantly less supply growth in this current development cycle.

We estimate 39% of our stores are currently affected by new supply in the 5-mile trade area. And we believe our secondary markets will continue to see less new supply than the primary markets, given that many of these secondary markets have lower average rents per square foot. These lower rates don't make new development nearly as attractive to developers.

Second, in primary markets such as Riverside, San Bernardino, Atlanta and Dallas/Fort Worth, where we have several facilities, we tend to have a higher percentage of single-story drive-up facilities relative to our peers. The new supply coming online is generally multistory, climate controlled, higher price per square foot units.

These new facilities often are not direct competition to our facilities, given they are a significantly different product type. As such, we often see less negative impact from this type of new supply.

And finally, we continue to benefit from very significant geographic diversity in our portfolio. Given these factors, we are optimistic that we'll continue to deliver solid results despite the elevated new supply. Contributing to the strong results, we remain active on the acquisition front having acquired 24 properties for $185 million in the second quarter, bringing year-to-date acquisitions to almost $400 million.

Our summer leasing season has been slightly above normal with higher occupancy year-over-year, although, that delta has narrowed subsequent to quarter end as we expected.

As such, we're well positioned for the back half of the year. The favorable year-to-date and expected second half performance is reflected in our updated guidance, which is positive across the board, despite tougher comps in the second half. We believe our sector-leading same store NOI in core FFO per share growth should result in a more favorable valuation for NSA shares.

On average, fundamentals in our portfolio remain healthy. We continued to push mid- to high-single digit rent increases to our in-place customers, which is currently a key driver of our revenue growth. We're further encouraged by our occupancy gains in the second quarter, which were consistent with the first quarter. And we expect that the strength of our PRO structure, combined with our constantly evolving revenue management and Internet marketing systems, will provide additional operational upside going forward.

The combination of strong external growth and robust same store NOI growth gives us confidence that we'll continue to achieve year-over-year double-digit percentage growth in core FFO per share to lead our sector in 2019. With that, I'll now turn the call over to Tammy.

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Tamara D. Fischer, National Storage Affiliates Trust - President, CFO, Treasurer & Secretary [4]

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Thank you, Arlen. We continue to deliver solid results as our second quarter core FFO per share of $0.38 represents growth of 11.8% over the prior-year period.

This growth was fueled by a combination of strong same store NOI growth, strong acquisition volume and growing fees from our JV platform. For the second quarter, same store NOI increased by 5.5%, driven by growth in same store revenues, up 4.7% and property operating expense growth of 2.8%.

We continued to push rate increases on existing tenants, which resulted in a 3.8% increase in average annualized rent per square foot. Same store average occupancy increased 40 basis points to 89.6% during the quarter. Same store OpEx growth for the quarter was 2.8%, driven primarily by property taxes, which were up 3.8% year-over-year and repairs and maintenance, which were up about 19% year-over-year. Although, that's really a function of timing and whether.

Personnel and marketing expense increases were close to our average number. These increases were partially offset by decreases in insurance and utility. But we do expect overall expenses to pick up in the back half of the year with property taxes remaining the key wildcard.

Turning to geographic performance. Our leading MSAs in terms of same store revenue growth include Atlanta, Indianapolis and Las Vegas, where recent demand growth has exceeded supply growth. Lagging markets in our portfolio included Portland, Dallas and Phoenix, where we continue to face the most

impactful headwinds from elevated new supply. We're also seeing increasing pressure from new supply in West Florida. Worth noting, all of our top 10 MSAs generated positive same store revenue and NOI growth in the second quarter. I'll now turn the call over to Brandon Togashi to address recent balance sheet activity.

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Brandon S. Togashi, National Storage Affiliates Trust - Senior VP & CAO [5]

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Thanks, Tammy. With respect to the balance sheet. We've been being proactive in accessing various sources of capital while extended maturities, keeping leverage low and creating significant dry powder for future acquisition opportunities. During the second quarter, we issued approximately $140 million of equity through the issuance of both common and preferred stock under our ATM program as well as a combination of OP, SP and preferred OP units issued in connection with the acquisitions.

In addition, we closed on a $100 million 10-year unsecured term loan with an effective interest rate of 4.27%. Subsequent to quarter end, we successfully completed our inaugural private placement transaction. In connection with that transaction, we agreed to issue $100 million of 3.98% 10-year senior unsecured notes and $50 million of 4.08% 12-year senior unsecured notes. The notes are expected to fund on August 30 and have been rated BBB by Kroll Bond Rating Agency rating agency. We're very pleased with the execution of this transaction and we appreciate the support of our new capital providers.

We also recently closed on the recast of our credit facility, which increased our revolver capacity to $500 million and increased our term loan borrowings by $155 million in addition to extending the maturities. Notably, we also lowered our costs by reducing the current spread on the revolver by 10 basis points and lowering the weighted average swapped cost on the term loans by 7 basis points.

After the recast of the facility and funding of the private placement notes, we expect our $500 million revolving line of credit to be fully available to us, providing significant capacity for future acquisitions. Our weighted average cost of debt at quarter end was 3.6%, with 84% of our debt fixed rate or swapped to fixed. After giving pro forma effect for the recast of the credit facility and funding our private placement, our weighted average maturity increases to 6.4 years from 4.1 years at the end of the second quarter and our weighted average interest rate will be 3.5%. Our net debt-to-EBITDA ratio was 5.9x at the end of the second quarter, in the middle of our target range of 5.5 to 6.5x. We have no additional debt maturing for the remainder of 2019, and we remain committed to maintaining a conservative balance sheet.

I'll now pass the call back to Tammy to address guidance for 2019.

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Tamara D. Fischer, National Storage Affiliates Trust - President, CFO, Treasurer & Secretary [6]

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Thanks, Brandon. Performance for the first half of this year has been better-than-expected. We're confident in the outlook for the back half of the year but we do expect revenue growth to slow primarily due to tougher comp, especially on the stores added to the same store pool this year, which performed very well in the second half of 2018. Accumulative impact of the new supply will remain a headwind. We also expect expenses to tick up in the back half of the year primarily due to timing and anticipated increases in property taxes.

Taking all of this into consideration, we've updated our full year 2019 guidance as follows: we now project full year same store revenue growth in the range of 3.5% to 4% versus our original guidance of 2.5% to 3.5%. The new midpoint of 3.75% represents a 75 basis point increase from the previous midpoint.

We project same store operating expense growth of 2.75% to 3.25% from 2.5% to 3.5% previously, the midpoint remained 3% but we've narrowed the range. And we now project same store NOI growth of 3.5% to 4.5%, up from our previous guidance of 2.5% to 3.5%. The new midpoint of 4% represents 100 basis point increase from previous guidance. We are also increasing our guidance for full year 2019 core FFO per share to a range of $1.51 to $1.54, up from our previous range of $1.48 to $1.52. Additional guidance updates includes full year 2019 wholly-owned acquisitions of $400 million to $500 million, up from $300 million to $500 million. And we're maintaining our JV acquisition guidance at $20 million to $100 million. Additional details on our updated assumptions are included in our earnings release.

Thanks again for joining our call today. We'll now turn the call back to the operator to take your questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Smedes Rose with Citi.

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Smedes Rose, Citigroup Inc, Research Division - Director & Senior Analyst [2]

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I just wanted to ask you a little bit just on the acquisition's front? If you are seeing anything changing on the pricing side? If more product is coming to market that's of an interest to you? Or kind of maybe just some color there?

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Arlen Dale Nordhagen, National Storage Affiliates Trust - Chairman of the Board of Trustees & CEO [3]

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Yes. Smedes, this is Arlen. I would say overall, we saw a lot of activity in the first half. We certainly looked at everything that came out there. And there were some larger portfolios that ended up going at pricing that we wouldn't bid that high obviously we kept our discipline in our underwriting. And -- So we definitely had several hundred million dollars of acquisitions that we looked at that we didn't -- we decided not to buy. But I'd say in general that represents those continuing fact that we see portfolio premiums whenever there's a portfolio of properties coming on the market. But on individual one-off transactions which is mostly what we've done this year, the cap rates are staying pretty similar. We're in the 6% to 6.5% cap rate range again on pretty much all the stuff we bought this last quarter.

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Smedes Rose, Citigroup Inc, Research Division - Director & Senior Analyst [4]

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Okay. And then from the other public companies, it's just been little discussion on higher marketing cost particularly around bidding on search terms. Is that something that you're seeing? Or is it lesser than an issue maybe in the -- you've talked being in more secondary markets?

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Steven B. Treadwell, National Storage Affiliates Trust - Executive VP & COO [5]

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Smedes, this is Steve. We have not seen the same impact as our peers. We're probably about 3% up year-over-year when it looks to amortizing cost. And there's a couple of things driving that. Some of that is market base. Yes, we're probably a more secondary and tertiary markets than they are. But I still think it speaks to our process and our team and improving efficiencies, we're very focused on cost per acquisition, and our processes and our machine learning continue to get better as our portfolio gets larger and our data sets gets richer. So we, frankly, just been more effective and we've been pleased with the results so far this year.

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Operator [6]

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Our next question comes from Todd Thomas with KeyBanc Capital Markets.

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Todd Michael Thomas, KeyBanc Capital Markets Inc., Research Division - MD and Senior Equity Research Analyst [7]

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First question, just circling back to acquisitions. So what was the average cap rate on the $185 million completed in the quarter? And can you provide some detail in terms of where they are from an occupancy standpoint?

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Arlen Dale Nordhagen, National Storage Affiliates Trust - Chairman of the Board of Trustees & CEO [8]

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Yes. As I mentioned, Todd, the average cap is right around the 6.25%. They all ranged between 6% and 6.5%. Average occupancy on those was probably in the mid-to-high 80s. So there is a little bit of upside opportunity on the occupancy. But mainly where we see the opportunity is from our platforms being able to drive rents higher, average rent per occupied square foot higher. We do some cost reductions in several areas as well. But primarily it's on the marketing side that we've seen the tremendous value add that we get on our acquisition.

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Todd Michael Thomas, KeyBanc Capital Markets Inc., Research Division - MD and Senior Equity Research Analyst [9]

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Got it. And then how many of these were from the -- were sourced from the captive pipeline versus being third-party deals?

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Tamara D. Fischer, National Storage Affiliates Trust - President, CFO, Treasurer & Secretary [10]

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About a half a dozen, Todd. I think if you think about Sovran just coming in, they contributed 3 more in the second quarter. And then a handful of other ones from other PROs across the 6-month period.

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Arlen Dale Nordhagen, National Storage Affiliates Trust - Chairman of the Board of Trustees & CEO [11]

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But it's mostly third-party obviously with only a half a dozen being in the captive pipeline. And interestingly, our captive pipeline ends up, even though, we absorbed properties out of there into the acquisitions, our PROs end up getting new ones either through third-party management or through developments that they are doing. So the size of our acquisition or captive pipeline pretty much stays the same or even keeps growing slowly over time.

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Todd Michael Thomas, KeyBanc Capital Markets Inc., Research Division - MD and Senior Equity Research Analyst [12]

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So can you comment on that? Can you -- where is the captive pipeline today? And if you look across the portfolio and all the PROs that you're working with, how many properties are being third-party managed today?

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Arlen Dale Nordhagen, National Storage Affiliates Trust - Chairman of the Board of Trustees & CEO [13]

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We don't track it exactly but I know it's around 100 properties that are third-party managed where we include in that properties that PROs might have a percentage ownership in, that they are not 100% controlling. And so that would be sort of for them JV. Their JV properties plus their total third-party properties. And those are the ones that take a lot longer for us to obviously get in out of the captive pipeline because the PRO doesn't control the decision on when those come into NSA. But the total captive pipeline is well over 100 properties and over $1 billion because we've added these new PROs recently which obviously adds to the captive pipeline.

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Todd Michael Thomas, KeyBanc Capital Markets Inc., Research Division - MD and Senior Equity Research Analyst [14]

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Okay. Right. And then -- and what's the current thinking then -- so the acquisitions in the quarter high 80% range, maybe sitting a little bit below the portfolio average. But what's the current thinking from an investment standpoint on lease-up stores? You've refrained from development and C of O deals, but what about lease-up properties? Is that something that you would consider or starting to see more opportunity in?

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Arlen Dale Nordhagen, National Storage Affiliates Trust - Chairman of the Board of Trustees & CEO [15]

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We definitely see more opportunity honestly. I probably see 3 or 4 of those stores come across my internet every week because there is a lot of, I guess, developer panic out there that are not filling up as fast as they thought they would. And we are considering -- we keep considering them. We definitely look at them in markets that we like for our joint venture acquisitions. And we have approved -- the Board has approved a small number about up to 3% of our asset base as potential acquisitions of nonstabilized go up stores in our core portfolio wholly-owned as well. But honestly, we have not seen the prices of those come down enough to do very much of it yet. We do think that they'll keep coming down and once they do, we are going to be very interested in it.

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Operator [16]

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(Operator Instructions) Our next question comes from Ronald Kamdem with Morgan Stanley.

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Ronald Kamdem, Morgan Stanley, Research Division - Research Associate [17]

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Obviously, congratulations on the management transition. The first question I had was just maybe, can you just comment on maybe move-in volumes and move-in rates during the quarter to the extent that you can provide any color on that? And sort of trends in July as well would be helpful.

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Steven B. Treadwell, National Storage Affiliates Trust - Executive VP & COO [18]

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Yes, this is Steve. Move-in volumes for the quarter were good. They were strong as you would imagine for this part of the season. Relative to last year, maybe a little bit lighter. But the good news is that even given that, we held occupancy 40 bps higher during the quarter versus last year. So we felt strong about the move-in volume, a different volume is out there. But certainly there's a lot of new supply and that's really what's driving us on the Street rates side. We'll continue to see Street rates down year-over-year. But Q2, I'd say, on average they were down about 3% to 4%. So that's been a consistent trend over the last couple of quarters. We expect that to persist through the balance of the year. At this point, it's just too much to supply out there.

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Ronald Kamdem, Morgan Stanley, Research Division - Research Associate [19]

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Got it. That's very helpful. The other question I have was just going back to sort of the acquisition -- the acquisitions question on sort of the cap rates that you're looking at just so I'm clear. Are those cash cap rates recording or are those GAAP adjusted?

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Arlen Dale Nordhagen, National Storage Affiliates Trust - Chairman of the Board of Trustees & CEO [20]

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Those are cash flow projections for the year. The first year had are closing. So if you want…

(technical difficulty)

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Ronald Kamdem, Morgan Stanley, Research Division - Research Associate [21]

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I'm sorry. You were breaking up, maybe that was me. But…

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Arlen Dale Nordhagen, National Storage Affiliates Trust - Chairman of the Board of Trustees & CEO [22]

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Yes, I'll repeat that. It's cash, year one cash flow divided by year one or total capital investment. Did you hear that, Ron?

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Ronald Kamdem, Morgan Stanley, Research Division - Research Associate [23]

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Yes. Yes. I got it. That was clear. Helpful. The last question was just on, I saw you obviously issued equity and debt and so forth, a lot of financing activity during the quarter. So just maybe remind us like how are you guys thinking about when to sort of pull the equity trigger versus issuing debt? What sort of goes into those decisions as you're thinking about funding acquisitions?

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Brandon S. Togashi, National Storage Affiliates Trust - Senior VP & CAO [24]

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Ronald, this is Brandon. I'll take that and Tammy can add on. So we -- I'll kind of frame it in the context of the 3 objectives we had coming into 2019. One was to relaunch our ATM, which we did early in the year. And remember that under that program we have the optionally to issue common and preferred. So that was kind of our expectations towards this year, which you saw us putting on our lease for what we did in Q2. We also wanted to recap the credit facility, which we did just earlier this week. And then debt by the placement was with the third item. So we had, frankly, good opportunities this quarter with pricing on all 3 of those alternatives and we pulled the trigger. We also match that with high volume of acquisitions we had in Q1 and in Q2. I think as you look forward to the back half of the year obviously with our revised acquisitions guidance, we're implying a lighter deal flow. And as you'll see us have a lot less activity. We are also fully undrawn on the revolver after we get through our private placement funding. So we don't really have a lot in the way of capital needs immediately.

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Arlen Dale Nordhagen, National Storage Affiliates Trust - Chairman of the Board of Trustees & CEO [25]

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And I would add to that, that one of the things that we really do from a strategic standpoint is try to have excess equity at all times to be available so that we can pull the trigger on acquisition opportunities when they come up. We are really continuing to be focused as a growth company and we never want to find ourselves that we can't do an acquisition because of the fact that we've leveraged ourselves too highly and our stock price isn't good. So we want to try to do that in advance as much as we can. And so now we are positioned where we can do a lot of acquisitions without having to issue equity. And if the equity price is good again, we can issue more equity and just keep building that capacity going forward.

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Operator [26]

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Our next question comes from Todd Stender with Wells Fargo.

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Todd Jakobsen Stender, Wells Fargo Securities, LLC, Research Division - Director & Senior Analyst [27]

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Just looking at the same store pool, occupancy and rate were up. It's pretty good execution in peak season. Can you just share maybe what's your revenue management systems are telling you? And just I guess broader -- broadly speaking, what the discounting levels were in the quarter?

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Brandon S. Togashi, National Storage Affiliates Trust - Senior VP & CAO [28]

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Yes. And so we're always looking to optimize revenue rather than occupancy or rate per se, and we're always trying to find the right mix. And you can see our cost or different markets, you see a different dynamic and in some places we're given up occupancy and other places we're grabbing it back. So it's on a case-by-case basis. I think the expectation is that occupancy continues to be flattish or maybe mildly positive through the remainder of the years is the expectation. And we expect to continue to push rate. We've been very successful with our revenue management system in terms of pushing out rent increases to existing customers. That has persisted for many, many quarters now. We tend to hit sort of a high single digits on our average rate increase. And I think as we've messaged before, we fully expect to give 3 quarters of our customers a rate increase effectively through the course of the year. When you look at discounting, it's been relatively flat for a long, long time. This quarter, we actually saw it down versus Q2 of last year, it is down about 5% in dollar terms, that was a pleasant surprise, given the uptick in occupancy. I would expect it to be flattish for the balance of the year. But it's been a nice tailwind here for a few months and it'll probably die off here towards the end of the year. So while we're sure of it, we can still use discounting as a good lever to drive move-ins, to hold occupancy and to be competitive with our peers. So I think discounting will continue to be strong through the balance of the year.

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Todd Jakobsen Stender, Wells Fargo Securities, LLC, Research Division - Director & Senior Analyst [29]

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That's helpful. And then when do customers get their first rental rate increase? And does that change per PRO or geographically?

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Steven B. Treadwell, National Storage Affiliates Trust - Executive VP & COO [30]

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Yes. So unfortunately, I'll tell you it varies a lot. It varies by market. It varies by market dynamic. It varies by customer. In some cases we have customers that came in well below what we think our market rate this because we wanted to grab that occupancy and where we'll hit those customers sooner than later. In other places, where we're a little worried about the new supply in occupancy, we might be a little more reluctant to push out a rate increase before, say, the 9 months or 12-month period. So on average, I would say, the first increase across our portfolio, the average would be about 7 to 9 months after a customer joins us. But that is not uniform across portfolio or across PROs.

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Arlen Dale Nordhagen, National Storage Affiliates Trust - Chairman of the Board of Trustees & CEO [31]

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In almost all cases within the year, a customer would receive a rate increase.

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Steven B. Treadwell, National Storage Affiliates Trust - Executive VP & COO [32]

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Yes. Certainly, that's the intent. There's very, very few cases where we would not give a rate increase within a year. But it's typically between 7 and 9 months.

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Todd Jakobsen Stender, Wells Fargo Securities, LLC, Research Division - Director & Senior Analyst [33]

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Just last question. I think you gave the occupancy on the new properties acquired in the quarter but when you speak about the rate, your average at least in the same store pool, is up around $11.80 a square foot. And what did the new properties come in at, I guess, above or below that average?

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Arlen Dale Nordhagen, National Storage Affiliates Trust - Chairman of the Board of Trustees & CEO [34]

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I think the new ones came in very close to that average. But I know our number were above and some below. So...

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Tamara D. Fischer, National Storage Affiliates Trust - President, CFO, Treasurer & Secretary [35]

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Yes. So market specific.

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Arlen Dale Nordhagen, National Storage Affiliates Trust - Chairman of the Board of Trustees & CEO [36]

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It's a very market specific there. And I'm sorry, Todd, I don't have that exact number. We can follow up after the call and give you that. But I can tell it will be relatively close.

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Operator [37]

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Our next question comes from Jon Petersen with Jefferies.

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Jonathan Michael Petersen, Jefferies LLC, Research Division - Equity Analyst [38]

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So I know you talked a little bit about equity versus debt in the markets today. I was just kind of curious maybe more pointedly looking at your leverage ratio debt-to-EBITDA of 5.9x. Just kind of curious what your kind of long-term targets are? And then maybe how you would think about that trending in the short term, given pricing in the capital markets?

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Tamara D. Fischer, National Storage Affiliates Trust - President, CFO, Treasurer & Secretary [39]

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So our long-term objective, Jon, is in the range of 5.5% to 6.5% net debt-to-EBITDA. And then so we're perfectly comfortable with 5.9%. I think what we've talked about in the past is that to the extent we're aggressively acquiring assets, we may, on a short-term basis, see that number end up at the top-end of range for a little while we reposition. Right now, of course, we feel like we are in great shape and well positioned to opportunistically take advantage of acquisitions as they become available to us.

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Jonathan Michael Petersen, Jefferies LLC, Research Division - Equity Analyst [40]

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Okay. And I think what you guys are doing, I don't know, one disposition or so a quarter. Just curious how we should think about dispositions going forward? I don't know how large the portfolio of target dispositions is internally. Maybe just some more thoughts on that?

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Tamara D. Fischer, National Storage Affiliates Trust - President, CFO, Treasurer & Secretary [41]

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We don't have a target disposition number, Jon. but the way we think about it is that when an asset no longer fits our profile or if there is a higher and better use. For instance, the land on which an asset sits, which is the case in one of our dispositions this year, we -- it just made all the sense in the world to go ahead with the disposition. With our PRO structure, it -- we have the advantage of having, call it, 10 acquisition teams on the ground. We also have 10 asset managers on the ground. And they are the closest to their own portfolios and...

(technical difficulty)

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Arlen Dale Nordhagen, National Storage Affiliates Trust - Chairman of the Board of Trustees & CEO [42]

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As a good example on the one that we did in the second quarter, it was generated by the PRO in a situation where they found a buyer that would pay a really low cap rate because they are used -- they're going to...

(technical difficulty)

You know we love to do that kind of deal with that kind of...

(technical difficulty)

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Jonathan Michael Petersen, Jefferies LLC, Research Division - Equity Analyst [43]

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Okay. I think I got most of it. You guys are kind of breaking up again. But I think I got that. But just one cleanup question, if I could, on the revenue line management fees were up quite a bit. I think up $3 million year-over-year. I'm just kind curious if there's anything one-time in there we need to adjust for?

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Brandon S. Togashi, National Storage Affiliates Trust - Senior VP & CAO [44]

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Hey, Jon, this is Brandon. Not one-time but remember we had the 2018 JV come in September of last year. So if you're looking year-over-year, really until you get to Q4 of this year, you're not going to have an apples-to-apples comp. So it's really the influx of the fees related to that second joint venture, our 2018 JV.

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Arlen Dale Nordhagen, National Storage Affiliates Trust - Chairman of the Board of Trustees & CEO [45]

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And that's also part of a reason why G&A costs are up year-over-year.

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Operator [46]

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Thank you, ladies and gentlemen. There are no further questions at this time. I'll turn it back to Tamara Fischer for closing remarks.

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Tamara D. Fischer, National Storage Affiliates Trust - President, CFO, Treasurer & Secretary [47]

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Thanks, everyone, for joining NSA's second quarter 2019 earnings call. To reiterate, we're very pleased with our year-to-date performance and full year outlook which benefit from the differentiated PRO structure and our portfolio. We appreciate your continued interest in, and support of, National Storage Affiliates. And we look forward to seeing many of you at the upcoming conference this fall.

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Arlen Dale Nordhagen, National Storage Affiliates Trust - Chairman of the Board of Trustees & CEO [48]

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Thank you.

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Operator [49]

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