8-K: NSA Trust Q3 2025: Net Income Dips, Occupancy Falls Amid Market Shift

National Storage Affiliates Trust reported a decrease in Q3 2025 net income and Core FFO per share, alongside declining same store NOI and occupancy, though management sees sequential improvement.

Summary

• Net income for Q3 2025 was $29.0 million, a 2.5% decrease compared to $29.8 million in Q3 2024.
• Diluted earnings per share for Q3 2025 was $0.17, down from $0.18 in Q3 2024.
• Core Funds From Operations (Core FFO) for Q3 2025 was $76.5 million, an 8.8% decrease from $83.9 million in Q3 2024.
• Core FFO per share for Q3 2025 was $0.57, an 8.1% decrease from $0.62 in Q3 2024.
• Same store net operating income (NOI) decreased by 5.7% for Q3 2025 compared to Q3 2024.
• Same store total revenues decreased by 2.6% for Q3 2025 compared to Q3 2024.
• Same store property operating expenses increased by 4.9% for Q3 2025 compared to Q3 2024.
• Same store period-end occupancy was 84.5% as of September 30, 2025, a decrease of 140 basis points from September 30, 2024.
• An unconsolidated real estate venture acquired two self-storage properties for approximately $32.0 million during Q3 2025, with NSA contributing approximately $8.0 million.
• NSA completed the rebranding of all NSA-owned Moove In branded stores to iStorage, reducing the number of NSA operated brands to six.
• The company reaffirmed its previously provided Core FFO guidance estimates for the full year 2025, ranging from $2.17 to $2.23 per share.

Sentiment

Score: 4

Explanation: While key financial metrics like net income, Core FFO per share, same store NOI, and occupancy declined year-over-year, management expressed confidence that fundamentals have bottomed and are trending upward. The reaffirmation of full-year guidance, despite negative projections, suggests the results were within expectations for a challenging period. Strategic moves like the new joint venture and rebranding are positive, but current operational headwinds are significant.

Positives

• Management observed sequential improvement in same store revenue growth across the majority of markets, indicating a potential bottoming out and upward trend in fundamentals.
• The completion of rebranding Moove In stores to iStorage streamlines operations and reduces the number of managed brands.
• Formation of a new IRE Joint Venture where NSA's committed capital will be in the form of preferred equity, with a 10% preferred return per annum and opportunity for additional returns.
• General and administrative expenses decreased by $1.7 million for Q3 2025 and $7.6 million year-to-date compared to the same periods in 2024.
• Decreased management fees paid to former PROs following the internalization of the PRO structure.
• The company maintains approximately $543.6 million of available capacity on its $950.0 million revolving line of credit.
• Markets such as Portland, San Juan, PR, and Houston generated above portfolio average same store total revenue growth.

Negatives

• Net income decreased 2.5% for Q3 2025 and 49.4% for the nine months ended September 30, 2025, compared to the same periods in 2024.
• Diluted earnings per share decreased from $0.18 to $0.17 for Q3 2025 and from $1.03 to $0.46 year-to-date.
• Core FFO per share and unit decreased 8.1% for Q3 2025 and 9.8% year-to-date.
• Same store net operating income (NOI) decreased 5.7% for Q3 2025 and 5.8% year-to-date.
• Same store total revenues decreased 2.6% for Q3 2025 and 2.9% year-to-date, driven by lower occupancy and rental revenue per occupied square foot.
• Same store property operating expenses increased 4.9% for Q3 2025 and 4.4% year-to-date, primarily due to increases in marketing, property tax, and utilities.
• Same store period-end occupancy decreased 140 basis points to 84.5% as of September 30, 2025.
• Average annualized rental revenue per occupied square foot decreased 0.4% for Q3 2025 and 0.6% year-to-date.
• The year-to-date decrease in net income was primarily due to larger gains on the sale of self-storage properties recognized during 2024.
• An increase in interest expense contributed to the decrease in FFO and Core FFO per share and unit.
• Markets such as Riverside-San Bernardino, Atlanta, and Phoenix generated below portfolio average same store total revenue growth.

Risks

• Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and generally beyond the company's control.
• Changes in market trends in the self-storage industry, interest rates, inflation, the debt and lending markets, or the general economy could negatively impact performance.
• The company's ability to realize the benefits from the internalization of the PRO structure and portfolio optimization strategy may be impacted by unforeseen challenges.
• The current operating environment remains competitive, which could continue to pressure revenues and occupancy.
• Increases in property operating expenses, such as marketing, property taxes, and utilities, could further impact NOI margins.

Future Outlook

Management reaffirms its full-year 2025 Core FFO guidance of $2.17-$2.23 per share, with expected same store total revenue growth of -3.0% to -2.0%, property operating expenses growth of 3.25% to 4.25%, and NOI growth of -5.75% to -4.25%. The company believes self-storage fundamentals have found a bottom and are beginning to trend upward. They anticipate an improvement in self-storage fundamentals in 2026 and beyond, supported by potential interest rate cuts and a more favorable supply environment, and are focused on capital recycling and operational efficiency to capitalize on this expected upturn.

Management Comments

• "During the third quarter, the majority of our markets showed sequential improvement in same store revenue growth, which supports our view that fundamentals have found a bottom and are beginning to trend upward."
• "While the current operating environment remains competitive, the backdrop for self storage going forward is the best that we have seen in a number of years."
• "Given the potential positive impacts on the housing market from expected interest rates cuts and a more favorable supply environment, we expect to see an improvement in self storage fundamentals supported by an improving supply/demand balance in 2026 and beyond."
• "Our focus over the past several quarters has been to best position NSA to take advantage of this expected upturn through capital recycling and improved operational efficiency. We are ready to execute in this environment and excited about the opportunities ahead."

Industry Context

The self-storage industry is currently experiencing a competitive operating environment, characterized by declining same store revenues and occupancy for NSA. However, management expresses optimism for a future upturn, citing potential positive impacts from expected interest rate cuts on the housing market and a more favorable supply environment. This suggests an anticipated improvement in the supply/demand balance for self-storage in 2026 and beyond, aligning with broader economic recovery expectations.

Related Party Transactions

• Entered into an agreement to form a new joint venture (the 'IRE Joint Venture') between a subsidiary of NSA and an affiliate of Investment Real Estate Management, LLC, with NSA committing 75% of the equity as preferred equity.
• A joint venture between a subsidiary of NSA and a state pension fund advised by Heitman Capital Management, LLC (the '2023 Joint Venture') acquired two self-storage properties, with NSA contributing approximately $8.0 million.

Stakeholder Impact

• Shareholders: Experienced decreased diluted EPS and Core FFO per share, but received a consistent quarterly cash dividend of $0.57 per common share. Future performance is tied to the anticipated market recovery.
• Employees: The completion of rebranding Moove In stores to iStorage may lead to operational adjustments. The internalization of the PRO structure, completed in July 2024, has already impacted former PROs.
• Creditors: The company maintains healthy debt ratios (Net Debt to Annualized Current Quarter Adjusted EBITDA of 6.7x, Trailing Twelve Month Fixed Charge Coverage Ratio of 2.6x, Total Leverage Ratio of 46.6%), indicating compliance with covenants and sound financial management.

Next Steps

• Host a conference call on November 4, 2025, to discuss Q3 2025 financial results.
• Participate in the Jefferies Real Estate Conference from November 17-19, 2025.
• Participate in the Nareit REITworld 2025 Annual Conference from December 8-11, 2025.
• Continue to focus on capital recycling and improved operational efficiency to position for an expected upturn in self-storage fundamentals in 2026 and beyond.

Key Dates

Recommendation

While the reported financial results for Q3 2025 show significant year-over-year declines in net income, Core FFO per share, same store NOI, and occupancy, management has reaffirmed its full-year guidance and expressed a view that self-storage fundamentals have bottomed and are expected to improve in 2026 and beyond. The company is actively pursuing strategic initiatives like new joint ventures and operational efficiencies. Given the current headwinds but optimistic long-term outlook, a 'hold' recommendation is appropriate for investors to monitor the anticipated market recovery and the company's execution on its strategic plans.

Keywords

National Storage Affiliates Trust, NSA, self storage, REIT, Q3 2025 earnings, financial results, Core FFO, NOI, occupancy, real estate investment trust, property acquisition, corporate governance, dividends, NYSE