Executive Summary / Key Takeaways

• Strategic Inflection Point: National Storage Affiliates (NSA) has reached a pivotal moment, having completed its comprehensive PRO internalization and platform consolidation in 2024. This strategic transformation is now yielding operational efficiencies and is expected to drive enhanced shareholder returns by eliminating profit-sharing with former regional operators.
• Operational Momentum and Revenue Recovery: Despite a challenging macroeconomic backdrop, NSA is demonstrating sequential improvements in key operating metrics. The third quarter of 2025 saw sequential improvement in same-store revenue growth across 16 of 21 MSAs, with October contract rates up 160 basis points year-over-year and occupancy holding relatively flat.
• Technological Differentiators: NSA is leveraging advanced technology, including a centralized digital marketing platform (nsastorage.com), AI in its call center (handling 15% of incoming calls), and a self-service "My Storage Navigator" tool, to enhance customer acquisition, optimize pricing, and improve operational efficiency.
• Favorable Industry Outlook: The self-storage sector is poised for a healthier environment in 2026 and beyond, driven by a projected decline in new supply to below historical averages and the potential for increased demand from an eventual housing market recovery and lower interest rates.
• New Growth Avenues: The launch of a preferred investment program with a former PRO offers an accretive capital deployment strategy with attractive initial yields and a captive acquisition pipeline, signaling NSA's commitment to diversified earnings growth.

A New Chapter for National Storage Affiliates

National Storage Affiliates Trust (NSA) is a fully integrated, self-administered, and self-managed real estate investment trust (REIT) focused on the ownership, operation, and acquisition of self-storage properties. Primarily targeting the top 100 metropolitan statistical areas (MSAs) across the United States, NSA has grown to own and operate 1,069 properties across 37 states and Puerto Rico, encompassing approximately 69.8 million rentable square feet as of September 30, 2025. The company's journey began with a vision to integrate experienced regional operators, a strategy that fueled its growth for over a decade.

The year 2024 marked a profound strategic pivot for NSA with the internalization of its Participating Regional Operator (PRO) structure. This monumental undertaking involved consolidating 12 brands down to seven, integrating approximately 250 properties and over 380 employees onto a unified corporate platform, and migrating all stores to a single property management system and a centralized web domain, nsastorage.com. This move was a long-term strategic objective, designed to enhance scale, drive operational efficiencies, and directly benefit shareholder returns by eliminating the previous profit-sharing model with PROs.

The self-storage industry, while historically resilient, has faced headwinds from elevated new supply and muted demand stemming from historically low housing turnover. However, the outlook for 2026 and beyond appears increasingly favorable. New supply is projected to decline significantly, with rentable square feet as a percentage of stock expected to fall from 3.5% in 2024 to 2% by 2027, well below the long-term national average. This shift is anticipated to rebalance the supply-demand dynamics, creating a healthier operating environment. Furthermore, an eventual recovery in the housing market, coupled with potential Fed interest rate cuts, could unlock pent-up demand and accelerate the current inflection in fundamentals.

Competitive Landscape and NSA's Differentiated Approach

NSA operates within a highly fragmented yet competitive self-storage market. Its primary direct competitors among publicly traded REITs include Public Storage (PSA), Extra Space Storage (EXR), and CubeSmart (CUBE). While these rivals boast significant scale and market presence, NSA distinguishes itself through a regionally focused operational strategy, now bolstered by its internalized platform.

Public Storage, as one of the largest players, benefits from extensive brand recognition and a broad national footprint, often demonstrating consistently strong profitability and cash flow. Extra Space Storage leverages a robust third-party management and joint venture model, emphasizing technology integration and flexible business structures. CubeSmart focuses on customer-centric services and technology-enhanced experiences, particularly in digital tools for rentals.

NSA's strategic response to this competitive environment centers on optimizing its operational control and leveraging its technological advancements. The company believes its ability to pull levers on both occupancy and rate provides a growth advantage. While NSA's scale may be smaller than some peers, its post-internalization structure allows for more direct control over property decisions and a more unified approach to revenue management and marketing. The 75% third-party interest in its unconsolidated real estate ventures, valued at approximately $2.10 billion, also represents a significant potential acquisition opportunity, offering a clear path for future growth.

Technological Edge and Operational Excellence

NSA's strategic transformation is deeply intertwined with its technological advancements, which are now central to its competitive moat and operational efficiency. The company has invested significantly in consolidating and upgrading its digital infrastructure.

The core of NSA's technological differentiation lies in its centralized operating platforms and upgraded marketing and pricing tools. By migrating all stores to a single property management system and unifying its web presence under nsastorage.com, NSA has created a powerful, data-driven ecosystem. This consolidation allows for enhanced pricing algorithms to optimize rate decisions and a more efficient, centralized marketing platform. The tangible benefits are already emerging: in October 2025, web shopping sessions were up 23% year-over-year, and the conversion rate increased by 7.1%. This indicates improved visibility and effectiveness in attracting new customers.

Furthermore, NSA is actively integrating Artificial Intelligence (AI) into its operations. In its call center, AI now handles 15% of the total incoming call volume, successfully resolving customer inquiries without human intervention. This not only drives efficiency but also allows human agents to focus on more complex interactions, optimizing staffing levels and reducing personnel costs. The company is also exploring how AI can further assist call center agents and store personnel.

A significant customer-centric innovation is "My Storage Navigator," a self-service tool launched at NSA's stores. Customers can scan a QR code with their cell phone and complete a transaction 100% independently, without requiring a manager. This caters to the evolving consumer preference for digital interactions, with approximately 65% of total rental volume now originating from digital platforms, and 40% of customers completing transactions entirely on their own. This technology enhances convenience, reduces friction in the rental process, and positions NSA to capture demand from tech-savvy consumers.

The "so what" for investors is clear: these technological investments contribute directly to NSA's competitive advantage and financial performance. The centralized platforms enable more precise revenue management, leading to better contract rates and optimized occupancy. The AI and self-service tools drive operational efficiencies, potentially lowering operating expenses and improving margins. This technological roadmap, continuously refined through data analysis and machine learning, allows NSA to adapt rapidly to market dynamics and customer behaviors, strengthening its market positioning and supporting long-term growth.

Financial Performance and Liquidity

NSA's recent financial performance reflects the initial challenges and subsequent sequential improvements following its strategic transformation. For the three months ended September 30, 2025, total revenue decreased by $4.90 million, or 2.5%, year-over-year, primarily due to a decline in total portfolio average occupancy from 86% to 84.5% and the sale of 12 self-storage properties. Rental revenue, the core component, saw a 2.6% decrease, driven by similar factors. However, management highlighted a meaningful improvement, with rental revenue down 2.2% year-over-year in Q3 2025, compared to negative 3.2% in the first half of 2025.

Despite revenue pressures, management fees and other revenue increased by 5% in Q3 2025, largely due to increased tenant insurance activity and higher management fees from new joint ventures. Property operating expenses rose by 5%, influenced by increases in marketing, personnel costs, and property taxes, although some of this was offset by property sales. General and administrative expenses, however, decreased by 12.6% in Q3 2025, a direct benefit of the internalized PRO structure. Interest expense increased by 2.5% due to the maturity of interest rate swaps, exposing more debt to variable rates.

Notably, equity in earnings/losses of unconsolidated real estate ventures improved significantly, moving from a $4.70 million loss in Q3 2024 to a $0.50 million gain in Q3 2025.

NSA maintains a healthy liquidity position. As of September 30, 2025, the company had $543.60 million of remaining Revolver commitments available under its $1.35 billion credit facility, which also has an expansion option up to $1.90 billion. Subsequent to quarter-end, NSA amended its credit facility to remove a 10 basis point SOFR index adjustment on certain term loans, resulting in nearly $1 million in annual interest savings. The company has no significant debt maturities until the second half of 2026. Net debt-to-EBITDA stood at 6.7x at quarter-end, a slight improvement from 6.8x in Q2 2025. NSA's capital recycling program, which involves strategic dispositions to deleverage and fund attractive investments, is a key component of its financial strategy.

Strategic Growth and Forward Outlook

NSA's management expresses a positive outlook for the self-storage sector in 2026 and beyond, anticipating a "solid inflection off of the bottom". This optimism is grounded in several factors: the expected decline in new supply, the potential for increased demand from a housing market recovery, and the benefits of lower interest rates on borrowing costs and acquisition activity.

The company's strategic initiatives are designed to capitalize on this improving backdrop. NSA is focused on enhancing marketing and revenue management, optimizing staffing, and controlling expenses. These efforts are already showing results, with contract rates in October 2025 improving by 160 basis points year-over-year and occupancy holding relatively flat. The PRO stores, in particular, demonstrated a 10.1% improvement in net rental square footage in Q3 2025, indicating the positive impact of rebranding and centralized platforms.

A new growth driver is the recently launched preferred investment program with a former PRO, the Investment Real Estate Group. This program allows NSA to make accretive investments in value-add self-storage deals, targeting an initial cash flow priority up to a 10% preferred return, with the unpaid portion accruing and paid over time. These deals often involve undermanaged properties or those with expansion opportunities, and NSA has a right of first offer on properties acquired by the joint venture, creating a captive acquisition pipeline. This strategy is expected to "help return NSA to being a growth company".

While NSA maintained its 2025 guidance ranges for same-store growth and core FFO per share, the midpoint implies continued improvement in the pace of growth for Q4 2025, building on the Q3 inflection and providing confidence for positive momentum into 2026. Management anticipates exiting 2025 with positive same-store NOI growth in the low-to-mid single digits.

Risks and Challenges

Despite the positive momentum, NSA faces several risks. The macroeconomic environment, including interest rate volatility and inflationary pressures, remains a concern, impacting interest expense and property operating costs. The pace of housing market recovery, while anticipated, remains uncertain, and a prolonged slowdown could temper demand. New supply, though projected to decline, still needs to be absorbed in several markets, maintaining competitive pressure.

Tariff actions by the U.S. and other countries also present a risk, potentially affecting business conditions and access to capital, though NSA has not yet seen a direct impact. The company's dividend payout ratio is currently above its earnings, a situation management is actively monitoring with the expectation that growing FFO will improve this metric.

Conclusion

National Storage Affiliates is emerging from a period of significant strategic transformation, having successfully internalized its PRO structure and consolidated its operational and technological platforms. This foundational shift, coupled with a disciplined approach to capital allocation and the introduction of innovative growth programs like the preferred investment vehicle, positions NSA for a compelling growth trajectory. The company's focus on leveraging technology to drive efficiencies in marketing, pricing, and customer engagement is a clear differentiator, enhancing its competitive standing in a fragmented market.

While macroeconomic uncertainties and competitive pressures persist, the anticipated decline in new self-storage supply and the eventual recovery of the housing market provide a favorable backdrop. NSA's sequential operational improvements, particularly in same-store revenue growth and contract rates, signal a positive inflection point. For discerning investors, NSA presents a compelling investment thesis rooted in its strategic evolution, technological leadership, and a clear path to unlocking future earnings growth within a resilient industry.