National Storage Affiliates is a publicly-traded real estate investment trust (REIT) focused on the self-storage sector. The company controls 784 properties across 35 states and Puerto Rico with 49 million rentable square feet, making it the sixth-largest U.S. operator. However, it's currently the smallest publicly traded self-storage REIT at 2.6% of the U.S. self-storage market by square footage, well below industry behemoth Public Storage (NYSE: PSA) and its 9% market share.
What differentiates National Storage Affiliates from other self-storage REITs is how it owns its properties. Instead of consolidating all its operations under one national brand, National Storage Affiliates maintains the regional identity of the self-storage operators it buys through a unique ownership structure known as a Participating Regional Operator (PRO).
Under this structure, an operator will contribute their property portfolio through a tax-efficient UPREIT structure, and in exchange, they will receive equity in National Storage Affiliates. PROs then enter a management contract to continue managing and growing their portfolio under the corporate umbrella of National Storage Affiliates. Currently, 341 properties are part of the PRO program, operating under the following brands:
- Guardian Storage Centers: Responsible for facilities throughout California, Arizona, and Nevada.
- Hide-Away Storage Services: Responsible for covering the western Florida market.
- Moove In Self Storage: Responsible for properties throughout Pennsylvania, Maryland, New Jersey, and New York.
- Move It Self Storage: Responsible for covering portions of Alabama, Florida, Louisiana, Mississippi, and Texas.
- Northwest Self Storage: Responsible for covering the northwest region and operates facilities throughout Oregon and Washington.
- Optivest Properties: Responsible for managing properties across Arizona, California, Massachusetts, Nevada, New Hampshire, New Mexico, and Texas.
- Personal Mini Storage: Responsible for covering portions of the central Florida market.
- Southern Self Storage: Responsible for covering the southern region, including Florida, Louisiana, Georgia, and Puerto Rico.
- Storage Solutions: Responsible for covering portions of the Arizona market.
National Storage Affiliates also operates the wholly-owned iStorage and SecurCare brands that own a combined 266 locations. In addition to that, those two brands manage 177 joint venture properties for National Storage Affiliates.
The PRO structure has several benefits for regional self-storage operators and National Storage Affiliates. For operators, it provides the ability to monetize their investment while maintaining property management, participating in the upside, and enhancing their NOI through best practices, as well as the opportunity and incentives to grow their portfolio. Meanwhile, National Storage Affiliates benefits from the growth of these brands with some downside protection as PROs absorb more of a decline in NOI during a recession. The company's unique PRO structure also gives it a competitive advantage over its larger rivals. It allows the REIT to acquire top private operators who aren't yet ready to give up full control. The company can provide liquidity and capital to these operators while allowing them to continue growing their business and participate in that upside.
National Storage Affiliates sees significant expansion potential in its PRO program, where it targets top private operators with 20 or more high-quality properties in the top 100 markets. It noted that the leading 100 operators -- excluding its publicly traded REIT peers -- own or manage 4,500 self-storage facilities.
In addition to bringing more PROs into the fold, the REIT has an extensive pipeline of acquisition opportunities thanks to its existing relationships. It has a captive acquisition pipeline of more than 140 properties worth an estimated $1.4 billion. Meanwhile, its joint ventures control 177 properties worth an estimated $2 billion, implying the potential to invest up to $1.5 billion to acquire full control of these portfolios in the future, given its current 25% interest.