Self-storage has been one of the most resilient industries in the commercial real estate (CRE) world during the pandemic. Like many other sectors of the economy, initial concerns resulted in some tenants falling behind, as well as a decrease in leasing, but the industry has rebounded and is growing quickly.
Most investors look to Public Storage (NYSE: PSA), the largest self-storage real estate investment trust (REIT) and one of the top five largest REITs by market cap to invest in. Afterall, its size and incredible reputation make it an appealing pick. But it's not the only storage REIT investors should have their eyes on. If you're considering buying shares in Public Storage, here's why you should consider National Storage Affiliates Trust (NYSE: NSA) instead.
Not your normal storage REIT
National Storage Affiliates Trust is the smallest self-storage REIT in the industry, but that doesn't mean it's any less worthy of a buy. In many ways, it actually means the company has a lot of room to grow, especially with its unique business model of owning and operating its portfolio.
Unlike most storage REITs, which operate under a singular brand, National Storage Affiliates Trusts works with regional operators investing in the company through an UPREIT structure called a Participating Regional Operator (PRO). A PRO allows individual brands to maintain their identities and operations while providing the company with interest in and a portion of the facilities' revenues.
This model, coupled with its joint venture partnerships, provides the company with interest or ownership in 844 properties, 667 of which are wholly owned, 379 are managed by its PROs, and 177 are jointly owned.
This unique way of owning and operating storage facilities puts the company at an advantage while minimizing overhead and utilizing in-place management for well-operating facilities. Considering this is still a relatively untapped market -- where the majority of storage facilities are mom-and-pop owners -- being able to use its regional partnerships to grow its presence in tertiary and major metro markets is a major upside.
Since mid-2015, NSA has consistently outperformed its competitors, including Public Storage, in terms of average same-store net operating income (NOI) growth, funds from operations (FFO) per share growth, total returns, and stock price growth.
This impressive growth has also allowed the company to consistently increase its dividends since going public. Right now, its dividend payouts provide investors with a 2.8% return, while Public Storage offers roughly a 2.5% return, a minute difference comparatively.
Looking at share price growth of Public Storage compared to National Storage Affiliates Trust over the past five years, NSA's share price has increased over 24% while Public Storage's has only grown 8% on an annualized basis. It's also important to note that shares for NSA are in the upper $50's, while Public Storage's are in the low $300's -- a big price difference for investors who may not have as much capital upfront to invest in.