National Storage (NSA) Q2 FFO Falls 11%

National Storage Affiliates Trust (NSA -1.94%), a real estate investment trust specializing in self-storage facilities, reported second quarter 2025 results on August 4, 2025. The update revealed declining key financial metrics, with core funds from operations per share at $0.55—significantly below the $0.62 Core FFO per share and unit reported in Q2 2024. GAAP revenue came in at $188.8 million, down 0.8% from a year ago. Diluted earnings per share (EPS) (GAAP) was $0.19. Weak demand in Sunbelt markets, elevated competition, and greater marketing spend contributed to declining margins and a reset of near-term expectations. Management’s assessment revised full-year guidance downward, with limited signs of near-term stabilization in key operating trends.

Business Overview and Current Strategic Priorities

National Storage Affiliates Trust operates a large network of self-storage properties across the United States and Puerto Rico, owning 1,067 stores with approximately 69.7 million rentable square feet as of June 30, 2025. with a focus on convenience and quality. The company competes within a fragmented self-storage industry, targeting portfolio growth by acquiring new properties, entering joint ventures, and operating efficiently at scale.

Recent years highlighted two primary focuses for the company: expanding by acquiring or partnering on self-storage assets and shifting toward an internalized property management platform. This latter strategy is intended to control costs and yield operational benefits, including improved marketing capabilities and more effective staffing across properties. Financial flexibility remains another key factor, as NSA balances growth against prudent leverage and regulatory compliance to maintain its real estate investment trust (REIT) status and capture market opportunities.

Quarter Highlights: Operations, Financial Results, and Developments

The quarter saw a slowdown in both top-line and operating results. Revenue declined 0.8% year over year, while Core funds from operations ("Core FFO"), a major REIT profitability measure that strips out gains, losses, and certain non-cash items, fell 11.3% compared to Q2 2024. This decline pointed to weaker earnings power for the business. Same store net operating income (a key measure of profitability for comparable properties owned at least a year) fell 6.1% (non-GAAP), driven by a 3.0% decrease in same store total revenues and a 4.6% increase in same store property operating expenses. These negative trends reflect persistent demand softness in core Sunbelt and suburban markets, where both occupancy and pricing have struggled.

Management described “sequential improvement” in contract rates, occupancy, and rent roll-down, but this progress was not enough to counteract broad weakness in existing home sales and elevated competitive pressures, particularly in markets like Atlanta, Dallas, and Phoenix. In those areas, same store revenue (non-GAAP) was down between 5.6% and 9.0%, and net operating income (non-GAAP) declines were even greater. Occupancy rates trended lower, with period-end occupancy in the same store pool dropped to 85.0% from 87.2% in Q2 2024, and average occupancy was 84.2%, down 240 basis points.

The internalization of the property management platform—completed in July 2024—remained a central initiative. Integration of these operations is designed to reduce general and administrative (G&A) expenses and increase efficiency. General and administrative (G&A) expenses (GAAP) decreased by $3.4 million, falling from $16.2 million in Q2 2024 to $12.8 million, a benefit attributed to decreased management fees paid to former PROs, reflected within general and administrative expenses after the internalization of the PRO structure. However, Increased marketing investment contributed to expense growth as the company worked to boost brand visibility and tenant traffic through higher digital and paid search spending. According to company disclosures, year-over-year same store property operating expenses increased 4.6% for Q2 2025 and 4.1% for the first six months of 2025, primarily driven by higher marketing, repairs and maintenance, and property tax expense.

NSA’s growth strategy through acquisitions and joint ventures slowed. Only one wholly-owned property was acquired alongside an annex (totaling $11.4 million in investment), and One joint venture property was purchased for approximately $18.0 million. Dispositions outpaced acquisitions, with NSA entering agreements to sell ten properties for approximately $66.5 million. This portfolio pruning reflects a more cautious stance, with near-term proceeds from asset sales targeted for debt reduction.

Operational pressures also led to increased use of move-in concessions—temporary discounts or promotions on new leases. Management confirmed these concessions were elevated, which lifted rental volumes but had a near-term negative effect on rental rates and revenue. While most larger metropolitan areas struggled, select markets like Portland and Houston saw positive same store revenue growth and stood out as exceptions to broader declines. Across the portfolio, average annualized rental revenue per occupied square foot (non-GAAP) stayed essentially flat at $15.68, down just 0.3% year over year.

On the capital side, NSA reported total debt of $3.40 billion as of June 30, 2025 and a net debt to adjusted EBITDA ratio of 6.8 times. Available liquidity remained healthy, with $544.1 million untapped on its credit revolver and no significant near-term maturities. The company’s quarterly dividend remained steady at $0.57 per share.

Looking Ahead: Guidance, Risks, and Potential Milestones

Management lowered its outlook for fiscal 2025, resetting core funds from operations per share ("Core FFO", non-GAAP) guidance to a range of $2.17–$2.23 for 2025 and cutting expectations for same store revenue and net operating income growth for 2025. updated projections now include further declines: same store revenue is expected to range from (3.0)% to (2.0)% year-over-year for 2025, and same store NOI from (5.75)% to (4.25)% year-over-year for 2025. The company also reduced planned acquisition activity, with $50–100 million expected for 2025 (consolidated and joint venture at share), down from the original $100–300 million range. These actions reflect management’s more pessimistic near-term view, especially given continued softness in Sunbelt storage demand and excess new supply entering many regional markets.

NSA’s updated approach signals a defensive position and ongoing caution until clearer signs of demand recovery emerge. The company acknowledged that elevated use of concessions had a near-term negative effect on rental rates and revenue, and that portfolio-level occupancy now sits below long-term averages. Portfolio reshaping, efficiency initiatives, and cost controls remain in focus, but improvement in occupancy, rates, and transaction growth will likely require stabilization in housing turnover and a less competitive supply environment. Investors will be watching for evidence of improved same store revenue metrics, further G&A savings from the management platform shift, and whether market exits translate over time into better margin performance. The quarterly dividend was unchanged at $0.57 per share.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.