National Storage Affiliates Trust Reports Third Quarter 2024 Results

Business Wire

Wed, Oct 30, 2024, 2:05 PM 18 min read

Reported net income of $29.8 million for the third quarter of 2024, a decrease of 30.9% compared to the third quarter of 2023. Reported diluted earnings per share of $0.18 for the third quarter of 2024 compared to $0.26 for the third quarter of 2023.
Reported core funds from operations ("Core FFO") of $83.9 million, or $0.62 per share and unit for the third quarter of 2024, a decrease of 7.5% per share compared to the third quarter of 2023.
Reported a decrease in same store net operating income ("NOI") of 5.3% for the third quarter of 2024 compared to the same period in 2023, driven by a 3.5% decrease in same store total revenues and an increase of 1.2% in same store property operating expenses.
Reported same store period-end occupancy of 85.6% as of September 30, 2024, a decrease of 270 basis points compared to September 30, 2023.
One of the Company's unconsolidated real estate ventures acquired 18 self storage properties for approximately $147.9 million, in two separate transactions. The venture financed the acquisitions with capital contributions from the venture members, of which the Company contributed approximately $37.0 million.
On September 5, 2024, the Company issued $350.0 million of senior unsecured notes with a weighted average interest rate of 5.6% and a weighted average maturity of 7.6 years in a private placement with institutional investors.
As previously announced, effective July 1, 2024 (the "Closing Date"), the Company completed the internalization of its participating regional operator ("PRO") structure. As a result, the Company purchased the PROs' management contracts, and in some cases, their brand names, related intellectual property and certain rights related to the PROs' tenant insurance programs. As of the Closing Date, the Company will no longer pay supervisory and administrative fees or reimbursements under the previous agreements with the PROs. The Company continues to transition the majority of operations in a phased approach, which has begun and is expected to continue over the 12 month period following the Closing Date, and the Company has executed new asset management and property management agreements with a number of the PROs for all or a part of this transitionary period at newly negotiated management fees. In connection with the internalization, on July 1, 2024, 11,906,167 subordinated performance units and DownREIT subordinated performance units were converted into 17,984,787 OP units and DownREIT OP units.

David Cramer, President and Chief Executive Officer, commented, "We are pleased to announce that all our team members are safe following Hurricanes Helene and Milton. We hope that all affected by these storms remain safe, and we wish them the best as they work their way through the tough recovery period. While several of our facilities in the path of these storms experienced minor damage, largely impacting gates, roofs, and signage, all of our stores are back open for business. Separately, we made meaningful progress on our PRO internalization during the quarter, and I am very proud of our team’s effort on this significant transition for our company. Although still early, we are encouraged by the benefits that we are already starting to realize from implementing consistent marketing and pricing strategies while utilizing a centralized web platform."

Mr. Cramer further commented, "Results for the quarter were in line with our expectations, as our team did a good job navigating the competitive operating environment while working on the PRO transition. On a positive note, the transaction environment is improving as we are seeing more deals come to market, with sellers becoming more realistic about pricing. As a result, we acquired 18 properties totaling almost $150 million through our 2023 Joint Venture during the quarter. Further, we opportunistically accessed the debt private placement market by issuing $350 million of senior unsecured notes with a weighted average coupon of 5.6%. The combination of an improving acquisition environment, more attractive cost of capital and the benefits from the internalization of the PRO structure, make us excited about what the future holds for NSA."

Financial Results

($ in thousands, except per share and unit data)	Three Months Ended September 30,						Nine Months Ended September 30,
	2024		2023		Change		2024		2023			Change
Net income	$	29,771	$	43,064	(30.9	)%	$	157,139	$	128,932		21.9	%

Funds From Operations ("FFO")⁽¹⁾	$	82,365	$	85,418	(3.6	)%	$	224,377	$	258,161		(13.1	)%
Add back acquisition costs		287		341	(15.8	)%		1,274		1,424		(10.5	)%
Add integration and executive severance costs⁽²⁾		907		—	—	%		1,534		—		—	%
Subtract casualty-related recoveries⁽³⁾		—		—	—	%		—		(522	)	—	%
Add loss on early extinguishment of debt		323		—	—	%		323		758		(57.4	)%
Core FFO⁽¹⁾	$	83,882	$	85,759	(2.2	)%	$	227,508	$	259,821		(12.4	)%

Earnings per share - basic	$	0.18	$	0.28	(35.7	)%	$	1.03	$	0.83		24.1	%
Earnings per share - diluted	$	0.18	$	0.26	(30.8	)%	$	1.03	$	0.77		33.8	%

FFO per share and unit⁽¹⁾	$	0.61	$	0.67	(9.0	)%	$	1.81	$	1.99		(9.0	)%
Core FFO per share and unit⁽¹⁾	$	0.62	$	0.67	(7.5	)%	$	1.84	$	2.01		(8.5	)%

(1)		Non-GAAP financial measures, including FFO, Core FFO and NOI, are defined in the Glossary in the supplemental financial information and, where appropriate, reconciliations of these measures and other non-GAAP financial measures to their most directly comparable GAAP measures are included in the Schedules to this press release and in the supplemental financial information.
(2)		Integration costs relate to expenses incurred as a part of the internalization of the PRO structure. Executive severance costs are recorded within the line items "General and administrative expenses" and "Non-operating (expense) income" in our consolidated statements of operations.
(3)		Casualty-related recoveries relate to casualty-related expenses incurred during 2022 and are recorded in the line item "Other" within operating expenses in our consolidated statements of operations.

Net income decreased $13.3 million for the third quarter of 2024 and increased $28.2 million for the nine months ended September 30, 2024 ("year-to-date") as compared to the same periods in 2023. The decrease in net income in the third quarter of 2024 was primarily due to a decrease in NOI, primarily driven by (i) the sale of 32 self storage properties to a third party in December 2023, (ii) the contribution of 56 self storage properties to a joint venture between a subsidiary of NSA and a subsidiary of Heitman Capital Management, LLC (the "2024 Joint Venture"), in the first quarter of 2024, and (iii) the sale of 40 self storage properties to third parties in the nine months ended September 30, 2024, partially offset by decreases in depreciation expense of $8.2 million and interest expense of $3.5 million. The year-to-date increase in net income resulted primarily from the gain on the sale of 40 self storage properties to third parties and 56 self storage properties contributed to the 2024 Joint Venture during the nine months ended September 30, 2024.

The decreases in FFO and Core FFO for the third quarter of 2024 and year-to-date were the result of a decrease in NOI of 14.5% and 12.4%, respectively, which were partially offset by a decrease in interest expense of 8.1% and 4.8%, respectively, as compared to the same periods in 2023. The decrease in FFO and Core FFO per share and unit for the third quarter of 2024 and year-to-date was largely driven by a decrease in same store NOI, partially offset by decreased management fees paid to former PROs, reflected within general and administrative expenses, following the internalization of the PRO structure.

Same Store Operating Results (776 Stores)

($ in thousands, except per square foot data)	Three Months Ended September 30,								Nine Months Ended September 30,
	2024			2023			Change		2024			2023			Change
Total revenues	$	174,808		$	181,211		(3.5	)%	$	522,861		$	536,982		(2.6	)%
Property operating expenses		50,164			49,566		1.2	%		149,659			144,674		3.4	%
Net Operating Income (NOI)	$	124,644		$	131,645		(5.3	)%	$	373,202		$	392,308		(4.9	)%
NOI Margin		71.3	%		72.6	%	(1.3	)%		71.4	%		73.1	%	(1.7	)%

Average Occupancy		86.3	%		89.2	%	(2.9	)%		86.1	%		89.4	%	(3.3	)%
Average Annualized Rental Revenue Per Occupied Square Foot	$	15.67		$	15.81		(0.9	)%	$	15.72		$	15.61		0.7	%

Year-over-year same store total revenues decreased 3.5% for the third quarter of 2024 and 2.6% year-to-date as compared to the same period in 2023. The decrease for the third quarter was driven primarily by a 290 basis point decrease in average occupancy and a 0.9% decrease in average annualized rental revenue per occupied square foot. The year-to-date same store total revenue decrease was driven primarily by a 330 basis point decrease in average occupancy, partially offset by a 0.7% increase in average annualized rental revenue per occupied square foot. Markets which generated above portfolio average same store total revenue growth for the third quarter of 2024 include: San Juan, Wichita and Portland. Markets which generated below portfolio average same store total revenue growth for the third quarter of 2024 include: Atlanta, Phoenix and Sarasota-Bradenton.

Year-over-year same store property operating expenses increased 1.2% for the third quarter of 2024 and 3.4% year-to-date as compared to the same periods in 2023. The increases in the third quarter of 2024 primarily resulted from increases in property tax and insurance expense.

Investment Activity

During the third quarter, a joint venture between a subsidiary of NSA and a state pension fund advised by Heitman Capital Management, LLC (the "2023 Joint Venture") acquired 18 self storage properties for approximately $147.9 million in two separate transactions. The 2023 Joint Venture financed the acquisitions with capital contributions from the venture members, of which the Company contributed approximately $37.0 million.

On July 1, 2024, as part of the internalization of the PRO structure, the Company paid consideration in cash and equity for the purchase of the PRO management contracts and, in some cases, their brand names and related intellectual property at a value of approximately $34.6 million and to acquire certain rights with respect to each PROs' tenant insurance programs at a value of approximately $60.3 million. The total cash and equity consideration for these transactions consisted of approximately $32.6 million in cash and the issuance of 1,548,866 OP units.

Balance Sheet

On September 5, 2024, NSA issued $75.0 million of 5.40% senior unsecured notes due September 5, 2028, $125.0 million of 5.55% senior unsecured notes due September 5, 2031 and $150.0 million of 5.74% senior unsecured notes due September 5, 2034 in a private placement with institutional investors. The Company used the proceeds from the private placement to repay its $325.0 million Tranche C term loan, which addresses all debt maturities in 2025, a portion of the revolving line of credit and for general corporate purposes.

Common Share Dividends

On August 15, 2024, NSA's Board of Trustees declared a quarterly cash dividend of $0.56 per common share. The third quarter 2024 dividend was paid on September 30, 2024 to shareholders of record as of September 13, 2024.

2024 Guidance

NSA reaffirms its previously provided Core FFO guidance estimates and related assumptions for the year ended December 31, 2024.

	Current Ranges for Full Year 2024						Actual Results for Full Year 2023
	Low			High			Actual Results for Full Year 2023
Core FFO per share⁽¹⁾	$	2.36		$	2.44		$	2.69

Same store operations⁽²⁾
Total revenue growth		(3.75	)%		(2.25	)%		2.4	%
Property operating expenses growth		3.5	%		5.0	%		4.7	%
NOI growth		(6.5	)%		(4.5	)%		1.6	%

General and administrative expenses
General and administrative expenses (excluding equity-based compensation), in millions	$	50.0		$	52.0		$	52.6
Equity-based compensation, in millions	$	7.75		$	8.25		$	6.7

Management fees and other revenue, in millions	$	39.5		$	41.5		$	34.4
Core FFO from unconsolidated real estate ventures, in millions	$	22.0		$	24.0		$	24.6

Subordinated performance unit distributions, in millions	$	21.6		$	21.6		$	49.0

Acquisitions of self storage properties, in millions	$	100.0		$	300.0		$	229.5


	Current Ranges for Full Year 2024
	Low			High
Earnings per share - diluted	$	1.10		$	1.17
Impact of the difference in weighted average number of shares and GAAP accounting for noncontrolling interests, two-class method and treasury stock method		0.18			0.11
Add real estate depreciation and amortization		1.45			1.49
Add (subtract) equity in losses (earnings) of unconsolidated real estate ventures		0.11			0.13
Add NSA's share of FFO of unconsolidated real estate ventures		0.17			0.19
FFO attributable to subordinated unitholders		(0.17	)		(0.17	)
Less gain on sale of self storage properties		(0.50	)		(0.50	)
Add integration and executive severance costs		0.01			0.01
Add acquisition costs and NSA's share of unconsolidated real estate venture acquisition costs		0.01			0.01
Core FFO per share and unit	$	2.36		$	2.44

(1) The table above provides a reconciliation of the range of estimated earnings per share - diluted to estimated Core FFO per share and unit.
(2) 2024 guidance reflects NSA's 2024 same store pool comprising 776 stores. 2023 actual results reflect NSA's 2023 same store pool comprising 724 stores.

Supplemental Financial Information

The full text of this earnings release and supplemental financial information, including certain financial information referenced in this release, are available on NSA's website at https://ir.nsastorage.com and as exhibit 99.1 to the Company's Form 8-K furnished to the SEC on October 30, 2024.

Non-GAAP Financial Measures & Glossary

This press release contains certain non-GAAP financial measures. These non-GAAP measures are presented because NSA's management believes these measures help investors understand NSA's business, performance and ability to earn and distribute cash to its shareholders by providing perspectives not immediately apparent from net income (loss). These measures are also frequently used by securities analysts, investors and other interested parties. The presentations of FFO, Core FFO and NOI in this press release are not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. In addition, NSA's method of calculating these measures may be different from methods used by other companies, and, accordingly, may not be comparable to similar measures as calculated by other companies that do not use the same methodology as NSA. These measures, and other words and phrases used herein, are defined in the Glossary in the supplemental financial information and, where appropriate, reconciliations of these measures and other non-GAAP financial measures to their most directly comparable GAAP measures are included in the Schedules to this press release and in the supplemental financial information.

Quarterly Teleconference and Webcast

The Company will host a conference call at 1:00 pm Eastern Daylight Time on Thursday, October 31, 2024 to discuss its third quarter 2024 financial results. At the conclusion of the call, management will accept questions from certified financial analysts. All other participants are encouraged to listen to a webcast of the call by accessing the link found on the Company's website at www.nsastorage.com.

Conference Call and Webcast:

Date/Time: Thursday, October 31, 2024, 1:00 pm EDT

Webcast available at: www.nsastorage.com

Domestic (Toll Free US & Canada): 877.407.9711

International: 412.902.1014

A replay of the webcast will be available for 30 days on NSA's website at www.nsastorage.com.

Upcoming Industry Conference

NSA management is scheduled to participate in the upcoming Nareit REITworld 2024 Annual Conference on November 18 – 20, 2024 in Las Vegas, Nevada, and the Jefferies Real Estate Conference on December 10 – 11, 2024 in Miami Beach, Florida.

About National Storage Affiliates Trust

National Storage Affiliates Trust is a real estate investment trust headquartered in Greenwood Village, Colorado, focused on the ownership, operation and acquisition of self storage properties predominantly located within the top 100 metropolitan statistical areas throughout the United States. As of September 30, 2024, the Company held ownership interests in and operated 1,070 self storage properties located in 42 states and Puerto Rico with approximately 70.0 million rentable square feet. NSA is one of the largest owners and operators of self storage properties among public and private companies in the United States. For more information, please visit the Company’s website at www.nsastorage.com. NSA is included in the MSCI US REIT Index (RMS/RMZ), the Russell 1000 Index of Companies and the S&P MidCap 400 Index.

NOTE REGARDING FORWARD LOOKING STATEMENTS

Certain statements contained in this press release constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the Company's control. These forward-looking statements include information about possible or assumed future results of the Company's business, financial condition, liquidity, results of operations, plans and objectives. Changes in any circumstances may cause the Company's actual results to differ significantly from those expressed in any forward-looking statement. When used in this release, the words "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may" or similar expressions are intended to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: market trends in the Company's industry, interest rates, inflation, the debt and lending markets or the general economy; the Company's business and investment strategy; the acquisition of properties, including those under contract and the Company's ability to execute on its acquisition pipeline; the timing of acquisitions under contract; and the Company's guidance estimates for the year ended December 31, 2024. For a further list and description of such risks and uncertainties, see the Company's most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the Securities and Exchange Commission, and the other documents filed by the Company with the Securities and Exchange Commission. The forward-looking statements, and other risks, uncertainties and factors are based on the Company's beliefs, assumptions and expectations of its future performance, taking into account all information currently available to the Company. Forward-looking statements are not predictions of future events. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

National Storage Affiliates Trust Consolidated Statements of Operations (in thousands, except per share amounts) (unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
REVENUE
Rental revenue	$	174,467		$	201,833		$	529,218		$	595,273
Other property-related revenue		7,405			7,764			20,654			22,184
Management fees and other revenue		11,749			9,550			30,345			25,194
Total revenue		193,621			219,147			580,217			642,651
OPERATING EXPENSES
Property operating expenses		52,712			58,581			159,607			172,158
General and administrative expenses		13,114			15,100			44,977			44,325
Depreciation and amortization		47,661			55,842			141,702			168,005
Other		3,643			4,138			10,510			8,531
Total operating expenses		117,130			133,661			356,796			393,019
OTHER INCOME (EXPENSE)
Interest expense		(39,575	)		(43,065	)		(114,920	)		(120,706	)
Loss on early extinguishment of debt		(323	)		—			(323	)		(758	)
Equity in (losses) earnings of unconsolidated real estate ventures		(4,712	)		1,930			(10,791	)		5,469
Acquisition and integration costs		(1,164	)		(341	)		(2,151	)		(1,424	)
Non-operating (expense) income		(83	)		(24	)		352			(426	)
Gain on sale of self storage properties		—			—			63,841			—
Other expense, net		(45,857	)		(41,500	)		(63,992	)		(117,845	)
Income before income taxes		30,634			43,986			159,429			131,787
Income tax expense		(863	)		(922	)		(2,290	)		(2,855	)
Net income		29,771			43,064			157,139			128,932
Net income attributable to noncontrolling interests		(11,070	)		(13,827	)		(62,349	)		(41,290	)
Net income attributable to National Storage Affiliates Trust		18,701			29,237			94,790			87,642
Distributions to preferred shareholders		(5,112	)		(5,110	)		(15,332	)		(13,908	)
Net income attributable to common shareholders	$	13,589		$	24,127		$	79,458		$	73,734

Earnings per share - basic	$	0.18		$	0.28		$	1.03		$	0.83
Earnings per share - diluted	$	0.18		$	0.26		$	1.03		$	0.77

Weighted average shares outstanding - basic		75,760			87,004			77,047			88,263
Weighted average shares outstanding - diluted		75,760			146,118			77,047			147,610

National Storage Affiliates Trust Consolidated Balance Sheets (dollars in thousands, except per share amounts) (unaudited)

	September 30,			December 31,
	2024			2023
ASSETS
Real estate
Self storage properties	$	5,821,364		$	5,792,174
Less accumulated depreciation		(1,006,543	)		(874,359	)
Self storage properties, net		4,814,821			4,917,815
Cash and cash equivalents		69,886			64,980
Restricted cash		8,539			22,713
Debt issuance costs, net		6,343			8,442
Investment in unconsolidated real estate ventures		257,381			211,361
Other assets, net		211,176			134,002
Assets held for sale, net		—			550,199
Operating lease right-of-use assets		21,515			22,299
Total assets	$	5,389,661		$	5,931,811
LIABILITIES AND EQUITY
Liabilities
Debt financing	$	3,428,304		$	3,658,205
Accounts payable and accrued liabilities		108,424			92,766
Interest rate swap liabilities		7,774			3,450
Operating lease liabilities		23,493			24,195
Deferred revenue		20,778			27,354
Total liabilities		3,588,773			3,805,970
Equity
Preferred shares of beneficial interest, par value $0.01 per share. 50,000,000 authorized, 14,692,381 and 14,685,716 issued (in series) and outstanding at September 30, 2024 and December 31, 2023, respectively, at liquidation preference		340,818			340,651
Common shares of beneficial interest, par value $0.01 per share. 250,000,000 shares authorized, 76,216,680 and 82,285,995 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively		762			823
Additional paid-in capital		1,124,533			1,509,563
Distributions in excess of earnings		(498,787	)		(449,907	)
Accumulated other comprehensive income		19,543			21,058
Total shareholders' equity		986,869			1,422,188
Noncontrolling interests		814,019			703,653
Total equity		1,800,888			2,125,841
Total liabilities and equity	$	5,389,661		$	5,931,811

Reconciliation of Net Income to FFO and Core FFO
(in thousands, except per share and unit amounts) (unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Net income	$	29,771		$	43,064		$	157,139		$	128,932
Add (subtract):
Real estate depreciation and amortization		47,286			55,528			140,588			167,078
Equity in losses (earnings) of unconsolidated real estate ventures		4,712			(1,930	)		10,791			(5,469	)
Company's share of FFO in unconsolidated real estate ventures		6,164			6,217			18,026			18,542
Gain on sale of self storage properties		—			—			(63,841	)		—
Distributions to preferred shareholders and unitholders		(5,568	)		(5,393	)		(16,704	)		(14,758	)
FFO attributable to subordinated performance units⁽¹⁾		—			(12,068	)		(21,622	)		(36,164	)
FFO attributable to common shareholders, OP unitholders, and LTIP unitholders		82,365			85,418			224,377			258,161
Add (subtract):
Acquisition costs		287			341			1,274			1,424
Integration and executive severance costs⁽²⁾		907			—			1,534			—
Casualty-related recoveries⁽³⁾		—			—			—			(522	)
Loss on early extinguishment of debt		323			—			323			758
Core FFO attributable to common shareholders, OP unitholders, and LTIP unitholders	$	83,882		$	85,759		$	227,508		$	259,821

Weighted average shares and units outstanding - FFO and Core FFO:⁽⁴⁾
Weighted average shares outstanding - basic		75,760			87,004			77,047			88,263
Weighted average restricted common shares outstanding		19			25			21			26
Weighted average OP units outstanding		52,740			38,030			42,709			38,504
Weighted average DownREIT OP unit equivalents outstanding		5,769			2,120			3,346			2,120
Weighted average LTIP units outstanding		663			562			676			545
Total weighted average shares and units outstanding - FFO and Core FFO		134,951			127,741			123,799			129,458

FFO per share and unit	$	0.61		$	0.67		$	1.81		$	1.99
Core FFO per share and unit	$	0.62		$	0.67		$	1.84		$	2.01

(1)		Amounts represent distributions declared for subordinated performance unitholders and DownREIT subordinated performance unitholders for the periods presented.
(2)		Integration costs relate to expenses incurred as a part of the internalization of the PRO structure. Executive severance costs are recorded within the line items "General and administrative expenses" and "Non-operating (expense) income" in our consolidated statements of operations.
(3)		Casualty-related recoveries relate to casualty-related expenses incurred during 2022 and are recorded in the line item "Other" within operating expenses in our consolidated statements of operations.
(4)		NSA combines OP units and DownREIT OP units with common shares because, after the applicable lock-out periods, OP units in the Company's operating partnership are redeemable for cash or, at NSA's option, exchangeable for common shares on a one-for-one basis and DownREIT OP units are also redeemable for cash or, at NSA's option, exchangeable for OP units in the Company's operating partnership on a one-for-one basis, subject to certain adjustments in each case. LTIP units may also, under certain circumstances, be convertible into or exchangeable for common shares (or other units that are convertible into or exchangeable for common shares). All subordinated performance units and DownREIT subordinated performance units were converted into OP units on July 1, 2024, in connection with the internalization of the PRO structure. See footnote⁽⁵⁾ for additional discussion of subordinated performance units, DownREIT subordinated performance units, and LTIP units in the calculation of FFO and Core FFO per share and unit.

Reconciliation of Earnings Per Share - Diluted to FFO and Core FFO Per Share and Unit
(in thousands, except per share and unit amounts) (unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Earnings per share - diluted	$	0.18		$	0.26		$	1.03		$	0.77
Impact of the difference in weighted average number of shares⁽⁵⁾		(0.08	)		0.04			(0.39	)		0.11
Impact of GAAP accounting for noncontrolling interests, two-class method and treasury stock method⁽⁶⁾		0.08			—			0.49			—
Add real estate depreciation and amortization		0.35			0.44			1.14			1.29
Add (subtract) equity in losses (earnings) of unconsolidated real estate ventures		0.03			(0.02	)		0.08			(0.04	)
Add Company's share of FFO in unconsolidated real estate ventures		0.05			0.05			0.15			0.14
Subtract gain on sale of self storage properties		—			—			(0.52	)		—
FFO attributable to subordinated performance unitholders		—			(0.10	)		(0.17	)		(0.28	)
FFO per share and unit		0.61			0.67			1.81			1.99
Add acquisition costs		—			—			0.01			0.01
Add integration and executive severance costs		0.01			—			0.02			—
Add loss on early extinguishment of debt		—			—			—			0.01
Core FFO per share and unit	$	0.62		$	0.67		$	1.84		$	2.01

(5)		Adjustment accounts for the difference between the weighted average number of shares used to calculate diluted earnings per share and the weighted average number of shares used to calculate FFO and Core FFO per share and unit. Diluted earnings per share is calculated using the two-class method for the company's restricted common shares and the treasury stock method for certain unvested LTIP units, and assumes the conversion of vested LTIP units into OP units on a one-for-one basis and the hypothetical conversion of subordinated performance units, and DownREIT subordinated performance units into OP units, even though such units may only be convertible into OP units (i) after a lock-out period and (ii) upon certain events or conditions. All outstanding subordinated performance units and DownREIT subordinated performance units were converted into OP units on July 1, 2024, in connection with the internalization of the PRO structure. The computation of weighted average shares and units for FFO and Core FFO per share and unit includes all restricted common shares and LTIP units that participate in distributions and excludes all subordinated performance units and DownREIT subordinated performance units because their effect has been accounted for through the allocation of FFO to the related unitholders based on distributions declared.
(6)		Represents the effect of adjusting the numerator to consolidated net income prior to GAAP allocations for noncontrolling interests, after deducting preferred share and unit distributions, and before the application of the two-class method and treasury stock method, as described in footnote⁽⁵⁾.

Net Operating Income
(dollars in thousands) (unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Net income	$	29,771		$	43,064		$	157,139		$	128,932
(Subtract) add:
Management fees and other revenue		(11,749	)		(9,550	)		(30,345	)		(25,194	)
General and administrative expenses		13,114			15,100			44,977			44,325
Other		3,643			4,138			10,510			8,531
Depreciation and amortization		47,661			55,842			141,702			168,005
Interest expense		39,575			43,065			114,920			120,706
Equity in losses (earnings) of unconsolidated real estate ventures		4,712			(1,930	)		10,791			(5,469	)
Loss on early extinguishment of debt		323			—			323			758
Acquisition and integration costs		1,164			341			2,151			1,424
Income tax expense		863			922			2,290			2,855
Gain on sale of self storage properties		—			—			(63,841	)		—
Non-operating expense (income)		83			24			(352	)		426
Net Operating Income	$	129,160		$	151,016		$	390,265		$	445,299

EBITDA and Adjusted EBITDA (dollars in thousands) (unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Net income	$	29,771		$	43,064		$	157,139		$	128,932
Add:
Depreciation and amortization		47,661			55,842			141,702			168,005
Company's share of unconsolidated real estate ventures depreciation and amortization		5,418			4,287			15,110			13,073
Interest expense		39,575			43,065			114,920			120,706
Income tax expense		863			922			2,290			2,855
Loss on early extinguishment of debt		323			—			323			758
EBITDA		123,611			147,180			431,484			434,329
Add (subtract):
Acquisition costs		287			341			1,274			1,424
Effect of hypothetical liquidation at book value (HLBV) accounting for unconsolidated 2024 Joint Venture⁽¹⁾		5,458			—			13,707			—
Gain on sale of self storage properties		—			—			(63,841	)		—
Integration and executive severance costs, excluding equity-based compensation⁽²⁾		877			—			1,100			—
Casualty-related recoveries⁽³⁾		—			—			—			(522	)
Equity-based compensation expense		1,911			1,702			6,097			5,028
Adjusted EBITDA	$	132,144		$	149,223		$	389,821		$	440,259

(1)		Reflects the non-cash impact of applying HLBV to the 2024 Joint Venture, which allocates GAAP income (loss) on a hypothetical liquidation of the underlying joint venture at book value as of the reporting date.
(2)		Integration costs relate to expenses incurred as a part of the internalization of the PRO structure. Executive severance costs are recorded within the line items "General and administrative expenses" and "Non-operating (expense) income" in our consolidated statements of operations.
(3)		Casualty-related recoveries relate to casualty-related expenses incurred during 2022 and are recorded in the line item "Other" within operating expenses in our consolidated statements of operations.