Greetings and welcome to the National Storage Affiliates Fourth Quarter and Year End 2016 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Marti Dowling, Director of Investor Relations for National Storage Affiliates. Thank you. Miss Dowling, you may now begin.

Hello, everyone, we would like to thank you for joining us today for the fourth quarter and full year 2016 earnings conference call of National Storage Affiliates Trust. In addition to the press release distributed yesterday after market close, we have filed an 8-K with the SEC containing our supplemental package with additional details on our results, which may also be found in the Investor Relations section on our website at nationalstorageaffiliates.com. On today's call management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties. The Company cautions that actual results may differ materially from those projected in any forward-looking statement. For additional detail concerning our forward-looking statements, please refer to our public filings with the SEC. We encourage listeners to review the definitions and reconciliations of non-GAAP financial measures such as FFO, core FFO and net operating income contained in the supplemental information package available in the Investor Relations section on the company’s website and in filings made with the SEC. Today's conference call is hosted by National Storage Affiliates' Chief Executive Officer, Arlen Nordhagen; Chief Financial Officer, Tamara Fischer; and Senior Vice President of Operations, Steve Treadwell. Following prepared remarks management will accept questions from registered financial analysts. I will now turn the call over to Arlen.

Thanks, Marti, and welcome, everyone, to our year-end 2016 earnings conference call. To begin 2016 was a very strong year for NSA on all fronts. We realized robust growth across virtually our entire portfolio driving strong increases in all our operating metrics. We grew same store portfolio average occupancy by 210 basis points, increasing average occupancy to 90% for the year. Our average rent per square foot increased by 5.3% resulting in same store revenue and NOI increases of 7.7% and 10.2% respectively. It was another year of very strong acquisition growth further demonstrating the depth and quality of our pipeline and our unique ability to source and close accretive acquisitions through our PRO relationships. During 2016, we acquired and invested in a total of 173 high quality assets primarily in our core growth markets representing total investment of over $1.3 billion including the addition of our seventh PRO hideaway in April and the acquisition of our 66th property, iStorage portfolio through a joint venture with the major state pension fund. As a result, we ended the year with a portfolio of 448 self storage properties located in 23 states. In total, we have about 28 million rentable square feet, an increase of 75% from one year earlier and over 100% since our initial public offering. In 2016, we materially expanded and improved our balance sheet. We upsized our creditor facility to $725 million, closed on an additional $100 million term loan and issued over $500 million in new equity. Our equity base grew through two well received common equity offerings issuances under our ATM program and through substantial issuance of new OP and SP equity for property acquisitions. The combination of these transactions maintains the capacity and flexibility we need to fund future growth opportunities. As a result at…

Thank you Arlen, in my comments today, I’ll review our fourth quarter and full-year 2016 results, update you on our balance sheet and liquidity and finally discuss our outlook for 2017, which was provided in detail in our earnings release issued yesterday. Beginning with our financial results for the fourth quarter 2016, we reported net income of $6.1 million, compared to $5.4 million in the fourth quarter of 2015. And core FFO of $20 million or $0.30 per share an increase of 25% on a per share basis compared to Q4 2015. For the full-year 2016 our net income was $24.9 million compared to $4.8 million in 2015 and our core FFO was $65.5 million or $1.12 per share, an increase of 21.7% compared to $0.92 per share reported in 2015. The increase in core FFO for both the quarter and the year was due to strong growth within the same store portfolio. As well as our robust acquisition activity in 2016 partially offset by higher financing costs, G&A and an increase of the fully diluted share count. Turning to our operations for the fourth quarter 2016, we reported a 9.2% increase in same-store NOI compared to Q4 2015. Same store revenue was up 6.3% driven by a 6.7% increase in average rent per square foot, slightly offset by a 30 basis point decrease in average occupancy to 89.1%. One impact we are seeing of our new revenue management system is that it results in pushing rental rates further. Even if that results in slight occupancy decreases property operating expense increased only a 0.5% compared to the prior year, which was in line with our expectations. For the full-year 2016 our same-store NOI increased 10.2% compared to 2015. Same-store revenue was up 7.7% driven by a 5.3% increase in average…

Thank you we will not be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Vikram Malhotra with Morgan Stanley, please go ahead with your questions.

Thank you. Two quick questions, so one, can you maybe just give us a little bit more color on when you talk about supply and not really seeing impacts but you're baking in some impact towards a second half. How are you the sort of – the new supply coming online, what’s your expectation in terms of how it will impact occupancy, rent growth and how are you factoring that into the guidance?

Hi Vikram, this is Arlen. So yes we monitor of course all of our properties on a regular basis to look at where do we see new supply potentially coming in online over the next 12 to 18 months. And particularly as it relates to properties that have some exposure to new supply this year about 12% of our portfolio has the potential that by the end of the year some new supply will be within their trade area. And so our forecast in our budgeting for this year reflects the fact that we expect those new stores to come online, which will obviously create some additional pressure on discounting some impact on occupancy and therefore slower revenue growth in the few cases even revenue being flat. But generally we reflect that based upon those forecasted openings as the time that they're expected to come into the market.

Okay, that's helpful. And just to clarify the revenue growth expectation for 2017, the five to seven, can you break that, Arlen between occupancy and rate growth?

Yes, we are pretty close to what we would consider optimal occupancy based on the way the revenue management program is directing us to push harder on rate, we might gain another 50 basis points for average occupancy for this year or something like that but we're really forecasting almost all of that to be rate growth.

All of that to be rate, okay and then just last one to clarify on the supply comment. Just based on what you're seeing and talking to other PROs. Will we –peak supply is 2017 sort of the year where we see peak supply your comments around the second half. And just maybe how much lead time are sort of what you need to see to get a sense of how supply would could potentially look like in 2018?

Yes. It looks like late 2017 will probably be the peak additions of new supply. Now we do have some visibility into supply coming into 2018 obviously. But we're also starting to see some of the developers canceling projects as they reevaluate the market and they recognize wait a minute, there's too much supply here already on the pipeline. So we are actually starting to see some of that. So I do think late 2017 maybe early 2018 will probably be the peak of when supply additions peak in the overall total National market.

Okay. Thank you very much.

Thanks, Vikram.

Thank you. Our next question is come from the line of RJ Milligan with Robert W. Baird. Please go ahead with your question.

Hey, good afternoon guys. Arlen, I was wondering if you could give some guidance in terms of your expected external growth this year $350 million at the midpoint, can you give us an idea of what buckets those are coming from whether it’d be another PRO, within your captive pipeline or just one-off growth?

Yes, thanks RJ. We have – as I mentioned we have our captive pipeline now is almost $1 billion. And as we look at that of what's maturing in 2017 for debt maturities about 20% of that will be maturing in 2017, now we never project that we’ll get all of that because obviously the decision makers on that are not always are PROs and such. But we know sizable portion of that growth will come through the captive pipeline this year. We also do expect a sizable number of third-party acquisitions, we already have closed on some this year. And we have a number of ongoing discussions underway as well. We as you know we added Marc Smith in Personal Mini as our new PRO, we don’t anticipate very much new properties coming from the Personal Mini this year. But we will have at least one or two acquisitions on that area as well. And then if we ended with another new PRO in late this year that would be more to put as toward the high end of the guidance. But otherwise it's primarily just what we know right now plus the captive pipeline in the third-party acquisitions.

Okay. And then Tammy, I wanted to talk about the same-store definition. So does same-store for 2017 include everything that was acquired in 2015?

It’s all the stores that we owned for all of 2016.

Is it fair to assume, given that you guys have acquired a significant amount in 2016. I think $1.3 billion as you bring those on to your platform and continue to lease those up or maximize revenue in those properties. Could we expect in I guess an added benefit in 2018 same-stores NOIs those properties are brought into the system in the same-store pool?

Yes, RJ. This is Arlen. I would say that we’ve definitely seen that. Particularly as we acquire new properties the first two years of that we see outsized growth. So 2017 obviously, we don't – they're not in our 2017 pool but in 2018 we'll see some continuation on that. To be honest, we’d like to be able to continue to accelerate the platform adoption programs to try and get those benefits as quickly as possible. But historically, we've seen substantial gains in both year one and year two.

So on average the acquisitions in 2015 will be a greater contributor to same-store NOI growth in 2017 versus the legacy portfolio?

Yes, that's true. It's probably about a percent or so higher than the legacy portfolio.

Okay, excellent. Thanks guys.

Thank you. Our next question is come from the line of Todd Thomas of KeyBanc. Please go ahead with your questions.

Hi, thanks. Good morning out there. First with regard to occupancy, can you just talk about that balance between rate and occupancy level? But you noted that the revenue management systems increasing rate at the expense of occupancy, and just given that we're seeing some new supplier enter the market and Tammy you mentioned that forecasting is a little challenging today. I guess – how comfortable are you with that strategy here?

Hey, Todd, this is Arlen again. Yes, we saw some very small occupancy trade-off in the fourth quarter and we've always focused on revenue growth. That's really are what we try for. It's just that with the new systems, we have a little more sophisticated approach, perhaps and how to get that revenue growth, and of course we had industry-leading revenue growth in the fourth quarter. We've continued to see really strong revenue growth so far this year, but it's really great driven. And to the extent we trade-off 10, 20, 30 basis points of occupancy to get significant rate growth, we're going to do that. Now over the long run it's not going to be material, I mean, the rate – the occupancy declines are really pretty low. Even in fact right now we're back to pretty much the same occupancies that we were a year ago. So that small decline has already been made up, but it’s that balance and ultimately we're just pushing for overall revenues – total revenues.

Do you have an updated occupancy stat for the end of February here, and what that looks like on a year-over-year basis?

Yes, I know we are literally flat year-over-year on the same-store pool.

Okay. And that’s the new same-store pool or…

Yes, that’s the new one.

Yes.

Okay, got it. And then just following up on the discussion around – potentially adding a new PRO to the network, sounds like there could be one – little later in the year perhaps. I think Arlen, you had felt that there was sort of a limit or a max overall that NSA could support in terms of PROs, where you could achieve optimal performance. Any update there at this point in terms of what your current thinking is in long-term for new ads altogether?

Yes. We continue to have a good pipeline of discussions. Usually it's around 10 PROs in discussion, potential PROs. We have eight PROs right now. Our long-term goal would be to be somewhere between 12 PROs and 15 PROs, depending on how big the territories are for the PROs that join us. So we've got somewhere between four and six or so slots remaining. We cannot control the timing of when PROs join us. We just continue to have the discussions and our goal is to add one to three a year. I certainly hope we can add another one later this year, but unfortunately that's not a one-sided decision. We just keep working on it and we're very pleased with the interest level that we have. But there's a big commitment involved from PROs who join us and we just wanted to be right for their timing as well.

Okay. And then just a clarification, I'm not sure if I heard this right. But at the high end of the acquisition guidance, is that baking in the addition of another PRO, or do you think you can get to the $500 million just with third-party acquisitions?

We wouldn't get to $500 million with one-off third-party acquisitions. So it would either be a new PRO or a portfolio acquisition, a pretty good size portfolio. When we certainly could have that, but if we just do it with the typical one-off, one, two properties from what we call the mom-and-pop sellers, we wouldn't get the $500 million that way.

Okay. Thank you.

Thank you.

Our next question comes from the line of David Corak with FBR. Please proceed with your questions.

Hey, good afternoon everyone. For the SP unit distribution guidance, can you kind of walk us through the assumptions on the high and low end there of that $4 million range. Specifically what does that imply in terms of new SP equity and how does that fit in kind of your acquisition guidance, kind of along the lines of what you were just talking about with the PRO assumptions. I think you said you already have maybe four or five assets in Orlando that will fall under that.

Yes, David. Pretty much the high end of the SP guidance corresponds with the high end – the rest of the guidance. So we hit the high end of NOI growth and we hit the high end of our acquisitions growth. That would also tie in with the high end of our SP guidance. And likewise the low end; if we hit the low end of our NOI growth, the low end of our acquisitions growth, that's going to tie in with the low end of the SP guidance as well. Now that the SP guidance in total dollars is up a fair amount from 2016, primarily obviously because of the large number of acquisitions that we did in 2016 and especially a lot of those coming in later in the year. And so the SP equity cash flow related to those was only effective for last year for a very small part of the year. So by having those all through the entire year, that's the main reason why the absolute dollar amount goes up quite a bit. But where we are within the guidance range is totally dependent on how we perform on those other metrics.

Okay. That’s helpful. And then you mentioned adding a few more PROs over the next couple of years here, but what are the territory at this point would you want to add in terms of the PROs, I mean what are the most attractive territory that they you don’t currently have?

Look if you take a look at our map – sort of our map of the United States, we've always said that our goal is to be in as many of the top 100 MSAs as we can be in an accretive way for our investors. So we're not going to go into an MSA just because we want to be there if it's going to hurt our investors. But you look at the white space on our map and we say where we like to be in those white space areas or the lighter blues on our map. We have the different colors on the lighter blue means we're not as dense there. So we'd like to strengthen the lighter blue and add into the white spaces. But only to the extent that number one there is a really good operator PRO in that area. And number two that we can do it in a way that’s accretive for our investors. And so within that, that’s kind of how we're having discussions with about the 10 or so different PROs that we're talking to.

Okay, fair enough. And then just going back to your JV here, the on balance sheet acquisition guidance should we be assuming the iStorage JV is still actively looking with some of their capacity to acquire and then is that $200 million, is that fixed or can that be increased overtime?

Dave, this is Steve. Definitely iStorage portfolio is looking to grow in 2017 and beyond. We have capital commitments both from NSA and from our partner. So we're actively out there bidding on properties and underwriting. And some of that is built into our guidance just to your minor portion at our 25% share of the JV. And so we'll continue to grow that portfolio.

And I would add to that Dave is that $200 million commitment that we have made for acquisitions with our partner is intended to occur as good accretive acquisitions come up. So I think in our overall thought process we thought that might take four years, but if we could find $100 million of acquisitions this year in those iStorage territories, we certainly do $100 million rather than $50 million, but we've forecasted it to be at a fairly slow pace.

All right. Fair enough, thanks guys.

Thank you.

Thank you. [Operator Instructions] Our next question is come from the line of Ki Bin Kim with SunTrust. Please proceed with your questions.

Thank you. Could you talk a little bit about your non same-store performance in the quarter year-over-year and as it compares to your same-store performance just given that that same-store pool is a pretty small portion of the entire pool.

Yes. So Ki Bin our same-store pool this year represents about 70% of our total square footage. So there is little over 30% that’s in the non same-store pool. And that’s of the wholly owned, so that is not include the joint venture. And historically our non same-store performance has been better than our same-store performance. As we implemented the programs with the platform tools, et cetera, the NOI growth in our non same-store has typically been better by anywhere from 1% to 2% higher NOI growth, up to as much as double, same-store NOI growth depending on how well the store was doing before we bought it. So we definitely will say that the non same-store pool will do better than the – but the amount that are depends quite a bit on the how it did before we bought it.

So when you provide 2017 guidance? Are you taking that into account that the non same-store pool that becomes same-store pool gets some type of benefit from just having a better run rate?

Yes. What we do is we use our underwritten budget for the forecast for our guidance and if you recall we've talked about how our budget in our underwriting has actual performance versus underwriting. And so far historically our actual performance has exceeded our underwriting in a pretty meaningful way, but we use our underwritten estimates for our guidance.

Okay. And in terms of Personal Mini Storage, what is the kind of approximate run rate for how many – how much acquisitions that new PRO will fuel over the course of the year, because if I read this correctly, you can close on many acquisitions from that PRO, yes, right.

That’s right. So that’s a little bit of a different scenario because we had already gone into acquire some recent properties in the Orlando market, but we did not have a PRO there. We had ongoing discussions with Marc Smith therefore for quite a number of months. And so it made a lot of sense and he was agreeable to join NSA and he will take over management four of those recent acquisitions immediately and then we'll be bringing in another acquisition in the short-term here. And then additional future acquisitions that might come through the Personal Mini will depend both on what Marc can generate in terms of third-party acquisitions in his market, because he is very well known in the Orlando area. And also the ability of potential properties from within his portfolio to be contributed, we have not forecast really any of those additional contribution properties for this year. We would hope that we might be able to start seeing some of those in next year and beyond based upon both being comfortable with how all of the NSA programs work and also debt maturities et cetera. But I do expect, we’ll have some third-party acquisitions in the Orlando area in this year, but we have not forecast very much in our guidance.

As what’s keeping ahead – what’s keeping Personal Mini Storage from contributing more assets to NSA? Is it more the timing of debt maturities or…

Certainly, one element of it is timing of debt maturities. And the second part of it relates to the issue of the – control of the properties. And looking at because, they manage about 36 additional properties on top of the ones that are managed by that will be – he’ll be managing for NSA. And obviously, in any discussion where there’s another party that’s involved in the decision making on contribution of properties being managed, those have to be discussed with that – those decision makers. So it’s a combination of debt timing plus discussions with decision makers to make it make sense for them and the timing of what they’re trying to do.

Okay. And do you have any cap rate guidance on the acquisitions volume that you expect to close in 2017. I’m sure it’s a big range, but any type of range that you can provide.

Yes, obviously it is a range, but we are seeing generally cap rates have at least stopped declining. And so we’re seeing deals were underwriting right now and looking at basically right around the 6% cap rate. I mean, there is a few of them that are a little below 6%, few of them that are little above 6%, but I’d say if you’re trying to think about an average somewhere around to 6% is going to be pretty accurate.

And is that – in place on a forward.

That would be on a forward basis.

Okay, thank you.

Thank you.

Our next question is come from the line of Barry Oxford with DA Davidson. Please go ahead with your questions.

Great, thanks guys. I just drill little more down on the Personal Mini. What made them do this deal with you guys, because they had to be looking at other possible entities out there in the marketplace? What would you guys offering?

Yes, Barry, we certainly see that with every large really good operator PRO that we talk with that they all have lots of options. And really when PRO gets into and understands the details of the benefits that they get through the NSA, which is a combination of the platform tools and the participation in the best practices operations plus the access to capital for growth and the ability to really drive an accretive growth for their portfolio. And then the analysis of how that translates into value for the PROs, if they want to stay in the business for a relatively long period and by that I mean at least five years. And they want to continue to operate for at least five years. We are absolutely certain that the NSA PRO program is the best option for an operator to go under. Now, they want to cash out and get the money and run and get out quickly, there’s lots of other options for them, and that then NSA is not the best. But for close to really like the business, want to grow the business, want to keep in the business for at least five more years, I’m confident the NSA program is the best option.

And then when you look at the SPU units that would be going to Personal Mini, how does that work when you acquire their properties.

So, for the initial portfolio, where they’re managing these properties that we already owned, they’ve co-invested, several million dollars for the SP co-investment related to that. And then as any properties that they would contribute in the future come in then part of their equity would come in, in terms of SP equity and part of their equity with come in, in terms of OP equity just like we’ve done year-after-year with all of our existing PROs.

Right, right. Okay, great thanks a lot guys.

Thank you, Barry.

Thank you. Our next questions are follow-up from Ki Bin Kim with SunTrust. Please go ahead with your question.

Just a couple of quick ones here. Could you just provide some more color on the status of your existing customer rate increase program? So for example what percent of your customers are eligible or I guess, could you first described what the program is and what percent of your customer base is eligible for it in 2017 for an increase?

Hey, Ki Bin, this is Steve. Yes, we’re very focused on raising rates for in place customers. We gauge the risk of customer flight based on market and market conditions. So every short every markets will be different and we use the revenue management algorithms to guide us in that decision making process. In some markets, we’re pretty aggressive and we will send through an increase as early as six months after a customer moves in and then hit them every nine months thereafter. Other places we’re a little less aggressive, we might wait up to a year before we send out their first letter and we might have sort of the interim increases after that spaced about nine months to a year. So its market dependent, it’s been very successful for us. We found at least in 2016, that we were able to raise rates at sort of the high single-digits type of range. And no customer is safe, we consider them all when they’re ready and there are some that we go for and some that we don’t. So it’s not a monolithic approach across the entire portfolio.

I see. And I’m guessing that sounds like as PRO dependent. Is that correct?

It’s more market dependent and PRO dependent, but every PRO has their own style and approach. But it is really gets to the strength of the market or the strength of a store.

Yes. I guess what I was getting my larger question was. Is there a broader initiative to bring things like that things like pricing – pricing strategies more under the NSA umbrella, now given that some time it has definitely past since your IPO any kind of progress update on – maybe having a more singular centralized approach on those type of things.

Our approach is really to provide a common set of tools and techniques to our approach. So they can leverage the scale that we have is a grander portfolio. But our PROs on the operators, there are the boots on ground as Arlen said earlier. And we trust them with their pricing decision more than we trust any system. So we provide the system, we provide the techniques, we provide best practices and we want to guide us all to the right decisions. But it’s a PRO level decision when it comes to pricing and price increases.

So one thing to add to that Ki Bin is that, the system and the guidance is common. We’re everyone is on the same system. And then it gives guidance to the PRO, but the PRO makes the final decision. And the guidance that they get it gives them both the conservative approach, sort of the middle approach and an aggressive approach to pricing and they make the call on what they do with that pricing. But the guidance into the system is common across all our PROs.

Okay. And just last one here. Do you understand on promotions, what percent of customers we’re receiving on promotion in the fourth quarter in 2016 versus fourth quarter 2015?

It was probably around two-thirds of our customers received promotion of some sort in 2016 Q4, which was marginally up from 2015. We are actively using discounts promotions to help drive our preserved occupancy and we’ve recognized that we’ve got to be competitive. So it’s once again the store dependent and market dependent. But all-in-all, we think our discounting growth is well under control. What we’re seeing in Q1 right now is basically flat with what we did in Q4 of last year from a same-store perspective. So we think it’s on a control but it’s probably elevated relative to last year.

Okay. That’s it for me. Thank you.

Thanks, Ki Bin.

Thank you. This concludes our question-and-answer session. Now I would like to turn the floor back to Arlen Nordhagen for closing comments.

Thank you, operator and thanks again everyone for joining us for today’s year-end earnings call. 2016 was an exceptional year for NSA and we appreciate your continued support of National Storage Affiliates Trust as we move forward into 2017 and look forward to another great year ahead. Thank you.

Thank you. Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time. And thank you for your participation.