Insider Weekends: Self Storage REIT Insider Makes His First Purchase In Four Years

With over 71.5 million square feet of rental space, National Storage Affiliates (NSA) is one of the largest owners and operators of self-storage facilities in the US. The company was founded in 2013 and went public in 2015. NSA is a REIT with an unusually interesting structure. The company is composed of separate Participating Regional Operators (PRO), who contribute their properties in exchange for equity in NSA, while still retaining their brand name and control as property managers for their individual portfolios. In addition to the PROs, NSA has three different internal brands (iStorage, Northwest, and SecurCare) that manage other parts of NSA’s business. Out of the 1,100 properties that constitute the NSA portfolio, 915 are wholly owned (either by their PROs or through the core NSA portfolio) and 185 are part of 2 joint ventures, in which NSA has a 25% stake.

NSA has dropped by over 44% during this year’s bear market, but has still managed to grow on the business side. In Q3 2022, same store net operating income grew by 12.1% year-over-year and revenue grew by 10.7%. Additionally, NSA reports a 94.1% same store average occupancy rate. Over the years, NSA has consistently either met or beat EPS and funds from operations (FFO) estimates and has steadily increased its dividend since its IPO in 2015. NSA has also been expanding its business through a series of acquisitions, which has led to an 81.5% increase in wholly-owned square feet from 2019 to 2021 – a striking number especially when compared to the 600 pound gorilla in this space, Public Storage (PSA), which has grown by 22.4% in the comparable time period. In the last 5 years, NSA has seen an average same store revenue growth of 7.3% and an average same store net operating income growth of 9.2%.

NSA could be an attractive opportunity during a recession, considering the self storage storage sector holds up well and outperforms other REITs both in the midst of a recession and in the long term. In the last 28 years, self storage has proven to be the least volatile and most profitable equity REIT sector, with an average annual return of 18.8% and a volatility ratio (defined by the standard deviation of return divided by the average return) of a little over 1. Apartment REITs sit at a volatility ratio of around 1.5 and an average annual return of 14.2% and office and retail REITs both have an average annual return of around 12.1% and a volatility ratio that is slightly below 2.

NSA has an enterprise value of $9.9 billion, and as is typical for REITs, net debt is fairly large (around $3.5 billion) and makes up around 35% of the enterprise value. NSA is able to easily cover the interest on the debt, with an interest coverage ratio of 5. The weighted average maturity of the debt is 5.4 years, especially with around $1 billion set to mature in the next two years. This short-term maturity of debt is a significant concern in light of rising interest rates, the fact that NSA’s current effective interest rate is a low 3.6% and the company has very little cash on the balance sheet.

The company has an annual (forward) dividend payout of $2.20 per share, which works out to an attractive yield of 6%. This compares with an average dividend yield of 3.36% for the five public self-storage REITs. The five year dividend growth rate has been almost 16% and the company has been increasing dividends for seven years in a row.

The insider purchase that stood out for us this week was by a Director of NSA, Chad LeRoy Meisinger, who purchased 55,000 shares for a total of $2.15 million. This is Mr. Meisinger’s first insider purchase in over 4 years. His last purchase was in 2018 when the stock was trading at $26.80. Mr. Meisinger is the also the CEO of Over the Top Marketing, which he founded back in 2006, and he has also served as the CEO of Thinique Medical Weight Loss and First MediaWorks.

Over the next few months we are going to see several management change at NSA, with the current CEO, Tamara Fischer (who took on the role of CEO in 2020), being elevated to Executive Chair and David Cramer being named as her replacement. Mr. Cramer joined NSA in April 2020, and is currently the President and COO of the company. Derek Bergeon (who joined NSA in 2019, and is currently the Senior Vice President of Operations) will become the new COO. All these management changes will go into effect on April 1, 2023, and we look forward to seeing what direction NSA will take under this new leadership. Until we see interest rates start to stabilize and the company’s plan to refinance or pay down their debt that is maturing in the next two years, we would prefer to follow the company from the sidelines.

Welcome to edition 651 of Insider Weekends. Insider buying decreased last week with insiders purchasing $75.6 million of stock compared to $95.05 million in the week prior. Selling on the other hand increased significantly to $5.04 billion compared to $1.58 million in the week prior.

Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week went up to 66.68 . In other words, insiders sold almost 67 times as much stock as they purchased. The Sell/Buy ratio this week was unfavorable compared to the prior week when the ratio stood at 16.62.

Notable Insider Buys:

1. SoFi Technologies, Inc. (SOFI): $4.64

Chief Executive Officer Anthony Noto acquired 1,134,065 shares of this digital financial services provider, paying $4.42 per share for a total amount of $5.01 million. Mr. Noto increased his stake by 28.68% to 5,087,751 shares with this purchase.

You can view the list of recent insider transactions for SoFi Technologies, Inc. here.

2. Global Indemnity Group, LLC (GBLI): $23.47

Director Gary Charles Tolman acquired 138,151 shares of this specialty property and casualty insurance provider, paying $24.17 per share for a total amount of $3.34 million. 46,151 of these shares were purchased indirectly by a trust.

You can view the list of recent insider transactions for Global Indemnity Group, LLC here.

3. B. Riley Financial, Inc. (RILY): $39.93

Chairman and Co-CEO Bryant R. Riley acquired 63,527 shares of B. Riley Financial, paying $41.31 per share for a total amount of $2.62 million. Mr. Riley increased his stake by 1.05% to 6,093,456 shares with this purchase.

You can view the list of recent insider transactions for B. Riley Financial, Inc. here.

4. National Storage Affiliates Trust (NSA): $36.56

Director Chad LeRoy Meisinger acquired 55,000 shares of this self storage properties operator, paying $39.11 per share for a total amount of $2.15 million. Mr. Meisinger increased his stake by 134.97% to 95,750 shares with this purchase. 25,000 of these shares were purchased indirectly through various plans.

You can view the list of recent insider transactions for National Storage Affiliates Trust here.

5. Membership Collective Group Inc. (MCG): $3.85

Director Mark Ein acquired 456,936 shares of this upscale social clubs operator, paying $3.91 per share for a total amount of $1.79 million. Mr. Ein increased his stake by 277.75% to 621,447 shares with this purchase.

You can view the list of recent insider transactions for Membership Collective Group Inc. here.

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Tesla, Inc. (TSLA): $150.23

CEO Elon Musk sold 21,995,000 shares of Tesla for $162.81, generating $3.58 billion from the sale. These shares were sold indirectly by a trust.

You can view the list of recent insider transactions for Tesla, Inc. here.

2. Walmart Inc. (WMT): $142.75

Director Robson S. Walton sold 2,297,356 shares of Walmart for $147.32, generating $338.44 million from the sale. These shares were sold indirectly by a trust.

You can view the list of recent insider transactions for Walmart Inc. here.

3. PTC Inc. (PTC): $123.51

Director Blake D. Moret sold 311,281 shares of this software and services company for $121.26, generating $37.75 million from the sale. These shares were sold indirectly by Rockwell Autotmation.

You can view the list of recent insider transactions for PTC Inc. here.

4. Airbnb, Inc. (ABNB): $89.57

Director Joseph Gebbia sold 250,000 shares of Airbnb for $95.37, generating $23.84 million from the sale. These shares were sold indirectly by a trust.

You can view the list of recent insider transactions for Airbnb, Inc. here.

5. Boyd Gaming Corporation (BYD): $57.12

Shares of this multi-jurisdictional gaming company were sold by 2 insiders:

• Co-Executive Chair William S. Boyd sold 296,562 shares for $58.80, generating $17.44 million from the sale. These shares were sold indirectly by a trust.
• Vice President William R. Boyd sold 16,000 shares for $59.23, generating $947,632 from the sale.

You can view the list of recent insider transactions for Boyd Gaming Corporation here.

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium and Plus members.

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