# National Storage Affiliates Trust (NSA) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from National Storage Affiliates Trust's 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1618563/000162828023005252/nsa-20221231.htm
Accession: 0001628280-23-005252
Filing date: 2023-02-27
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/NSA/
All MD&A years: /company/NSA/mda/
Previous year: /company/NSA/mda/fy2021/ (FY 2021)
Next year: /company/NSA/mda/fy2023/ (FY 2023)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the financial statements and notes thereto included in Item 8. "Financial Statements and Supplementary Data" as well as Item 1. "Business," Item 1A. "Risk Factors," and Item 2. "Properties," respectively, in this Annual Report on Form 10-K.

Overview

National Storage Affiliates Trust is a fully integrated, self-administered and self-managed real estate investment trust organized in the state of Maryland on May 16, 2013. We have elected and we believe that we have qualified to be taxed as a REIT commencing with our taxable year ended December 31, 2015. We serve as the sole general partner of our operating partnership, a Delaware limited partnership formed on February 13, 2013 to conduct our business, which is focused on the ownership, operation, and acquisition of self storage properties located predominantly within the top 100 MSAs throughout the United States.

Our executive chairman of the board of trustees and former chief executive officer, Arlen D. Nordhagen, co-founded SecurCare Self Storage, Inc. in 1988 to invest in and manage self storage properties. While growing SecurCare to over 150 self storage properties, Mr. Nordhagen recognized a market opportunity for a differentiated public self storage REIT that would leverage the benefits of national scale by integrating multiple experienced regional self storage operators with local operational focus and expertise. We believe that his vision, which is the foundation of the Company, aligns the interests of our PROs, with those of our public shareholders by allowing our PROs to participate alongside our shareholders in our financial performance and the performance of our PROs' managed portfolios. This structure offers our PROs a unique opportunity to serve as regional property managers for their managed portfolios and directly participate in the potential upside of those properties while simultaneously diversifying their investment to include a broader portfolio of self storage properties. Over time, largely through our unconsolidated real estate ventures and internalization of three of our largest PROs, SecurCare, Northwest and, following January 1, 2023, Move It, we have developed a full service internally-staffed property management platform to complement our PRO structure.

Our Structure

Through our property management platform, we direct, manage and control the day-to-day operations and affairs of certain consolidated properties and our unconsolidated real estate ventures under our iStorage, Northwest, SecurCare and, following January 1, 2023, Move It brands. As of December 31, 2022, our property management platform managed and controlled 531 of our consolidated properties and 185 of our unconsolidated real estate venture properties. As of December 31, 2022, our PROs managed the day-to-day operations of 385 of our consolidated properties.

We earn certain customary fees for managing and operating the properties in the unconsolidated real estate ventures and we facilitate tenant insurance and/or tenant warranty protection programs for tenants at these properties in exchange for half of all proceeds from such programs.

For properties managed by our PROs, our structure promotes operator accountability as subordinated performance units issued to our PROs in exchange for the contribution of their properties are entitled to distributions only after those properties satisfy minimum performance thresholds. In the event of a material reduction in operating cash flow, distributions on our subordinated performance units will be reduced before or disproportionately to distributions on our common shares held by our common shareholders. In addition, we expect our PROs will generally co-invest subordinated equity in the form of subordinated performance units in each acquisition that they source, and the value of these subordinated performance units will fluctuate with the performance of their managed portfolios. Therefore, our PROs are incentivized to select acquisitions that are expected to exceed minimum performance thresholds, thereby increasing the value of their subordinated equity stake. We expect that our shareholders will benefit from the higher levels of property performance that our PROs are incentivized to deliver.

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Our PROs

We had nine PROs as of December 31, 2022: Optivest, Move It, Guardian, Southern, Blue Sky, Moove In, Hide Away, Storage Solutions and Personal Mini. We seek to further expand our platform by continuing to recruit additional established self storage operators, while integrating our operations through the implementation of centralized initiatives, including management information systems, revenue enhancement, and cost optimization programs. Our national platform allows us to capture cost savings by eliminating redundancies and utilizing economies of scale across the property management platforms of our PROs while also providing greater access to lower-cost capital.

Effective January 1, 2022, Northwest elected to retire as one of our PROs. As a result of the retirement, on January 1, 2022, management of our properties in the Northwest managed portfolio was transferred to us and the Northwest brand name and related intellectual property was internalized by us, and we discontinued payment of any supervisory and administrative fees or reimbursements to Northwest.

During the year ended December 31, 2022, one of our PROs, Move It Self Storage and its controlled affiliates, notified us of Move It's election to retire as a PRO effective January 1, 2023. As a result of the retirement, on January 1, 2023, management of our properties in the Move It managed portfolio was transferred to us and the Move It brand name and related intellectual property was internalized by us, and we discontinued payment of any supervisory and administrative fees or reimbursements to Move It. In addition, on January 1, 2023, we issued a notice of non-voluntary conversion to convert all of the subordinated performance units related to Move It's managed portfolio into OP units. As part of the internalization, a majority of Move It's employees were offered and provided employment by us and continue to manage Move It's portfolio of properties as members of NSA's existing property management platform.

Our Consolidated Properties

We seek to own properties that are well located in high quality sub-markets with highly accessible street access and attractive supply and demand characteristics, providing our properties with strong and stable cash flows that are less sensitive to the fluctuations of the general economy. Many of these markets have multiple barriers to entry against increased supply, including zoning restrictions against new construction and new construction costs that we believe are higher than our properties' fair market value. We maintain an active acquisition pipeline that we expect will continue to drive our future growth.

As of December 31, 2022, we owned a geographically diversified portfolio of 916 self storage properties, located in 39 states and Puerto Rico, comprising approximately 58.3 million rentable square feet, configured in approximately 453,000 storage units. Of these properties, 301 were acquired by us from our PROs, 614 were acquired by us from third-party sellers and one was acquired by us from the 2016 Joint Venture.

Our Unconsolidated Real Estate Ventures

We seek to opportunistically partner with institutional funds and other institutional investors to acquire attractive portfolios utilizing a promoted return structure. We believe there is significant opportunity for continued external growth by partnering with institutional investors seeking to deploy capital in the self storage industry.

2018 Joint Venture

As of December 31, 2022, our 2018 Joint Venture, in which we have a 25% interest, owned and operated a portfolio of 104 properties containing approximately 7.8 million rentable square feet, configured in approximately 64,000 storage units and located across 17 states.

2016 Joint Venture

As of December 31, 2022, our 2016 Joint Venture, in which we have a 25% ownership interest, owned and operated a portfolio of 81 properties containing approximately 5.6 million rentable square feet, configured in approximately 47,000 storage units and located across 13 states.

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Results of Operations

When reviewing our results of operations it is important to consider the timing of acquisition activity. We acquired 45 self storage properties during the year ended December 31, 2022 and 229 self storage properties during the year ended December 31, 2021. As a result of these and other factors, we do not believe that our historical results of operations discussed and analyzed below are comparable or necessarily indicative of our future results of operations or cash flows.

During the year ended December 31, 2022, we incurred outsized casualty-related expenses and losses due to certain events including floods, fires, and hurricanes Fiona and Ian, which we do not consider indicative of our core operating performance. These elevated amounts of casualty costs from these events totaled $6.4 million which is included in other operating expenses. The Company maintains property and casualty insurance on its wholly-owned and joint venture properties, which covers both damages and business interruption expenses subject to varying deductibles depending on the cause and extent of the claim.

The following discussion and analysis of the results of our operations and financial condition for the year ended December 31, 2022 compared to the year ended December 31, 2021 should be read in conjunction with the accompanying consolidated financial statements included in Item 8. The discussion and analysis of the results of our operations and financial condition for the year ended December 31, 2021 compared to the year ended December 31, 2020, can be found in Part II, "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 25, 2022.

Certain figures, such as interest rates and other percentages, included in this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our consolidated financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.

Year Ended December 31, 2022 compared to the Year Ended December 31, 2021

Overview

The following table illustrates the changes in rental revenue, other property-related revenue, management fees and other revenue, property operating expenses, and other expenses for the year ended December 31, 2022 compared to the year ended December 31, 2021 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2022","","2021","","Change"],["Rental revenue","$","748,814","","","$","541,547","","","$","207,267"],["Other property-related revenue","25,131","","","19,750","","","5,381"],["Management fees and other revenue","27,624","","","24,374","","","3,250"],["Total revenue","801,569","","","585,671","","","215,898"],["Property operating expenses","211,025","","","155,265","","","55,760"],["General and administrative expenses","59,311","","","51,001","","","8,310"],["Depreciation and amortization","233,158","","","158,312","","","74,846"],["Other","8,537","","","2,853","","","5,684"],["Total operating expenses","512,031","","","367,431","","","144,600"],["Other (expense) income"],["Interest expense","(110,599)","","","(72,062)","","","(38,537)"],["Equity in earnings of unconsolidated real estate ventures","7,745","","","5,294","","","2,451"],["Acquisition costs","(2,745)","","","(1,941)","","","(804)"],["Non-operating (expense)","(951)","","","(906)","","","(45)"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2022","","2021","","Change"],["Gain on sale of self storage properties","5,466","","","\u2014","","","5,466"],["Other expense, net","(101,084)","","","(69,615)","","","(31,469)"],["Income before income taxes","188,454","","","148,625","","","39,829"],["Income tax expense","(4,689)","","","(1,690)","","","(2,999)"],["Net income","183,765","","","146,935","","","36,830"],["Net income attributable to noncontrolling interests","(80,028)","","","(41,682)","","","(38,346)"],["Net income attributable to National Storage Affiliates Trust","103,737","","","105,253","","","(1,516)"],["Distributions to preferred shareholders","(13,425)","","","(13,104)","","","(321)"],["Net income attributable to common shareholders","$","90,312","","","$","92,149","","","$","(1,837)"]]
[[/GREPCENT_TABLE]]

Total Revenue

Our total revenue, including management fees and other revenue, increased by $215.9 million, or 36.9%, for the year ended December 31, 2022, as compared to the year ended December 31, 2021. This increase was primarily attributable to incremental revenue from 45 self storage properties acquired during the year ended December 31, 2022 and from 229 self storage properties acquired during 2021 (partially offset by the disposition of two self storage properties), increases in management fees and other revenue from our unconsolidated real estate ventures. Total revenue increased despite a decrease in total portfolio average occupancy from 94.2% for the year ended December 31, 2021 to 91.9% for the year ended December 31, 2022 due to an increase in rental rates. Average occupancy is calculated based on the average of the month-end occupancy immediately preceding the period presented and the month-end occupancies included in the respective period presented.

Rental Revenue

Rental revenue increased by $207.3 million, or 38.3%, for the year ended December 31, 2022, as compared to the year ended December 31, 2021. The increase in rental revenue was primarily attributable to incremental rental revenue of $17.7 million from 45 self storage properties acquired during 2022, and $127.6 million from 229 self storage properties acquired during 2021. Annualized total portfolio rental revenues (including fees and net of any discounts and uncollectible customer amounts) divided by average occupied square feet ("average annualized rental revenue per occupied square foot") increased from $13.01, for the year ended December 31, 2021 to $14.83, or 14.0%, for the year ended December 31, 2022, driven primarily by increased contractual lease rates for in-place tenants.

Other Property-Related Revenue

Other property-related revenue represents ancillary income from our self storage properties, such as tenant insurance-related access fees and sales of storage supplies. Other property-related revenue increased by $5.4 million, or 27.2%, for the year ended December 31, 2022, as compared to the year ended December 31, 2021. This increase primarily resulted from incremental other property-related revenue of $0.4 million from 45 self storage properties acquired during 2022, and $5.2 million from 229 self storage properties acquired during 2021.

Management Fees and Other Revenue

Management fees and other revenue, which are primarily related to managing and operating the unconsolidated real estate ventures, were $27.6 million for the year ended December 31, 2022, compared to $24.4 million for the year ended December 31, 2021, an increase of $3.2 million or 13.3%. This increase was primarily attributable to increased property management fees due to growth in unconsolidated real estate venture revenue.

Property Operating Expenses

Property operating expenses were $211.0 million for the year ended December 31, 2022 compared to $155.3 million for the year ended December 31, 2021, an increase of $55.8 million, or 35.9%. The increase in property operating expenses was primarily attributable to incremental property operating expenses of $5.0 million from 45 self storage properties acquired during 2022, and $43.9 million from 229 self storage properties acquired during 2021.

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General and Administrative Expenses

General and administrative expenses increased $8.3 million, or 16.3%, for the year ended December 31, 2022, compared to the year ended December 31, 2021. This increase was attributable to increases in supervisory and administrative fees charged by our PROs of $2.2 million, due to increases in property revenue and acquisitions of additional properties managed by our PROs, as well as increases in personnel costs and equity based compensation expense.

Depreciation and Amortization

Depreciation and amortization increased $74.8 million, or 47.3%, for the year ended December 31, 2022, compared to the year ended December 31, 2021. This increase was primarily attributable to incremental depreciation expense related to the 45 self storage properties acquired during 2022 and 229 self storage properties acquired during 2021. The increase in depreciation and amortization includes an increase in amortization of customer in-place leases from $20.7 million for the year ended December 31, 2021 to $34.4 million for the year ended December 31, 2022.

Other

Other expenses increased $5.7 million, or 199.2%, for the year ended December 31, 2022, compared to the year ended December 31, 2021. This increase was primarily attributable to increases in casualty-related expenses and losses.

Interest Expense

Interest expense increased $38.5 million, or 53.5%, for the year ended December 31, 2022, compared to the year ended December 31, 2021. The increase in interest expense was attributable to rising interest rates on our variable-rate debt and higher outstanding borrowings including (i) the May 2021 issuance of $55.0 million of 3.10% senior unsecured notes due May 4, 2033, (ii) the July 2021 issuance of $35.0 million of 2.16% senior unsecured notes due May 4, 2026 and $90.0 million of 3.00% senior unsecured notes due May 4, 2031, (iii) the September 2021 issuance of $125.0 million of term loan debt under our credit facility with an effective interest rate of 2.96% as of December 31, 2022, (iv) the December 14, 2021 issuance of $75.0 million of 2.72% senior unsecured notes due November 30, 2030, $175.0 million of 2.81% senior unsecured notes due November 30, 2031 and $75.0 million of 3.06% senior unsecured notes due November 30, 2036, (v) the January 2022 issuance of $125.0 million of 2.96% senior unsecured notes due November 30, 2033, (vi) the June 2022 issuance of $285.0 million of term loan debt due June 2029 with an effective interest rate of 5.37% as of December 31, 2022, (vii) the September 2022 issuance of $200.0 million of 5.06% senior unsecured notes due November 2032, and (viii) an increase in borrowings under our revolving line of credit with an effective interest rate of 5.69% as of December 31, 2022.

Equity In Earnings Of Unconsolidated Real Estate Ventures

Equity in earnings of unconsolidated real estate ventures represents our share of earnings and losses incurred through our 25% ownership interests in the 2018 Joint Venture and the 2016 Joint Venture. During the year ended December 31, 2022, we recorded $7.7 million of equity in earnings from our unconsolidated real estate ventures compared to $5.3 million for the year ended December 31, 2021.

Net Income Attributable to Noncontrolling Interests

As discussed in Note 2 to the consolidated financial statements in Item 8, we allocate U.S. generally accepted accounting principles ("GAAP") income (loss) utilizing the HLBV method, in which we allocate income or loss based on the change in each unitholders' claim on the net assets of our operating partnership at period end after adjusting for any distributions or contributions made during such period.

Due to the stated liquidation priorities and because the HLBV method incorporates non-cash items such as depreciation expense, in any given period, income or loss may be allocated disproportionately to noncontrolling interests. Net income attributable to noncontrolling interests was $80.0 million for the year ended December 31, 2022, compared to $41.7 million for the year ended December 31, 2021.

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Critical Accounting Policies and Use of Estimates

Our financial statements have been prepared on the accrual basis of accounting in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and assumptions, including those that impact our most critical accounting policies. We base our estimates and assumptions on historical experience and on various other factors that we believe are reasonable under the circumstances. Our critical accounting estimates are defined as accounting estimates or assumptions made in accordance with GAAP, which involve a significant level of estimation, uncertainty or subjectivity and have had or are reasonably likely to have a material impact on our financial condition or results of operations. Actual results may differ from these estimates. We believe the following are our most critical accounting policies.

Principles of Consolidation and Presentation of Noncontrolling Interests

Our consolidated financial statements include the accounts of our operating partnership and its controlled subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidation of entities.

The limited partner ownership interests in our operating partnership that are held by owners other than us are referred to as noncontrolling interests. Noncontrolling interests also include ownership interests in DownREIT partnerships held by entities other than our operating partnership. Noncontrolling interests in a subsidiary are generally reported as a separate component of equity in our consolidated balance sheets. In our consolidated statements of operations, the revenues, expenses and net income or loss related to noncontrolling interests in our operating partnership are included in the consolidated amounts, with net income or loss attributable to the noncontrolling interests deducted separately to arrive at the net income or loss solely attributable to us.

When we obtain an economic interest in an entity, we evaluate the entity to determine if the entity is deemed a variable interest entity ("VIE"), and if we are deemed to be the primary beneficiary, in accordance with authoritative guidance issued on the consolidation of VIEs. When an entity is not deemed to be a VIE, we consider the provisions of additional guidance to determine whether the general partner controls a limited partnership or similar entity when the limited partners have certain rights. We consolidate all entities that are VIEs and of which the Company is deemed to be the primary beneficiary.

Self Storage Properties and Customer In-Place Leases

Self storage properties are carried at historical cost less accumulated depreciation and any impairment losses. When self storage properties are acquired, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on estimated fair values. The purchase price is allocated to the individual properties based on the fair value determined using an income approach or a cash flow analysis using appropriate risk adjusted capitalization rates, which take into account the relative size, age, and location of the individual properties along with current and projected occupancy and relative rental rates or appraised values, if available. Tangible assets are allocated to land, buildings and related improvements, and furniture and equipment.

In allocating the purchase price for a self storage property acquisition, we determine whether the acquisition includes intangible assets. We allocate a portion of the purchase price to an intangible asset attributed to the value of customer in-place leases. Because the majority of tenant leases are on a month-to-month basis, this intangible asset represents the estimated value of the leases in effect on the acquisition date. This intangible asset is amortized to expense using the straight-line method over 12 months, the estimated average remaining rental period for the leases.

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Non-GAAP Financial Measures

FFO and Core FFO

Funds from operations, or FFO, is a widely used performance measure for real estate companies and is provided here as a supplemental measure of our operating performance. The December 2018 Nareit Funds From Operations White Paper - 2018 Restatement, which we refer to as the White Paper, defines FFO as net income (as determined under GAAP), excluding: real estate depreciation and amortization, gains and losses from the sale of certain real estate assets, gains and losses from change in control, mark-to-market changes in value recognized on equity securities, impairment write-downs of certain real estate assets and impairment of investments in entities when it is directly attributable to decreases in the value of depreciable real estate held by the entity and after items to record unconsolidated partnerships and joint ventures on the same basis. Distributions declared on subordinated performance units and DownREIT subordinated performance units represent our allocation of FFO to noncontrolling interests held by subordinated performance unitholders and DownREIT subordinated performance unitholders. For purposes of calculating FFO attributable to common shareholders, OP unitholders, and LTIP unitholders, we exclude distributions declared on subordinated performance units, DownREIT subordinated performance units, preferred shares and preferred units. We define Core FFO as FFO, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our core operating performance. These further adjustments consist of acquisition costs, gains on debt forgiveness, gains (losses) on early extinguishment of debt, casualty-related expenses or losses and adjustments for unconsolidated partnerships and joint ventures.

Management uses FFO and Core FFO as key performance indicators in evaluating the operations of our properties. Given the nature of our business as a real estate owner and operator, we consider FFO and Core FFO as key supplemental measures of our operating performance that are not specifically defined by GAAP. We believe that FFO and Core FFO are useful to management and investors as a starting point in measuring our operational performance because FFO and Core FFO exclude various items included in net income (loss) that do not relate to or are not indicative of our operating performance such as gains (or losses) from sales of self storage properties and depreciation, which can make periodic and peer analyses of operating performance more difficult. Our computation of FFO and Core FFO may not be comparable to FFO reported by other REITs or real estate companies.

FFO and Core FFO should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP, such as total revenues, operating income and net income (loss). FFO and Core FFO do not represent cash generated from operating activities determined in accordance with GAAP and are not a measure of liquidity or an indicator of our ability to make cash distributions. We believe that to further understand our performance, FFO and Core FFO should be compared with our reported net income (loss) and considered in addition to cash flows computed in accordance with GAAP, as presented in our consolidated financial statements.

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The following table presents a reconciliation of net income to FFO and Core FFO for the periods presented (in thousands, except per share and unit amounts):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2022","","2021","","2020"],["Net income","$","183,765","","","$","146,935","","","$","79,478"],["Add (subtract):"],["Real estate depreciation and amortization","231,870","","","156,930","","","115,757"],["Company's share of unconsolidated real estate venture real estate depreciation and amortization","17,072","","","15,408","","","15,297"],["Gain on sale of self storage properties","(5,466)","","","\u2014","","","\u2014"],["Mark-to-market changes in value on equity securities","\u2014","","","\u2014","","","142"],["Distributions to preferred shareholders and unitholders","(14,510)","","","(14,070)","","","(14,055)"],["FFO attributable to subordinated performance unitholders(1)","(58,838)","","","(49,810)","","","(29,708)"],["FFO attributable to common shareholders, OP unitholders, and LTIP unitholders","353,893","","","255,393","","","166,911"],["Add:"],["Acquisition costs","2,745","","","1,941","","","2,424"],["Casualty-related expenses(2)","6,388","","","\u2014","","","\u2014"],["Core FFO attributable to common shareholders, OP unitholders, and LTIP unitholders","$","363,026","","","$","257,334","","","$","169,335"],["Weighted average shares and units outstanding - FFO and Core FFO:(3)"],["Weighted average shares outstanding - basic","91,239","","","81,195","","","66,547"],["Weighted average restricted common shares outstanding","27","","","33","","","30"],["Weighted average effect of outstanding forward offering agreement(4)","\u2014","","","100","","","60"],["Weighted average OP units outstanding","35,421","","","30,127","","","29,863"],["Weighted average DownREIT OP unit equivalents outstanding","1,925","","","1,925","","","1,906"],["Weighted average LTIP units outstanding","514","","","542","","","543"],["Total weighted average shares and units outstanding - FFO and Core FFO","129,126","","","113,922","","","98,949"],["FFO per share and unit","$","2.74","","","$","2.24","","","$","1.69"],["Core FFO per share and unit","$","2.81","","","$","2.26","","","$","1.71"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1) Amounts represent distributions declared for subordinated performance unitholders and DownREIT subordinated performance unitholders for the periods presented."],["(2) These casualty-related expenses are recorded in the line item \"Other\" included in operating expense in the accompanying consolidated statement of operations."],["(3) 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 our operating partnership on a one-for-one basis, subject to certain adjustments in each case. Subordinated performance units, DownREIT subordinated performance units, and 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). See footnote(1) to the following table 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."],["(4) Represents the dilutive effect of the forward offering from the application of the treasury stock method."]]
[[/GREPCENT_TABLE]]

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The following table presents a reconciliation of earnings per share - diluted to FFO and Core FFO per share and unit for the periods presented:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2022","","2021","","2020"],["Earnings per share - diluted","$","0.99","","","$","0.98","","","$","0.53"],["Impact of the difference in weighted average number of shares(1)","(0.28)","","","0.18","","","(0.16)"],["Impact of GAAP accounting for noncontrolling interests, two-class method and treasury stock method(2)","0.62","","","\u2014","","","0.30"],["Add real estate depreciation and amortization","1.79","","","1.38","","","1.17"],["Add Company's share unconsolidated venture real estate depreciation and amortization","0.13","","","0.14","","","0.15"],["Subtract gain on sale of self storage properties","(0.05)","","","\u2014","","","\u2014"],["FFO attributable to subordinated performance unitholders","(0.46)","","","(0.44)","","","(0.30)"],["FFO per share and unit","2.74","","","2.24","","","1.69"],["Add acquisition costs and Company's share of unconsolidated real estate venture acquisition costs","0.02","","","0.02","","","0.02"],["Add casualty-related expenses","0.05","","","\u2014","","","\u2014"],["Core FFO per share and unit","$","2.81","","","$","2.26","","","$","1.71"],["(1) 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, the treasury stock method for certain unvested LTIP units, and includes the assumption of a 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. For additional information about the conversion of subordinated performance units, DownREIT subordinated performance units and LTIP units into OP units, see Note 10 to the consolidated financial statements in Item 8. 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."],["(2) Represents the effect of adjusting the numerator to consolidated net income (loss) 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 (1)."]]
[[/GREPCENT_TABLE]]

Net Operating Income

Net operating income, or NOI, represents rental revenue plus other property-related revenue less property operating expenses. NOI is not a measure of performance calculated in accordance with GAAP.

We believe NOI is useful to investors in evaluating our operating performance because:

•NOI is one of the primary measures used by our management and our PROs to evaluate the economic productivity of our properties, including our ability to lease our properties, increase pricing and occupancy and control our property operating expenses;

•NOI is widely used in the real estate industry and the self storage industry to measure the performance and value of real estate assets without regard to various items included in net income that do not relate to or are not indicative of operating performance, such as depreciation and amortization, which can vary depending upon accounting methods, the book value of assets, and the impact of our capital structure; and

•We believe NOI helps our investors to meaningfully compare the results of our operating performance from period to period by removing the impact of our capital structure (primarily interest expense on our outstanding indebtedness) and depreciation of the cost basis of our assets from our operating results.

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There are material limitations to using a non-GAAP measure such as NOI, including the difficulty associated with comparing results among more than one company and the inability to analyze certain significant items, including depreciation and interest expense, that directly affect our net income (loss). We compensate for these limitations by considering the economic effect of the excluded expense items independently as well as in connection with our analysis of net income (loss). NOI should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP, such as total revenues and net income (loss).

As of December 31, 2022, our same store portfolio consisted of 628 self storage properties. Our same store portfolio is defined as those properties owned and operated since the first day of the earliest year presented, excluding any properties sold, expected to be sold or subject to significant changes such as expansions or casualty events which cause the portfolio's year-over-year operating results to no longer be comparable. The following table illustrates the changes in rental revenue, other property-related revenue, and property operating expenses, for the year ended December 31, 2022 compared to the year ended December 31, 2021 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2022","","2021","","Change"],["Rental revenue"],["Same store portfolio","$","531,870","","","$","472,218","","","$","59,652"],["Non-same store portfolio","216,944","","","69,329","","","147,615"],["Total rental revenue","748,814","","","541,547","","","207,267"],["Other property-related revenue"],["Same store portfolio","16,869","","","17,120","","","(251)"],["Non-same store portfolio","8,262","","","2,630","","","5,632"],["Total other property-related revenue","25,131","","","19,750","","","5,381"],["Property operating expenses"],["Same store portfolio","140,724","","","134,276","","","6,448"],["Non-same store portfolio","70,301","","","21,671","","","48,630"],["Prior period comparability adjustment","\u2014","","","(682)","","","682"],["Total property operating expenses","211,025","","","155,265","","","55,760"],["Net operating income"],["Same store portfolio","408,015","","","355,062","","","52,953"],["Non-same store portfolio","154,905","","","50,970","","","103,935"],["Total net operating income","$","562,920","","","$","406,032","","","$","156,888"]]
[[/GREPCENT_TABLE]]

Rental Revenue

Same store portfolio rental revenues increased $59.7 million, or 12.6%, due to a 13.4% increase, from $13.05 to $14.80, in annualized same store rental revenue (including fees and net of any discounts and uncollectible customer amounts) divided by average occupied square feet for the year ended December 31, 2022, driven primarily by increased contractual lease rates for in-place tenants offset by a decrease in average occupancy from 94.7% for the year ended December 31, 2021 to 93.8% for the year ended December 31, 2022.

Other Property-Related Revenue

Same store other property-related revenue remained consistent decreasing by $0.3 million, or 1.5%, for the year ended December 31, 2022, as compared to the year ended December 31, 2021.

Property Operating Expenses

Same store property operating expenses were $140.7 million for the year ended December 31, 2022 compared to $134.3 million for the year ended December 31, 2021, an increase of $6.4 million, or 4.8%. The increase in same store property operating expenses was a result of increases in property tax, utilities and marketing costs during the year ended December 31, 2022.

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The following table presents a reconciliation of net income to NOI for the periods presented (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2022","","2021","","2020"],["Net income","$","183,765","","","$","146,935","","","$","79,478"],["(Subtract) add:"],["Management fees and other revenue","(27,624)","","","(24,374)","","","(23,038)"],["General and administrative expenses","59,311","","","51,001","","","43,640"],["Other","8,537","","","2,853","","","808"],["Depreciation and amortization","233,158","","","158,312","","","117,174"],["Interest expense","110,599","","","72,062","","","62,595"],["Equity in (earnings) of unconsolidated real estate ventures","(7,745)","","","(5,294)","","","(265)"],["Acquisition costs","2,745","","","1,941","","","2,424"],["Income tax expense","4,689","","","1,690","","","1,671"],["Gain on sale of self storage properties","(5,466)","","","\u2014","","","\u2014"],["Non-operating expense","951","","","906","","","1,211"],["Net operating income","$","562,920","","","$","406,032","","","$","285,698"]]
[[/GREPCENT_TABLE]]

Our consolidated NOI shown in the table above does not include our proportionate share of NOI for our unconsolidated real estate ventures. For additional information about our 2018 Joint Venture and 2016 Joint Venture see Note 5 to the consolidated financial statements in Item 8.

EBITDA and Adjusted EBITDA

We define EBITDA as net income (loss), as determined under GAAP, plus interest expense, loss on early extinguishment of debt, income taxes, depreciation and amortization expense and the Company's share of unconsolidated real estate venture depreciation and amortization. We define Adjusted EBITDA as EBITDA plus acquisition costs, equity-based compensation expense, losses on sale of properties, impairment of long-lived assets and casualty-related expense, minus gains on sale of properties and debt forgiveness, and after adjustments for unconsolidated partnerships and joint ventures. These further adjustments eliminate the impact of items that we do not consider indicative of our core operating performance. In evaluating EBITDA and Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of EBITDA and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

We present EBITDA and Adjusted EBITDA because we believe they assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. EBITDA and Adjusted EBITDA have limitations as an analytical tool. Some of these limitations are:

•EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements, for capital expenditures, contractual commitments or working capital needs;

•EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;

•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;

•Adjusted EBITDA excludes equity-based compensation expense, which is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period;

•EBITDA and Adjusted EBITDA do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and

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•other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations by considering the economic effect of the excluded expense items independently as well as in connection with our analysis of net income (loss). EBITDA and Adjusted EBITDA should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP, such as total revenues and net income (loss).

The following table presents a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods presented (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2022","","2021","","2020"],["Net income","$","183,765","","","$","146,935","","","$","79,478"],["Add:"],["Depreciation and amortization","233,158","","","158,312","","","117,174"],["Company's share of unconsolidated real estate venture depreciation and amortization","17,072","","","15,408","","","15,297"],["Income tax expense","4,689","","","1,690","","","1,671"],["Interest expense","110,599","","","72,062","","","62,595"],["EBITDA","549,283","","","394,407","","","276,215"],["Add:"],["Acquisition costs","2,745","","","1,941","","","2,424"],["Gain on sale of self storage properties","(5,466)","","","\u2014","","","\u2014"],["Casualty-related expenses (recoveries)","6,388","","","\u2014","","","\u2014"],["Equity-based compensation expense","6,258","","","5,462","","","4,278"],["Adjusted EBITDA","$","559,208","","","$","401,810","","","$","282,917"]]
[[/GREPCENT_TABLE]]

Liquidity and Capital Resources

Liquidity Overview

Liquidity is the ability to meet present and future financial obligations. Our primary source of liquidity is cash flow from our operations. Additional sources are proceeds from equity and debt offerings, debt financings including additional borrowing capacity under the credit facility, and expansion options available under the 2028 Term Loan Facility, the June 2029 Term Loan Facility, and our credit facility.

Our short-term liquidity requirements consist primarily of property operating expenses, property acquisitions, capital expenditures, general and administrative expenses and principal and interest on our outstanding indebtedness. A further short-term liquidity requirement relates to distributions to our common and preferred shareholders and holders of preferred units, OP units, subordinated performance units, LTIP units, DownREIT OP units and DownREIT subordinated performance units. We expect to fund short-term liquidity requirements from our operating cash flow, cash on hand and borrowings under our credit facility.

Our long-term liquidity needs consist primarily of the repayment of debt, property acquisitions, and capital expenditures. We acquire properties through the use of cash, preferred units, OP units and subordinated performance units in our operating partnership or DownREIT partnerships. We expect to meet our long-term liquidity requirements with operating cash flow, cash on hand, secured and unsecured indebtedness, and the issuance of equity and debt securities.

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The availability of credit and its related effect on the overall economy may affect our liquidity and future financing activities, both through changes in interest rates and access to financing. During 2022, the Federal Reserve Board has raised interest rates from historically low levels and has signaled an intention to continue to do so until current inflation levels re-align with the Federal Reserve Board's long-term inflation target. Our ability to access capital on favorable terms as well as to use cash from operations to continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted, could be affected by various risks and uncertainties. We believe that, as a publicly-traded REIT, we will have access to multiple sources of capital to fund our long-term liquidity requirements, including the incurrence of additional debt and the issuance of debt and additional equity securities. However, we cannot assure you that this will be the case.

Cash Flows

At December 31, 2022, we had $35.3 million in cash and cash equivalents and $6.9 million of restricted cash, an increase in cash and cash equivalents of $10.3 million and an increase in restricted cash of $4.0 million from December 31, 2021. Restricted cash primarily consists of escrowed funds deposited with financial institutions resulting from property sales for which we elected to purchase replacement property in accordance with Section 1031 of the Code, and for real estate taxes, insurance, and other reserves for capital improvements in accordance with our loan agreements. The following discussion relates to changes in cash due to operating, investing, and financing activities, which are presented in our consolidated statements of cash flows included in Item 8 of this report.

Operating Activities

Cash provided by our operating activities was $443.8 million for the year ended December 31, 2022 compared to $331.3 million for the year ended December 31, 2021, an increase of $112.5 million. Our operating cash flow increased primarily due to operating cash flows from 229 self storage properties acquired during the year ended December 31, 2021 that generated cash flow for the entire year ended December 31, 2022 and 45 self storage properties that were acquired during the year ended December 31, 2022. These increases were partially offset by higher cash payments for interest expense.

Investing Activities

Cash used in investing activities was $584.2 million for the year ended December 31, 2022 compared to $2.0 billion for the year ended December 31, 2021. The primary uses of cash for the year ended December 31, 2022 were for our acquisition of 45 self storage properties for cash consideration of $496.4 million, capital expenditures of $42.8 million and capital contributions of $55.0 million to fund the self storage property acquisitions of our 2016 Joint Venture and 2018 Joint Venture. Cash used in investing activities was $2.0 billion for the year ended December 31, 2021 compared to $509.7 million for the year ended December 31, 2020. The primary uses of cash for the year ended December 31, 2021 were for our acquisition of 229 self storage properties for cash consideration of $2.0 billion, capital expenditures of $27.6 million and the acquisition of the interest in a reinsurance company and related cash flows of $2.9 million.

Capital expenditures totaled $42.8 million, $27.6 million and $16.4 million during the years ended December 31, 2022, 2021 and 2020 respectively. We generally fund post-acquisition capital additions from cash provided by operating activities.

We categorize our capital expenditures broadly into three primary categories:

•recurring capital expenditures, which represent the portion of capital expenditures that are deemed to replace the consumed portion of acquired capital assets and extend their useful life;

•value enhancing capital expenditures, which represent the portion of capital expenditures that are made to enhance the revenue and value of an asset from its original purchase condition; and

•acquisitions capital expenditures, which represent the portion of capital expenditures capitalized during the current period that were identified and underwritten prior to a property's acquisition.

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The following table presents a summary of the capital expenditures for these categories, along with a reconciliation of the total for these categories to the capital expenditures reported in the accompanying consolidated statements of cash flows for the periods presented (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2022","","2021","","2020"],["Recurring capital expenditures","$","11,794","","","$","9,500","","","$","6,057"],["Value enhancing capital expenditures","11,732","","","8,738","","","4,026"],["Acquisitions capital expenditures","19,215","","","11,185","","","6,064"],["Total capital expenditures","42,741","","","29,423","","","16,147"],["Change in accrued capital spending","57","","","(1,846)","","","248"],["Capital expenditures per statement of cash flows","$","42,798","","","$","27,577","","","$","16,395"]]
[[/GREPCENT_TABLE]]

Financing Activities

Cash provided by our financing activities was $154.6 million for the year ended December 31, 2022 compared to $1.7 billion for the year ended December 31, 2021. Our sources of financing cash flows for the year ended December 31, 2022 primarily consisted of $962.0 million of borrowings under the Revolver, $285.0 million of borrowings under our June 2029 Term Loan, $125.0 million from the issuance of the November 2033 Notes and $200.0 million from the issuance of the November 2032 Notes. Our primary uses of financing cash flows for the year ended December 31, 2022 were for principal payments on existing debt of $960.4 million (which included $956.0 million of principal repayments under the Revolver and $4.4 million in fixed rate mortgage payments), distributions to common shareholders of $195.7 million, distributions to noncontrolling interests of $141.0 million and distributions to preferred shareholders of $13.4 million. Our sources of financing cash flows for the year ended December 31, 2021 primarily consisted of $1.6 billion of borrowings under the Revolver, $901.0 million of proceeds from the issuance of common shares, $505.0 million of borrowings from the issuance of senior unsecured notes, $125.0 million of Term Loan borrowings under our credit facility and $88.0 million of borrowings under secured fixed-rate note agreements. Our primary uses of financing cash flows for the year ended December 31, 2021 were for principal payments on existing debt of $1.3 billion (which included $1.3 billion of principal repayments under the Revolver and $3.9 million in fixed rate mortgage principal payments, and $3.8 million of scheduled fixed rate mortgage principal payments), distributions to common shareholders of $131.7 million, distributions to noncontrolling interests of $102.2 million, and distributions to preferred shareholders of $13.1 million.

Credit Facility and Term Loan Facilities

As of December 31, 2022, our credit facility provided for total borrowings of $1.550 billion, consisting of six components: (i) a Revolver which provides for a total borrowing commitment up to $650.0 million, whereby we may borrow, repay and re-borrow amounts under the Revolver, (ii) a $125.0 million Term Loan A, (iii) a $250.0 million Term Loan B, (iv) a $225.0 million Term Loan C, (v) a $175.0 million Term Loan D and (vi) a $125.0 million Term Loan E. The Revolver was set to mature in January 2024; provided that we had the ability to extend to July 2024 by paying an extension fee of 0.075% of the total borrowing commitment thereunder at the time of extension and meeting other customary conditions with respect to compliance. The Term Loan A was set to mature in January 2023, the Term Loan B matures in July 2024, the Term Loan C matures in January 2025, the Term Loan D matures in July 2026 and the Term Loan E matures in March 2027. The Revolver, Term Loan A, Term Loan B, Term Loan C, Term Loan D and Term Loan E were not subject to any scheduled reduction or amortization payments prior to maturity. As of December 31, 2022, we had an expansion option under the credit facility, which, if exercised in full, would provide for a total credit facility of $1.750 billion.

As of December 31, 2022, $125.0 million was outstanding under the Term Loan A with an effective interest rate of 3.74%, $250.0 million was outstanding under the Term Loan B with an effective interest rate of 2.94%, $225.0 million was outstanding under the Term Loan C with an effective interest rate of 2.91%, $175.0 million was outstanding under the Term Loan D with an effective interest rate of 3.12% and $125.0 million was outstanding under the Term Loan E with an effective interest rate of 5.59%. As of December 31, 2022, we would have had the capacity to borrow remaining Revolver commitments of $147.8 million while remaining in compliance with the credit facility's financial covenants.

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On January 3, 2023, we entered into a third amended and restated credit agreement which expands the total borrowing capacity of our credit facility by $405.0 million to $1.955 billion with an expansion option to expand the total borrowing capacity to $2.5 billion. The maturity date of the Revolver is now January 2027 versus the previous maturity date of January 2024, while the total borrowing capacity was increased to $950 million from $650 million. In connection with the credit facility recast the $125 million Term Loan A due January 2023 was eliminated by us, Term Loan B increased from $250 million to $275 million, Term Loan C increased from $225 million to $325 million, Term Loan D increased from $175 million to $275 million, and Term Loan E increased from $125 million to $130 million.

As of December 31, 2022, we had a 2023 Term Loan Facility that was set to mature in June 2023 and was separate from the credit facility in an aggregate amount of $175.0 million. As of December 31, 2022, the entire amount was outstanding under the 2023 Term Loan Facility with an effective interest rate of 2.83%. We had an expansion option under the 2023 Term Loan Facility, which, if exercised in full, would have provided for total borrowings in an aggregate amount of $400.0 million. In connection with the credit facility recast on January 3, 2023, the Company retired the $175 million term loan facility due in June 2023.

We have a 2028 Term Loan Facility that matures in December 2028 and is separate from the credit facility and 2023 Term Loan Facility in an aggregate amount of $75.0 million. As of December 31, 2022 the entire amount was outstanding under the 2028 Term Loan Facility with an effective interest rate of 4.62%. We have an expansion option under the 2028 Term Loan Facility, which, if exercised in full, would provide for total borrowings in an aggregate amount up to $125.0 million.

We have an April 2029 Term Loan Facility that matures in April 2029 and is separate from the credit facility, 2023 Term Loan Facility and 2028 Term Loan Facility in an aggregate amount of $100.0 million. As of December 31, 2022 the entire amount was outstanding under the April 2029 Term Loan Facility with an effective interest rate of 4.27%.

We have a June 2029 Term Loan Facility that matures in June 2029 and is separate from the credit facility, 2023 Term Loan Facility, 2028 Term Loan Facility, and April 2029 Term Loan Facility in an aggregate amount of $285.0 million. As of December 31, 2022 the June 2029 Term Loan Facility had a variable effective interest rate of 5.37%. We have an expansion option under the June 2029 Term Loan Facility, which, if exercised in full, would provide for total borrowings in an aggregate amount up to $300.0 million.

For a summary of our financial covenants and additional detail regarding our credit facility, 2023 Term Loan Facility, 2028 Term Loan Facility, April 2029 Term Loan Facility and June 2029 Term Loan Facility, please see Note 8 to the consolidated financial statements in Item 8.

2029 and August 2031 Senior Unsecured Notes

On August 30, 2019, our operating partnership issued $100.0 million of 3.98% senior unsecured notes due August 30, 2029 and $50.0 million of 4.08% senior unsecured notes due August 30, 2031 in a private placement to certain institutional investors.

August 2030 and 2032 Senior Unsecured Notes

On October 22, 2020, our operating partnership issued $150.0 million of 2.99% senior unsecured notes due August 5, 2030 and $100.0 million of 3.09% senior unsecured notes due August 5, 2032 in a private placement to certain institutional investors.

2026, May 2031 and May 2033 Senior Unsecured Notes

On May 26, 2021, our operating partnership issued $55.0 million of 3.10% senior unsecured notes due May 4, 2033. On July 26, 2021, our operating partnership issued $35.0 million of 2.16% senior unsecured notes due May 4, 2026 and $90.0 million of 3.00% senior unsecured notes due May 4, 2031.

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November 2030, November 2031, November 2033 and 2036 Senior Unsecured Notes

On December 14, 2021, our operating partnership issued $75.0 million of 2.72% senior unsecured notes due November 30, 2030, $175.0 million of 2.81% senior unsecured notes due November 30, 2031 and $75.0 million of 3.06% senior unsecured notes due November 30, 2036. On January 28, 2022, our operating partnership issued $125.0 million of 2.96% senior unsecured notes due November 30, 2033.

November 2032 Senior Unsecured Notes

On September 28, 2022, the operating partnership issued $200.0 million of 5.06% senior unsecured notes due November 16, 2032.

Fixed Rate Mortgage Payable

On July 9, 2021, we entered into an agreement with a single lender for an $88.0 million debt financing secured by eight of our self storage properties. This interest-only loan matures in July 2028 and has a fixed interest rate of 2.77%.

Sources of Liquidity and Capital Resources

As of December 31, 2022, we had $35.3 million in cash and cash equivalents, compared to $25.0 million as of December 31, 2021. Our cash flows from operations result primarily from the ownership and management of self-storage facilities as described in Part I, Item 1, "Business".

Our material cash requirements from contractual and other obligations primarily relate to our debt obligations. Expected timing of those payments are as follows. The information in this section should be read in conjunction with Note 8 and other information included in the accompanying consolidated financial statements included in Item 8.

[[GREPCENT_TABLE]]
[["(in thousands)","","Next 12 Months","","Beyond 12 Months","","Total"],["Senior Unsecured Notes (1)","","$","\u2014","","","$","1,230,000","","","$","1,230,000"],["Revolving line of credit(2)","","\u2014","","","496,000","","","496,000"],["Term loan facilities (2)(3)","","300,000","","","1,235,000","","","1,535,000"],["Fixed rate mortgage notes payable","","76,813","","","222,757","","","299,570"],["Total","","$","376,813","","","$","3,183,757","","","$","3,560,570"]]
[[/GREPCENT_TABLE]]

(1) We believe we have access to additional financing and refinancing, if needed.

(2) Under the amended credit facility effective January 3, 2023, the Company has an expansion option which if exercised in full, would provide an additional $545.0 million of borrowing capacity.

(3) In connection with the January 3, 2023 amendments to our credit facility, we repaid in full both the $125.0 million of Term Loan A and the $175.0 million June 2023 Term Loan, both of which were to mature in 2023.

We anticipate our current cash balances, cash flows from operations and available sources of liquidity will be sufficient to fund operations and meet our short-term and long-term cash requirements, including our scheduled debt repayments, payments for contractual obligations, acquisitions, capital expenditures, working capital needs, dividends, and other prudent uses of our capital, as needed. However, we will continue to assess our liquidity needs. In the event of certain market conditions, we may require additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.

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Equity Transactions

Issuance and Repurchase of Common Shares

On July 11, 2022, we approved a share repurchase program authorizing, but not obligating, the repurchase of up to $400.0 million of the Company's common shares from time to time. During the year ended December 31, 2022, we repurchased 1,986,175 common shares for approximately $90.1 million.

During the year ended December 31, 2022, after receiving notices of redemption from certain OP unitholders, we elected to issue 627,896 common shares to such holders in exchange for 627,896 OP units in satisfaction of the operating partnership's redemption obligations.

Issuance of OP Equity

In connection with the 45 properties acquired during the year ended December 31, 2022, we issued $68.9 million of OP equity (consisting of 353,030 series A-1 perpetual preferred units, 887,291 OP units and 167,396 subordinated performance units). We also issued $3.2 million of OP equity (consisting of 46,540 OP units) as consideration for Northwest's rights to property management contracts, brand, intellectual property, and certain intangible assets in connection with the PRO retirement.

As discussed in Note 3 to the consolidated financial statements in Item 8, during the year ended December 31, 2022, the Company also issued (i) 3,911,260 OP units upon the non-voluntary conversion of 2,078,357 subordinated performance units in connection with Northwest's retirement, (ii) 235,241 OP units upon the voluntary conversion of 82,611 subordinated performance units and (iii) 192,296 OP units upon the conversion of an equivalent number of LTIP units. We also issued 393,614 subordinated performance units upon the conversion of 800,556 OP units.

Dividends and Distributions

During the year ended December 31, 2022, the Company paid $195.7 million of distributions to common shareholders, $13.4 million of distributions to preferred shareholders and distributed $141.0 million to noncontrolling interests.

On February 22, 2023, our board of trustees declared a cash dividend and distribution, respectively, of $0.55 per common share and OP unit to shareholders and OP unitholders of record as of March 15, 2023. On February 22, 2023, our board of trustees also declared cash distributions of $0.375 per Series A Preferred Share and Series A-1 preferred unit to shareholders and unitholders of record as of March 15, 2023. In addition, we expect to declare a cash distribution in the first quarter of 2023 to our subordinated performance unitholders of record as of March 15, 2023. Such dividends and distributions are expected to be paid on March 30, 2023.

Cash Distributions from our Operating Partnership

Under the LP Agreement of our operating partnership, to the extent that we, as the general partner of our operating partnership, determine to make distributions to the partners of our operating partnership out of the operating cash flow or capital transaction proceeds generated by a real property portfolio managed by one of our PROs, the holders of the series of subordinated performance units that relate to such portfolio are entitled to share in such distributions. Under the LP Agreement of our operating partnership, operating cash flow with respect to a portfolio of properties managed by one of our PROs is generally an amount determined by us, as general partner of our operating partnership, equal to the excess of property revenues over property related expenses from that portfolio. In general, property revenue from the portfolio includes:

(i)all receipts, including rents and other operating revenues;

(ii)any incentive, financing, break-up and other fees paid to us by third parties;

(iii)amounts released from previously set aside reserves; and

(iv)any other amounts received by us, which we allocate to the particular portfolio of properties.

In general, property-related expenses include all direct expenses related to the operation of the properties in that portfolio, including real property taxes, insurance, property-level general and administrative expenses, employee costs, utilities, property marketing expense, property maintenance and property reserves and other expenses incurred at the property level. In addition, other expenses incurred by our operating partnership will also be allocated by us, as general partner, to the property portfolio and will be included in the property-related expenses of that portfolio. Examples of such other expenses include:

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(i)corporate-level general and administrative expenses;

(ii)out-of-pocket costs, expenses and fees of our operating partnership, whether or not capitalized;

(iii)the costs and expenses of organizing and operating our operating partnership;

(iv)amounts paid or due in respect of any loan or other indebtedness of our operating partnership during such period;

(v)extraordinary expenses of our operating partnership not previously or otherwise deducted under item (ii) above;

(vi)any third-party costs and expenses associated with identifying, analyzing, and presenting a proposed property to us and/or our operating partnership; and

(vii)reserves to meet anticipated operating expenditures, debt service or other liabilities, as determined by us.

To the extent that we, as the general partner of our operating partnership, determine to make distributions to the partners of our operating partnership out of the operating cash flow of a real property portfolio managed by one of our PROs, operating cash flow from a property portfolio is required to be allocated to OP unitholders and to the holders of series of subordinated performance units that relate to such property portfolio as follows:

First, an amount is allocated to OP unitholders in order to provide OP unitholders (together with any prior allocations of capital transaction proceeds) with a cumulative preferred allocation on the unreturned capital contributions attributed to the OP units in respect of such property portfolio. The preferred allocation for all of our existing portfolios is 6%. As of December 31, 2022, our operating partnership had an aggregate of $2,915.8 million of unreturned capital contributions with respect to common shareholders and OP unitholders, with respect to the various property portfolios.

Second, an amount is allocated to the holders of the series of subordinated performance units relating to such property portfolio in order to provide such holders with an allocation (together with prior distributions of capital transaction proceeds) on their unreturned capital contributions. Although the subordinated allocation for the subordinated performance units is non-cumulative from period to period, if the operating cash flow from a property portfolio related to a series of subordinated performance units is sufficient, in the judgment of the general partner (with the approval of a majority of our independent trustees), to fund distributions to the holders of such series of subordinated performance units, but we, as the general partner of our operating partnership, decline to make distributions to such holders, the amount available but not paid as distributions will be added to the subordinated allocation corresponding to such series of subordinated performance units. The subordinated allocation for the outstanding subordinated performance units is 6%. As of December 31, 2022, an aggregate of $244.3 million of unreturned capital contributions has been allocated to the various series of subordinated performance units.

Thereafter, any additional operating cash flow is allocated to OP unitholders and the applicable series of subordinated performance units equally.

Following the allocation described above, we as the general partner of our operating partnership, will generally cause our operating partnership to distribute the amounts allocated to the relevant series of subordinated performance units to the holders of such series of subordinated performance units. We, as the general partner, may cause our operating partnership to distribute the amounts allocated to OP unitholders or may cause our operating partnership to retain such amounts to be used by our operating partnership for any purpose. Any operating cash flow that is attributable to amounts retained by our operating partnership pursuant to the preceding sentence will generally be available to be allocated as an additional capital contribution to the various property portfolios.

The foregoing description of the allocation of operating cash flow between the OP unitholders and subordinated performance unitholders is used for purposes of determining distributions to holders of subordinated performance units but does not necessarily represent the operating cash flow that will be distributed to OP unitholders (or paid as dividends to holders of our common shares). Any distribution of operating cash flow allocated to the OP unitholders will be made at our discretion (and paid as dividends to holders of our common shares at the discretion of our board of trustees).

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Under the LP Agreement of our operating partnership, capital transactions are transactions that are outside the ordinary course of our operating partnership's business, involve the sale, exchange, other disposition, or refinancing of any property, and are designated as capital transactions by us, as the general partner. To the extent the general partner determines to distribute capital transaction proceeds, the proceeds from capital transactions involving a particular property portfolio are required to be allocated to OP unitholders and to the series of subordinated performance units that relate to such property portfolio as follows:

First, an amount determined by us, as the general partner, of such capital transaction proceeds is allocated to OP unitholders in order to provide OP unitholders (together with any prior allocations of operating cash flow) with a cumulative preferred allocation on the unreturned capital contributions attributed to the OP unitholders in respect of such property portfolio that relate to such capital transaction plus an additional amount equal to such unreturned capital contributions.

Second, an amount determined by us, as the general partner, is allocated to the holders of the series of subordinated performance units relating to such property portfolio in order to provide such holders with a non-cumulative subordinated allocation on the unreturned capital contributions made by such holders in respect of such property portfolio that relate to such capital transaction plus an additional amount equal to such unreturned capital contributions.

The preferred allocation and subordinated allocation with respect to capital transaction proceeds for each portfolio is equal to the preferred allocation and subordinated allocation for distributions of operating cash flow with respect to that portfolio.

Thereafter, any additional capital transaction proceeds are allocated to OP unitholders and the applicable series of subordinated performance units equally.

Following the allocation described above, we, as the general partner of our operating partnership, will generally cause our operating partnership to distribute the amounts allocated to the relevant series of subordinated performance units to the holders of such series of subordinated performance units. We, as general partner of our operating partnership, may cause our operating partnership to distribute the amounts allocated to the OP unitholders or may cause our operating partnership to retain such amounts to be used by our operating partnership for any purpose. Any capital transaction proceeds that are attributable to amounts retained by our operating partnership pursuant to the preceding sentence will generally be available to be allocated as an additional capital contribution to the various property portfolios.

The foregoing allocation of capital transaction proceeds between the OP unitholders and subordinated performance unitholders is used for purposes of determining distributions to holders of subordinated performance units but does not necessarily represent the capital transaction proceeds that will be distributed to OP unitholders (or paid as dividends to holders of our common shares). Any distribution of capital transaction proceeds allocated to the OP unitholders will be made at our discretion (and paid as dividends to holders of our common shares at the discretion of our board of trustees).

Our OP units are redeemable for cash or, at our option exchangeable on a one-for-one basis into common shares after an agreed period of time and certain other conditions. Our subordinated performance units are only convertible into OP units following a two year lock-out period and then (i) at the holder's election only upon the achievement of certain performance thresholds relating to the properties to which such subordinated performance units relate or (ii) at our election upon a retirement event of a PRO that holds such subordinated performance units or upon certain qualifying terminations.

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Notwithstanding the two-year lock out period on conversions of subordinated performance units into OP units, if such subordinated performance units were convertible into OP units as of December 31, 2022, each subordinated performance unit would on average hypothetically convert into 1.72 OP units, or into an aggregate of approximately 21.5 million OP units. These amounts are based on historical financial information for the trailing twelve months ended December 31, 2022. The hypothetical conversion is calculated by dividing the average cash available for distribution, or CAD, per subordinated performance unit by 110% of the CAD per OP unit over the same period. We anticipate that as our CAD grows over time, the conversion ratio will also grow, including to levels that may exceed this amount. The actual number of OP units into which such subordinated performance units will become convertible may vary significantly and will depend upon the applicable conversion penalty and the actual CAD to the OP units and the actual CAD to the converted subordinated performance units in the one-year period ending prior to conversion. We have also granted registration rights to those persons who will be eligible to receive common shares issuable upon exchange of OP units issued in our formation transactions and certain contribution transactions.

Allocation of Capital Contributions

We, as the general partner of our operating partnership, in our discretion, have the right to increase or decrease, as appropriate, the amount of capital contributions allocated to our operating partnership in general and to each series of subordinated performance units to reflect capital expenditures made by our operating partnership in respect of each portfolio, the sale or refinancing of all or a portion of the properties comprising the portfolio, the distribution of capital transaction proceeds by our operating partnership, the retention by our operating partnership of cash for working capital purposes and other events impacting the amount of capital contributions allocated to the holders. In addition, to avoid conflicts of interests, any decision by us to increase or decrease allocations of capital contributions must also be approved by a majority of our independent trustees.

Segment 

We manage our business as one reportable segment consisting of investments in self storage properties located in the United States. Although we operate in several markets, these operations have been aggregated into one reportable segment based on the similar economic characteristics among all markets.

Seasonality 

The self storage business is subject to minor seasonal fluctuations. A greater portion of revenues and profits are realized from May through September. Historically, our highest level of occupancy has typically been in July, while our lowest level of occupancy has typically been in February. Results for any quarter may not be indicative of the results that may be achieved for the full fiscal year.