National Storage Affiliates (NSA) Q3 2025: Preferred Equity Program Targets 10% Return as Revenue Inflects

November 4, 2025 | By EarningsIQ Research

NSA’s third quarter marked a strategic inflection, with operational reforms and a new preferred equity joint venture targeting a 10% return reshaping its growth trajectory. Management’s tone and actions signal confidence in sustained improvement, even as same-store revenue remains negative. Forward focus is on leveraging centralized platforms, disciplined capital recycling, and measured expansion to regain growth footing into 2026.

Summary

• Capital Deployment Shift: Preferred equity JV program aims for 10% returns, diversifying NSA’s growth and acquisition model.
• Operational Reset Gains Traction: Centralized revenue management and brand consolidation are driving early improvements in occupancy and rental momentum.
• 2026 Setup Strengthens: Management expects to start next year in the best position in years, with improving fundamentals and sector tailwinds.

Performance Analysis

NSA’s Q3 reflected a pivotal operational and financial stabilization after a challenging period for the self-storage sector. Same-store revenues declined 2.6% year-over-year, primarily due to lower occupancy and a modest drop in average revenue per square foot, but this was a meaningful sequential improvement versus the first half’s steeper declines. Rental revenue, which constitutes over 95% of same-store revenue, improved by 100 basis points sequentially, signaling that the worst of revenue contraction may be behind the company.

Expense growth was elevated at 4.9%, with property tax and marketing spend as primary drivers. Marketing investment rose 29% year-over-year, reflecting a deliberate push to drive customer acquisition in targeted markets. NSA’s capital recycling program continued, with two asset sales funding new investments, including the launch of a preferred equity program that provides higher initial yields than traditional wholly owned acquisitions. Leverage remains elevated at 6.7x net debt to EBITDA, though management is gradually deleveraging through asset sales and improved cash flow discipline.

• Sequential Revenue Inflection: Same-store rental revenue decline narrowed to -2.2%, improving from -3.2% in the first half.
• Occupancy Stabilization: Occupancy held relatively flat in October, with contact rates up 160 basis points year-over-year.
• Marketing-Driven Volume: Move-in square footage rose 5.8% in Q3, with former “pro” stores up a notable 10.1%.

NSA’s operational overhaul is yielding early traction, but expense inflation and negative same-store comps remain headwinds into year-end.

Executive Commentary

Strategic Positioning

1. Preferred Equity JV: Expanding Capital Efficiency

NSA’s new preferred equity joint venture structure enables the company to invest in value-add self-storage properties with a priority return of 10%. This model allows NSA to access higher-yielding deals, maintain a captive acquisition pipeline, and partner with experienced local operators (“former pros”, legacy third-party operators) without the capital intensity of wholly owned acquisitions. The program is expected to deploy capital gradually, with initial cash yields ramping to the 10% target typically by year three, and potential upside to 14% on exit.

2. Centralized Platform and Brand Consolidation

NSA’s operational reset over the past two years has centralized revenue management, marketing, and pricing on a unified platform (nsastorage.com). This consolidation has improved efficiency, increased web shopping sessions by 23%, and lifted conversion rates by 7.1% year-over-year in October. The move is designed to enhance scale, reduce complexity, and enable more agile pricing and promotional strategies across the portfolio.

3. Capital Recycling and Measured Growth

NSA continues to recycle capital through selective asset sales, using proceeds to deleverage and fund higher-yielding investments. Management emphasized that the pace of growth remains measured, with new investment activity focused on long-term benefits and prudent risk-adjusted returns. The capital recycling program is largely past its peak, but ongoing portfolio optimization remains a priority.

4. Enhanced Leadership and Data-Driven Execution

Recent hires in revenue management, IT, and marketing have strengthened NSA’s ability to execute its ECRI (existing customer rate increase) strategy, optimize promotions, and drive data-informed decision making. The company is now able to test and refine pricing, staffing, and marketing tactics with greater precision, supporting a more dynamic operational model.

Key Considerations

NSA’s Q3 underscores a transition from structural overhaul to early-stage recovery, with management betting on platform leverage and disciplined capital allocation to drive future growth.

Key Considerations:

• Preferred Equity Returns: The 10% preferred return target on JV investments is materially higher than NSA’s recent acquisition yields, but realization depends on successful value-add execution and market stability.
• Occupancy and Rate Levers: NSA retains flexibility to drive growth through both occupancy gains and rate management, a strategic advantage as sector supply moderates.
• Expense Pressures Persist: Elevated property tax and marketing costs continue to weigh on operating margins, though some moderation is expected in Q4.
• Sector Supply Tailwinds: Industry-wide new supply is expected to fall below historical averages, improving the supply-demand balance and supporting a more constructive outlook for 2026.
• Balance Sheet Watch: Leverage remains high, and further deleveraging will be closely linked to continued asset sales and cash flow improvement.

Risks

NSA’s recovery thesis hinges on sustained rental momentum, successful execution of the preferred equity program, and continued expense discipline. Key risks include persistent occupancy softness, inability to realize targeted JV returns, and macroeconomic headwinds affecting consumer storage demand. Elevated leverage constrains flexibility if sector conditions deteriorate or if asset sales slow.

Forward Outlook

For Q4 2025, NSA guided to:

• Same-store revenue and NOI growth improvement at the midpoint of guidance
• Core FFO per share consistent with prior guidance ranges

For full-year 2025, management maintained guidance:

• Same-store revenue and NOI declines narrowing sequentially

Management highlighted:

• Continued operational momentum, with positive inflection in revenue growth metrics
• Sector supply moderation and potential Fed rate cuts as tailwinds for 2026

Takeaways

NSA’s Q3 signals an inflection from operational restructuring to measured recovery, with the launch of a preferred equity JV as a new growth lever.

• Growth Model Evolution: The preferred equity program reflects a shift toward capital-light, higher-yielding investments, with upside tied to local operator partnerships.
• Operational Leverage Emerges: Centralized marketing and revenue management are beginning to drive improved occupancy and rental activity, but cost pressures remain a watchpoint.
• 2026 Setup Strengthens: Investors should monitor the pace of occupancy recovery, success of new JV deployments, and further deleveraging as indicators of sustainable growth into next year.

Conclusion

NSA exits Q3 with early signs of operational and financial stabilization, bolstered by a new preferred equity investment approach and centralized platform efficiencies. Execution on occupancy, rate, and disciplined capital allocation will determine whether 2026 delivers on management’s confidence in a sector recovery.

Industry Read-Through

NSA’s results and commentary highlight an industry-wide shift toward capital-light, partnership-driven growth models as traditional acquisition yields compress. The sector’s improving supply-demand balance and focus on operational efficiency are likely to benefit larger, technology-enabled operators with scale. Expense inflation and occupancy headwinds remain common challenges, while the adoption of centralized platforms and data-driven pricing is emerging as a competitive differentiator. Investors in self-storage REITs should watch for further innovation in JV structures and the pace of deleveraging as key signals for sector health into 2026.

NSA Real Estate Self-Storage JVs Preferred Equity Capital Recycling Operational Efficiency