National Storage Affiliates Trust Q4 FY2021 Earnings Call

Greetings, and welcome to National Storage Affiliates Fourth Quarter 2021 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, George Hoglund, Vice President of Investor Relations for National Storage Affiliates. Thank you. Mr. Hoglund, you may begin.

We'd like to thank you for joining us today for the fourth quarter 2021 earnings conference call of National Storage Affiliates Trust. On the line with me here today are NSA's CEO, Tamara Fischer; COO, Dave Cramer; and CFO, Brandon Togashi. Following prepared remarks, management will accept questions from registered financial analysts. Please limit your questions to one question and one follow-up, and then return to the queue if you have questions. In addition to the press release distributed yesterday, we furnished our supplemental package with additional detail on our results, which may be found in the investor relations section on our website at nationalstorageaffiliates.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties and represent management's estimates as of today, February 22, 2022. The Company assumes no obligation to revise or update any forward-looking statements because of changing market conditions or other circumstances after the date of this conference call. The company cautions that actual results may differ materially from those projected in any forward-looking statement. For additional detail concerning our forward-looking statements, please refer to our public filings with the SEC. We also encourage listeners to review the definitions and reconciliations of non-GAAP financial measures, such as FFO, core FFO, and net operating income contained in the supplemental information package available in the Investor Relations section on our website and in our SEC filings. I will now turn the call over to Tammy.

Thanks, George, and thanks everyone for joining our call today. Before we discuss the strengths of our industry, and NSA’s banner year and outlook for 2022, I'd like to first acknowledge and thank our team for their extraordinary dedication and hard work, which allowed us to accomplish all that we did in 2021. As industry fundamentals remain strong, we finished the year on a high note, achieving some of the strongest operating results in the history of the self storage industry. In the fourth quarter alone, we delivered record results with same store NOI growth over 20%, acquisition volume over a billion dollars and growth in core FFO per share of 39%, the highest quarterly earnings growth in our history as a public company. Those strong results solidify 2021 as a banner year across the board for NSA, including record same store revenue and an NOI growth of 15.1% and 19.8% respectively, the highest reported full year results in the history of self storage, acquisition volume of $2.2 billion, the highest year in our history, and core FFO per share growth of 32%, also the highest in our history. To cap the year off, in December, our portfolio surpassed the 1,000 properties milestone, and NSA delivered total shareholder return of 98% in 2021, including raising our dividends by 29% throughout the year. Our results are driven by the powerful combination of our differentiated PRO structure, our concentration in Sunbelt, suburban and secondary markets and the remarkable strength and resilience of the self storage sector. Building off a record 2021, we begin 2022 with another accretive event, the retirement of Northwest self storage, one of our founding PROs. As a reminder, we've discussed and anticipated PRO retirements over time, and we expected at the time of our IPO that as many as half of our six PROs at the time would choose to retire within 10 years or less. Northwest will now be the second of our PRO retirements. We expect that this internalization will be even smoother as we implement based on lessons learned from our experience with SecurCare. In terms of the transition, all of our Northwest stores have been migrated onto NSA corporate platforms. Almost all of the Northwest team came on board with us and we'll continue to operate the stores under the Northwest flag. The internalization of Northwest increases the number of stores managed within our corporate portfolio to 685 stores, or 65% of our total 1,050 stores at the end of the year. We estimate this retirement will be approximately $0.02 per share accretive to core FFO in 2022. I'd like to thank the Northwest team for their partnership over the years. They’ve been a key contributor to NSA's success. On the external growth front, we topped off the year and the fourth quarter with an investment of over $1 billion in 110 properties, bringing our total acquisition volume for the year to 229 properties valued at $2.2 billion. This significantly surpassed our expectations and exceeded the top end of our guidance range. Cap rates on fourth quarter deals averaged 5.1% but generally ranged from the high 3s to the high 6s based on the level of lease-up, location, source of the deal, that is, whether it was marketed, off-market, or from our captive pipeline, and whether there was a portfolio premium involved. As we talked about over the course of the year, we were more active in 2021 in the acquisition of non-stabilized properties. So about $350 million or 16% of the properties we acquired in 2021 were non-stabilized. We believe this provides significant growth opportunities for 2022 and beyond. The weighted average cap rate on all of our transactions in 2021 was approximately 5.3%. It's also worth noting that over 60% of the deals we closed in 2021 were off-market or from our captive pipeline, where we tend to buy at cap rates slightly above market. The strength and resilience of our industry continues to draw attention and increased interest in investing in self storage. So it's not surprising that we continue to see significant competition for transactions despite the upward movement in the 10-year treasury and the overall increase in the cost of capital. As a result, we expect a lower volume of acquisitions this year as we remain disciplined in our underwriting and focused on assets that add to the long-term value of our portfolio and are accretive to our shareholders. Year-to-date, we've closed down properties valued at about $20 million and we have additional deals valued at between $200 million and $300 million under contract or letter of intent. Complementing external growth this year, we have a significant opportunity to drive growth and scale efficiencies from the integration of the record number of assets that we acquired in 2021, as well as through the integration of the Northwest stores onto NSA's management platform. Our exceptional fourth quarter results, elevated acquisition volume and continued tailwinds in the sector give us confidence for 2022. Our guidance once again implies double-digit same-store NOI growth and 20% growth in core FFO per share, which is an impressive encore to 2021. Brandon will provide further details on our guidance in his comments. I'll now turn the call over to Dave to provide color on what we're seeing on the ground and with new supply.

Thanks, Tammy. On our third quarter earnings call we said that overall storage fundamentals remain strong. We also noted that we didn't see any near-term signs of changes to the current favorable environment. So that's certainly how the fourth quarter laid out and that statement still holds true today. We did experience some normal seasonality at the end of the year, but occupancy levels remain high. As a result, our street rates averaged 25% higher this fourth quarter compared to a year earlier. We're also able to hold discounting concessions well below historical averages at 2% of revenue. We were assertive on rent increases to in-place tenants with the increases averaging in the low to mid-teens. Our rent roll up in the fourth quarter was a positive 3.5%. This is down from the 7% we realized in the third quarter but is still well above normal at a time when we usually experience rent roll downs. The rent roll up trend remains positive in 2022. Our contract rates improved every month in 2021 and were up about 12% for the fourth quarter. Keep in mind that we started the year flat year-over-year, so we are pleased with the momentum of our contract rents. We ended the fourth quarter with occupancy of 94.8%. This is up 310 basis points over the prior year. Occupancy declined just 190 basis points from June and 210 basis points from the peak occupancy at the end of July, both of which were below historical norms but in line with our expectations. Continue to return to our normal seasonal trends, we will be entering the spring leasing season well-positioned on both occupancy and rate. Having this momentum in these areas helps us with our ultimate goal, which is revenue growth. One thing I'd like to put into your perspective is that coming off a record 2021, moderation in growth is expected. Nonetheless, our same-store guidance implies revenue and NOI growth that is double the sector's long-term historical averages, not too shabby. Turning to new supply. We're starting to see a handful of projects get started in mostly the top 20 MSAs. However, we continue to take the impacts new supply will likely remain muted through 2022 and into 2023. Currently, the unprecedented consumer demand means there is certainly no shortage of developers who want to build self storage, and we do expect development activity to pick up as construction and land costs remain high and the entitlement and permitting process is still slow and cumbersome. Overall, we expect to continue to face competition from new supply in Portland, Phoenix, certain submarkets in Dallas, Atlanta, and West Florida, but strong fundamentals in these markets are offsetting much of the impact. We have not seen a significant change in the new competitive landscape within our portfolio. The percentage of stores having a new competitor in the three or five-mile radius is in line with last quarter and flat to slightly down from the year-end 2020. I'll now turn the call over to Brandon to discuss financial results and balance sheet activity.

Thank you, Dave. This morning we reported core FFO per share of $0.64 for the fourth quarter of 2021, which represents an increase of 39% over the prior year period, a strong acceleration from the $0.57 we reported in Q3. The sequential increase was due to a combination of factors, including the fact that our Q3 acquisition volume was weighted toward the end of the quarter. We had some dilution in Q3 from our July equity raise, and we had record acquisition volume during the fourth quarter. In-store NOI increased by 21.7% in the fourth quarter over the prior year period, driven by a 17.4% revenue increase, combined with a 6.5% increase in property operating expenses. Same store occupancy averaged 95.5% during the quarter, an increase of 360 basis points compared to Q4 2020. For the full year, core FFO per share was $2.26, a 32% increase over 2020, driven by robust same-store growth and healthy acquisition volume in the back half of 2020 and throughout 2021. Full year same-store NOI grew 19.8%, a record in the history of the self storage industry, driven by 15.1% revenue growth and 4% growth in OpEx. Same-store NOI growth was near the high end of our guidance range, while core FFO per share results beat the top end, largely due to outside acquisition volume and better-than-expected results from our non-same-store pool. Regarding OpEx, same-store growth ticked up in the fourth quarter to 6.5% due to the challenging year-over-year comp and upward pressure on personnel expenses. Specifically, personnel costs increased 8% with R&M and utilities up by a similar percentage. This expense growth was partially offset by marketing costs that were down 11.8% and property taxes that grew just 1.5%. For the full year, we were pleased that on a combined basis our two largest OpEx line items, personnel and property tax, only grew 3.2% year-over-year. Now moving on to guidance. We expect the elevated acquisition volume in 2021, which was largely back half weighted, will have a meaningful impact on corporate FFO per share growth in 2022 and add to the momentum that we're currently experiencing with operating fundamentals. We expect a very strong 2022, with higher growth levels in the first half of the year, as comps become more challenging in the second half. Taking all of this into consideration, we introduce full year 2022 guidance as follows: core FFO per share of $2.68 to $2.74 or 20% growth over the prior year at the midpoint; a same store pool of 631 properties with revenue growth of 8% to 9.5%, OpEx growth of 5.25% to 6.5%, and NOI growth of 9% to 11%. We expect acquisitions of $400 million to $600 million during the year and we also expect the retirement of Northwest to be accretive by 2 pennies per share in 2022. Regarding Northwest, I'll offer a reminder on the mechanics of a PRO retirement. The SP units associated with the Northwest PRO were converted to OP units on January 1st, with a conversion ratio of 1.88. Therefore, distributions to SP units will be reduced accordingly. NSA will no longer pay a management fee to a PRO for the Northwest branded properties, so there will be a reduction in supervisory and administrative expenses within G&A, which will be partially offset by an increase in other G&A, but the properties will now be managed by NSA's corporate property management platform. All of these items are factored into our additional guidance assumptions that are detailed in the earnings release.

And at this time, we'll be conducting our question-and-answer session. Our first question comes from Elvis Rodriguez with Bank of America Securities.

Just a quick question on the internalization of Northwest self storage. Anything you can share on the dollar amount, the yield that you're bringing in the portfolio today relative to when you first created the relationship?

So a couple of things just to clarify for you and others, because we've only had the one other PRO retirement prior to the Northwest, back in 2020 SecurCare. So of course, we own all of the assets already. So this transaction is purely related to a couple of things. One, the PRO has subordinated performance or SP equity, that gets converted into OP equity, that's what I mentioned in my remarks happened on January 1. The specific unit counts are in the supplemental, they're in fine print but it's the second page of supplemental schedule four where we talk about 2.1 million OP units converting into 3.9 million OP units -- 2.1 million SP units converting into 3.9 million OP units. So that's one thing, and then the SP distributions that were going to the Northwest PRO will no longer happen. And so that's a benefit to the FFO number and then our FFO denominator obviously goes up for that OP unit count. And then the second critical thing is that management fee that we pay to a PRO that's a percentage of revenue number that goes away. I mentioned that in my opening remarks. We will have some incremental G&A that we absorb. Tammy mentioned we've hired for the vast majority of those Northwest employees. So that comes into our normal corporate G&A load. But there isn't that benefit there and that's part of the calculus to get to that 2 pennies of accretion. So I guess I'll offer that as just a breakdown of the key elements of the PRO retirement. But let me see if you have follow-up if there's anything I didn’t hit.

No, that's very helpful. Perhaps moving on to the performance year-to-date on the portfolio? Can you share an update of where the portfolio is today street rates versus in place, as well as any occupancy gains that you can share?

We're very pleased with where the portfolio started out in 2022. Obviously, finishing as strong as we did in 2021, we've only lost about 20 to 30 basis points of occupancy through January, and in February so we're pleased with that. We've been able to maintain street rate levels, we're still in a positive rent roll-up situation as far as move-out and move-in tenants. And then we still have a spread of about a little over close, probably pretty close to about 2% street rate over contract grant at this point in time. So everything fundamentally is great. As we look to the spring season, rental velocities have remained well, remain good and move-out velocity is still a little bit muted for us. So all things positive.

Our next question comes from Neil Malkin with Capital One.

First question for me. Dave, maybe you can elaborate. But given the large amounts of acquisitions you guys made in '21 and the relative, significant portion of lease-up opportunity and not to mention just the overall benefit from being on the MSA sort of corporate revenue management platform. Can you maybe give us an idea or order of magnitude and what that non-same portfolio NOI would do or should grow relative to the same-store this year?

We might need just a little more color on the question. So you're asking on the non-same-store pool, how to think about the performance of that relative to the same-store subset?

Yes. I mean, you acquired a lot. So I'm just trying to gauge what kind of upside from being on your platform, from third parties, all that kind of how you think about that in terms of, again, just increasing from not only the acquisitions relative to your cost of capital but just being in the NSA platform in terms of revenue and expense management and then also the accretion from lease up. Just trying to see maybe how you think that should perform relative to your same-store. Is it 500 basis points of alpha just again, given the lease up, any way to think about that? Because obviously those two portfolios aren't going to grow at the same rate. So just any kind of color or view would be great.

So certainly, we acquired a significant amount of properties, and so we had a bucket of those properties that were certainly more mature. And as we look at those properties and how we are able to perform, as you think about really growing rates and growing around some of the occupancy metrics where maybe they were very strong, physically occupied, but there was an economic spread of 15 to 20 points on physical and economic occupancy, that mature portfolio certainly, the benefit we will have bringing on our portfolios will tighten up that economic occupancy and really close that 15 to 20 point spread very quickly as we work through our revenue management system, as we work through our contract rates and our in-place rent changes. So you look at the opportunity within that portfolio versus our stable portfolio, you certainly have -- that occupancy spread is where I would probably tell you where most of that gain is going to come as we close up that economic to physical occupancy. And so we certainly expect that portfolio to outperform our stable portfolio as you think about how we season that up. I'm not sure I'm prepared to give you probably a hard number on what that spread of points is going to be, but we certainly do expect it to outperform the stable portfolio. And then we had another bucket, as Tammy mentioned in her opening comments about this non-season group. That non-season group probably has a physical occupancy of around 70% and maybe an economic occupancy of another 15 points below that. Those will take a little bit longer to season. You may look at our window of maybe 18 to 24 months to season those properties to maybe a little more stable level, and certainly, you season those properties out and stabilize the revenue and drive some of the rental rates forward, those will certainly perform at a much higher level than what our stable portfolio will perform at.

The other one for me is, in terms of acquisitions. I mean, I'm sure people are going to ask a lot of different ways. But I think Tammy you said you have $200 million to $300 million under contract or LOI. I understand that competition continues to increase, but does that what $400 to $600 million seem a little, I guess, conservative? I mean, I feel like last time you talked, it sounded like if 2021 didn't exist, 2022 theoretically would be like a record year as well, just given the amount of transaction activity. So can you just maybe kind of speak on what you're seeing and how you expect the year to shape up just given all the things I mentioned, plus the fact that you still have very attractive cost of capital?

So we're still seeing a significant amount of activity in the funnel. So, a lot of transactions coming to market, and we continue to look at every deal that crosses our desk. The issue is that cap rates remain compressed. And while the cost of capital is good, it's not as good as it was. And we, frankly, do not like what we're seeing as much as what we were looking at last year. When you think about that and consider the fact that we've always said, we'll be very disciplined in our underwriting. We're buying for the long-term, we're improving the quality of our portfolio and are very focused on acquiring assets that are accretive to our shareholders. It's just causing us to pause a little bit now. We acquired $2 billion of assets last year. That's going to take some time and effort and energy to integrate into our portfolio. We have a lot of upside in those assets that we acquired in the fourth quarter. So I think we're comfortable with the guidance that we're providing now. Something might change. We're seeing a handful of small and midsized portfolios that might prove interesting. But at least for now, I think our view is to be cautiously optimistic about 2022, let me put it that way.

Our next question comes from Todd Thomas with KeyBanc Capital Markets.

Just first question, I guess following up on that last line of questioning. Dave, I'm curious, how much of the 2021 investment volumes almost $2.2 billion, how much of that was non-stabilized or non-seasoned where there is outsized growth? And how much yield upside should we assume, 150 basis points during a year, maybe 250 basis points, what's the right way to think about that throughout the year?

The way we're looking at that $2.2 billion, about $350 million of it is what we consider non-stabilized, in some phase of stabilization. The cap rate on those assets was in the low to mid-3% range. The stabilized cap rate, so call it two to three years out, would be about 6%.

And then regarding the guidance. Can you talk about what's embedded in the guidance for occupancy throughout the year whether we should expect NSA to maintain a positive year-over-year occupancy spread throughout the year? Are you anticipating embedding in the guidance, occupancy gains to flatten out or turn negative during the year?

So certainly, we're starting at an elevated level. So we certainly think we're returning to some normal seasonal trends. We started the back half of 2021, really the back quarter of 2021, we saw some seasonal transit, occupancy pull off just a little bit. We’re starting at a higher level in 2022, and we certainly expect to see the seasonality in the summer months. Albeit, we're a little slower now. So we may not see the significant change in occupancy, as you said into June and July, but we certainly are going to see improvement in June and July, and we expect it to pale off in the back half of the year. Really starting around August, around more seasonal normal historical trends and normal occupancy. So that's usually around 300 to 350 basis points from the peak to the end of the year. We've modeled that maybe just a little more conservatively this year, because we are starting at a higher level and we may not have as many seasonal tenants. And so we may be thinking if normal history was 300 to 350, we're probably thinking 250 to 300 is what we're thinking about by the end of the year as far as occupancy landing point.

And can you share where current occupancy is today and what that spread looks like year-over-year?

So Todd, at the end of the year we were at 94.8%, and Dave, I think mentioned it earlier, we're about 30 basis points out, which is kind of normal from that December to mid-February, so call it 94.5%, and that's still a healthy prior year.

Our next question comes from Smedes Rose with Citi.

Tammy, I just want to ask you. When you say that you don't really like what you're seeing in the market now, on the acquisition side, is it a function of quality or you said cap rates remain compressed? And I'm just wondering, are you seeing the same amount of sort of product from the market? It seemed like there was kind of this rush to sell last year, and is that kind of down a little bit?

I would say that the volume is still high, the volume of potential transactions. And I think what gives us pause is a combination of quality and cap rate. So where you were paying compressed cap rates on markets where we're building scale and want to operate long-term in 2021, the markets are not maybe not quite as desirable and the assets frankly, maybe not quite as desirable in terms of improving the long-term quality of our portfolio.

And then I want to ask you, when the PROs retire now that you've had two, is it always the case that their retirement is accretive to NSA, or are there times where it may not be, where it might be neutral or even dilutive?

It will always be modestly accretive. But there's, obviously, probably obviously they’re the PRO more accretions to NSA. But if you think about it, there's the penalty on the conversion from the SP units to the OP units, which is one component of the accretions. And then the second component is management savings taking the assets off the PRO management fee and the PRO management platform onto NSA’s corporate platforms. In that regard, we'll save some money on the management fee, but we also expect to get some benefits from the full use of the corporate platform.

Our next question comes from Kevin Stein with Stifel.

I was just wondering if you've seen any changes in the top of your funnel in terms of demand, maybe any color there would be helpful?

The overall activity at top of the funnel still remains very robust and we haven't seen a significant change as far as the amount of activity we are able to drive. What you're starting to see is a return to normal pricing around cost per acquisition. If you think of 2021, particularly the spring of 2021, we had very favorable marketing costs, very favorable demands, which created cheaper rentals, if you want to think about it that way from and marketing expense, and the teams have done a good job returning to very disciplined practices. But the marketing costs are returning to a more normal cost and a more normal pace, but the top of the funnel remains very robust.

Our next question comes from Samir Khanal with Evercore.

Brandon, I guess just on guidance. Can you maybe break down the OpEx line items? Just trying to see where personnel, property taxes, what your views are on the various line items for this year?

So personnel cost, I would tell you we are estimating kind right in line with that total OpEx guide at 5.25% to 6.50%. Property taxes baked into the ranges, a number of 5% to 7% growth. Outside of that, I would highlight marketing and insurance as two line items that would be above the total OpEx range, call it, double-digits 10% to 15% growth. R&M is one where it would be below the 5.25% to 6.5% range.

And I guess, as a follow-up, just sticking to expenses. Your G&A is, I think when you do the maths are up about 15% year-over-year and I know costs are up across the board. But wondering what else is driving that. I know you, maybe the PRO retirement acquisitions, or is there something else that's driving that number.

I mean the PRO retirement will actually be a little bit of a benefit to my earlier remarks. But you are right, Samir. I mean, the G&A growth this past year '21 over '20 was 17%. If you look at the guidance that we gave at the midpoint, it's implied to be a 15% growth. But you are also talking about top-line revenue in '21 grew 36% this past year. Our projection for 2022 is a top-line revenue growth of 32%. So we are certainly still taking advantage of the scale of efficiencies, growing the top-line at a faster pace than our G&A load. One of the metrics that we look at internally is G&A as a percentage of revenue. And so that number, if you look at 2020 was 10%, it's down to 9% in '21 and I expect at least 8% in 2022. So those are all good indicators for us and results in EBITDA and margin expansion.

Our next question comes from Ki Bin Kim with Truist.

So I'm not sure if I missed because, but can you talk about the street rate trends that you are seeing? I think you said 12% up in 4Q. What does that look like in mid-February and what is implicit in your guidance and how you are thinking about that as it progresses through the year?

Certainly, Ki, I'll start off and Brandon can finish here. We certainly seen, year-over-year the percentages of street rate increases are still in the low 20s. So things are very positive starting out the year as far as street rates, year-over-year. We are starting to see street rates, you're not seeing the rapid, rapid rise that we saw certainly for parts of 2021, but we are still able to improve in most of our markets. So we are happy with that and the positive rent roll up, as we talked about earlier, we're still positive in our rent roll up, which allows us to still have strong street rates and strong occupancy. We're still being very assertive in the IPRC. But thus far street rates are still doing very well.

And Ki Bin, the 12% you heard was a contract rate for the fourth quarter year-over-year.

And so the second part of that question was, what do you expect for the rest of the year? Is it still in the 20% range?

No, you can’t be able to hold that level. I mean, certainly we had tremendous growth in 2021. As you look at the back half of the year comps said that that spread of growth year-over-year will not be in the 20s. As we bring it down towards the end of the year, certainly see that coming into probably more normal historical ranges, as you think of the back half year as far as street rate growth.

And in terms of PRO internalization this quarter. Was that PRO fully on the NSA platform or were they operating under their own umbrella or was there something in between? If it's the case that it comes onto NSA platform are there additional synergies that you think you might be able to extract from that?

They were probably more on their own platforms than they were on NSA platforms. And so what I mean by that is they ran their own website, they had their own web team, they used the NSA's revenue management platform, and they had their own decision-making process within their company around that piece of it. So we do think there's efficiencies we can gain, and we do think there's upside there. We've already transformed them to the NSA platform. So they're currently on this CMS and they're on full revenue management platform and all the platforms across. We do think there's upside here. The team did a wonderful job. They were very good at what they do, so it's a big challenge for us. But we do think there's upside here.

If I can squeeze in a third one. You mentioned that you're going to keep the same flag that is currently exists. But if I think about what storage companies have done over the past decade, it's been to drive to increase scale, not just in a physical means but from a digital perspective, getting the benefit scale on Google search and whatnot. So why keep it under its own flag or is that interim decision?

No, it's not an interim decision. The Northwest brand is very dominant in those markets, our ability to bring it on our platform and put all the tools in place will certainly make it better. But the Northwest brand itself has been there for a long time, and it’s been well represented and well positioned, and they've done a good job building that brand out. As we evaluate the cost of rebranding the stores and the disruption when you rebrand every restore, we just don't think it's warranted. We think we can run the Northwest brand very well. The digital benefits with the platforms we have, the tools we have, we can implement everything we do with the Northwest brands. There's no hiccup there at all, and it actually gets better. As we think about it, we just think it's the right decision to keep the brand.

And I think the other thing I would add, Ki Bin, is we talked about this over the years is that this is a very local trade area business. So what 80%, 90% of our customers come from within a three-mile, maybe now it's expanding a little bit up to a five-mile trade area. But the benefit that we would lose by the branding -- we do not believe that it could be offset. I don't know if I'm saying this the right way. The benefit of the local presence would be lost in a rebranding effort, and we don't believe it would be worth the cost of rebranding.

Our next question comes from Ronald Kamdem with Morgan Stanley.

Just two quick ones for me. One just on the rent increases, both in terms of the frequency and the magnitude. As you're doing your guidance for 2022, is there any sort of thoughts or changes maybe this year versus last year, how should we think about that? What's the strategy for this year? Thanks.

Certainly, we've been able to be more assertive than we really have been through 2021, really the back half of 2021. The strategy going into 2022 is very much the same. We're not coming off of our assumptions, we're leaving most -- all of the frequencies in place. If you notice, as we talked earlier, our increases are actually in the low to mid-teens, where a year ago they may have been low single -- or high single digits to low teens. So we've certainly been able to be more assertive, and we're going to keep that program running at this point. We’re just not seeing significant pushback or changes in the environment. As we model occupancy through the year, we just believe that we've got stuff dialed in and there will be a significant change.

And then just another one on the PROs, obviously, second one internalized. I remember in previous calls, you talked about conversations with new PROs coming on. Maybe can you just remind us how those conversations are going? And does the math change at all for a PRO coming in today versus I don't know 12 to 24 months ago?

We continue to have conversations with high-quality private operators who might be a good fit for the NSA differentiated structure. But as we've talked about before, it's a long and difficult process. It's a big decision for an operator to join NSA; it's a very big decision for us to decide to affiliate with an operator. It takes time and it's unpredictable in terms of the timing. But in terms of the math, no real change to the structure. Our structure has remained consistent since, basically since formation in 2013 and we're not contemplating any changes to the structure for new or existing PROs right now.

Our next question comes from Wes Golladay with Baird.

I just have a quick question on the balance sheet, looks like the line balance was up a little to finish the year. I think you mentioned you cleared the line a little bit. But what are the long-term plans for the year on the line of credit?

We did bring that down post-year-end with the last tranche that we had yet to fund on the private placements. So it's closer to just over $350 million now. We also upped our capacity on our line at the end of December. So we have a total capacity of $650 million. We still got a lot of room in terms of capacity. So nothing urgent, not feeling under the gun to necessarily address anything. I mentioned those 2022 maturities and Tammy’s comments about the deal flow. So we're comfortable with where we're at. We always strive to have optionality and flexibility. We’re very pleased with the private placement transaction we have late last year; that's certainly an option on that side. We also did some things with a bank group last year and did very well; we’ll do so again this year. So anyway, a lot of opportunities, a lot of options, still plenty of capacity on our ATM as well.

And then one quick one. You mentioned that a normalized debt-to-EBITDA due to timing of the fourth quarter after the acquisitions. Could you provide us with the EBITDA that was not captured in 4Q in the run rate?

The math, Wes, to get from that 6.1 to 5.7 is really adding about $35 million of EBITDA to the annualized number. I mean, that's the number that gets you to that specific math. And then just another point of color of the one point, a little over $1.1 billion of deals that we did in Q4, about half for that was in the month of December. The majority of that December volume was really in the last two weeks of December, from December 15 through the end of the year, which might help with the modeling.

Our next question comes from Neil Malkin with Capital One.

Can you talk about just given historically kind of low turnover and you are getting aggressive or you continue to be aggressive on the IPRC? What percentage of the portfolio is eligible or receiving renewal notices versus like 2019 or pre-COVID? How much more, how much of the portfolio is eligible and getting that bump? Obviously, that's pretty much your largest driver of growth every year. So, can you maybe quantify that?

I think, as I look at it, I'd say probably an average of 2% to 3% more of our tenants per month are eligible and receiving rate increases versus what maybe 2019 would look like. So that's a pretty significant number given the tenant base that we have. And, again, with the amount of rate increase we are doing and the way we remove some caps and really just increase not only frequency of the amount, it’s adding up a pretty good number for us, but I would say 2% to 3% more on average is what's coming across.

Neil, and also, pre-COVID, we were open about the annual number being maybe 75% of the customer base. So if you do the math on what Dave just gave you, that you're talking about hitting each of the customers over the course of the year.

And obviously you're turning customers over every month and new customers are being replaced. So that factors into that as well.

The other one is, in terms of some markets had the eviction moratorium, I believe, expire in some form or another at the end of last year, January 1st of this year, some coastal markets. Have you seen any increase in demand in markets where you've had either long-winded or protections moratoriums? Are you seeing an influx of demand from this location or nothing really discernible?

Nothing discernible. Anecdotally, we have certainly heard the stories, and we have seen folks who have been through the process of being evicted and had to relocate. So we're hearing stories about it; I can't give you a real number on what it's doing as far as overall impact.

And ladies and gentlemen, that's all the questions we have for today. I'll now turn the call back to Tamara Fischer for closing remarks. Thank you.

So I'll close call today by again thanking our team for their commitment and efforts through an incredibly busy quarter and year of 2021. We're very optimistic about our prospects for 2022 as we continue to deliver outstanding results by executing on our differentiated strategy, including our PRO structure, our geographic diversity and our presence in Sunbelt and secondary markets. Thanks again for joining our call and for your interest and support of NSA. We've said it before and I'm sure we'll say it again, it's a great time to be in self storage.

Thank you. This concludes today's conference. All parties may disconnect. Have a great day.