On Monday, KeyBanc issued a downgrade for National Storage Affiliates Trust (NYSE:NSA) moving its rating from Overweight to Sector Weight. The firm cited concerns about the company's near-term fundamentals, expecting them to underperform relative to peers due to a weaker demand environment. This shift in demand is anticipated to affect occupancy rates and net operating income (NOI) growth for a more extended period than previously expected.
KeyBanc pointed to the company's ongoing integration of the PRO platform as an additional risk factor. The transition of portfolios to National Storage Affiliates' platform is occurring during what is described as a challenging operating environment, which could present higher risks during this integration phase.
The downgrade comes as National Storage Affiliates' shares are trading at a 5.3% implied capitalization rate, which is 50 basis points above the Self Storage Real Estate Investment Trust (REIT) subsector compared to the historical average implied cap rate spread of +10 basis points since the company's initial public offering in 2015.
Moreover, the stock is trading at a 2.9% 2025 adjusted funds from operations (AFFO) multiple discount versus its peers, which is narrower than the average historical discount of approximately 5%.
KeyBanc's outlook suggests that the stock's performance will align with the broader Self Storage REIT subsector, without expecting outperformance or underperformance in the near term. This neutral stance reflects the firm's cautious outlook on the company's immediate growth prospects and operational challenges.
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