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National Storage Affiliates: Clarity On Share Dilution

|Includes: JCAP, National Storage Affiliates Trust (NSA)

In my recent article on National Storage Affiliates (NYSE:NSA), I did not get into details about the REIT's share count and equity offerings.

Back in June, NSA announced a secondary offering and the company raised ~$237.5 million. The shares were priced at $20.75 per share. Since that time, NSA shares have only managed to surpass $20.75 per share for brief periods of time.

In October, NSA announced an "At the Market" offering program to raise up to $200 million. As an NSA shareholder, one would hope that the additional offerings would be priced at $20.75 or higher. However, that has not been the case. From NSA's most recent 10Q:

"During October 2016, the Company sold 1,500,000 of its common shares through the ATM program. The common shares were sold at an average offering price of$19.50 per share, resulting in net proceeds to the Company of approximately $28.9 million after deducting the underwriting discount."

Going forward, NSA investors should be cautious about buying above $20.75 until we hear more details about the ATM offering program. Share dilution from the ATM program should be considered, especially if the shares are being offered at a lower price than the secondary offering. That said, I still believe NSA shares are undervalued given the long term growth prospects.

If you believe NSA shares are fully valued, you may want to look into my latest article on Jernigan Capital (NYSE:JCAP). JCAP is a self storage development lender that is carving an interesting niche.

Disclosure: I am/we are long NSA, JCAP.