SELF STORAGE PROPERTY ACQUISITIONS AND DISPOSITIONS

The Company acquired 58 self storage properties with an estimated fair value of $313.0 million during the year ended December 31, 2015 and 83 self storage properties with an estimated fair value of $479.1 million during the year ended December 31, 2014. During the year ended December 31, 2015, 25 self storage properties with an estimated fair value of $134.4 million were acquired by us from our PROs, and 13 self storage properties with an estimated fair value of $65.3 million were acquired by us from an entity which is managed by a member of our board of trustees. During the year ended December 31, 2014, 60 self storage properties with an estimated fair value of $382.1 million were acquired by us from our PROs.

These self storage property acquisitions were accounted for as business combinations whereby the Company recognized the estimated fair value of the acquired assets and assumed liabilities on the respective dates of such acquisitions. The Company allocated the total purchase price to the estimated fair value of tangible and intangible assets acquired, and liabilities assumed. The Company allocated a portion of the purchase price to identifiable intangible assets consisting of customer in-place leases which were recorded at estimated fair value of $8.5 million and $13.2 million during the years ended December 31, 2015 and 2014, respectively, resulting in a total fair value of $304.5 million and $465.9 million allocated to real estate during the years ended December 31, 2015 and 2014, respectively.

The following table summarizes, by calendar quarter, the consideration for the business combinations completed by the Company during the years ended December 31, 2015 and 2014 (dollars in thousands):




Acquisitions Closed During the Three Months Ended:
		Summary of Consideration
	Number of Properties			Value of OP Equity⁽²⁾		Settlement of Note Receivable		Liabilities Assumed (Assets Acquired)					Noncontrolling Interests⁽⁴⁾		Total Fair Value
	Number of Properties	Cash⁽¹⁾		Value of OP Equity⁽²⁾		Settlement of Note Receivable		Mortgages⁽³⁾		Other			Noncontrolling Interests⁽⁴⁾		Total Fair Value
3/31/2015	6	$	6,991	$	8,954	$	1,778	$	16,442	$	70		$	6,770	$	41,005
6/30/2015	21	41,277		22,971		—		30,547		288			—		95,083
9/30/2015	15	84,673		10,188		—		2,866		512			8,327		106,566
12/31/2015	16	39,626		1,402		—		23,643		(359		)	6,040		70,352
Total	58	$	172,567	$	43,515	$	1,778	$	73,498	$	511		$	21,137	$	313,006

3/31/2014	1	$	1,900	$	—	$	—	$	—	$	5		$	—	$	1,905
6/30/2014	36	94,580		72,803		—		—		986			—		168,369
9/30/2014	31	77,252		39,547		—		59,546		1,070			35,442		212,857
12/31/2014	15	55,242		28,254		—		6,270		342			5,855		95,963
Total	83	$	228,974	$	140,604	$	—	$	65,816	$	2,403		$	41,297	$	479,094


⁽¹⁾	^{Includes cash advances during 2014 of}^{$11.0 million}^{for notes receivable that subsequently settled as a reduction of cash payable for self storage property acquisitions.}


⁽²⁾	^{Value of OP equity represents the fair value of OP units, subordinated performance units, and LTIP units. The amounts shown for OP equity are net of receivables from the OP equity holders of}^{$4.8 million}^{for the three months ended September 30, 2014 and}^{$0.4 million}^{for the three months ended December 31, 2014.}


⁽³⁾	^{Includes fair value of debt adjustment for assumed mortgages of approximately}^{$2.2 million}^and^{$5.5 million}^{during the}^year^{s ended}^{December 31, 2015}^and²⁰¹⁴^{, respectively.}


⁽⁴⁾	^{Represents the fair value of noncontrolling interests associated with self storage properties acquired in DownREIT partnerships. We estimate the portion of the fair value of the net assets owned by noncontrolling interests based on the fair value of the real estate and debt assumed.}

As discussed in Note 12, three of the 58 self storage properties acquired during the year ended December 31, 2015, and one of the 83 self storage properties acquired during the year ended December 31, 2014, are subject to non-cancelable leasehold interest agreements that are classified as operating leases.

The results of operations for these business combinations are included in our statements of operations beginning on the respective closing date for each acquisition. The accompanying statements of operations includes aggregate revenue of $19.3 million and operating income of $2.4 million related to the 58 self storage properties acquired during the year ended December 31, 2015. For the year ended December 31, 2014, the accompanying statements of operations includes aggregate revenue of $21.8 million and operating income of $2.1 million related to the 83 self storage properties acquired during such period. Acquisition costs in the accompanying statements of operations include consulting fees, transaction expenses, and other costs related to business combinations, which amounted to $4.8 million and $9.6 million for the years ended December 31, 2015 and 2014, respectively.

Self Storage Properties Under Contract

As of March 9, 2016, the Company was under contract to acquire an additional 22 self storage properties, and during January and February 2016, the Company acquired 16 self storage properties for approximately $85.0 million, as discussed further in Note 15.

Unaudited Pro Forma Financial Information

The unaudited pro forma financial information set forth below reflects adjustments to the historical data of the Company and NSA Predecessor to give effect to the acquisitions and related financing activities for (i) nine of the 16 self storage properties discussed in Note 15 that were acquired subsequent to December 31, 2015, as if each acquisition had occurred on January 1, 2015 (unaudited pro forma financial information is not presented for seven of the self storage properties acquired subsequent to December 31, 2015 because the information required is not available to the Company), (ii) 42 of the 58 self storage properties acquired during the year ended December 31, 2015, as if the acquisitions had occurred on January 1, 2014 (unaudited pro forma financial information is not presented for 16 of the self storage properties acquired during the year ended December 31, 2015 since the information required is not available to the Company), (iii) each of the 83 self storage properties that were acquired during the year ended December 31, 2014, as if each acquisition had occurred on January 1, 2013, and (iv) 43 self-storage property acquisitions that occurred during 2013, as if each had occurred on January 1, 2012.

As described in greater detail above, given that certain information with respect to the self storage properties we acquired during the year ended December 31, 2015 and subsequent to December 31, 2015 is not available to the Company, readers of this Annual Report on Form 10-K and investors are cautioned not to place undue reliance on our unaudited pro forma financial information. The unaudited pro forma information presented below does not purport to represent what the actual results of operations would have been for the periods indicated, nor does it purport to represent the Company's future results of operations. The following table summarizes on an unaudited pro forma basis the results of operations for the years ended December 31, 2015, 2014, and 2013 (dollars in thousands):



	Unaudited
	NSA Year Ended December 31,						Combined⁽¹⁾
	2015			2014			2013
Pro forma revenue:
Historical results	$	133,919		$	76,970		$	40,164
Acquisitions subsequent to December 31, 2015⁽²⁾	4,348			—			—
2015 Acquisitions⁽³⁾	9,462			22,596			—
2014 Acquisitions	—			28,377			46,500
2013 Acquisitions	—			—			11,701
Total	$	147,729		$	127,943		$	98,365
Pro forma net income (loss): ⁽⁴⁾
Historical results	$	4,796		$	(16,357	)	$	(11,734	)
Acquisitions subsequent to December 31, 2015⁽²⁾	(142		)	—			—
2015 Acquisitions⁽³⁾	10,403			(7,258		)	—
2014 Acquisitions	—			21,395			(17,721		)
2013 Acquisitions	—			—			7,565
Total	$	15,057		$	(2,220	)	$	(21,890	)

⁽¹⁾

^{In order to present pro forma data in a way that offers a consistent period to period comparison, the historical results of operations of NSA for the nine months ended December 31, 2013 (consisting of total revenue of}^{$32.9 million}^{and net loss of}^{$10.5 million}^{) have been combined with the historical results of operations of NSA Predecessor for the three months ended March 31, 2013 (consisting of total revenue of}^{$7.3 million}^{and net loss of}^{$1.3 million}^{), after giving effect to the pro forma adjustments discussed above for the entire year ended December 31, 2013. The combination of NSA's historical operating results with the historical operating results of NSA Predecessor does not comply with U.S. GAAP and is presented solely for the purposes of this disclosure of pro forma operating results for the year ended December 31, 2013.}


⁽²⁾	^Reflects^nine^{of the}¹⁶^{self storage properties acquired during this period because the information required with respect to the}^seven^{remaining properties acquired during this period is not available to the Company.}


⁽³⁾	^Reflects⁴²^{of the}⁵⁸^{self storage properties acquired during this period because the information required with respect to the}¹⁶^{remaining properties acquired during this period is not available to the Company.}

⁽⁴⁾

^{Significant assumptions and adjustments in preparation of the pro forma information include the following: (i) for the cash portion of the purchase price for self storage properties acquired during the year ended December 31, 2015 the Company assumed borrowings under the Company's revolving line of credit with interest computed based on the effective interest rate of}^2.03%^{as of}^{December 31, 2015}^{; (ii) for the cash portion of the purchase price for properties acquired during the year ended December 31, 2014, the Company assumed borrowings under the Company's revolving line of credit with interest computed based on the effective interest rate of}^2.66%^{as of December 31, 2014; (iii) for assumed debt financing directly associated with the acquisition of specific self storage properties, interest was computed for the entirety of the periods presented using the effective interest rates under such financings; (iv) for acquisition costs of}^{$4.8 million}^{incurred during the}^year^ended^{December 31, 2015}^{, pro forma adjustments give effect to these costs as if they were incurred on January 1, 2014; and (v) for acquisition costs of}^{$9.6 million}^{incurred during the}^year^ended^{December 31, 2014}^{, pro forma adjustments give effect to these costs as if they were incurred on January 1, 2013.For acquisition costs of}^{$3.4 million}^{incurred in 2013, pro forma adjustments give effect to these expenses as if they were incurred on January 1, 2012.}

Dispositions

In May 2014, the Company sold to an unrelated party one of the self storage properties contributed by NSA Predecessor. The gross selling price was $3.0 million and the Company recognized a gain on sale of $1.4 million.