Greetings, and welcome to the National Storage Affiliates first quarter 2019 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Marti Dowling, Director of Investor Relations for National Storage Affiliates. Thank you, Mrs. Dowling. You may begin.
Hello, everyone. We would like to thank you for joining us today for the first quarter 2019 earnings conference call of National Storage Affiliates Trust. In addition to the press release distributed yesterday, we have filed an 8-K with the SEC containing our supplemental package with additional details 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. The company cautions that actual results may differ materially from those projected in any forward-looking statements. 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. Today's conference call is hosted by National Storage Affiliates Chairman and Chief Executive Officer, Arlen Nordhagen; President and Chief Financial Officer, Tamara Fischer; Chief Operating Officer, Steven Treadwell, and Vice President of Investor Relations, George Hoglund. Following prepared remarks, management will accept questions from registered financial analysts. I will now turn the call over to Arlen.
Thanks, Marti, and good morning, everyone. Before I discuss our quarterly results, I would first like to point out that we recently celebrated the four-year anniversary of our IPO, and as such, I think it would be helpful context to highlight some of our accomplishments over that time. Since our IPO, we have acquired nearly $4 billion of properties, grown same-store NOI by a quarterly average of 8.3% year-over-year, and grown core FFO per share by a quarterly average of almost 15% year-over-year. We have also added four new PROs, plus our internal management PRO, and implemented an aggressive joint venture investment strategy. Lastly, and perhaps most importantly for our investors, since IPO, we have delivered total shareholder returns of over 160%, which leads the self-storage sector. We are very proud of our accomplishments to date, and we look forward to continuing this success in 2019 and beyond.
Turning to the current environment, we see that the broader economy is providing a favorable backdrop for self-storage. The economy grew at 3.2% in the first quarter, the highest rate of first quarter growth in four years, and demand for self-storage units remained solid. Regarding new supply, we're encouraged by recent market data that suggests that the pipeline of projects under construction has peaked, and we continue to see projects in the planning phases being canceled. We also continue to believe that 2018 represented the peak in new supply deliveries in our markets, although 2019 will be another significant year. Against this backdrop, we're pleased to report another excellent quarter. Once again, our strong first quarter results of 4.8% same-store revenue growth and 6.7% same-store NOI growth benefited from our differentiated PRO platform as we continued to hone our operational strategies while executing on our external growth strategy.
We were able to deliver these results in the face of continued pressure from new supply and stiff competition on the acquisition front, as there remains a significant amount of capital chasing desirable self-storage assets. Our strong start to the year positions us well to deliver outsized growth in core FFO per share in 2019. In addition to healthy operations during the quarter, acquisition volume was significant. We brought on two new PROs, Southern and Moove In, and acquired a total of 32 properties for approximately $195 million. Average cap rates remained in the low to mid 6% range, with market pricing relatively unchanged from recent quarters. To date, we haven't seen much improvement in cap rates and haven't spotted many distressed sales, except for a few non-stabilized properties in a couple of severely overbuilt markets.
Competition for acquisitions remains high, we continue to benefit from our PRO structure through their established local market relationships and knowledge. Our first quarter core FFO per share of $0.37 grew by 15.6% over the prior year period, fueled by a combination of strong same-store NOI growth, robust acquisition volume, and growing fees from our JV platform. These results are a reflection of the outstanding execution of our business plan by the entire NSA team. From a supply perspective, we believe new supply in our markets will remain at elevated levels in 2019, and we expect the impact on fundamentals to increase over the course of the year. That said, given our higher level of secondary market exposure relative to our peers, we expect our portfolio will experience less pressure from new supply, given that excess supply this cycle has been disproportionately weighted to the primary markets.
We estimate 35% of our stores are affected by new supply in the five-mile trade area. As I've mentioned before, we have and will continue to benefit from the significant geographic diversity of our portfolio, with the majority of our markets seeing a balanced or even favorable supply-demand picture. Although new supply is weighing on street rates in several markets and drives the need for increased marketing efforts and discounting, we remain confident in our ability to continue to push mid to high single-digit rent increases to in-place customers, which is a key driver of our revenue growth. We're further encouraged by our 40 basis point average occupancy gain in the first quarter, following a 20 basis point decline in occupancy for the full year 2018.
We believe the strength of our PRO platform and the fact that we're in the early stages of the life cycle of honing our revenue management and internet marketing platforms will provide additional operational upside going forward. We complement our internal growth with external levers inherent in our differentiated platform, including a deep pipeline of acquisitions, which we source through our PROs and their network of industry relationships, as well as an active joint venture strategy. Having 10 PROs essentially means having 10 acquisition teams in the field, in addition to our corporate acquisition team. As such, with approximately $210 million in acquisitions completed year to date, we're well on our way to meeting our full year 2019 acquisition guidance of $300 million-$500 million.
In addition, the captive acquisition pipeline managed by our PROs, but not yet owned by NSA, is currently over 100 properties valued at approximately $1 billion. This powerful external growth engine, combined with our sector-leading same-store NOI growth, gives us confidence that we will again achieve core FFO per share growth that leads our sector. With that, I'll now turn the call over to Tammy.
Thanks, Arlen. As mentioned on our last call, our 2019 same-store pool increased by 63 stores, and our 439 property same-store pool represents nearly 85% of our wholly owned stores. For the first quarter, same-store NOI increased by 6.7%, driven by growth in same-store revenues of 4.8% and relatively flat same-store property operating expenses. We continued to push rate increases on existing tenants, which drove a 4% increase in average annualized rent per square foot, and we were pleased with the 40 basis point increase in our average occupancy during the quarter. Our revenue growth was better than expected this quarter, partially due to a healthy contribution from the 63 stores added to the same-store pool this year. In addition, we're seeing solid execution by our PROs, who continue to benefit from our evolving revenue management and internet marketing platform.
Same-store expense growth for the quarter was relatively flat at just under 1%, benefiting from operating efficiencies, moderate increases in property taxes of just under 4%, and a milder winter in many of our markets. While we're pleased with this result, we do expect expense growth to be at more normal levels throughout the remainder of the year. Notably, property taxes are very much a wild card, and we won't have a good sense of the full-year impact until the back half of the year. Turning to geographic performance, our best performing MSAs include Riverside, Atlanta, Indianapolis, Los Angeles, and Las Vegas, where demand growth has been stronger than supply growth. Markets that underperformed included Portland, Dallas, Oklahoma City, Tulsa, and Phoenix, most of which were impacted by elevated new supply.
With respect to our balance sheet, we remain committed to our conservative strategy, providing the flexibility we need to continue to fund our aggressive growth. During the first quarter, we issued over $33 million of OP equity in connection with the acquisitions we completed. In addition, we just refreshed our ATM program in March. While we didn't utilize our ATM during the quarter, it remains an attractive tool as we think about sources of capital. Subsequent to quarter end, we received a BBB rating with a stable outlook from Kroll. This is a key step in the evolution of our capital strategy and will facilitate access to additional sources of capital. We also recently closed on a $100 million 10-year term loan with a fixed interest rate of 4.27%. We used the proceeds to reduce borrowings on our revolver.
Our weighted average cost of debt at quarter end was 3.6%, and 75% of our debt was fixed rate. After the recently completed term loan, approximately 82% of our debt is now fixed rate, and our weighted average maturity increases to four and a half years. Given the proceeds of the $100 million term loan completed last week, we have approximately $220 million of additional availability on our $400 million revolver. At the end of the first quarter, our net debt to EBITDA ratio was six times, the middle of our target range of five and a half to six and a half times. We have no debt maturities in 2019. Now, let me address our guidance for 2019.
Although our first quarter results were strong, as are trends subsequent to quarter end, it's been our practice to wait until we get further along the peak spring and summer leasing season before we revise our full-year guidance expectations. We're reaffirming our guidance and leaving it unchanged at this time. We would remind you that we continue to expect the pace of same-store revenue and NOI growth to moderate somewhat as the year progresses due to increasing pressure from new supply and more challenging year-over-year comps on the back half of the year. However, we'll revisit our guidance numbers at the time of our second quarter earnings release. Before we move on to the Q&A portion of the call, I'd like to highlight an upcoming event that we're hosting for institutional investors and analysts on Tuesday, June 25th.
We'll be hosting a Meet the Pros and Portland Property Tour in Portland, Oregon. Given the heightened interest in that market, which is our second largest MSA, and requests for more exposure to our PROs, we decided this would be an efficient way for analysts and investors to interact with our PROs and take a deep dive into the Portland market. More details will be provided shortly, and we hope you'll be able to join us for this event. Thanks again for joining our call this morning. We'll now turn it back to the operator to take your questions. Operator?
At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.
Hi, thanks. Good afternoon. Tammy, just first question, I was wondering if you could discuss the changes to the same-store pool and what the impact was on the same-store metrics in the quarter.
Sure. As I mentioned, we added 63 stores to the same-store pool this year, Todd. 13 of them were in the Atlanta market, six in St. Louis, five in Portland—actually five in Las Vegas, four in Portland, and four in Shreveport. Overall, the new stores performed better than the old same-store pool. The same-store revenue growth on the 2018 same-store pool would have been 4%. That's on the 376 stores that were in our pool last year. Same-store NOI growth would have been 5.5%. The new stores performed, frankly, ahead of our expectations this quarter.
Okay, that's helpful. In terms of the guidance, I understand the policy about waiting a little further into the year to revisit the guidance if necessary, just given the seasonality of the business. Can you give us a sense of how much ahead revenue and NOI was in the quarter versus your expectations in the quarter?
I'd say it was probably 100 basis points maybe ahead of where we thought it was going to come out. We got the benefit from the new stores to the same-store pool, and we think that will diminish over the balance of the year. We also, as you know, we have tough comps in the back half of the year, and in the face of new supply and 35% of our stores are facing challenges from new supply, we just thought it would be prudent to hold off, see how this spring and summer leasing season goes, and revisit it in August when we release earnings.
Okay. Got it. Just last question. In terms of the rent increase program to existing customers, I was wondering if you could talk about the sort of legacy policies of some of the PROs, whether the PROs have been pushing rates to existing customers all along historically, or has that changed at all more recently, either in the last few years or as some of the PROs have joined the platform a little bit more? I'm just trying to get a sense for how that program may have changed or may be changing in recent years or recent quarters.
Hey, Todd, it's Steve. Honestly, we've been quite consistent on our rent increase policy and programs for the last, I'd say three years, really, since we started in earnest with revenue management. The PROs do have sort of differences in practice sometimes, but in terms of looking at the timeline, everybody's been generally pretty consistent through time. You aren't seeing anything in this quarter that is different than what we've been doing for the last couple of years. To just summarize, we're still getting sort of high single digit increases on average every quarter, and we still expect to raise rents on, let's say, three-quarters of our customers across the course of the year.
What about for the PROs that have joined NSA since the initial formation of the company? Have you seen or do you sense that they do get either more aggressive or have increased confidence sort of after joining the platform and either working with some of the company's best practices and technology and systems, or is that also just not necessarily consistent with what's happening?
I think that's a fair point. Certainly, the newer PROs, as we bring them under the NSA umbrella and get them plugged into our platforms, they definitely adjust their behavior and certainly learn from their peers. They sort of join the fray, if you will, when it comes to rent increases. I would say that happens early on when a new PRO comes online and everybody's been pretty consistent since they've been with NSA.
Okay. All right. That's helpful. Thank you.
Our next question comes from the line of Ki Bin Kim with SunTrust. Please proceed with your question.
Thank you. Can you talk about the same-store pool definition?
Same-store pool definition. The way we define the same store, Ki Bin, is those are all stores that we own for the entirety of both periods being reported upon. All of the stores that were owned by NSA, 1/1/2018, would be in our 2019 same-store pool. At least historically, we do not adjust the same-store pool over the course of the year.
Also, Ki Bin, this is Arlen. Remember, we only buy stabilized assets, so we don't have any fill-up assets in any of our portfolios. Basically, these are all stabilized assets. The thing that changes, though, during the year is early on in the year, for example, if we bought a property, let's say in November of 2017, it would now be in our same-store pool. We buy most all of these properties from third-party operators, by the first quarter of 2018, we may not have had all of our improvements to the property in terms of the physical CapEx that we spend on the properties. We certainly wouldn't have had all of our programs implemented fully.
That's really the source of the pickup, is the fact that our performance is so much better than the prior performance under the third-party sellers once we implement our programs and platforms. The first quarter is always going to be the highest in terms of the new contribution from the new stores to the same-store pool.
We'll expect to see a trail off.
Yeah, it won't be nearly as much later because we will have already been running that for nine months or whatever.
For this pool, actually, it's interesting. A large number of the stores that are coming into the same-store pool in 2019 were part of a portfolio acquisition that we completed in November of 2017. The first quarter of 2018, we really only owned those stores for, call it 60 days by the time the new year started. All of that adds up to create this differential in the first quarter, positive differential.
Do you have a occupancy minimum to be considered a stabilized property that you would put in the same-store pool? I realize you're not buying a ton of development, but maybe kind of recently developed projects might still not be fully stabilized.
No, we don't. We have a practice of not acquiring non-stabilized properties.
The definition we use is that they have to be at least above the market average occupancy in the market that it's at. Basically, the bottom line of that is, we don't have any properties in the same-store pool that are typically below 80% or 85% occupancy. If the market average occupancy was 75%, theoretically, a 75% store could go into the same-store pool if that's the stabilized occupancy for that market.
Okay. You mentioned the uplift that you're getting in same-store revenue once you add a property to your platform. I know it probably depends on which property you're adding and what assets and what markets, any sense of directionally how much uplift you are actually able to get?
Well, yeah, in general, what we see is that the performance of new stores when they come in, it varies a lot by who the prior operator was. On average, they typically for the first year or so will run double what our average same-store performance is on our portfolio that we've had for a long time.
Okay. Just last question. I remember last conference call, you guys mentioned that street rates were down low- to mid-single digits. When we see this type of same-store revenue re-acceleration, it is quite a bit of surprise. Can you talk about what you're seeing with street rates today for the current pool?
Yeah. Ki Bin, it's quite similar. It may have flipped a little bit, frankly, since the last time we talked about this. I would say we're probably down about 3%-4% on street rates right now versus last year this time, and that was true through the bulk of Q1 as well. Street rates are still a headwind for us. Obviously, we make up for it with rent increases to existing customers. As we mentioned for this quarter, for Q1, we made up for it with some occupancy pickups. It is still a tough fight out there with the new supply and
We're working it out store by store and unit type by unit type.
Am I correct to assume that if street rates are still negative, low to mid-single digits, and your average occupancy, the way you show it, is up only 60 basis points year-over-year, it basically just implies that you're getting a huge uplift from the ECRI program, especially as it pertains to newly added stores? Is that the right way to think about it?
No, that's absolutely correct. We've been saying that for several quarters now, that really the lever that we're pulling when we grow revenue is the rent increases to existing customers. There is a roll-down effect with street rates being lower than last year. We offset that and go beyond through the rent increases. That's how we achieve the rental rate growth that we're putting out there at 4% for Q1.
We did get a good lift in occupancy from the new stores added to.
Absolutely.
Yeah. That's right.
If you think about the 40 basis that we saw in Q1.
that is largely coming from the new stores and same-store pool. When you look at the rental rate increase of 4%, that is a combination of a headwind from street rates being down and new supply and a tailwind, or the thrust of the existing customer rate increases or ECRI, whichever term you prefer.
Okay, thank you.
Thanks, Ki Bin.
Our next question comes from the line of Ronald Kamdem with Morgan Stanley. Please proceed with your question.
Hey, this is Ron. Just a couple quick ones from me. One, can you just touch on some of the discounting trends that happened in the quarter and how you're looking at that for the rest of the year? The follow-up to that would be, in terms of online advertising, how are you guys thinking about that channel, and is that something where we could see spending increasing?
Yeah. Discounting year-over-year, well, it's been flat for a number of quarters. I would say that for Q1, it was probably up about 2% year-over-year. Once again, all the same factors apply here. We were fighting new supply in many of our markets with many of our stores. Discounting makes a difference. As we've said many times, discounting is preferred to a lower street rate. We would rather use discounting than a lower rate where we can, and we've definitely been pulling on that lever. When you think about advertising spend, I know some of our peers have expressed that they're up. We actually have seen flat year-over-year advertising spend, and that's really been driven by improvements in our advertising platform and our whole marketing platform.
Marketing team, if you will, is doing a much better job year-over-year. We're seeing the cost per reservation, the cost per lead actually edge downwards for us. Advertising expense has been very constant or flat so far. I would expect that as you get the year wears on, we may choose to invest more in advertising costs to generate more rentals. I don't expect it to stay flat necessarily, but that's what we saw for Q1. Sort of tying it all together, I would say discounting is up, advertising is flat, maybe a bias to the downside in Q1. Customer acquisition cost in Q1 was really very stable. It's really a reflection, Ron, of the fact that as we keep improving our platform tools and refining them, we get a lot more effective with our marketing dollars.
Everyone knows that the cost per click and all of those with Google are going up, when we can be more effective with how those are spent, we just get the benefit of that. Some of our peers have been doing it longer than we have, obviously, since we're a new company. They've got those things already milked out in their system, and we're just continuing to refine that as we go forward.
Great. That's helpful. If I could kind of follow up on the previous line of questioning in terms of acquiring stabilized asset and then sort of putting it through your program to get that uplift. Can you just talk about what are you guys doing to the properties? Is it just cosmetics in terms of the facade? Is it structural? In terms of the operationally, maybe what are the two or three low-hanging fruit things that are really driving those kind of uplifts?
Yeah, I'd say it's going to vary certainly by store, by portfolio. It depends on who managed the store previously. There are certainly cases where we find a store is undermanaged. There are cases where we find the store has been poorly marketed, and we can improve that. There are cases where we find that existing customers have not been getting rent increases, and we find that as a lever that we can pull. It is not consistent across every store, but we always look for catalysts like those that will allow us to drive value. It just happens to be different across a broad swath of the portfolio. We use every advantage we can get, and it's a combination of all those things. We certainly do, as you say, improve the curb appeal where it makes sense and invest in that as well.
I apologize I can't give you a more focused answer, but it's all the things that you talked about.
No.
I would say, Ron-
That's helpful
One thing we rarely see would be structural problems. If we do have that would be negotiated as part of the contract where the seller is effectively paying for those repairs. That's almost never. It's almost always geared towards things that make the property more attractive, more marketable. Frankly, it's a big part of our acquisition total budget. We spend a lot of money on almost every property we buy on the front end.
Got it. That answers it perfectly. That's really helpful. I guess the last question was just, I appreciate the same-store disclosure by MSA, which I found to be helpful. Just from your standpoint, can you just provide us, I think we've talked about this theme of supply potentially moving to some of the secondary markets. What are you hearing on that front, and what are your thoughts going forward on that? Thanks.
In general, we're very pleased with the fact that the secondary markets, while they certainly have new supply, for the most part, the supply has been much more balanced with the demand growth. Now, there are exceptions to that. What you'd consider, for example, Portland is sort of a secondary market. Austin is a secondary market from the standpoint it's not the top 15, neither of those are top 15, and both of those are severely overbuilt markets because they're highly attractive markets. People love them because they're growing so much. In general, for the most of our secondary markets, what we love about them is we see new supply, but it's coming in very commonly at the rate of growth of new demand, and that's really helpful.
Great. Congrats on a great quarter. Thank you.
Thank you.
Thank you.
As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from the line of Smedes Rose with Citi. Please proceed with your question.
Hi. Thanks. Also just wanted to add in, we do appreciate the incremental disclosure that you've started to provide. That's helpful. A lot of our questions have been asked and answered, but I just wanted to make sure I understand. The deceleration that you're anticipating through the balance of the year in same-store NOI, it sounds like that's primarily driven on the expense side versus a downtick in the revenues or both.
I think we'll see a combination. We do not expect to see this level of revenue growth as the year wears on. It's partially the impact of the newly acquired stores that have entered the same-store pool. Those will mature as the year wears on, so their impact on growth will diminish. We certainly had a great quarter when it comes to expenses. We do not expect to hit 1% for the year, so you're exactly right, that will tick up. I think, NOI in general is going to be a combination of both increasing expenses and deceleration on revenue growth.
I think one thing we're seeing, Smedes, is that on the old same-store pool, that's pretty much.
What we expect.
it'll continue pretty common, pretty much where it has been. The new part to the same-store pool is going to slow down because the comps from last year keep getting tougher as we have had those programs, our platform programs, implemented longer last year. That's really where we see the revenue impact slowing down the most.
I guess the only other thing I would add is Q1 property taxes came in at 3.7% on the same-store pool. As you know or you might remember, we've talked about 5%-6% being built into our guidance. While we were pleased with the Q1 results, we're still waiting to see what happens when we start getting the final notices for 2019 in Q3. We'll have more information, more color on that too when we report Q2.
Okay. Arlen, on your last quarterly call, you talked about seeing acquisition Cap rates at 6%-6.5%. Have you seen any changes in the last 60 days or however?
No, we really haven't. I would say the good news is they haven't gone down. Cap rates haven't gotten worse, they really haven't improved either. We're still running right in that range. Typically, we'll average for the year in the 6.25 type number with the markets that we go in for primarily. If you go into the really larger primary markets, it'll be in the 5.5%-6% range, the smaller markets, it'll be 6.5, and it kind of blends out with our mix right around 6.25.
Are you seeing any sort of It looks like obviously you're getting acquisitions done, but are you seeing any, I guess, change in the volume of properties coming to market or kind of the quality of properties coming to market? Anything there that's maybe different since last we talked?
No, not really anything different. I would say the first quarter might be a little slower than in terms of the new stuff coming to market, which of course wouldn't close until Q2 or Q3. That's maybe a little slower than it was in Q4. We're still seeing a very good volume of opportunities to look at. Quality is comparable. I would say one difference is that who we are seeing in the market is consistently different in that it used to be we were really always bidding against the other REITs. Nowadays there's a lot of private equity-backed buyers that we're bidding against. I would say in a typical deal, there might be 10 bids and eight of them will be from private equity-backed guys.
Interesting. Okay. Thank you.
Thank you.
Our next question comes from the line of Todd Stender with Wells Fargo. Please proceed with your question.
Hi. Thanks. Did you guys go through the yields for the acquisitions in the quarter? I know it's a pretty diverse group. You've got the bulk, I guess, is in Louisiana, and then you've got some New Jersey tucked in there, as well as Georgia. Can we just hear some of those cap rates? I guess that would be helpful. Thank you.
On average, Todd, we were looking at, call it six and a quarter across the portfolio. But you're right, they're geographically diverse. The assets that came in with Southern were primarily in the Florida Panhandle. We closed on the New Orleans portfolio at the same time. The stores that came in with Moove In are mostly secondary markets in Pennsylvania and Mid-Atlantic. On average, I'd say six and a quarter is a good average cap rate to use.
Okay. Were all 32 facilities acquired through the two new PROs?
No, there were a handful of other portfolios and one-off transactions that we closed in the quarter. Those were the two biggest, obviously.
Okay. For the remainder that were not from the new PROs, how many properties were spread across how many existing PROs?
Let's see. If I know that right off the top of my head. I would say about half the stores were not with the two new PROs, and they were spread among probably four or five different PROs.
Yeah. Only about half. Just a little over half the stores came with the new PROs.
Almost half of them were from our existing PROs, and we continue to see that as we look into the second quarter. All the PROs are active. We're going to be seeing acquisitions with almost all of our PROs this second quarter.
Okay. Thank you. That's helpful. For the new PROs, were they using revenue management systems, and how sophisticated would you say were those properties run? I guess institutionally run, and just to maybe get a glimpse of the upside potential.
Definitely, both of our PROs are institutional operators. In terms of specific revenue management policies and procedures, I would say one of the PROs was very advanced in that respect, the other, maybe not so much. We'll get maybe a little more uplift from that other PRO. Sort of a split house on that one.
Certainly, both of the new PROs will benefit from some of the scale benefits that we get through our platform tools. That will be a benefit that they get, which our other PROs have always received.
Okay. Thank you. Just last question. When you go to, I guess, the funding sources, you guys have had great access to capital. Funding sources have been pretty diverse, particularly in this quarter. Can you just go through some of the costs or coupons? You have the Series A-1 preferreds. You've assumed some liabilities, not much, but just maybe go through some of the costs associated with your capital.
Most of the capital that we issued was SP and OP equity, and that's issued at market. The preferred equity was a very small piece of that, and I think we issued that at just under par. Something slightly over 6%, if you will. I guess beyond Well, that's really it. The OP and SP equity-
The debt though.
The debt we did after the end of the quarter, I think we locked that in at 4.27% fixed. We swapped it to fixed, I should say.
Okay. Sorry. I guess maybe I do have one last question. With the Kroll rating, what's that for the benefit of? Does that help with your term loan pricing? Is this just a stepping stone maybe before you start to seek ratings from S&P and Moody's? Where does that kind of fit in?
I think we think of it more as a stepping stone, and I think it will give us an opportunity to gain easier access to perhaps the debt private placement market. As you say, I would think of it more as a stepping stone.
Okay. Thank you.
Thanks, Todd.
Ladies and gentlemen, we have reached the end of the question and answer session. I would like to turn the call back to George Hoglund, Vice President of Investor Relations for closing comments.
Thanks everyone for joining NSA's first quarter 2019 earnings call. We appreciate your continued interest in and support of National Storage Affiliates. We look forward to seeing many of you at the upcoming REITWeek conference in June and later that month at our Meet the PROs and Portland Property Tour event. Have a nice weekend.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.