National Storage Affiliates Trust was organized in the state of Maryland on May 16, 2013 and is a fully integrated, self-administered and self-managed real estate investment trust focused on the self storage sector. As used herein, "NSA," the "Company," "we," "our," and "us" refers to National Storage Affiliates Trust and its consolidated subsidiaries, except where the context indicates otherwise. The Company has elected and believes it has qualified as a real estate investment trust ("REIT") for U.S. federal income tax purposes commencing with its taxable year ending December 31, 2015.

Through its controlling interest as the sole general partner of NSA OP, LP (its "operating partnership"), a Delaware limited partnership formed on February 13, 2013, the Company is focused on the ownership, operation, and acquisition of self storage properties located within the top 100 metropolitan statistical areas in the United States. Pursuant to the Agreement of Limited Partnership (as amended, the "LP Agreement") of its operating partnership, the Company's operating partnership is authorized to issue preferred units, Class A Units ("OP units"), different series of Class B Units ("subordinated performance units"), and Long-Term Incentive Plan Units ("LTIP units"). The Company also owns certain of its self storage properties through other consolidated limited partnership subsidiaries of its operating partnership, which the Company refers to as "DownREIT partnerships." The DownREIT partnerships issue equity ownership interests that are intended to be economically equivalent to the Company's OP units ("DownREIT OP units") and subordinated performance units ("DownREIT subordinated performance units").

The Company owned 413492 consolidated self storage properties in 2526 states and Puerto Rico with approximately 25.230.0 million rentable square feet in approximately 200,000239,000 storage units as of September 30, 2017.2018. These properties are managed with local operational focus and expertise by the Company and its participating regional operators ("PROs"). These PROs are SecurCare Self Storage, Inc. and its controlled affiliates ("SecurCare"), Kevin Howard Real Estate Inc., d/b/a Northwest Self Storage and its controlled affiliates ("Northwest"), Optivest Properties LLC and its controlled affiliates ("Optivest"), Guardian Storage Centers LLC and its controlled affiliates ("Guardian"), Move It Self Storage and its controlled affiliates ("Move It"), Arizona Mini Storage Management Company d/b/a Storage Solutions and its controlled affiliates ("Storage Solutions"), Hide-Away Storage Services, Inc. and its controlled affiliates ("Hide-Away") and an affiliate of Shader Brothers Corporation d/b/a Personal Mini Storage ("Personal Mini") of Orlando, Florida.

The accompanying condensed consolidated financial statements are presented on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles ("GAAP") and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the condensed consolidated financial statements have been included. The Company's results of operations for the quarterly period ended September 30, 20172018 are not necessarily indicative of the results to be expected for the full year or any other future period.

The Company's financial statements include the accounts of its operating partnership and its controlled subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidation of entities.

When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed a variable interest entity ("VIE"), and if the Company is deemed to be the primary beneficiary, in accordance with authoritative guidance issued on the consolidation of VIEs. When an entity is not deemed to be a VIE, the Company considers the provisions of additional guidance to determine whether the general partner controls a limited partnership or similar entity when the limited partners have certain rights. The Company consolidates all entities that are VIEs and of which the Company is deemed to be the primary beneficiary. The Company has determined that its operating partnership is a VIE. The sole significant asset of National Storage Affiliates Trust is its investment in its

As of September 30, 20172018 and December 31, 2016,2017, the Company's operating partnership was the primary beneficiary of, and therefore consolidated, 21 DownREIT partnerships that are considered VIEs, which owned 34 self storage properties. The net book value of the real estate owned by these VIEs was $249.9$242.2 million and $256.8$248.0 million as of September 30, 20172018 and December 31, 2016,2017, respectively. For the DownREIT partnerships which are subject to fixed rate mortgages payable, the carrying value of such fixed rate mortgages payable held by these VIEs was $140.8$138.9 million and $41.4$140.3 million as of September 30, 20172018 and December 31, 2016,2017, respectively. The creditors of the consolidated VIEs do not have recourse to the Company's general credit.

Rental revenue consists of space rentals and related notes have been reclassified to conform to the current year presentation. Such reclassifications do not impact the Company's previously reported financial position or net income (loss).

Other property-related revenue consists of ancillary revenues such as tenant insurance-relatedinsurance and/or tenant warranty protection-related access fees and commissions and sales of storage supplies which are recognized in the period earned.

The Company recognizes gains from disposition of facilities only upon closing in accordance with the guidance on sales of real estate. Payments received from purchasers prior to closing are recorded as deposits.nonfinancial assets. Profit on real estate sold is recognized using the full accrual method upon closing when the collectabilityall, or substantially all, of the sales pricepromised consideration has been received and is reasonably assurednonrefundable and the Company is not obligatedhas transferred control of the facilities to perform significant activities after the sale. Profit may be deferred in whole or part until the sale meets the requirements of profit recognition on sales under this guidance.

The Company’s investmentinvestments in its unconsolidated real estate venture isventures are recorded under the equity method of accounting in the accompanying condensed consolidated financial statements. Under the equity method, the Company’s investmentinvestments in unconsolidated real estate venture isventures are stated at cost and adjusted for the Company’s share of net earnings or losses and reduced by distributions. Equity in earnings (losses) is recognized based on the Company’s ownership interest in the earnings (losses) of the unconsolidated real estate venture.ventures. The Company follows the "look through" approach"nature of the distribution approach" for classification of distributions from its unconsolidated real estate ventureventures in its condensed consolidated statements of cash flows. Under this approach, distributions are reported underon the basis of the nature of the activity or activities that generated the distributions as either a return on investment, which are classified as operating cash flow unless the facts and circumstances of a specific distribution clearly indicate that it isflows, or a return of capitalinvestment (e.g., proceeds from the unconsolidated real estate venture’sventures' sale of assets), in which case it isare reported as an investing activity.cash flows.

All of the limited partner equity interests ("OP equity") in the operating partnership not held by the Company are reflected as noncontrolling interests. Noncontrolling interests also include ownership interests in DownREIT partnerships held by entities other than the operating partnership or its subsidiaries. In the condensed consolidated statements of operations, the Company allocates net income (loss) attributable to noncontrolling interests to arrive at net income (loss) attributable to National Storage Affiliates Trust.

For transactions that result in changes to the Company's ownership interest in its operating partnership, the carrying amount of noncontrolling interests is adjusted to reflect such changes. The difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interest is adjusted is reflected as an adjustment to additional paid-in capital on the condensed consolidated balance sheets.

The distribution rights and priorities set forth in the operating partnership's LP Agreement differ from what is reflected by the underlying percentage ownership interests of the unitholders. Accordingly, the Company allocates GAAP income (loss) utilizing the hypothetical liquidation at book value ("HLBV") method, in which the Company allocates income or loss based on the change in each unitholders’ claim on the net assets of its operating partnership at period end after adjusting for any distributions or contributions made during such period. The HLBV method is commonly applied to equity investments where cash distribution percentages vary at different points in time and are not directly linked to an equity holder’s ownership percentage.

The HLBV method is a balance sheet-focused approach to income (loss) allocation. A calculation is prepared at each balance sheet date to determine the amount that unitholders would receive if the operating partnership were to liquidate all of its assets (at GAAP net book value) and distribute the resulting proceeds to its creditors and unitholders based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is used to derive each unitholder's share of the income (loss) for the period. Due to the stated liquidation priorities and because the HLBV method incorporates non-cash items such as depreciation expense, in any given period, income or loss may be allocated disproportionately to unitholders as compared to their respective ownership percentage in the operating partnership, and net income (loss) attributable to National Storage Affiliates Trust could be more or less net income than actual cash distributions received and more or less income or loss than what may be received in the event of an actual liquidation. Additionally, the HLBV method could result in net income (or net loss) attributable to National Storage Affiliates Trust during a period when the Company reports consolidated net loss (or net income), or net income (or net loss) attributable to National Storage Affiliates Trust in excess of the Company's consolidated net income (or net loss). The computations of basic and diluted earnings (loss) per share may be materially affected by these disproportionate income (loss) allocations, resulting in volatile fluctuations of basic and diluted earnings (loss) per share.

The Company has cash flow hedge derivative instruments that are measured at fair value with unrealized gains or losses recognized in other comprehensive income (loss) with a corresponding adjustment to accumulated other comprehensive income within equity, as discussed further in Note 12. Under the HLBV method of allocating income (loss) discussed above, a calculation is prepared at each balance sheet date by applying the HLBV method including, and excluding, the assets and liabilities resulting from the Company's cash flow hedge derivative instruments to determine comprehensive income (loss) attributable to National Storage Affiliates Trust. As a result of the distribution rights and priorities set forth in the operating partnership's LP Agreement, in any given period, other comprehensive income (loss) may be allocated disproportionately to unitholders as compared to their respective ownership percentage in the operating partnership and as compared to their respective allocation of net income (loss).

The Company's restricted cash consists of escrowed funds deposited with financial institutions for real estate taxes, insurance and other reserves for capital improvements in accordance with the Company's loan agreements.agreements and like-kind exchange proceeds.

The Company classifies properties as held for sale when certain criteria are met. At such time, the properties, including significant assets and liabilities that are expected to be transferred as part of a sale transaction, are presented separately on the condensed consolidated balance sheet at the lower of carrying value or estimated fair value less costs to sell and depreciation is no longer recognized. As of December 31, 20162017, the Company had twoone self storage propertiesproperty classified as held for sale. The results of operations for the self storage propertiesproperty classified as held for sale are reflected within income from operations in the Company's condensed consolidated statements of operations.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The Company adopted ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. The Company plans to adopt ASU 2014-09 on its effective date, January 1, 2018, using the cumulative effect transition method. The Company is evaluating the effectand concluded that its adoption of ASU 2014-09 will havehad no material effect on its condensed consolidated financial statements and related disclosures. As ASU 2014-09 does not impact lessor accounting,as most of the Company does not believe the adoption of ASU 2014-09 will significantly impact its accounting for rental revenue. The Company expects that certain property-related ancillary revenues and management and other fees will be inCompany's revenue is derived from lease contracts, which are excluded from the scope of the new guidance. For the Company’s other property-related revenue and management fees and other revenue subject to the new guidance, but does not anticipatethe Company performed an evaluation which included identifying its performance obligations and when such performance obligations are satisfied. Based on this evaluation, the Company determined that there was no material changes to itschange in the timing or pattern of recognition of revenue for these activities as a resultcompared to the application of adopting ASU 2014-09.previous revenue recognition guidance.

In February 2016, the FASB issued ASU 2016-02, Leases, which amends the existing guidance for accounting for leases, including requiring lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases and lessees to recognize most leases on-balance sheet as lease liabilities with corresponding right-of-use assets. The Company will adopt ASU 2016-02 effective January 1, 2019. ASU 2016-02 requiresinitially required a modified retrospective approach, with entities applying the new guidance at the beginning of the earliest period presented in the financial statements in which they first apply the new standard, with certain elective transition relief. In July 2018, the FASB issued ASU 2018-11, Leases - Targeted Improvements, which allows entities the option to apply the new standard at adoption date with a cumulative-effect adjustment in the period of adoption. The Company will adopt ASU 2016-02 and ASU 2018-11 effective January 1, 2019. The Company is evaluating the effect that ASU 2016-02 and ASU 2018-11 will have on its operating leases, condensed consolidated financial statements and related disclosures.

All of the limited partnerOP equity interests in the Company's operating partnership not held by the Company are reflected as noncontrolling interests. Noncontrolling interests also include ownership interests in DownREIT partnerships held by entities other than the Company's operating partnership. NSA is the general partner of its operating partnership and is authorized to cause its operating partnership to issue additional partner interests, including OP units and subordinated performance units, at such prices and on such other terms as it determines in its sole discretion.

As of September 30, 20172018 and December 31, 2016,2017, units reflecting noncontrolling interests consisted of the following:

OP units in the Company's operating partnership are redeemable for cash or, at the Company's option, exchangeable for the Company's common shares of beneficial interest, $0.01 par value per share ("common shares") on a one-for-one basis, and DownREIT OP units are redeemable for cash or, at the Company's option, exchangeable for OP units in its operating partnership on a one-for-one basis, subject to certain adjustments in each case. The holders of OP unitsunitholders are generally not entitled to elect redemption until one year after the later of the closing of the Company's initial public offering or the issuance of the OP units. The holders of DownREIT OP units are generally not entitled to elect redemption until five years after the date of the contributor's initial contribution. Accordingly, these limited partner interests are included in noncontrolling interests within equity in the accompanying condensed consolidated balance sheets as of September 30, 2017 and December 31, 2016.

The increase in OP Units outstanding from December 31, 20162017 to September 30, 20172018 was due to the conversionissuance of 992,210 LTIP units into2,024,170 OP units andrelated to the voluntary conversions of 997,074 subordinated performance units (as discussed further below), the issuance of 473,533520,455 OP units in connection with the acquisition of self storage properties and 9,100 LTIP units which were converted into OP units, partially offset by the redemption of 1,189,801364,348 OP units for common shares.

Subordinated performance units may also, under certain circumstances, be convertible into OP units which are exchangeable for common shares as described above, and DownREIT subordinated performance units may, under certain circumstances, be exchangeable for subordinated performance units on a one-for-one basis. Subordinated performance units are only convertible into OP units after a two year lock-out period and then generally (i) at the holder’s election only upon the achievement of certain performance thresholds relating to the properties to which such subordinated performance units relate or (ii) at the Company's election upon a retirement event of a PRO that holds such subordinated performance units or upon certain qualifying terminations. The holders of DownREIT subordinated performance units are generally not entitled to elect redemption until at least five years after the date of the contributor's initial contribution.

The increasedecrease in subordinated performance units outstanding from December 31, 20162017 to September 30, 20172018 was due to the issuancevoluntary conversion of 300,043997,074 subordinated performance units to an affiliate of Personal Mini (the Company's chairman and chief executive officer, Arlen D. Nordhagen, has a noncontrolling minority ownership interest in this affiliate of Personal Mini) andinto 2,024,170 OP units partially offset by the issuance of 96,394102,110 subordinated performance units for co-investment by certain of the Company's PROs in connection with the acquisition of self storage properties.

LTIP units are a special class of partnership interest in the Company's operating partnership that allow the holder to participate in the ordinary and liquidating distributions received by holders of the OP units (subject to the achievement of specified levels of profitability by the Company's operating partnership or the achievement of certain events). LTIP units may also, under certain circumstances, be convertible into OP units on a one-for-one basis, which are then exchangeable for common shares as described above.

Self storage properties are summarized as follows (dollars in thousands):

Depreciation expense related to self storage properties amounted to $15.2$19.2 million and $11.1$15.2 million during the three months ended September 30, 20172018 and 2016,2017, respectively, and $43.6$56.1 million and $29.9$43.6 million during the nine months ended September 30, 20172018 and 2016,2017, respectively.

As of September 30, 2017,2018, the Company's unconsolidated real estate venture, formed in September 2016 with a state pension fund advised by Heitman Capital Management LLC (the "2016 Joint Venture"), owned and operated a portfolio of 7073 properties containing approximately 4.9 million rentable square feet, configured in approximately 39,00040,000 storage units and located across 1314 states.

The unconsolidated real estate venture2016 Joint Venture acquired fourthree self storage properties withand an estimated fair value of $49.8expansion project at an existing property for $28.5 million during the nine months ended September 30, 2017.2018. The unconsolidated real estate venture2016 Joint Venture financed the self storage propertythese acquisitions with capital contributions from the unconsolidated real estate venture2016 Joint Venture members, of which the Company contributed $12.5$7.3 million for its 25% proportionate share inshare. During the unconsolidated real estate venture.nine months ended September 30, 2018, the 2016 Joint Venture also sold to an unrelated third party one self storage property for a gross sales price of $9.3 million.

The following table presents the combined condensed financial position of the Company's unconsolidated real estate ventureventures as of September 30, 20172018 and December 31, 20162017 (in thousands):

The following table presents the combined condensed operating information of the Company's unconsolidated real estate ventureventures for the three and nine months ended September 30, 2018 and 2017 (in thousands):

The Company acquired 3450 self storage properties and an expansion project adjacent to an existing property with an estimated fair value of $225.8$305.3 million during the nine months ended September 30, 2017.2018. Of these acquisitions, seventhree self storage properties and the expansion project adjacent to an existing property with an estimated fair value of $40.9$19.7 million were acquired by the Company from its PROs. As a result of the Company's adoption of ASU 2017-01 during the nine months ended September 30, 2017, the 34The 50 self storage property acquisitions were accounted for as asset acquisitions and accordingly, $2.5$1.6 million of acquisitiontransaction costs related to the acquisitions were capitalized as part of the basis of the acquired properties. 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 $5.5$7.1 million, resulting in a total fair value of $220.3$298.2 million allocated to real estate.

The following table summarizes the investment in self storage property acquisitions completed by the Company during the nine months ended September 30, 20172018 (dollars in thousands):

During the nine months ended September 30, 2017,2018, the Company sold to unrelated third parties threetwo self storage properties, and excess land parcels adjacent to its self storage properties.one of which was classified as held for sale as of December 31, 2017. The gross sales price was $17.8$5.5 million and the Company recognized $5.7$0.4 million of gaingains on the sales.

Other assets consist of the following (dollars in thousands):

The Company's outstanding debt as of September 30, 20172018 and December 31, 20162017 is summarized as follows (dollars in thousands):

 On February 8, 2017,January 29, 2018, pursuant to a partialfull exercise by the Company's operating partnership of its remaining expansion option and a partial exercise of its Additional Expansion Option (defined below) under its amended and restated credit agreement dated as of May 6, 2016, the Company's operating partnership, as borrower, certain of its subsidiaries that are party to the amended and restated credit agreement, as subsidiary guarantors, and the Company as parent guarantor, entered into a secondthird increase agreement and amendment (the "Increase Agreement") with a syndicated group of lenders to increase the total borrowing capacity under the Company's credit agreement by adding an additional tranche AD term loan facility (the "Term Loan A") and the tranche B term loan facility (the "Term Loan B") by $10.0 million and $55.0

The Term Loan CD matures on February 8, 2024.January 29, 2023. It is not subject to any scheduled reduction or amortization payment prior to maturity. Interest rates applicable to loans under the Term Loan CD are determined based on a 1, 2, 3 or 6 month London Interbank Offered Rate ("LIBOR")LIBOR period (as elected by the Company at the beginning of any applicable interest period) plus an applicable margin, or a base rate, determined by the greatest of the Key Bank prime rate, the federal funds rate plus 0.50% or one month LIBOR plus 1.00%, plus an applicable margin. The applicable margins for the Term Loan CD are leverage based and range from 1.70%1.30% to 2.25%1.85% for LIBOR loans and 0.70%0.30% to 1.25%0.85% for base rate loans; provided that after such time as the Company achieves an investment grade rating from at least two rating agencies, the Company may elect (but is not required to elect) that the Term Loan CD is subject to the rating based on applicable margins ranging from 1.50%0.90% to 2.45%1.75% for LIBOR Loans and 0.50%0.00% to 1.45%0.75% for base rate loans. Prepayments of any loans underThe Term Loan C are subject to prepayment premiums of 2.00% from the date of the Increase Agreement through and including the first anniversary of the Increase Agreement and 1.00% from the first anniversary of the Increase Agreement through and including the second anniversary of the Increase Agreement. There is no prepayment penalty thereafter. D may be prepaid at any time without penalty.

Other than the increases and amendments related to the Term Loan CD and the Additional Expansion Option described above, the Increase Agreement did not impact or amend the amended and restated credit agreement'sfacility's previously disclosed terms, including its covenants, events of default, or terms of payment. For a summary of the Company's financial covenants and additional detail regarding the Company's credit facility, term loan facility, and fixed rate mortgages payable, please see Note 8 to the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.

As of September 30, 2017,2018, the Company had outstanding letters of credit totaling $4.7 million and would have had the capacity to borrow remaining Revolver commitments of $194.3$231.8 million while remaining in compliance with the credit facility's financial covenants. At September 30, 2017,2018, the Company was in compliance with all such covenants.

On May 31, 2018, the Company, under its credit agreement dated as of May 6, 2016, the Company's financialoperating partnership, as borrower, and certain of its subsidiaries that are party to the credit agreement, as subsidiary guarantors, entered into a fourth amendment with a syndicated group of lenders to reduce the applicable margins for borrowings under the Term Loan B. The amended applicable margins for LIBOR loans range from 1.30% to 1.70% and for base rate loans range from 0.30% to 0.70%; provided that after such time as the Company achieves an investment grade rating from at least two rating agencies, the Company may elect (but is not required to elect) that the Term Loan B is subject to the rating based on applicable margins ranging from 0.90% to 1.75% for LIBOR Loans and 0.00% to 0.75% for base rate loans. Other than the reduction in the applicable margins for borrowings under the Term Loan B described above, the fourth amendment did not impact or amend the credit facility's previously disclosed terms, including its covenants, events of default, or terms of payment.

On June 5, 2018, the Company's credit facility, term loan facility,operating partnership and fixed rate mortgage payables, please see Note 8 to the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.

In addition, the Second Amendment reduces the applicable margin for borrowings under the Term Loan Facility. The amended applicable margins for LIBOR loans range from 1.30% to 1.70% and has a fixed interestfor base rate loans range from 0.30% to 0.70%; provided that after such time as the Company achieves an investment grade rating from at least two rating agencies, the Company may elect (but is not required to elect) that the Term Loan Facility is subject to the rating based on applicable margins ranging from 0.90% to 1.75% for LIBOR loans and 0.00% to 0.75% for base rate loans. The covenants, events of 4.14%.default, and terms of payment under the Term Loan Facility are otherwise unchanged.

Based on existing debt agreements in effect as of September 30, 2017,2018, the scheduled principal and maturity payments for the Company's outstanding borrowings are presented in the table below (in thousands):

The following table sets forth the computation of basic and diluted earnings (loss) per common share for the three and nine months ended September 30, 20172018 and 2016, respectively2017, (in thousands, except per share amounts):

Outstanding equity interests of the operating partnership and DownREIT partnerships are considered potential common shares for purposes of calculating diluted earnings (loss) per share as the unitholders may, through the exercise of redemption rights, obtain common shares, subject to various restrictions. Basic earnings per share is calculated based on the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by further adjusting for the dilutive impact using the treasury stock method for unvested LTIP units subject

Generally, following certain lock-out periods, OP units in the operating partnership are redeemable for cash or, at the Company's option, exchangeable for common shares on a one-for-one basis, subject to certain adjustments and DownREIT OP units are redeemable for cash or, at the Company's option, exchangeable for OP units in the operating partnership on a one-for-one basis, subject to certain adjustments in each case.

LTIP units may also, under certain circumstances, be convertible into OP units on a one-for-one basis, which are then exchangeable for common shares as described above. Certain LTIP units vested prior to or upon the completion of the Company's initial public offering and certain LTIP units have vested upon the satisfaction of a service condition or will vest upon the satisfaction of future service and market conditions. Vested LTIP units and unvested LTIP units that vest based on a service or market condition are allocated income or loss in a similar manner as OP units. Unvested LTIP units subject to a service or market condition are evaluated for dilution using the treasury stock method. For the three and nine months ended September 30, 2017, 410,8252018, 383,712 unvested LTIP units that vest based on a service or market

Subordinated performance units may also, under certain circumstances, be convertible into OP units which are exchangeable for common shares as described above, and DownREIT subordinated performance units may, under certain circumstances, be exchangeable for subordinated performance units on a one-for-one basis. Subordinated performance units are only convertible into OP units, after a two year lock-out period and then generally (i) at the holder’s election only upon the achievement of certain performance thresholds relating to the properties to which such subordinated performance units relate or (ii) at the Company's election upon a retirement event of a PRO that holds such subordinated performance units or upon certain qualifying terminations. Although subordinated performance units may only be convertible after a two year lock-out period, the Company assumes a hypothetical conversion of each subordinated performance unit (including each DownREIT subordinated performance unit) into OP units (with subsequently assumed redemption into common shares) for the purposes of calculating diluted weighted average common shares. This hypothetical conversion is calculated using historical financial information, and as a result, is not necessarily indicative of the results of operations, cash flows or financial position of the Company upon expiration of the two-year lock out period on conversions.

For the three months ended September 30, 2018 and 2017, potential common shares totaling 51.1 million and 51.3 million, respectively, related to OP units, DownREIT OP units, subordinated performance units and DownREIT subordinated performance units have been excluded from the calculation of diluted earnings (loss) per share as they are not dilutive to earnings (loss) per share. For the nine months ended September 30, 2018 and 2017, potential common shares totaling 51.350.4 million and 50.6 million, respectively, related to OP units, DownREIT OP units, subordinated performance units and DownREIT subordinated performance units have been excluded from the calculation of diluted earnings (loss) per share as they are not dilutive to earnings (loss) per share.

Participating securities, which consist of unvested restricted common shares, receive dividends equal to those received by common shares. The effect of participating securities for the periods presented above is calculated using the two-class method of allocating distributed and undistributed earnings.

TheFor the self storage properties that are managed by the PROs, the Company has entered into asset management agreements with the PROs to provide leasing, operating, supervisory and administrative services related to the Company's self storage properties.services. The asset management agreements generally provide for fees ranging from 5% to 6% of gross revenue for the managed self storage properties. During the three months ended September 30, 20172018 and 2016,2017, the Company incurred $3.7$4.4 million and $3.0$3.7 million, respectively, for supervisory and administrative fees to the PROs and during the nine months ended September 30, 20172018 and 2016,2017, the Company incurred $10.5$12.6 million and $7.8$10.5 million, respectively, for supervisory and administrative fees to the PROs. Such fees are included in general and administrative expenses in the accompanying condensed consolidated statements of operations.

The employees responsible for operation ofFor the self storage properties that are generallymanaged by the PROs, the employees responsible for operations are employees of the PROs who charge the Company for the costs associated with the respective employees. For the three months ended September 30, 20172018 and 2016,2017, the Company incurred $6.1$7.4 million and $5.1$6.1 million, respectively, for payroll and related costs reimbursable to these PROs and for the nine months ended September 30, 20172018 and 2016,2017, the Company incurred $17.8$21.9 million and $13.8$17.8 million, respectively, for payroll and related costs reimbursable to these PROs. Such costs are included in property operating expenses in the accompanying condensed consolidated statements of operations.

During the three months ended September 30, 20172018 and 2016,2017, the Company incurred $0.2less than $0.1 million and $0.4$0.2 million, respectively, of expenses payable to certain PROs related to self storage property acquisitions sourced by the PROs and during the nine months ended September 30, 20172018 and 2016,2017, the Company incurred $0.5$0.3 million and $0.7$0.5 million, respectively, of expenses payable to certain PROs related to self storage property acquisitions sourced by the PROs. These expenses, which are based on the volume of transactions sourced by the PROs, are intended to reimburse the PROs for due diligence costs incurred in the sourcing and underwriting process. For the three and nine months ended September 30, 2017, theseThese due diligence costs are capitalized as part of the basis of the acquired self storage properties and for the three and nine months ended September 30, 2016, these due diligence costs are included in acquisition costs in the accompanying condensed consolidated statements of operations.

During the nine months ended September 30, 2017,2018, the Companyoperating partnership issued 44,91711,490 subordinated performance units to an affiliate of Personal Mini (the Company's chairman and chief executive officer, Arlen D. Nordhagen, has a noncontrolling minority ownership interest in this affiliate of Personal Mini), for $0.3 million of co-investment related to the acquisition of a self storage property from an unrelated third party.

During the nine months ended September 30, 2018, the operating partnership issued 19,973 subordinated performance units to affiliates of Hide-Away, one of the Company's PROs, as partial consideration for the acquisition of a self storage property to SA-SCMI LLC, an affiliate of Securcare and Move It. At the time of the issuance, SA-SCMI LLC was an affiliate of Arlen D. Nordhagen, the Company's chairman and chief executive officer.

The Company is subject to litigation, claims, and assessments that may arise in the ordinary course of its business activities. Such matters include contractual matters, employment related issues, and regulatory proceedings. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters will not have a material adverse effect on the Company's financial position, results of operations, or liquidity.

The Company sometimes limits its exposure to interest rate fluctuations by entering into interest rate swap agreements. The interest rate swap agreements moderate the Company's exposure to interest rate risk by effectively converting the interest on variable rate debt to a fixed rate. The Company measures its interest rate swap derivatives at fair value on a recurring basis. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income (loss) and are subsequently reclassified into earnings in the period that the hedged transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly into earnings.

Information regarding the Company's interest rate swaps measured at fair value, which are classified within Level 2 of the GAAP fair value hierarchy, is presented below (dollars in thousands):

As of September 30, 20172018 and December 31, 2016,2017, the Company had outstanding interest rate swaps with aggregate notional amounts of $595.0$720.0 million and $425.0$595.0 million, respectively, designated as cash flow hedges. As of September 30, 2017,2018, the Company's swaps had a weighted average remaining term of approximately 3.84.1 years. The fair value of these swaps are presented within accounts payable and accrued liabilities and other assets in the Company's balance sheets, and the Company recognizes any changes in the fair value as an adjustment of accumulated other comprehensive income (loss) within equity to the extent of their effectiveness.equity. If the forward rates at September 30, 20172018 remain constant, the Company estimates that during the next 12 months, the Company would reclassify into earnings approximately $0.6$6.1 million of the unrealized lossesgains included in accumulated other comprehensive income (loss). If market interest rates increaseare above the 1.51%1.77% weighted average fixed rate under these interest rate swaps, the Company will benefitbenefits from net cash payments due to it from the counterparty to the interest rate swaps.its swap counterparties.

There were no transfers between levels of the three-tier fair value measurement hierarchy during the nine months ended September 30, 20172018 and 2016.2017. For financial assets and liabilities that utilize Level 2 inputs, the Company utilizes both direct and indirect observable price quotes, including LIBOR yield curves. The Company uses valuation techniques for Level 2 financial assets and liabilities which include LIBOR yield curves at the reporting date as well as assessing counterparty credit risk. Counterparties to these contracts are highly rated financial institutions. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with the Company's derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and the counterparties. As of September 30, 2017,2018, the Company determined that the effect of credit valuation adjustments on the overall valuation of its derivative positions are not significant to the overall valuation of its derivatives. Therefore, the Company has determined that its derivative valuations are appropriately classified in Level 2 of the fair value hierarchy.

The carrying values of cash and cash equivalents, restricted cash, trade receivables, and accounts payable and accrued liabilities reflected in the balance sheets at September 30, 20172018 and December 31, 2016,2017, approximate fair value due to the short term nature of these financial assets and liabilities. The carrying value of variable rate debt financing reflected in the balance sheets at September 30, 20172018 and December 31, 20162017 approximates fair value as the changes in their associated interest rates reflect the current market and credit risk is similar to when the loans were originally obtained.

The fair values of fixed rate mortgages were estimated using the discounted estimated future cash payments to be made on such debt; the discount rates used approximated current market rates for loans, or groups of loans, with similar maturities and credit quality (categorized within Level 2 of the fair value hierarchy). The combined principal balance of the Company's fixed rate mortgages payable was approximately $272.7$269.4 million as of September 30, 20172018 with a fair value of approximately $285.0 million.$272.4 million (categorized within Level 2 of the fair value hierarchy). In determining the fair value, the Company estimated a weighted average market interest rate of approximately 3.94%4.57%, compared to the weighted average contractual interest rate of 4.87%4.85%. The combined principal balance of the Company's fixed rate mortgages was approximately $201.7$271.5 million as of December 31, 20162017 with a fair value of approximately $214.0$282.6 million. In determining the fair value as of December 31, 2016,2017, the Company estimated a weighted average market interest rate of approximately 3.89%4.04%, compared to the weighted average contractual interest rate of 5.25%4.87%.

In October 2018, the Company entered into definitive agreements with affiliates of Southern Self Storage, Property AcquisitionsLLC d/b/a Southern Self Storage of Palm Beach Gardens, Florida, to add Southern Self Storage (“Southern”) as the Company's ninth PRO. The Company expects the initial contribution transaction and related closing documentation, including the entry into a facilities portfolio management agreement, to close in January 2019, subject to customary closing conditions.

Since September 30, 2017, the Company acquired 28Southern currently owns and operates a portfolio of nine self storage properties, for approximately $174.5 million. Consideration for these 28 self storage properties included approximately $165.0 million of net cash and OP equity of $7.4 million (consistingprimarily located in the southeast region of the issuanceUnited States. In accordance with the executed agreements, Southern will contribute six of 260,490 OP Units and 45,335 subordinated performance units, including 26,049 OP units issued to Nordhagen LLLP, an entity for which Arlen D. Nordhagen, the Company's chairman and chief executive officer, holds voting and/or investment power and 22,214 subordinated performance units to SecurCare Self Storage Inc., an affiliate of SecurCare and an affiliate of Arlen D. Nordhagen), and the assumption of approximately $2.1 million of other working capital liabilities. Such amounts incorporate the effect of $1.1 million of subordinated equity issued in exchange for cash co-invested by SecurCare and Move It. In connection with these acquisitions, the Company incurred $0.3 million of expenses, payable to certain PROs, for due diligence costs related to the self storage properties sourced by the PROs.

National Storage Affiliates Trust is a fully integrated, self-administered and self-managed real estate investment trust organized in the state of Maryland on May 16, 2013. We have elected and believe we have qualified to be taxed as a REIT commencing with our taxable year ended December 31, 2015. We serve as the sole general partner of our operating partnership, a Delaware limited partnership formed on February 13, 2013 to conduct our business, which is focused on the ownership, operation, and acquisition of self storage properties located within the top 100 metropolitan statistical areas throughout the United States.

Our chairman and chief executive officer, Arlen D. Nordhagen, co-founded SecurCare Self Storage, Inc. in 1988 to invest in and manage self storage properties. While growing SecurCare to over 150 self storage properties, Mr. Nordhagen recognized a market opportunity for a differentiated public self storage REIT that would leverage the benefits of national scale by integrating multiple experienced regional self storage operators with local operational focus and expertise. We believe that his vision, which is the foundation of the Company, aligns the interests of our participating regional operators ("PROs"), with those of our public shareholders by allowing our PROs to participate alongside our shareholders in our financial performance and the performance of our PROs' managed portfolios. This structure offers our PROs a unique opportunity to serve as regional property managers for their managed portfolios and directly participate in the potential upside of those properties while simultaneously diversifying their investment to include a broader portfolio of self storage properties.

Our structure promotes operator accountability as subordinated performance units issued to our PROs in exchange for the contribution of their properties are entitled to distributions only after those properties satisfy minimum performance thresholds. In the event of a material reduction in operating cash flow, distributions on our subordinated performance units will be reduced before or disproportionately to distributions on our common shares held by our common shareholders. In addition, we expect our PROs will generally co-invest subordinated equity in the form of subordinated performance units in each acquisition that they source, and the value of these subordinated performance units will fluctuate with the performance of their managed portfolios. Therefore, our PROs are incentivized to select acquisitions that are expected to exceed minimum performance thresholds, thereby increasing the value of their subordinated equity stake. We expect that our shareholders will benefit from the higher levels of property performance that our PROs are incentivized to deliver.

The Company had eight PROs as of September 30, 2017:2018: SecurCare, Northwest, Optivest, Guardian, Move It, Storage Solutions, Hide Away and Personal Mini. We seek to further expand our platform by continuing to recruit

We seek to own properties that are well located in high quality sub-markets with highly accessible street access and attractive supply and demand characteristics, providing our properties with strong and stable cash flows that are less sensitive to the fluctuations of the general economy. Many of these markets have multiple barriers to entry against increased supply, including zoning restrictions against new construction and new construction costs that we believe are higher than our properties' fair market value.

As of September 30, 2017,2018, we owned a geographically diversified portfolio of 413492 self storage properties, located in 2526 states and Puerto Rico, comprising approximately 25.230.0 million rentable square feet, configured in approximately 200,000239,000 storage units. Of these properties, 242246 were acquired by us from our PROs and 171246 were acquired by us from third-party sellers.

During the nine months ended September 30, 2017,2018, we acquired 3450 self storage properties withand an aggregate fair value of $225.8expansion project at an existing property for $305.3 million, comprising approximately 2.32.8 million rentable square feet, configured in approximately 17,30024,900 storage units. Of these acquisitions, seventhree were acquired by us from our PROs and 2747 were acquired by us from third-party sellers.

During the nine months ended September 30, 2017, the Company2018, we sold three self storage properties to unrelated third parties for $15.6 million. Thesetwo self storage properties comprisedfor $5.5 million, comprising approximately 0.20.1 million rentable square feet, configured in approximately 1,200 storage units.

We seek to opportunistically partner with institutional funds and other institutional investors to acquire attractive portfolios utilizing a promoted return structure. We believe there is significant opportunity for continued external growth by partnering with institutional investors seeking to deploy capital in the self storage industry.

Immediately following the closing of the acquisition, the 2018 Joint Venture distributed the six self storage properties in the Portfolio located in Puerto Rico and a single self storage property located in Ohio to us in exchange for a $64.2 million cash contribution from us. In addition, two of the properties acquired in the Portfolio were combined with other properties for operational efficiency. As of September 30, 2017,2018, our unconsolidated real estate venture,2018 Joint Venture owned and operated a portfolio of 103 properties containing approximately 7.6 million rentable square feet, configured in approximately 63,000 storage units and located across 17 states.

As of September 30, 2018, our 2016 Joint Venture, in which we have a 25% ownership interest, owned and operated a portfolio of 7073 properties containing approximately 4.9 million rentable square feet, configured in approximately 39,00040,000 storage units and located across 1314 states.

During the nine months ended September 30, 2017,2018, our unconsolidated real estate venture2016 Joint Venture acquired fourthree self storage properties withand an aggregate fair value of $49.8expansion project at an existing property for $28.5 million, comprising approximately 0.30.2 million rentable square feet, configured in approximately 3,1001,300 storage units.

Through our property management platform, we direct, manage and control the day-to-day operations and affairs of thecertain consolidated properties and our unconsolidated real estate venture andventures. We earn certain customary fees for managing and operating the properties. In addition, we provide tenant warranty protection to tenants atproperties in the unconsolidated real estate ventureventures and we facilitate tenant insurance and/or tenant warranty protection programs for tenants at these properties in exchange for half of all proceeds from the tenant warranty protection program at each unconsolidated real estate venture property.such programs.

When reviewing our results of operations it is important to consider the timing of acquisition activity. We acquired 3450 self storage properties during the nine months ended September 30, 20172018 and 10765 self storage properties during the year ended December 31, 2016.2017. As a result of these and other factors, we do not believe that our historical results of operations discussed and analyzed below are comparable or necessarily indicative of our future results of operations or cash flows.

To help analyze the operating performance of our self storage properties, we also discuss and analyze operating results relating to our same store portfolio. Our same store portfolio is defined as those properties owned and operated forsince the entiretyfirst day of the applicable periodsearliest year presented, excluding any properties sold, or expected to be sold or where we completed a storage space expansionsubject to significant changes such as expansions or casualty events which causedcause the property'sportfolio's year-over-year operating results to no longer be comparable. As of September 30, 2017,2018, our same store portfolio consisted of 277376 self storage properties which consists of only those properties that were included in our condensed consolidated financial statements since January 1, 2016.properties.

The following discussion and analysis of the results of our operations and financial condition should be read in conjunction with the accompanying condensed consolidated financial statements in Item 1. Certain figures, such as interest rates and other percentages, included in this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our condensed consolidated financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.

The following table illustrates the changes in rental revenue, other property-related revenue, management fees and other revenue, property operating expenses, and other expenses for the three months ended September 30, 20172018 compared to the three months ended September 30, 20162017 (dollars in thousands):