SmartStop Self Storage REIT, Inc. Reports Second Quarter 2022 Results

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LADERA RANCH, Calif., August 11, 2022--(BUSINESS WIRE)--SmartStop Self Storage REIT, Inc. ("SmartStop"), a self-managed and fully-integrated self storage company, announced its overall results for the three and six months ended June 30, 2022.

"The second quarter was another strong period of growth, both organically and externally, culminating with the closing of the previously announced SSGT II merger at the beginning of June," said H. Michael Schwartz, Chairman and CEO of SmartStop. "Prior to the closing of the SSGT II merger, we launched a new private REIT within our Managed REIT Platform, Strategic Storage Growth Trust III. Storage fundamentals remain robust in our busy summer rental season, as we were able to continue to increase rental rates throughout our owned portfolio. Additionally, we transformed the right side of our balance sheet with the closing of SmartStop’s inaugural private placement notes and the receipt of a BBB- investment grade credit rating. With our healthy balance sheet and Managed REIT Platform, we believe that we have ample levers to continue to execute on our overall growth strategies."

Three Months Ended June 30, 2022 Financial Highlights:

  • Net income attributable to common stockholders was approximately $9.1 million. This represents an improvement of approximately $13.0 million when compared to the same period in 2021. Net income per Class A and Class T shares (diluted) was $0.10, an improvement of $0.15 when compared to the same period in 2021.

  • Total self storage-related revenues were approximately $48.6 million, an increase of approximately $8.4 million when compared to the same period in 2021.

  • FFO, as adjusted (attributable to common stockholders and Operating Partnership ("OP") unit holders), was approximately $17.4 million, an increase of approximately $8.0 million when compared to the same period in 2021.

  • FFO, as adjusted per share and OP unit outstanding – diluted was $0.17, an increase of $0.07 when compared to the same period in 2021.

  • Same-store revenues, expenses and NOI increased by 14.1%, 0.6% and 20.3%, respectively compared to the same period in 2021.

  • Same-store average physical occupancy decreased by 0.3% to 95.5% compared to the same period in 2021.

  • Same-store annualized rent per occupied square foot was approximately $18.47, an increase of approximately 15.3% when compared to the same period in 2021.

Six Months Ended June 30, 2022 Financial Highlights:

  • Net income attributable to common stockholders was approximately $8.9 million. This represents an improvement of approximately $26.7 million when compared to the same period in 2021. Net income per Class A and Class T shares (diluted) was $0.10, an improvement of $0.34, when compared to the same period in 2021.

  • Total self storage-related revenues were approximately $93.6 million, an increase of approximately $22.4 million when compared to the same period in 2021.

  • Same-store revenues, expenses and NOI increased by 16.2%, 2.1% and 22.9%, respectively compared to the same period in 2021.

  • Same-store average physical occupancy increased by 0.8% to 95.3%, compared to the same period in 2021.

  • Same-store annualized rent per occupied square foot was approximately $18.12, which represented an increase of approximately 15.8% when compared to the same period in 2021.

External Growth

In May, the Company announced the acquisition of two self storage facilities, one in Sacramento, California (the "Sacramento Property") and one in the Jacksonville, Florida market (the "Jacksonville Property"). The Sacramento Property’s 860 storage units encompass approximately 79,800 square feet and are 100% climate controlled, and the facility also offers over 60 spaces for boat and RV storage. The Jacksonville Property’s facility was constructed in 2017 and features a standalone three-story building. The Jacksonville Property’s 480 units are 100% climate controlled and span across approximately 55,400 square feet.

In June, the Company announced the acquisition of a self storage facility in Aurora, Colorado. The 55,000 square-foot facility was built in 2018 and features one single-story and one three-story building with 540 storage units.

Subsequent to quarter end, the Company completed an expansion project at its Mill Creek, Washington property located in the Seattle metropolitan area. The project added approximately 36,000 rentable square feet to the existing facility.

Strategic Storage Growth Trust II, Inc. Merger

On June 1, 2022, SmartStop and Strategic Storage Growth Trust II, Inc. ("SSGT II") announced that the companies closed their previously announced merger, in which SSGT II merged into a newly-formed subsidiary of SmartStop (the "Merger") in a stock-for-stock transaction that valued SSGT II’s real estate portfolio at approximately $260 million.

As a result of the Merger, SmartStop acquired all of the real estate owned by SSGT II, consisting of 10 wholly-owned operating self storage facilities located across seven states, an interest in one operating property held through an unconsolidated joint venture with an unaffiliated third party and two properties in various stages of development that are held through unconsolidated joint ventures with an unaffiliated third party. The total SSGT II operating portfolio, including the operating joint venture property, currently represents approximately 8,500 self storage units and 900,000 net rentable square feet. Additionally, the Company obtained SSGT II’s rights to acquire (a) one parcel of land being developed into a self storage facility in an unconsolidated joint venture with an unaffiliated third party, and (b) a property located in Southern California.

Managed REIT Platform Update

During the quarter, SmartStop closed the previously announced merger with SSGT II, and launched a new private REIT named Strategic Storage Growth Trust III, Inc. ("SSGT III"). As of quarter end, SmartStop serves as the sponsor of SSGT III and Strategic Storage Trust VI, Inc., a publicly-registered non-traded REIT ("SST VI" and together with SSGT III, our "Managed REITs"). We receive advisory fees and property management fees from our Managed REITs, which had a combined portfolio of 11 properties and approximately 7,600 units and 900,000 rentable square feet at quarter end. During the quarter, assets under management for SST VI increased by $66.6 million to approximately $206.0 million.

Capital Markets Activities

In April 2022, SmartStop was assigned an investment grade credit rating from Kroll Bond Rating Agency, Inc. ("KBRA") of BBB- with a Stable Outlook. In connection with the rating announcement, SmartStop announced that its operating partnership issued $150 million of 4.530% senior notes due April 2032 (the "Notes"). The Notes issuance occurred in two funding tranches, with the first $75 million tranche having occurred on April 19, 2022 and the second $75 million having occurred on May 25, 2022. With proceeds from the Notes, the Company defeased and paid off the SST IV TCF loan and the Midland North Carolina CMBS Loan. SmartStop used the remaining proceeds from the Notes to pay off SSGT II’s existing debt at the close of the Merger.

Declared Distributions

On June 23, 2022, SmartStop’s board of directors declared a distribution rate for the month of July 2022 of approximately $0.00164 per day per share on the outstanding shares of common stock payable to Class A and Class T stockholders of record of such shares as shown on SmartStop’s books at the close of business on each day of the period commencing on July 1, 2022 and ending July 31, 2022. On July 21, 2022, SmartStop’s board of directors declared a distribution rate for the month of August 2022 of approximately $0.00164 per day per share on the outstanding shares of common stock payable to Class A and Class T stockholders of record of such shares as shown on our books at the close of business on each day of the period commencing on August 1, 2022 and ending August 31, 2022. Such distributions payable to each stockholder of record during a month will be paid the following month.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

June 30,
2022
(Unaudited)

December 31,
2021

ASSETS

Real estate facilities:

Land

$

422,592,268

$

397,508,081

Buildings

1,379,838,788

1,117,204,944

Site improvements

88,382,218

78,910,603

1,890,813,274

1,593,623,628

Accumulated depreciation

(178,029,203

)

(155,926,875

)

1,712,784,071

1,437,696,753

Construction in process

4,210,552

1,799,004

Real estate facilities, net

1,716,994,623

1,439,495,757

Cash and cash equivalents

45,894,264

37,254,226

Restricted cash

7,444,707

7,432,135

Investments in unconsolidated real estate ventures

28,868,557

18,943,284

Investments in and advances to Managed REITs

11,271,875

12,404,380

Other assets, net

20,944,488

15,423,508

Intangible assets, net of accumulated amortization

22,373,984

14,337,820

Trademarks, net of accumulated amortization

15,982,353

16,052,941

Goodwill

53,643,331

53,643,331

Debt issuance costs, net of accumulated amortization

2,871,677

3,305,394

Total assets

$

1,926,289,859

$

1,618,292,776

LIABILITIES AND EQUITY

Debt, net

$

1,022,748,112

$

873,866,855

Accounts payable and accrued liabilities

21,977,212

22,693,941

Due to affiliates

410,334

584,291

Distributions payable

8,940,680

8,360,420

Contingent earnout

15,800,000

30,000,000

Deferred tax liabilities

6,809,790

7,719,098

Total liabilities

1,076,686,128

943,224,605

Commitments and contingencies

Redeemable common stock

76,578,073

71,334,675

Preferred stock, $0.001 par value; 200,000,000 shares authorized:

Series A Convertible Preferred Stock, $0.001 par value; 200,000 shares authorized; 200,000 and 200,000 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively, with aggregate liquidation preferences of $203,116,438 and $203,150,685 at June 30, 2022 and December 31, 2021, respectively

196,356,107

196,356,107

Equity:

SmartStop Self Storage REIT, Inc. equity:

Class A common stock, $0.001 par value; 350,000,000 shares authorized; 88,857,061 and 77,057,743 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

88,857

77,058

Class T common stock, $0.001 par value; 350,000,000 shares authorized; 8,085,550 and 8,056,198 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

8,085

8,056

Additional paid-in capital

893,713,908

724,739,872

Distributions

(236,750,901

)

(210,964,464

)

Accumulated deficit

(161,924,488

)

(170,846,475

)

Accumulated other comprehensive income (loss)

1,261,504

(279,975

)

Total SmartStop Self Storage REIT, Inc. equity

496,396,965

342,734,072

Noncontrolling interests in our Operating Partnership

80,248,548

64,632,417

Other noncontrolling interests

24,038

10,900

Total noncontrolling interests

80,272,586

64,643,317

Total equity

576,669,551

407,377,389

Total liabilities and equity

$

1,926,289,859

$

1,618,292,776

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended
June 30,

Six Months Ended
June 30,

2022

2021

2022

2021

Revenues:

Self storage rental revenue

$

46,471,360

$

38,104,699

$

89,528,232

$

67,608,141

Ancillary operating revenue

2,098,835

2,027,041

4,073,155

3,584,471

Managed REIT Platform revenue

2,013,134

1,058,291

3,822,230

3,346,031

Reimbursable costs from Managed REITs

1,204,919

1,061,619

2,348,492

2,277,662

Total revenues

51,788,248

42,251,650

99,772,109

76,816,305

Operating expenses:

Property operating expenses

13,637,231

12,479,969

26,742,556

22,823,250

Managed REIT Platform expenses

617,846

316,142

1,007,111

636,032

Reimbursable costs from Managed REITs

1,204,919

1,061,619

2,348,492

2,277,662

General and administrative

7,946,583

6,811,313

13,784,230

11,564,302

Depreciation

11,826,106

10,742,801

22,934,092

19,286,728

Intangible amortization expense

4,471,973

3,653,681

8,372,857

4,913,228

Acquisition expenses

285,097

30,448

702,871

336,098

Contingent earnout adjustment

800,000

400,000

1,313,821

2,519,744

Write-off of equity interest and preexisting relationships upon acquisition of control

2,049,682

2,049,682

8,389,573

Total operating expenses

42,839,437

35,495,973

79,255,712

72,746,617

Gain on equity interests upon acquisition

16,101,237

16,101,237

Gain on sale of real estate

178,631

178,631

Income from operations

25,050,048

6,934,308

36,617,634

4,248,319

Other income (expense):

Interest expense

(8,852,586

)

(8,416,349

)

(16,428,370

)

(17,032,420

)

Net loss on extinguishment of debt

(2,393,475

)

(2,393,475

)

(2,444,788

)

Other, net

209,135

171,203

(513,208

)

1,614,585

Net income (loss)

14,013,122

(1,310,838

)

17,282,581

(13,614,304

)

Net (income) loss attributable to noncontrolling interests

(1,758,141

)

546,092

(2,161,963

)

2,023,086

Less: Distributions to preferred stockholders

(3,116,439

)

(3,116,438

)

(6,198,631

)

(6,198,630

)

Net income (loss) attributable to SmartStop Self Storage REIT, Inc. common stockholders

$

9,138,542

$

(3,881,184

)

$

8,921,987

$

(17,789,848

)

Net income (loss) per Class A & Class T share – basic

$

0.10

$

(0.05

)

$

0.10

$

(0.24

)

Net income (loss) per Class A & Class T share – diluted

$

0.10

$

(0.05

)

$

0.10

$

(0.24

)

Weighted average Class A shares outstanding – basic

80,896,716

75,994,754

78,932,668

66,252,067

Weighted average Class A shares outstanding – diluted

81,422,623

75,994,754

79,411,284

66,252,067

Weighted average Class T shares outstanding – basic

8,085,550

7,960,999

8,078,290

7,944,502

Weighted average Class T shares outstanding – diluted

8,085,550

7,960,999

8,078,290

7,944,502

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NON-GAAP MEASURE – COMPUTATION OF FUNDS FROM OPERATIONS, AS ADJUSTED

Three Months
Ended
June 30, 2022

Three Months
Ended
June 30, 2021

Six Months
Ended
June 30, 2022

Six Months
Ended
June 30, 2021

Net income (loss) (attributable to common stockholders)

$

9,138,542

$

(3,881,184

)

$

8,921,987

$

(17,789,848

)

Add:

Depreciation of real estate

11,619,040

10,521,283

22,481,157

18,898,768

Amortization of real estate related intangible assets

4,286,753

3,441,144

7,946,836

4,003,229

Depreciation and amortization of real estate and intangible assets from unconsolidated entities

358,716

213,959

658,729

230,996

Deduct:

Gain on deconsolidation

(169,533

)

(169,533

)

Gain on sale of real estate

(178,631

)

(178,631

)

Gain on equity interests upon acquisition (7)

(16,101,237

)

(16,101,237

)

Adjustment for noncontrolling interests (6)

58,107

(1,500,869

)

(1,540,958

)

(2,616,924

)

FFO (attributable to common stockholders)

9,359,921

8,446,169

22,366,514

2,378,057

Other Adjustments:

Intangible amortization expense - contracts (1)

185,220

212,537

426,021

909,999

Acquisition expenses (2)

285,097

30,448

702,871

336,098

Acquisition expenses and foreign currency (gains) losses, net from unconsolidated entities

31,460

107,388

51,956

107,388

Contingent earnout adjustment (3)

800,000

400,000

1,313,821

2,519,744

Write-off of equity interest and preexisting relationships upon acquisition of control

2,049,682

2,049,682

8,389,573

Accretion of fair market value of secured debt

(7,556

)

(31,250

)

(42,198

)

(63,116

)

Net loss on extinguishment of debt (4)

2,393,475

2,393,475

2,444,788

Foreign currency and interest rate derivative losses, net (5)

251,804

(643,547

)

76,272

(425,549

)

Adjustment of deferred tax liabilities (1)

...