Le Lézard
Classified in: Business, Covid-19 virus
Subject: EARNINGS

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


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:

Six Months Ended June 30, 2022 Financial Highlights:

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)

 

 

(1,040,711

)

 

 

(56,880

)

 

 

(799,123

)

 

 

(1,929,746

)

Offering related expenses (8)

 

 

1,387,760

 

 

 

?

 

 

 

1,387,760

 

 

 

?

 

Adjustment for noncontrolling interests (6)

 

 

(744,709

)

 

 

(1,784

)

 

 

(876,681

)

 

 

(1,435,079

)

FFO, as adjusted (attributable to common stockholders)

 

$

14,951,443

 

 

$

8,463,081

 

 

$

29,050,370

 

 

$

13,232,157

 

(1)

 

These items represent the amortization, accretion, or adjustment of intangible assets or deferred tax liabilities.

(2)

 

This represents acquisition expenses associated with investments in real estate that were incurred prior to the acquisitions becoming probable and therefore not capitalized in accordance with SmartStop's capitalization policy.

(3)

 

The contingent earnout adjustment represents the adjustment to the fair value during the period of the Class A-2 Units issued in connection with the self administration transaction.

(4)

 

The net loss associated with the extinguishment of debt includes prepayment penalties, the write-off of unamortized deferred financing fees, and other fees incurred.

(5)

 

This represents the mark-to-market adjustment for SmartStop's derivative instruments not designated for hedge accounting and the ineffective portion of the change in fair value of derivatives recognized in earnings, as well as changes in foreign currency related to SmartStop's foreign equity investments not classified as long term.

(6)

 

This represents the portion of the above stated adjustments in the calculations of FFO and FFO, as adjusted, that are attributable to SmartStop's non-controlling interests.

(7)

 

This gain relates to the mark up in fair value of SmartStop's preexisting equity interests in SSGT II as a result of SmartStop's acquisition of control in the SSGT II Merger.

(8)

 

Such costs relate to SmartStop's filing of an S-11 registration statement and SmartStop's pursuit of a potential offering of SmartStop's common stock. As this item is non-recurring and not a primary driver in SmartStop's decision-making process, FFO is adjusted for its effect to arrive at FFO, as adjusted, as a means of determining a comparable sustainable operating performance metric.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES
NON-GAAP MEASURE ? COMPUTATION OF FUNDS FROM OPERATIONS, AS ADJUSTED ATTRIBUTABLE TO SHARES AND OP UNITS OUTSTANDING - DILUTED

The following is a reconciliation of FFO and FFO, as adjusted (attributable to common stockholders), to FFO and FFO, as adjusted (attributable to common stockholders and OP Unit holders), for each of the periods presented below:

 

 

Three Months
Ended
June 30, 2022

 

 

Three Months
Ended
June 30, 2021

 

 

Six Months
Ended
June 30, 2022

 

 

Six Months
Ended
June 30, 2021

 

FFO (attributable to common stockholders and

OP unit holders) Calculation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO (attributable to common stockholders)

 

$

9,359,921

 

 

$

8,446,169

 

 

$

22,366,514

 

 

$

2,378,057

 

Net income (loss) attributable to the noncontrolling

interests

 

 

1,758,141

 

 

 

(546,092

)

 

 

2,161,963

 

 

 

(2,023,086

)

Adjustment for noncontrolling interests(1)

 

 

(58,107

)

 

 

1,500,869

 

 

 

1,540,958

 

 

 

2,616,924

 

FFO (attributable to common stockholders and

OP unit holders)

 

$

11,059,955

 

 

$

9,400,946

 

 

$

26,069,435

 

 

$

2,971,895

 

FFO, as adjusted (attributable to common

stockholders and OP unit holders) Calculation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO, as adjusted (attributable to common stockholders)

 

$

14,951,443

 

 

$

8,463,081

 

 

$

29,050,370

 

 

$

13,232,157

 

Net income (loss) attributable to the noncontrolling

interests

 

 

1,758,141

 

 

 

(546,092

)

 

 

2,161,963

 

 

 

(2,023,086

)

Adjustment for noncontrolling interests(1)

 

 

686,602

 

 

 

1,502,653

 

 

 

2,417,639

 

 

 

4,052,003

 

FFO, adjusted (attributable to common

stockholders and OP unit holders)

 

$

17,396,186

 

 

$

9,419,642

 

 

$

33,629,972

 

 

$

15,261,074

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average Class A & T shares outstanding

 

 

88,982,266

 

 

 

83,955,753

 

 

 

87,010,958

 

 

 

74,196,569

 

Weighted average OP units outstanding

 

 

11,496,892

 

 

 

10,270,455

 

 

 

10,959,537

 

 

 

9,762,238

 

Weighted average other dilutive securities

 

 

525,907

 

 

 

239,279

 

 

 

478,616

 

 

 

200,546

 

Weighted average shares & OP units

outstanding ? diluted(2)

 

 

101,005,065

 

 

 

94,465,487

 

 

 

98,449,111

 

 

 

84,159,353

 

FFO, as adjusted per share & OP unit

outstanding ? diluted

 

$

0.17

 

 

$

0.10

 

 

$

0.34

 

 

$

0.18

 

(1)

 

This represents the portion of the above stated adjustments in the calculations of FFO and FFO, as adjusted, that are attributable to our non-controlling interests.

(2)

 

Includes all Class A Shares, Class T Shares and OP Units, as well as the dilutive effect on FFO and FFO, as adjusted of both unvested restricted stock and long term incentive plan units (both time-based units and performance based-units), and is calculated using the two-class, treasury stock or if-converted method, as applicable. The outstanding convertible preferred stock was excluded as the conversion of such shares was antidilutive to FFO and FFO, as adjusted. This excludes Class A-2 OP Units, the conversion of which is contingent on growth in assets under management or other contingent events before being converted to a class of OP Units equivalent to a common share.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES
COMPUTATION OF SAME-STORE OPERATING RESULTS
(Unaudited)

Same-Store Facility Results - Three Months Ended June 30, 2022 and 2021

The following table sets forth operating data for SmartStop's same-store facilities (those properties included in the consolidated results of operations since January 1, 2021, excluding three lease-up properties SmartStop owned as of January 1, 2021) for the three months ended June 30, 2022 and 2021. SmartStop considers the following data to be meaningful as this allows for the comparison of results without the effects of acquisition, lease up, or development activity.

 

 

Same-Store Facilities

 

 

Non Same-Store Facilities

 

Total

 

 

 

2022

 

 

2021

 

 

%
Change

 

 

2022

 

 

2021(6)

 

 

%
Change

 

2022

 

 

2021

 

 

%
Change

 

Revenue (1)

 

$

34,694,481

 

 

$

30,396,194

 

 

 

14.1

%

 

$

12,039,007

 

 

$

8,022,875

 

 

N/M

 

$

46,733,488

 

 

$

38,419,069

 

 

 

21.6

%

Property operating expenses (2)

 

 

9,543,263

 

 

 

9,488,105

 

 

 

0.6

%

 

 

4,093,968

 

 

 

2,991,864

 

 

N/M

 

 

13,637,231

 

 

 

12,479,969

 

 

 

9.3

%

Net operating income

 

$

25,151,218

 

 

$

20,908,089

 

 

 

20.3

%

 

$

7,945,039

 

 

$

5,031,011

 

 

N/M

 

$

33,096,257

 

 

$

25,939,100

 

 

 

27.6

%

Number of facilities

 

 

109

 

 

 

109

 

 

 

 

 

 

44

 

 

 

30

 

 

 

 

 

153

 

 

 

139

 

 

 

 

Rentable square feet (3)

 

 

8,036,285

 

 

 

8,034,200

 

 

 

 

 

 

3,758,445

 

 

 

2,543,800

 

 

 

 

 

11,794,730

 

 

 

10,578,000

 

 

 

 

Average physical occupancy (4)

 

 

95.5

%

 

 

95.8

%

 

 

 

 

 

92.5

%

 

 

88.9

%

 

 

 

 

94.5

%

 

 

94.6

%

 

 

 

Annualized rent per occupied square foot (5)

 

$

18.47

 

 

$

16.02

 

 

 

 

 

N/M

 

 

N/M

 

 

 

 

$

18.09

 

 

$

15.76

 

 

 

 

N/M Not meaningful

(1)

 

Revenue includes rental revenue, certain ancillary revenue, administrative and late fees, and excludes Tenant Protection Program revenue.

(2)

 

Property operating expenses excludes corporate general and administrative expenses, interest expense, depreciation, amortization expense, and acquisition expenses.

(3)

 

Of the total rentable square feet, parking represented approximately 1,016,000 square feet and 937,000 square feet as of June 30, 2022 and 2021, respectively. On a same-store basis, for the same periods, parking represented approximately 680,000 square feet.

(4)

 

Determined by dividing the sum of the month-end occupied square feet for the applicable group of facilities for each applicable period by the sum of their month-end rentable square feet for the period.

(5)

 

Determined by dividing the aggregate realized rental income for each applicable period by the aggregate of the month-end occupied square feet for the period. Properties are included in the respective calculations in their first full month of operations, as appropriate. SmartStop has excluded the realized rental revenue and occupied square feet related to parking herein for the purpose of calculating annualized rent per occupied square foot.

(6)

 

Included in the non same-store data is a self storage facility consisting of approximately 84,000 square feet owned by SST VI OP, which was consolidated by SmartStop from March 10, 2021 until May 1, 2021.

SmartStop's same-store revenue increased by approximately $4.3 million, or approximately 14.1%, for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 due to higher annualized rent per occupied square foot, partially offset by a slight decrease in average occupancy.

The following table presents a reconciliation of net income (loss) as presented on SmartStop's consolidated statements of operations to net operating income, as stated above, for the periods indicated:

 

 

For the Three Months Ended
June 30,

 

 

 

2022

 

 

2021

 

Net income (loss)

 

$

14,013,122

 

 

$

(1,310,838

)

Adjusted to exclude:

 

 

 

 

 

 

Tenant Protection Program revenue(1)

 

 

(1,836,707

)

 

 

(1,712,671

)

Managed REIT Platform revenue

 

 

(2,013,134

)

 

 

(1,058,291

)

Managed REIT Platform expenses

 

 

617,846

 

 

 

316,142

 

General and administrative

 

 

7,946,583

 

 

 

6,811,313

 

Depreciation

 

 

11,826,106

 

 

 

10,742,801

 

Intangible amortization expense

 

 

4,471,973

 

 

 

3,653,681

 

Acquisition expenses

 

 

285,097

 

 

 

30,448

 

Contingent earnout adjustment

 

 

800,000

 

 

 

400,000

 

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

 

 

2,049,682

 

 

 

?

 

Gain on equity interests upon acquisition

 

 

(16,101,237

)

 

 

?

 

Gain on sale of real estate

 

 

?

 

 

 

(178,631

)

Interest expense

 

 

8,852,586

 

 

 

8,416,349

 

Net loss on extinguishment of debt

 

 

2,393,475

 

 

 

?

 

Other, net

 

 

(209,135

)

 

 

(171,203

)

Total net operating income

 

$

33,096,257

 

 

$

25,939,100

 

(1)

 

Approximately $1.4 million of Tenant Protection Program revenue was earned at same-store facilities during three months ended June 30, 2022, with the remaining approximately $0.5 million earned at non same-store facilities.

Same-Store Facility Results - Six Months Ended June 30, 2022 and 2021

The following table sets forth operating data for SmartStop's same-store facilities (those properties included in the consolidated results of operations since January 1, 2021, excluding three lease-up properties SmartStop owned as of January 1, 2021) for the six months ended June 30, 2022 and 2021. SmartStop considers the following data to be meaningful as this allows for the comparison of results without the effects of acquisition, lease up, or development activity.

 

 

Same-Store Facilities

 

 

Non Same-Store Facilities

 

Total

 

 

 

2022

 

 

2021

 

 

%
Change

 

 

2022

 

 

2021(6)

 

 

%
Change

 

2022

 

 

2021

 

 

%
Change

 

Revenue (1)

 

$

68,018,946

 

 

$

58,552,193

 

 

 

16.2

%

 

$

21,991,236

 

 

$

9,590,980

 

 

N/M

 

$

90,010,182

 

 

$

68,143,173

 

 

 

32.1

%

Property operating expenses (2)

 

 

19,310,992

 

 

 

18,906,251

 

 

 

2.1

%

 

 

7,431,564

 

 

 

3,916,999

 

 

N/M

 

 

26,742,556

 

 

 

22,823,250

 

 

 

17.2

%

Net operating income

 

$

48,707,954

 

 

$

39,645,942

 

 

 

22.9

%

 

$

14,559,672

 

 

$

5,673,981

 

 

N/M

 

$

63,267,626

 

 

$

45,319,923

 

 

 

39.6

%

Number of facilities

 

 

109

 

 

 

109

 

 

 

 

 

 

44

 

 

 

30

 

 

 

 

 

153

 

 

 

139

 

 

 

 

Rentable square feet (3)

 

 

8,036,285

 

 

 

8,034,200

 

 

 

 

 

 

3,758,445

 

 

 

2,543,800

 

 

 

 

 

11,794,730

 

 

 

10,578,000

 

 

 

 

Average physical occupancy (4)

 

 

95.3

%

 

 

94.5

%

 

 

 

 

 

92.2

%

 

 

90.1

%

 

 

 

 

94.3

%

 

 

93.5

%

 

 

 

Annualized rent per occupied square foot (5)

 

$

18.12

 

 

$

15.65

 

 

 

 

 

N/M

 

 

N/M

 

 

 

 

$

17.78

 

 

$

15.46

 

 

 

 

N/M Not meaningful

(1)

 

Revenue includes rental revenue, certain ancillary revenue, administrative and late fees, and excludes Tenant Protection Program revenue.

(2)

 

Property operating expenses excludes corporate general and administrative expenses, interest expense, depreciation, amortization expense, and acquisition expenses.

(3)

 

Of the total rentable square feet, parking represented approximately 1,016,000 square feet and 937,000 square feet as of June 30, 2022 and 2021, respectively. On a same-store basis, for the same periods, parking represented approximately 680,000 square feet.

(4)

 

Determined by dividing the sum of the month-end occupied square feet for the applicable group of facilities for each applicable period by the sum of their month-end rentable square feet for the period.

(5)

 

Determined by dividing the aggregate realized rental income for each applicable period by the aggregate of the month-end occupied square feet for the period. Properties are included in the respective calculations in their first full month of operations, as appropriate. SmartStop has excluded the realized rental revenue and occupied square feet related to parking herein for the purpose of calculating annualized rent per occupied square foot.

(6)

 

Included in the non same-store data is a self storage facility consisting of approximately 84,000 square feet owned by SST VI OP, which was consolidated by SmartStop from March 10, 2021 until May 1, 2021.

SmartStop's same-store revenue increased by approximately $9.5 million, or approximately 16.2%, for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to higher annualized rent per occupied square foot.

The following table presents a reconciliation of net income (loss) as presented on SmartStop's consolidated statements of operations to net operating income, as stated above, for the periods indicated:

 

 

For the Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

Net income (loss)

 

$

17,282,581

 

 

$

(13,614,304

)

Adjusted to exclude:

 

 

 

 

 

 

Tenant Protection Program revenue(1)

 

 

(3,591,205

)

 

 

(3,049,439

)

Managed REIT Platform revenue

 

 

(3,822,230

)

 

 

(3,346,031

)

Managed REIT Platform expenses

 

 

1,007,111

 

 

 

636,032

 

General and administrative

 

 

13,784,230

 

 

 

11,564,302

 

Depreciation

 

 

22,934,092

 

 

 

19,286,728

 

Intangible amortization expense

 

 

8,372,857

 

 

 

4,913,228

 

Acquisition expenses

 

 

702,871

 

 

 

336,098

 

Contingent earnout adjustment

 

 

1,313,821

 

 

 

2,519,744

 

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

 

 

2,049,682

 

 

 

8,389,573

 

Gain on sale of real estate

 

 

?

 

 

 

(178,631

)

Interest expense

 

 

16,428,370

 

 

 

17,032,420

 

Net loss on extinguishment of debt

 

 

2,393,475

 

 

 

2,444,788

 

Gain on equity interests upon acquisition

 

 

(16,101,237

)

 

 

?

 

Other, net

 

 

513,208

 

 

 

(1,614,585

)

Total net operating income

 

$

63,267,626

 

 

$

45,319,923

 

(1)

 

Approximately $2.7 million of Tenant Protection Program revenue was earned at same-store facilities during six months ended June 30, 2022, with the remaining approximately $0.9 million earned at non same-store facilities.

ADDITIONAL INFORMATION REGARDING NOI, FFO, and FFO, as adjusted

Net Operating Income ("NOI")

NOI is a non-GAAP measure that SmartStop defines as net income (loss), computed in accordance with GAAP, generated from properties, excluding tenant protection plan revenue, before corporate general and administrative expenses, asset management fees, interest expense, depreciation, amortization, acquisition expenses and other non-property related expenses. SmartStop believes that NOI is useful for investors as it provides a measure of the operating performance of its operating assets because NOI excludes certain items that are not associated with the ongoing operation of the properties. Additionally, SmartStop believes that NOI is a widely accepted measure of comparative operating performance in the real estate community. However, SmartStop's use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount.

Funds from Operations ("FFO") and FFO, as Adjusted

Funds from Operations

Funds from operations ("FFO"), is a non-GAAP financial metric promulgated by NAREIT that SmartStop believes is an appropriate supplemental measure to reflect operating performance. SmartStop defines FFO consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, or the White Paper. The White Paper defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property and real estate related asset impairment write downs, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Additionally, gains and losses from change in control are excluded from the determination of FFO. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. SmartStop's FFO calculation complies with NAREIT's policy described above.

FFO, as Adjusted

SmartStop uses FFO, as adjusted, as an additional non-GAAP financial measure to evaluate their operating performance. FFO, as adjusted, provides investors with supplemental performance information that is consistent with the performance models and analysis used by management. In addition, FFO, as adjusted, is a measure used among SmartStop's peer group, which includes publicly traded REITs. Further, SmartStop believes FFO, as adjusted, is useful in comparing the sustainability of their operating performance with the sustainability of the operating performance of other real estate companies.

In determining FFO, as adjusted, SmartStop makes further adjustments to the NAREIT computation of FFO to exclude the effects of non-real estate related asset impairments and intangible amortization, acquisition related costs, other write-offs incurred in connection with acquisitions, contingent earnout expenses, accretion of fair value of debt adjustments, gains or losses from extinguishment of debt, adjustments of deferred tax liabilities, realized and unrealized gains/losses on foreign exchange transactions, and gains/losses on foreign exchange and interest rate derivatives not designated for hedge accounting, which SmartStop believes are not indicative of their overall long-term operating performance. SmartStop excludes these items from GAAP net income (loss) to arrive at FFO, as adjusted, as they are not the primary drivers in their decision-making process and excluding these items provides investors a view of their continuing operating portfolio performance over time, which in any respective period may experience fluctuations in such acquisition, merger or other similar activities that are not of a long-term operating performance nature. FFO, as adjusted, also reflects adjustments for unconsolidated partnerships and jointly owned investments. SmartStop uses FFO, as adjusted, as one measure of their operating performance when they formulate corporate goals and evaluate the effectiveness of their strategies.

Presentation of FFO and FFO, as adjusted, is intended to provide useful information to investors as they compare the operating performance of different REITs. However, not all REITs calculate FFO and FFO, as adjusted, the same way, so comparisons with other REITs may not be meaningful. Furthermore, FFO and FFO, as adjusted, are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) as an indication of our performance, as an alternative to cash flows from operations as an indication of SmartStop's liquidity or indicative of funds available to fund their cash needs including their ability to make distributions to their stockholders. FFO and FFO, as adjusted, should be reviewed in conjunction with other measurements as an indication of our performance.

Neither the SEC, NAREIT, nor any other regulatory body has passed judgment on the acceptability of the adjustments that SmartStop uses to calculate FFO or FFO, as adjusted. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the publicly registered, non-traded REIT industry and SmartStop would have to adjust its calculation and characterization of FFO or FFO, as adjusted.

This press release, our Form 10-K for the year ended December 31, 2021, our form 10-Q for the quarter ended June 30, 2022, a financial supplement, and additional information about SmartStop are available on our website, investors.smartstopselfstorage.com.

About SmartStop Self Storage REIT, Inc. ("SmartStop"):

SmartStop is a self-managed REIT with a fully integrated operations team of approximately 450 self storage professionals focused on growing the SmartStop® Self Storage brand. SmartStop, through its indirect subsidiary SmartStop REIT Advisors, LLC, also sponsors other self storage programs. As of August 11th, 2022, SmartStop has an owned or managed portfolio of 174 properties in 22 states and Ontario, Canada, comprising approximately 119,200 units and 13.5 million rentable square feet. SmartStop and its affiliates own or manage 19 operating self storage properties in the Greater Toronto Area, which total approximately 16,200 units and 1.6 million rentable square feet. Additional information regarding SmartStop is available at investors.smartstopselfstorage.com.

Forward-Looking Statements

Certain of the matters discussed in this earnings release, other than historical facts, constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as "may," "will," "expect," "intend," "anticipate," "estimate," "believe," "continue," or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements and any such forward-looking statements are qualified in their entirety by reference to the following cautionary statements. There are several factors which could cause actual plans and results to differ materially from those expressed or implied in forward-looking statements, including, without limitation, the following: (i) risks related to disruption of management's attention from SmartStop's ongoing business operations due to recent mergers, or other business matters; (ii) significant transaction costs, including financing costs, and unknown liabilities; (iii) failure to realize the expected benefits and synergies of recent mergers in the expected timeframes or at all; (iv) costs or difficulties related to the integration of acquired self storage facilities and operations, including facilities acquired through recent mergers; (v) changes in the political and economic climate, economic conditions and fiscal imbalances in the United States, and other major developments, including wars, natural disasters, epidemics and pandemics, including the outbreak of novel coronavirus (COVID-19), military actions, and terrorist attacks; (vi) changes in tax and other laws and regulations; or (vii) difficulties in SmartStop's ability to attract and retain qualified personnel and management.

Actual results may differ materially from those indicated by such forward-looking statements. In addition, the forward-looking statements represent SmartStop's views as of the date on which such statements were made. SmartStop anticipates that subsequent events and developments may cause its views to change. These forward-looking statements should not be relied upon as representing SmartStop's views as of any date subsequent to the date hereof.

Additional factors that may affect the business or financial results of SmartStop are described in the risk factors included in SmartStop's filings with the SEC, including SmartStop's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which factors are incorporated herein by reference, all of which are filed with the SEC and available at www.sec.gov. All forward-looking statements speak only as of the date hereof and are based on current expectations and involve a number of assumptions, risks and uncertainties that could cause the actual results to differ materially from such forward-looking statements. SmartStop expressly disclaims a duty to provide updates to forward-looking statements, whether as a result of new information, future events or other occurrences.


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