SmartStop Self Storage REIT, Inc. [STSFF] Filings

10-Q 1 ck0001585389-20240630.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-55617

SmartStop Self Storage REIT, Inc.

(Exact name of Registrant as specified in its charter)

    Maryland

    46-1722812

    (State or other jurisdiction of
incorporation or organization)

    (IRS Employer
Identification No.)

10 Terrace Road

Ladera Ranch, California 92694

(Address of principal executive offices)

(877) 327-3485

(Registrant’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
None	None	None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 9, 2024, there were 88,257,265 outstanding shares of Class A common stock and 8,118,881 outstanding shares of Class T common stock of the registrant.

FORM 10-Q

SMARTSTOP SELF STORAGE REIT, INC.

TABLE OF CONTENTS


		Page No.
	Cautionary Note Regarding Forward-Looking Statements	3

PART I.	FINANCIAL INFORMATION	5

Item 1.	Consolidated Financial Statements:	5
	Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023	6
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	7
	Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	8
	Consolidated Statements of Equity and Temporary Equity for the Three Months Ended June 30, 2024 and 2023 (unaudited)	9
	Consolidated Statements of Equity and Temporary Equity for the Six Months Ended June 30, 2024 and 2023 (unaudited)	11
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (unaudited)	13
	Notes to Consolidated Financial Statements (unaudited)	15
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	62
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	82
Item 4.	Controls and Procedures	83

PART II.	OTHER INFORMATION	84

Item 1.	Legal Proceedings	84
Item 1A.	Risk Factors	84
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	84
Item 3.	Defaults Upon Senior Securities	84
Item 4.	Mine Safety Disclosures	84
Item 5.	Other Information	84
Item 6.	Exhibits	84

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-Q of SmartStop Self Storage REIT, Inc., other than historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “seek,” “continue,” or other similar words.

Any such forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which we operate, and beliefs of, and assumptions made by, our management and involve uncertainties that could significantly affect our financial results. Such statements include, but are not limited to: (i) statements about our plans, strategies, initiatives, and prospects; and (ii) statements about our future results of operations, capital expenditures, and liquidity. Such statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those projected or anticipated, including, without limitation:

•

We have paid, and may continue to pay, distributions from sources other than cash flow from operations; therefore, we will have fewer funds available for the acquisition of properties, and our stockholders’ overall return may be reduced.

•

There is currently no public trading market for our shares and there may never be one; therefore, it will be difficult for our stockholders to sell their shares. Our charter does not require us to pursue a liquidity transaction at any time.

•

Our share redemption program is partially suspended, and even if stockholders are able to have their shares redeemed, our stockholders may not be able to recover the amount of their investment in our shares.

•

We have issued Series A Convertible Preferred Stock that ranks senior to all common stock and grants the holder superior rights compared to common stockholders, which may have the effect of diluting our stockholders’ interests in us and discouraging a takeover or other similar transaction.

•

We may only calculate the estimated value per share for our shares annually and, therefore, our stockholders may not be able to determine the estimated net asset value of their shares on an ongoing basis.

•

If we fail to maintain an effective system of internal control over financial reporting and disclosure controls, we may not be able to accurately and timely report our financial results.

•

Our future results may suffer as a result of the effect of recent affiliated mergers, acquisitions and other strategic transactions.

•

Certain of our officers and key personnel will face competing demands relating to their time and will face conflicts of interest related to the positions they hold with affiliated entities, which could cause our business to suffer.

•

Revenue and earnings from the Managed REIT Platform are uncertain.

•

A subsidiary of ours is the sponsor of the Managed REITs and may sponsor additional future programs. As a result, we could be subject to any litigation that may arise by investors in those entities or the respective operations of those entities.

•

Because we are focused on the self storage industry, our rental revenues will be significantly influenced by demand for self storage space generally, and a decrease in such demand would likely have a greater adverse effect on our rental revenues than if we owned a more diversified real estate portfolio.

•

A high concentration of our properties in a particular geographic area would magnify the effects of downturns in that geographic area.

•

Property taxes may increase, which would adversely affect our net operating income and cash available for distributions.

•

If we suffer losses that are not covered by insurance or that are in excess of insurance coverage, we could lose invested capital and anticipated profits.

•

Changes in the Canadian Dollar/USD exchange rate could have a material adverse effect on our operating results and value of the investment of our stockholders.

•

We have broad authority to incur debt, and high debt levels could hinder our ability to continue to pay distributions at the current rate and could decrease the value of our stockholders’ investments.

•

We have incurred and intend to continue to incur, mortgage indebtedness and other borrowings, which may increase our business risks.

•

If we or the other parties to our loans or secured notes payable, as applicable, breach covenants thereunder, such loan or loans or secured notes payable could be deemed in default, which could accelerate our repayment date and materially adversely affect the value of our stockholders’ investment in us.

•

Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to continue to pay distributions at the current rate to our stockholders.

•

Failure to continue to qualify as a REIT would adversely affect our operations and our ability to continue to pay distributions at our current level as we will incur additional tax liabilities.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the U.S. Securities and Exchange Commission (the “SEC”) and are not intended to be a guarantee of our performance in future periods. We cannot guarantee the accuracy of any such forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

For further information regarding risks and uncertainties associated with our business, and important factors that could cause our actual results to vary materially from those expressed or implied in such forward-looking statements, please refer to the factors listed and described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Risk Factors” sections of the documents we file from time to time with the SEC, including, but not limited to, our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC, as supplemented by the risk factors included in Part II, Item 1A of this Form 10-Q, copies of which may be obtained from our website at www.investors.smartstopselfstorage.com.

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The information furnished in the accompanying unaudited consolidated balance sheets and related consolidated statements of operations, comprehensive income (loss), equity and temporary equity, and cash flows reflects all adjustments (consisting of normal and recurring adjustments) that are, in management’s opinion, necessary for a fair and consistent presentation of the aforementioned consolidated financial statements.

The accompanying consolidated financial statements should be read in conjunction with the notes to our consolidated financial statements included in this report on Form 10-Q. The accompanying consolidated financial statements should also be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023. Our results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the operating results expected for the full year.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)


	June 30, 2024 (Unaudited)			December 31, 2023
ASSETS
Real estate facilities:
Land	$	432,381		$	430,869
Buildings		1,404,894			1,401,981
Site improvements		93,105			91,896
		1,930,380			1,924,746
Accumulated depreciation		(281,485	)		(255,844	)
		1,648,895			1,668,902
Construction in process		8,968			5,977
Real estate facilities, net		1,657,863			1,674,879
Cash and cash equivalents		34,677			45,079
Restricted cash		7,368			8,348
Investments in unconsolidated real estate ventures (Note 4)		36,442			35,832
Investments in and advances to Managed REITs		39,837			34,391
Deferred tax assets		4,568			4,450
Other assets, net		17,698			21,701
Intangible assets, net of accumulated amortization		1,635			1,170
Trademarks, net of accumulated amortization		15,700			15,771
Goodwill		53,643			53,643
Debt issuance costs, net of accumulated amortization		8,154			377
Total assets	$	1,877,585		$	1,895,641
LIABILITIES, TEMPORARY EQUITY, AND EQUITY
Debt, net	$	1,106,614		$	1,087,401
Accounts payable and accrued liabilities		39,196			28,978
Due to affiliates		410			416
Distributions payable		8,736			9,156
Deferred tax liabilities		6,084			6,194
Total liabilities		1,161,040			1,132,145
Commitments and contingencies (Note 12)
Redeemable common stock		65,371			71,277
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, 2024 and December 31, 2023, respectively, with aggregate liquidation preferences of $203,108 and $203,151 at June 30, 2024 and December 31, 2023, respectively		196,356			196,356
Equity:
SmartStop Self Storage REIT, Inc.:
Class A common stock, $0.001 par value; 350,000,000 shares authorized; 88,696,458 and 88,761,135 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		89			89
Class T common stock, $0.001 par value; 350,000,000 shares authorized; 8,124,618 and 8,113,827 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		8			8
Additional paid-in capital		894,870			894,857
Distributions		(353,086	)		(324,191	)
Accumulated deficit		(175,739	)		(167,270	)
Accumulated other comprehensive income		(360	)		847
Total SmartStop Self Storage REIT, Inc. equity		365,782			404,340
Noncontrolling interests in our Operating Partnership		89,010			91,488
Other noncontrolling interests		26			35
Total noncontrolling interests		89,036			91,523
Total equity		454,818			495,863
Total liabilities, temporary equity and equity	$	1,877,585		$	1,895,641

See notes to consolidated financial statements.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Amounts in thousands, except share and per share data)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Revenues:
Self storage rental revenue	$	52,660		$	51,678		$	103,129		$	102,955
Ancillary operating revenue		2,324			2,180			4,516			4,371
Managed REIT Platform revenue		2,670			4,320			5,405			6,597
Reimbursable costs from Managed REITs		1,509			1,412			3,155			2,803
Total revenues		59,163			59,590			116,205			116,726
Operating expenses:
Property operating expenses		17,695			16,483			35,085			33,016
Managed REIT Platform expenses		648			681			1,500			1,231
Reimbursable costs from Managed REITs		1,509			1,412			3,155			2,803
General and administrative		7,813			7,182			15,240			13,719
Depreciation		13,636			13,376			27,221			26,648
Intangible amortization expense		173			1,836			245			3,756
Acquisition expenses		12			11			82			42
Total operating expenses		41,486			40,981			82,528			81,215

Income from operations		17,677			18,609			33,677			35,511
Other income (expense):
Equity in earnings (losses) from investments in JV Properties		(359	)		(536	)		(688	)		(941	)
Equity in earnings (losses) from investments in Managed REITs		(257	)		(216	)		(709	)		(450	)
Other, net		(125	)		1,193			384			1,943
Interest expense		(17,294	)		(14,905	)		(33,848	)		(29,608	)
Loss on debt extinguishment		—			—			(471	)		—
Income tax (expense) benefit		(347	)		134			(689	)		(143	)
Net (loss) income		(705	)		4,279			(2,344	)		6,312
Net (income) loss attributable to noncontrolling interests		(8	)		(770	)		91			(1,110	)
Less: Distributions to preferred stockholders		(3,108	)		(3,116	)		(6,216	)		(6,199	)
Net (loss) income attributable to SmartStop Self Storage REIT, Inc. common stockholders	$	(3,821	)	$	393		$	(8,469	)	$	(997	)
Net (loss) income per Class A & Class T share – basic	$	(0.04	)	$	0.00		$	(0.09	)	$	(0.01	)
Net (loss) income per Class A & Class T share – diluted	$	(0.04	)	$	0.00		$	(0.09	)	$	(0.01	)
Weighted average Class A shares outstanding – basic		88,652,922			88,717,078			88,683,783			88,726,076
Weighted average Class T shares outstanding – basic		8,122,802			8,097,928			8,120,031			8,091,773
Weighted average Class A shares outstanding – diluted		88,652,922			89,153,907			88,683,783			88,726,076
Weighted average Class T shares outstanding – diluted		8,122,802			8,097,928			8,120,031			8,091,773

See notes to consolidated financial statements.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(Amounts in thousands)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Net income (loss)	$	(705	)	$	4,279		$	(2,344	)	$	6,312
Other comprehensive income (loss):
Foreign currency translation adjustment		(598	)		1,184			(1,919	)		1,437
Foreign currency hedge contract gains (losses)		504			(963	)		1,860			(1,054	)
Interest rate swap and cap contract gains (losses)		(808	)		550			(1,314	)		(943	)
Other comprehensive income (loss)		(902	)		771			(1,373	)		(560	)
Comprehensive income (loss)		(1,607	)		5,050			(3,717	)		5,752
Comprehensive income attributable to noncontrolling interests:
Comprehensive (income) loss attributable to noncontrolling interests		100			(860	)		257			(1,046	)
Comprehensive income (loss) attributable to SmartStop Self Storage REIT, Inc. stockholders	$	(1,507	)	$	4,190		$	(3,460	)	$	4,706

See notes to consolidated financial statements.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY AND TEMPORARY EQUITY

(Unaudited)

(Amounts in thousands, except share and per share data)


	Common Stock
	Class A						Class T
	Number of Shares			Common Stock Par Value			Number of Shares			Common Stock Par Value			Additional Paid-in Capital			Distributions			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)		Total SmartStop Self Storage REIT, Inc. Equity			Noncontrolling Interests			Total Equity			Preferred Stock		Redeemable Common Stock
Balance as of March 31, 2024		88,869,543		$	88			8,127,815		$	8		$	894,796		$	(338,634	)	$	(171,918	)	$	433	$	384,772		$	90,094		$	474,866		$	196,356	$	68,312
Offering costs		—			—			—			—			(80	)		—			—			—		(80	)		—			(80	)		—		—
Changes to redeemable common stock		—			—			—			—			(5,682	)		—			—			—		(5,682	)		—			(5,682	)		—		5,682
Redemptions of common stock		(511,962	)		(1	)		(41,441	)		(1	)		—			—			—			—		(1	)		—			(1	)		—		(8,623	)
Issuance of restricted stock, net of forfeitures		4,562			1			—			—			—			—			—			—		1			—			1			—		—
Distributions ($0.15 per share)		—			—			—			—			—			(14,452	)		—			—		(14,452	)		—			(14,452	)		—		—
Distributions to noncontrolling interests in our Operating Partnership		—			—			—			—			—			—			—			—		—			(2,117	)

SmartStop Self Storage REIT, Inc. [STSFF] Filings

SmartStop Self Storage REIT, Inc. [SSST] Filings