SmartStop Self Storage REIT, Inc. Reports Fourth Quarter 2023 Results

LADERA RANCH, Calif.–(BUSINESS WIRE)–SmartStop Self Storage REIT, Inc. (“SmartStop” or “the Company”), a self-managed and fully-integrated self storage company, announced its overall results for the three months and 12 months ended December 31, 2023.

“Coming off of the strongest period in the history of the self storage industry in 2021 and 2022, SmartStop posted a solid year in 2023,” said H. Michael Schwartz, Chairman and Chief Executive Officer of SmartStop. “Operationally, we posted same-store revenue growth above the long-term average, while leasing up the majority of our non-stabilized properties, ending the year at 91.6% occupancy for our entire wholly-owned portfolio. We were very disciplined with our capital on the acquisition front, acquiring only one property on-balance sheet during the year. However, our Managed REIT Platform continues to provide us with attractive returns, as assets under management for our two Managed REITs increased by approximately $350 million over the course of 2023. We were also very proactive in positioning our debt stack for optimal growth, while protecting against interest rate and foreign exchange risks. Most notably, we recast our multi-currency credit facility post quarter-end, a transaction that was 1.5x over-subscribed. We also took advantage of less volatile and less expensive Canadian debt markets, recently executing three fixed-rate, CAD denominated term loans, providing both a natural foreign currency hedge and interest rate protection. These transactions along with our solid year of results in 2023 are a testament to SmartStop as a company and our tremendous team, as well as the strength and value of our best-in-class North American self storage portfolio.”

Three Months Ended December 31, 2023 Financial Highlights:

• Net loss attributable to common stockholders was approximately $1.1 million. This represents an increase in the Company’s earnings of approximately $0.2 million when compared to the same period in 2022. Net loss per Class A and Class T shares (diluted) was $0.01, which was unchanged when compared to the same period in 2022.
• Total self storage-related revenues were approximately $53.2 million, a decrease of approximately $0.1 million when compared to the same period in 2022.
• FFO, as adjusted (attributable to common stockholders and Operating Partnership (“OP”) unit holders), was approximately $13.3 million, a decrease of approximately $2.5 million when compared to the same period in 2022.
• FFO, as adjusted per share and OP unit outstanding – diluted was $0.12, a decrease of $0.02 when compared to the same period in 2022.
• Same-store revenues, expenses and net operating income (“NOI”) decreased by 0.3%, 0.7% and 0.1%, respectively, compared to the same period in 2022.
• Same-store average physical occupancy decreased by 0.9% to 92.4% compared to the same period in 2022.
• Same-store annualized rent per occupied square foot was approximately $19.94, an increase of approximately $0.08 when compared to the same period in 2022.

12 Months Ended December 31, 2023 Financial Highlights:

• Net loss attributable to common stockholders was approximately $2.7 million. This represents a decrease in the Company’s earnings of approximately $9.1 million when compared to the same period in 2022. Net loss per Class A and Class T shares (diluted) was $0.03, a decrease in per share earnings of $0.10 when compared to the same period in 2022.
• Total self storage-related revenues were approximately $215.3 million, an increase of approximately $15.1 million when compared to the same period in 2022.
• FFO, as adjusted (attributable to common stockholders and Operating Partnership (“OP”) unit holders), was approximately $57.8 million, a decrease of approximately $8.5 million when compared to the same period in 2022.
• FFO, as adjusted per share and OP unit outstanding – diluted was $0.52, a decrease of $0.12 when compared to the same period in 2022.
• Same-store revenues, expenses and net operating income (“NOI”) increased by 4.1%, 6.6% and 3.1%, respectively, compared to the same period in 2022.
• Same-store average physical occupancy decreased by 1.7% to 92.9% compared to the same period in 2022.
• Same-store annualized rent per occupied square foot was approximately $20.04, an increase of approximately $1.17 when compared to the same period in 2022.

Facility Openings

During the quarter, the Company opened a 78,000 square foot storage facility in San Gabriel, California. The newly converted industrial property is a three-story building with approximately 790 units, drive-up access, climate control, and video surveillance.

Subsequent to quarter end, the Company opened an 87,700 square foot, 900 unit storage facility in the Town of Whitby in the Greater Toronto Area of Ontario. The facility was developed in partnership with SmartCentres (TSX: SRU.UN). This is SmartStop’s 32^nd owned or managed operating location in the Greater Toronto Area and 34^th in Canada.

Capital Market Activities

In November, the Company entered into a term loan (the “2028 Canadian Term Loan”) with affiliates of QuadReal Finance LP (“QuadReal”). The 2028 Canadian Term Loan has aggregate borrowings of $110 million CAD and is secured by eight properties that were previously included in the borrowing base of the Credit Facility. The net proceeds of approximately $110 million CAD from the 2028 Canadian Term Loan were used to pay down the revolving portion of our credit facility. The 2028 Canadian Term Loan has a maturity date of December 1, 2028, and carries a fixed interest rate for the term of the loan of 6.41%.

In November, the Company closed on a $70 million CAD term loan (the “RBC JV Term Loan”) with Royal Bank of Canada pursuant to which five of the Company’s joint venture subsidiaries that each own 50% of a Joint Venture property are borrowers. The RBC JV Term Loan is secured by first mortgages on five of the JV Properties which were previously encumbered by other debt. The maturity date of the RBC JV Term Loan is November 2, 2025, which may be extended by one additional year at the discretion of the lender. Interest is a fixed annual rate of 6.21%.

Subsequent to quarter end, the Company entered into an amended and restated multi-currency revolving credit facility (the “2024 Credit Facility”) of up to $650 million with a syndicate of banks led by KeyBank National Association, Bank of Montreal, JPMorgan Chase Bank, N.A., M&T Bank, Truist Bank and Wells Fargo Bank, N.A. The 2024 Credit Facility replaced the Company’s Credit Facility that it entered into in March of 2021, and the Company immediately drew down an aggregate amount of $576 million, which was used primarily to pay off the amounts outstanding under the Credit Facility. The 2024 Credit Facility has an accordion feature permitting expansion of the 2024 Credit Facility up to $1.5 billion, subject to certain conditions. The 2024 Credit Facility has a three-year term with a maturity date of February 22, 2027 and a one-year extension option. Borrowings under the 2024 Credit Facility may be in either U.S. dollars or Canadian dollars at SmartStop’s election. Initial advances under the 2024 Credit Facility bear interest at a consistent pricing grid as the previous revolving credit facility. The 2024 Credit Facility is secured by a pledge of equity interests in certain of SmartStop’s property owning subsidiaries. SmartStop can elect to release the pledges upon the achievement of certain financial conditions, making the 2024 Credit Facility fully unsecured and resulting in a reduction in the applicable credit spread, among other changes.

Subsequent to quarter end, the Company entered into a term loan (the “2027 NBC Loan”) with National Bank of Canada (“NBC”) as administrative agent, and certain other lenders. The 2027 NBC Loan has aggregate borrowings of $75 million CAD and is secured by five Canadian properties, four of which were previously included in the borrowing base of the 2024 Credit Facility. The net proceeds from the 2027 NBC Loan were used to pay down the 2024 Credit Facility by approximately $55.1 million USD. The 2027 NBC Loan has a maturity date of March 7, 2027, and carries a floating interest rate that has been fixed using an interest rate swap to a rate of 6.4%.

Managed REIT Platform Update

SmartStop, through an indirect subsidiary, serves as the sponsor of Strategic Storage Growth Trust III, Inc. (“SSGT III”) and Strategic Storage Trust VI, Inc. (“SST VI” and together with SSGT III, the “Managed REITs”). SmartStop receives asset management fees, property management fees, acquisition fees, and other fees and also receives substantially all of the tenant protection program revenue earned by the Managed REITs, which had a combined portfolio of 31 operating properties and approximately 24,500 units and 2.8 million rentable square feet at quarter end. During the quarter, assets under management for the Managed REITs increased by $28.7 million to approximately $729.4 million. SmartStop also manages one additional property, not owned by the Managed REITs.

Additionally, SmartStop has made investments in the Managed REITs in the form of mezzanine loans, notes, subordinated limited partnership interests, and preferred limited partnership interests in the operating partnerships of the respective Managed REITs. During the quarter, SSGT III paid down $1.0 million on the SSGT III Mezzanine Loan.

Declared Distributions

On January 26, 2024, our board of directors declared a distribution rate for the month of February 2024 of approximately $0.0475 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 February 29, 2024. Such distributions payable to each stockholder of record will be paid the following month.

On February 28, 2024, our board of directors declared a distribution rate for the month of March 2024 of approximately $0.0508 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 March 31, 2024. Such distributions payable to each stockholder of record will be paid the following month.

⁽¹⁾ This gain relates to the mark up in fair value of our preexisting equity interests in SSGT II as a result of our acquisition of control in the SSGT II Merger.

⁽²⁾ This represents the portion of the above stated adjustments in the calculations of FFO and FFO, as adjusted, that are attributable to our noncontrolling interests in our Operating Partnership.

⁽³⁾ These items represent the amortization, accretion, or adjustment of intangible assets or deferred tax assets and liabilities.

⁽⁴⁾ 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 our capitalization policy.

⁽⁵⁾ Such casualty losses relate to Hurricane Ian, which occurred in September 2022.

⁽⁶⁾ 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.

⁽⁷⁾ The net loss associated with the extinguishment of debt includes prepayment penalties, defeasance costs, the write-off of unamortized deferred financing fees, and other fees incurred.

⁽⁸⁾ This represents the mark-to-market adjustment for our 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 our foreign equity investments not classified as long term.

⁽⁹⁾ Such costs relate to our filing of an S-11 registration statement and our pursuit of a potential offering of our common stock. As this item is non-recurring and not a primary driver in our 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.

⁽¹⁰⁾ Pursuant to the Sponsor Funding Agreement, SmartStop funds certain costs of SST VI’s share sales, and in return receives Series C Units in SST VI’s OP. The excess of the funding over the value of the Series C Units received is accounted for as a reduction of revenue from SST VI over the remaining estimated term of the relationship with SST VI. FFO is adjusted for its effect to arrive at FFO, as adjusted, as a means of determining a comparable sustainable operating performance metric.

Contacts

David Corak
VP of Corporate Finance

SmartStop Self Storage REIT, Inc.

investors.smartstopselfstorage.com
[email protected]

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