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What changed in SmartStop Self Storage REIT, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SmartStop Self Storage REIT, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+377 added−358 removedSource: 10-K (2024-03-18) vs 10-K (2023-03-03)

Top changes in SmartStop Self Storage REIT, Inc.'s 2023 10-K

377 paragraphs added · 358 removed · 302 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeFailure to comply with these requirements could result in the imposition of fines by governmental authorities or awards of damages to private litigants. We intend to acquire properties that are in material compliance with all such regulatory requirements.
Biggest changeOther Regulations The properties we acquire will be subject to various federal, state and local regulatory requirements, such as zoning and state and local fire and life safety requirements. Failure to comply with these requirements could result in the imposition of fines by governmental authorities or awards of damages to private litigants.
Available Information We make available on the “Information – SEC Filings” subpage of our website (www.investors.smartstopselfstorage.com) free of charge our annual reports on Form 10-K, including this report, quarterly reports on Form 10-Q, current reports on Form 8-K, ownership reports on Forms 3, 4 and 5 and any amendments to those reports as soon as practicable after we electronically file such reports with the SEC.
Available Information We make available on the “Information – SEC Filings” subpage of our website (www.investors.smartstopselfstorage.com) free of charge our annual reports on Form 10-K, including this report, quarterly 8 reports on Form 10-Q, current reports on Form 8-K, ownership reports on Forms 3, 4 and 5 and any amendments to those reports as soon as practicable after we electronically file such reports with the SEC.
Our primary business model is focused on owning and operating high quality self storage properties in high growth markets in the United States and Canada. We finance our portfolio through a diverse capital strategy which includes cash generated from operations, borrowings under our syndicated revolving line of credit, secured and unsecured debt financing, equity offerings and joint ventures.
Our primary business model is focused on owning and operating high quality self storage properties in high growth markets in the United States and Canada. We finance our portfolio through a diverse capital strategy which includes cash generated from operations, borrowings under our syndicated revolving line of credit, secured debt financing, equity offerings and joint ventures.
For example, in connection with the Self Administration Transaction (defined below), we acquired a joint venture arrangement with SmartCentres Real Estate Investment Trust, an unaffiliated third party (“SmartCentres”), pursuant to which we and SmartCentres work together to identify primarily self storage development opportunities in certain regions in Canada.
For example, in connection with the Self Administration Transaction (as defined below), we acquired a joint venture arrangement with SmartCentres Real Estate Investment Trust, an unaffiliated third party (“SmartCentres”), pursuant to which we and SmartCentres work together to identify primarily self storage development opportunities in certain regions in Canada.
Changes in these laws and regulations, or their interpretation by agencies and courts, occur frequently. Accommodations for Persons with Disabilities We are subject to various rules, regulations and standards with respect to accommodations we must make for individuals with disabilities.
Changes in these laws and regulations, or their interpretation by agencies and courts, occur frequently. 7 Accommodations for Persons with Disabilities We are subject to various rules, regulations and standards with respect to accommodations we must make for individuals with disabilities.
On March 17, 2021, we acquired six SmartCentres joint venture properties in the SST IV Merger (defined below). On June 1, 2022, we acquired three SmartCentres joint ventures in the SSGT II Merger (defined below).
On March 17, 2021, we acquired six SmartCentres joint venture properties in the SST IV Merger (as defined below). On June 1, 2022, we acquired three SmartCentres joint ventures in the SSGT II Merger (as defined below).
(our "Operating Partnership") as issuer, entered into a note purchase agreement (the "Note Purchase Agreement"), pursuant to which we issued $150 million of 4.53% Senior Notes due April 19, 2032 (the "2032 Private Placement Notes").
(our "Operating Partnership") as issuer, entered into a note purchase agreement (the "Note Purchase Agreement"), pursuant to which we issued $150 million of Senior Notes due April 19, 2032 (the "2032 Private Placement Notes").
As of December 31, 2022, we had sold approximately 7.2 million Class A Shares and approximately 1.0 million Class T Shares for approximately $77.8 million and $11.1 million, respectively, in our DRP Offering.
As of December 31, 2023, we had sold approximately 7.2 million Class A Shares and approximately 1.0 million Class T Shares for approximately $77.8 million and $11.1 million, respectively, in our DRP Offering.
Employees and Human Capital As of December 31, 2022, we had approximately 450 employees, none of which are represented by a collective bargaining agreement. We continually assess and strive to enhance employee satisfaction and engagement. We believe our relationship with our employees is good and that we provide them with adequate flexibility to meet personal and family needs.
Employees and Human Capital As of December 31, 2023, we had approximately 500 employees, none of which are represented by a collective bargaining agreement. We continually assess and strive to enhance employee satisfaction and engagement. We believe our relationship with our employees is good and that we provide them with adequate flexibility to meet personal and family needs.
We seek to acquire under-managed facilities that are not operated by institutional operators, where we can implement our proprietary management and technology platforms to maximize net operating income. As an operating business, self storage requires a much greater focus on strategic planning and tactical operation plans.
We seek to acquire undermanaged facilities that are not operated by institutional operators, where we can implement our proprietary management and technology to maximize net operating income. As an operating business, self storage requires a much greater focus on strategic planning and tactical operation plans.
As of the merger date, the SST IV JV Properties consisted of three operating self storage properties and three parcels of land in various stages of development into self storage facilities, jointly owned with subsidiaries of SmartCentres. As of December 31, 2022, two of the development joint venture properties had been completed and had begun operations.
As of the merger date, the SST IV JV Properties consisted of three operating self storage properties and three parcels of land in various stages of development into self storage facilities, jointly owned with subsidiaries of SmartCentres. As of December 31, 2023, all of the development joint venture properties had been completed and had begun operations.
Additionally, we obtained SSGT II's rights to acquire (i) one parcel of land being developed into a self storage facility in an unconsolidated joint venture with SmartCentres, and (ii) a self storage property located in Southern California. As of December 31, 2022, one of the development joint venture properties had been completed and had begun operations.
Additionally, we obtained SSGT II's rights to acquire and subsequently closed on (i) one parcel of land being developed into a self storage facility in an unconsolidated joint venture with SmartCentres, and (ii) a self storage property located in Southern California. As of December 31, 2023, one of the development joint venture properties had been completed and had begun operations.
Subsequent to December 31, 2022, on January 12, 2023 we as 50% owner and SmartCentres as the other 50% owner of a joint venture subsidiary, acquired a parcel of land in Whitby, Ontario (the "Whitby Property"), that we and SmartCentres intend to develop into a self storage facility in the future.
On January 12, 2023 we as 50% owner and SmartCentres as the other 50% owner of a joint venture subsidiary, acquired a parcel of land in Whitby, Ontario (the "Whitby Property"), that we and SmartCentres intend to develop into a self storage facility in the future.
As a result of the Self Administration Transaction, we became self-managed and now, through our subsidiaries, serve as the sponsor of the Managed REITs. In addition, we have the internal capability to originate, structure and manage additional investment products (the “Managed REIT Platform”) which would be sponsored by SmartStop REIT Advisors, LLC (“SRA”), our indirect subsidiary.
As a result of the Self Administration Transaction, we became self-managed and now, through our subsidiaries, serve as the sponsor of the Managed REITs. In addition, we have the internal capability to originate, structure and manage additional investment products (the “Managed REIT Platform”) which would be sponsored by SRA, our indirect subsidiary.
See Note 5 – Debt, for additional information. Self Administration Transaction On June 28, 2019, we acquired the self storage advisory, asset management and property management businesses and certain joint venture interests of Strategic Asset Management I, LLC (f/k/a SmartStop Asset Management, LLC), our former sponsor (“SAM”), along with certain other assets of SAM (collectively, the “Self Administration Transaction”).
Self Administration Transaction On June 28, 2019, we acquired the self storage advisory, asset management and property management businesses and certain joint venture interests of Strategic Asset Management I, LLC (f/k/a SmartStop Asset Management, LLC), our former sponsor (“SAM”), along with certain other assets of SAM (collectively, the “Self Administration Transaction”).
On December 6, 2022, our board of directors, upon recommendation of our Nominating and Corporate Governance Committee, approved an estimated net asset value per share of our common stock of $15.21 for our Class A Shares and Class T Shares based on the estimated value of our assets less the estimated value of our liabilities, or net asset value, divided by the number of shares outstanding on a fully diluted basis, calculated as of September 30, 2022.
Net Asset Value On January 15, 2024, our board of directors, upon recommendation of our Nominating and Corporate Governance Committee, approved an estimated net asset value per share of our common stock of $15.25 for our Class A Shares and Class T Shares based on the estimated value of our assets less the estimated value of our liabilities, or net asset value, divided by the number of shares outstanding on a fully diluted basis, calculated as of September 30, 2023.
The proceeds were used primarily to pay off existing debt and to pay off certain existing indebtedness of SSGT II in connection with the SSGT II Merger. See Note 5 – Debt, for additional information.
The proceeds were used primarily to pay off existing debt and to pay off certain existing indebtedness of SSGT II in connection with the SSGT II Merger. See Note 5 – Debt of the Notes to the Consolidated Financial Statements, for more information.
The largest 100 operators manage approximately 59.0% of net rentable square footage, but only 34.8% of all U.S.-based self storage properties. The six publicly listed self storage companies are Public Storage, Extra Space Storage Inc., AMERCO (the parent company of U-Haul), CubeSmart, LifeStorage, Inc. and National Storage Affiliates Trust, which collectively operate approximately 21.9% of all U.S.-based self storage properties.
The largest 100 operators manage approximately 59% of net rentable square footage, but only 35% of all U.S.-based self storage properties. The five publicly listed self storage companies are Public Storage, Extra Space Storage Inc., AMERCO (the parent company of U-Haul), CubeSmart, and National Storage Affiliates Trust, which collectively operate approximately 22% of all U.S.-based self storage properties.
Further, through our Managed REIT Platform (as defined below), we serve as the sponsor of Strategic Storage Trust VI, Inc., a publicly-registered non-traded REIT ("SST VI"), and Strategic Storage Growth Trust III, Inc., a private company that intends to elect to qualify as a REIT ("SSGT III" and together with SST VI, the "Managed REITs"), both of which pay us fees to manage these programs and manage their 19 operating self storage properties (as of December 31, 2022).
Further, through our Managed REIT Platform (as defined below), we serve as the sponsor of Strategic Storage Trust VI, Inc., a publicly-registered non-traded REIT ("SST VI"), and Strategic Storage Growth Trust III, Inc., a private REIT ("SSGT III" and together with SST VI, the "Managed REITs"), and manage one additional self storage property, all of which pay us fees to manage these programs and manage their 32 operating self storage properties (as of December 31, 2023).
Additionally, we had 50% equity interests in ten unconsolidated real estate ventures located in the Greater Toronto Area, which consisted of seven operating self storage properties and two parcels of land currently under development into self storage facilities, and one single tenant industrial building, which we plan to convert into a self storage property over the long term.
Additionally, we owned a 50% equity interest in eleven unconsolidated real estate ventures located in Canada, which consisted of eight operating self storage properties, two parcels of land currently under development into self storage facilities, and one single tenant industrial building, which we plan to convert into a self storage property over the long term.
However, we cannot make assurances that these requirements will not be changed or that new requirements will not be imposed which would require significant unanticipated expenditures by us and could have an adverse effect on our financial condition and results of operations.
We intend to acquire properties that are in material compliance with all such regulatory requirements. However, we cannot make assurances that these requirements will not be changed or that new requirements will not be imposed which would require significant unanticipated expenditures by us and could have an adverse effect on our financial condition and results of operations.
As a result of the SST IV Merger, approximately 23.1 million shares of SmartStop class A common stock ("Class A Shares") were issued in exchange for approximately 10.6 million shares of SST IV common stock.
As a result of the SST IV Merger, approximately 23.1 million shares of SmartStop class A common stock ("Class A Shares") were issued in exchange for approximately 10.6 million shares of SST IV common stock. SSGT II Merger On June 1, 2022, we closed on our merger with SSGT II (the "SSGT II Merger").
Prior to March 17, 2021 and June 1, 2022, SST IV and SSGT II, respectively, were also included in the “Managed REITs.” We operate the properties owned by the Managed REITs, consisting of, as of December 31, 2022, 19 operating properties and approximately 14,600 units and approximately 1.8 million rentable square feet.
Prior to March 17, 2021 and June 1, 2022, SST IV and SSGT II, respectively, were also included in the “Managed REITs.” We operate the properties owned by the Managed REITs, which together with one other self storage property we manage consist of, as of December 31, 2023, 32 operating properties and approximately 25,400 units and approximately 2.8 million rentable square feet.
Certain environmental laws also impose liability in connection with the handling of or exposure to asbestos containing materials, pursuant to which third parties may seek recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials and other hazardous or toxic substances. 8 Other Regulations The properties we acquire will be subject to various federal, state and local regulatory requirements, such as zoning and state and local fire and life safety requirements.
Certain environmental laws also impose liability in connection with the handling of or exposure to asbestos containing materials, pursuant to which third parties may seek recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials and other hazardous or toxic substances.
As of December 31, 2022, our wholly-owned portfolio consisted of 153 self storage properties diversified across 19 states and the Greater Toronto Area of Ontario, Canada comprising approximately 103,000 units and 11.8 million net rentable square feet.
As of December 31, 2023, our wholly-owned portfolio consisted of 154 operating self storage properties diversified across 19 states and Canada comprising approximately 104,000 units and 11.9 million net rentable square feet.
As a result of this amendment, the aggregate commitment under the Credit Facility is now $700 million. 5 On April 19, 2022, we amended the Credit Facility to facilitate the issuance of the 2032 Private Placement Notes, make conforming changes between the Note Purchase Agreement and the Credit Facility, and to transition from London Interbank Offer Rate ("LIBOR") to secured overnight financing rate ("SOFR") for floating rate borrowings.
On April 19, 2022, we amended the Credit Facility to facilitate the issuance of the 2032 Private Placement Notes, make conforming changes between the Note Purchase Agreement and the Credit Facility, and to transition from London Interbank Offer Rate ("LIBOR") to secured overnight financing rate ("SOFR") for floating rate borrowings. 5 On February 22, 2024, we entered into an amended and restated revolving credit facility with KeyBank (the "2024 Credit Facility").
According to the Inside Self Storage Top-Operators List for 2022, we are the 11th largest owner and operator of self storage properties in the United States based on number of properties, units, and rentable square footage.
Based on the Inside Self Storage Top-Operators List ranking for 2023, and after accounting for recent market transactions, we are the 10th largest owner and operator of self storage properties in the United States based on rentable square footage.
As a result of the SSGT II Merger, approximately 11.5 million shares of SmartStop Class A common stock ("Class A Shares") were issued in exchange for approximately 12.7 million shares of SSGT II common stock.
As a result of the SSGT II Merger, approximately 11.5 million shares of SmartStop Class A common stock ("Class A Shares") were issued in exchange for approximately 12.7 million shares of SSGT II common stock. 2032 Private Placement Notes On April 19, 2022, we as guarantor, and SmartStop OP, L.P.
With the majority of the existing supply operated locally by non-institutional groups in the U.S and Canada, there is a significant market opportunity to acquire existing facilities and increase revenue and profitability through professional management, digitalization and physical expansion projects. 7 The ability for employees to work remotely has fueled demand for storage, contributing to a second consecutive year of above-historical average operating results across the industry in 2022.
With the majority of the existing supply operated locally by non-institutional groups in the U.S and Canada, there is a significant market opportunity to acquire existing facilities and increase revenue and profitability through professional management, digitalization and physical expansion projects.
Business Objectives and Strategy We focus on the ownership, operation, and acquisition of self storage properties located primarily within the top 100 metropolitan statistical areas, or MSAs, throughout the United States and the top census metropolitan areas, or CMAs, in Canada.
As used in this report, “we,” “us,” “our,” and “Company” refer to SmartStop Self Storage REIT, Inc. and each of our subsidiaries. Business Objectives and Strategy We focus on the acquisition, ownership, and operation of self storage properties located primarily within the top 100 metropolitan statistical areas, or MSAs, throughout the United States and Canada.
Removed
As used in this report, “we,” “us,” “our,” and “Company” refer to SmartStop Self Storage REIT, Inc. and each of our subsidiaries.
Added
As a result of this amendment, the aggregate commitment under the Credit Facility is now $700 million.
Removed
The 24 SST IV operating properties were included in our operations for the 12 months ended December 31, 2022, and revenue associated therewith was approximately $35.5 million. SSGT II Merger On June 1, 2022, we closed on our merger with SSGT II (the "SSGT II Merger").
Added
The 2024 Credit Facility replaces the Credit Facility we entered into on March 17, 2021, and has a maturity date of February 22, 2027. See Note 14 – Subsequent Events of the Notes to the Consolidated Financial Statements, for more information. See Note 5 – Debt of the Notes to the Consolidated Financial Statements, for more information.
Removed
The 10 SSGT II operating properties were included in our operations for the last seven months of the year ended December 31, 2022, and revenue associated therewith was approximately $8.8 million. 2032 Private Placement Notes On April 19, 2022, we as guarantor, and SmartStop OP, L.P.
Added
No information contained on our website is intended to be included as part of, or incorporated by reference into, this Annual Report on Form 10-K
Removed
On March 7, 2022, our board of directors approved the suspension of our DRP Offering such that distributions for the month of March 2022, payable on April 15, 2022, will be paid in cash, and thereafter, until such suspension is removed, if ever.
Removed
Elevated occupancy levels, supply constraints, and underlying demand drivers position the sector for continued growth in rents and profitability. These fundamentals have driven the self storage sector to achieve outsized rent growth relative to other REIT sectors in 2022. The short-term nature of self storage leases positions operators well in an inflationary environment.
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The nimble price, marketing, and leasing strategies that sophisticated operators have executed on, coupled with the current supply and demand environment, should position self storage favorably in order to achieve incremental growth relative to other real estate sectors.
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Despite the significant acceleration in recent growth, prior rates paired with operators' ability to increase rates to existing customers, suggest that there is room for continued rate growth. We believe the sector is well-positioned for continued growth, as self storage fundamentals remain healthy.
Removed
For a discussion of additional measures taken by us with respect to our employees in response to the COVID-19 pandemic, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Market Conditions,” below.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

89 edited+25 added−14 removed315 unchanged
Biggest changeFurther, the results of operations for a property in any one period may not be indicative of results in future periods, and the long-term performance of such property generally may not be comparable to, and cash flows may not be as predictable as, other properties owned by third parties in the same or similar industry.
Biggest changeFurther, the results of operations for a property in any one period may not be indicative of results in future periods, and the long-term performance of such property generally may not be comparable to, and cash flows may not be as predictable as, other properties owned by third parties in the same or similar industry. 23 Our inability to sell a property when we desire to do so could adversely impact our business and financial condition, and our inability to sell our properties at a price equal to, or greater than, the price for which we purchased such properties may lead to a decrease in the value of our assets.
If we fail to pay distributions on the Series A Convertible Preferred Stock for four quarters (whether or not consecutive), the Preferred Investor is permitted to vote on any matter submitted to a vote of the common stockholders of the Company, upon which the Preferred Investor and common stockholders shall vote together as a single class.
If we fail to pay distributions on the Series A Convertible Preferred Stock for four quarters (whether or not consecutive), the Preferred Investor is permitted to vote on any matter submitted to a vote of the common stockholders of the Company, upon which the Preferred Investor and common stockholders shall vote together as a single class.
There can be no assurance that our expansion or acquisition opportunities will be successful, or that we will realize our expected operating efficiencies, cost savings, revenue enhancements, synergies, or other benefits. Moreover, we assumed the liabilities of SSGT, SST IV and SSGT II in connection with the respective mergers.
There can be no assurance that our expansion or acquisition opportunities will be successful, or that we will realize our expected operating efficiencies, cost savings, revenue enhancements, synergies, or other benefits. Moreover, we assumed the liabilities of SST IV and SSGT II in connection with the respective mergers.
Ownership and operation of foreign assets pose several risks, including, but not limited to the following: • the burden of complying with both Canadian and United States’ laws; • changing governmental rules and policies, including changes in land use and zoning laws, more stringent environmental laws or changes in such laws; • existing or new Canadian laws relating to the foreign ownership of real property or loans and laws restricting the ability of Canadian persons or companies to remove profits earned from activities within the country to the person’s or company’s country of origin; 27 • the potential for expropriation; • possible currency transfer restrictions; • imposition of adverse or confiscatory taxes; • changes in real estate and other tax rates or laws and changes in other operating expenses in Canada; • possible challenges to the anticipated tax treatment of our revenue and our properties; • adverse market conditions caused by terrorism, civil unrest and changes in national or local governmental or economic conditions; • the potential difficulty of enforcing obligations in other countries; • changes in the availability, cost, and terms of loan funds resulting from varying Canadian economic policies; and • our limited experience and expertise in foreign countries relative to our experience and expertise in the United States.
Ownership and operation of foreign assets pose several risks, including, but not limited to the following: • the burden of complying with both Canadian and United States’ laws; • changing governmental rules and policies, including changes in land use and zoning laws, more stringent environmental laws or changes in such laws; • existing or new Canadian laws relating to the foreign ownership of real property or loans and laws restricting the ability of Canadian persons or companies to remove profits earned from activities within the country to the person’s or company’s country of origin; • the potential for expropriation; 27 • possible currency transfer restrictions; • imposition of adverse or confiscatory taxes; • changes in real estate and other tax rates or laws and changes in other operating expenses in Canada; • possible challenges to the anticipated tax treatment of our revenue and our properties; • adverse market conditions caused by terrorism, civil unrest and changes in national or local governmental or economic conditions; • the potential difficulty of enforcing obligations in other countries; • changes in the availability, cost, and terms of loan funds resulting from varying Canadian economic policies; and • our limited experience and expertise in foreign countries relative to our experience and expertise in the United States.
In particular: • part of the income and gain recognized by certain qualified employee pension trusts with respect to our common stock may be treated as UBTI if shares of our common stock are predominately held by qualified employee pension trusts, and we are required to rely on a special look-through rule for purposes of meeting one 31 of the REIT share ownership tests, and we are not operated in a manner to avoid treatment of such income or gain as UBTI; • part of the income and gain recognized by a tax-exempt investor with respect to our common stock would constitute UBTI if the investor incurs debt in order to acquire the common stock; and • part or all of the income or gain recognized with respect to our common stock by social clubs, voluntary employee benefit associations and supplemental unemployment benefit trusts which are exempt from federal income taxation under Sections 501(c)(7), (9), or (17) of the Code may be treated as UBTI.
In particular: 31 • part of the income and gain recognized by certain qualified employee pension trusts with respect to our common stock may be treated as UBTI if shares of our common stock are predominately held by qualified employee pension trusts, and we are required to rely on a special look-through rule for purposes of meeting one of the REIT share ownership tests, and we are not operated in a manner to avoid treatment of such income or gain as UBTI; • part of the income and gain recognized by a tax-exempt investor with respect to our common stock would constitute UBTI if the investor incurs debt in order to acquire the common stock; and • part or all of the income or gain recognized with respect to our common stock by social clubs, voluntary employee benefit associations and supplemental unemployment benefit trusts which are exempt from federal income taxation under Sections 501(c)(7), (9), or (17) of the Code may be treated as UBTI.
See the risk factor captioned “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.” in the section titled “Risks Related to an Investment in SmartStop Self Storage REIT, Inc.,” above.
See the risk factor captioned “We have issued Series A 16 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.” in the section titled “Risks Related to an Investment in SmartStop Self Storage REIT, Inc.,” above.
Information security risks for our business have generally increased in recent years in part because of the proliferation of new technologies; the use of the Internet and telecommunications technologies to process, transmit and store electronic information, including the management and support of a variety of business processes, including financial transactions and records, personally 20 identifiable information, and tenant and lease data; and the increased sophistication and activities of organized crime, hackers, and terrorists, activists, and other external parties.
Information security risks for our business have generally increased in recent years in part because of the proliferation of new technologies; the use of the Internet and telecommunications technologies to process, transmit and store electronic information, including the management and support of a variety of business processes, including financial transactions and records, personally identifiable information, and tenant and lease data; and the increased sophistication and activities of organized crime, hackers, and terrorists, activists, and other external parties.
When determining the estimated value per share there are currently no SEC, federal or state rules that establish requirements specifying the methodology to employ in determining an estimated value per share; provided, however, that the determination of the estimated value per share must be conducted by, or with the material assistance or confirmation of, a third-party valuation expert or service and must be derived from a methodology that conforms to standard industry practice.
When determining the estimated value per share there are currently no SEC, federal or state rules that establish requirements specifying the methodology to employ in determining an estimated value per share; provided, however, that the 10 determination of the estimated value per share must be conducted by, or with the material assistance or confirmation of, a third-party valuation expert or service and must be derived from a methodology that conforms to standard industry practice.
Our ability to provide such liquidity events, and to do so under circumstances that will satisfy the applicable subordination requirements, will depend on market conditions at the relevant time, which may vary considerably over a period of years. If we are unable to satisfy such subordination requirements, certain equity interests we hold in the Managed REITs may be impaired.
Our 14 ability to provide such liquidity events, and to do so under circumstances that will satisfy the applicable subordination requirements, will depend on market conditions at the relevant time, which may vary considerably over a period of years. If we are unable to satisfy such subordination requirements, certain equity interests we hold in the Managed REITs may be impaired.
Moreover, revenue 14 generated from asset management fees, property management fees, and other fees and distributions relating to the Managed REITs’ offerings and the investment and management of their respective assets may be affected by factors that include not only our ability to increase the Managed REITs’ portfolio of properties under management, but also changes in valuation of those properties, sales of the Managed REIT properties and assets and our ability to successfully operate the Managed REIT properties.
Moreover, revenue generated from asset management fees, property management fees, and other fees and distributions relating to the Managed REITs’ offerings and the investment and management of their respective assets may be affected by factors that include not only our ability to increase the Managed REITs’ portfolio of properties under management, but also changes in valuation of those properties, sales of the Managed REIT properties and assets and our ability to successfully operate the Managed REIT properties.
The CCPA, as amended by the CPRA, is intended to protect consumer privacy rights, and, among other things, provide California residents with the ability to know what information companies collect about them, to request, in certain circumstances, the deletion of such information, and to affirmatively opt out of the sale or “sharing” of their personal information.
The CCPA, as amended 13 by the CPRA, is intended to protect consumer privacy rights, and, among other things, provide California residents with the ability to know what information companies collect about them, to request, in certain circumstances, the deletion of such information, and to affirmatively opt out of the sale or “sharing” of their personal information.
If debt financing is not available on terms and conditions we find acceptable, we may not be able to obtain financing for investments. If these disruptions in the credit markets resurface, our ability to borrow monies to finance the purchase of, or other activities related to, real estate assets will be negatively impacted.
If debt financing is not available on terms and conditions we find acceptable, we may not be able to obtain financing 29 for investments. If these disruptions in the credit markets resurface, our ability to borrow monies to finance the purchase of, or other activities related to, real estate assets will be negatively impacted.
If we are unable to successfully recruit, train, and retain qualified field personnel, our rental incomes may be adversely affected, which could have a material adverse impact on our business, financial condition, and results of operations. Delays in development and lease-up of our properties would reduce our profitability.
If we are unable to successfully recruit, train, and retain qualified field personnel, our rental incomes may be adversely affected, which could have a material adverse impact on our business, financial condition, and results of operations. 19 Delays in development and lease-up of our properties would reduce our profitability.
If any property is not fully occupied or if rents are being paid in an amount that is insufficient to cover operating expenses, we could be required to expend funds for that property’s operating expenses. Our properties will be subject to increases in tax rates, utility costs, operating expenses, insurance costs, repairs and maintenance and administrative expenses.
If any property is not fully occupied or if rents are being paid in an amount that is 22 insufficient to cover operating expenses, we could be required to expend funds for that property’s operating expenses. Our properties will be subject to increases in tax rates, utility costs, operating expenses, insurance costs, repairs and maintenance and administrative expenses.
Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and efforts on our business. Consequently, actions by or disputes with partners or co-venturers might result in subjecting properties owned by the partnership or joint venture to additional risk.
Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and efforts on our business. Consequently, actions by or disputes with partners or co-venturers might 24 result in subjecting properties owned by the partnership or joint venture to additional risk.
An interested stockholder is defined as: • any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the corporation’s outstanding voting stock; or 16 • an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding stock of the corporation.
An interested stockholder is defined as: • any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the corporation’s outstanding voting stock; or • an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding stock of the corporation.
Distributions to our common stockholders will be based principally on distribution expectations of our investors and cash available from our operations. 11 The amount of cash available for distribution will be affected by many factors, such as our operating expense levels, as well as many other variables. Actual cash available for distribution may vary substantially from estimates.
Distributions to our common stockholders will be based principally on distribution expectations of our investors and cash available from our operations. The amount of cash available for distribution will be affected by many factors, such as our operating expense levels, as well as many other variables. Actual cash available for distribution may vary substantially from estimates.
In addition, the Department of Labor (“DOL”) plan asset regulations provide that, subject to certain exceptions, the assets of an entity in which a plan holds an equity interest may be treated as assets of an investing plan, in which event the underlying assets of such entity (and transactions involving such assets) would be subject to the prohibited transaction provisions.
In addition, the Department of Labor (“DOL”) plan asset regulations provide that, subject to certain exceptions, the assets of an entity in which a plan holds an equity interest may be treated as assets of an investing plan, in which event the underlying assets of such entity (and transactions involving such 33 assets) would be subject to the prohibited transaction provisions.
In particular, yield maintenance or defeasance provisions could preclude us from participating in major transactions that could result in a disposition of our assets or a change in control, even though that disposition or change in control might be in our stockholders’ best interests. 22 Rising expenses could reduce cash available for future acquisitions.
In particular, yield maintenance or defeasance provisions could preclude us from participating in major transactions that could result in a disposition of our assets or a change in control, even though that disposition or change in control might be in our stockholders’ best interests. Rising expenses could reduce cash available for future acquisitions.
We intend to take such steps as may be necessary to qualify us for one or more of the exemptions available, and thereby prevent our assets as being treated as assets of any investing plan. ITEM 1B. UNRESOLV ED STAFF COMMENTS 33 Not applicable.
We intend to take such steps as may be necessary to qualify us for one or more of the exemptions available, and thereby prevent our assets as being treated as assets of any investing plan. ITEM 1B. UNRESOLV ED STAFF COMMENTS Not applicable.
In addition, competition for suitable investments may reduce the number of suitable investment opportunities available to us, may increase acquisition costs, and may reduce demand for self storage units in certain areas where our facilities are located, all of which may adversely affect our operating results.
In addition, competition for suitable investments may reduce the number of suitable investment opportunities available to us, may increase acquisition costs, and may reduce demand for self storage units in certain areas 18 where our facilities are located, all of which may adversely affect our operating results.
If we are unable to borrow monies on terms and 29 conditions that we find acceptable, we may be forced to use a greater proportion of our Offering proceeds to finance our acquisitions, reduce the number of properties we can purchase, and/or dispose of some of our assets.
If we are unable to borrow monies on terms and conditions that we find acceptable, we may be forced to use a greater proportion of our Offering proceeds to finance our acquisitions, reduce the number of properties we can purchase, and/or dispose of some of our assets.
Such foreclosure 28 could result in a material loss for us and would adversely affect the value of our stockholders’ investment in us. In addition, certain of our loans are cross-collateralized and cross-defaulted with each other such that a default under one loan would cause a default under the other loans.
Such foreclosure could result in a material loss for us and would adversely affect the value of our stockholders’ investment in us. In addition, certain of our loans are cross-collateralized and cross-defaulted with each other such that a default under one loan would cause a default under the other loans.
In addition, if we fail to qualify as a REIT, we may be required to repurchase the Series A Convertible Preferred Stock. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax and redeem holders of the Series A Convertible Preferred Stock.
In addition, if we fail to qualify as a REIT, we may be required to repurchase the Series A Convertible Preferred Stock. If this occurs, we may be required to borrow funds or liquidate some investments in order to pay the applicable tax and redeem holders of the Series A Convertible Preferred Stock.
If we do not have sufficient cash to repay the applicable loan or note at that time, such lenders or noteholder could foreclose on the property securing the applicable loan or note or take control of the pledged collateral, as the case may be.
If we do 28 not have sufficient cash to repay the applicable loan or note at that time, such lenders or noteholder could foreclose on the property securing the applicable loan or note or take control of the pledged collateral, as the case may be.
Furthermore, our Transfer Agent will be responsible for supervising third party service providers who may, at times, be responsible for executing certain transfer agent and registrar services. If our Transfer Agent fails to perform its functions for us effectively, our operations may be adversely affected.
Furthermore, our Transfer Agent 12 will be responsible for supervising third party service providers who may, at times, be responsible for executing certain transfer agent and registrar services. If our Transfer Agent fails to perform its functions for us effectively, our operations may be adversely affected.
We will devote substantial resources to the establishment and protection of our trademarks and other proprietary intellectual property rights. 12 Our efforts to protect our intellectual property may not be adequate. Third parties may misappropriate or infringe on our intellectual property.
We will devote substantial resources to the establishment and protection of our trademarks and other proprietary intellectual property rights. Our efforts to protect our intellectual property may not be adequate. Third parties may misappropriate or infringe on our intellectual property.
Should we pay higher prices for self storage properties or other assets, our operating results may suffer. Furthermore, when we acquire self storage properties, we will be required to 18 integrate them into our then-existing portfolio.
Should we pay higher prices for self storage properties or other assets, our operating results may suffer. Furthermore, when we acquire self storage properties, we will be required to integrate them into our then-existing portfolio.
We are obligated to pay the Preferred Investor its current distributions and any accumulated and unpaid distributions prior to any distributions being paid to our common stockholders and, therefore, any cash available for distribution is used 10 first to pay distributions to the Preferred Investor.
We are obligated to pay the Preferred Investor its current distributions and any accumulated and unpaid distributions prior to any distributions being paid to our common stockholders and, therefore, any cash available for distribution is used first to pay distributions to the Preferred Investor.
A general reduction in the level of discretionary spending or shifts in consumer discretionary spending could adversely affect our growth and profitability. 23 If market conditions worsen, the value of the properties we acquire may decline.
A general reduction in the level of discretionary spending or shifts in consumer discretionary spending could adversely affect our growth and profitability. If market conditions worsen, the value of the properties we acquire may decline.
In addition, certain outstanding equity awards may be subject to accelerated vesting or may remain eligible for vesting, as specified further in the Executive Severance and Change of Control Plan.
In addition, certain outstanding equity awards may be subject to accelerated vesting or may remain eligible for vesting, as specified further in the Executive Severance and Change of Control 11 Plan.
Partners or co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or 24 objectives.
Partners or co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives.
We also cannot assure that the current environmental condition of our properties will not be affected by neighbors and occupants, by the condition of nearby properties, or by other unrelated third parties.
We also cannot assure that the current 25 environmental condition of our properties will not be affected by neighbors and occupants, by the condition of nearby properties, or by other unrelated third parties.
We earn fees in connection with these arrangements. These arrangements, including the payments associated with these arrangements, may be subject to state-specific or provincial-specific governmental regulation.
We earn fees in connection with these arrangements. These 20 arrangements, including the payments associated with these arrangements, may be subject to state-specific or provincial-specific governmental regulation.
If we fund distributions from financings, then such financings will need to be repaid, and if we fund distributions from sources other than cash flow from operations in the future, then we will have fewer funds available for acquisition of properties or working capital, which may affect our ability to generate future cash flows from operations and may reduce our stockholders’ overall returns.
If we fund distributions from financings, then such financings will need to be repaid, and if we fund distributions from sources other than cash flow from operations, then we will have fewer funds available for acquisition of properties or working capital, which may affect our ability to generate future cash flows from operations and may reduce our stockholders’ overall returns.
In light of the potential cost and uncertainty involved in litigation, we have in the past and may in the future settle matters even when we believe we have a meritorious defense. Certain claims may 13 seek injunctive relief, which could disrupt the ordinary conduct of our business and operations or increase our cost of doing business.
In light of the potential cost and uncertainty involved in litigation, we have in the past settled and may in the future settle matters even when we believe we have a meritorious defense. Certain claims may seek injunctive relief, which could disrupt the ordinary conduct of our business and operations or increase our cost of doing business.
As described below, our share redemption program is currently suspended. If we lift the suspension of our share redemption program, stockholders will continue to be limited in terms of the amount of shares which may be redeemed. Therefore, it may be difficult for our stockholders to sell their shares promptly or at all.
As described below, our share redemption program is partially suspended. If we lift the suspension of our share redemption program, stockholders will continue to be limited in terms of the amount of shares which may be redeemed. Therefore, it may be difficult for our stockholders to sell their shares promptly or at all.
During 2020, with the emergence of the COVID-19 Pandemic and the resulting volatility and disruption of the economy and capital markets, and the ability of our Managed REITs to raise additional equity in light of the foregoing, we recorded various impairments to goodwill and other intangible assets, related to our Managed REITs.
During 2020, with the emergence of the COVID-19 Pandemic and the resulting volatility and disruptions of the economy and capital markets, and the ability of our Managed REITs to raise additional equity in light of the foregoing, we recorded various impairments to goodwill and other intangible assets, related to our Managed REITs.
Our future results may suffer as a result of the effect of recent affiliated mergers, acquisitions and other strategic transactions. We consummated the SSGT Merger in January 2019, the SST IV Merger in March 2021 and the SSGT II merger in June 2022.
Our future results may suffer as a result of the effect of recent affiliated mergers, acquisitions and other strategic transactions. We consummated the SST IV Merger in March 2021 and the SSGT II Merger in June 2022.
For the purposes of calculating the estimated value per share, an independent third party appraiser valued our properties as of September 30, 2022. The valuation methodologies used to value our properties involved certain subjective judgments.
For the purposes of calculating the estimated value per share, an independent third party appraiser valued our properties as of September 30, 2023. The valuation methodologies used to value our properties involved certain subjective judgments.
As a result, unless our stockholders are a tax-exempt entity, our stockholders may have to use funds from other sources to pay their tax liability on the value of the common stock received.
As a result, unless our stockholders are tax-exempt entities, our stockholders may have to use funds from other sources to pay their tax liability on the value of the common stock received.
As of December 31, 2022, we had $200 million of Series A Convertible Preferred Stock outstanding, which would represent approximately 16.2% of our common stock on an as converted, fully diluted basis. See Note 6 – Preferred Equity, of the Notes to the Consolidated Financial Statements, for more information.
As of December 31, 2023, we had $200 million of Series A Convertible Preferred Stock outstanding, which would represent approximately 16% of our common stock on an as converted, fully diluted basis. See Note 6 – Preferred Equity, of the Notes to the Consolidated Financial Statements, for more information.
In determining our estimated value per share, we primarily relied upon a valuation of our portfolio of properties as of September 30, 2022.
In determining our estimated value per share, we primarily relied upon a valuation of our portfolio of properties as of September 30, 2023.
This may result in an outcome that may not be favorable to our stockholders. Our Chief Executive Officer may also make decisions on behalf of SAM related to redemptions of either its limited partnership interests or its common stock which may negatively impact our stockholders. Revenue and earnings from the Managed REIT Platform are uncertain.
This may result in an outcome that may not be favorable to our stockholders. Our Chief Executive Officer may also make decisions on behalf of SAM related to redemptions of either its OP units or its common stock which may negatively impact our stockholders. Revenue and earnings from the Managed REIT Platform are uncertain.
SST VI is a public non-traded Managed REIT which began operations in early 2021 that invests in self storage properties and has assets of approximately $280 million as of December 31, 2022, and SSGT III is a private Managed REIT which began operations in May 2022 that invests in self storage properties and had assets of approximately $91 million as of December 31, 2022.
SST VI is a public non-traded Managed REIT which began operations in early 2021 that invests in self storage properties and has assets of approximately $560 million as of December 31, 2023, and SSGT III is a private Managed REIT which began operations in May 2022 that invests in self storage properties and had assets of approximately $180 million as of December 31, 2023.
Concerns and changes in behavior as a result of a pandemic could also impact the availability of site-level personnel, which could adversely affect our ability to adequately manage our facilities.
Concerns and changes in behavior as a result of such an event could also impact the availability of site-level personnel, which could adversely affect our ability to adequately manage our facilities.
In particular, we have a Credit Facility with KeyBank, National Association of up to $700 million, of which approximately $618.2 million was outstanding as of December 31, 2022. We are also party to the Note Purchase Agreement, whereby we issued to the purchasers an aggregate of $150 million of secured notes payable.
In particular, we have a Credit Facility with KeyBank, National Association of up to $700 million, of which approximately $568.7 million was outstanding as of December 31, 2023. We are also party to the Note Purchase Agreement, whereby we issued to the purchasers an aggregate of $150 million of secured notes payable.
Finally, a subsidiary of SAM owns units of limited partnership interest in our Operating Partnership which are convertible into shares of our Class A common stock under certain circumstances. 17 Therefore, existing stockholders will experience dilution of their equity investment in us as we (1) sell additional shares in the future, including those issued pursuant to our distribution reinvestment plan, (2) sell securities that are convertible into shares of our common stock, (3) issue shares of our common stock in a private offering of securities, (4) issue restricted shares of our common stock or other equity-based securities to our independent directors and executive officers, (5) issue shares of our common stock in a merger or to sellers of properties acquired by us in connection with an exchange of limited partnership interests of our Operating Partnership, or (6) convert shares of our Series A Convertible Preferred Stock into shares of our common stock.
Therefore, existing stockholders will experience dilution of their equity investment in us as we (1) sell additional shares in the future, including those issued pursuant to our distribution reinvestment plan, (2) sell securities that are convertible into shares of our common stock, (3) issue shares of our common stock in a private offering of securities, (4) issue restricted shares of our common stock or other equity-based securities to our independent directors and executive officers, (5) issue shares of our common stock in a merger or to sellers of properties acquired by us in connection with an exchange of limited partnership interests of our Operating Partnership, or (6) convert shares of our Series A Convertible Preferred Stock into shares of our common stock.
We may also encounter unforeseen cost increases associated with building materials or construction services resulting from trade tensions, disruptions, tariffs, duties or restrictions or an epidemic, pandemic or other health crisis, such as the COVID-19 outbreak.
We have encountered in the past, and we may also encounter in the future unforeseen cost increases associated with building materials or construction services resulting from trade tensions, disruptions, tariffs, duties or restrictions or an epidemic, pandemic or other health crisis, such as the COVID-19 outbreak.
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. On December 6, 2022, our board of directors approved an estimated value per share for our Class A shares and Class T shares of $15.21.
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. On January 15, 2024, our board of directors approved an estimated value per share for our Class A shares and Class T shares of $15.25.
If we were to fail to so qualify, gain realized by foreign investors on a sale of our shares would be subject to FIRPTA tax, unless our shares were traded on an established securities market and the foreign investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common stock.
If we were to fail to so qualify, gain realized by foreign investors on a sale of our shares would be subject to FIRPTA tax, unless our shares were traded on an established securities market and the foreign investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common stock. 32 Legislative or other actions affecting REITs materially and adversely affect our stockholders and us.
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. 9 During 2022, 100% of our distributions were funded using cash flow from operations.
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.
New legislation, Treasury Regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify as a REIT or the federal income tax consequences of such qualification, or the federal income tax consequences of an investment in us.
We cannot predict how changes in the tax laws might affect our investors or us. New legislation, Treasury Regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify as a REIT or the federal income tax consequences of such qualification, or the federal income tax consequences of an investment in us.
Additionally, we had invested an aggregate of approximately $15.0 million in the form of preferred units of the Managed REITs' operating partnerships. If the Managed REITs are unable to raise sufficient additional capital or produce 15 adequate funds from operations, they may not be able to repay such loan amounts or redeem such preferred equity investments on a timely basis.
Additionally, we had previously invested an aggregate of approximately $15.0 million in the form of preferred units of the Managed REITs’ operating partnerships, which were redeemed. If the Managed REITs are unable to raise sufficient additional capital or produce adequate funds from operations, they may not be able to repay such loan amounts.
We may be unable to promptly re-let units within our facilities at satisfactory rental rates. Generally, our unit leases are on a month-to-month basis. Delays in re-letting units as vacancies arise would reduce our revenues and could adversely affect our operating performance.
Furthermore, if such attacks are not detected immediately, their effect could be compounded. We may be unable to promptly re-let units within our facilities at satisfactory rental rates. Generally, our unit leases are on a month-to-month basis. Delays in re-letting units as vacancies arise would reduce our revenues and could adversely affect our operating performance.
However, we cannot assure our stockholders that we will be able to acquire properties or allocate responsibilities in this manner. If we cannot, our funds used for such compliance may affect cash available for distribution and the amount of distributions to our stockholders. Property taxes may increase, which would adversely affect our net operating income and cash available for distributions.
However, we cannot assure our stockholders that we will be able to acquire properties or allocate responsibilities in this manner. If we cannot, our funds used for such compliance may affect cash available for distribution and the amount of distributions to our stockholders.
We may be required to make distributions to stockholders at times it would be more advantageous to reinvest cash in our business or when we do not have cash readily available for distribution, and we may be forced to liquidate assets on terms and at times unfavorable to us. 30 These methods of obtaining funding could affect future distributions by increasing operating costs and decreasing available cash.
We may be required to make 30 distributions to stockholders at times it would be more advantageous to reinvest cash in our business or when we do not have cash readily available for distribution, and we may be forced to liquidate assets on terms and at times unfavorable to us.
The seller of a property will often sell such property in its “as is” condition on a “where is” basis and “with all faults,” without any warranties of merchantability or fitness for a particular use or purpose. In addition, purchase agreements may contain only limited warranties, representations, and indemnifications that will only survive for a limited period after the closing.
We may obtain only limited warranties when we purchase a property. The seller of a property will often sell such property in its “as is” condition on a “where is” basis and “with all faults,” without any warranties of merchantability or fitness for a particular use or purpose.
Future offerings of debt securities, which would be senior to our common stock, or equity securities, which would dilute our existing stockholders and may be senior to our common stock, may adversely affect our stockholders, and our stockholders’ interests in us will be diluted as we issue additional shares.
Future offerings of debt securities, which would be senior to our common stock, or equity securities, which would dilute our existing stockholders and may be senior to our common stock, may adversely affect our stockholders, and our stockholders’ interests in us will be diluted as we issue additional shares. 17 We may in the future attempt to increase our capital resources by offering debt or equity securities, including notes and classes of preferred or common stock.
While we recorded net income attributable to our common stockholders of approximately $6.3 million for the fiscal year ended December 31, 2022, we have historically incurred net losses and cannot guarantee that we will sustain profitability or that we will not incur future operating losses. Our accumulated deficit was approximately $164.5 million as of December 31, 2022.
We recorded a net loss attributable to our common stockholders of approximately $2.7 million for the fiscal year ended December 31, 2023. We have historically incurred net losses attributable to our common stockholders and cannot guarantee that we will not incur future operating losses. Our accumulated deficit was approximately $167.3 million as of December 31, 2023.
Legislative or other actions affecting REITs materially and adversely affect our stockholders and us. 32 The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Department of the Treasury.
The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Department of the Treasury. Changes to the tax laws, with or without retroactive application, could materially and adversely affect our stockholders and us.
If we are unable to acquire additional capital, our financial condition, cash flow, and the amount available for distributions to our common stockholders could be adversely affected. A subsidiary of ours is the sponsor of the Managed REITs and may sponsor additional future programs.
If we are unable to acquire additional capital, our financial condition, cash flow, and the amount available for distributions to our common stockholders could be adversely affected.
Our share redemption program is currently 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. In March 2022, our board of directors approved the full suspension of our share redemption program with respect to our common stockholders.
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.
Our Chief Executive Officer is a controlling person of an entity that owns a minority interest in our Operating Partnership and Class A Shares, and therefore may face conflicts with regard to his fiduciary duties to us and his fiduciary duties to that entity, including conditions pertaining to redemption of our common stock or the limited partnership interests and voting matters related to such interests.
Our Chief Executive Officer has direct and indirect beneficial ownership in our Operating Partnership and shares of our common stock, and therefore may face conflicts with regard to his fiduciary duties to us and his fiduciary duties to the entity which holds such interests, including conditions pertaining to redemption of our common stock or the limited partnership interests and voting matters related to such interests.
Such damage may or may not be covered by insurance maintained by us, if any. We will determine the amounts and types of insurance coverage that we will maintain, including any coverage over the contents of any properties in which we may invest.
We will determine the amounts and types of insurance coverage that we will maintain, including any coverage over the contents of any properties in which we may invest.
Any material expenditures, fines, or damages we must pay will reduce our ability to continue to pay distributions at the current rate to our stockholders and may reduce the value of our stockholders’ investments. 25 We cannot assure our stockholders that the independent third party environmental assessments we obtain prior to acquiring any properties we purchase will reveal all environmental liabilities, or that a prior owner, occupant, or neighbor of a property did not create a material environmental condition not known to us.
We cannot assure our stockholders that the independent third party environmental assessments we obtain prior to acquiring any properties we purchase will reveal all environmental liabilities, or that a prior owner, occupant, or neighbor of a property did not create a material environmental condition not known to us.
While our DRP is currently suspended, if our DRP is reinstated, we may also make the distributions out of proceeds from our DRP. We are not prohibited from undertaking such activities by our charter, bylaws or investment policies, and we may use an unlimited amount from any source to pay our distributions.
We are not prohibited from undertaking such activities by our charter, bylaws or investment policies, and we may use an unlimited amount from any source to pay our distributions.
We have provided and may continue to provide financial support to the Managed REITs in the form of mezzanine loans, preferred equity investments, and other strategic investments.
We have provided and may continue to provide financial support to the Managed REITs in the form of mezzanine loans, preferred equity investments, and other strategic investments. As of March 13, 2024, we had an aggregate of approximately $17.0 million in outstanding loans to the Managed REITs.
The ultimate extent of the impact of the COVID-19 pandemic or any future pandemics on our business, financial condition, liquidity, results of operations and prospects will be driven primarily by the duration, spread, and severity of the pandemic itself, the effectiveness of vaccine and treatment developments, including against variants of COVID-19, public adoption rates of vaccines, including booster shots, as well as the duration of indirect economic impacts and potential longer term changes in consumer behavior, all of which are uncertain and difficult to predict.
The ultimate extent of the impact of such an event on our business, financial condition, liquidity, results of operations and prospects will be driven primarily by the duration, spread, and severity of the event itself, as well as the duration of indirect economic impacts and potential longer term changes in consumer behavior, all of which are uncertain and difficult to predict.
Other states have also considered or are considering privacy laws similar to the CCPA and the CPRA, and a federal consumer privacy law has also been proposed.
Other states including Colorado, Connecticut, Delaware, Florida, Indiana, Iowa, Montana, Oregon, Tennessee, Texas, Utah, and Virginia have also considered or are considering privacy laws similar to the CCPA and the CPRA, and a federal consumer privacy law has also been proposed.
The risks associated with storage contents may increase our operating costs or expose us to potential liability that may not be covered by insurance, which may have adverse effects on our business, financial condition, and results of operations. 19 The self storage facilities we own and operate are leased directly to customers who store their belongings without any immediate inspections or oversight from us.
The risks associated with storage contents may increase our operating costs or expose us to potential liability that may not be covered by insurance, which may have adverse effects on our business, financial condition, and results of operations.
We may unintentionally lease space to groups engaged in illegal and dangerous activities. Damage to storage contents may occur due to, among other occurrences, the following: war, acts of terrorism, earthquakes, floods, hurricanes, pollution, environmental matters, fires or events caused by fault of a customer, fault of a third party, or fault of our own.
Damage to storage contents may occur due to, among other occurrences, the following: war, acts of terrorism, earthquakes, floods, hurricanes, pollution, environmental matters, fires or events caused by fault of a customer, fault of a third party, or fault of our own. Such damage may or may not be covered by insurance maintained by us, if any.
We may acquire or finance properties with yield maintenance or defeasance provisions, which may restrict our operational and financial flexibility. Yield maintenance or defeasance provisions are provisions that generally require the payment of a premium in connection with the prepayment of a loan balance. Such provisions are typically provided for by the terms of the agreement underlying a loan.
Yield maintenance or defeasance provisions are provisions that generally require the payment of a premium in connection with the prepayment of a loan balance. Such provisions are typically provided for by the terms of the agreement underlying a loan. Yield maintenance or defeasance provisions could materially restrict us from selling or otherwise disposing of or refinancing properties.
We may also incur mortgage debt and pledge all or some of our real properties as security for that debt to obtain funds to acquire real properties. If we default on our secured indebtedness, the lender may foreclose and we could lose our entire investment in the properties securing such loan, which could adversely affect distributions to our stockholders.
If we default on our secured indebtedness, the lender may foreclose and we could lose our entire investment in the properties securing such loan, which could adversely affect distributions to our stockholders.
In the event that we have a concentration of properties in any particular geographic area, any adverse situation that disproportionately affects that geographic area would have a magnified adverse effect on our portfolio.
In the event that we have a concentration of properties in any particular geographic area, any adverse situation that disproportionately affects that geographic area would have a magnified adverse effect on our portfolio. For 2023, approximately 23%, 20%, and 10% of our rental income was concentrated in Florida, California, and the Greater Toronto Area of Canada, respectively.
While we have not seen a continuing material impact on the demand for self storage space resulting from the COVID-19 pandemic as of the date of this report, if the pandemic or the effects of government responses to the pandemic causes weakness in national, regional and local economies that negatively impact the demand for self storage space and/or increase bad debts, our business, financial condition, liquidity, results of operations and prospects could be adversely impacted.
If such an event causes weakness in national, regional and local economies that negatively impact the demand for self storage space and/or increase bad debts, our business, financial condition, liquidity, results of operations and prospects could be adversely impacted.
Yield maintenance or defeasance provisions may increase the costs of reducing the outstanding indebtedness with respect to any properties or refinancing such indebtedness.
These provisions would affect our ability to turn our investments into cash and thus affect cash available for distribution to our stockholders. Yield maintenance or defeasance provisions may increase the costs of reducing the outstanding indebtedness with respect to any properties or refinancing such indebtedness.
We face risks related to an epidemic, pandemic or other health crisis, such as the ongoing COVID-19 pandemic, which could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects. 21 We face risks related to an epidemic, pandemic or other health crisis, including the ongoing COVID-19 pandemic which impacts the United States, Canada and the markets in which we operate and could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
We face risks related to an epidemic, pandemic or other health crisis, which could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects. Our rental revenue and operating results depend significantly on the demand for self storage space.
Also, many sellers of real estate are single purpose entities without significant other assets. The purchase of properties with limited warranties or from undercapitalized sellers increases the risk that we may lose some or all of our invested capital in the property as well as rental income from that property.
The purchase of properties with limited warranties or from undercapitalized sellers increases the risk that we may lose some or all of our invested capital in the property as well as rental income from that property. We may acquire or finance properties with yield maintenance or defeasance provisions, which may restrict our operational and financial flexibility.
From time to time, our property taxes may increase as property values or assessment rates change or for other reasons deemed relevant by the assessors. In addition, state or local governments may increase tax rates or assessment levels. Increases in real property taxes will adversely affect our net operating income and cash available for distributions.
In addition, state or local governments may increase tax rates or assessment levels. Further, insurance premiums have recently increased and may continue to increase due to various factors, including inflation and natural disasters. Increases in real property taxes and insurance premiums will adversely affect our net operating income and cash available for distributions.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePhysical Occupancy % (3) Rental Income % (4) Alabama 1 1,090 163,300 1.4 % 92.7 % 0.7 % Arizona 4 3,130 329,100 2.8 % 91.9 % 2.7 % California 29 19,195 2,030,300 17.1 % 92.3 % 20.1 % Colorado 8 4,550 493,085 4.2 % 89.8 % 3.6 % Florida 26 19,870 2,363,100 20.1 % 93.1 % 23.0 % Illinois 6 3,785 429,500 3.6 % 91.4 % 2.9 % Indiana 2 1,030 112,700 1.0 % 91.3 % 0.6 % Massachusetts 1 840 93,200 0.8 % 93.8 % 1.9 % Maryland 2 1,610 169,500 1.4 % 91.7 % 1.4 % Michigan 4 2,220 266,100 2.3 % 92.9 % 1.8 % New Jersey 2 2,350 205,100 1.7 % 90.6 % 1.8 % Nevada 9 7,160 865,000 7.3 % 92.0 % 6.9 % North Carolina 19 9,190 1,192,400 10.1 % 92.8 % 8.4 % Ohio 5 2,310 279,700 2.4 % 91.7 % 1.5 % South Carolina 3 1,940 246,000 2.1 % 93.6 % 1.6 % Texas 12 6,960 919,300 7.8 % 93.0 % 6.7 % Virginia 1 830 71,100 0.6 % 92.8 % 0.8 % Washington 5 3,427 390,545 3.3 % 89.3 % 3.3 % Wisconsin 1 780 83,400 0.7 % 91.0 % 0.5 % Ontario, Canada 13 10,610 1,092,300 9.3 % 93.2 % 9.8 % Total 153 102,877 11,794,730 100 % 92.4 % 100 % (1) Includes all rentable units, consisting of storage units and parking (approximately 3,400 units).
Biggest changePhysical Occupancy % (3) Rental Income % (4) Alabama 1 1,090 163,300 1.4 % 90.7 % 0.7 % Arizona 4 3,130 329,100 2.8 % 91.3 % 2.6 % California 30 19,985 2,108,400 17.7 % 88.8 % 20.1 % Colorado 8 4,550 493,085 4.1 % 90.5 % 3.7 % Florida 26 19,870 2,363,100 19.9 % 92.5 % 22.7 % Illinois 6 3,785 429,500 3.6 % 91.9 % 3.0 % Indiana 2 1,030 112,700 0.9 % 92.5 % 0.6 % Massachusetts 1 840 93,200 0.8 % 91.3 % 1.9 % Maryland 2 1,610 169,500 1.4 % 91.8 % 1.4 % Michigan 4 2,220 266,100 2.2 % 94.2 % 1.8 % New Jersey 2 2,350 205,100 1.7 % 87.9 % 1.7 % Nevada 9 7,160 865,000 7.4 % 93.2 % 6.6 % North Carolina 19 9,190 1,204,900 10.1 % 91.6 % 8.2 % Ohio 5 2,310 279,700 2.3 % 91.3 % 1.5 % South Carolina 3 1,940 246,000 2.1 % 92.2 % 1.6 % Texas 12 6,960 919,300 7.7 % 93.3 % 6.9 % Virginia 1 830 71,100 0.6 % 88.6 % 0.9 % Washington 5 3,427 390,545 3.3 % 91.7 % 3.3 % Wisconsin 1 780 83,400 0.7 % 91.1 % 0.5 % Ontario, Canada 13 10,610 1,110,655 9.3 % 92.6 % 10.3 % Total 154 103,667 11,903,685 100 % 91.6 % 100 % (1) Includes all rentable units, consisting of storage units and parking (approximately 3,400 units).
See Note 5 – Debt, of the Notes to the Consolidated Financial Statements contained in this report for more information about our indebtedness secured by our properties. As of December 31, 2022, our wholly-owned self storage portfolio was comprised as follows: State No. of Properties Units (1) Sq. Ft. (net) (2) % of Total Rentable Sq. Ft.
See Note 5 – Debt, of the Notes to the Consolidated Financial Statements contained in this report for more information about our indebtedness secured by our properties. As of December 31, 2023, our wholly-owned operating self storage portfolio was comprised as follows: State No. of Properties Units (1) Sq. Ft. (net) (2) % of Total Rentable Sq. Ft.
(2) Includes all rentable square feet, consisting of storage units and parking (approximately 1,016,000 square feet). (3) Represents the occupied square feet of all facilities we owned in a state or province divided by total rentable square feet of all the facilities we owned in such state or area as of December 31, 2022.
(2) Includes all rentable square feet, consisting of storage units and parking (approximately 1,017,000 square feet). (3) Represents the occupied square feet of all facilities we owned in a state or province divided by total rentable square feet of all the facilities we owned in such state or area as of December 31, 2023.
(2) These joint venture properties were acquired through the SST IV Merger. (3) This property is currently leased as a single tenant industrial lease. The joint venture plans to develop this property into a self storage facility in the future.
(2) These joint venture properties were acquired through the SST IV Merger, which closed on March 17, 2021. (3) This property is currently leased as a single tenant industrial lease. The joint venture plans to develop this property into a self storage facility in the future.
As a result of the SSGT II Merger, we acquired three self storage real estate joint ventures located in the Greater Toronto Area of Ontario, Canada, two of which were operational and one of which was under development as of December 31, 2022.
As a result of the SSGT II Merger, we ultimately acquired four self storage real estate joint ventures located in the Greater Toronto Area of Ontario, Canada, two of which were operational and two of which were under development as of December 31, 2023.
PR OPERTIES As of December 31, 2022, we owned 153 operating self storage facilities located in 19 states (Alabama, Arizona, California, Colorado, Florida, Illinois, Indiana, Maryland, Massachusetts, Michigan, New Jersey, Nevada, North Carolina, Ohio, South Carolina, Texas, Virginia, Washington and Wisconsin) and the Greater Toronto Area of Ontario, Canada, comprising approximately 103,000 units and approximately 11.8 million rentable square feet.
ITEM 2. PR OPERTIES As of December 31, 2023, we owned 154 operating self storage facilities located in 19 states (Alabama, Arizona, California, Colorado, Florida, Illinois, Indiana, Maryland, Massachusetts, Michigan, New Jersey, Nevada, North Carolina, Ohio, South Carolina, Texas, Virginia, Washington and Wisconsin) and Canada, comprising approximately 104,000 units and approximately 11.9 million rentable square feet.
The following table summarizes our 50% ownership interests in unconsolidated real estate ventures in the Greater Toronto Area, Canada as of December 31, 2022 and 2021: JV Property Date Real Estate Venture Became Operational Carrying Value of Investment as of December 31, 2022 Carrying Value of Investment as of December 31, 2021 Dupont (1) October 2019 $ 4,245,434 $ - East York (2) June 2020 6,039,951 6,393,576 Brampton (2) November 2020 2,166,186 2,354,346 Vaughan (2) January 2021 2,625,089 2,871,265 Oshawa (2) August 2021 1,506,798 1,801,413 Scarborough (2) November 2021 2,364,175 2,862,677 Aurora (1) December 2022 2,546,407 - Kingspoint (2) March 2023 3,342,969 2,660,007 Markham (1) Under Development 1,038,541 - Regent (3) Under Development 2,646,532 - $ 28,522,082 $ 18,943,284 (1) These joint venture properties were acquired through the SSGT II Merger.
The following table summarizes our 50% ownership interests in unconsolidated real estate ventures in the Greater Toronto Area, Canada as of December 31, 2023 and 2022: JV Property Date Real Estate Venture Became Operational Carrying Value of Investment as of December 31, 2023 Carrying Value of Investment as of December 31, 2022 Dupont (1) October 2019 $ 3,974,813 $ 4,245,434 East York (2) June 2020 5,662,757 6,039,951 Brampton (2) November 2020 1,974,811 2,166,186 Vaughan (2) January 2021 2,297,273 2,625,089 Oshawa (2) August 2021 1,274,680 1,506,798 Scarborough (2) November 2021 2,342,720 2,364,175 Aurora (1) December 2022 2,480,800 2,546,407 Kingspoint (2) March 2023 3,947,014 3,342,969 Markham (1) Under Development 2,063,919 1,038,541 Regent (3) Under Development 2,737,202 2,646,532 Whitby (4) Under Development 7,075,611 - $ 35,831,600 $ 28,522,082 (1) These joint venture properties were acquired through the SSGT II Merger, which closed on June 1, 2022.
(4) Represents rental income (excludes administrative fees, late fees, and other ancillary income) for all facilities we owned in a state or province divided by our total rental income for the month ended December 31, 2022. Additionally, we own our office located at 10 Terrace Rd, Ladera Ranch, California (the “Ladera Office”) which houses our corporate headquarters.
(4) Represents rental income (excludes administrative fees, late fees, and other ancillary income) for all facilities we owned in a state or province divided by our total rental income for the month ended December 31, 2023.
These joint venture agreements are with a subsidiary of SmartCentres, an unaffiliated third party, to acquire, develop, and operate self storage facilities.
These joint venture agreements are with a subsidiary of SmartCentres, an unaffiliated third party, to acquire, develop, and operate self storage facilities. In accordance with such agreements, we intend to fund development costs of up to approximately $12.8 million as early as 2024 and 2025.
As a result of the SST IV Merger, we acquired six self storage real estate joint ventures located in the Greater Toronto Area of Ontario, Canada, five of which were operating properties and one of which was under development as of December 31, 2022.
Additionally, we own our office located at 10 Terrace Rd, Ladera Ranch, California (the “Ladera Office”) which houses our corporate headquarters. 35 As a result of the SST IV Merger, we acquired six self storage real estate joint ventures located in the Greater Toronto Area of Ontario, Canada, all of which were operating properties as of December 31, 2023.
Equity in earnings (loss) will generally be recognized based on our ownership interest in the earnings (loss) of each of the unconsolidated investments.
We account for these investments using the equity method of accounting and they are stated at cost and adjusted for our share of net earnings or losses and reduced by distributions and increased for contributions. Equity in earnings (loss) will generally be recognized based on our ownership interest in the earnings (loss) of each of the unconsolidated investments.
Removed
Subsequent to December 31, 2022, on January 12, 2023 we as 50% owner and SmartCentres as the other 50% owner of a joint venture subsidiary, acquired a parcel of land in Whitby, Ontario (the "Whitby Property"), that we and SmartCentres intend to develop into a self storage facility in the future. 34 We account for these investments using the equity method of accounting and they are stated at cost and adjusted for our share of net earnings or losses and reduced by distributions and increased for contributions.
Added
(4) This property was acquired on January 12, 2023 in connection with a purchase agreement assumed in the SSGT II Merger.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn such cases, there may be an exposure to loss in excess of any amounts accrued. We are not aware of any such proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition. (b) None. ITEM 4. MINE SAF ETY DISCLOSURES Not Applicable. 35 PART II
Biggest changeIn such cases, there may be an exposure to loss in excess of any amounts accrued. We are not aware of any such proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition. (b) None. ITEM 4. MINE SAF ETY DISCLOSURES Not Applicable. 36 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAfter considering all information provided, including the Committee’s receipt and review of the Stanger Appraisal Report and the Stanger NAV Report (the “Reports”), and based on the Committee’s extensive knowledge of our assets and liabilities, the Committee concluded that the range in estimated value per share of $14.15 to $16.38, with a mid-point estimated value per share of $15.21, as indicated in the Stanger NAV Report was reasonable and recommended to the Board that it adopt $15.21 as the Estimated Per Share NAV for our Class A shares and Class T shares. 36 The table below sets forth the calculation of our Estimated Per Share NAV as of September 30, 2022 and the Company’s previous estimated value per share as of June 30, 2021: September 30, June 30, Assets 2022 2021 Real Estate Properties $ 2,713,719,123 $ 2,447,983,782 Additional assets Cash 41,193,848 26,580,765 Restricted Cash 8,673,253 7,276,448 Investments in Unconsolidated JV's 53,382,222 38,682,262 Other assets 68,191,538 22,216,661 Managed REIT Platform 124,780,000 86,330,000 Total Assets $ 3,009,939,984 $ 2,629,069,918 Liabilities Debt $ 1,043,438,537 $ 852,742,137 Mark-to-market on mortgage debt (37,004,302 ) 20,863,687 Accounts payable and accrued liabilities 29,981,882 24,971,716 Due to affiliates 409,730 92,545 Distributions payable 9,088,802 8,088,854 Total Liabilities $ 1,045,914,649 $ 906,758,939 Net Asset Value 1,964,025,335 1,722,310,979 Preferred Equity (1) - - Net Asset Value to Common $ 1,964,025,335 $ 1,722,310,979 Net Asset Value for Class A shares $ 1,841,027,171 $ 1,601,952,979 Number of Class A shares outstanding (1)(2) 121,023,898 106,199,040 Estimated value per Class A share $ 15.21 $ 15.08 Net Asset Value for Class T shares $ 122,998,164 $ 120,358,000 Number of Class T shares outstanding 8,085,550 7,978,951 Estimated value per Class T share $ 15.21 $ 15.08 (1) The outstanding shares of the Series A Convertible Preferred Stock are convertible into shares of the Company’s Class A common stock on or after the second anniversary of the effective date (October 29, 2021) of that certain preferred stock purchase agreement by and between the Company and Extra Space Storage LP (the “Preferred Stock Purchase Agreement”).
Biggest changeThe table below sets forth the calculation of our Estimated Per Share NAV as of September 30, 2023 and our previous estimated value per share as of September 30, 2022: September 30, September 30, Assets 2023 2022 Real Estate Properties $ 2,726,668,843 $ 2,713,719,123 Additional assets Cash 34,239,378 41,193,848 Restricted Cash 9,572,290 8,673,253 Investments in Unconsolidated JV's 77,773,171 53,382,222 Other assets 53,380,943 68,191,538 Managed REIT Platform 146,800,000 124,780,000 Total Assets $ 3,048,434,625 $ 3,009,939,984 Liabilities Debt $ 1,059,001,412 $ 1,043,438,537 Mark-to-market on mortgage debt (38,510,001 ) (37,004,302 ) Accounts payable and accrued liabilities 40,711,053 29,981,882 Due to affiliates 84,000 409,730 Distributions payable 8,927,504 9,088,802 Total Liabilities $ 1,070,213,968 $ 1,045,914,649 Net Asset Value 1,978,220,657 1,964,025,335 Preferred Equity (1) - - Net Asset Value to Common $ 1,978,220,657 $ 1,964,025,335 Net Asset Value for Class A shares $ 1,854,366,321 $ 1,841,027,171 Number of Class A shares outstanding (1)(2) 121,589,335 121,023,898 Estimated value per Class A share $ 15.25 $ 15.21 Net Asset Value for Class T shares $ 123,854,336 $ 122,998,164 Number of Class T shares outstanding 8,121,031 8,085,550 Estimated value per Class T share $ 15.25 $ 15.21 (1) The outstanding shares of our Series A Convertible Preferred Stock (the “Series A Convertible Preferred Stock”) are convertible into shares of our Class A common stock on or after the second anniversary of the effective date (October 29, 2021) of that certain preferred stock purchase agreement by and between us and Extra Space Storage LP (the “Preferred Stock Purchase Agreement”).
Accordingly, with respect to the Estimated Per Share NAV, we can give no assurance that: • a stockholder would be able to resell his or her Class A shares of common stock or Class T shares of common stock at the Estimated Per Share NAV; • a stockholder would ultimately realize distributions per share equal to the Estimated Per Share NAV upon liquidation of our assets and settlement of its liabilities or a sale of our Company; • our shares of Class A common stock and Class T common stock would trade at the Estimated Per Share NAV on a national securities exchange; • a different independent third-party appraiser or other third-party valuation firm would agree with the Estimated Per Share NAV; or • the Estimated Per Share NAV, or the methodology used to estimate the Estimated Per Share NAV, will be found by any regulatory authority to comply with the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code of 1986, as amended, or other regulatory requirements.
Accordingly, with respect to the Estimated Per Share NAV, the Company can give no assurance that: • a stockholder would be able to resell his or her Class A shares of common stock or Class T shares of common stock at the Estimated Per Share NAV; • a stockholder would ultimately realize distributions per share equal to the Estimated Per Share NAV upon liquidation of our assets and settlement of its liabilities or a sale of the Company; • our shares of Class A common stock and Class T common stock would trade at the Estimated Per Share NAV on a national securities exchange; • a different independent third-party appraiser or other third-party valuation firm would agree with the Estimated Per Share NAV; or • the Estimated Per Share NAV, or the methodology used to estimate the Estimated Per Share NAV, will be found by any regulatory authority to comply with the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code of 1986, as amended, or other regulatory requirements.
Such OP Units are, or will be upon vesting (as applicable), exchangeable on a one-for-one basis into Class A shares of our common stock. Further, the value of the Company’s shares will fluctuate over time as a result of, among other things, developments related to individual assets and responses to the real estate and capital markets.
Such OP Units are, or will be upon vesting (as applicable), exchangeable on a one-for-one basis into Class A shares of our common stock. Further, the value of our shares will fluctuate over time as a result of, among other things, developments related to individual assets and responses to the real estate and capital markets.
The payment of distributions from sources other than cash flows from operations may reduce the amount of proceeds available for investment and operations or cause us to incur additional interest expense as a result of borrowed funds. 43 Over the long-term, we expect that a greater percentage of our distributions will be paid from cash flows from operations.
The payment of distributions from sources other than cash flows from operations may reduce the amount of proceeds available for investment and operations or cause us to incur additional interest expense as a result of borrowed funds. Over the long-term, we expect that a greater percentage of our distributions will be paid from cash flows from operations.
The Company does not believe that there are any material conflicts of interest between Stanger, on the one hand, and the Company, and their affiliates, on the other hand. The Company engaged Stanger, with approval from the Committee, to deliver its Reports to assist in the net asset value calculation and Stanger received compensation for those efforts.
The Company does not believe that there are any material conflicts of interest between Stanger, on the one hand, and the Company, and their affiliates, on the other hand. We engaged Stanger, with approval from the Committee, to deliver its Reports to assist in the net asset value calculation and Stanger received compensation for those efforts.
In preparing the Stanger Appraisal Report, Stanger, among other things: • performed a site visit of the Stanger Appraised Properties in the context of this assignment or prior assignments; • interviewed the Company’s officers to obtain information relating to the physical condition of each Stanger Appraised Property, including known environmental conditions, status of ongoing or planned property additions and reconfigurations, and other factors for such properties; • reviewed historical operating statements, asking rental rates by unit type, achieved rental rates, market rental rates, occupancy for the subject properties and competing properties, current tax information and a review of tax comparable properties, where appropriate, and capitalization rates for self storage properties observed in the marketplace based on investor surveys and general discussions in the market, and extracted from recent sales of self storage properties in each property’s region.
In preparing the Stanger Appraisal Report, Stanger, among other things: • performed a site visit of the Stanger Appraised Properties in the context of this assignment or prior assignments; • interviewed our officers to obtain information relating to the physical condition of each Stanger Appraised Property, including known environmental conditions, status of ongoing or planned property additions and reconfigurations, and other factors for such properties; • reviewed historical operating statements, asking rental rates by unit type, achieved rental rates, market rental rates, occupancy for the subject properties and competing properties, current tax information and a review of tax comparable properties, where appropriate, and capitalization rates for self storage properties observed in the marketplace based on investor surveys and general discussions in the market, and extracted from recent sales of self storage properties in each property’s region.
However, our operating performance cannot be accurately predicted and may deteriorate in the future due to numerous factors, including our ability to invest capital at favorable yields, the financial performance of our investments in the current real estate and financial environment and the types and mix of investments in our portfolio.
However, our operating performance cannot be accurately predicted and may deteriorate in the future due to 44 numerous factors, including our ability to invest capital at favorable yields, the financial performance of our investments in the current real estate and financial environment and the types and mix of investments in our portfolio.
Class A is pictured in the graph below. There can be no assurance that the performance of our Class A shares will continue in line with the same or similar trends depicted in the performance graph. 45 ITEM 6. [RESERVED ] 46
Class A is pictured in the graph below. There can be no assurance that the performance of our Class A shares will continue in line with the same or similar trends depicted in the performance graph. 45 46 ITEM 6. [RESERVED ] 47
A special committee of the Board previously engaged Stanger to serve as a financial advisor in connection with the Company’s acquisition of Strategic Storage Growth Trust, Inc., Strategic Storage Trust IV, Inc., Strategic Storage Growth Trust II, Inc. and the Managed REIT Platform acquired from Strategic Asset Management I, LLC (f/k/a SmartStop Asset Management, LLC) (“SAM”) and Stanger provided fairness opinions in connection with certain of those transactions, for which Stanger was paid usual and customary fees.
A special committee of the Board previously engaged Stanger to serve as a financial advisor in connection with our acquisition of Strategic Storage Growth Trust, Inc., Strategic Storage Trust IV, Inc., Strategic Storage Growth Trust II, Inc. and the Managed REIT Platform acquired from Strategic Asset Management I, LLC (f/k/a SmartStop Asset Management, LLC) (“SAM”) and Stanger provided fairness opinions in connection with certain of those transactions, for which Stanger was paid usual and customary fees.
Finally, Stanger served as a financial advisor 38 in the negotiation and closing of the Series A Convertible Preferred Stock by Extra Space Storage LP, a subsidiary of Extra Space Storage Inc.
Finally, Stanger served as a financial advisor in the negotiation and closing of the Series A Convertible Preferred Stock by Extra Space Storage LP, a subsidiary of Extra Space Storage Inc.
Therefore, Stanger assumed the Series A Convertible Preferred Stock was converted into common shares and was included in the fully diluted share count as of the Valuation Date. The carrying value of a majority of the Company’s other assets and liabilities are considered to equal their fair value due to their short maturities or liquid nature.
Therefore, Stanger assumed the Series A Convertible Preferred Stock was converted into common shares and was included in the fully diluted share count as of the Valuation Date. The carrying value of a majority of our other assets and liabilities are considered to equal their fair value due to their short maturities or liquid nature.
Different parties using different assumptions and estimates could derive a different Estimated Per Share NAV, and these differences could be significant. The value of the Company’s shares will fluctuate over time in response to developments related to individual assets in the Company’s portfolio and the management of those assets and in response to the real estate and finance markets .
Different parties using different assumptions and estimates could derive a different Estimated Per Share NAV, and these differences could be significant. The value of our shares will fluctuate over time in response to developments related to individual assets in our portfolio and the management of those assets and in response to the real estate and finance markets.
Stanger considered the projected Tenant Protection Program income and related reasonable expenses to derive an EBITDA projection for the 12 month period (the “Projected TI EBITDA”) following the Valuation Date. Stanger then applied a range of capitalization rates to the Projected TI EBITDA to derive an estimated value range associated with the Tenant Protection Programs.
Stanger considered the projected Tenant Protection Program income and related reasonable expenses to derive an EBITDA projection for the 12-month period (the “Projected TP EBITDA”) following the Valuation Date. Stanger then applied a range of capitalization rates to the Projected TP EBITDA to derive an estimated value range associated with the Tenant Protection Programs.
The total aggregate purchase price of the wholly-owned appraised properties in the Stanger Appraisal Report was approximately $1.9 billion. In addition, through the Valuation Date, the Company had invested approximately $77 million in capital improvements on these real estate assets since inception.
The total aggregate purchase price of the wholly-owned appraised properties in the Stanger Appraisal Report was approximately $1.9 billion. In addition, through the Valuation Date, the Company had invested approximately $90 million in capital improvements on these real estate assets since inception.
The Stanger Appraisal Report contains other assumptions, qualifications, and limitations that qualify the analyses, opinions, and conclusions set forth therein. Furthermore, the prices at which the Company’s real estate properties may actually be sold could differ from Stanger’s analyses.
The Stanger Appraisal Report contains other assumptions, qualifications, and limitations that qualify the analyses, opinions, and conclusions set forth therein. Furthermore, the prices at which our real estate properties may actually be sold could differ from Stanger’s analyses.
The Reports are not addressed to the public, may not be relied upon by any other person to establish an Estimated Per Share NAV of the Company’s common stock, and do not constitute a recommendation to any person to purchase or sell any shares of the Company’s common stock.
The Reports are not addressed to the public, may not be relied upon by any other person to establish an Estimated Per Share NAV of our common stock, and do not constitute a recommendation to any person to purchase or sell any shares of our common stock.
Although Stanger reviewed information supplied or otherwise made available by the Company for reasonableness, Stanger assumed and relied upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to Stanger by any other party and did not independently verify any such information.
Although Stanger reviewed information supplied or otherwise made available by us for reasonableness, Stanger assumed and relied upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to Stanger by any other party and did not independently verify any such information.
The Board’s Determination of the Estimated Per Share NAV Based upon a review of the Reports provided by Stanger, upon the recommendation of the Committee, the board of directors estimated the Estimated Per Share NAV for each of the Class A common stock and Class T common stock to be $15.21.
The Board’s Determination of the Estimated Per Share NAV Based upon a review of the Reports provided by Stanger, upon the recommendation of the Committee, the board of directors estimated the Estimated Per Share NAV for each of the Class A common stock and Class T common stock to be $15.25.
The Estimated Per Share NAV is based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding on a fully diluted basis, calculated as of September 30, 2022 (the “Valuation Date”).
The Estimated Per Share NAV is based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding on a fully diluted basis, calculated as of September 30, 2023 (the “Valuation Date”).
Upon a liquidation, the holder of the Series A Convertible Preferred Stock would receive the greater of the Liquidation Amount (as defined in the Preferred Stock Purchase Agreement) or the amount that would have been payable upon conversion of the Series A Convertible Preferred Stock into shares of the Company’s Class A common stock.
Upon a liquidation, the holder of the Series A Convertible Preferred Stock would receive the greater of the Liquidation Amount (as defined in the Preferred Stock Purchase Agreement) or the amount that would have been payable upon conversion of the Series A Convertible Preferred Stock into shares of our Class A common stock.
Similarly, the amount a stockholder may receive upon repurchase of their shares, if they participate in our share redemption program and such redemption program is available, may be greater than or less than the amount a stockholder paid for the shares, regardless of any increase in the underlying value of any assets owned by us. 41 The Estimated Per Share NAV is based on the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding on an adjusted fully diluted basis, calculated as of September 30, 2022.
Similarly, the amount a stockholder may receive upon repurchase of their shares, if they participate in our share redemption program and such redemption program is available, may be greater than or less than the amount a stockholder paid for the shares, regardless of any increase in the underlying value of any assets owned by us. 42 The Estimated Per Share NAV is based on the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding on an adjusted fully diluted basis, calculated as of September 30, 2023.
The Estimated Per Share NAV is not audited and does not represent the fair value of the Company’s assets less its liabilities according to U.S. generally accepted accounting principles (“GAAP”), nor does it represent a liquidation value of the Company’s assets and liabilities or the amount the Company’s shares of common stock would trade at on a national securities exchange.
The Estimated Per Share NAV is not audited 38 and does not represent the fair value of our assets less its liabilities according to U.S. generally accepted accounting principles (“GAAP”), nor does it represent a liquidation value of our assets and liabilities or the amount our shares of common stock would trade at on a national securities exchange.
Stanger also prepared a net asset value report (the “Stanger NAV Report”) which estimates the net asset value range per share of each of our Class A common stock and Class T common stock as of September 30, 2022.
Stanger also prepared a net asset value report (the “Stanger NAV Report”) which estimates the net asset value range per share of each of our Class A common stock and Class T common stock as of September 30, 2023.
For purposes of this analysis, Stanger assumed the conversion of the Series A Convertible Preferred Stock into shares of the Company’s Class A common stock based on the conversion price, as described in the Preferred Stock Purchase Agreement, of $10.66.
For purposes of this analysis, Stanger assumed the conversion of the Series A Convertible Preferred Stock into shares of our Class A common stock based on the conversion price, as described in the Preferred Stock Purchase Agreement, of $10.66.
The Company currently anticipates publishing a new estimated share value on an annual basis. 42 Distributions We elected to be taxed as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Code beginning with the taxable year ended December 31, 2014.
We currently anticipates publishing a new estimated share value on an annual basis. 43 Distributions We elected to be taxed as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Code beginning with the taxable year ended December 31, 2014.
For example, unless specifically informed to the contrary, Stanger assumed that the Company has clear and marketable title to each real estate property appraised, that no title defects exist, that any improvements were made in accordance with law, that no hazardous materials are present or were present previously, that no significant deed restrictions exist, and that no changes to zoning ordinances or regulations governing use, density, or shape are pending or being considered.
For example, unless specifically informed to the contrary, Stanger assumed that we have clear and marketable title to each real estate property appraised, that no title defects exist, that any improvements were made in accordance with law, that no hazardous materials are present or were present previously, that no significant deed restrictions exist, and that no changes to zoning ordinances or regulations governing use, density, or shape are pending or being considered.
Stanger relied on the Company to advise it promptly if any information previously provided became inaccurate or was required to be updated during the period of their review.
Stanger relied on us to advise it promptly if any information previously provided became inaccurate or was required to be updated during the period of their review.
As of the Valuation Date, the total value range of the wholly-owned appraised properties was approximately $2.6 billion to $2.9 billion. The mid-point appraised value of approximately $2.7 billion represents an approximately 37% increase in the total value of the real estate assets over the aggregate purchase price and aggregate improvements.
As of the Valuation Date, the total value range of the wholly-owned appraised properties was approximately $2.6 billion to $2.9 billion. The mid-point appraised value of approximately $2.7 billion represents an approximately 35.5% increase in the total value of the real estate assets over the aggregate purchase price and aggregate improvements.
Approximately $28.0 million of the 2022 total distributions, comprised of approximately 51.3% of our common stockholder distributions and none of our preferred stockholder distributions, constituted a non-taxable return of capital.
Approximately $28.0 million of the 2022 total distributions, composed of approximately 51.3% of our common stockholder distributions and none of our preferred stockholder distributions, constituted a non-taxable return of capital.
Approximately $36.7 million of the 2021 total distributions, comprised of approximately 80% of our common stockholder distributions and none of our preferred stockholder distributions, constituted a non-taxable return of capital.
Approximately $36.7 million of the 2021 total distributions, composed of approximately 80% of our common stockholder distributions and none of our preferred stockholder distributions, constituted a non-taxable return of capital.
The table below illustrates the impact on the Estimated Per Share NAV if the direct capitalization rates were adjusted by 25 basis points or 5%, assuming the mid-point value conclusion for each Stanger Appraised Property is based on the method being sensitized and all other factors remain unchanged: Estimated Per Share NAV due to: Increase 25 Basis Points Decrease 25 Basis Points Increase 5.0% Decrease 5.0% Direct Capitalization Rate $ 14.15 $ 16.38 $ 14.18 $ 16.36 Debt Values for the Company’s secured mortgage debt and other Company debt outstanding (the “Outstanding Debt”) were estimated by Stanger using a discounted cash flow analysis, which used inputs based on the remaining loan terms and estimated current market interest rates for debt with similar characteristics, including remaining loan term, loan-to-value ratios, debt-service-coverage ratios, customary affirmative and negative covenants, prepayment terms, and collateral attributes.
The table below illustrates the impact on the Estimated Per Share NAV if the direct capitalization rates were adjusted by 25 basis points or 5%, assuming the mid-point value conclusion for each Stanger Appraised Property is based on the method being sensitized and all other factors remain unchanged: Estimated Per Share NAV due to: Increase 25 Basis Points Decrease 25 Basis Points Increase 5.0% Decrease 5.0% Direct Capitalization Rate $ 14.14 $ 16.46 $ 14.21 $ 16.40 Debt Values for our secured mortgage debt and other Company debt outstanding (the “Outstanding Debt”) were estimated by Stanger using a discounted cash flow analysis, which used inputs based on the remaining loan terms and estimated current market interest rates for debt with similar characteristics, including remaining loan term, loan-to-value ratios, debt-service-coverage ratios, customary affirmative and negative covenants, prepayment terms, and collateral attributes.
Stanger has assumed that any operating or financial forecasts and other information and data provided to or otherwise reviewed by or discussed with Stanger were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of the Company’s management and/or the Board.
Stanger has assumed that any operating or financial forecasts and other information and data provided to or otherwise reviewed by or discussed with Stanger were reasonably prepared in good faith on the basis of reflecting the best currently available estimates and judgments of our management and/or the Board.
Stanger prepared an appraisal report (the “Stanger Appraisal Report”) summarizing key information and assumptions and providing an appraised value range on 156 wholly-owned properties and six properties held in unconsolidated joint ventures in our portfolio as of September 30, 2022 (collectively, the “Stanger Appraised Properties”).
Stanger prepared an appraisal report (the “Stanger Appraisal Report”) summarizing key information and assumptions and providing an appraised value range on 156 wholly-owned properties and eight properties held in unconsolidated joint ventures in our portfolio as of September 30, 2023 (collectively, the “Stanger Appraised Properties”).
The following summarizes the key assumptions that were used in the direct capitalization models to arrive at the mid-point appraised value of the Stanger Appraised Properties: Assumption Range Weighted Average Direct Capitalization rate 4.25% to 5.75% 4.95% 39 While the Company believes that Stanger’s assumptions and inputs are reasonable, a change in these assumptions and inputs would significantly impact the calculation of the appraised value of the Stanger Appraised Properties and thus, the Estimated Per Share NAV.
The following summarizes the key assumptions that were used in the direct capitalization models to arrive at the mid-point appraised value of the Stanger Appraised Properties: Assumption Range Weighted Average Direct Capitalization rate 4.25% to 5.75% 4.95% 40 While we believe that Stanger’s assumptions and inputs are reasonable, a change in these assumptions and inputs would significantly impact the calculation of the appraised value of the Stanger Appraised Properties and thus, the Estimated Per Share NAV.
In performing its analyses, Stanger made numerous other assumptions as of various points in time with respect to industry performance, general business, economic, and regulatory conditions, and other matters, many of which are beyond its control and the Company’s control. Stanger also made assumptions with respect to certain factual matters.
In performing its analyses, Stanger made numerous assumptions using various points in time with respect to industry performance, general business, economic, and regulatory conditions, and other matters, many of which are beyond its control and our control. Stanger also made assumptions with respect to certain factual matters.
In addition, Stanger was previously engaged by the Committee and performed a net asset value calculation for the Company for the periods ended June 30, 2021, December 31, 2019 and March 31, 2019. In 2021, Stanger was also engaged to provide other financial advisory services to the Company.
In addition, Stanger was previously engaged by the Committee and performed a net asset value calculation for us for the periods ended 39 September 30, 2022, June 30, 2021 and December 31, 2019. In 2021, Stanger was also engaged to provide other financial advisory services to the Company.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOC KHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information As of March 1, 2023, we had approximately 88.9 million Class A Shares outstanding and approximately 8.1 million Class T Shares outstanding, held by a total of approximately 19,500 stockholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOC KHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information As of March 13, 2024, we had approximately 88.8 million Class A Shares outstanding and approximately 8.1 million Class T Shares outstanding, held by a total of approximately 19,000 stockholders of record.
During the three months ended December 31, 2022, we redeemed shares as follows: For the Month Ended Total Number of Shares Redeemed Average Price Paid per Share Total Number of Shares Redeemed as Part of Publicly Announced Plans or Programs Maximum Number of Shares (or Units) That May Yet to be Purchased Under the Plans or Programs October 31, 2022 — $ — — 3,971,919 (1) November 30, 2022 — — — 3,971,919 (1) December 31, 2022 — — — 3,971,919 (1) (1) A description of the maximum number of shares that may be purchased under our SRP is included in Note 12 – Commitments and Contingencies, of the Notes to the Consolidated Financial Statements contained in this report.
During the three months ended December 31, 2023, we redeemed shares as follows: For the Month Ended Total Number of Shares Redeemed Average Price Paid per Share Total Number of Shares Redeemed as Part of Publicly Announced Plans or Programs Maximum Number of Shares (or Units) That May Yet to be Purchased Under the Plans or Programs October 31, 2023 460,196 $ 15.21 460,196 3,348,293 (1) November 30, 2023 — — — 3,348,293 (1) December 31, 2023 — — — 3,348,293 (1) (1) A description of the maximum number of shares that may be purchased under our SRP is included in Note 12 – Commitments and Contingencies, of the Notes to the Consolidated Financial Statements contained in this report.
See Note 12 – Commitments and Contingencies of the Notes to the Consolidated Financial Statements contained in this report for additional information. Unless and until our shares are listed for trading on a national securities exchange, it is not expected that a public market for our shares will develop.
All other redemptions remain suspended at this time. See Note 12 – Commitments and Contingencies of the Notes to the Consolidated Financial Statements contained in this report for additional information. Unless and until our shares are listed for trading on a national securities exchange, it is not expected that a public market for our shares will develop.
Real Estate Valuation As described above, the Company engaged Stanger to provide an appraisal containing a range of market value of the Stanger Appraised Properties consisting of 156 wholly-owned properties and six properties held in unconsolidated joint ventures in the Company’s portfolio as of September 30, 2022.
Real Estate Valuation As described above, the Company engaged Stanger to provide an appraisal containing a range of market value of the Stanger Appraised Properties consisting of 156 wholly-owned properties and eight properties held in unconsolidated joint ventures in our portfolio as of September 30, 2023.
Unconsolidated Joint Ventures Value The Company holds interests in unconsolidated entities in joint ventures with SmartCentres Real Estate Investment Trust, which own self storage properties or properties in various stages of planning and development into self storage properties located in Canada.
Unconsolidated Joint Ventures Value We hold interests in unconsolidated entities in joint ventures with SmartCentres Real Estate Investment Trust, which own self storage properties or properties in various stages of planning and development into self storage properties located in Canada.
Stanger deducted estimated lease up costs for properties that were not considered stabilized and adjusted the value conclusion of properties that suffered from deferred maintenance.
Stanger deducted estimated lease up costs for properties that were not considered stabilized and adjusted the value conclusion of properties for any identified deferred maintenance.
Stanger may from time to time in the future perform other services for the Company or its managed REITs, so long as such other services do not adversely affect the independence of Stanger as certified in the applicable Stanger Appraisal Report.
Stanger has in the past and may from time to time in the future perform other services for us or the managed REITs, so long as such other services do not adversely affect the independence of Stanger as certified in the applicable Stanger Appraisal Report.
Determination of Estimated Per Share Net Asset Value On December 6, 2022, our board of directors (the “Board”), at the recommendation of the Nominating and Corporate Governance Committee of the Board (the “Committee”), unanimously approved and established an estimated net asset value per share (“Estimated Per Share NAV”).
Determination of Estimated Per Share Net Asset Value On January 15, 2024, our board of directors (the “Board”), at the recommendation of the Nominating and Corporate Governance Committee of the Board (the “Committee”), unanimously approved and established an estimated net asset value per share (“Estimated Per Share NAV”).
The weighted-average discount rate applied to the future estimated debt payments of the Outstanding Debt was approximately 5.39%. While the Company believes that Stanger’s assumptions and inputs are reasonable, a change in these assumptions and inputs would significantly impact the calculation of the estimated value of the Outstanding Debt and thus, the Estimated Per Share NAV.
The weighted-average discount rate applied to the future estimated debt payments of the Outstanding Debt was approximately 6.72%. While we believe that Stanger’s assumptions and inputs are reasonable, a change in these assumptions and inputs would significantly impact the calculation of the estimated value of the Outstanding Debt and thus, the Estimated Per Share NAV.
The table below illustrates the impact on the Estimated Per Share NAV if the market interest rate of the Outstanding Debt were adjusted by 25 basis points or 5%, and assuming all other factors remain unchanged: Estimated Per Share NAV due to: Decrease 25 Basis Points Increase 25 Basis Points Decrease 5.0% Increase 5.0% $ 15.14 $ 15.28 $ 15.13 $ 15.29 Cash, Other Assets, Other Liabilities and Preferred Equity The fair value of the Company’s cash, other assets, and other liabilities were estimated by the Company to approximate carrying value as of the Valuation Date.
The table below illustrates the impact on the Estimated Per Share NAV if the market interest rate of the Outstanding Debt were adjusted by 25 basis points or 5%, and assuming all other factors remain unchanged: Estimated Per Share NAV due to: Decrease 25 Basis Points Increase 25 Basis Points Decrease 5.0% Increase 5.0% $ 15.21 $ 15.31 $ 15.20 $ 15.32 Cash, Other Assets, Other Liabilities and Preferred Equity The fair value of our cash, other assets, and other liabilities were estimated by us to approximate carrying value as of the Valuation Date.
Stanger then applied a range of EBITDA multiples to the Projected EBITDA to derive an estimated value range associated with the Management Contracts. 40 To derive the estimated value range of the Managed REIT Platform, Stanger also estimated the market value associated with the agreements between the Company, SSGT III and SST VI related to the tenant insurance, tenant protection plans or similar programs (“Tenant Protection Programs”) using a direct capitalization approach.
To derive the estimated value range of the Managed REIT Platform, Stanger also estimated the market value associated with the agreements between us, SSGT III and SST VI related to the tenant insurance, tenant protection plans or similar 41 programs (“Tenant Protection Programs”) using a direct capitalization approach.
In addition, the Company has agreed to indemnify Stanger against certain liabilities arising out of this engagement.
In addition, we have agreed to indemnify Stanger against certain liabilities arising out of this engagement.
The current market interest rate was generally determined based on market rates for available comparable debt. The estimated current market interest rates ranged from 4.35% to 6.20% for the Outstanding Debt. As of September 30, 2022, Stanger’s estimated fair value of the Company’s consolidated Outstanding Debt was approximately $1.0 billion.
The current market interest rate was generally determined based on market rates for available comparable debt. The estimated current market interest rates ranged from 5.70% to 7.90% for the Outstanding Debt. As of September 30, 2023, Stanger’s estimated fair value of our consolidated Outstanding Debt was approximately $1.0 billion.
Recent Sales of Unregistered Securities We did not have any recent sales of unregistered securities during the period covered by this Annual Report that were not disclosed in a quarterly report on Form 10-Q or current report on Form 8-K.
As a result, future distributions declared and paid may exceed cash flow from operations. Recent Sales of Unregistered Securities We did not have any recent sales of unregistered securities during the period covered by this Annual Report that were not disclosed in a quarterly report on Form 10-Q or current report on Form 8-K.
Pursuant to the terms of our charter, certain restrictions are imposed on the ownership and transfer of shares. On March 7, 2022, our board of directors approved the suspension of our distribution reinvestment plan and share redemption program such that distributions for the month of March 2022, payable on April 15, 2022, were paid in cash.
Pursuant to the terms of our charter, certain restrictions are imposed on the ownership and transfer of shares. On March 7, 2022, our board of directors approved the suspension of our distribution reinvestment plan and share redemption program.
Stanger is engaged in the business of appraising commercial real estate properties and is not affiliated with the Company. The compensation the Company paid to Stanger related to the valuation is based on the scope of work and not on the appraised values of the Company’s real estate properties.
The compensation the Company paid to Stanger related to the valuation is based on the scope of work and not on the appraised values of our real estate properties.
Stanger considered the projected fee income from the Management Contracts and the associated reasonable expenses to support such activities to derive an EBITDA projection for the 12 month period (the “Projected EBITDA”) following the Valuation Date.
(“SSGT III”) and Strategic Storage Trust VI, Inc. (“SST VI”) using a comparable transactions analysis. Stanger considered the projected fee income from the Management Contracts and the associated reasonable expenses to support such activities to derive an EBITDA projection for the 12-month period (the “Projected EBITDA”) following the Valuation Date.
See Note 12 – Commitments and Contingencies, of the Notes to the Consolidated Financial Statements contained in this report for additional information. 44 The performance graph below is a comparison of the cumulative total return of our shares of Class A common stock, the Standard and Poor’s 500 Index (“S&P 500”), the FTSE NAREIT All Equity REITs Index and the Russell 2000 Index (“Russell 2000”), assuming a starting investment of $100 on December 31, 2017 and reinvestment of distributions.
The performance graph below is a comparison of the cumulative total return of our shares of Class A common stock, the Standard and Poor’s 500 Index (“S&P 500”), the FTSE NAREIT All Equity REITs Index and the Russell 2000 Index (“Russell 2000”), assuming a starting investment of $100 on December 31, 2018 and reinvestment of distributions.
The following table shows the distributions we have paid in cash and through our distribution reinvestment plan for the years ended December 31, 2021 and 2022: Quarter OP Unit Holders (1) Preferred Stockholder (2) Common Stockholders (1) Distributions Declared per Common Share 1st Quarter 2021 $ 1,377,906 $ 2,928,620 $ 8,748,732 $ 0.15 2nd Quarter 2021 $ 1,549,658 $ 3,082,192 $ 11,899,179 $ 0.15 3rd Quarter 2021 $ 1,615,264 $ 3,116,438 $ 12,586,324 $ 0.15 4th Quarter 2021 $ 1,596,944 $ 3,150,685 $ 12,487,739 $ 0.15 1st Quarter 2022 $ 1,597,751 $ 3,150,685 $ 12,424,264 $ 0.15 2nd Quarter 2022 $ 1,763,224 $ 3,082,192 $ 13,020,126 $ 0.15 3rd Quarter 2022 $ 1,903,553 $ 3,116,438 $ 14,710,548 $ 0.15 4th Quarter 2022 $ 2,036,687 $ 3,150,685 $ 14,480,242 $ 0.15 (1) Declared distributions are paid monthly in arrears.
The following table shows the distributions we have paid in cash and through our distribution reinvestment plan for the years ended December 31, 2022 and 2023: Quarter OP Unit Holders (1) Preferred Stockholder (2) Common Stockholders (1) Distributions Declared per Common Share 1st Quarter 2022 $ 1,597,751 $ 3,150,685 $ 12,424,264 $ 0.15 2nd Quarter 2022 $ 1,763,224 $ 3,082,192 $ 13,020,126 $ 0.15 3rd Quarter 2022 $ 1,903,553 $ 3,116,438 $ 14,710,548 $ 0.15 4th Quarter 2022 $ 2,036,687 $ 3,150,685 $ 14,480,242 $ 0.15 1st Quarter 2023 $ 2,005,649 $ 3,150,685 $ 14,684,560 $ 0.15 2nd Quarter 2023 $ 2,138,485 $ 3,082,192 $ 14,746,039 $ 0.15 3rd Quarter 2023 $ 2,106,602 $ 3,116,438 $ 14,339,518 $ 0.15 4th Quarter 2023 $ 2,022,160 $ 3,150,685 $ 14,464,023 $ 0.15 (1) Declared distributions are paid monthly in arrears.
The Estimated Per Share NAV was based upon 129,109,448 shares of common equity or equivalent interests outstanding as of September 30, 2022, which was comprised of (i) 88,857,061 Class A shares of our common stock, of which 145,233 are unvested restricted Class A common stock issued to our directors and employees, plus (ii) 8,085,550 outstanding Class T shares of our common stock, plus (iii) 18,761,726 shares related to the assumed conversion of the Series A Preferred Stock into common shares, plus (iv) 13,405,111 OP Units, of which 809,581 are unvested OP Units issued to our directors and executive officers.
The Estimated Per Share NAV was based upon 129,710,366 shares of common equity or equivalent interests outstanding as of September 30, 2023, which was composed of (i) 88,835,383 Class A shares of our common stock, plus (ii) 8,121,031 outstanding Class T shares of our common stock, plus (iii) 18,761,726 shares related to the assumed conversion of the Series A Convertible Preferred Stock into common shares, plus (iv) 13,992,226 OP Units, of which 1,128,052 are unvested OP Units issued to our directors and management.
Stanger relied in part on property-level information provided by the Company, including: (i) historical and projected operating revenues and expenses; (ii) unit mixes; (iii) rent rolls; and (iv) information regarding recent or planned capital expenditures. In conducting its investigation and analyses, Stanger took into account customary and accepted financial and commercial procedures and considerations as it deemed relevant.
Stanger collected reasonably available material information that it deemed relevant in appraising our real estate properties. Stanger relied in part on property-level information provided by us, including: (i) historical and projected operating revenues and expenses; (ii) unit mixes; (iii) rent rolls; and (iv) information regarding recent or planned capital expenditures.
Certain balances, such as intangible assets and liabilities and deferred financing costs, have been eliminated for the purpose of the valuation due to the fact that the value of those balances were already considered in the valuation of the respective investments. These amounts include investments in and advances to our managed REITs.
Certain balances, such as intangible assets and liabilities and deferred financing costs, have been eliminated for the purpose of the valuation due to the fact that the value of those balances were already considered in the valuation of the respective investments Managed REIT Platform Value To derive the estimated value range of the Managed REIT Platform, Stanger estimated the market value associated with our asset management and property management contracts (the “Management Contracts”) with us, Strategic Storage Growth Trust III, Inc.
Redemption Program Our share redemption program enables our stockholders to have their shares redeemed by us, subject to the significant conditions and limitations described in our publicly filed documents. As of December 31, 2022, approximately $76.6 million of common stock was available for redemption and none was included in accrued expenses and other liabilities as of December 31, 2022.
Share Redemption Program Our share redemption program enables our stockholders to have their shares redeemed by us, subject to the significant conditions and limitations described in our publicly filed documents.
In preparing its Reports, Stanger did not, and was not requested to, solicit third-party indications of interest for the Company’s common stock in connection with possible purchases thereof or the acquisition of all or any part of the Company. Stanger collected reasonably available material information that it deemed relevant in appraising the Company’s real estate properties.
The use of the reports is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. In preparing its Reports, Stanger did not, and was not requested to, solicit third-party indications of interest for our common stock in connection with possible purchases thereof or the acquisition of all or any part of the Company.
(2) Includes outstanding units in SmartStop OP, L.P., the Company’s operating partnership (the “Operating Partnership”) (“OP Units”) and unvested restricted stock and unvested OP Units issued to the Company’s directors and management.
(2) Includes outstanding units in SmartStop OP, L.P., our operating partnership (the “Operating Partnership”) (“OP Units”) and unvested restricted stock and unvested OP Units issued to our directors and management. Methodology and Key Assumptions In determining the Estimated Per Share NAV, the Board considered the recommendation of the Committee, the Reports provided by Stanger and information provided by us.
The estimated value range of the Stanger Appraised Properties does not necessarily represent the value the Company would receive or accept if the assets were marketed for sale. 37 The Estimated Per Share NAV does not reflect a real estate portfolio premium or discount compared to the sum of the individual property values.
The estimated asset values may not, however, represent current market value or book value. The estimated value range of the Stanger Appraised Properties does not necessarily represent the value the Company would receive or accept if the assets were marketed for sale.
Although Stanger considered any comments received from the Company relating to their Reports, the final appraised value ranges of the Company’s real estate properties were determined by Stanger for the Stanger Appraised Properties.
Although Stanger considered any comments received from us relating to their Reports, the final appraised value ranges of our real estate properties were determined by Stanger for the Stanger Appraised Properties. The Reports are addressed solely to the Committee to assist it in calculating and recommending to the Board an Estimated Per Share NAV of our common stock.
The Estimated Per Share NAV also does not take into account estimated disposition costs and fees for real estate properties that are not held for sale. Independent Valuation Firm Stanger was selected by the Committee to appraise and provide a value on the Stanger Appraised Properties.
The Estimated Per Share NAV does not reflect a real estate portfolio premium or discount compared to the sum of the individual property values. The Estimated Per Share NAV also does not take into account estimated disposition costs and fees for real estate properties that are not held for sale.
Removed
The process for estimating the value of our assets and liabilities was performed in accordance with the provisions of the IPA Valuation Guidelines.
Added
On March 16, 2023, the distribution reinvestment plan was fully reinstated and the share redemption program was partially reinstated to allow for redemptions solely sought in connection with a stockholder's death, "qualifying disability" (as that term is defined in the share redemption program), confinement to a long-term care facility, or other exigent circumstances.
Removed
Methodology and Key Assumptions In determining the Estimated Per Share NAV, the Board considered the recommendation of the Committee, the Reports provided by Stanger and information provided by the Company.
Added
The process for estimating the value of our assets and liabilities was performed in accordance with the provisions of the IPA Valuation Guidelines. 37 After considering all information provided, including the Committee’s receipt and review of the Stanger Appraisal Report and the Stanger NAV Report (the “Reports”), and based on the Committee’s extensive knowledge of our assets and liabilities, the Committee concluded that the range in estimated value per share of $14.14 to $16.46, with a mid-point estimated value per share of $15.25, as indicated in the Stanger NAV Report was reasonable and recommended to the Board that it adopt $15.25 as the Estimated Per Share NAV for our Class A shares and Class T shares.
Removed
The estimated asset values may not, however, represent current market value or book value.
Added
Independent Valuation Firm Stanger was selected by the Committee to appraise and provide a value on the 164 Stanger Appraised Properties. Stanger is engaged in the business of appraising commercial real estate properties and is not affiliated with the Company.
Removed
The use of the reports is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.
Added
In conducting its investigation and analyses, Stanger took into account customary and accepted financial and commercial procedures and considerations as it deemed relevant.
Removed
The Reports are addressed solely to the Committee to assist it in calculating and recommending to the Board an Estimated Per Share NAV of the Company’s common stock.
Added
These amounts include investments in and advances to our managed REITs.
Removed
Managed REIT Platform Value To derive the estimated value range of the Managed REIT Platform, Stanger estimated the market value associated with the Company’s asset management and property management contracts (the “Management Contracts”) with the Company, Strategic Storage Growth Trust III, Inc. (“SSGT III”) and Strategic Storage Trust VI, Inc. (“SST VI”) using a comparable transactions analysis.
Added
Stanger then applied a range of EBITDA multiples to the Projected EBITDA to derive an estimated value range associated with the Management Contracts.
Removed
As a result, future distributions declared and paid may exceed cash flow from operations. Securities Authorized for Issuance Under Equity Compensation Plans The following table provides details of our 2022 Long-Term Incentive Plan (the "Plan") as of December 31, 2022, under which we are able to issue various forms of equity based compensation.
Added
For 2023, we paid a total of approximately $79.0 million in distributions, which consisted of approximately $58.2 million to our common stockholders, approximately $8.3 million to our OP Unit holders, and approximately $12.5 million to our preferred stockholder.
Removed
Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining for Future Issuance Under Equity Compensation Plans Equity Compensation Plans Approved by Security Holders — — 9,978,272 Equity Compensation Plans Not Approved by Security Holders — — — Total — — 9,978,272 (1) The total number of shares of stock reserved for issuance under the Plan is 10,000,000 shares in the aggregate, less amounts already issued under the plan.
Added
Approximately $41.2 million of the 2023 total distributions, composed of approximately 70.9% of our common stockholder distributions and none of our preferred stockholder distributions, constituted a non-taxable return of capital.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

101 edited+34 added−25 removed73 unchanged
Biggest changeFFO and FFO, as adjusted, should be reviewed in conjunction with other measurements as an indication of our performance. 56 The following is a reconciliation of net income (loss), which is the most directly comparable GAAP financial measure, to FFO and FFO, as adjusted (attributable to common stockholders), and FFO and FFO, as adjusted (attributable to common stockholders and OP unit holders) for each of the periods presented below: Year Ended December 31, 2022 Year Ended December 31, 2021 Year Ended December 31, 2020 Net income (loss) (attributable to common stockholders) $ 6,321,880 $ (29,401,595 ) $ (54,354,394 ) Add: Depreciation of real estate 48,400,073 40,158,233 31,711,102 Amortization of real estate related intangible assets 14,628,068 11,030,316 5,110,207 Depreciation and amortization of real estate and intangible assets from unconsolidated entities 1,535,416 754,831 — Deduct: Gain on deconsolidation — (169,533 ) — Gain on sale of real estate — (178,631 ) — Gain on equity interests upon acquisition (1) (16,101,237 ) — — Adjustment for noncontrolling interests in our Operating Partnership (2) (5,279,214 ) (5,727,520 ) (4,756,580 ) FFO (attributable to common stockholders) 49,504,986 16,466,101 (22,289,665 ) Other Adjustments: Intangible amortization expense - contracts (3) 572,786 1,391,889 4,666,909 Acquisition expenses (4) 888,009 934,838 1,366,092 Acquisition expenses and foreign currency (gains) losses, net from unconsolidated entities 149,094 210,377 — Casualty loss due to hurricane (5) 661,326 — — Contingent earnout adjustment (6) 1,514,447 12,619,744 (2,500,000 ) Write-off of equity interest and preexisting relationships upon acquisition of control 2,049,682 8,389,573 — Impairment of goodwill and intangible assets (7) — — 36,465,732 Impairment of investments in Managed REITs (7) — — 4,376,879 Accretion of fair market value of secured debt (35,738 ) (110,942 ) (130,682 ) Net loss on extinguishment of debt (8) 2,393,475 2,444,788 — Foreign currency and interest rate derivative (gains) losses, net (9) 75,030 366,849 203,995 Offering related expenses (10) 1,802,945 — — Adjustment of deferred tax liabilities (2) (1,073,317 ) (2,025,869 ) (5,926,732 ) Adjustment for noncontrolling interests in our Operating Partnership (1,017,068 ) (2,720,691 ) (5,321,725 ) FFO, as adjusted (attributable to common stockholders) $ 57,485,657 $ 37,966,657 $ 10,910,803 FFO (attributable to common stockholders) $ 49,504,986 $ 16,466,101 $ (22,289,665 ) Net income (loss) attributable to the noncontrolling interests in our Operating Partnership 2,536,297 (2,663,123 ) (6,901,931 ) Adjustment for noncontrolling interests in our Operating Partnership (2) 5,279,214 5,727,520 4,756,580 FFO (attributable to common stockholders and OP unit holders) $ 57,320,497 $ 19,530,498 $ (24,435,016 ) FFO, as adjusted (attributable to common stockholders) $ 57,485,657 $ 37,966,657 $ 10,910,803 Net income (loss) attributable to the noncontrolling interests in our Operating Partnership 2,536,297 (2,663,123 ) (6,901,931 ) Adjustment for noncontrolling interests in our Operating Partnership (2) 6,296,282 8,448,211 10,078,305 FFO, as adjusted (attributable to common stockholders and OP unit holders) $ 66,318,236 $ 43,751,745 $ 14,087,177 57 (1) This gain relates to recording the fair value of our preexisting equity interests in SSGT II as a result of our acquisition of control in the SSGT II Merger.
Biggest changeFFO and FFO, as adjusted, should be reviewed in conjunction with other measurements as an indication of our performance. 57 The following is a reconciliation of net income (loss) (attributable to common stockholders), which is the most directly comparable GAAP financial measure, to FFO and FFO, as adjusted (attributable to common stockholders), and FFO and FFO, as adjusted (attributable to common stockholders and OP unit holders) for each of the periods presented below: Year Ended December 31, 2023 Year Ended December 31, 2022 Year Ended December 31, 2021 Net income (loss) (attributable to common stockholders) $ (2,745,698 ) $ 6,321,880 $ (29,401,595 ) Add: Depreciation of real estate 52,619,881 48,400,073 40,158,233 Amortization of real estate related intangible assets 6,301,682 14,628,068 11,030,316 Depreciation and amortization of real estate and intangible assets from unconsolidated entities 2,374,675 1,535,416 754,831 Deduct: Gain on deconsolidation — — (169,533 ) Gain on sale of real estate — — (178,631 ) Gain on equity interests upon acquisition (1) — (16,101,237 ) — Adjustment for noncontrolling interests (2) (7,164,542 ) (5,279,214 ) (5,727,520 ) FFO (attributable to common stockholders) 51,385,998 49,504,986 16,466,101 Other Adjustments: Intangible amortization expense - contracts (3) 292,171 572,786 1,391,889 Acquisition expenses (4) 192,358 888,009 934,838 Acquisition expenses and foreign currency (gains) losses, net from unconsolidated entities 69,095 149,094 210,377 Casualty loss due to hurricane (5) — 661,326 — Contingent earnout adjustment (6) — 1,514,447 12,619,744 Write-off of equity interest and preexisting relationships upon acquisition of control — 2,049,682 8,389,573 Accretion of fair market value of secured debt 12,920 (35,738 ) (110,942 ) Net loss on extinguishment of debt (7) — 2,393,475 2,444,788 Foreign currency and interest rate derivative (gains) losses, net (8) (177,811 ) 75,030 366,849 Offering related expenses (9) 791,918 1,802,945 — Adjustment of deferred tax assets and liabilities (3) (3,300,688 ) (1,073,317 ) (2,025,869 ) Sponsor funding reduction (10) 33,643 — — Adjustment for noncontrolling interests in our Operating Partnership 245,470 (1,017,068 ) (2,720,691 ) FFO, as adjusted (attributable to common stockholders) $ 49,545,074 $ 57,485,657 $ 37,966,657 FFO (attributable to common stockholders) $ 51,385,998 $ 49,504,986 $ 16,466,101 Net income (loss) attributable to the noncontrolling interests in our Operating Partnership 1,313,566 2,536,297 (2,663,123 ) Adjustment for noncontrolling interests in our Operating Partnership (2) 7,164,542 5,279,214 5,727,520 FFO (attributable to common stockholders and OP unit holders) $ 59,864,106 $ 57,320,497 $ 19,530,498 FFO, as adjusted (attributable to common stockholders) $ 49,545,074 $ 57,485,657 $ 37,966,657 Net income (loss) attributable to the noncontrolling interests in our Operating Partnership 1,313,566 2,536,297 (2,663,123 ) Adjustment for noncontrolling interests in our Operating Partnership (2) 6,919,072 6,296,282 8,448,211 FFO, as adjusted (attributable to common stockholders and OP unit holders) $ 57,777,712 $ 66,318,236 $ 43,751,745 58 (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.
In determining FFO, as adjusted, we make 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, gains/losses on foreign exchange and interest rate derivatives not designated for hedge accounting, and other select non-recurring income or expense items which we believe are not indicative of our overall long-term operating performance.
In determining FFO, as adjusted, we make 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 assets and liabilities, realized and unrealized gains/losses on foreign exchange transactions, gains/losses on foreign exchange and interest rate derivatives not designated for hedge accounting, and other select non-recurring income or expense items which we believe are not indicative of our overall long-term operating performance.
In general, a VIE is an entity or other legal structure used to conduct activities or hold assets that either (1) has an insufficient amount of equity to carry out its principal activities without additional subordinated 49 financial support, (2) has a group of equity owners that are unable to make significant decisions about its activities, or (3) has a group of equity owners that do not have the obligation to absorb losses or the right to receive returns generated by its operations.
In general, a VIE is an entity or other legal structure used to conduct activities or hold assets that either (1) has an insufficient amount of equity to carry out its principal activities without additional subordinated financial support, (2) has a group of equity owners that are unable to make significant decisions about its activities, or (3) has a group of equity owners that do not have the obligation to absorb losses or the right to receive returns generated by its operations.
Our primary business model is focused on owning and operating high quality self storage properties in high growth markets in the United States and Canada. We finance our portfolio through a diverse capital strategy which includes cash generated from operations, borrowings under our syndicated revolving line of credit, secured and unsecured debt financing, equity offerings and joint ventures.
Our primary business model is focused on owning and operating high quality self storage properties in high growth markets in the United States and Canada. We finance our portfolio through a diverse capital strategy which includes cash generated from operations, borrowings under our syndicated revolving line of credit, secured debt financing, equity offerings and joint ventures.
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.
The White Paper defines FFO as net income (loss) computed in accordance with 56 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.
The payment of distributions from sources other than cash flows from operations may reduce the amount of proceeds available for investment and operations or cause us to incur additional interest expense as a result of borrowed funds. 61 Over the long-term, we expect that a greater percentage of our distributions will be paid from cash flows from operations.
The payment of distributions from sources other than cash flows from operations may reduce the amount of proceeds available for investment and operations or cause us to incur additional interest expense as a result of borrowed funds. Over the long-term, we expect that a greater percentage of our distributions will be paid from cash flows from operations.
When indicators of potential impairment are present, we will assess the recoverability of the particular asset by determining whether the carrying value of the asset will be recovered, 48 through an evaluation of the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition.
When indicators of potential impairment are present, we will assess the recoverability of the particular asset by determining whether the carrying value of the asset will be recovered, through an evaluation of the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition.
(10) 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.
(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.
Although property taxes were moderated through assessment challenges over the past two years, we expect elevated property tax increases in our sector in the coming years. We expect same-store expense growth resulting from increases in employee costs, property insurance and property taxes in 2023, to be partially offset by operating efficiencies gained from leveraging technology and solar initiatives.
Although property taxes were moderated through assessment challenges over the past two years, we expect elevated property tax increases in our sector in the coming years. We expect same-store expense growth resulting from increases in employee costs, property insurance and property taxes in 2024, to be partially offset by operating efficiencies gained from leveraging technology and solar initiatives.
Such distributions payable to each stockholder of record during a month will be paid the following month. Background and History of Common Stock Distributions Since substantially all of our operations are performed indirectly through our Operating Partnership, our ability to pay distributions depends in large part on our Operating Partnership’s ability to pay distributions to its partners, including to us.
Such distributions payable to each stockholder of record will be paid the following month. Background and History of Common Stock Distributions Since substantially all of our operations are performed indirectly through our Operating Partnership, our ability to pay distributions depends in large part on our Operating Partnership’s ability to pay distributions to its partners, including to us.
Gain On Equity Interests Upon Acquisition Gain on equity interests upon acquisition for the year ended December 31, 2022 and 2021 was approximately $16.1 million and none, respectively. The gain was related to recording the fair value of our preexisting special limited partnership interest in SSGT II in connection with the SSGT II Merger.
Gain On Equity Interests Upon Acquisition Gain on equity interests upon acquisition for the year ended December 31, 2023 and 2022 was none and approximately $16.1 million, respectively. The gain was related to recording the fair value of our preexisting special limited partnership interest in SSGT II in connection with the SSGT II Merger.
(9) 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.
(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.
(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. (3) These items represent the amortization, accretion, or adjustment of intangible assets or deferred tax liabilities.
(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.
If the Series A Convertible Preferred Stock has not been redeemed on or prior to the fifth anniversary date of the Initial Closing, the dividend rate will increase an additional 0.75% per annum each year thereafter to a maximum of 9.0% per annum until the tenth anniversary of the Initial Closing, at which time the dividend rate shall increase 0.75% per annum each year thereafter until the Series A Convertible Preferred Stock is either converted or repurchased in full.
If the Series A Convertible Preferred Stock has not been redeemed on or prior to the fifth anniversary date of the Initial Closing (October 29, 2024), the dividend rate will increase an additional 0.75% per annum each year thereafter to a maximum of 9.0% per annum until the tenth anniversary of the Initial Closing, at which time the dividend rate shall increase 0.75% per annum each year thereafter until the Series A Convertible Preferred Stock is either converted or repurchased in full.
Goodwill is allocated to various reporting units, as applicable, and is not amortized. We perform an annual impairment test as of December 31 for goodwill; between annual tests we evaluate the recoverability of goodwill whenever events or changes in circumstances indicate that the carrying amount of goodwill may not be fully recoverable.
Goodwill is allocated to various reporting units, as applicable, and is not amortized. We perform an annual qualitative impairment assessment as of December 31 for goodwill; between annual tests we evaluate the recoverability of goodwill whenever events or changes in circumstances indicate that the carrying amount of goodwill may not be fully recoverable.
We may not be able to pay distributions from our cash flows from operations, in which case distributions may be paid in part from debt or other financing sources. Distributions are paid to our common stockholders based on the record date selected by our board of directors. Such distributions are based on daily declaration and record dates.
We may not be able to pay distributions from our cash flows from operations, in which case distributions may be paid in part from debt or other financing sources. Distributions are paid to our common stockholders based on the record date selected by our board of directors. Such distributions are based on monthly declaration.
Over time we expect the SSGT II Merger and SST IV Merger to be accretive to FFO, as adjusted, primarily as the former SST IV and SSGT II properties eventually reach higher levels of either physical or economic occupancy or both.
Over time, we expect the SSGT II Merger to be accretive to FFO, as adjusted, primarily as the former SSGT II properties eventually reach higher levels of either physical or economic occupancy or both.
Long-Term Liquidity and Capital Resources On a long-term basis, our principal demands for funds will be for our property operating expenses, general and administrative expenses, Managed REIT Platform expenses, debt service payments, capital expenditures, property acquisitions, investments in our Managed REITs, and distributions to our Series A Convertible Preferred stockholder, limited partners in our Operating Partnership, and our stockholders, as necessary to maintain our REIT qualification.
Long-Term Liquidity and Capital Resources On a long-term basis, our principal demands for funds will be for our property operating expenses, general and administrative expenses, Managed REIT Platform expenses, debt service payments, capital expenditures, property acquisitions, investments in our Managed REITs, required payments pursuant to our Sponsor Funding Agreement, and distributions to our Series A Convertible Preferred stockholder, limited partners in our Operating Partnership, and our stockholders, as necessary to maintain our REIT qualification.
Comparison of the Years Ended December 31, 2021 and 2020 The results of operations and cash flows for the years ended December 31, 2021 compared to December 31, 2020 were included in our Annual Report on Form 10-K for the year ended December 31, 2021 which was filed with the SEC on March 23, 2022.
Comparison of the Years Ended December 31, 2022 and 2021 The results of operations and cash flows for the years ended December 31, 2022 compared to December 31, 2021 were included in our Annual Report on Form 10-K for the year ended December 31, 2022 which was filed with the SEC on March 3, 2023.
We evaluate the consolidation of our investments in joint ventures in accordance with relevant accounting guidance. This evaluation requires us to determine whether we have a controlling interest in a joint venture through a means other than voting rights, and, if so, such joint venture may be required to be consolidated in our financial statements.
We evaluate the consolidation of our investments in VIE's in accordance with relevant accounting guidance. This evaluation requires us to determine whether we have a controlling interest in a VIE through a means other than voting rights, and, if so, such VIE may be required to be consolidated in our financial statements.
We expect reimbursable costs from Managed REITs to fluctuate commensurate with our Managed REITs' increase in operations as we receive reimbursement for providing such services. General and Administrative Expenses General and administrative expenses for the years ended December 31, 2022 and 2021 were approximately $28.3 million and $23.3 million, respectively.
We expect reimbursable costs from Managed REITs to fluctuate commensurate with our Managed REITs' increase in operations as we receive reimbursement for providing such services. General and Administrative Expenses General and administrative expenses for the years ended December 31, 2023 and 2022 were approximately $27.5 million and $28.3 million, respectively.
We expect general and administrative expenses to decrease as a percentage of total revenues over time. Depreciation and Amortization Expenses Depreciation and amortization expenses for the years ended December 31, 2022 and 2021 were approximately $64.6 million and $53.4 million, respectively. Depreciation expense consists primarily of depreciation on the buildings and site improvements at our properties.
We expect general and administrative expenses to decrease as a percentage of total revenues over time. Depreciation and Amortization Expenses Depreciation and amortization expenses for the years ended December 31, 2023 and 2022 were approximately $60.2 million and $64.6 million, respectively. Depreciation expense consists primarily of depreciation on the buildings and site improvements at our properties.
Net Loss on Extinguishment of Debt Net loss on extinguishment of debt for the years ended December 31, 2022 and 2021 was approximately $2.4 million and $2.4 million, respectively.
Net Loss on Extinguishment of Debt Net loss on extinguishment of debt for the years ended December 31, 2023 and 2022 was none and approximately $2.4 million, respectively.
Our evaluation of our joint ventures under such accounting guidance could result in a materially different presentation of the financial statements or materially different amounts being reported in the financial statements, as the joint venture entities included in our consolidated financial statements may vary based on the estimates and assumptions we use.
Our evaluation of our VIE's under such accounting guidance could result in a materially different presentation of the financial statements or materially different amounts being reported in the financial statements, as the VIE's included in our consolidated financial statements may vary based on the estimates and assumptions we use.
Liquidity and Capital Resources Short-Term Liquidity and Capital Resources Our liquidity needs consist primarily of our property operating expenses, general and administrative expenses, Managed REIT Platform expenses, debt service payments, capital expenditures, property acquisitions, investments in our Managed REITs, and distributions to our Series A Convertible Preferred stockholder, limited partners in our Operating Partnership, and our stockholders, as necessary to maintain our REIT qualification.
Liquidity and Capital Resources Short-Term Liquidity and Capital Resources Our liquidity needs consist primarily of our property operating expenses, general and administrative expenses, Managed REIT Platform expenses, debt service payments, capital expenditures, property acquisitions, property developments and improvements, investments in our Managed REITs, required payments pursuant to our Sponsor Funding Agreement, and distributions to our Series A Convertible Preferred stockholder, limited partners in our Operating Partnership, and our stockholders, as necessary to maintain our REIT qualification.
Trademarks Valuation Trademarks are based on the value of our brands. Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademarks, we would have to make a stream of payments to a brand or franchise owner in return for the right to use their name.
Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademarks, we would have to make a stream of payments to a brand or franchise owner in return for the right to use their name.
Additionally, we expect to see increases in self storage revenues from any future acquisitions. Managed REIT Platform Revenue Managed REIT Platform revenue for the years ended December 31, 2022 and 2021 was approximately $7.8 million and $6.3 million, respectively.
Additionally, we expect to see increases in self storage revenues from any future acquisitions. Managed REIT Platform Revenues Managed REIT Platform revenues for the years ended December 31, 2023 and 2022 was approximately $11.9 million and $7.8 million, respectively.
Property Operating Expenses Property operating expenses for the years ended December 31, 2022 and 2021 were approximately $58.4 million (or 29.2% of self storage revenue) and $48.1 million (or 30.4% of self storage revenue), respectively. Property operating expenses include the costs to operate our facilities including payroll expense, utilities, insurance, real estate taxes, and marketing.
Property Operating Expenses Property operating expenses for the years ended December 31, 2023 and 2022 were approximately $65.4 million (or 30.4% of self storage revenue) and $58.4 million (or 29.2% of self storage revenue), respectively. Property operating expenses include the costs to operate our facilities including compensation related expenses, utilities, insurance, real estate taxes, and property related marketing.
Comparison of the Years Ended December 31, 2022 and 2021 Total Self Storage Revenues Total self storage related revenues for the years ended December 31, 2022 and 2021 were approximately $200.2 million and $158.2 million, respectively.
Comparison of the Years Ended December 31, 2023 and 2022 Total Self Storage Revenues Total self storage related revenues for the years ended December 31, 2023 and 2022 were approximately $215.3 million and $200.2 million, respectively.
As of December 31, 2022 and 2021, we wholly-owned 153 and 139 operating self storage facilities, respectively. Our operating results for the year ended December 31, 2022 included full year period results for 139 operating self storage facilities and partial period results for 14 operating self storage facilities acquired during the year ended December 31, 2022.
As of December 31, 2023 and 2022, we wholly-owned 154 and 153 operating self storage facilities, respectively. Our operating results for the year ended December 31, 2023 included full year period results for 153 operating self storage facilities and partial period results for one operating self storage facility acquired during the year ended December 31, 2023.
Our 2021, 2022 and future operating results have been and will continue to be significantly impacted by these mergers as a result of collectively acquiring 34 operating self storage facilities and 50% equity interests in nine unconsolidated real estate ventures, as well as the elimination of management fees that we previously earned from SST IV and SSGT II.
Our 2022, 2023 and future operating results have been and will continue to be significantly impacted by this merger as a result of collectively acquiring 10 operating self storage facilities and 50% equity interests in three unconsolidated real estate ventures, as well as the elimination of management fees that we previously earned from SSGT II.
Recently, the broader economy began experiencing increased levels of inflation, higher interest rates, tightening monetary and fiscal policies and a slowdown in home price appreciation and new home sales. This could result in less discretionary spending, weakening consumer balance sheets and reduced demand for self storage.
Further, the broader economy has been experiencing elevated levels of inflation, higher interest rates, tightening monetary and fiscal policies and a slowdown in home sales. This could result in less discretionary spending, weakening consumer balance sheets and reduced demand for self storage.
Further, through our Managed REIT Platform (as defined below), we serve as the sponsor of Strategic Storage Trust VI, Inc., a publicly-registered non-traded REIT ("SST VI"), and Strategic Storage Growth Trust III, Inc., a private company that intends to elect to qualify as a REIT ("SSGT III" and together with SST VI, the "Managed REITs"), both of which pay us fees to manage these programs and manage their 19 operating self storage properties (as of December 31, 2022).
Further, through our Managed REIT Platform (as defined below), we serve as the sponsor of Strategic Storage Trust VI, Inc., a publicly-registered non-traded REIT ("SST VI"), and Strategic Storage Growth Trust III, Inc., a private REIT ("SSGT III" and together with SST VI, the "Managed REITs"), and manage one additional self storage property, all of which pay us fees to manage these programs and manage their 32 operating self storage properties (as of December 31, 2023).
We further expect reimbursable costs from Managed REITs to generally fluctuate commensurate with our Managed REITs' increase in operations as we receive reimbursement for providing such services.
We expect reimbursable costs from Managed REITs to increase in future periods as a result of additional acquisitions by our Managed REITs. We further expect reimbursable costs from Managed REITs to generally fluctuate commensurate with our Managed REITs' increase in operations as we receive reimbursement for providing such services.
As of December 31, 2022, our wholly-owned portfolio consisted of 153 self storage properties diversified across 19 states and Canada comprising approximately 103,000 units and 11.8 million net rentable square feet.
As of December 31, 2023, our wholly-owned portfolio consisted of 154 operating self storage properties diversified across 19 states and Canada comprising approximately 104,000 units and 11.9 million net rentable square feet.
Additionally, we had 50% equity interests in ten unconsolidated real estate ventures located in the Greater Toronto Area, which consisted of seven operating self storage properties, two parcels of land under development into self storage facilities, and one single tenant industrial building, which we plan to convert into a self storage property over the long term.
Additionally, we owned a 50% equity interest in eleven unconsolidated real estate ventures located in Canada, which consisted of eight operating self storage properties, two parcels of land currently under development into self storage facilities, and one single tenant industrial building, which we plan to convert into a self storage property over the long term.
Such expenses consist of costs incurred by us as we provide property management and advisory services to the Managed REITs, which are reimbursed by our Managed REITs, pursuant to our related contracts with the Managed REITs.
Such expenses consist of costs incurred by us as we provide property management and advisory services to the Managed REITs, which are reimbursed by our Managed REITs, pursuant to our related contracts with the Managed REITs. The increase in reimbursable costs from Managed REITs is primarily related to the growth in the Managed REITs' assets under management.
Such revenues consist of costs incurred by us as we provide property management and advisory services to the Managed REITs, which are reimbursed by our Managed REITs, pursuant to our related contracts with the Managed REITs. We expect Reimbursable costs from Managed REITs to increase in future periods as a result of additional acquisitions by our Managed REITs.
Such revenues consist of costs incurred by us as we provide property management and advisory services to the Managed REITs, which are reimbursed by the Managed REITs, pursuant to our related contracts with the Managed REITs. The increase in reimbursable costs from Managed REITs is primarily related to the growth in the Managed REITs assets under management.
(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 December 31, 2022 and 2021, respectively.
(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 1,017,000 square feet and 1,016,000 square feet as of December 31, 2023 and 2022, respectively. On a same-store basis, for the same periods, parking represented approximately 949,000 square feet.
As a result, future distributions declared and paid may exceed cash flow from operations. Indebtedness As of December 31, 2022, our net debt was approximately $1,068 million, which included approximately $442.8 million in fixed rate debt, and $630.2 million in variable rate debt, less approximately $0.1 million in debt discount, and approximately $4.5 million in net debt issuance costs.
As a result, future distributions declared and paid may exceed cash flow from operations. 62 Indebtedness As of December 31, 2023, our net debt was approximately $1,087.4 million, which included approximately $523.1 million in fixed rate debt, and $568.7 million in variable rate debt, less approximately $0.1 million in debt discount, and approximately $4.3 million in net debt issuance costs.
Based on these favorable supply and demand dynamics, we believe that disciplined self storage operators will generate revenue growth in the near term and will continue to drive revenue through various economic cycles. Likewise, we expect moderate growth in new supply through 2024.
However, we expect the new supply delivered in the recent past to continue to be absorbed and we expect only moderate growth in new supply through 2025. Based on these dynamics, we believe that disciplined self storage operators will generate revenue growth in the near term and will continue to drive revenue through various economic cycles.
Non-GAAP Financial Measures Funds from Operations Funds from operations (“FFO”) is a non-GAAP financial metric promulgated by the National Association of Real Estate Investment Trusts (NAREIT), that we believe is an appropriate supplemental measure to reflect our operating performance. 55 We define FFO, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, or the White Paper.
Non-GAAP Financial Measures Funds from Operations Funds from operations (“FFO”) is a non-GAAP financial metric promulgated by the National Association of Real Estate Investment Trusts (NAREIT), that we believe is an appropriate supplemental measure to reflect our operating performance.
On January 17, 2023, our board of directors declared a distribution rate for the month of February 2023 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 February 1, 2023 and ending February 28, 2023.
Common Stock 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.
In addition to the sector’s numerous historical demand drivers, one demand driver that increased substantially during the COVID-19 pandemic is the trend towards working from home, or hybrid work environment.
In addition to the sector’s numerous historical demand drivers, one demand driver that developed and has continued as a result of the COVID-19 pandemic is the trend towards working from home, or a hybrid work environment.
Our same-store revenue increased by approximately $16.0 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to higher annualized rent per occupied square foot.
Our same-store revenue increased by approximately $7.3 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 due to higher annualized rent per occupied square foot, slightly offset by decreased occupancy.
Additionally, during the year ended December 31, 2022, we recorded expenses of approximately $1.8 million related to our filing of an S-11 registration statement (including subsequent amendments) and related costs in pursuit of a potential offering of our common stock. The remaining increase is primarily attributable to increased professional and legal costs, transfer agent costs and compensation-related expenses.
Additionally, during the years ended December 31, 2023 and 2022, we recorded expenses of approximately $0.8 million and $1.8 million, respectively, related to our filing of an S-11 registration statement (including subsequent amendments) and related costs in pursuit of a potential offering of our common stock.
The funds that are available for distribution may be affected by a number of factors, including the following: • our operating and interest expenses; • our ability to keep our properties occupied; • our ability to maintain or increase rental rates; • increases to our property operating expenses; • construction defects or capital improvements; • capital expenditures and reserves for such expenditures; • the issuance of additional shares; • financings and refinancings; and • dividends with respect to the outstanding shares of our Series A Convertible Preferred Stock. 60 The following shows our distributions paid and the sources of such distributions for the respective periods presented: Year Ended December 31, 2022 Year Ended December 31, 2021 Distributions paid in cash – common stockholders $ 49,391,782 $ 26,157,045 Distributions paid in cash – Operating Partnership unitholders 7,301,215 6,139,772 Distributions paid in cash – preferred stockholders 12,500,000 12,277,935 Distributions reinvested 5,243,398 19,564,929 Total distributions $ 74,436,395 $ 64,139,681 Source of distributions Cash flows provided by operations $ 74,436,395 100.0 % $ 58,764,984 91.6 % Cash provided by financing activities — 0.0 % — 0.0 % Offering proceeds from distribution reinvestment plan — 0.0 % 5,374,697 8.4 % Total sources $ 74,436,395 100 % $ 64,139,681 100 % From our inception through December 31, 2022, we paid cumulative distributions of approximately $321.0 million, of which approximately $260.7 million were paid to common stockholders, as compared to cumulative FFO (attributable to common stockholders) of approximately $68.5 million.
The funds that are available for distribution may be affected by a number of factors, including the following: • our operating and interest expenses; • our ability to keep our properties occupied; • our ability to maintain or increase rental rates; • increases to our property operating expenses; • construction defects or capital improvements; • capital expenditures and reserves for such expenditures; • the issuance of additional shares; • financings and refinancings; and • dividends with respect to the outstanding shares of our Series A Convertible Preferred Stock. 61 The following shows our distributions paid and the sources of such distributions for the respective periods presented: Year Ended December 31, 2023 Year Ended December 31, 2022 Distributions paid in cash – common stockholders $ 40,597,803 $ 49,391,782 Distributions paid in cash – noncontrolling interests 8,860,426 7,301,215 Distributions paid in cash – preferred stockholders 12,500,000 12,500,000 Distributions reinvested 17,636,337 5,243,398 Total distributions $ 79,594,566 $ 74,436,395 Source of distributions Cash flows provided by operations $ 73,191,384 92.0 % $ 74,436,395 100.0 % Offering proceeds from distribution reinvestment plan 6,403,182 8.0 % - 0.0 % Total sources $ 79,594,566 100 % $ 74,436,395 100 % From our inception through December 31, 2023, we paid cumulative distributions of approximately $400.4 million, of which approximately $318.7 million were paid to common stockholders, as compared to cumulative FFO (attributable to common stockholders) of approximately $119.9 million.
According to the Inside Self Storage Top-Operators List for 2022, we are the 11th largest owner and operator of self storage properties in the United States based on number of properties, units, and rentable square footage.
Based on the Inside Self Storage Top-Operators List ranking for 2023, and after accounting for recent market transactions, we are the 10th largest owner and operator of self storage properties in the United States based on number of properties, units, and rentable square footage.
Seasonality We believe that we will experience minor seasonal fluctuations in the occupancy levels of our facilities, which we believe will be slightly higher over the summer months due to increased moving activity.
Subsequent Events Please see Note 14 – Subsequent Events, of the Notes to the Consolidated Financial Statements contained in this report. Seasonality We believe that we will experience minor seasonal fluctuations in the occupancy levels of our facilities, which we believe will be slightly higher over the summer months due to increased moving activity.
Prior to March 17, 2021 and June 1, 2022, SST IV and SSGT II, respectively, were also included in the “Managed REITs.” We operate the properties owned by the Managed REITs, consisting of, as of December 31, 2022, 19 operating properties and approximately 14,600 units and approximately 1.8 million rentable square feet.
Prior to March 17, 2021 and June 1, 2022, SST IV and SSGT II, respectively, were also included in the “Managed REITs.” We operate the properties owned by the Managed REITs, which together with one other self storage property we manage, as of December 31, 2023, represented 32 operating properties and approximately 25,400 units and approximately 2.8 million rentable square feet.
These factors may limit our ability to acquire self storage properties in an as accretive manner going forward. 50 Results of Operations Overview We derive revenues principally from: (i) rents received from our self storage tenant leases; (ii) fees generated from our Managed REITs; (iii) our Tenant Protection Programs; and (iv) sales of packing and storage-related supplies at our storage facilities.
Results of Operations Overview We derive revenues principally from: (i) rents received from our self storage tenant leases; (ii) fees generated from our Managed REITs; (iii) our Tenant Protection Programs; and (iv) sales of packing and storage-related supplies at our storage facilities.
On February 24, 2023, our board of directors declared a distribution rate for the month of March 2023 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 59 shown on our books at the close of business on each day of the period commencing on March 1, 2023 and ending March 31, 2023.
Such distributions payable to each stockholder of record will be paid the following month. 60 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.
Acquisitions of portfolios of facilities are allocated to the individual facilities based upon an income approach or a cash flow analysis using appropriate risk adjusted capitalization rates which take into account the relative size, age, and location of the individual facility along with current and projected occupancy and rental rate levels or appraised values, if available.
Acquisitions of portfolios of facilities are allocated to the individual facilities based upon an income approach or a cash flow analysis using appropriate risk adjusted capitalization rates which take into account the relative size, age, and location of the individual facility along with current and projected occupancy and rental rate levels or appraised values, if available. 49 Our allocations of purchase prices are based on certain significant estimates and assumptions, variations in such estimates and assumptions could result in a materially different presentation of the consolidated financial statements or materially different amounts being reported in the consolidated financial statements.
Alternatively, we may issue additional secured or unsecured financing from banks or other lenders, or we may enter into various other forms of financing. In April 2022, we received an investment grade credit rating of BBB- from Kroll Bond Rating Agency, Inc. In accordance with the Note Purchase Agreement, we intend to maintain a credit rating on an annual basis.
Alternatively, we may issue additional secured or unsecured financing from banks or other lenders, or we may enter into various other forms of financing. In April 2022, we received our initial investment grade credit rating of BBB- from Kroll Bond Rating Agency, Inc.
Preparing financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. Following is a discussion of the estimates and assumptions used in setting accounting policies that we consider critical in the presentation of our consolidated financial statements.
Following is a discussion of the estimates and assumptions used in setting accounting policies that we consider critical in the presentation of our consolidated financial statements.
The broader shift of people working from home, elevated migration patterns and strength in the housing market helped drive growth in self storage demand, which generally contributed to our results through the twelve months ended December 31, 2022.
Since the beginning of the COVID-19 pandemic in late March 2020, the broader shift of people working from home, elevated migration patterns and strength in the housing market helped drive growth in self storage demand, which generally contributed to our results since the onset of COVID-19, and through calendar year 2022.
Same-Store Facility Results – Years Ended December 31, 2022 and 2021 The following table sets forth operating data for our same-store facilities (those properties included in the consolidated results of operations since January 1, 2021, excluding three lease-up properties we owned as of January 1, 2021) for the years ended December 31, 2022 and 2021.
Same-Store Facility Results – Years Ended December 31, 2023 and 2022 The following table sets forth operating data for our same-store facilities (stabilized and comparable properties that have been included in the consolidated results of operations since January 1, 2022, excluding two other properties) for the years ended December 31, 2023 and 2022.
The change is primarily the result of additional interest revenue and financing fee revenue earned in 2022. Income Tax (Expense) Benefit Income tax benefit for the years ended December 31, 2022 and 2021 was approximately $0.6 million and $1.8 million of income, respectively. Income tax consists primarily of adjustments to deferred tax liabilities, state, federal, and Canadian income tax.
Income Tax (Expense) Benefit Income tax for the years ended December 31, 2023 and 2022 was approximately $2.6 million and $0.6 million of benefit, respectively. Income tax consists primarily of adjustments to deferred tax liabilities, state, federal, and Canadian income tax.
The change in financing activities is primarily attributable to the effect of debt borrowings, net of paydowns of approximately $196.3 million during the year ended December 31, 2022 compared to approximately $79.7 million of net debt financing provided during the year ended December 31, 2021.
The change in financing activities is primarily attributable to the effect of cash inflows from debt borrowings, net of paydowns of approximately $16.0 million during the year ended December 31, 2023 compared to approximately $196.3 million of net debt financing provided during the year ended December 31, 2022, which resulted in a reduction of such cash inflows of approximately $180.3 million.
We expect Managed REIT Platform Revenue to fluctuate commensurate with our Managed REITs' increase in operations and assets under management. 51 Reimbursable Costs from Managed REITs Reimbursable costs from Managed REITs for the years ended December 31, 2022 and 2021 were approximately $4.6 million and $4.3 million, respectively.
We expect Managed REIT Platform Revenue to fluctuate commensurate with our Managed REITs' increase in operations and assets under management, as well as reductions to such revenue in connection with the Sponsor Funding Agreement as SST VI continues to sell shares in its public offering. 52 Reimbursable Costs from Managed REITs Reimbursable costs from Managed REITs for the years ended December 31, 2023 and 2022 were approximately $5.8 million and $4.6 million, respectively.
For the year ended December 31, 2022, we paid distributions of approximately $74.4 million, of which approximately $54.6 million was paid to common stockholders, as compared to FFO (attributable to common stockholders) of approximately $49.5 million, which reflects a write-off of equity interest and preexisting relationships of approximately $2.0 million, debt defeasance costs of approximately $2.4 million, and acquisition related expenses of approximately $0.9 million.
For the year ended December 31, 2022, we paid distributions of approximately $74.4 million, of which approximately $54.6 million was paid to common stockholders, as compared to FFO (attributable to common stockholders) of approximately $49.5 million.
The SmartCentres Lender is an affiliate of SmartCentres Real Estate Investment Trust, an unaffiliated third party ("SmartCentres"), that owns the other 50% of our unconsolidated real estate joint ventures located in the Greater Toronto Area of Canada. As of December 31, 2022, approximately $116.7 million Canadian Dollars ("CAD") or approximately $86.1 million in USD was outstanding on the SmartCentres Financings.
The SmartCentres Lender is an affiliate of SmartCentres Real Estate Investment Trust, an unaffiliated third party ("SmartCentres"), that owns the other 50% of our unconsolidated real estate joint ventures located in the Greater Toronto Area of Canada.
Our determinations of the useful lives of the assets could result in a materially different presentation of the consolidated financial statements or materially different amounts being reported in the financial statements, as such determinations, and the corresponding amount of depreciation expense, may vary dramatically based on the estimates and assumptions we use.
Our determinations of the useful lives of the assets could result in a materially different presentation of the consolidated financial statements or materially different amounts being reported in the financial statements, as such determinations, and the corresponding amount of depreciation expense, may vary dramatically based on the estimates and assumptions we use. 50 Consolidation Considerations Current accounting guidance provides a framework for identifying a variable interest entity (“VIE”) and determining when a company should include the assets, liabilities, noncontrolling interests, and results of activities of a VIE in its consolidated financial statements.
Write-off of equity interest and preexisting relationships upon acquisition of control Write-off of equity interest and preexisting relationships upon acquisition of control for the year ended December 31, 2022 and 2021 was approximately $2.0 million and $8.4 million, respectively.
No future adjustments related to the Self Administration Transaction earnout will be recorded. Write-off of equity interest and preexisting relationships upon acquisition of control Write-off of equity interest and preexisting relationships upon acquisition of control for the year ended December 31, 2023 and 2022 was none and approximately $2.0 million, respectively.
No impairment charges were recognized during the years ended December 31, 2022 or 2021.
No impairment charges were recognized during the years ended December 31, 2023, 2022 or 2021. Trademarks Valuation Trademarks are based on the value of our brands.
Interest expense includes interest expense on our debt, accretion of fair market value adjustments of our debt, amortization of debt issuance costs, and the impact of our interest rate hedging derivatives.
Interest Expense Interest expense for the years ended December 31, 2023 and 2022 was approximately $61.8 million and $41.5 million, respectively. Interest expense includes interest expense on our debt, accretion of fair market value adjustments of our debt, amortization of debt issuance costs, and the impact of our interest rate hedging derivatives.
The proceeds of the SmartCentres Financings have been and will be used to finance the development and construction of the SmartCentres joint venture properties. See Note 4 – Investments in Unconsolidated Real Estate Ventures, of the Notes to the Consolidated Financial Statements contained in this report for additional information regarding the SmartCentres Financings.
See Note 4 – Investments in Unconsolidated Real Estate Ventures, of the Notes to the Consolidated Financial Statements contained in this report for additional information.
As of December 31, 2022, pursuant to the SST VI Mezzanine Loan, we were potentially required to fund an additional $20.0 million in debt to SST VI at their option.
As of December 31, 2023, pursuant to the SSGT III Mezzanine Loan, we were potentially required to fund an additional $1.5 million in debt to SSGT III at their option. Through December 31, 2023, we have paid SST VI approximately $6.6 million in connection with the Sponsor Funding Agreement.
The following table presents a reconciliation of net loss as presented on our consolidated statements of operations to net operating income, as stated above, for the periods indicated: For the Year Ended December 31, 2022 2021 Net loss $ 21,669,452 $ (19,564,718 ) Adjusted to exclude: Tenant Protection Program revenue (1) (7,455,948 ) (6,520,645 ) Managed REIT Platform revenue (7,819,216 ) (6,322,970 ) Managed REIT Platform expenses 2,485,290 1,451,166 General and administrative 28,253,905 23,265,196 Depreciation 49,417,679 40,946,406 Intangible amortization expense 15,200,854 12,422,205 Acquisition expenses 888,009 934,838 Contingent earnout adjustment 1,514,447 12,619,744 Write-off of equity interest and preexisting relationships upon acquisition of control 2,049,682 8,389,573 Gain on equity interest upon consolidation (16,101,237 ) — Gain on sale of real estate — (178,631 ) Interest expense 41,511,911 33,383,604 Net loss on extinguishment of debt 2,393,475 2,444,788 Income tax expense (benefit) (554,785 ) (1,811,275 ) Other 848,805 2,055,351 Total net operating income $ 134,302,323 $ 103,514,632 (1) Approximately $5.4 million and $5.3 million of Tenant Protection Program revenue was earned at same store facilities during the years ended December 31, 2022 and 2021, respectively, with the remaining approximately $2.1 million and $1.2 million earned at non same-store facilities during the years ended December 31, 2022 and 2021, respectively.
The following table presents a reconciliation of net income (loss) as presented on our consolidated statements of operations to net operating income, as stated above, for the periods indicated: For the Year Ended December 31, 2023 2022 Net income $ 11,646,760 $ 21,669,452 Adjusted to exclude: Tenant Protection Program revenue (1) (7,784,026 ) (7,455,948 ) Managed REIT Platform revenue (11,906,311 ) (7,819,216 ) Managed REIT Platform expenses 3,365,491 2,485,290 General and administrative 27,451,533 28,253,905 Depreciation 53,636,353 49,417,679 Intangible amortization expense 6,593,853 15,200,854 Acquisition expenses 192,358 888,009 Contingent earnout adjustment — 1,514,447 Write-off of equity interest and preexisting relationships upon acquisition of control — 2,049,682 Gain on equity interest upon acquisition — (16,101,237 ) (Earnings) losses from our equity method investments in JV Properties 1,625,135 760,005 (Earnings) losses from our equity method investments in Managed REITs 1,273,143 930,201 Other, net (3,128,867 ) (841,401 ) Interest expense 61,804,621 41,511,911 Net loss on extinguishment of debt — 2,393,475 Income tax expense (benefit) (2,595,856 ) (554,785 ) Total net operating income $ 142,174,187 $ 134,302,323 (1) Approximately $6.8 million and $6.8 million of Tenant Protection Program revenue was earned at same store facilities during the years ended December 31, 2023 and 2022, respectively, with the remaining approximately $1.0 million and $0.7 million earned at non same-store facilities during the years ended December 31, 2023 and 2022, respectively.
See Note 5 – Debt and Note 14 – Subsequent Events of the Notes to the Consolidated Financial Statements for more information about our indebtedness. Additionally, we are party to a master mortgage commitment agreement (the "SmartCentres Financings") with SmartCentres Storage Finance LP (the "SmartCentres Lender").
See Note 5 – Debt and Note 14 – Subsequent Events of the Notes to the Consolidated Financial Statements for more information about our indebtedness.
(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.
(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.
As discussed below, the results of operations presented herein cover a period of time prior to the SST IV Merger and SSGT II Merger.
Operating results in future periods will depend on the results of operations of these properties and of the real estate properties that we acquire in the future. As discussed below, the results of operations presented herein cover a period of time prior to the SSGT II Merger.
In addition, we have the internal capability to originate, structure and manage additional self storage investment programs (the “Managed REIT Platform”) which would be sponsored by SmartStop REIT Advisors, LLC (“SRA”), our indirect subsidiary.
In addition, we have the internal capability to originate, structure and manage additional self storage investment programs (the “Managed REIT Platform”) which would be sponsored by SRA, our indirect subsidiary. We generate asset management fees, property management fees, acquisition fees, and other fees and also receive substantially all of the tenant protection program revenue earned by our Managed REITs.
For cash requirements related to potential acquisitions currently under contract, please see Note 3 – Real Estate Facilities of the Notes to the Consolidated Financial Statements. Subsequent Events Please see Note 14 – Subsequent Events, of the Notes to the Consolidated Financial Statements contained in this report.
See Note 10 – Related Party Transactions of the Notes to the Consolidated Financial Statements for more information about our obligations under these agreements. For cash requirements related to potential acquisitions currently under contract, please see Note 3 – Real Estate Facilities and Note 4 – Investments in Unconsolidated Real Estate Ventures of the Notes to the Consolidated Financial Statements.
These acquisition expenses were incurred prior to acquisitions becoming probable in accordance with our capitalization policy. Contingent Earnout Adjustment The contingent earnout adjustment for the year ended December 31, 2022 and 2021 reflects an increase in the contingent earnout liability of approximately $1.5 million and $12.6 million, respectively.
Acquisition Expenses Acquisition expenses for the years ended December 31, 2023 and 2022 were approximately $0.2 million and $0.9 million, respectively. These acquisition expenses were incurred prior to acquisitions becoming probable in accordance with our capitalization policy. The decrease in acquisition expenses of approximately $0.7 million is related to reduced acquisition activity.
Offsetting such net increase in cash flows from financing activities was an approximately $23.2 million increase in cash distributions paid to common stockholders, due to the cessation of our distribution reinvestment plan and the additional shares outstanding.
Offsetting such amounts was a reduction of approximately $8.8 million in cash distributions paid to common stockholders due to the cessation of our distribution reinvestment plan during 2022 and reinstatement of our distribution reinvestment plan during 2023.
We expect property operating expenses to decrease as a percentage of revenue as revenues increase. Managed REIT Platform Expenses Managed REIT Platform expenses for the years ended December 31, 2022 and 2021 were approximately $2.5 million and $1.5 million, respectively.
Managed REIT Platform Expenses Managed REIT Platform expenses for the years ended December 31, 2023 and 2022 were approximately $3.4 million and $2.5 million, respectively.
(8) 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.
(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.
Cash Flows A comparison of cash flows for operating, investing and financing activities for the years ended December 31, 2022 and 2021 are as follows: Year Ended December 31, 2022 Year Ended December 31, 2021 Change Net cash flow provided by (used in): Operating activities $ 87,909,977 $ 58,764,984 $ 29,144,993 Investing activities $ (205,151,158 ) $ (120,214,731 ) $ (84,936,427 ) Financing activities $ 120,067,251 $ 25,674,567 $ 94,392,684 Cash flows provided by operating activities for the years ended December 31, 2022 and 2021 were approximately $87.9 million and $58.8 million, respectively, an increase of approximately $29.1 million.
Cash Flows A comparison of cash flows for operating, investing and financing activities for the years ended December 31, 2023 and 2022 are as follows: Year Ended December 31, 2023 Year Ended December 31, 2022 Change Net cash flow provided by (used in): Operating activities $ 73,191,384 $ 87,909,977 $ (14,718,593 ) Investing activities $ 261,312 $ (205,151,158 ) $ 205,412,470 Financing activities $ (66,098,584 ) $ 120,067,251 $ (186,165,835 ) Cash flows provided by operating activities for the years ended December 31, 2023 and 2022 were approximately $73.2 million and $87.9 million, respectively, a decrease of approximately $14.7 million.
Cash flows used in investing activities for the years ended December 31, 2022 and 2021 were approximately $205.2 million and $120.2 million, respectively, an increase in the use of cash of approximately $84.9 million.
Cash flows provided by investing activities for the year ended December 31, 2023 was approximately $0.3 million and cash flows used for investing activities for the year ended December 31, 2022 was approximately $205.2 million, a reduction in the use of cash of approximately $205.4 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+2 added−0 removed9 unchanged
Biggest changeAs of December 31, 2021, our net debt was approximately $873.9 million, which included approximately $340.7 million in fixed rate debt, $536.8 million in variable rate debt and approximately $0.2 million in net debt premium less approximately $3.9 million in net debt issuance costs. Our debt instruments were entered into for other than trading purposes.
Biggest changeWe will not enter into derivative or interest rate transactions for speculative purposes. 64 As of December 31, 2023, our net debt was approximately $1,087.4 million, which included approximately $523.1 million in fixed rate debt, and $568.7 million in variable rate debt, less approximately $0.1 million in debt discount, and approximately $4.3 million in net debt issuance costs.
If the underlying rate of the related index on our variable rate debt were to increase by 100 basis points, the increase in interest, net of our interest rate derivatives, would decrease future earnings and cash flows by approximately $2.8 million annually. Interest rate risk amounts were determined by considering the impact of hypothetical interest rates on our financial instruments.
If the underlying rate of the related index on our variable rate debt were to increase by 100 basis points, the increase in interest, net of our interest rate derivatives, would decrease future earnings and cash flows by approximately $2.2 million annually. Interest rate risk amounts were determined by considering the impact of hypothetical interest rates on our financial instruments.
We may also enter into derivative financial instruments such as interest rate swaps and caps in order to mitigate our interest rate risk on a related financial instrument. We will not enter into derivative or interest rate transactions for speculative purposes.
We may also enter into derivative financial instruments such as interest rate swaps and caps in order to mitigate our interest rate risk on a related financial instrument.
As of December 31, 2022, our net debt was approximately $1,068 million, which included approximately $442.8 million in fixed rate debt, and $630.2 million in variable rate debt, less approximately $0.1 million in debt discount, and approximately $4.5 million in net debt issuance costs.
As of December 31, 2022, our net debt was approximately $1,068.4 million, which included approximately $442.8 million in fixed rate debt, and $630.2 million in variable rate debt, less approximately $0.1 million in debt discount, and approximately $4.5 million in net debt issuance costs. Our debt instruments were entered into for other than trading purposes.
The following table summarizes annual debt maturities and average interest rates on our outstanding debt as of December 31, 2022: 63 Year Ending December 31, 2023 2024 2025 2026 2027 Thereafter Total Fixed rate debt $ 2,639,404 $ 2,734,895 $ 2,869,187 $ 91,916,098 $ 48,105,555 $ 294,500,000 $ 442,765,139 Average interest rate (1) 4.43 % 4.43 % 4.43 % 4.49 % 4.57 % 4.50 % Variable rate debt $ — $ 380,193,788 $ — $ 250,000,000 $ — $ — $ 630,193,788 Average interest rate (1) 6.05 % 6.02 % 6.00 % 6.00 % N/A N/A (1) Interest expense for fixed rate debt was calculated based upon the contractual rate and the interest expense on variable rate debt was calculated based on the rate in effect on December 31, 2022, excluding the impact of interest rate derivatives.
The following table summarizes annual debt maturities and average interest rates on our outstanding debt as of December 31, 2023: Year Ending December 31, 2024 2025 2026 2027 2028 Thereafter Total Fixed rate debt $ 2,734,900 $ 2,987,627 $ 93,312,927 $ 49,594,599 $ 79,968,686 $ 294,500,000 $ 523,098,739 Average interest rate (1) 4.96 % 4.97 % 5.05 % 5.24 % 5.31 % 5.14 % Variable rate debt (2) $ 318,688,429 $ — $ 250,000,000 $ — $ — $ — $ 568,688,429 Average interest rate (1) 7.09 % 7.08 % 7.08 % N/A N/A N/A (1) Interest expense for fixed rate debt was calculated based upon the contractual rate and the interest expense on variable rate debt was calculated based on the rate in effect on December 31, 2023, excluding the impact of interest rate derivatives.
Debt denominated in foreign currency has been converted based on the rate in effect as of December 31, 2022. Currently, our only foreign exchange rate risk comes from our Canadian properties and the Canadian Dollar (“CAD”).
Currently, our only foreign exchange rate risk comes from our Canadian properties and the Canadian Dollar (“CAD”).
Added
Debt denominated in foreign currency has been converted based on the rate in effect as of December 31, 2023. (2) On February 22, 2024, we entered into an amended and restated revolving credit facility with KeyBank. The 2024 Credit Facility replaces the Credit Facility we entered into on March 17, 2021, and has a maturity date of February 22, 2027.
Added
Additionally, on March 7, 2024, we entered into a $75 million CAD term loan with National Bank of Canada (the "2027 NBC Loan"), which has a maturity date of March 7, 2027. See Note 5 – Debt, and Note 14 – Subsequent Events of the Notes to the Consolidated Financial Statements, for more information.

Other SMA 10-K year-over-year comparisons