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

LADERA RANCH, Calif.–(BUSINESS WIRE)–SmartStop Self Storage REIT, Inc. (“SmartStop”), a self-managed and fully-integrated self storage company, announced its overall results for the three and nine months ended September 30, 2022.

“We posted another terrific quarter of results, highlighted by our eighth consecutive quarter of double digit same-store net operating income growth,” said H. Michael Schwartz, Chairman and CEO of SmartStop. “With industry leading same-store results over the past three years, the SmartStop Platform and our incredible operations team are truly best in class. This was on full display, as SmartStop received the number one ranking among self storage centers in Newsweek’s America’s Best Customer Service 2023, our second time in the top spot. We are extremely proud of our team and the results of their hard work.”

Three Months Ended September 30, 2022 Financial Highlights:

Net loss attributable to common stockholders was approximately $1.3 million. This represents an improvement of approximately $0.9 million when compared to the same period in 2021. Net loss per Class A and Class T shares (diluted) was $0.01, an improvement of $0.02 when compared to the same period in 2021.
Total self storage-related revenues were approximately $53.2 million, an increase of approximately $10.5 million when compared to the same period in 2021.
FFO, as adjusted (attributable to common stockholders and Operating Partnership (“OP”) unit holders), was approximately $16.9 million, an increase of approximately $3.3 million when compared to the same period in 2021.
FFO, as adjusted per share and OP unit outstanding – diluted was $0.15, an increase of $0.01 when compared to the same period in 2021.
Same-store revenues, expenses and net operating income (“NOI”) increased by 11.8%, 7.5% and 13.7%, respectively, compared to the same period in 2021.
Same-store average physical occupancy decreased by 1.4% to 94.5% compared to the same period in 2021.
Same-store annualized rent per occupied square foot was approximately $19.30, an increase of approximately $2.42 when compared to the same period in 2021.

Nine Months Ended September 30, 2022 Financial Highlights:

Net income attributable to common stockholders was approximately $7.7 million. This represents an improvement of approximately $27.7 million when compared to the same period in 2021. Net income per Class A and Class T shares (diluted) was $0.08, an improvement of $0.34, when compared to the same period in 2021.
Total self storage-related revenues were approximately $146.8 million, an increase of approximately $32.9 million when compared to the same period in 2021.
Same-store revenues, expenses and NOI increased by 14.6%, 4.0% and 19.5%, respectively, compared to the same period in 2021.
Same-store average physical occupancy was 95.0%, consistent with the same period in 2021.
Same-store annualized rent per occupied square foot was approximately $18.51, which represented an increase of approximately $2.45 when compared to the same period in 2021.

External Growth

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

Managed REIT Platform Update

As of quarter end, SmartStop serves as the sponsor of Strategic Storage Growth Trust III, Inc. (“SSGT III”) and Strategic Storage Trust VI, Inc. (“SST VI” and together with SSGT III, the “Managed REITs”). SmartStop receives advisory fees and property management fees from the Managed REITs, which had a combined portfolio of 16 properties and approximately 11,600 units and 1.35 million rentable square feet at quarter end. During the quarter, assets under management for the Managed REITs increased by $98.9 million to approximately $304.9 million.

Declared Distributions

On September 20, 2022, SmartStop’s board of directors declared a distribution rate for the month of October 2022 of approximately $0.00164 per day per share on the outstanding shares of common stock payable to Class A and Class T stockholders of record of such shares as shown on SmartStop’s books at the close of business on each day of the period commencing on October 1, 2022 and ending October 31, 2022. On October 25, 2022, SmartStop’s board of directors declared a distribution rate for the month of November 2022 of approximately $0.00164 per day per share on the outstanding shares of common stock payable to Class A and Class T stockholders of record of such shares as shown on our books at the close of business on each day of the period commencing on November 1, 2022 and ending November 30, 2022. Such distributions payable to each stockholder of record during a month will be paid the following month.


SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

	September 30, 2022 (Unaudited)			December 31, 2021
ASSETS
Real estate facilities:
Land	$	419,955,631		$	397,508,081
Buildings		1,372,872,398			1,117,204,944
Site improvements		88,518,025			78,910,603
		1,881,346,054			1,593,623,628
Accumulated depreciation		(189,348,455	)		(155,926,875	)
		1,691,997,599			1,437,696,753
Construction in process		4,294,011			1,799,004
Real estate facilities, net		1,696,291,610			1,439,495,757
Cash and cash equivalents		41,193,848			37,254,226
Restricted cash		8,673,253			7,432,135
Investments in unconsolidated real estate ventures		27,768,860			18,943,284
Investments in and advances to Managed REITs		34,491,631			12,404,380
Other assets, net		37,829,529			15,423,508
Intangible assets, net of accumulated amortization		17,479,185			14,337,820
Trademarks, net of accumulated amortization		15,947,059			16,052,941
Goodwill		53,643,331			53,643,331
Debt issuance costs, net of accumulated amortization		2,451,334			3,305,394
Total assets	$	1,935,769,640		$	1,618,292,776
LIABILITIES AND EQUITY
Debt, net	$	1,038,598,478		$	873,866,855
Accounts payable and accrued liabilities		29,981,882			22,693,941
Due to affiliates		409,730			584,291
Distributions payable		9,088,802			8,360,420
Contingent earnout		—			30,000,000
Deferred tax liabilities		6,275,250			7,719,098
Total liabilities		1,084,354,142			943,224,605
Commitments and contingencies
Redeemable common stock		76,578,073			71,334,675
Preferred stock, $0.001 par value; 200,000,000 shares authorized:
Series A Convertible Preferred Stock, $0.001 par value; 200,000 shares authorized; 200,000 and 200,000 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively, with aggregate liquidation preferences of $203,150,685 and $203,150,685 at September 30, 2022 and December 31, 2021, respectively		196,356,107			196,356,107
Equity:
SmartStop Self Storage REIT, Inc.:
Class A common stock, $0.001 par value; 350,000,000 shares authorized; 88,857,061 and 77,057,743 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		88,857			77,058
Class T common stock, $0.001 par value; 350,000,000 shares authorized; 8,085,550 and 8,056,198 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		8,085			8,056
Additional paid-in capital		893,998,929			724,739,872
Distributions		(251,489,095	)		(210,964,464	)
Accumulated deficit		(163,194,695	)		(170,846,475	)
Accumulated other comprehensive income (loss)		3,499,198			(279,975	)
Total SmartStop Self Storage REIT, Inc. equity		482,911,279			342,734,072
Noncontrolling interests in our Operating Partnership		95,506,351			64,632,417
Other noncontrolling interests		63,688			10,900
Total noncontrolling interests		95,570,039			64,643,317
Total equity		578,481,318			407,377,389
Total liabilities, temporary equity and equity	$	1,935,769,640		$	1,618,292,776

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenues:
Self storage rental revenue	$	51,022,976		$	40,695,622		$	140,551,208		$	108,303,763
Ancillary operating revenue		2,209,695			2,007,411			6,282,850			5,591,882
Managed REIT Platform revenue		2,055,224			1,263,029			5,877,454			4,609,060
Reimbursable costs from Managed REITs		1,165,994			972,551			3,514,486			3,250,213
Total revenues		56,453,889			44,938,613			156,225,998			121,754,918
Operating expenses:
Property operating expenses		15,984,019			12,593,191			42,726,575			35,416,441
Managed REIT Platform expenses		725,599			587,704			1,732,710			1,223,736
Reimbursable costs from Managed REITs		1,165,994			972,551			3,514,486			3,250,213
General and administrative		7,330,245			5,232,950			21,114,475			16,797,252
Depreciation		13,220,916			10,748,337			36,155,008			30,035,065
Intangible amortization expense		4,849,934			3,710,736			13,222,791			8,623,964
Acquisition expenses		77,813			211,985			780,684			548,083
Contingent earnout adjustment		200,626			700,000			1,514,447			3,219,744
Write-off of equity interest and preexisting relationships upon acquisition of control		—			—			2,049,682			8,389,573
Total operating expenses		43,555,146			34,757,454			122,810,858			107,504,071
Gain on equity interests upon acquisition		—			—			16,101,237			—
Gain on sale of real estate		—			—			—			178,631
Income from operations		12,898,743			10,181,159			49,516,377			14,429,478
Other income (expense):
Interest expense		(11,752,656	)		(8,288,215	)		(28,181,026	)		(25,320,635	)
Net loss on extinguishment of debt		—			—			(2,393,475	)		(2,444,788	)
Other, net		1,202,670			(1,110,294	)		184,987			(1,300,405	)
Income tax (expense) benefit		(102,233	)		276,592			402,242			2,081,288
Net income (loss)		2,246,524			1,059,242			19,529,105			(12,555,062	)
Net (income) loss attributable to noncontrolling interests		(366,047	)		(119,678	)		(2,528,010	)		1,903,408
Less: Distributions to preferred stockholders		(3,150,684	)		(3,150,685	)		(9,349,315	)		(9,349,315	)
Net income (loss) attributable to SmartStop Self Storage REIT, Inc. common stockholders	$	(1,270,207	)	$	(2,211,121	)	$	7,651,780		$	(20,000,969	)
Net income (loss) per Class A & Class T share – basic	$	(0.01	)	$	(0.03	)	$	0.08		$	(0.26	)
Net income (loss) per Class A & Class T share – diluted	$	(0.01	)	$	(0.03	)	$	0.08		$	(0.26	)
Weighted average Class A shares outstanding – basic		88,701,119			76,407,968			82,224,600			69,674,568
Weighted average Class A shares outstanding – diluted		88,701,119			76,407,968			82,344,928			69,674,568
Weighted average Class T shares outstanding – basic		8,085,550			8,003,062			8,080,737			7,964,237
Weighted average Class T shares outstanding – diluted		8,085,550			8,003,062			8,080,737			7,964,237

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES NON-GAAP MEASURE – COMPUTATION OF FUNDS FROM OPERATIONS, AS ADJUSTED (Unaudited)

	Three Months Ended September 30, 2022			Three Months Ended September 30, 2021			Nine Months Ended September 30, 2022			Nine Months Ended September 30, 2021
Net income (loss) (attributable to common stockholders)	$	(1,270,207	)	$	(2,211,121	)	$	7,651,780		$	(20,000,969	)
Add:
Depreciation of real estate		12,938,956			10,556,270			35,420,113			29,455,038
Amortization of real estate related intangible assets		4,776,068			3,469,777			12,722,904			7,473,006
Depreciation and amortization of real estate and intangible assets from unconsolidated entities		411,257			256,233			1,069,986			487,229
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⁾		(1,973,133	)		(1,545,084	)		(3,514,091	)		(4,162,008	)
FFO (attributable to common stockholders)		14,882,941			10,526,075			37,249,455			12,904,132
Other Adjustments:
Intangible amortization expense – contracts ⁽³⁾		73,866			240,959			499,887			1,150,958
Acquisition expenses ⁽⁴⁾		77,813			211,985			780,684			548,083
Acquisition expenses and foreign currency losses, net from unconsolidated entities		70,634			27,767			122,590			135,155
Casualty loss due to hurricane		350,000			—			350,000			—
Contingent earnout adjustment ⁽⁵⁾		200,626			700,000			1,514,447			3,219,744
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		3,230			(29,228	)		(38,968	)		(92,344	)
Net loss on extinguishment of debt ⁽⁶⁾		—			—			2,393,475			2,444,788
Foreign currency and interest rate derivative (gains) losses, net ⁽⁷⁾		(808,077	)		536,428			(731,805	)		110,879
Adjustment of deferred tax liabilities ⁽³⁾		(116,213	)		(290,942	)		(915,336	)		(2,220,688	)
Offering related expenses ⁽⁸⁾		95,243			—			1,483,003			—
Adjustment for noncontrolling interests ⁽²⁾		30,953			(151,463	)		(845,727	)		(1,586,543	)
FFO, as adjusted (attributable to common stockholders)	$	14,861,016		$	11,771,581		$	43,911,387		$	25,003,737

⁽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.
⁽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.
⁽⁴⁾		This represents acquisition expenses associated with investments in real estate that were incurred prior to the acquisitions becoming probable and therefore not capitalized in accordance with our capitalization policy.
⁽⁵⁾		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.
⁽⁶⁾		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.
⁽⁷⁾		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⁾		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.

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

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

	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
FFO (attributable to common stockholders and OP unit holders) Calculation:
FFO (attributable to common stockholders)	$	14,882,941	$	10,526,075	$	37,249,455	$	12,904,132
Net income (loss) attributable to the noncontrolling interests		128,223		119,678		2,290,186		(1,903,408	)
Adjustment for noncontrolling interests ⁽¹⁾		1,973,133		1,545,084		3,514,091		4,162,008
FFO (attributable to common stockholders and OP unit holders)	$	16,984,297	$	12,190,837	$	43,053,732	$	15,162,732
FFO, as adjusted (attributable to common stockholders and OP unit holders) Calculation:
FFO, as adjusted (attributable to common stockholders)	$	14,861,016	$	11,771,581	$	43,911,387	$	25,003,737
Net income (loss) attributable to the noncontrolling interests		128,223		119,678		2,290,186		(1,903,408	)
Adjustment for noncontrolling interests ⁽¹⁾		1,942,180		1,696,547		4,359,818		5,748,551
FFO, adjusted (attributable to common stockholders and OP unit holders)	$	16,931,419	$	13,587,806	$	50,561,391	$	28,848,880

Weighted average Class A & T shares outstanding		96,786,669		84,411,030		90,305,337		77,638,805
Weighted average OP units outstanding		12,131,585		10,270,455		11,354,513		9,933,505
Weighted average other dilutive securities		514,316		245,648		490,646		215,746
Weighted average shares & OP units outstanding – diluted ⁽²⁾		109,432,570		94,927,133		102,150,496		87,788,056
FFO, as adjusted per share & OP unit outstanding – diluted	$	0.15	$	0.14	$	0.49	$	0.33

⁽¹⁾		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.
⁽²⁾		Includes all Class A Shares, Class T Shares and OP Units, as well as the dilutive effect on FFO and FFO, as adjusted of both unvested restricted stock and long term incentive plan units (both time-based units and performance based-units), and is calculated using the two-class, treasury stock or if-converted method, as applicable. The outstanding convertible preferred stock was excluded as the conversion of such shares was antidilutive to FFO and FFO, as adjusted. This excludes Class A-2 OP Units for the period prior to their conversion into Class A-1 OP Units, which was contingent on growth in assets under management or other contingent events.

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

*Same-Store Facility Results – Three Months Ended September 30, 2022 and 2021*

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

	Same-Store Facilities									Non Same-Store Facilities							Total
	2022			2021			% Change			2022			2021			% Change	2022			2021			% Change
Revenue ⁽¹⁾	$	35,841,292		$	32,054,209			11.8	%	$	15,448,916		$	8,905,315		N/M	$	51,290,208		$	40,959,524			25.2	%
Property operating expenses ⁽²⁾		10,390,555			9,662,993			7.5	%		5,593,464			2,930,198		N/M		15,984,019			12,593,191			26.9	%
Net operating income	$	25,450,737		$	22,391,216			13.7	%	$	9,855,452		$	5,975,117		N/M	$	35,306,189		$	28,366,333			24.5	%
Number of facilities		109			109						44			29				153			138
Rentable square feet ⁽³⁾		8,036,285			8,034,200						3,758,445			2,459,600				11,794,730			10,493,800
Average physical occupancy ⁽⁴⁾		94.5	%		95.9	%					93.4	%		94.7	%			94.2	%		95.6	%
Annualized rent per occupied square foot ⁽⁵⁾	$	19.30		$	16.88					N/M			N/M				$	19.02		$	16.67

N/M Not meaningful
⁽¹⁾		Revenue includes rental revenue, certain ancillary revenue, administrative and late fees, and excludes Tenant Protection Program revenue.
⁽²⁾		Property operating expenses excludes corporate general and administrative expenses, interest expense, depreciation, amortization expense, and acquisition expenses.
⁽³⁾		Of the total rentable square feet, parking represented approximately 1,016,000 square feet and 937,000 square feet as of September 30, 2022 and 2021, respectively. On a same-store basis, for the same periods, parking represented approximately 680,000 square feet.
⁽⁴⁾		Determined by dividing the sum of the month-end occupied square feet for the applicable group of facilities for each applicable period by the sum of their month-end rentable square feet for the period.
⁽⁵⁾		Determined by dividing the aggregate realized rental income for each applicable period by the aggregate of the month-end occupied square feet for the period. Properties are included in the respective calculations in their first full month of operations, as appropriate. SmartStop has excluded the realized rental revenue and occupied square feet related to parking herein for the purpose of calculating annualized rent per occupied square foot.

SmartStop’s same-store revenue increased by approximately $3.8 million, or approximately 11.8%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 due to higher annualized rent per occupied square foot, partially offset by an approximately 1% decrease in average occupancy.

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

	For the Three Months Ended September 30,
	2022			2021
Net income (loss)	$	2,246,524		$	1,059,242
Adjusted to exclude:
Tenant Protection Program revenue⁽¹⁾		(1,942,463	)		(1,743,509	)
Managed REIT Platform revenue		(2,055,224	)		(1,263,029	)
Managed REIT Platform expenses		725,599			587,704
General and administrative		7,330,245			5,232,950
Depreciation		13,220,916			10,748,337
Intangible amortization expense		4,849,934			3,710,736
Acquisition expenses		77,813			211,985
Contingent earnout adjustment		200,626			700,000
Interest expense		11,752,656			8,288,215
Income Tax		102,233			(276,592	)
Other, net		(1,202,670	)		1,110,294
Total net operating income	$	35,306,189		$	28,366,333

⁽¹⁾		Approximately $1.3 million and $1.4 million of Tenant Protection Program revenue was earned at same-store facilities during the three months ended September 30, 2022 and 2021, respectively, with the remaining approximately $0.6 million and $0.4 million earned at non same-store facilities during the three months ended September 30, 2022 and 2021, respectively.

Same-Store Facility Results – Nine Months Ended September 30, 2022 and 2021

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

	Same-Store Facilities									Non Same-Store Facilities							Total
	2022			2021			% Change			2022			2021⁽⁶⁾			% Change	2022			2021			% Change
Revenue ⁽¹⁾	$	103,860,238		$	90,606,377			14.6	%	$	37,440,152		$	18,496,288		N/M	$	141,300,390		$	109,102,665			29.5	%
Property operating expenses ⁽²⁾		29,701,547			28,569,244			4.0	%		13,025,028			6,847,197		N/M		42,726,575			35,416,441			20.6	%
Net operating income	$	74,158,691		$	62,037,133			19.5	%	$	24,415,124		$	11,649,091		N/M	$	98,573,815		$	73,686,224			33.8	%
Number of facilities		109			109						44			30				153			139
Rentable square feet ⁽³⁾		8,036,285			8,034,200						3,758,445			2,543,800				11,794,730			10,578,000
Average physical occupancy ⁽⁴⁾		95.0	%		95.0	%					93.2	%		91.4	%			94.4	%		94.1	%
Annualized rent per occupied square foot ⁽⁵⁾	$	18.51		$	16.06					NM			NM				$	18.28		$	15.89

Contacts

David Corak
VP of Corporate Finance

SmartStop Self Storage REIT, Inc.

www.investors.smartstopselfstorage.com
[email protected]

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