SmartStop Self Storage REIT, Inc. Reports Fourth 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 twelve months ended December 31, 2022.

“The fourth quarter capped off another exceptional year for SmartStop,” said H. Michael Schwartz, Chairman and Chief Executive Officer of SmartStop. “Coming off of a record year of growth in 2021, which saw the highest level of same-store NOI growth in our Company’s history, we posted 16.5% same-store NOI growth in 2022. Likewise, our Managed REIT Platform continues to provide us with attractive returns, as assets under management for our two Managed REITs increased by approximately $287 million over the course of 2022 and fees increased by approximately 379%. These results and the value creation demonstrated in our updated NAV substantiate the investments we’ve made in our platform, technology and people. We are grateful for the remarkable team that’s worked tirelessly to build SmartStop to the company it is today.”

Three Months Ended December 31, 2022 Financial Highlights:

Net loss attributable to common stockholders was approximately $1.3 million. This represents an improvement of approximately $8.1 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 $0.10 when compared to the same period in 2021.
Total self storage-related revenues were approximately $53.4 million, an increase of approximately $9.1 million when compared to the same period in 2021.
FFO, as adjusted (attributable to common stockholders and Operating Partnership (“OP”) unit holders), was approximately $15.8 million, an increase of approximately $0.9 million when compared to the same period in 2021.
FFO, as adjusted per share and OP unit outstanding – diluted was $0.14, a decrease of $0.02 when compared to the same period in 2021.
Same-store revenues, expenses and net operating income (“NOI”) increased by 8.2%, 7.9% and 8.4%, respectively, compared to the same period in 2021.
Same-store average physical occupancy decreased by 2.1% to 93.3% compared to the same period in 2021.
Same-store annualized rent per occupied square foot was approximately $19.64, an increase of approximately $1.98 when compared to the same period in 2021.

Twelve Months Ended December 31, 2022 Financial Highlights:

Net income attributable to common stockholders was approximately $6.3 million. This represents an improvement of approximately $35.7 million when compared to the same period in 2021. Net income per Class A and Class T shares (diluted) was $0.07, an improvement of $0.44, when compared to the same period in 2021.
Total self storage-related revenues were approximately $200.2 million, an increase of approximately $42.0 million when compared to the same period in 2021.
FFO, as adjusted (attributable to common stockholders and OP unit holders), was approximately $66.3 million, an increase of approximately $22.6 million when compared to the same period in 2021.
FFO, as adjusted per share and OP unit outstanding – diluted was $0.64, an increase of $0.15 when compared to the same period in 2021.
Same-store revenues, expenses and NOI increased by 12.9%, 4.9% and 16.5%, respectively, compared to the same period in 2021.
Same-store average physical occupancy decreased by 0.5% to 94.6% compared to the same period in 2021.
Same-store annualized rent per occupied square foot was approximately $18.79, which represented an increase of approximately $2.33 when compared to the same period in 2021.

External Growth

During the quarter, the Company completed the development of a facility located in the town of Aurora in the Greater Toronto Area of Ontario. Subsequent to quarter end, the Company completed the development of a facility located in Brampton, Ontario, Canada.

Managed REIT Platform Update

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 18 operating properties and approximately 13,700 units and 1.7 million rentable square feet at quarter end. During the quarter, assets under management for the Managed REITs increased by $67.9 million to approximately $378.9 million. Subsequent to year end, the combined portfolio owned by the Managed REITs increased by two properties.

Additionally, SmartStop periodically makes debt investments in the Managed REITs in the form of mezzanine loans and preferred limited partnership interests in the operating partnerships of the respective Managed REITs. As of December 31, 2022, there was $35.0 million outstanding on a mezzanine loan from SmartStop to the operating partnership of SST VI, and $17.5 million outstanding on a mezzanine loan from SmartStop to the operating partnership of SSGT III. Subsequent to December 31, 2022, on January 30, 2023, SST VI borrowed an additional $15.0 million on the SST VI Mezzanine Loan. Additionally, on January 30, 2023, SmartStop invested $15.0 million in preferred limited partnership interests in SST VI OP. On January 26, 2023, SSGT III fully repaid the $17.5 million outstanding principal on the SSGT III Mezzanine Loan, plus accrued interest.

Declared Distributions

On December 20, 2022, SmartStop’s board of directors declared a distribution rate for the month of January 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 SmartStop’s books at the close of business on each day of the period commencing on January 1, 2023 and ending January 31, 2023. On January 25, 2023, SmartStop’s 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. 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 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 during a month will be paid the following month.

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

	December 31,
	2022			2021
ASSETS
Real estate facilities:
Land	$	420,522,591		$	397,508,081
Buildings		1,377,311,421			1,117,204,944
Site improvements		89,371,633			78,910,603
		1,887,205,645			1,593,623,628
Accumulated depreciation		(202,682,688	)		(155,926,875	)
		1,684,522,957			1,437,696,753
Construction in process		4,490,926			1,799,004
Real estate facilities, net		1,689,013,883			1,439,495,757
Cash and cash equivalents		39,486,588			37,254,226
Restricted cash		6,551,803			7,432,135
Investments in unconsolidated real estate ventures		28,522,082			18,943,284
Investments in and advances to Managed REITs		62,371,167			12,404,380
Other assets, net		34,131,543			15,423,508
Intangible assets, net of accumulated amortization		15,553,303			14,337,820
Trademarks, net of accumulated amortization		15,911,765			16,052,941
Goodwill		53,643,331			53,643,331
Debt issuance costs, net of accumulated amortization		2,031,922			3,305,394
Total assets	$	1,947,217,387		$	1,618,292,776
LIABILITIES, TEMPORARY EQUITY, AND EQUITY
Debt, net	$	1,068,371,956		$	873,866,855
Accounts payable and accrued liabilities		28,151,741			22,693,941
Due to affiliates		409,730			584,291
Distributions payable		9,324,453			8,360,420
Contingent earnout		—			30,000,000
Deferred tax liabilities		6,205,620			7,719,098
Total liabilities		1,112,463,500			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 December 31, 2022 and December 31, 2021, respectively, with aggregate liquidation preferences of $203,150,685 and $203,150,685 at December 31, 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; 88,853,454 and 77,057,743 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively		88,853			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 December 31, 2022 and December 31, 2021, respectively		8,085			8,056
Additional paid-in capital		894,283,954			724,739,872
Distributions		(266,151,517	)		(210,964,464	)
Accumulated deficit		(164,524,595	)		(170,846,475	)
Accumulated other comprehensive income (loss)		3,654,682			(279,975	)
Total SmartStop Self Storage REIT, Inc. equity		467,359,462			342,734,072
Noncontrolling interests in our Operating Partnership		94,405,766			64,632,417
Other noncontrolling interests		54,479			10,900
Total noncontrolling interests		94,460,245			64,643,317
Total equity		561,819,707			407,377,389
Total liabilities, temporary equity and equity	$	1,947,217,387		$	1,618,292,776

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

	Three Months Ended December 31, (Unaudited)						Year Ended December 31,
	2022			2021			2022			2021
Revenues:
Self storage rental revenue	$	51,198,370		$	42,306,574		$	191,749,578		$	150,610,337
Ancillary operating revenue		2,162,953			1,960,715			8,445,803			7,552,597
Managed REIT Platform revenue		1,941,762			1,713,910			7,819,216			6,322,970
Reimbursable costs from Managed REITs		1,114,011			1,028,454			4,628,497			4,278,667
Total revenues		56,417,096			47,009,653			212,643,094			168,764,571
Operating expenses:
Property operating expenses		15,710,535			12,711,216			58,437,110			48,127,657
Managed REIT Platform expenses		752,580			227,430			2,485,290			1,451,166
Reimbursable costs from Managed REITs		1,114,011			1,028,454			4,628,497			4,278,667
General and administrative		7,139,430			6,467,944			28,253,905			23,265,196
Depreciation		13,262,671			10,911,341			49,417,679			40,946,406
Intangible amortization expense		1,978,063			3,798,241			15,200,854			12,422,205
Acquisition expenses		107,325			386,755			888,009			934,838
Contingent earnout adjustment		—			9,400,000			1,514,447			12,619,744
Write-off of equity interest and preexisting relationships upon acquisition of control		—			—			2,049,682			8,389,573
Total operating expenses		40,064,615			44,931,381			162,875,473			152,435,452
Gain on equity interests upon acquisition		—			—			16,101,237			—
Gain on sale of real estate		—			—			—			178,631
Income (loss) from operations		16,352,481			2,078,272			65,868,858			16,507,750
Other income (expense):
Interest expense		(13,330,885	)		(8,062,969	)		(41,511,911	)		(33,383,604	)
Net loss on extinguishment of debt		—			—			(2,393,475	)		(2,444,788	)
Other, net		(1,033,792	)		(754,946	)		(848,805	)		(2,055,351	)
Income tax (expense) benefit		152,543			(270,013	)		554,785			1,811,275
Net income (loss)		2,140,347			(7,009,656	)		21,669,452			(19,564,718	)
Net (income) loss attributable to noncontrolling interests		(319,562	)		759,715			(2,847,572	)		2,663,123
Less: Distributions to preferred stockholders		(3,150,685	)		(3,150,685	)		(12,500,000	)		(12,500,000	)
Net income (loss) attributable to SmartStop Self Storage REIT, Inc. common stockholders	$	(1,329,900	)	$	(9,400,626	)	$	6,321,880		$	(29,401,595	)
Net income (loss) per Class A & Class T share – basic	$	(0.01	)	$	(0.11	)	$	0.07		$	(0.37	)
Net income (loss) per Class A & Class T share – diluted	$	(0.01	)	$	(0.11	)	$	0.07		$	(0.37	)
Weighted average Class A shares outstanding – basic		88,701,852			76,707,037			83,857,222			71,454,798
Weighted average Class A shares outstanding – diluted		88,701,852			76,707,037			83,974,488			71,454,798
Weighted average Class T shares outstanding – basic		8,085,550			8,040,965			8,081,950			7,983,576
Weighted average Class T shares outstanding – diluted		8,085,550			8,040,965			8,081,950			7,983,576

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

	Three Months Ended December 31, (Unaudited)						Year Ended December 31,
	2022			2021			2022			2021
Net income (loss) (attributable to common stockholders)	$	(1,329,900	)	$	(9,400,626	)	$	6,321,880		$	(29,401,595	)
Add:
Depreciation of real estate		12,979,960			10,703,195			48,400,073			40,158,233
Amortization of real estate related intangible assets		1,905,164			3,557,310			14,628,068			11,030,316
Depreciation and amortization of real estate and intangible assets from unconsolidated entities		465,430			267,602			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⁾		(1,765,123	)		(1,565,512	)		(5,279,214	)		(5,727,520	)
FFO (attributable to common stockholders)		12,255,531			3,561,969			49,504,986			16,466,101
Other Adjustments:
Intangible amortization expense – contracts ⁽³⁾		72,899			240,931			572,786			1,391,889
Acquisition expenses ⁽⁴⁾		107,325			386,755			888,009			934,838
Acquisition expenses and foreign currency (gains) losses, net from unconsolidated entities		26,504			75,222			149,094			210,377
Casualty loss due to hurricane ⁽⁵⁾		311,326			—			661,326			—
Contingent earnout adjustment ⁽⁶⁾		—			9,400,000			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		3,230			(18,598	)		(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⁾		806,835			255,970			75,030			366,849
Offering related expenses ⁽⁹⁾		319,942			—			1,802,945			—
Adjustment of deferred tax liabilities ⁽³⁾		(157,981	)		194,819			(1,073,317	)		(2,025,869	)
Adjustment for noncontrolling interests in our Operating Partnership ⁽²⁾		(171,341	)		(1,134,148	)		(1,017,068	)		(2,720,691	)
FFO, as adjusted (attributable to common stockholders)	$	13,574,270		$	12,962,920		$	57,485,657		$	37,966,657

⁽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⁾		Such casualty losses relate to Hurricane Ian, which occurred in September 2022.
⁽⁶⁾		The contingent earnout adjustment represents the adjustment to the fair value during the period of the Class A-2 Units issued in connection with the self administration transaction.
⁽⁷⁾		The net loss associated with the extinguishment of debt includes prepayment penalties, defeasance costs, the write-off of unamortized deferred financing fees, and other fees incurred.
⁽⁸⁾		This represents the mark-to-market adjustment for our derivative instruments not designated for hedge accounting and the ineffective portion of the change in fair value of derivatives recognized in earnings, as well as changes in foreign currency related to our foreign equity investments not classified as long term.
⁽⁹⁾		Such costs relate to our filing of an S-11 registration statement and our pursuit of a potential offering of our common stock. As this item is non-recurring and not a primary driver in our decision-making process, FFO is adjusted for its effect to arrive at FFO, as adjusted, as a means of determining a comparable sustainable operating performance metric.

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

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

	Three Months Ended December 31, (Unaudited)					Year Ended December 31,
	2022		2021			2022		2021
FFO (attributable to common stockholders and OP unit holders) Calculation:
FFO (attributable to common stockholders)	$	12,255,531	$	3,561,969		$	49,504,986	$	16,466,101
Net income (loss) attributable to the noncontrolling interests		246,111		(759,715	)		2,536,297		(2,663,123	)
Adjustment for noncontrolling interests ⁽¹⁾		1,765,123		1,565,512			5,279,214		5,727,520
FFO (attributable to common stockholders and OP unit holders)	$	14,266,765	$	4,367,766		$	57,320,497	$	19,530,498
FFO, as adjusted (attributable to common stockholders and OP unit holders) Calculation:
FFO, as adjusted (attributable to common stockholders)	$	13,574,270	$	12,962,920		$	57,485,657	$	37,966,657
Net loss attributable to noncontrolling interests in our OP		246,111		(759,715	)		2,536,297		(2,663,123	)
Adjustment for noncontrolling interests		1,936,464		2,699,660			6,296,282		8,448,211
FFO, as adjusted (attributable to common stockholders and OP unit holders)	$	15,756,845	$	14,902,865		$	66,318,236	$	43,751,745

Weighted average Class A & T shares outstanding – basic		96,787,402		84,748,002			91,939,172		79,438,374
Weighted average OP units outstanding		12,597,034		10,271,642			11,667,696		10,097,549
Weighted average other dilutive securities		567,910		489,477			510,121		284,820
Weighted average shares & OP units outstanding – diluted⁽²⁾		109,952,346		95,509,121			104,116,989		89,820,743
FFO, as adjusted per share & OP unit outstanding – diluted	$	0.14	$	0.16		$	0.64	$	0.49

⁽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 December 31, 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 December 31, 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⁾	$	35,767,259		$	33,042,552			8.2	%	$	15,671,783	$	9,497,072	N/M	$	51,439,042		$	42,539,624			20.9	%
Property operating expenses ⁽²⁾		10,383,874			9,625,845			7.9	%		5,326,661		3,085,371	N/M		15,710,535			12,711,216			23.6	%
Net operating income	$	25,383,385		$	23,416,707			8.4	%	$	10,345,122	$	6,411,701	N/M	$	35,728,507		$	29,828,408			19.8	%
Number of facilities		109			109						44		29			153			138
Rentable square feet ⁽³⁾		8,036,285			8,034,200						3,758,445		2,546,600			11,794,730			10,580,800
Average physical occupancy ⁽⁴⁾		93.3	%		95.4	%		-2.1	%	N/M		N/M				92.7	%		94.0	%
Annualized rent per occupied square foot ⁽⁵⁾	$	19.64		$	17.66			11.2	%	N/M		N/M			$	19.45		$	17.70

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 December 31, 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 $2.7 million, or approximately 8.2%, for the three months ended December 31, 2022 compared to the three months ended December 31, 2021 due to higher annualized rent per occupied square foot, partially offset by an approximately 2% decrease in average occupancy.

Contacts

David Corak
VP of Corporate Finance

SmartStop Self Storage REIT, Inc.

www.investors.smartstopselfstorage.com
ir@smartstop.com

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