Business Context and Reporting Period
This Form 8-K filing by SmartStop Self Storage REIT, Inc. (SmartStop) reports the Board of Directors' determination of an Estimated Per Share Net Asset Value (NAV) for the Company's Class A and Class T common stock. The valuation is calculated as of June 30, 2021, and the report was filed on October 19, 2021. The valuation was performed to assist broker-dealers in meeting FINRA Rule 2231 obligations regarding customer account statements for non-listed REITs.
Key Financial Metrics
The filing provides a detailed breakdown of assets, liabilities, and the resulting NAV per share as of June 30, 2021, compared to December 31, 2019.
| Metric | June 30, 2021 | December 31, 2019 |
|---|---|---|
| Total Assets | $2,629,069,918 | $1,615,853,750 |
| Total Liabilities | $906,758,939 | $756,170,084 |
| Net Asset Value (Common) | $1,722,310,979 | $709,683,666 |
| Debt (Secured) | $852,742,137 | $719,769,887 |
| Cash and Restricted Cash | $33,857,213 | $68,571,123 |
| Estimated Value Per Share (Class A & T) | $15.08 | $10.40 |
Note: The filing does not provide revenue, profit, or cash flow metrics for a specific reporting period; it focuses exclusively on the balance sheet valuation.
Material Changes Versus Prior Period
- NAV Increase: The Estimated Per Share NAV increased from $10.40 (Dec 31, 2019) to $15.08 (June 30, 2021), representing a significant appreciation in shareholder value.
- Asset Growth: Total assets grew by approximately $1.01 billion, driven primarily by an increase in Real Estate Properties from $1.46 billion to $2.45 billion.
- Debt Expansion: Total debt increased by approximately $133 million to support asset growth.
- Preferred Equity: The $150 million Series A Convertible Preferred Stock outstanding in 2019 was assumed to be converted into common shares for the 2021 calculation, resulting in $0 preferred equity on the 2021 balance sheet for NAV purposes.
- Joint Ventures: Investments in unconsolidated joint ventures increased from $0 to $38.7 million.
Valuation Methodology, Risks, and Unusual Items
Valuation Methodology: The valuation was conducted by Robert A. Stanger & Co., Inc. ("Stanger"), an independent third-party firm. The process utilized the income approach (direct capitalization) for 145 properties and the sales comparison approach for one office condominium. The weighted average direct capitalization rate used was 4.28% (range 3.75% to 5.25%).
Sensitivity Analysis: The filing highlights that the NAV is sensitive to changes in assumptions:
- Capitalization Rates: A 25 basis point increase in cap rates would lower the NAV to $13.85, while a 25 basis point decrease would raise it to $16.44.
- Interest Rates: Changes in market interest rates for secured debt have a minimal impact on NAV (ranging from $15.04 to $15.17 for a 25 basis point swing).
Risks and Limitations:
- The Estimated Per Share NAV is not audited and does not represent fair value under GAAP or liquidation value.
- It does not reflect a portfolio premium or discount, nor does it account for disposition costs or fees for properties not held for sale.
- The Share Redemption Program (SRP) remains suspended except for specific exigent circumstances (death, disability, long-term care).
Unusual Items: The filing notes that the denominator for the Earn-Out Exchange Ratio for OP Units was fixed at $10.66 for the 12 months following the filing date.
Investor Verification Checklist
- Valuation Date: Confirm that the $15.08 NAV applies specifically to June 30, 2021, and may not reflect current market conditions.
- Liquidity Constraints: Verify the status of the Share Redemption Program, which is currently suspended for general redemptions.
- Assumption Sensitivity: Review the impact of capitalization rate fluctuations on the NAV, as a 25 basis point change results in a ~$1.20 swing in share value.
- Debt Obligations: Note the total debt load of approximately $853 million and the associated mark-to-market adjustments.
- Preferred Stock Conversion: Understand that the $150 million preferred equity was treated as converted for this valuation, affecting the share count and per-share value.