Business Context and Reporting Period
This Form 8-K was filed by Strategic Storage Trust II, Inc. on October 11, 2018. The filing reports the entry into a material definitive agreement involving a new loan facility secured by properties in the greater Toronto, Canada metropolitan area.
Key Financial Metrics
- Loan Facility Size: Maximum borrowing capacity of $112 million CAD.
- Initial Proceeds: $99.3 million CAD borrowed immediately.
- Future Advances: Up to $12.7 million CAD available subject to conditions.
- Interest Rate: CDOR + 2.25% (approximately 4.1% as of October 11, 2018).
- Interest Rate Cap: Purchased cap on CDOR at 3.00% through October 15, 2021, on a notional amount of $99.3 million.
- Maturity Date: October 9, 2020, with options to extend for three consecutive one-year terms.
- Payment Structure: Interest-only monthly payments; full principal due at maturity.
Material Changes
The primary material change is the refinancing of existing debt. The initial proceeds of $99.3 million CAD were used to pay off all existing loans encumbering the Registrant's properties in the greater Toronto area. These properties now serve as collateral under the new Loan Agreement with Citibank, N.A.
Outlook, Risks, and Contingencies
- Collateral: The loan is secured by first mortgage liens on the properties and cross-collateralized by all property owned, leased, or operated by the Borrower, Nominee, and Solar ULC.
- Guaranty: The Registrant serves as a non-recourse guarantor under a limited recourse guaranty.
- Covenants: The agreement includes customary affirmative, negative, and financial covenants, as well as reserve requirements and events of default.
- Extension Costs: If the Borrower exercises the third extension option, the interest rate margin will increase by 0.25%.
- Prepayment: The loan may be prepaid or terminated at any time, subject to associated costs and expenses.
Investor Verification Checklist
- Verify the specific financial covenants and reserve requirements detailed in the attached Loan Agreement (Exhibit 10.1).
- Confirm the exact terms of the limited recourse guaranty (Exhibit 10.2) to understand the extent of the Registrant's liability.
- Monitor the CDOR rate fluctuations to assess the impact on the variable interest rate, noting the 3.00% cap protection.
- Review the conditions required to access the remaining $12.7 million CAD in future advances.