Business Context and Reporting Period
This Form 8-K filing by Strategic Storage Trust II, Inc. (a non-listed REIT) reports the Board of Directors' approval of an estimated Net Asset Value (NAV) per share as of December 31, 2015, announced on April 8, 2016. The valuation was conducted to assist broker-dealers with FINRA reporting and fiduciaries with ERISA obligations. The company owns a portfolio of 33 self-storage properties.
Key Financial Metrics
| Metric | Value (as of Dec 31, 2015) |
|---|---|
| Total Assets | $241,943,145 |
| Real Estate Properties (Appraised) | $207,600,000 |
| Cash and Restricted Cash | $28,514,962 |
| Total Liabilities | $27,046,409 |
| Mortgage Debt (Carrying Value) | $22,437,841 |
| Net Asset Value (Total) | $214,896,736 |
| Estimated NAV per Share (Class A & T) | $10.09 |
| Shares Outstanding (Fully Diluted) | 21,301,273 |
Material Changes and Valuation Analysis
- Asset Appreciation: The aggregate appraised value of real estate assets ($207.6 million) represents a 27.6% increase over the aggregate purchase price of approximately $162.7 million paid from inception through December 31, 2015.
- Valuation Range: The independent valuation firm, Duff & Phelps, provided a value range of $9.47 to $10.69 per share. The Board adopted the mid-range value of $10.09.
- Debt Valuation: The fair value of mortgage debt ($23.4 million) was slightly higher than the carrying value ($23.2 million) due to market interest rate assumptions.
Outlook, Methodology, and Risks
Valuation Methodology: The valuation utilized the income capitalization approach as the primary indicator, supported by the sales comparison approach. Key assumptions included a weighted average terminal capitalization rate of 6.37% and a discount rate of 7.62%.
Pricing Updates:
- New Offering Prices (Effective April 14, 2016): Class A shares at $11.21; Class T shares at $10.62. These prices include sales commissions and dealer manager fees.
- Distribution Reinvestment Plan (Effective April 21, 2016): Share price set at the estimated NAV of $10.09.
Risks and Limitations:
- The estimated NAV is not a GAAP fair value, nor does it represent a liquidation value or a guaranteed trading price on an exchange.
- Valuation is sensitive to assumptions; a 25 basis point change in terminal capitalization rates could alter real estate value by approximately $3.4 million.
- Future values will fluctuate based on real estate market conditions and asset management performance.
Investor Verification Checklist
- Verify the independence and credentials of the valuation firm, Duff & Phelps, LLC.
- Review the specific capitalization rates (5.75% to 7.25%) and discount rates (7.0% to 8.5%) used for the portfolio's 33 properties.
- Confirm the calculation of the incentive distribution payable to the Advisor (15% of appraised value over a 6% cumulative return).
- Understand that the $10.09 NAV is an estimate for reporting purposes and does not guarantee resale value or liquidation proceeds.
- Note the distinction between the NAV ($10.09) and the new public offering prices ($11.21/$10.62) which include fees.