Smartstop Self Storage REIT, Inc. current report, 29 January 2015

Business Context and Reporting Period

This Form 8-K, filed on February 4, 2015, reports events occurring on January 29, 2015, for Strategic Storage Trust II, Inc. (Registrant). The filing details the completion of the "Second Phase" of a larger acquisition agreement for a portfolio of 26 self-storage facilities originally executed in July 2014.

Key Financial Metrics and Transaction Details

  • Acquisition Cost: The Second Phase acquisition of five facilities cost approximately $28.4 million, plus closing costs and acquisition fees.
  • Acquisition Fees: Approximately $496,000 was incurred for this phase.
  • Asset Size: The five properties comprise approximately 3,420 units and 332,600 net rentable square feet.
  • Occupancy: Average physical occupancy was approximately 86% as of December 31, 2014.
  • Financing Structure:
    • Debt: Approximately $16.4 million drawn under the KeyBank Facility (Eurodollar Loan at ~3.4% interest).
    • Equity: Approximately $12.0 million funded from proceeds of a $24.1 million Series A Cumulative Redeemable Preferred Units issuance.
  • Management Fees: A one-time fee of $3,750 per property and ongoing fees equal to 6% of gross monthly revenues.

Material Changes and Portfolio Expansion

The Registrant expanded its portfolio by acquiring five self-storage facilities located in California (Lancaster, Upland, Vallejo, Santa Rosa) and Colorado (Federal Heights). This follows the "First Phase" closing on January 23, 2015, which involved seven facilities for approximately $25.9 million. The total portfolio under the original agreement is valued at approximately $128.2 million.

Outlook, Risks, and Contingencies

  • Future Closings: The Registrant expects to close the remaining 14 properties of the 26-property portfolio in additional phases over the coming weeks.
  • Funding Strategy: Future phases will be funded via remaining Preferred Equity Investment proceeds, additional Preferred Unit issuances, and further draws on the KeyBank Facility.
  • Financial Reporting: Audited or unaudited financial statements for the acquired properties are not currently available. The Registrant intends to file these statements by April 16, 2015, via an amendment to this Form 8-K.
  • Collateral: The five newly acquired properties now serve as additional collateral under the KeyBank Credit Agreement.

Investor Verification Checklist

  • Verify the final closing costs and total acquisition fees for the Second Phase beyond the stated $496,000.
  • Confirm the specific terms and covenants of the KeyBank Facility draw, particularly regarding the 3.4% interest rate and collateral requirements.
  • Monitor the filing of the required financial statements for the acquired properties by the April 16, 2015 deadline.
  • Track the timeline and funding sources for the remaining 14 properties in the portfolio.
  • Review the impact of the 6% management fee on net operating income for the newly acquired assets.