Business Context and Reporting Period
Company: Strategic Storage Trust II, Inc. (Smartstop Self Storage REIT, Inc.)
Filing Type: Form 10-K (Annual Report)
Period: January 8, 2013 (Inception) through December 31, 2013
Status: Newly formed start-up enterprise. As of the reporting date, the Company had not commenced operations, owned no properties, and had not received subscriptions for its public offering. The Company intends to invest in self-storage facilities and qualify as a Real Estate Investment Trust (REIT).
Key Financial Metrics
| Metric | Value |
|---|---|
| Total Revenues | $0 |
| Net Income/Loss | $0 |
| Total Assets | $201,000 |
| Cash and Cash Equivalents | $201,000 |
| Total Liabilities | $0 |
| Long-term Debt | $0 |
| Stockholders' Equity | $1,000 (Common Stock) |
| Noncontrolling Interest | $200,000 (Operating Partnership) |
| Shares Outstanding | 100 |
Material Changes and Operational Status
There were no material changes in financial performance compared to the prior period as the Company was in its inception phase. Key operational developments include:
- Capital Formation: The Company raised $201,000 in total capital: $1,000 from the issuance of 100 shares of common stock to its Advisor and $200,000 from the issuance of limited partnership units in its Operating Partnership.
- Offering Status: The Company had not commenced its Primary Offering as of December 31, 2013. The SEC declared the registration statement effective on January 10, 2014.
- Asset Base: The Company owned no real estate assets and had not contracted to purchase any properties as of the reporting date.
Guidance, Outlook, and Risks
Outlook and Strategy: The Company plans to raise a minimum of $1.5 million and a maximum of $1 billion in its Primary Offering. Proceeds will be used to acquire self-storage facilities. The Company intends to seek a liquidity event (such as an exchange listing or merger) within three to five years after the completion of the Offering.
Subsequent Events (Post-December 31, 2013):
- Offering Progress: As of March 24, 2014, the Company had received subscriptions of approximately $65,000, held in escrow.
- Acquisition Pipeline: The Company's Sponsor executed an agreement to acquire a portfolio of five self-storage facilities (Raleigh/Myrtle Beach) for $22.1 million. The Company intends to assume this agreement upon meeting the Minimum Offering Amount.
- Distributions: On March 25, 2014, the Board authorized an initial daily distribution rate equivalent to an annualized 6.0% (assuming a $10.00 share price), payable once the Minimum Offering Amount is raised.
Risks and Contingencies:
- Start-up Risk: No operating history; risk of business failure is high.
- Liquidity Risk: No established trading market for common stock; shares are not listed on a national exchange.
- Conflicts of Interest: Significant conflicts exist between the Company and its Advisor/Sponsor regarding the allocation of investment opportunities and management time.
- REIT Qualification: Failure to qualify as a REIT would subject the Company to corporate income tax.
- Offering Failure: If the Minimum Offering Amount ($1.5 million) is not raised by January 10, 2015, funds will be returned to subscribers.
Investor Verification Checklist
- Offering Escrow Status: Verify if the $1.5 million Minimum Offering Amount has been met to prevent the return of funds and termination of the offering.
- Acquisition Execution: Confirm whether the Company has successfully assumed the purchase agreement for the Raleigh/Myrtle Beach portfolio and secured the necessary financing.
- Valuation Methodology: Review the Company's policy for estimating share value, as there is no public market price; currently, the gross offering price ($10.00) is used as the estimated value.
- Related Party Fees: Monitor the reimbursement of organization and offering costs to the Advisor, which are capped at 3.5% of gross proceeds (excluding commissions) and 15% (including commissions).
- REIT Compliance: Verify the Company's ability to meet the 90% distribution requirement and asset tests to maintain REIT status.