Business context and reporting period
Period: Three months ended March 31, 2014. The filing is for Strategic Storage Trust II, Inc., a newly formed self-storage REIT in formation; this differs from the company name in the request metadata, Smartstop Self Storage REIT, Inc.
The company had not commenced operations and had acquired no properties by quarter-end. Its offering became effective January 10, 2014; subscriptions had not reached the $1.5 million minimum needed to release funds from escrow and begin operations.
Key financial metrics
| Metric | March 31, 2014 / Q1 2014 |
|---|---|
| Total assets | $201,000, entirely cash and cash equivalents |
| Liabilities and debt | No liabilities or indebtedness reported |
| Revenue, expenses, net income | $0 reported for each |
| Cash flow | No net change; ending cash was $201,000 |
| Equity | $1,000 company equity and $200,000 noncontrolling interest |
| Margins | Not meaningful; no revenue or operating activity |
For the comparable period from inception through March 31, 2013, revenue, expenses, net income, and cash were also reported as zero. Cash and total assets were unchanged from December 31, 2013.
Material changes, outlook, and risks
- By March 31, subscriptions of approximately $190,000 were in escrow; by May 7, 2014, subscriptions had increased to approximately $680,000. Neither amount met the $1.5 million minimum.
- The board authorized distributions at an annualized 6.0% rate, assuming a $10 per-share purchase price. Payments would begin only after the minimum offering amount was raised; the company could not predict when cash distributions would start. Distributions may be funded from offering proceeds or borrowings if operating cash flow is insufficient.
- A potential acquisition is a five-facility portfolio in Raleigh, North Carolina, and Myrtle Beach, South Carolina, for $22.1 million plus closing costs and acquisition fees. The proposed funding includes assumption of an existing $12.8 million loan and offering proceeds. Closing was expected in Q2 or Q3 2014, subject to the minimum offering, lender approval, and closing conditions; completion was not assured.
- Organization and offering costs were approximately $1.65 million at quarter-end, rising to approximately $1.8 million as of May 1. The filing describes reimbursement and cost limits tied to offering proceeds.
- The company intended to elect REIT tax treatment beginning in 2014 and must meet applicable requirements, including distributing at least 90% of taxable income. Failure to qualify could result in corporate taxes and loss of REIT eligibility for four years, subject to possible relief.
- Key risks include startup and fundraising risk, failure to complete acquisitions, reliance on affiliated advisors and service providers, the possibility distributions exceed operating cash flow, and future interest-rate exposure. Management reported effective disclosure controls; no material change in internal control, legal proceedings, or material risk-factor changes was reported.
Important facts to verify
- Confirm the registrant identity: the filing names Strategic Storage Trust II, Inc., not Smartstop Self Storage REIT, Inc.
- Check whether the offering reached its $1.5 million minimum and whether escrow funds were released.
- Verify whether the five-property acquisition closed, its final price and financing, and whether the $12.8 million loan was assumed.
- Review the source and sustainability of any distributions, including whether they were supported by property operations or by offering proceeds or borrowings.
- Monitor offering and organizational costs, related-party fees, and the company’s compliance with REIT qualification and distribution requirements.