Global Self Storage, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparison is with Q1 2023 unless noted. Global Self Storage is a self-managed, self-administered REIT operating primarily in self-storage rental operations. At quarter-end, it owned and/or managed 13 properties across eight states, including 12 owned same-store properties and one third-party-managed property.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / prior date | Change |
|---|---|---|---|
| Total revenue | $3.034 million | $3.038 million | Down 0.1% |
| Operating expenses | $2.443 million | $2.213 million | Up 10.4% |
| Operating income | $591,000 | $825,000 | Down 28.3% |
| Net income | $266,000 | $993,000 | Down 73.2% |
| Diluted EPS | $0.02 | $0.09 | Down $0.07 |
| FFO / diluted share | $0.08 | $0.09 | Down $0.01 |
| AFFO / diluted share | $0.08 | $0.10 | Down $0.02 |
| Operating cash flow | $797,000 | $1.004 million | Down 20.6% |
Operating margin, calculated as operating income divided by revenue, was approximately 19.5%, versus 27.1% a year earlier. Net income included a $175,000 unrealized loss on marketable equity securities, compared with a $362,000 unrealized gain in Q1 2023. The company reported no realized gains or losses on those securities in Q1 2024.
At March 31, 2024, total assets were $66.1 million, cash and cash equivalents were $6.7 million, and restricted cash was $126,000. Marketable equity securities were valued at $2.6 million. Note payable principal was $17.1 million ($16.8 million net of unamortized costs); the revolving credit facility had no balance outstanding. Total liabilities were $18.3 million and stockholders’ equity was $47.8 million.
Cash, cash equivalents, and restricted cash declined by $162,000 during the quarter. Financing cash outflows included $806,000 of dividends paid and $143,000 of principal payments; investing cash outflow for improvements and equipment was $10,000. Quarterly dividends were $0.0725 per share, totaling approximately $809,000 declared. Operating cash flow was slightly below dividends paid plus capital expenditures.
Material changes and operating trends
- Rental income declined 0.4% to $2.913 million. Management attributed this primarily to lower move-in rates, partly offset by higher occupancy and existing-tenant rate increases.
- Same-store revenue was essentially flat at $3.017 million, while same-store operating costs rose 9.8% to $1.231 million. Same-store NOI fell 5.7% to $1.786 million.
- Same-store occupancy increased to 91.3% from 87.9% at March 31, 2023; management reported 92.8% as of May 1, 2024. Annualized revenue per leased square foot declined 3.8% to $15.91.
- Property operations expense rose 9.8%, with increases in marketing, employment, insurance, and real estate taxes. General and administrative expense rose 18.1%, including higher professional fees and one-time IT spending for cybersecurity and productivity.
- Interest expense declined to $205,000 from $236,000, while dividend and interest income increased to $55,000 from $42,000. FFO decreased 18.3% and AFFO decreased 14.7% year over year.
- The closing share price was $4.45 at March 31, 2024, versus $5.14 a year earlier. Shares issued and outstanding at quarter-end were 11,267,048.
Outlook, risks, and contingencies
- No numerical full-year earnings or revenue guidance was provided. Management expects available capital resources to meet liquidity needs for the next 12 months, while noting that retained operating cash flow after distributions and maintenance capital expenditures is expected to be negligible.
- The $14.5 million revolving credit facility matures July 6, 2024. Its effective interest rate was approximately 8.44% at quarter-end. Management said it was considering refinancing or a suitable replacement; the facility was undrawn at March 31. The company also reported an interest-rate cap on $7.5 million with a 3.75% strike, expiring July 6, 2024.
- The company cited inflation, higher interest rates, economic and credit-market volatility, competition, local demand, labor and operating costs, and geopolitical and public-health events as risks. Management expects existing-tenant rent increases, if any, during the rest of 2024 to be lower than in the prior year, and anticipates higher property-tax expense due to increased assessments.
- The Dolton, Illinois property’s tax reassessment and loss of a tax incentive remain under appeal. There is no assurance of a favorable outcome; property tax expense at the site was $559,000 in 2023.
- Management reported no material rent-collection degradation at March 31, 2024, but warned that customer financial stress and lower recoveries from auctioned units could increase bad debt or affect occupancy and rents.
- The company said it was in compliance with note-payable covenants, reported no material pending legal proceedings, and disclosed no material changes to previously reported risk factors. Management concluded disclosure controls were effective and reported no material quarterly change in internal control over financial reporting.
Most important facts for investors to verify
- Whether the revolving facility was refinanced or replaced before its July 6, 2024 maturity, and on what terms.
- Whether operating cash flow can support distributions, maintenance spending, and debt service without continued cash depletion or additional financing.
- Whether same-store NOI stabilizes as occupancy gains translate into revenue growth and operating-cost increases moderate.
- The outcome and financial effect of the Dolton property-tax appeals and increased assessments elsewhere.
- The valuation and eventual disposition proceeds of the marketable securities portfolio, whose quarterly fair-value movements materially affected reported net income.