Global Self Storage, Inc. — 2022 Form 10-K
Business and period: Self-managed, self-administered REIT operating self-storage properties. This annual report covers the fiscal year ended December 31, 2022; year-over-year comparisons are to 2021. At year-end, the company owned 12 stores and managed one third-party store across eight states, with approximately 966,800 leasable square feet and 7,023 units.
Key financial results
| Metric | 2022 | 2021 |
|---|---|---|
| Total revenue | $11.945 million | $10.509 million |
| Operating income | $3.527 million | $2.685 million |
| Net income | $2.058 million | $3.281 million |
| Diluted EPS | $0.19 | $0.33 |
| Net cash from operating activities | $4.797 million | $3.643 million |
| Capital improvements and equipment additions | $0.113 million | $0.253 million |
- Revenue rose 13.7%, primarily from higher rental rates and existing-tenant rate increases. Rental income increased 14.3% to $11.486 million.
- Total expenses increased 7.6% to $8.418 million; property operating costs rose 10.4%, mainly due to employment and real estate tax expense. Operating margin was approximately 29.5%, versus 25.6% in 2021.
- Same-store NOI increased 15.6% to $7.692 million on 13.7% higher revenue; same-store NOI margin was approximately 64.8%, compared with 63.8% in 2021. For Q4, same-store revenue rose 10.8% and NOI rose 6.9% year over year.
- Same-store year-end occupancy fell to 89.6% from 93.1%; annualized revenue per leased square foot increased 18.3% to $15.95. Average tenant stay was about 3.3 years, versus 3.0 years.
- FFO was $4.487 million ($0.41 diluted per share), versus $3.346 million ($0.33); AFFO was $4.709 million ($0.43), versus $3.586 million ($0.36). These are non-GAAP measures and are not substitutes for GAAP earnings or operating cash flow.
Debt, liquidity and distributions
- Year-end cash and cash equivalents were $6.364 million, plus $0.151 million restricted cash and $2.366 million in marketable securities. The company reported approximately $23.9 million of capital resources, including $15 million undrawn under its revolving facility.
- Term-loan principal was $17.801 million ($17.421 million net of unamortized costs), at a fixed 4.192% rate, maturing July 2036. The $15 million revolver had no balance outstanding and matures July 2024; its effective rate was 4.12% at year-end. The revolver’s reference rate transitions from LIBOR to SOFR after June 30, 2023. The company reported compliance with its term-loan covenants.
- Cash dividends declared were $0.275 per share in 2022, versus $0.26 in 2021; cash dividends paid were $3.014 million. Operating cash flow exceeded cash dividends paid in 2022.
Material changes, outlook and risks
- Despite improved operating income, net income declined because the company recorded a $1.117 million unrealized loss on marketable equity securities, compared with a $1.567 million gain in 2021. Interest expense fell to $0.780 million from $1.046 million. A $0.307 million gain from PPP loan forgiveness was recorded in 2022.
- The company made no self-storage acquisitions in 2022. It issued 373,833 shares through its at-the-market program, generating $2.008 million in net proceeds. A conversion adding approximately 2,500 leasable square feet at the Lima, Ohio property was completed in January 2023.
- Management stated it expected capital resources to cover projected liquidity needs for the next 12 months. It described possible rent growth drivers, but provided no formal numerical earnings or revenue guidance. Management expected 2023 existing-tenant rent increases, if any, to be lower than in 2022, and anticipated higher property taxes, marketing costs and certain operating expenses.
- Management cited inflation, rising interest rates, labor and utility costs, recession concerns, changing occupancy and tenant move-out patterns, competition, property-tax increases, and access to financing among the risks to results. The Dolton, Illinois property tax reassessment and tax-incentive status remained under appeal, with no assurance of a favorable outcome. No material pending legal proceedings were reported.
- The auditor issued an unqualified opinion on the financial statements and reported no critical audit matters. Management concluded disclosure controls and internal control over financial reporting were effective as of year-end.
Important facts for investors to verify
- Whether higher rental rates can offset lower occupancy and support sustainable same-store revenue and NOI growth.
- The status and potential financial effect of the Dolton tax appeals and the expected phaseout of its tax incentive.
- Current debt balances, covenant headroom, and borrowing costs after the LIBOR-to-SOFR transition.
- How marketable-security gains or losses affect GAAP earnings, and the timing of planned security sales to fund property investment.
- Whether recurring operating cash flow can support dividends, capital needs and growth plans without further equity issuance or increased borrowing.