Global Self Storage, Inc. — Q1 2021 Form 10-Q
Business context and reporting period. The unaudited quarter ended March 31, 2021. Global Self Storage is a self-managed Maryland REIT operating primarily in self-storage rental properties. At quarter-end it owned or operated 12 stores and managed one third-party store across eight states.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Total revenue | $2.442 million | $2.240 million; up 9.0% |
| Operating income | $464,000; 19.0% of revenue | $116,000; 5.2% of revenue |
| Net income (loss) | $411,000; $0.04 per diluted share | $(356,000); $(0.04) per diluted share |
| Operating cash flow | $676,000 | $625,000 |
| Investing cash flow | $(42,000), primarily improvements and equipment | $(800,000), including construction |
| Cash, cash equivalents and restricted cash | $1.856 million at March 31 | $1.955 million at December 31, 2020 |
| Debt | $23.865 million principal outstanding; $23.417 million net carrying value | Includes $18.721 million term-loan principal and $5.144 million revolver borrowing |
Rental income increased 8.5%, principally from rate and occupancy gains at wholly owned stores and lease-up of expansions. Same-store occupancy rose to 96.1% from 91.4%; same-store revenue increased 4.7% and NOI increased 2.7%. Across same-store and non-same-store owned properties, occupancy was 94.8%, revenue grew 9.1%, and NOI grew 9.5%.
Operating expenses declined 6.9% to $1.978 million, mainly from lower general and administrative costs and depreciation and amortization; property operating costs rose 8.5%, including substantially higher snow-removal expense. The net-income turnaround also reflected a $215,000 unrealized gain on marketable equity securities, versus a $190,000 unrealized loss in Q1 2020. FFO was $602,000 ($0.06 per diluted share) and AFFO was $634,000 ($0.07 per diluted share); both are non-GAAP measures.
Cash dividends paid were $607,000, or $0.065 per share, similar to the prior-year quarter. Cash flow from operations exceeded dividends before capital spending. Total assets were $64.7 million and total equity was $39.9 million at March 31.
Material changes and outlook
- Management attributed revenue growth to higher occupancy and rental rates, expansions, and ancillary tenant-insurance income. Millbrook, McCordsville, and West Henrietta expansions/conversions were in lease-up; no acquisitions were completed in the quarter.
- Management reported approximately $8.9 million of capital resources: $1.9 million of cash and restricted cash, $2.1 million of marketable securities, and $4.9 million available under the credit facility. It expected available cash sources to meet liquidity needs for the next 12 months.
- The $10 million revolving facility had $5.144 million drawn, bore interest at 3% over one-month LIBOR (6.46% effective rate as disclosed), and matures December 20, 2021. The company was considering refinancing or a replacement. The $20 million term loan bears 4.192% interest and matures July 2036.
- Management expected existing-tenant rent increases, if any, during the remainder of 2021 to be higher than in the prior year. It also anticipated potential inflationary pressure in compensation, landscaping, and utility costs. The filing provides no numerical earnings or revenue guidance.
- COVID-19 remained a material uncertainty. Management said rent collections had not materially deteriorated and the business remained operational, but warned of possible higher bad debt, delayed lien-sale auctions, tenant move-outs, lower occupancy, and pressure on rental rates. Demand trends could be temporary or reverse.
- The company expected Dolton, Illinois property taxes to rise approximately 20% in 2021; appeals of the assessment and tax-incentive status were pending, with no assurance of a favorable outcome.
- An approximately $300,000 share of an affiliate-borrower’s PPP loan was attributed to the company under the SBA formula. Forgiveness had been requested in March 2021; any gain would be recorded only after forgiveness and legal release. No material Q1 operating or cash-flow impact was reported.
Risks, contingencies and other items
Other risks include real-estate and local-market conditions, competition, financing and interest-rate exposure, REIT qualification and tax matters, and execution of acquisitions and expansion lease-up. A $7.5 million interest-rate cap was due to mature December 20, 2021. The filing reported no material pending legal proceedings, no material changes to previously disclosed risk factors, and no material changes in internal control; management concluded disclosure controls were effective. The company reported related-party arrangements and the PPP loan through an affiliate, which investors may wish to review.
Important facts for investors to verify
- Whether the revolver was refinanced or replaced before its December 2021 maturity, and the resulting borrowing rate and terms.
- Whether strong occupancy and rent growth continued, and whether expansions—particularly West Henrietta—leased up as planned.
- Actual rent collections, bad-debt losses, move-outs, and auction activity as pandemic-related conditions changed.
- Outcome of the Dolton property-tax appeals and actual 2021 tax expense.
- Status and amount of PPP forgiveness, if any, and the timing and accounting for any recognized gain.
- Whether operating cash flow continues to cover distributions and required property investment; also assess FFO/AFFO alongside GAAP earnings and cash flow.
- The contribution and volatility of marketable-security fair-value gains or losses to reported net income.