Business Context and Reporting Period
This Form 8-K was filed by SmartStop Self Storage REIT, Inc. on November 1, 2023. The filing reports the entry into a Material Definitive Agreement involving SmartStop REIT Advisors, LLC ("SRA"), an indirect subsidiary of the Company, and Strategic Storage Trust VI, Inc. ("SST VI"). The agreement relates to changes in the public offering of SST VI (the "SST VI Offering").
Key Financial Metrics
The filing does not report standard financial performance metrics such as revenue, profit, cash flow, margins, or debt levels for the Company. The primary financial data points disclosed relate to the specific terms of the Sponsor Funding Agreement:
- Estimated Dilution Reimbursement: Approximately $6.0 million in cash to cover dilution from one-time stock dividends.
- Funded Expenses: SRA agreed to fund the upfront 3% sales commission, the upfront 3% dealer manager fee, and estimated 1% organization and offering expenses for Class Y and Class Z shares.
- Offering Price: The initial offering price for Class Y and Class Z shares is $9.30 per share.
Material Changes
The material change reported is the execution of the Sponsor Funding Agreement and Amendment No. 3 to the SST VI Operating Partnership Agreement. Key changes include:
- Sponsor Funding: SRA will fund front-end sales loads and offering expenses for the SST VI Offering.
- Compensation Structure: In exchange for funding, SST VI OP will issue Series C Subordinated Convertible Units to SRA. The number of units issued equals the dollar amount of funding divided by the offering price ($9.30).
- Unit Conversion: Series C Units have no initial distribution, liquidation, or voting rights. They automatically convert one-to-one into Class A Units (which have full rights) when SST VI discloses an estimated net asset value per share of at least $10.00.
Outlook, Risks, and Contingencies
Management Commentary and Outlook: The agreement is designed to support the SST VI Offering by covering upfront costs and dilution. The arrangement is contingent on the continuation of the offering; the agreement terminates immediately when SST VI ceases to offer Class Y and Class Z shares.
Risks and Contingencies: The value of the compensation to SRA (Series C Units) is contingent on the offering price and the future achievement of a $10.00 net asset value per share for conversion. The filing notes that the summaries provided are qualified by reference to the full agreements filed as Exhibits 10.1 and 10.2.
Investor Verification Checklist
- Verify the total dollar amount of funding SRA commits to pay for sales commissions and offering expenses.
- Confirm the exact terms of the $6.0 million estimated reimbursement for stock dividend dilution.
- Review the full text of the Sponsor Funding Agreement (Exhibit 10.1) and Amendment No. 3 (Exhibit 10.2) for specific conditions on the conversion of Series C Units.
- Monitor SST VI's future disclosures regarding net asset value to determine the trigger point for Series C Unit conversion.