Business Context and Reporting Period
This Form 8-K was filed by Strategic Storage Trust II, Inc. (operating as Smartstop Self Storage REIT, Inc.) on December 22, 2015. The filing reports the entry into a material definitive agreement involving the refinancing of the company's credit facilities.
Key Financial Metrics and Debt Structure
The filing details the establishment of an Amended and Restated Revolving Credit Facility with KeyBank, National Association. Key terms include:
- Maximum Borrowing Capacity: $105 million (initially), with an option to increase by up to $395 million for a total potential facility size of $500 million.
- Previous Facility: Replaced a term credit facility with a maximum capacity of approximately $71.3 million.
- Term and Maturity: Initial term of three years, maturing on December 22, 2018, with two one-year extension options.
- Amortization: Interest-only payments for the first 36 months, followed by a 30-year amortization schedule.
- Collateral: Secured by cross-collateralized first mortgage liens on 28 mortgaged properties.
- Interest Rates: Based on Alternate Base Rate or Adjusted LIBO Rate plus an Applicable Rate tied to total leverage.
- Fees: Includes an annual administrative fee of $35,000 and an Unused Commitment Fee.
The filing does not provide specific revenue, profit, cash flow, or margin figures for the reporting period.
Material Changes Versus Prior Period
The primary material change is the transition from a term credit facility to a revolving credit facility, increasing the maximum borrowing capacity from approximately $71.3 million to $105 million. The new facility provides greater flexibility for funding future self-storage property acquisitions and includes an expansion option to $500 million.
Guidance, Outlook, and Covenants
Management intends to use the Amended KeyBank Credit Facility to fund future self-storage property acquisitions. The agreement includes strict financial covenants that must be met at the close of each fiscal quarter:
- Total Leverage Ratio: No greater than 60%.
- Tangible Net Worth: Not less than $158,282,000 plus 80% of Net Equity Proceeds.
- Interest Coverage Ratio: No less than 1.85 to 1.0.
- Fixed Charge Ratio: No less than 1.6 to 1.0.
- Loan to Value Ratio: Not greater than 60%.
- Debt-Service Coverage Ratio: No less than 1.35 to 1.0.
- Minimum Collateral: At least 15 mortgaged properties with a minimum pool value of $100 million.
The facility is fully recourse to the Registrant and the Borrower. Prepayment is allowed at any time without penalty, subject to indemnification for breakage costs.
Investor Verification Checklist
- Verify the current utilization of the $105 million revolving facility and any outstanding balances.
- Confirm compliance with the financial covenants, specifically the Total Leverage Ratio (60%) and Debt-Service Coverage Ratio (1.35x).
- Review the specific list of 28 mortgaged properties securing the facility to assess collateral quality.
- Monitor the company's progress toward the $500 million expansion option and the conditions required to exercise it.
- Check for any subsequent filings regarding the exercise of the one-year extension options or changes in interest rate spreads.