Business Context and Reporting Period
This Form 8-K, filed on February 5, 2015, by Strategic Storage Trust II, Inc. (Registrant), reports the completion of the third phase of a multi-phase acquisition of a 26-property self-storage portfolio. The Registrant is sponsored by SmartStop Self Storage, Inc. The reporting period covers the closing event on February 5, 2015, and related financing activities occurring in late January and early February 2015.
Key Financial Metrics
- Acquisition Cost (Third Phase): Approximately $45.4 million for seven properties, plus closing costs and acquisition fees of approximately $795,000.
- Asset Size (Third Phase): Approximately 4,070 units and 410,100 net rentable square feet.
- Occupancy: Average physical occupancy of 86% as of December 31, 2014.
- Debt Financing: Approximately $23.6 million drawn under the KeyBank Facility (Eurodollar Loan) at an interest rate of approximately 3.4%.
- Equity Financing: Funded via proceeds from Preferred Units. On January 21, 2015, $24.1 million was invested for 960,000 units. On February 4, 2015, an additional $20.9 million was invested for 835,000 units.
- Management Fees: One-time fee of $3,750 per property; ongoing fee equal to the greater of $3,000 per month or 6% of gross monthly revenues.
Material Changes
The Registrant expanded its asset base by acquiring seven self-storage facilities in California, Colorado, and Washington. This transaction represents the third phase of a larger $128.2 million portfolio acquisition initiated in August 2014. The acquisition was funded through a combination of new preferred equity issuances and increased debt leverage under the existing KeyBank Credit Agreement, with the new properties added as collateral.
Outlook, Risks, and Contingencies
- Future Acquisitions: The Registrant expects to close on the remaining seven properties of the 26-property portfolio during the first quarter of 2015.
- Funding Strategy: Future phases are expected to be funded by additional Preferred Unit issuances and further draws on the KeyBank Facility.
- Financial Reporting: Audited or unaudited financial statements for the acquired real property are not currently available. The Registrant intends to file these statements by April 23, 2015, via an amendment to this Form 8-K.
- Related Party Transactions: Property management is handled by Strategic Storage Property Management II, LLC, an indirect subsidiary of the sponsor, involving ongoing fee arrangements.
Investor Verification Checklist
- Verify the final closing date and purchase price for the remaining seven properties expected in Q1 2015.
- Review the upcoming amended Form 8-K (due by April 23, 2015) for audited financial statements of the acquired assets.
- Confirm the total outstanding balance and covenants of the KeyBank Facility following the $23.6 million draw.
- Assess the impact of the 6% gross revenue management fee on net operating income projections for the new assets.
- Monitor the occupancy trends of the newly acquired properties post-closing to validate the 86% baseline.