Global Self Storage, Inc. — Q2 2022 Form 10-Q
Business context and period: Unaudited results for the three and six months ended June 30, 2022. The REIT owned and operated, or managed, 13 self-storage properties in eight states; its primary business is rental operations.
Key financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $2.979 million | $2.575 million | $5.800 million | $5.017 million |
| Operating income | $899,000 | $635,000 | $1.574 million | $1.099 million |
| Net income | $404,000 | $861,000 | $687,000 | $1.273 million |
| Diluted EPS | $0.04 | $0.09 | $0.06 | $0.13 |
| FFO per diluted share | $0.10 | $0.08 | $0.19 | $0.15 |
| AFFO per diluted share | $0.11 | $0.09 | $0.20 | $0.16 |
- Q2 revenue rose 15.7%, mainly from higher rental rates; operating expenses increased 7.2%, led by store costs. Six-month revenue rose 15.6% and expenses 7.9%.
- Net income fell year over year despite stronger operating income. Q2 included a $604,622 unrealized securities loss, versus a $494,461 gain in Q2 2021; the six-month comparison was an $830,373 loss versus a $709,197 gain. The 2022 periods also included a $307,210 gain from PPP loan forgiveness.
- Same-store revenue increased 15.7% and same-store NOI rose 18.7% in Q2 and 20.3% for the first half. Same-store occupancy was 93.1%, down from 95.7% a year earlier; annualized revenue per leased square foot increased 19.1% in Q2.
- Six-month operating cash flow was $2.408 million, versus $1.895 million a year earlier. Investing activities used $15,000; financing activities used $180,000, including $1.407 million in dividends and $264,000 of debt principal payments. Cash, cash equivalents, and restricted cash ended at $5.277 million.
- At June 30, total assets were $66.9 million, stockholders’ equity $47.7 million, and note payable net of costs $17.7 million; principal outstanding was $18.1 million. No revolver borrowings were outstanding. The $15 million facility matures July 2024 and had a 4.06% effective rate; the $20 million term loan bears 4.192% and matures July 2036.
- Management cited approximately $22.9 million in capital resources: $5.3 million in cash and restricted cash, $2.7 million in marketable securities, and $15 million available under the revolver. It expected existing resources to meet liquidity needs for the next 12 months.
Outlook, commentary, and risks
- Management was reviewing acquisition opportunities and potential store expansions but completed no acquisitions in the first half of 2022. Capital may also support joint ventures and its third-party management platform.
- Management expected existing-tenant rent increases for the remainder of 2022, if any, to be similar to the prior year. It anticipated inflationary pressure on compensation, property taxes, repairs, utilities, landscaping, and other operating costs.
- Dolton, Illinois property taxes were expected to increase approximately 20% in 2022; the tax reassessment and incentive status remained under appeal, with no assurance of a favorable outcome.
- COVID-19 effects remain uncertain. The filing also identifies economic and local demand conditions, competition, interest rates and financing availability, real-estate risks, and REIT qualification as risks. Management reported no material pending legal proceedings and no material changes to previously disclosed risk factors.
- On August 2, 2022, the company declared a $0.0725-per-share dividend payable September 30, 2022. Q2 dividends were $0.065 per share.
Investor verification priorities
- Reconcile ATM offering proceeds: the equity note and cash-flow statement report $1.184 million net proceeds, while MD&A reports $1.403 million net proceeds; gross proceeds are reported as approximately $1.431 million.
- Assess the occupancy decline against rent growth and same-store NOI gains, including whether rent increases could affect move-outs and future occupancy.
- Review the volatility of marketable-securities results and the extent to which reported net income depends on fair-value movements or nonrecurring PPP forgiveness.
- Evaluate debt costs, the unused revolver’s variable-rate exposure, secured property values, covenant requirements, and liquidity after dividends and planned investment.
- Track the Dolton property-tax appeal, inflation-driven expense trends, and the company’s ability to fund acquisitions or expansions without additional equity dilution or borrowing.