Global Self Storage, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. The unaudited filing compares results with Q1 2022. Global Self Storage is a self-managed Maryland REIT operating primarily self-storage properties; at quarter-end it owned and/or managed 13 properties across eight states.
Financial performance and position
| Metric | Q1 2023 / March 31, 2023 | Comparable period / December 31, 2022 |
|---|---|---|
| Total revenue | $3.04 million, up 7.7% | $2.82 million |
| Operating income | $824,813; operating margin about 27.2% | $674,705; margin about 23.9% |
| Net income | $992,541; diluted EPS $0.09 | $283,207; diluted EPS $0.03 |
| Operating cash flow | $1.00 million | $1.11 million |
| Cash, cash equivalents and restricted cash | $6.47 million | $6.52 million |
| Marketable equity securities | $2.73 million | $2.37 million |
| Debt | $17.66 million principal; $17.29 million net carrying value | $17.80 million principal; $17.42 million net carrying value |
| Total assets / stockholders’ equity | $67.40 million / $48.56 million | $67.38 million / $48.34 million |
Rental income increased 8.0%, primarily from higher rental rates. Property operations expense rose 6.4%, reflecting employment costs and property taxes; general and administrative expense was nearly unchanged. Same-store net operating income (NOI), a non-GAAP measure, rose 8.4% to $1.89 million. Same-store revenue grew 7.7% while same-store cost of operations increased 6.4%.
Reported net income benefited substantially from a $362,050 unrealized gain on marketable equity securities, compared with a $225,751 unrealized loss in Q1 2022. These non-cash valuation changes contributed to the sharp year-over-year net income increase. FFO was $1.04 million and AFFO was $1.08 million; both are non-GAAP measures. Diluted AFFO per share was $0.10, versus $0.09.
Operating cash flow was below the prior-year quarter. Investing cash use was $109,609, primarily for improvements and equipment. Financing cash use was $940,870, including $803,855 of dividends paid and $137,015 of debt principal payments. The quarterly dividend was $0.0725 per share, up from $0.065.
Liquidity, debt and material changes
Management reported approximately $24.2 million of capital resources: $6.5 million of cash and restricted cash, $2.7 million of marketable securities, and $15.0 million available under the undrawn revolving credit facility. It stated that current resources should meet liquidity needs for the next 12 months. The $20 million original term loan bears fixed interest at 4.192% and matures July 2036; principal outstanding was $17.66 million. The separate $15 million revolver had no borrowings at quarter-end, matures July 2024, and had a 7.66% effective rate. Its rate transitions from LIBOR to SOFR after June 30, 2023. A $7.5 million interest-rate cap with a 3.75% strike runs through July 2024. The company reported compliance with debt covenants.
Same-store occupancy fell to 87.9% from 92.6% a year earlier; management reported 89.9% as of May 1, 2023. Same-store annualized revenue per leased square foot rose 13.7%. No acquisitions were completed in the quarter. The company completed a small conversion adding approximately 2,500 leasable square feet at its Lima, Ohio property in January.
Outlook, commentary and risks
No specific full-year earnings or revenue guidance was provided. Management said it expects any existing-tenant rent increases in the remainder of 2023 to be lower than the prior year. It cited potential 2023 increases in property taxes, compensation, utilities, landscaping and other direct store costs. Management expects to pursue acquisitions, expansions and joint ventures, and may use available debt or equity financing; it also plans to develop its third-party management platform.
The company noted possible pressure from inflation, rising interest rates, economic uncertainty, labor and supply-chain issues, changing tenant move-out patterns and local competition. It warned that weaker occupancy or replacement of long-term tenants at lower rates could weigh on revenue. It reported no material degradation in rent collections as of March 31, but said bad-debt losses could rise. The Dolton, Illinois property’s tax reassessment and loss of a tax incentive remain under appeal; there is no assurance of a favorable outcome. Management reported no material pending legal proceedings, no material changes to previously disclosed risk factors, and effective disclosure controls.
Important facts for investors to verify
- Review the occupancy decline, subsequent May 1 occupancy and rental-rate increases to assess durability of same-store revenue and NOI growth.
- Separate recurring property performance from securities valuation gains: the filing’s statements show a $362,050 Q1 2023 unrealized gain, but some MD&A wording appears to swap the 2023 and 2022 gain/loss labels.
- Assess dividend sustainability against operating cash flow, capital expenditures and financing needs; operating cash flow declined year over year.
- Monitor the revolver’s SOFR transition, variable borrowing costs and July 2024 maturity, alongside available liquidity and covenant compliance.
- Track Dolton property-tax appeals, expected property-tax increases, and other inflation-sensitive operating costs.