Global Self Storage, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2016. The filing was signed November 14, 2016. The company reported as a self-managed and self-administered REIT operating nine self-storage facilities across six states.
Business context and comparability
On January 19, 2016, the company deregistered as an investment company, adopted operating-company accounting, changed its name from Self Storage Group, Inc., and listed on Nasdaq as SELF. Consequently, 2016 results combine predecessor investment-company reporting through January 18 with successor REIT reporting beginning January 19; the 2015 figures use investment-company accounting and are not directly comparable.
Key financial metrics
| Metric | Third quarter 2016 | 2016 successor period, Jan. 19–Sept. 30 |
|---|---|---|
| Total revenue | $1.349 million | $3.420 million |
| Operating loss | $44,418 | $77,605 |
| Net loss | $217,372 | $180,557 |
| Basic and diluted loss per share | $0.03 | $0.02 |
| Net cash provided by operating activities | Not stated for quarter | $1.068 million |
| Cash used in investing activities | Not stated for quarter | $12.008 million |
The balance sheet reported $60.568 million of total assets, including $48.950 million of net self-storage facilities, $6.997 million of cash and cash equivalents, and $3.896 million of marketable securities. Total liabilities were $20.345 million, including $19.364 million of net debt; the loan’s $20.0 million principal was secured by certain facilities. Equity was $40.222 million. Management reported capital resources of approximately $10.9 million and said they exceeded planned capital needs for the next year.
Same-store revenue increased 7.7% in the quarter and 7.6% for the nine months versus comparable 2015 periods; same-store NOI rose 3.8% and 7.1%, respectively. Same-store occupancy was 91.4% at quarter-end, versus 89.3% in the comparison table. Across all facilities, occupancy was 91.2% at September 30. NOI is a non-GAAP measure; it is not a substitute for GAAP earnings or cash flow.
Material changes and operating activity
- Acquired facilities in Lima, Ohio, for $5.3 million and Fishers, Indiana, for $7.7 million, bringing the portfolio to nine stores. Management attributed combined-store revenue growth of 16.9% for the quarter and 10.8% for the nine months partly to these acquisitions.
- Same-store operating costs rose 14.4% in the quarter and 8.4% for the nine months, faster than same-store revenue growth. Management cited payroll, property taxes, repairs and maintenance, and marketing expenses.
- Quarterly general and administrative expense increased 56.9% year over year, to $393,561; management cited legal, accounting, compliance, Nasdaq listing, investor-relations, and capital-markets consulting costs. Business-development and acquisition costs were $238,537 for the quarter.
- Quarterly comprehensive loss was $668,782, including a $451,410 unrealized loss on available-for-sale securities. At September 30, accumulated comprehensive income was $1.448 million.
- The company paid $1.446 million in dividends during the successor period. Distributions were $0.065 per share for the quarter and $0.195 per share for the nine months.
Debt, liquidity, outlook, and risks
In June 2016, subsidiaries borrowed $20 million under a loan bearing 4.192% stated interest (4.40% effective), maturing July 1, 2036. The debt is interest-only through June 2018; principal payments are scheduled thereafter. The loan is secured by facilities with approximately $34.3 million of net book value and includes customary covenants, including a minimum-net-worth test. Management said proceeds were intended primarily for future acquisitions and development.
Management expected rental-income growth, if any, in the remainder of 2016 from tenant rent increases, higher move-in rates, reduced promotions, and occupancy. It expected existing-tenant increases to be slightly below the prior year. This was not formal numerical guidance. The company was developing a Bolingbrook, Illinois, expansion of approximately 44,260 leasable square feet, with a stated $2.4 million budget and anticipated November 2016 completion; completion and cost outcomes were not guaranteed. Management also cited seasonal and local demand, competition, property taxes, labor costs, weather and utility costs, acquisition execution, REIT qualification, regulatory requirements, and access to reasonably priced capital as risks. It reported no material pending legal proceedings and concluded disclosure controls were effective.
The filing contains an apparent net-loss inconsistency: the financial statements report $180,557 for the successor period, while MD&A once states $185,557. Comparability is also limited by the accounting-status change. Management provided no clear standalone quarterly cash-flow figure, forward earnings guidance, or explicit profit-margin guidance.
Important facts for investors to verify
- Reconcile the $180,557 versus $185,557 successor-period net-loss figures and confirm the correct reporting-period labels.
- Review the full loan documents, covenant headroom, collateral, and future principal and payment schedule.
- Assess acquisition performance, lease-up, and the cost and timing of the Bolingbrook expansion.
- Track same-store expense growth against revenue and NOI, including property taxes, payroll, marketing, and acquisition-related costs.
- Confirm current occupancy, dividend sustainability, REIT compliance, and the valuation and disposition plans for remaining securities.