Business Context and Reporting Period
Company: Strategic Storage Trust II, Inc. (SST II)
Filing Type: Form 8-K (Current Report)
Date of Report: October 1, 2018
Event: Entry into a Material Definitive Agreement (Merger Agreement) to acquire Strategic Storage Growth Trust, Inc. (SSGT).
Key Financial Metrics and Transaction Terms
Merger Consideration: $12.00 per share in cash for each outstanding share of SSGT common stock.
Partnership Conversion: Each unit of SSGT Operating Partnership (SSGT OP) converts to 1.127 units of SST II Operating Partnership (SST II OP).
Assets Acquired: 28 self-storage facilities located in 10 U.S. states and the Greater Toronto, Canada area.
Portfolio Size (as of June 30, 2018): Approximately 19,300 units and 2.1 million net rentable square feet.
Overall Physical Occupancy: 73.4% (as of June 30, 2018).
Termination Fees:
- SSGT Fee to SST II: $2.9 million if terminated within 5 business days after the "Go Shop" period; $9.6 million thereafter.
- SST II Reverse Fee to SSGT: $9.6 million under specified circumstances related to failure to close.
Material Changes and Portfolio Details
The filing details the acquisition of SSGT's real estate portfolio. The portfolio includes a mix of stabilized and lease-up properties.
Lease-up Properties (as of June 30, 2018): Elk Grove, Garden Grove, Sarasota, Mount Pleasant, Pembroke Pines, Riverview, Eastlake, Asheville I, and Stoney Creek. These properties show significantly lower occupancy rates (ranging from 6.1% to 73.7%) compared to stabilized assets.
Under Construction: The Torbarrie property in Toronto, Canada, is under construction with an expected completion in the second half of 2019.
Additional Rights: SST II will obtain rights to acquire two additional self-storage facilities currently under contract with SSGT.
Guidance, Outlook, Risks, and Contingencies
Conditions to Closing:
- Approval by holders of a majority of outstanding SSGT common stock.
- Customary closing conditions (no financing condition required).
- Not subject to SST II stockholder approval.
Go Shop Period: SSGT may solicit alternative proposals until 11:59 p.m. on November 15, 2018. SSGT may terminate the agreement to accept a superior proposal within five business days following this period.
Risks and Uncertainties:
- Failure to obtain stockholder approval or satisfy closing conditions.
- Disruption of management attention and operations.
- Significant transaction costs and unknown liabilities.
- Failure to realize expected synergies or integration difficulties.
- Changes in economic, political, or regulatory conditions.
Financial Outlook: The filing contains forward-looking statements regarding anticipated financial results and synergies but does not provide specific numerical guidance for future revenue or earnings.
Important Facts for Investor Verification
- Verify the final approval status of the merger by SSGT stockholders.
- Confirm the actual closing date, noting the April 1, 2019, termination deadline if not closed.
- Review the lease-up schedule and occupancy ramp-up for the 9 identified lease-up properties to assess near-term revenue impact.
- Monitor the "Go Shop" period for any superior proposals that could alter the transaction terms or lead to termination.
- Assess the construction timeline and budget for the Torbarrie property in Toronto.