Business Context and Reporting Period
This Form 8-K is filed by Strategic Storage Trust II, Inc. (Smartstop Self Storage REIT, Inc.) on December 29, 2016. The filing reports the completion of the second phase of a major asset acquisition, amendments to existing credit facilities, and the assumption of new debt obligations.
Key Financial Metrics and Transactions
- Asset Acquisition: Closed on the "Second Phase" of the 27 Property Portfolio on December 30, 2016, acquiring 11 self-storage facilities and 4 land parcels in North Carolina for approximately $93 million (plus closing costs and fees).
- Acquisition Details: The 11 facilities comprise approximately 4,850 units and 553,500 net rentable square feet. Total acquisition fees for this phase were approximately $1.6 million.
- Debt Assumption: Assumed a $47.2 million securitized loan (North Carolina Loan) from Wells Fargo Bank with an interest rate of 5.311% maturing in August 2024. Payments are interest-only through August 2019.
- Debt Reduction: Reduced the "Property Loan" (secured by KeyBank) from $105 million to approximately $92.8 million following the removal of one collateral property.
- Debt Extension: Extended the maturity of both the Property Loan and a $10 million "Subordinate Loan" (originally $30 million) from December 31, 2016, to March 31, 2017.
Material Changes Versus Prior Period
The primary material change is the expansion of the company's portfolio in North Carolina through the Second Phase acquisition, funded by public offering proceeds and debt assumption. Additionally, the company significantly reduced its outstanding balance on the Subordinate Loan by $20 million during the third and fourth quarters of 2016, bringing the balance to $10 million prior to the maturity extension.
Outlook, Risks, and Contingencies
- Financial Statements: The filing states it is impracticable to provide financial statements for the acquired real property at this time. The company intends to file these statements by March 17, 2017.
- Management Fees: Strategic Storage Property Management II, LLC will manage the new properties, charging fees equal to the greater of $2,500 per month or 6% of gross monthly revenues. A portion of this fee is passed to a sub-property manager (Extra Space Storage, Inc.).
- Debt Restrictions: The assumed North Carolina Loan is securitized and cannot be prepaid; it may only be repaid via partial or full defeasance.
- Extension Fees: The company paid extension fees to KeyBank for extending the maturity dates of both the Property Loan and the Subordinate Loan.
Investor Verification Checklist
- Verify the specific terms of the defeasance options for the $47.2 million North Carolina Loan.
- Confirm the exact amount of extension fees paid to KeyBank for the loan maturities extended to March 2017.
- Review the financial statements for the acquired North Carolina properties once filed by March 17, 2017.
- Assess the impact of the 6% gross revenue management fee on the net operating income of the newly acquired assets.
- Confirm the status of the $3 million redevelopment property in Asheville, NC, which was assigned to Strategic Storage Growth Trust, Inc.