Global Self Storage, Inc. — FY2020 Form 10-K
Reporting period: Year ended December 31, 2020; filed March 31, 2021. The company is a self-managed and self-administered self-storage REIT operating primarily in one segment: rental operations. At year-end it owned 12 stores and managed one third-party store across eight states, totaling 969,426 leasable square feet and 6,972 units. The filing reports annual results, not standalone fourth-quarter financial statements.
Financial results and liquidity
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Total revenue | $9.20 million | $8.67 million | +6.1% |
| Operating income | $1.22 million | $1.40 million | -12.9% |
| Net income | $274,341 | $590,619 | -53.6% |
| Diluted earnings per share | $0.03 | $0.08 | Down $0.05 |
| Net cash from operating activities | $2.00 million | $1.71 million | +$290,000 |
Operating margin was approximately 13.3% and net margin approximately 3.0%, based on reported total revenue. Rental income rose 5.0% to $8.79 million; other property-related income rose 18.9% to $337,166. Total expenses increased 9.8% to $7.98 million, led by depreciation and amortization, which rose 38.3% to $1.99 million, and higher general and administrative costs. Interest expense increased 9.7% to $1.18 million.
Same-store occupancy at year-end increased to 95.1% from 91.7%. Same-store revenue grew 0.7%, costs fell 8.8%, and NOI increased 7.8% to $4.55 million. Across same- and non-same-store properties, revenue increased 5.5%, occupancy rose to 94.1% from 90.5%, and NOI increased 9.1% to $5.54 million.
Cash, cash equivalents and restricted cash totaled $1.96 million at year-end, down from $4.25 million. Marketable securities were $1.92 million. Management stated total capital resources of approximately $8.8 million, including $4.9 million available on its revolving facility. Operating cash flow was $2.00 million; investing cash outflow was $1.61 million, primarily construction and improvements; financing cash outflow was $2.69 million. Cash dividends paid were $2.43 million.
Debt at year-end included $18.85 million principal on a secured term loan (4.192% fixed rate; July 2036 maturity) and $5.14 million drawn on a secured revolving facility (one-month U.S. dollar LIBOR plus 3%; December 20, 2021 maturity). The revolving facility has $4.86 million undrawn capacity under its $10 million limit. The company reported compliance with term-loan covenants. A $7.5 million interest-rate cap expires December 20, 2021.
FFO was $2.11 million, or $0.23 per diluted share, compared with $1.84 million, or $0.24 per diluted share. AFFO was $2.25 million, or $0.24 per diluted share, compared with $2.06 million, or $0.27 per diluted share. These are non-GAAP measures. The company paid $0.26 per share in cash dividends in each year; FY2020 dividends exceeded both GAAP earnings and reported FFO and AFFO per diluted share.
Material changes and operating developments
- Revenue growth reflected higher leased square footage and rent-management initiatives; net leased square footage across the owned portfolio increased 6.0%.
- Operating income and net income declined despite higher revenue, primarily because of higher depreciation and amortization, general and administrative expense, and interest expense. Unrealized gains on marketable equity securities were $155,139 in 2020 versus $193,705 in 2019.
- No self-storage acquisitions were completed in 2020. The company completed projects adding approximately 11,800 leasable square feet in Millbrook, New York, converting space to climate-controlled units in McCordsville, Indiana, and adding approximately 7,300 square feet in West Henrietta, New York.
- Millbrook occupancy reached 96.1% at year-end; McCordsville reached 90.3%; West Henrietta reached 86.2%. The filing cautions that lease-up of newly added space is not assured.
Outlook, risks and unusual items
- Management expects current cash sources to meet liquidity needs for the next 12 months, while monitoring liquidity and operating performance amid COVID-19 uncertainty. It is considering refinancing or replacing the revolving facility ahead of its December 2021 maturity.
- Management expects 2021 rent increases, if any, to be higher than in 2020, and expects expanded capacity to support revenue. No quantified earnings or revenue guidance is provided. Management also expects certain operating costs and property taxes to rise.
- COVID-19 reduced move-in and move-out activity in late March through May 2020; demand increased from June. The company reported no material degradation in rent collections at year-end, but warned of possible higher bad debt, delayed lien auctions, move-outs, lower rents and disruptions. Rent increases were temporarily suspended and restarted across properties in July 2020.
- Property taxes at Dolton, Illinois increased to $399,000 in 2020; the assessment and tax-incentive status are under appeal. Management expects the property’s tax expense to rise approximately 20% in 2021; neither appeal outcome is assured.
- An affiliate borrowed $486,602 under the PPP on behalf of affiliated entities, including the company. The company expects to bear a proportionate share of interest and eligible costs. Forgiveness is uncertain; the filing warns of repayment and potential government review or investigation.
- The company’s month-to-month leases, concentrated self-storage portfolio, debt covenants and financing access, REIT qualification and distribution requirements, competition, and property-tax and regulatory exposure are material risks. The board declared a $0.065-per-share dividend payable March 31, 2021.
Important facts for investors to verify
- How the company plans to refinance or replace the revolving facility maturing December 20, 2021, and the resulting interest cost and covenant headroom.
- Whether operating cash flow and FFO/AFFO can support the $0.26-per-share annual dividend, given FY2020 GAAP earnings of $0.03 and AFFO of $0.24 per diluted share.
- Progress in leasing the recently expanded or converted space, particularly West Henrietta, and whether the expected capacity-driven revenue growth materializes.
- Outcomes of the Dolton property-tax appeals and the actual effect of expected tax increases on cash flow.
- Whether the PPP loan is forgiven and what amount, if any, the company must repay or contribute.