SmartStop Self Storage REIT, Inc. Reports Strong Fourth Quarter 2021 Results with Best in Class Same-Store Revenue & NOI Growth

SmartStop Self Storage REIT, Inc. (“SmartStop”), a self-managed and fully-integrated self storage company, announced its overall results for the three and twelve months ended December 31, 2021.

“The fourth quarter capped off a truly exceptional year for SmartStop, and we are grateful for the remarkable team that’s worked tirelessly to build SmartStop to the company it is today,” said H. Michael Schwartz, Chairman and Chief Executive Officer of SmartStop. “In addition to posting best in class same-store revenue and NOI growth every quarter this year and for the full year, our fourth quarter FFO, as adjusted grew approximately 182% over the prior year. We are particularly proud that during the quarter, we declared an updated estimated Net Asset Value (‘NAV’) per share of $15.08 calculated as of June 30, 2021, approximately 45% higher than the prior NAV valued as of December 31, 2019, which values the Company at an enterprise value of over $2.5 billion. This value creation substantiates the investments we’ve made in our platform, technology and people. Having closed the $375 million Strategic Storage Trust IV, Inc. (‘SST IV’) merger along with a new $700 million multi-currency credit facility, we are poised to deliver strong risk-adjusted returns and grow stockholder value in 2022 and beyond.”

Three Months Ended December 31, 2021 Financial Highlights:

• Net loss attributable to common stockholders was approximately $9.4 million for the three months ended December 31, 2021. This represents an increase of approximately $4.9 million when compared to the same period in 2020. Net loss per Class A and Class T shares (basic and diluted) was $0.11, an increase of $0.04, or 47%, when compared to the same period in 2020.
  
  
• Total self storage-related revenues increased by approximately $15.1 million, or 51.7%, when compared to the same period in 2020.
  
  
• FFO, as adjusted (attributable to common stockholders and Operating Partnership (“OP”) unit holders), was approximately $14.9 million. This represents an increase of approximately $9.2 million, or 159.3%, when compared to the same period in 2020.
  
  
• FFO, as adjusted per share and OP unit outstanding - diluted was $0.16, an increase of $0.08, or 100.0%, when compared to the same period in 2020.
  
  
• Same-store revenues, expenses and NOI increased by 19.0%, 2.9% and 26.6%, respectively, compared to the same period in 2020.
  
  
• Same-store average physical occupancy increased by 3.2% to 95.4% compared to 92.2% during the same period in 2020.
  
  
• Same-store annualized rent per occupied square foot was approximately $17.68, which represented an increase of approximately 16.0% when compared to the same period in 2020.

Twelve Months Ended December 31, 2021 Financial Highlights:

• Net loss attributable to common stockholders was approximately $29.4 million for the twelve months ended December 31, 2021. This represents a decrease of approximately $25.0 million when compared to the same period in 2020. Net loss per Class A and Class T shares (basic and diluted) was $0.37, a decrease of $0.54, or 59.0%, when compared to the same period in 2020.
  
  
• Total self storage-related revenues increased by approximately $48.0 million, or 43.6%, when compared to the same period in 2020.
  
  
• Same-store revenues, expenses and NOI increased by 17.4%, 3.3% and 24.5%, respectively, compared to the same period in 2020.
  
  
• Same-store average physical occupancy increased by 4.5% to 95.1%, compared to 90.6% during the same period in 2020.
  
  
• Same-store annualized rent per occupied square foot was approximately $16.51, which represented an increase of approximately 11.5% when compared to the same period in 2020.

External Growth

In October, the Company acquired a self storage facility in Lakewood, CO. The facility serves the communities of Green Mountain, Foothills, Briarwood Hills, West Lochwood and Chateau Ridge Estates. The property’s 770 units span across approximately 87,000 square feet. The property offers customers a variety of amenities including a gated drive-in loading area, state-of-the-art security systems, keypad access and large truck accessibility. This is SmartStop’s seventh owned or managed location in the Denver market.

In November, the Company announced the opening of a newly constructed self storage facility in Scarborough, Ontario, Canada. The property’s 970 units are 100% climate-controlled across approximately 97,000 square feet. The property offers customers a variety of amenities including state-of-the-art security systems, elevators, keypad access, a gated loading area and more. This is SmartStop’s 19th owned or managed operating location in the Greater Toronto Area (GTA).

Subsequent to quarter end, the Company announced the acquisition of a self storage facility in Algonquin, IL. The property’s 900 units span across approximately 114,000 square feet, and offer customers a blend of interior, climate controlled and non-climate, drive-up product. The facility is located in a dense and high-end suburban pocket of Chicago serving the communities of Cary, Carpentersville, Lake in the Hills, Lake Zurich, Trout Valley and West Dundee. This is SmartStop’s sixth owned or managed location in the Chicago market and 163rd in North America.

Strategic Storage Growth Trust II, Inc. Merger

Subsequent to quarter end, SmartStop and Strategic Storage Growth Trust II, Inc. ("SSGT II"), a private REIT sponsored by an indirect subsidiary of SmartStop, announced that the companies have entered into a definitive agreement to merge in an all-stock transaction, in which SSGT II will merge into a newly-formed subsidiary of SmartStop. Per the merger agreement, SmartStop will acquire all of the real estate owned by SSGT II, consisting of 10 wholly-owned operating self storage facilities located across seven states, an interest in one operating property held through an unconsolidated joint venture with an unaffiliated third party and two properties in various stages of development that are held through an unconsolidated joint venture with an unaffiliated third party. The total SSGT II operating portfolio, including the operating joint venture property, currently represents approximately 8,500 self storage units and 900,000 net rentable square feet. Additionally, the Company will obtain SSGT II’s rights to acquire a property located in Southern California.

Under the terms of the agreement, SSGT II stockholders will receive 0.9118 shares of SmartStop Class A common stock for each share of SSGT II common stock they own. This exchange ratio represents an increase of 37 percent above SSGT II's most recent offering price, when using SmartStop's most recent estimated NAV of $15.08 per share. The transaction values SSGT II’s real estate assets at approximately $280 million, based on September 30, 2021 share counts and debt principal balances outstanding, and using the agreed exchange ratio and SmartStop's estimated NAV per share of $15.08. The merger is expected to close during the first half of 2022. Additional information regarding the merger and the merger agreement can be found in the Form 8-K filed by SmartStop with the Securities and Exchange Commission on February 24, 2022.

Capital Markets Activity

In October, the Company exercised $200 million of its accordion (the “Accordion”) under its existing multi-currency credit facility (the “Credit Facility”) with a syndicate of banks led by KeyBank National Association, Wells Fargo, N.A., Citibank, N.A. and Bank of Montreal. The increased commitment was entirely on the revolving portion of the Credit Facility (the “Revolver”). The Credit Facility now consists of a $450 million Revolver and a $250 million term loan (the “Term Loan”) for a total commitment of $700 million. The Accordion was also amended to permit expansion up to $1.05 billion, subject to certain conditions. The other terms and conditions of the Credit Facility remains materially unchanged.

Net Asset Value

During the quarter, the Company announced that its board of directors declared an updated estimated Net Asset Value (“NAV”) per share of $15.08 for its Class A and Class T shares, valued as of June 30, 2021. SmartStop’s previous estimated NAV per share was $10.40 valued as of December 31, 2019. Please see SmartStop’s Form 8-K filed on October 20, 2021 for a description of the methodologies and assumptions used to determine, and the limitations of, the estimated NAV per share.

Declared Distributions

On December 20, 2021, SmartStop’s board of directors declared a distribution rate for the first quarter of 2022, of approximately $0.00164 per day per share on the outstanding shares of common stock payable to both Class A and Class T stockholders. In connection with these distributions, after the stockholder servicing fee is paid, approximately $0.0014 per day will be paid per Class T share. Such distributions payable to each stockholder of record during a month will be paid the following month.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

COMPUTATION OF SAME-STORE OPERATING RESULTS

(Unaudited)

Same-Store Facility Results - Three Months Ended December 31, 2021 and 2020

The following table sets forth operating data for SmartStop’s same-store facilities (those properties included in the consolidated results of operations since January 1, 2020, excluding nine lease-up properties SmartStop owned as of January 1, 2020) for the three months ended December 31, 2021 and 2020. SmartStop considers the following data to be meaningful as this allows for the comparison of results without the effects of acquisition, lease up, or development activity.

N/M Not meaningful

SmartStop’s same-store revenue increased by approximately $5.2 million or approximately 19% for the three months ended December 31, 2021 compared to the three months ended December 31, 2020 primarily due to higher annualized rent per occupied square foot as well as increased occupancy.

The following table presents a reconciliation of net loss as presented on SmartStop’s consolidated statements of operations to net operating income, as stated above, for the periods indicated:

Same-Store Facility Results - Twelve Months Ended December 31, 2021 and 2020

The following table sets forth operating data for SmartStop’s same-store facilities (those properties included in the consolidated results of operations since January 1, 2020, excluding nine lease-up properties SmartStop owned as of January 1, 2020) for the years ended December 31, 2021 and 2020. SmartStop considers the following data to be meaningful as this allows for the comparison of results without the effects of acquisition, lease up, or development activity.

N/M Not meaningful

SmartStop’s same-store revenue increased by approximately $18.1 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 due to higher annualized rent per occupied square foot and increased occupancy.

The following table presents a reconciliation of net loss as presented on SmartStop’s consolidated statements of operations to net operating income, as stated above, for the periods indicated:

ADDITIONAL INFORMATION REGARDING NOI, FFO, and FFO, as adjusted

Net Operating Income (“NOI”)

NOI is a non-GAAP measure that SmartStop defines as net income (loss), computed in accordance with GAAP, generated from properties before corporate general and administrative expenses, asset management fees, interest expense, depreciation, amortization, acquisition expenses and other non-property related expenses. SmartStop believes that NOI is useful for investors as it provides a measure of the operating performance of its operating assets because NOI excludes certain items that are not associated with the ongoing operation of the properties. Additionally, SmartStop believes that NOI (also referred to as property operating income) is a widely accepted measure of comparative operating performance in the real estate community. However, SmartStop’s use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount.

Funds from Operations (“FFO”) and FFO, as Adjusted

Funds from Operations

Funds from operations (“FFO”) is an industry wide metric promulgated by the National Association of Real Estate Investment Trusts, or NAREIT, which SmartStop believes to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure.

SmartStop defines FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, or the White Paper. The White Paper defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property and asset impairment write downs, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Additionally, gains and losses from change in control are excluded from the determination of FFO. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. SmartStop’s FFO calculation complies with NAREIT’s policy described above.

FFO, as Adjusted

SmartStop uses FFO, as adjusted, as an additional non-GAAP financial measure to evaluate its operating performance. SmartStop previously used Modified Funds from Operations (“MFFO”) (as defined by the Institute for Portfolio Alternatives) as a non-GAAP measure of operating performance. Management replaced the MFFO measure with FFO, as adjusted, because FFO, as adjusted, provides investors with supplemental performance information that is consistent with the performance models and analysis used by management. In addition, FFO, as adjusted, is a measure used among SmartStop’s peer group, which includes publicly traded REITs. Further, SmartStop believes FFO, as adjusted, is useful in comparing the sustainability of its operating performance with the sustainability of the operating performance of other real estate companies.

In determining FFO, as adjusted, SmartStop makes further adjustments to the NAREIT computation of FFO to exclude the effects of non-real estate related asset impairments and intangible amortization, acquisition related costs, other write-offs incurred in connection with acquisitions, contingent earnout adjustments, adjustments of fair value of debt adjustments, gains or losses from extinguishment of debt, accretion of deferred tax liabilities, realized and unrealized gains/losses on foreign exchange transactions, and gains/losses on foreign exchange and interest rate derivatives not designated for hedge accounting, which SmartStop believes are not indicative of the Company’s overall long-term operating performance. SmartStop excludes these items from GAAP net income to arrive at FFO, as adjusted, as they are not the primary drivers in its decision-making process and excluding these items provides investors a view of its continuing operating portfolio performance over time and makes its results more comparable period to period and to other REITs, which in any respective period may experience fluctuations in such acquisition, merger or other similar activities that are not of a long-term operating performance nature. FFO, as adjusted, also reflects adjustments for unconsolidated partnerships and jointly owned investments. SmartStop uses FFO, as adjusted, as one measure of operating performance when SmartStop formulates corporate goals and evaluate the effectiveness of its strategies.

Presentation of FFO and FFO, as adjusted, is intended to provide useful information to investors as they compare the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and FFO, as adjusted, the same way, so comparisons with other REITs may not be meaningful. Furthermore, FFO and FFO, as adjusted, are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of SmartStop’s performance, as an alternative to cash flows from operations, which is an indication of liquidity, or indicative of funds available to fund SmartStop’s cash needs including SmartStop’s ability to make distributions to its stockholders. FFO and FFO, as adjusted, should not be considered as an alternative to net income (determined in accordance with GAAP) and should be reviewed in conjunction with other measurements as an indication of SmartStop’s performance.

Neither the SEC, NAREIT, nor any other regulatory body has passed judgment on the acceptability of the adjustments that SmartStop uses to calculate FFO or FFO, as adjusted. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the publicly registered, non-traded REIT industry and SmartStop would have to adjust its calculation and characterization of FFO or FFO, as adjusted.

This press release, our Form 10-K for the year ended December 31, 2021, a financial supplement, and additional information about SmartStop are available on our website, investors.smartstopselfstorage.com.

About SmartStop Self Storage REIT, Inc. (“SmartStop”):

SmartStop is a self-managed REIT with a fully integrated operations team of approximately 420 self storage professionals focused on growing the SmartStop® Self Storage brand. SmartStop, through its indirect subsidiary SmartStop REIT Advisors, LLC, also sponsors other self storage programs. As of March 27, 2022, SmartStop is one of the largest self storage companies in North America, with an owned and managed portfolio of 163 properties in 19 states and Ontario, Canada and comprising approximately 111,000 units and 12.6 million rentable square feet. SmartStop and its affiliates own or manage 19 operating self storage properties in the Greater Toronto Area, which total approximately 16,200 units and 1.7 million rentable square feet. Additional information regarding SmartStop is available at investors.smartstopselfstorage.com.

Additional Information and Where to Find It

In connection with the proposed Merger with SSGT II (the “Merger”), SmartStop intends to file a registration statement on Form S-4 with the SEC that will include a proxy statement of SSGT II and will also constitute a prospectus of SmartStop. SSGT II intends to mail or otherwise provide to its stockholders the proxy statement/prospectus and other relevant materials, and hold a meeting of its stockholders to obtain the requisite stockholder approval of the Merger. BEFORE MAKING ANY VOTING DECISION, SSGT II’S STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY WHEN IT BECOMES AVAILABLE AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED MERGER OR INCORPORATED BY REFERENCE THEREIN BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER AND THE PARTIES TO THE PROPOSED MERGER. Investors and security holders may obtain a free copy of the proxy statement/prospectus and other documents that SmartStop files with the SEC (when available) from the SEC’s website at www.sec.gov and SmartStop’s website at https://investors.smartstopselfstorage.com. In addition, the proxy statement/prospectus and other documents filed by SmartStop with the SEC (when available) may be obtained from SmartStop free of charge by directing a request to the following address: SmartStop Self Storage REIT, Inc., Attention: Nicholas M. Look, 10 Terrace Road, Ladera Ranch, California 92694, or by calling (877) 327-3485.

No Offer or Solicitation

This communication does not constitute an offer to sell or the solicitation of an offer to buy or sell any securities or a solicitation of a proxy or of any vote or approval. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended. This communication may be deemed to be solicitation material in respect of the proposed Merger.

Participants in Solicitation Relating to the Merger

SmartStop and SSGT II and their respective directors and executive officers, as well as SS Growth Advisor II, LLC, may be deemed, under SEC rules, to be participants in the solicitation of proxies from SSGT II’s stockholders with respect to the proposed Merger. Security holders can obtain information regarding the names, affiliations and interests of such persons in SmartStop’s proxy statement filed with the SEC on April 15, 2021 or in the proxy statement/prospectus regarding the proposed Merger when it becomes available. Investors may obtain additional information regarding the interests of such participants by reading the proxy statement/prospectus regarding the proposed Merger when it becomes available.

Forward-Looking Statements

Statements about the expected timing, completion and effects of the Merger and the other transactions contemplated by the merger agreement and all other statements in this communication, other than historical facts, constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements and any such forward-looking statements are qualified in their entirety by reference to the following cautionary statements.

All forward-looking statements speak only as of the date hereof and are based on current expectations and involve a number of assumptions, risks and uncertainties that could cause the actual results to differ materially from such forward-looking statements. Such forward-looking statements include, but are not limited to, statements about the expected effects and benefits of Merger, including anticipated future financial and operating results and synergies, as well as all other statements in this press release, other than historical facts. There are several factors which could cause actual plans and results to differ materially from those expressed or implied in forward-looking statements, including, without limitation, the following: (i) risks related to disruption of management’s attention from SmartStop’s ongoing business operations due to the Merger, or other business matters; (ii) significant transaction costs, including financing costs, and unknown liabilities; (iii) failure to realize the expected benefits and synergies of the Merger in the expected time frames or at all; (iv) costs or difficulties related to the integration of acquired self storage facilities and operations, including facilities acquired through the Merger; (v) changes in the political and economic climate, economic conditions and fiscal imbalances in the United States, and other major developments, including wars, natural disasters, epidemics and pandemics, including the outbreak of novel coronavirus (COVID-19), military actions, and terrorist attacks; (vi) changes in tax and other laws and regulations; or (vii) difficulties in SmartStop’s ability to attract and retain qualified personnel and management. In addition, SmartStop and SSGT II may not be able to complete the proposed Merger on the terms described above or other acceptable terms or at all because of a number of factors, including without limitation, the following: (i) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; (ii) the failure to obtain the approval of SSGT II’s stockholders or the failure to satisfy the other closing conditions to the Merger; (iii) risks related to disruption of management’s attention from the parties’ ongoing business operations due to the transaction; and (iv) the effect of the announcement of the Merger on the ability of the parties to retain and hire key personnel, maintain relationships with their customers and suppliers, and maintain their operating results and business generally.

Actual results may differ materially from those indicated by such forward-looking statements. In addition, the forward-looking statements represent SmartStop’s views as of the date on which such statements were made. SmartStop anticipates that subsequent events and developments may cause its views to change. These forward-looking statements should not be relied upon as representing SmartStop’s views as of any date subsequent to the date hereof. Additional factors that may affect the business or financial results of SmartStop are described in the risk factors included in SmartStop’s filings with the SEC, including SmartStop’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which factors are incorporated herein by reference, all of which are filed with the SEC and available at www.sec.gov. SmartStop expressly disclaims a duty to provide updates to forward-looking statements, whether as a result of new information, future events or other occurrences.

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