SmartStop Self Storage REIT, Inc. Reports Fourth Quarter 2022 Results

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, 2022.

“The fourth quarter capped off another exceptional year for SmartStop,” said H. Michael Schwartz, Chairman and Chief Executive Officer of SmartStop. “Coming off of a record year of growth in 2021, which saw the highest level of same-store NOI growth in our Company’s history, we posted 16.5% same-store NOI growth in 2022. Likewise, our Managed REIT Platform continues to provide us with attractive returns, as assets under management for our two Managed REITs increased by approximately $287 million over the course of 2022 and fees increased by approximately 379%. These results and the value creation demonstrated in our updated NAV substantiate the investments we’ve made in our platform, technology and people. We are grateful for the remarkable team that’s worked tirelessly to build SmartStop to the company it is today.”

Three Months Ended December 31, 2022 Financial Highlights:

• Net loss attributable to common stockholders was approximately $1.3 million. This represents an improvement of approximately $8.1 million when compared to the same period in 2021. Net loss per Class A and Class T shares (diluted) was $0.01, an improvement of $0.10 when compared to the same period in 2021.
• Total self storage-related revenues were approximately $53.4 million, an increase of approximately $9.1 million when compared to the same period in 2021.
• FFO, as adjusted (attributable to common stockholders and Operating Partnership (“OP”) unit holders), was approximately $15.8 million, an increase of approximately $0.9 million when compared to the same period in 2021.
• FFO, as adjusted per share and OP unit outstanding – diluted was $0.14, a decrease of $0.02 when compared to the same period in 2021.
• Same-store revenues, expenses and net operating income (“NOI”) increased by 8.2%, 7.9% and 8.4%, respectively, compared to the same period in 2021.
• Same-store average physical occupancy decreased by 2.1% to 93.3% compared to the same period in 2021.
• Same-store annualized rent per occupied square foot was approximately $19.64, an increase of approximately $1.98 when compared to the same period in 2021.

Twelve Months Ended December 31, 2022 Financial Highlights:

• Net income attributable to common stockholders was approximately $6.3 million. This represents an improvement of approximately $35.7 million when compared to the same period in 2021. Net income per Class A and Class T shares (diluted) was $0.07, an improvement of $0.44, when compared to the same period in 2021.
• Total self storage-related revenues were approximately $200.2 million, an increase of approximately $42.0 million when compared to the same period in 2021.
• FFO, as adjusted (attributable to common stockholders and OP unit holders), was approximately $66.3 million, an increase of approximately $22.6 million when compared to the same period in 2021.
• FFO, as adjusted per share and OP unit outstanding – diluted was $0.64, an increase of $0.15 when compared to the same period in 2021.
• Same-store revenues, expenses and NOI increased by 12.9%, 4.9% and 16.5%, respectively, compared to the same period in 2021.
• Same-store average physical occupancy decreased by 0.5% to 94.6% compared to the same period in 2021.
• Same-store annualized rent per occupied square foot was approximately $18.79, which represented an increase of approximately $2.33 when compared to the same period in 2021.

External Growth

During the quarter, the Company completed the development of a facility located in the town of Aurora in the Greater Toronto Area of Ontario. Subsequent to quarter end, the Company completed the development of a facility located in Brampton, Ontario, Canada.

Managed REIT Platform Update

SmartStop serves as the sponsor of Strategic Storage Growth Trust III, Inc. (“SSGT III”) and Strategic Storage Trust VI, Inc. (“SST VI” and together with SSGT III, the “Managed REITs”). SmartStop receives advisory fees and property management fees from the Managed REITs, which had a combined portfolio of 18 operating properties and approximately 13,700 units and 1.7 million rentable square feet at quarter end. During the quarter, assets under management for the Managed REITs increased by $67.9 million to approximately $378.9 million. Subsequent to year end, the combined portfolio owned by the Managed REITs increased by two properties.

Additionally, SmartStop periodically makes debt investments in the Managed REITs in the form of mezzanine loans and preferred limited partnership interests in the operating partnerships of the respective Managed REITs. As of December 31, 2022, there was $35.0 million outstanding on a mezzanine loan from SmartStop to the operating partnership of SST VI, and $17.5 million outstanding on a mezzanine loan from SmartStop to the operating partnership of SSGT III. Subsequent to December 31, 2022, on January 30, 2023, SST VI borrowed an additional $15.0 million on the SST VI Mezzanine Loan. Additionally, on January 30, 2023, SmartStop invested $15.0 million in preferred limited partnership interests in SST VI OP. On January 26, 2023, SSGT III fully repaid the $17.5 million outstanding principal on the SSGT III Mezzanine Loan, plus accrued interest.

Declared Distributions

On December 20, 2022, SmartStop’s board of directors declared a distribution rate for the month of January 2023 of approximately $0.00164 per day per share on the outstanding shares of common stock payable to Class A and Class T stockholders of record of such shares as shown on SmartStop’s books at the close of business on each day of the period commencing on January 1, 2023 and ending January 31, 2023. On January 25, 2023, SmartStop’s board of directors declared a distribution rate for the month of February 2023 of approximately $0.00164 per day per share on the outstanding shares of common stock payable to Class A and Class T stockholders of record of such shares as shown on our books at the close of business on each day of the period commencing on February 1, 2023 and ending February 28, 2023. On February 24, 2023, our board of directors declared a distribution rate for the month of March 2023 of approximately $0.00164 per day per share on the outstanding shares of common stock payable to Class A and Class T stockholders of record of such shares as shown on our books at the close of business on each day of the period commencing on March 1, 2023 and ending March 31, 2023. Such distributions payable to each stockholder of record during a month will be paid the following month.

SmartStop’s same-store revenue increased by approximately $2.7 million, or approximately 8.2%, for the three months ended December 31, 2022 compared to the three months ended December 31, 2021 due to higher annualized rent per occupied square foot, partially offset by an approximately 2% decrease in average occupancy.

The following table presents a reconciliation of net income (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 - Years Ended December 31, 2022 and 2021

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, 2021, excluding three lease-up properties SmartStop owned as of January 1, 2021) for the years ended December 31, 2022 and 2021. 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.

SmartStop’s same-store revenue increased by approximately $16.0 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 due to higher annualized rent per occupied square foot.

The following table presents a reconciliation of net income (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, excluding tenant protection plan revenue, 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 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 a non-GAAP financial metric promulgated by NAREIT that SmartStop believes is an appropriate supplemental measure to reflect operating performance. SmartStop defines FFO 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 real estate related 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 their operating performance. 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 their 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 expenses, accretion of fair value of debt adjustments, gains or losses from extinguishment of debt, adjustments 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 their overall long-term operating performance. SmartStop excludes these items from GAAP net income (loss) to arrive at FFO, as adjusted, as they are not the primary drivers in their decision-making process and excluding these items provides investors a view of their continuing operating portfolio performance over time, 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 their operating performance when they formulate corporate goals and evaluate the effectiveness of their 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. However, 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) as an indication of our performance, as an alternative to cash flows from operations as an indication of SmartStop’s liquidity or indicative of funds available to fund their cash needs including their ability to make distributions to their stockholders. FFO and FFO, as adjusted, should be reviewed in conjunction with other measurements as an indication of our 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, 2022, 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 450 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 3rd, 2023, SmartStop has an owned or managed portfolio of 182 properties in 22 states and Canada, comprising approximately 125,800 units and 14.5 million rentable square feet. SmartStop and its affiliates own or manage 25 operating self storage properties in Canada, which total approximately 21,450 units and 2.2 million rentable square feet. Additional information regarding SmartStop is available at investors.smartstopselfstorage.com.

Forward-Looking Statements

Certain of the matters discussed in this earnings release, 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. 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 recent mergers, or other business matters; (ii) significant transaction costs, including financing costs, and unknown liabilities; (iii) failure to realize the expected benefits and synergies of recent mergers in the expected timeframes or at all; (iv) costs or difficulties related to the integration of acquired self storage facilities and operations, including facilities acquired through recent mergers; (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.

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, 2022 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. 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. 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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