SmartStop Self Storage REIT, Inc. Reports Second Quarter 2024 Results

SmartStop Self Storage REIT, Inc. (“SmartStop” or “the Company”), a self-managed and fully-integrated self-storage company, announced its overall results for the three and six months ended June 30, 2024.

“We are pleased with our second quarter operating results, with sector leading same-store revenue growth,” said H. Michael Schwartz, Chairman and Chief Executive Officer of SmartStop. “We saw improving customer demand throughout our peak rental season and achieved a strong quarter-end same-store occupancy of 92.9%. Our GTA portfolio continues to outperform, with same-store revenue and NOI growth of 4.3% and 6.0% on a constant currency basis, respectively. However, the recovery in the U.S. single-family home market activity did not come to fruition during the quarter, leading to a challenging move-in rate environment and continued sector-wide competition. I’m proud of the efforts of the SmartStop team, and for our continued focus on enhancing our technology, as a differentiated factor of our ability to compete in a competitive U.S. storage market.”

Three Months Ended June 30, 2024 Financial Highlights:

• Net loss attributable to common stockholders was approximately $3.8 million. This represents a decrease in the Company’s earnings of approximately $4.2 million when compared to the same period in 2023. Net loss per Class A and Class T shares (basic and diluted) was $0.04, an increase in net loss per share of $0.04 as compared to the same period in 2023.
• Total self storage-related revenues were approximately $55.0 million, an increase of approximately $1.1 million when compared to the same period in 2023.
• FFO, as adjusted (attributable to common stockholders and Operating Partnership (“OP”) unit holders), was approximately $12.4 million, a decrease of approximately $3.8 million when compared to the same period in 2023.
• FFO, as adjusted per share and OP unit outstanding – diluted was $0.11, a decrease of approximately $0.04 when compared to the same period in 2023.
• Same-store revenues and expenses increased by 1.3% and 5.3%, respectively, while same-store net operating income (“NOI”) decreased by 0.6% compared to the same period in 2023.
• Same-store average physical occupancy decreased by 1.1% to 92.5% compared to the same period in 2023.
• Same-store annualized rent per occupied square foot was approximately $20.15, an increase of approximately $0.36 when compared to the same period in 2023.

Six Months Ended June 30, 2024 Financial Highlights:

• Net loss attributable to common stockholders was approximately $8.5 million. This represents a decrease in the Company’s earnings of approximately $7.5 million when compared to the same period in 2023. Net loss per Class A and Class T shares (diluted) was $0.09, an increase in net loss per share of $0.08 when compared to the same period in 2023.
• Total self storage-related revenues were approximately $107.6 million, an increase of approximately $0.3 million when compared to the same period in 2023.
• FFO, as adjusted (attributable to common stockholders and Operating Partnership (“OP”) unit holders), was approximately $23.5 million, a decrease of approximately $8.3 million when compared to the same period in 2023.
• FFO, as adjusted per share and OP unit outstanding – diluted was $0.21, a decrease of approximately $0.08 when compared to the same period in 2023.
• Same-store revenues and net operating income (“NOI”) decreased by 0.2% and 2.3%, respectively, and same-store expenses increased by 4.4% compared to the same period in 2023.
• Same-store average physical occupancy decreased by 0.8% to 92.5% compared to the same period in 2023.
• Same-store annualized rent per occupied square foot was approximately $19.82, an increase of approximately $0.09 when compared to the same period in 2023.

External Growth

During the quarter, the Company acquired a self-storage property in Colorado Springs, Colorado, its second property in the Colorado Springs market. The property comprises 480 storage units and approximately 100 RV parking spaces, as well as additional land available for expansion.

During the quarter, the Company opened a 95,000 square foot, 930 unit storage facility in the Town of Markham in the Greater Toronto Area of Ontario. The facility was developed in partnership with SmartCentres (TSX: SRU.UN). This is SmartStop’s 33rd owned or managed operating location in the Greater Toronto Area and 35th in Canada, as of quarter end

Capital Market Activities

Subsequent to quarter end, three of the Company's joint ventures with SmartCentres closed on a $46 million CAD term loan (the “RBC JV Term Loan II”) with Royal Bank of Canada pursuant to which the Company’s joint venture subsidiaries that each own 50% of a joint venture property are borrowers. The RBC JV Term Loan is secured by first mortgages on such JV properties which were previously encumbered. The maturity date of the RBC JV Term Loan II is November 3, 2025, which may be extended by one additional year at the discretion of the lender. Interest is a fixed annual rate of 4.97%. The net proceeds from the RBC JV Term Loan II were used to fully repay the allocated loan amounts of approximately $46.4 million CAD or approximately $34.1 million USD under loans previously provided by SmartCentres for each of the three JV properties.

Managed REIT Platform Update

SmartStop, through an indirect subsidiary, 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 asset management fees, property management fees, acquisition fees, and other fees and also receives substantially all of the tenant protection program revenue earned by the Managed REITs, which had a combined portfolio of 31 operating properties and approximately 24,500 units and 2.7 million rentable square feet at quarter end. Assets under management for the Managed REITs was approximately $744.0 million at quarter end. SmartStop also manages one additional property, not owned by the Managed REITs.

Declared Distributions

On June 26, 2024, our board of directors declared a distribution rate for the month of July 2024 of approximately $0.0508 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 July 31, 2024. Such distributions payable to each stockholder of record will be paid the following month.

On July 26, 2024, our board of directors declared a distribution rate for the month of August 2024 of approximately $0.0508 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 August 31, 2024. Such distributions payable to each stockholder of record will be paid the following month.

N/M Not meaningful

SmartStop's same-store revenue increased by approximately $0.6 million, or approximately 1.3%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 due to higher annualized rent per occupied square foot of approximately 1.8%, partially offset by an approximately 1.1% decrease in average occupancy. The increase in property operating expenses is primarily attributable to property insurance, repairs and maintenance, advertising expense, and property taxes.

The following table presents a reconciliation of net income (loss) as presented on our consolidated statements of operations to net operating income, as stated above, for the periods indicated (in thousands):

Same-Store Facility Results - six months ended June 30, 2024 and 2023

We consider the data below to be meaningful as this allows for the comparison of results without the effects of acquisition, lease up, or development activity. The following table sets forth operating data for our same-store facilities (stabilized and comparable properties that have been included in the consolidated results of operations since January 1, 2023, excluding four other properties) for the six months ended June 30, 2024 and 2023 (in thousands unless otherwise noted).

N/M Not meaningful

SmartStop's same-store revenue decreased by approximately $0.2 million, or approximately 0.2%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 due to an approximately 0.8% decrease in average occupancy, partially offset by an approximately 0.5% increase in annualized rent per occupied square foot. The increase in property operating expenses is primarily attributable to compensation related expenses, property insurance, property taxes, repairs and maintenance, and advertising expense.

The following table presents a reconciliation of net income (loss) as presented on our consolidated statements of operations to net operating income, as stated above, for the periods indicated (in thousands):

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, amortization of debt issuance costs, gains or losses from extinguishment of debt, adjustments of deferred tax assets and liabilities, realized and unrealized gains/losses on foreign exchange transactions, gains/losses on foreign exchange and interest rate derivatives not designated for hedge accounting, and other select non-recurring income or expense items 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-Q for the three and six months ended June 30, 2024, a financial supplement, and additional information about SmartStop are available on our website, investors.smartstopselfstorage.com.

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

SmartStop Self Storage REIT, Inc. (“SmartStop”) is a self-managed REIT with a fully integrated operations team of approximately 500 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 August 13, 2024, SmartStop has an owned or managed portfolio of 201 operating properties in 22 states and Canada, comprising approximately 141,400 units and 16.0 million rentable square feet. SmartStop and its affiliates own or manage 36 operating self-storage properties in Canada, which total approximately 31,000 units and 3.2 million rentable square feet.

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) disruptions in the economy, including debt and banking markets and foreign currency changes; (ii) significant transaction costs, including financing costs, and unknown liabilities; (iii) whether we will be successful in the pursuit of our business plan; (iv) whether we will succeed in our investment objectives; (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, military actions, and terrorist attacks; (vi) changes in tax and other laws and regulations; (vii) difficulties in our ability to attract and retain qualified personnel and management; or (viii) the effect of competition at our self-storage properties or from other storage alternatives, which could cause rents and occupancy rates to decline.

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, 2023, 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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