LADERA RANCH, CA--(Marketwired - Apr 5, 2013) - Strategic Storage Trust, Inc. today announced operating results for the three months and year ended December 31, 2012.
"We are proud of our strong results in 2012. We think this reflects the strength of our management team and our dedication to our stockholders," commented H. Michael Schwartz, CEO of Strategic Storage Trust, Inc. "Our growth has come through strategic acquisitions and our ability to increase revenues and operating income by targeting properties with upside potential, and applying strong marketing and operational management fundamentals to increase occupancy rates and revenues. With the people, management and marketing systems we now have in place and the potential for continued growth, coupled with the stability of the asset class, we believe we are well positioned for future success."
Key Highlights for the Three Months Ended December 31, 2012:
Increased IPA Modified Funds From Operations ("MFFO") by 59% to $4.2 million for the three months ended December 31, 2012 from $2.7 million for the three months ended September 30, 2012.
Increased MFFO by 46% to $4.2 million for the three months ended December 31, 2012 from $2.9 million for the three months ended December 31, 2011.
Increased same-store revenues and net operating income ("NOI") by 5.8% and 10.4%, respectively, for the three months ended December 31, 2012 compared to the three months ended December 31, 2011.
Increased same-store average occupancy by approximately 4% to 81% for the three months ended December 31, 2012 compared to 77% for the three months ended December 31, 2011.
Decreased property operating expenses as a percentage of revenue to 34.9% for the three months ended December 31, 2012 from 37.7% for the three months ended December 31, 2011.
Increased cash flows from operations by 90% to $3.1 million for the three months ended December 31, 2012 from $1.6 million for the three months ended December 31, 2011.
During the three months ended December 31, 2012, we acquired 10 properties for a total purchase price of approximately $60 million.
Key Highlights for the Year Ended December 31, 2012:
Increased same-store revenues and NOI by 6.0% and 11.5%, respectively, for the year ended December 31, 2012 compared to the year ended December 31, 2011.
Increased same-store average occupancy by approximately 4% to 80% for the year ended December 31, 2012 compared to 76% for the year ended December 31, 2011.
Increased cash flows from operations by 236% to $9.6 million for the year ended December 31, 2012 from $2.8 million for the year ended December 31, 2011.
Reduced debt leverage to 56% as of December 31, 2012 from 60% as of December 31, 2011.
Amended our Second Restated KeyBank Loan, such that on October 10, 2012 we refinanced $31 million thereof into a new KeyBank CMBS Loan with a term of 10 years and a favorable fixed interest rate of 4.65%, thereby significantly reducing our short-term debt maturities.
During 2012, we acquired 19 properties for a total purchase price of approximately $93 million.
Operations:
Quarterly same-store revenue and NOI increased by 5.8% and 10.4%, respectively, for the three months ended December 31, 2012 compared to the three months ended December 31, 2011. The increase in same-store revenues was primarily attributable to an increase in average occupancy of approximately 4%. Same-store NOI improved due to the same-store revenue increase, in combination with a decrease in property operating expenses as a percentage of revenue of approximately 0.7% primarily due to cost reduction initiatives and economies of scale.
General and administrative expenses for the three months ended December 31, 2012 compared to the three months ended December 31, 2011 decreased as a percentage of total revenues to 3.0% from 3.7%, primarily due to increased revenues.
MFFO for the quarter ended December 31, 2012 as compared to the quarter ended September 30, 2012 increased 59% or approximately $1.6 million. The improvement was primarily the result of sequential quarter improvements in same-store NOI and incremental NOI from our third and fourth quarter acquisitions.
MFFO for the quarter ended December 31, 2012 as compared to the quarter ended December 31, 2011 increased 46% or approximately $1.3 million. The improvement was primarily the result of increased same-store NOI and incremental NOI from the properties acquired during the fourth quarter of 2011 and the year ended December 31, 2012, offset by additional interest expense.
Occupancy for the Homeland Portfolio increased to 69% as of December 31, 2012 from 46% as of December 31, 2011. The Homeland Portfolio consists of 12 lease-up self-storage facilities which were acquired in December 2011 for $80 million.
Acquisitions:
On October 1, 2012 and November 5, 2012, we closed on the acquisition of the second and third phases, respectively, of the Stockade Portfolio, which consisted of an additional eight properties for a purchase price of approximately $50 million. The Stockade Portfolio consists of 16 properties located in South Carolina, Florida and Georgia. Additionally, on December 28, 2012, we acquired the remaining interests in Madison County Self Storage, DST, a two property portfolio in Mississippi. For the year ended December 31, 2012, we acquired 19 properties for a total purchase price of approximately $93 million.
Capital Transactions:
In connection with the acquisition of the Stockade Portfolio, we obtained two separate loans with Citigroup Global Markets Realty Corp., both of which have a term of 10 years. The first loan, in the amount of $18.2 million and bearing a fixed interest rate of 4.60%, closed on October 1, 2012, and the second loan, in the amount of $19.4 million and bearing a fixed interest rate of 4.61%, closed on November 5, 2012.
On October 10, 2012 we refinanced $31 million of our Second Restated KeyBank Loan into a new KeyBank CMBS Loan with a term of 10 years and a favorable fixed interest rate of 4.65%, thereby significantly reducing our short-term debt maturities.
Quarterly Dividend:
Our board of directors declared a distribution for the fourth quarter of 2012 of $0.00191257 per day per share on the outstanding shares of common stock (equivalent to an annual distribution rate of 7% assuming the share was purchased for $10 and approximately 6.5% assuming the share was purchased for $10.79).
About Strategic Storage Trust, Inc.:
Strategic Storage Trust, Inc. ("SSTI") is the first and only self storage REIT in the public non-traded REIT marketplace. SSTI is one of five publicly registered self storage REITs in the United States and is one of the fastest growing self storage REITs nationwide. The SSTI management team is comprised of industry veterans with extensive institutional experience in the acquisition and property management of self storage properties. Since the launch of SSTI in 2008, the company's portfolio of wholly-owned properties has expanded to include 110 properties in 17 states and Canada that are being branded as SmartStop® Self Storage. The portfolio includes approximately 70,000 self storage units and 9.2 million rentable square feet of storage space.
For more information about SSTI, please call 949-429-6600 or visit www.strategicstoragetrust.com
The information herein should be read in conjunction with the Company's Prospectus, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports and other information filed with, of furnished to, the SEC.
To view our properties and locations or to find a nearby storage facility, visit www.smartstopselfstorage.com
This press release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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. Because such statements include risks, uncertainties and contingencies, actual results may differ materially from the expectations, intentions, beliefs, plans or predictions of the future expressed or implied by such forward-looking statements. These risks, uncertainties and contingencies include, but are not limited to: uncertainties relating to changes in general economic and real estate conditions; uncertainties relating to the implementation of our real estate investment strategy; uncertainties relating to financing availability and capital proceeds; uncertainties relating to the closing of property acquisitions; uncertainties relating to the public offering of our common stock; uncertainties related to the timing and availability of distributions; and other risk factors as outlined in the Company's prospectus, as amended from time to time. This is neither an offer nor a solicitation to purchase securities.
December 31, 2012
December 31, 2011
ASSETS
Cash and cash equivalents
$
13,998,391
$
13,217,410
Real estate facilities:
Land
178,459,163
149,269,391
Buildings
389,149,948
330,842,349
Site improvements
37,118,784
30,283,836
604,727,895
510,395,576
Accumulated depreciation
(29,840,320
)
(15,971,288
)
574,887,575
494,424,288
Construction in process
5,233,426
1,754,582
Real estate facilities, net ($16,829,789 and $17,070,146 related to VIEs)
580,121,001
496,178,870
Deferred financing costs, net of accumulated amortization
5,989,290
7,449,525
Intangible assets, net of accumulated amortization
11,635,112
15,922,955
Restricted cash
6,449,225
5,234,479
Investments in unconsolidated joint ventures
8,772,005
9,180,538
Other assets
4,270,638
3,250,490
Total assets
$
631,235,662
$
550,434,267
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured debt ($10,149,024 and $10,210,249 related to VIEs)
$
353,440,758
$
330,043,207
Accounts payable and accrued liabilities
12,726,888
7,855,033
Due to affiliates
2,282,344
2,065,615
Distributions payable
2,724,603
2,071,876
Total liabilities
371,174,593
342,035,731
Commitments and contingencies
Redeemable common stock
3,960,664
2,807,837
Stockholders' equity:
Strategic Storage Trust, Inc. stockholders' equity:
Common stock, $0.001 par value; 700,000,000 shares authorized; 46,184,742 and 35,020,561 shares issued and outstanding at December 31, 2012 and 2011, respectively
46,184
35,021
Additional paid-in capital
383,072,118
285,211,557
Distributions
(71,401,126
)
(42,602,530
)
Accumulated deficit
(61,929,145
)
(42,955,433
)
Accumulated other comprehensive loss
(682,692
)
(829,652
)
Total Strategic Storage Trust, Inc. stockholders' equity
249,105,339
198,858,963
Noncontrolling interests in Operating Partnership
1,149,679
718,907
Other noncontrolling interests
5,845,387
6,012,829
Total noncontrolling interests
6,995,066
6,731,736
Total stockholders' equity
256,100,405
205,590,699
Total liabilities and stockholders' equity
$
631,235,662
$
550,434,267
Three Months Ended
December 31,
Year Ended
December 31,
2012
2011
2012
2011
Revenues:
Self storage rental income
$
17,898,098
$
13,835,571
$
64,464,466
$
48,109,145
Ancillary operating income
557,042
453,227
2,146,038
1,286,933
Total revenues
18,455,140
14,288,798
66,610,504
49,396,078
Operating expenses:
Property operating expenses
6,441,305
5,391,478
25,878,556
19,402,185
Property operating expenses - affiliates
2,165,594
1,735,778
8,254,016
5,702,921
General and administrative
564,386
531,765
2,361,229
2,405,218
Depreciation
3,907,364
2,752,405
14,254,525
9,422,606
Intangible amortization expense
2,736,224
3,497,286
11,547,843
13,935,903
Property acquisition expenses - affiliates
1,381,135
2,230,329
2,415,200
5,706,838
Other property acquisition expenses
155,449
258,544
1,232,435
2,036,196
Total operating expenses
17,351,457
16,397,585
65,943,804
58,611,867
Operating income (loss)
1,103,683
(2,108,787
)
666,700
(9,215,789
)
Other income (expense):
Interest expense
(4,573,310
)
(3,411,889
)
(17,813,762
)
(11,859,146
)
Deferred financing amortization expense
(565,744
)
(518,840
)
(3,466,463
)
(1,331,514
)
Equity in earnings of real estate ventures
226,787
206,177
887,551
852,728
Gain on sale of investment in unconsolidated joint venture
--
--
815,000
--
Other
(43,457
)
32,067
(104,168
)
(280,516
)
Net loss
(3,852,041
)
(5,801,272
)
(19,015,142
)
(21,834,237
)
Less: Net loss attributable to the noncontrolling interests in our Operating Partnership
15,955
20,509
83,435
118,601
Net (income) loss attributable to other noncontrolling interests
(7,808
)
34,583
(42,005
)
358,207
Net loss attributable to Strategic Storage Trust, Inc
$
(3,843,894
)
$
(5,746,180
)
$
(18,973,712
)
$
(21,357,429
)
Net loss per share - basic
$
(0.08
)
$
(0.17
)
$
(0.46
)
$
(0.68
)
Net loss per share - diluted
$
(0.08
)
$
(0.17
)
$
(0.46
)
$
(0.68
)
Weighted average shares outstanding - basic
45,301,669
34,374,426
41,103,477
31,243,109
Weighted average shares outstanding - diluted
45,301,669
34,374,426
41,103,477
31,243,109
Three Months
Ended
December 31,
2012
Three Months
Ended
December 31,
2011
Year Ended December 31,
2012
Year Ended
December 31,
2011
Net loss attributable to Strategic Storage Trust, Inc
$
(3,843,894
)
$
(5,746,180
)
$
(18,973,712
)
$
(21,357,429
)
Add:
Depreciation
3,794,626
2,723,240
13,882,475
9,303,615
Amortization of intangible assets
2,736,224
3,497,286
11,547,843
13,935,903
Deduct:
Gain on sale of investment in unconsolidated joint venture
--
--
(815,000
)
--
Adjustment for noncontrolling interests(2)
(80,312
)
(123,429
)
(335,036
)
(750,351
)
FFO
2,606,644
350,917
5,306,570
1,131,738
Other Adjustments:
Acquisition expenses(3)
1,536,584
2,488,873
3,647,635
7,743,034
Amortization of fair value adjustments of secured debt(4)
54,614
93,170
190,724
364,438
Realized and unrealized (gains) losses on foreign exchange holdings(5)
59,583
10,089
(60,281
)
16,833
Debt defeasance costs (6)
--
--
--
49,750
Adjustment for noncontrolling interests(2)
(21,515
)
(41,244
)
(78,091
)
(112,654
)
MFFO(1)
$
4,235,910
$
2,901,805
$
9,006,557
$
9,193,139
As discussed in the "Results of Operations" section contained in our Form 10-K for the year ended December 31, 2012, our net loss and MFFO for the three months and year ended December 31, 2012, have been significantly impacted by our acquisition of the Homeland Portfolio and additional debt we incurred to purchase such properties. The information below should be read in conjunction with the discussion regarding the Homeland Portfolio acquisition in Results of Operations.
(1) Changes in MFFO between the three months ended December 31, 2012 and 2011 include the following:
Total revenues less all property operating expenses were approximately $9.8 million for the three months ended December 31, 2012 compared to approximately $7.2 million for the three months ended December 31, 2011, thereby increasing MFFO by approximately $2.6 million. Such increase was primarily due to the acquisition of 32 properties during the fourth quarter of 2011 and the year ended December 31, 2012, along with an increase in same-store operating income of approximately $0.9 million or approximately 10.4%.
A decrease in MFFO of approximately $1.2 million due to increased interest expense, primarily related to interest incurred on the Second Restated KeyBank Loan (approximately $0.8 million) and, to a lesser extent, other new debt incurred.
Changes in MFFO between the year ended December 31, 2012 and 2011 include the following:
Total revenues less all property operating expenses were approximately $32.5 million for the year ended December 31, 2012 compared to approximately $24.3 million for the year ended December 31, 2011, thereby increasing MFFO by approximately $8.2 million. Such increase was primarily due to the acquisition of 65 properties during 2011 and 2012, along with an increase in same-store operating income during the same period of approximately $2.3 million, or approximately 11.5%.
A decrease in MFFO of approximately $6.0 million due to increased interest expense, primarily related to interest incurred on the Second Restated KeyBank Loan (approximately $3.8 million), the KeyBank Bridge Loan (approximately $0.7 million) and other new debt incurred.
A decrease in MFFO of approximately $2.1 million due to increased amortization of deferred financing costs, which increased for principally the same reasons as interest expense. Of the increase, approximately $0.9 million related to the KeyBank Bridge Loan.
(2) Relates to the noncontrolling interest in our consolidated joint venture and the noncontrolling interests in our Operating Partnership. The noncontrolling interest holder's share of our consolidated venture's real estate depreciation and amortization of intangible assets was $56,000 and $86,000, respectively, for the three months ended December 31, 2012 and 2011, and $225,000 and $621,000, respectively, for the years ended December 31, 2012 and 2011.
(3) In evaluating investments in real estate, we differentiate the costs to acquire the investment from the operations derived from the investment. Such information would be comparable only for publicly registered, non-traded REITs that have generally completed their acquisition activity and have other similar operating characteristics. By excluding expensed acquisition related expenses, we believe MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management's analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our Advisor and third parties. Acquisition related expenses under GAAP are considered operating expenses and as expenses included in the determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under GAAP. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property.
(4) This expense represents the difference between the stated interest rate and the estimated market interest rate on assumed notes or seller notes issued, as of the date of acquisition. Such amounts have been excluded from MFFO because we believe MFFO provides useful supplementary information by focusing on operating fundamentals, rather than events not related to our normal operations. We are responsible for managing interest rate risk and do not rely on another party to manage such risk. (5) These amounts primarily relate to transactions with our non-U.S. functional currency entities. The gains and losses are the result of fluctuations between the U.S. dollar and the Canadian dollar. Such amounts have been excluded from MFFO because we believe MFFO provides useful supplementary information by focusing on operating fundamentals, rather than events not related to our normal operations. We are responsible for managing hedge and foreign exchange risk and do not rely on another party to manage such risk.
(6) We believe that adjusting for the gain or loss on extinguishment of debt provides useful information because such gain or loss on extinguishment of debt may not be reflective of on-going operations.
Non-cash Items Included in Net Loss:
Provided below is additional information related to selected non-cash items included in net loss above, which may be helpful in assessing our operating results:
Amortization of deferred financing costs of approximately $0.6 million and $0.5 million was recognized as interest expense for the three months ended December 31, 2012 and 2011, respectively; and $3.5 million and $1.3 million was recognized as interest expense for the years ended December 31, 2012 and 2011, respectively.
Three Months Ended December 31, 2012
Three Months Ended September 30, 2012
Net loss attributable to Strategic Storage Trust, Inc
$
(3,843,894
)
$
(4,610,650
)
Add:
Depreciation
3,794,626
3,474,214
Amortization of intangible assets
2,736,224
2,723,705
Deduct:
Adjustment for noncontrolling interests
(80,312
)
(79,801
)
FFO
2,606,644
1,507,468
Other Adjustments:
Acquisition expenses
1,536,584
1,369,125
Amortization of fair value adjustments of secured debt
54,614
(21,219
)
Realized and unrealized (gains) losses on foreign exchange holdings
59,583
(165,232
)
Adjustment for noncontrolling interests
(21,515
)
(19,786
)
MFFO
$
4,235,910
$
2,670,356
Net Operating Income ("NOI")
NOI is a non-GAAP measure that we define 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. We believe that net operating income is useful for investors as it provides a measure of the operating performance of its operating assets because net operating income excludes certain items that are not associated with the operation of the properties. Additionally, we believe that NOI is a widely accepted measure of comparative operating performance in the real estate community. However, our 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 Modified Funds from Operations ("MFFO")
Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a measure known as funds from operations, or FFO, which we believe 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. FFO is not equivalent to our net income (loss) as determined under GAAP.
We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, 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 writedowns, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. Our FFO calculation complies with NAREIT's policy described above.
The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Diminution in value may occur if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances or other measures necessary to maintain the assets are not undertaken. However, we believe that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. In addition, in the determination of FFO, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying value, or book value, exceeds the total estimated undiscounted future cash flows (including net rental revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Testing for impairment is a continuous process and is analyzed on a quarterly basis. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and that we intend to have a relatively limited term of our operations; it could be difficult to recover any impairment charges through the eventual sale of the property. To date, we have not recognized any impairments.
Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization and impairments, assists in providing a more complete understanding of our performance to investors and to our management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income (loss).
However, FFO or Modified FFO ("MFFO"), should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss) or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be considered a more relevant measure of operational performance and is, therefore, given more prominence than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.
Changes in the accounting and reporting rules under GAAP that were put into effect and other changes to GAAP accounting for real estate subsequent to the establ
"We are proud of our strong results in 2012. We think this reflects the strength of our management team and our dedication to our stockholders," commented H. Michael Schwartz, CEO of Strategic Storage Trust, Inc. "Our growth has come through strategic acquisitions and our ability to increase revenues and operating income by targeting properties with upside potential, and applying strong marketing and operational management fundamentals to increase occupancy rates and revenues. With the people, management and marketing systems we now have in place and the potential for continued growth, coupled with the stability of the asset class, we believe we are well positioned for future success."
Key Highlights for the Three Months Ended December 31, 2012:
Increased IPA Modified Funds From Operations ("MFFO") by 59% to $4.2 million for the three months ended December 31, 2012 from $2.7 million for the three months ended September 30, 2012.
Increased MFFO by 46% to $4.2 million for the three months ended December 31, 2012 from $2.9 million for the three months ended December 31, 2011.
Increased same-store revenues and net operating income ("NOI") by 5.8% and 10.4%, respectively, for the three months ended December 31, 2012 compared to the three months ended December 31, 2011.
Increased same-store average occupancy by approximately 4% to 81% for the three months ended December 31, 2012 compared to 77% for the three months ended December 31, 2011.
Decreased property operating expenses as a percentage of revenue to 34.9% for the three months ended December 31, 2012 from 37.7% for the three months ended December 31, 2011.
Increased cash flows from operations by 90% to $3.1 million for the three months ended December 31, 2012 from $1.6 million for the three months ended December 31, 2011.
During the three months ended December 31, 2012, we acquired 10 properties for a total purchase price of approximately $60 million.
Key Highlights for the Year Ended December 31, 2012:
Increased same-store revenues and NOI by 6.0% and 11.5%, respectively, for the year ended December 31, 2012 compared to the year ended December 31, 2011.
Increased same-store average occupancy by approximately 4% to 80% for the year ended December 31, 2012 compared to 76% for the year ended December 31, 2011.
Increased cash flows from operations by 236% to $9.6 million for the year ended December 31, 2012 from $2.8 million for the year ended December 31, 2011.
Reduced debt leverage to 56% as of December 31, 2012 from 60% as of December 31, 2011.
Amended our Second Restated KeyBank Loan, such that on October 10, 2012 we refinanced $31 million thereof into a new KeyBank CMBS Loan with a term of 10 years and a favorable fixed interest rate of 4.65%, thereby significantly reducing our short-term debt maturities.
During 2012, we acquired 19 properties for a total purchase price of approximately $93 million.
Operations:
Quarterly same-store revenue and NOI increased by 5.8% and 10.4%, respectively, for the three months ended December 31, 2012 compared to the three months ended December 31, 2011. The increase in same-store revenues was primarily attributable to an increase in average occupancy of approximately 4%. Same-store NOI improved due to the same-store revenue increase, in combination with a decrease in property operating expenses as a percentage of revenue of approximately 0.7% primarily due to cost reduction initiatives and economies of scale.
General and administrative expenses for the three months ended December 31, 2012 compared to the three months ended December 31, 2011 decreased as a percentage of total revenues to 3.0% from 3.7%, primarily due to increased revenues.
MFFO for the quarter ended December 31, 2012 as compared to the quarter ended September 30, 2012 increased 59% or approximately $1.6 million. The improvement was primarily the result of sequential quarter improvements in same-store NOI and incremental NOI from our third and fourth quarter acquisitions.
MFFO for the quarter ended December 31, 2012 as compared to the quarter ended December 31, 2011 increased 46% or approximately $1.3 million. The improvement was primarily the result of increased same-store NOI and incremental NOI from the properties acquired during the fourth quarter of 2011 and the year ended December 31, 2012, offset by additional interest expense.
Occupancy for the Homeland Portfolio increased to 69% as of December 31, 2012 from 46% as of December 31, 2011. The Homeland Portfolio consists of 12 lease-up self-storage facilities which were acquired in December 2011 for $80 million.
Acquisitions:
On October 1, 2012 and November 5, 2012, we closed on the acquisition of the second and third phases, respectively, of the Stockade Portfolio, which consisted of an additional eight properties for a purchase price of approximately $50 million. The Stockade Portfolio consists of 16 properties located in South Carolina, Florida and Georgia. Additionally, on December 28, 2012, we acquired the remaining interests in Madison County Self Storage, DST, a two property portfolio in Mississippi. For the year ended December 31, 2012, we acquired 19 properties for a total purchase price of approximately $93 million.
Capital Transactions:
In connection with the acquisition of the Stockade Portfolio, we obtained two separate loans with Citigroup Global Markets Realty Corp., both of which have a term of 10 years. The first loan, in the amount of $18.2 million and bearing a fixed interest rate of 4.60%, closed on October 1, 2012, and the second loan, in the amount of $19.4 million and bearing a fixed interest rate of 4.61%, closed on November 5, 2012.
On October 10, 2012 we refinanced $31 million of our Second Restated KeyBank Loan into a new KeyBank CMBS Loan with a term of 10 years and a favorable fixed interest rate of 4.65%, thereby significantly reducing our short-term debt maturities.
Quarterly Dividend:
Our board of directors declared a distribution for the fourth quarter of 2012 of $0.00191257 per day per share on the outstanding shares of common stock (equivalent to an annual distribution rate of 7% assuming the share was purchased for $10 and approximately 6.5% assuming the share was purchased for $10.79).
About Strategic Storage Trust, Inc.:
Strategic Storage Trust, Inc. ("SSTI") is the first and only self storage REIT in the public non-traded REIT marketplace. SSTI is one of five publicly registered self storage REITs in the United States and is one of the fastest growing self storage REITs nationwide. The SSTI management team is comprised of industry veterans with extensive institutional experience in the acquisition and property management of self storage properties. Since the launch of SSTI in 2008, the company's portfolio of wholly-owned properties has expanded to include 110 properties in 17 states and Canada that are being branded as SmartStop® Self Storage. The portfolio includes approximately 70,000 self storage units and 9.2 million rentable square feet of storage space.
For more information about SSTI, please call 949-429-6600 or visit www.strategicstoragetrust.com
The information herein should be read in conjunction with the Company's Prospectus, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports and other information filed with, of furnished to, the SEC.
To view our properties and locations or to find a nearby storage facility, visit www.smartstopselfstorage.com
This press release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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. Because such statements include risks, uncertainties and contingencies, actual results may differ materially from the expectations, intentions, beliefs, plans or predictions of the future expressed or implied by such forward-looking statements. These risks, uncertainties and contingencies include, but are not limited to: uncertainties relating to changes in general economic and real estate conditions; uncertainties relating to the implementation of our real estate investment strategy; uncertainties relating to financing availability and capital proceeds; uncertainties relating to the closing of property acquisitions; uncertainties relating to the public offering of our common stock; uncertainties related to the timing and availability of distributions; and other risk factors as outlined in the Company's prospectus, as amended from time to time. This is neither an offer nor a solicitation to purchase securities.
December 31, 2012
December 31, 2011
ASSETS
Cash and cash equivalents
$
13,998,391
$
13,217,410
Real estate facilities:
Land
178,459,163
149,269,391
Buildings
389,149,948
330,842,349
Site improvements
37,118,784
30,283,836
604,727,895
510,395,576
Accumulated depreciation
(29,840,320
)
(15,971,288
)
574,887,575
494,424,288
Construction in process
5,233,426
1,754,582
Real estate facilities, net ($16,829,789 and $17,070,146 related to VIEs)
580,121,001
496,178,870
Deferred financing costs, net of accumulated amortization
5,989,290
7,449,525
Intangible assets, net of accumulated amortization
11,635,112
15,922,955
Restricted cash
6,449,225
5,234,479
Investments in unconsolidated joint ventures
8,772,005
9,180,538
Other assets
4,270,638
3,250,490
Total assets
$
631,235,662
$
550,434,267
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured debt ($10,149,024 and $10,210,249 related to VIEs)
$
353,440,758
$
330,043,207
Accounts payable and accrued liabilities
12,726,888
7,855,033
Due to affiliates
2,282,344
2,065,615
Distributions payable
2,724,603
2,071,876
Total liabilities
371,174,593
342,035,731
Commitments and contingencies
Redeemable common stock
3,960,664
2,807,837
Stockholders' equity:
Strategic Storage Trust, Inc. stockholders' equity:
Common stock, $0.001 par value; 700,000,000 shares authorized; 46,184,742 and 35,020,561 shares issued and outstanding at December 31, 2012 and 2011, respectively
46,184
35,021
Additional paid-in capital
383,072,118
285,211,557
Distributions
(71,401,126
)
(42,602,530
)
Accumulated deficit
(61,929,145
)
(42,955,433
)
Accumulated other comprehensive loss
(682,692
)
(829,652
)
Total Strategic Storage Trust, Inc. stockholders' equity
249,105,339
198,858,963
Noncontrolling interests in Operating Partnership
1,149,679
718,907
Other noncontrolling interests
5,845,387
6,012,829
Total noncontrolling interests
6,995,066
6,731,736
Total stockholders' equity
256,100,405
205,590,699
Total liabilities and stockholders' equity
$
631,235,662
$
550,434,267
Three Months Ended
December 31,
Year Ended
December 31,
2012
2011
2012
2011
Revenues:
Self storage rental income
$
17,898,098
$
13,835,571
$
64,464,466
$
48,109,145
Ancillary operating income
557,042
453,227
2,146,038
1,286,933
Total revenues
18,455,140
14,288,798
66,610,504
49,396,078
Operating expenses:
Property operating expenses
6,441,305
5,391,478
25,878,556
19,402,185
Property operating expenses - affiliates
2,165,594
1,735,778
8,254,016
5,702,921
General and administrative
564,386
531,765
2,361,229
2,405,218
Depreciation
3,907,364
2,752,405
14,254,525
9,422,606
Intangible amortization expense
2,736,224
3,497,286
11,547,843
13,935,903
Property acquisition expenses - affiliates
1,381,135
2,230,329
2,415,200
5,706,838
Other property acquisition expenses
155,449
258,544
1,232,435
2,036,196
Total operating expenses
17,351,457
16,397,585
65,943,804
58,611,867
Operating income (loss)
1,103,683
(2,108,787
)
666,700
(9,215,789
)
Other income (expense):
Interest expense
(4,573,310
)
(3,411,889
)
(17,813,762
)
(11,859,146
)
Deferred financing amortization expense
(565,744
)
(518,840
)
(3,466,463
)
(1,331,514
)
Equity in earnings of real estate ventures
226,787
206,177
887,551
852,728
Gain on sale of investment in unconsolidated joint venture
--
--
815,000
--
Other
(43,457
)
32,067
(104,168
)
(280,516
)
Net loss
(3,852,041
)
(5,801,272
)
(19,015,142
)
(21,834,237
)
Less: Net loss attributable to the noncontrolling interests in our Operating Partnership
15,955
20,509
83,435
118,601
Net (income) loss attributable to other noncontrolling interests
(7,808
)
34,583
(42,005
)
358,207
Net loss attributable to Strategic Storage Trust, Inc
$
(3,843,894
)
$
(5,746,180
)
$
(18,973,712
)
$
(21,357,429
)
Net loss per share - basic
$
(0.08
)
$
(0.17
)
$
(0.46
)
$
(0.68
)
Net loss per share - diluted
$
(0.08
)
$
(0.17
)
$
(0.46
)
$
(0.68
)
Weighted average shares outstanding - basic
45,301,669
34,374,426
41,103,477
31,243,109
Weighted average shares outstanding - diluted
45,301,669
34,374,426
41,103,477
31,243,109
Three Months
Ended
December 31,
2012
Three Months
Ended
December 31,
2011
Year Ended December 31,
2012
Year Ended
December 31,
2011
Net loss attributable to Strategic Storage Trust, Inc
$
(3,843,894
)
$
(5,746,180
)
$
(18,973,712
)
$
(21,357,429
)
Add:
Depreciation
3,794,626
2,723,240
13,882,475
9,303,615
Amortization of intangible assets
2,736,224
3,497,286
11,547,843
13,935,903
Deduct:
Gain on sale of investment in unconsolidated joint venture
--
--
(815,000
)
--
Adjustment for noncontrolling interests(2)
(80,312
)
(123,429
)
(335,036
)
(750,351
)
FFO
2,606,644
350,917
5,306,570
1,131,738
Other Adjustments:
Acquisition expenses(3)
1,536,584
2,488,873
3,647,635
7,743,034
Amortization of fair value adjustments of secured debt(4)
54,614
93,170
190,724
364,438
Realized and unrealized (gains) losses on foreign exchange holdings(5)
59,583
10,089
(60,281
)
16,833
Debt defeasance costs (6)
--
--
--
49,750
Adjustment for noncontrolling interests(2)
(21,515
)
(41,244
)
(78,091
)
(112,654
)
MFFO(1)
$
4,235,910
$
2,901,805
$
9,006,557
$
9,193,139
As discussed in the "Results of Operations" section contained in our Form 10-K for the year ended December 31, 2012, our net loss and MFFO for the three months and year ended December 31, 2012, have been significantly impacted by our acquisition of the Homeland Portfolio and additional debt we incurred to purchase such properties. The information below should be read in conjunction with the discussion regarding the Homeland Portfolio acquisition in Results of Operations.
(1) Changes in MFFO between the three months ended December 31, 2012 and 2011 include the following:
Total revenues less all property operating expenses were approximately $9.8 million for the three months ended December 31, 2012 compared to approximately $7.2 million for the three months ended December 31, 2011, thereby increasing MFFO by approximately $2.6 million. Such increase was primarily due to the acquisition of 32 properties during the fourth quarter of 2011 and the year ended December 31, 2012, along with an increase in same-store operating income of approximately $0.9 million or approximately 10.4%.
A decrease in MFFO of approximately $1.2 million due to increased interest expense, primarily related to interest incurred on the Second Restated KeyBank Loan (approximately $0.8 million) and, to a lesser extent, other new debt incurred.
Changes in MFFO between the year ended December 31, 2012 and 2011 include the following:
Total revenues less all property operating expenses were approximately $32.5 million for the year ended December 31, 2012 compared to approximately $24.3 million for the year ended December 31, 2011, thereby increasing MFFO by approximately $8.2 million. Such increase was primarily due to the acquisition of 65 properties during 2011 and 2012, along with an increase in same-store operating income during the same period of approximately $2.3 million, or approximately 11.5%.
A decrease in MFFO of approximately $6.0 million due to increased interest expense, primarily related to interest incurred on the Second Restated KeyBank Loan (approximately $3.8 million), the KeyBank Bridge Loan (approximately $0.7 million) and other new debt incurred.
A decrease in MFFO of approximately $2.1 million due to increased amortization of deferred financing costs, which increased for principally the same reasons as interest expense. Of the increase, approximately $0.9 million related to the KeyBank Bridge Loan.
(2) Relates to the noncontrolling interest in our consolidated joint venture and the noncontrolling interests in our Operating Partnership. The noncontrolling interest holder's share of our consolidated venture's real estate depreciation and amortization of intangible assets was $56,000 and $86,000, respectively, for the three months ended December 31, 2012 and 2011, and $225,000 and $621,000, respectively, for the years ended December 31, 2012 and 2011.
(3) In evaluating investments in real estate, we differentiate the costs to acquire the investment from the operations derived from the investment. Such information would be comparable only for publicly registered, non-traded REITs that have generally completed their acquisition activity and have other similar operating characteristics. By excluding expensed acquisition related expenses, we believe MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management's analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our Advisor and third parties. Acquisition related expenses under GAAP are considered operating expenses and as expenses included in the determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under GAAP. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property.
(4) This expense represents the difference between the stated interest rate and the estimated market interest rate on assumed notes or seller notes issued, as of the date of acquisition. Such amounts have been excluded from MFFO because we believe MFFO provides useful supplementary information by focusing on operating fundamentals, rather than events not related to our normal operations. We are responsible for managing interest rate risk and do not rely on another party to manage such risk. (5) These amounts primarily relate to transactions with our non-U.S. functional currency entities. The gains and losses are the result of fluctuations between the U.S. dollar and the Canadian dollar. Such amounts have been excluded from MFFO because we believe MFFO provides useful supplementary information by focusing on operating fundamentals, rather than events not related to our normal operations. We are responsible for managing hedge and foreign exchange risk and do not rely on another party to manage such risk.
(6) We believe that adjusting for the gain or loss on extinguishment of debt provides useful information because such gain or loss on extinguishment of debt may not be reflective of on-going operations.
Non-cash Items Included in Net Loss:
Provided below is additional information related to selected non-cash items included in net loss above, which may be helpful in assessing our operating results:
Amortization of deferred financing costs of approximately $0.6 million and $0.5 million was recognized as interest expense for the three months ended December 31, 2012 and 2011, respectively; and $3.5 million and $1.3 million was recognized as interest expense for the years ended December 31, 2012 and 2011, respectively.
Three Months Ended December 31, 2012
Three Months Ended September 30, 2012
Net loss attributable to Strategic Storage Trust, Inc
$
(3,843,894
)
$
(4,610,650
)
Add:
Depreciation
3,794,626
3,474,214
Amortization of intangible assets
2,736,224
2,723,705
Deduct:
Adjustment for noncontrolling interests
(80,312
)
(79,801
)
FFO
2,606,644
1,507,468
Other Adjustments:
Acquisition expenses
1,536,584
1,369,125
Amortization of fair value adjustments of secured debt
54,614
(21,219
)
Realized and unrealized (gains) losses on foreign exchange holdings
59,583
(165,232
)
Adjustment for noncontrolling interests
(21,515
)
(19,786
)
MFFO
$
4,235,910
$
2,670,356
Net Operating Income ("NOI")
NOI is a non-GAAP measure that we define 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. We believe that net operating income is useful for investors as it provides a measure of the operating performance of its operating assets because net operating income excludes certain items that are not associated with the operation of the properties. Additionally, we believe that NOI is a widely accepted measure of comparative operating performance in the real estate community. However, our 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 Modified Funds from Operations ("MFFO")
Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a measure known as funds from operations, or FFO, which we believe 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. FFO is not equivalent to our net income (loss) as determined under GAAP.
We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, 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 writedowns, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. Our FFO calculation complies with NAREIT's policy described above.
The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Diminution in value may occur if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances or other measures necessary to maintain the assets are not undertaken. However, we believe that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. In addition, in the determination of FFO, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying value, or book value, exceeds the total estimated undiscounted future cash flows (including net rental revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Testing for impairment is a continuous process and is analyzed on a quarterly basis. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and that we intend to have a relatively limited term of our operations; it could be difficult to recover any impairment charges through the eventual sale of the property. To date, we have not recognized any impairments.
Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization and impairments, assists in providing a more complete understanding of our performance to investors and to our management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income (loss).
However, FFO or Modified FFO ("MFFO"), should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss) or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be considered a more relevant measure of operational performance and is, therefore, given more prominence than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.
Changes in the accounting and reporting rules under GAAP that were put into effect and other changes to GAAP accounting for real estate subsequent to the establ
