UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31 2016, 2023
or
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For the transition period from to
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
Commission File Number: 001-12681
GLOBAL SELF STORAGE, INC.
(Exact name of registrant as specified in its charter)
Maryland | 13-3926714 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
Global Self Storage, Inc.
11 Hanover Square, 12th Floor3814 Route 44
Millbrook, NY 12545
(212) 785-0900
New York, NY 10005
(212) 785-0900
(Address, including zip code, and telephone number, including area code, of Company’s principal executive offices)
John F. Ramírez,Donald Klimoski II, Esq.
Global Self Storage, Inc.
11 Hanover Square, 12th Floor3814 Route 44
Millbrook, NY12545
New York, NY 10005(212) 785-0900
(Address of principal executive officers, including zip code, and telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of exchange on which registered or to be registered | ||
Common Stock, $0.01 par value | SELF | The Nasdaq Stock Market LLC | ||
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ Yes No☒ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ Yes No☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ Yes NO ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☒ Yes NO ☐ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer |
| Smaller reporting company | ☒ | |||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ Yes NO ☒ No
The aggregate market value of the common stock held by non-affiliates of the registrant was $38,944,308$52,290,789 based upon the closing price of the shares on the Nasdaq Capital Market on June 30, 2016,2023, the last business day of the registrant’s most recently completed second fiscal quarter. This calculation does not reflect a determination that persons whose shares are excluded from the computation are affiliates for any other purpose.
The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, as of March 22, 2017,15, 2024, was 7,619,469.11,146,179.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be issued in connection with the registrant’s annual stockholders’ meeting to be held in 2024 are incorporated by reference into Part III of this Annual Report on Form 10-K.
Auditor Firm Id: | 49 | Auditor Name: | RSM US LLP | Auditor Location: | Blue Bell, Pennsylvania, United States |
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Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
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Item 9C. | Disclosure Regarding Foreign Jurisdictions That Prevent Inspections | 47 | ||
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Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related |
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Item 13. | Certain Relationships and Related Transactions, and Director Independence |
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STATEMENT ON FORWARD LOOKINGFORWARD-LOOKING INFORMATION
Certain information presented in this annual reportAnnual Report on Form 10-K (this “annual report”) may contain “forward-looking statements” within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. Forward lookingForward-looking statements include statements concerning the Company’s plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, and other information that is not historical information. In some cases, forward lookingforward-looking statements can be identified by terminology such as “believes,” “plans,” “intends,” “expects,” “estimates,” “may,” “will,” “should,” “anticipates” or “intends,“anticipates,” or the negative of such terms or other comparable terminology, or by discussions of strategy. All forward-looking statements made by the Company involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of the Company, which may cause the Company’s actual results to be materially different from those expressed or implied by such statements. The Company may also make additional forward lookingforward-looking statements from time to time. All such subsequent forward-looking statements, whether written or oral, by the Company or on its behalf, are also expressly qualified by these cautionary statements. All forward-looking statements, including without limitation, the Company’s examination of historical operating trends and estimates of future earnings, are based upon the Company’s current expectations and various assumptions. The Company’s expectations, beliefs and projections are expressed in good faith and it believes there is a reasonable basis for them, but there can be no assurance that the Company’s expectations, beliefs and projections will result or be achieved. All forward lookingforward-looking statements apply only as of the date made. TheExcept as required by law, the Company undertakes no obligation to publicly update or revise forward lookingforward-looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events. There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this annual report. Any forward-looking statements should be considered in light of the risks referenced in our most recent registration statement on Form 10.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this report. Any forward-looking statements should be considered in light of the risks referenced in “Item 1A. Risk Factors” and in our most recent registration statement on Form 10.other filings with the Securities and Exchange Commission (the “SEC”). Such factors include, but are not limited to:
general risks associated with the ownership and operation of real estate, including changes in demand, risks related to developmentredevelopment (including expansion) of self storage facilities,properties, potential liability for environmental contamination, natural disasters and adverse changes in tax, real estate and zoning laws and regulations;
risks associated with downturns in the national and local economies in the markets in which we operate, including risks related to current economic conditions and the economic health of our customers;
the impact of competition from new and existing self storage and commercial facilitiesproperties and other storage alternatives;
difficulties in our ability to successfully evaluate, finance, integrate into our existing operations, and manage acquired and developed facilities;
risks related to our developmentredevelopment of new facilitiesproperties and expansions and related lease up at our existing properties and/or participation in joint ventures;
risks of ongoing litigation and other legal and regulatory actions, which may divert management’s time and attention, require us to pay damages and expenses or restrict the operation of our business;
the impact of the regulatory environment as well as national, state, and local laws and regulations including, without limitation, those governing the environment, taxes and our tenant reinsurance business and real estate investment trusts (“REITs”), and risks related to the impact of new laws and regulations;
risk of increased tax expense associated either with a possible failure by us to qualify as a REIT, or with challenges to intercompany transactions with our taxable REIT subsidiaries;
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security breaches or a failure of our networks, systems or technology could adversely impact our business, customer and employee relationships;
our ability to obtain and maintain financing arrangements on favorable terms;
fiscal policies or inaction at the U.S. federal government level, which may lead to federal government shutdowns or negative impacts on the U.S economy;
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BackgroundRISK FACTOR SUMMARY
An investment in our securities involves a high degree of risk. You should carefully consider the risks summarized in Item 1A, “Risk Factors” included in this report. These risks include, but are not limited to, the following:
Risks Related to our Self Storage Properties and our Business
Risks Related to Our Debt Financings
Risks Related to Our Qualification as a REIT
Risks Related to Our Common Stock
PART I
Item 1. Business.
General
Global Self Storage, Inc. (the “Company”) is a self-administered and self-managed real estate investment trust (“REIT”), formed as a Maryland corporation that owns, operates, manages, acquires, and is focused on the ownership, operation, acquisition, development and redevelopment ofredevelops self storage facilitiesproperties (“stores” or “properties”). The Company’s in the United States. Our stores are designed to offer affordable, easily accessible, and secure storage space for residential and commercial customers. As of December 31, 2023, the Company owned and operated, or managed, through its wholly owned subsidiaries, thirteen stores located in the Northeast, Mid-AtlanticConnecticut, Illinois, Indiana, New York, Ohio, Pennsylvania, South Carolina, and Mid-West regions of the United States.
Oklahoma. The Company was incorporated on December 12, 1996formerly registered under the laws of the state of Maryland, and from that date through the date of this annual report, the Company has been a corporation duly qualified and in good standing in that state.
From September 1, 1983 to February 7, 1997, the Company was a diversified series of shares of Bull & Bear Incorporated, an open-end management investment company. On January 23, 1997, the Company (formerly known as Global Income Fund, Inc.) filed a Form N-8A Notification of Registration pursuant to Section 8(a) of the Investment Company Act of 1940, as amended (the “1940 Act”), registering the Company as an investment company thereunder, and a Registration Statement on Form N-2 for closed-end investment companies. The Company commenced operations as a closed-endnon-diversified, closed end management investment company on February 7, 1997.
On February 29, 2012, the Company's stockholders approved a proposal to change the Company's business from an investment company to an operating company that owns, operates, manages, acquires, develops, and redevelops professionally managed self storage facilities and seeks to qualify as a REIT for federal tax purposes (the "Business Proposal").
company. The Securities and Exchange Commission’s (“SEC”) order approving the Company’s application to deregister from the 1940 Act was granted on January 19, 2016. Accordingly, effectiveOn January 19, 2016, and in connection with the Business Proposal, the Company changed its name to Global Self Storage, Inc. from Self Storage Group, Inc., changed its SEC registration from an investment company to aan operating company reporting company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), from an investment company under the 1940 Act, and listed its common stock on the Nasdaq Capital Market (“NASDAQ”)NASDAQ under the symbol “SELF”.
The Company's fiscal/taxable year endsCompany was incorporated on December 31.
12, 1996 under the laws of the state of Maryland. The Company has elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended (the “IRC”“Code”). To the extent the Company continues to qualify as a REIT, it will not generally be subject to U.S. federal income tax, with certain limited exceptions, on theits taxable income that is distributed to its stockholders.
The Company is authorized to issue 19,900,000 shares of $0.01 par value common stock. The Company also has 100,000 shares of Series A participating preferred stock, $0.01 par value, authorized, of which none has been issued. Business Activities
As of December 31, 2016, 7,619,469 shares of common stock of2023, the Company were outstanding and held by 33 stockholders of record.
On January 28, 2016, the Company announced that its Board of Directors (“Board of Directors” or “Board”) has adopted a stockholders rights plan (the “Rights Plan”). To implement the Rights Plan, the Board of Directors declared a dividend distribution of one right for each outstanding share of Company common stock, par value $.01 per share, to holders of record of the shares of common stock at the close of business on January 29, 2016. Each right entitles the registered holder to purchase from the Company one one-thousandth of a share of preferred stock, par value $.01 per share. The rights were distributed as a non-taxable dividend and will expire on January 29, 2026. The rights were evidenced by the underlying Company common stock, and no separate preferred stock purchase rights certificates have been distributed. The rights to acquire preferred stock are not immediately exercisable and will become exercisable only if a person or group, other than Exempt Persons (as defined in the Rights Plan agreement), acquires or commences a tender offer for 9.8% or more of the Company’s common stock. If a person or group, other than an Exempt Person, acquires or commences a tender offer for 9.8% or more of the Company’s common stock, each holder of a right, except the acquirer, will be entitled, subject to the Company’s right to redeem or exchange the right, to exercise, at an exercise price of $12, the right to purchase one one-thousandth of a share of
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the Company’s newly created Series A Participating Preferred Stock, or the number of shares of Company common stock equal to the holder’s number of rights multiplied by the exercise price and divided by 50% of the market price of the Company’s common stock on the date of the occurrence of such an event. The Company’s Board of Directors may terminate the Rights Plan at any time or redeem the rights, for $0.01 per right, at any time before a person acquires 9.8% or more of the Company’s common stock. This Rights Plan replaced the Company’s stockholders rights plan dated November 25, 2015, which expired on its own terms on March 24, 2016.
Principal Business Activities
As of March 22, 2017, the Company has 24had 35 total employees (13 full-time) and owns, operatesowned and manages,operated, or managed, through its wholly owned subsidiaries, eleven stores located in Connecticut, Illinois, Indiana, New York, Ohio, Pennsylvania, and South Carolina.thirteen stores. As of December 31, 2016,2023, these facilities total 754,095properties totaled 967,336 net leasable square feet and offer 5,625offered 7,039 storage units. In addition to traditional and climate-controlled units, many of the facilitiesproperties feature both covered and outside auto/RV/boat storage. The Company invests in stores by acquiring stores through its wholly owned subsidiaries and operates primarily in one segment: rental operations.
We continue to evaluate and enact a range of new initiatives and opportunities in order to help enable us to maximize our stores’ financial performance and stockholder value. Our strategies in seeking to maximize our stores’ financial performance and stockholder value include, among others, the following:
continue to implement and refine our move-in rate management systems in seeking to maximize occupancies and thus revenue derived from our store portfolio.
continue to implement and refine our proprietary existing tenant revenue rate management systemsprogram in seeking to maximize revenue per leased square foot from our store portfolio.
continue to implement and refine our digital, drive-by, and referral marketing programs in seeking to attract more and higher quality (e.g., credit card paying) customers to our stores at a lower net cost.
continue to pursue the acquisition of single stores and small portfolios that we believe can add stockholder value.
Our stores are generally located in densely populated and high traffic areas near major roads and highways. All of our stores display prominent road signage and most feature LED marquee boards describing the store features and move-in rent specials. Our stores are generally located in areas with strict zoning laws and attentive planning boards which make it difficult for our competition to develop new facilitiesproperties near ours. As we evaluate potential stores for acquisition, we seek stores in areas with these high barriers to entry.
Most of our stores compete with other well-managed and well-located competitors and we are subject to general economic conditions, particularly those that affect the spending habits of consumers and moving trends. Because we operate in competitive markets, often where self storage consumers have multiple stores from which to choose, such competition has affected and is likely to continue to affect our store results. We experience seasonal fluctuations in occupancy levels as well, with occupancy levels generally higher in the summer months due to
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increased moving activity. We believe that our centralized information networks, national telephone and online reservation system, the brand name “Global Self Storage,” and our economies of scale help enable us to meet such challenges effectively.
In seeking to maximize the performance of our stores, we employ our proprietary revenue rate management systemsprogram which help us to analyze, adjust, and set our move-in and existing tenant rental rates on a real-time basis across our portfolio. Among other technologies, we employ internet data scraping of our local competitors’ move-in rental rates to help enable us to proactively respond and take advantage of changing market conditions across our portfolio of stores.store portfolio. Our operating results typically depend significantly on our ability to manage our storage units’ rental rates, to respond in a timely manner to prospective tenant inquiries, and to lease available storage units, and on the ability of our tenants to make required storage unit rental payments.
We have registered the trademark and developed the brand "Global“Global Self Storage."” We have developed a corporate logo and have incorporated it on all of our on-site signage, advertising and other marketing materials. This
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branding process has included the creation and development of the www.GlobalSelfStorage.us website, whereby prospective customers can click through and read andrent a storage unit or learn about the features of any of our self storage facilities in their various locations.properties. We continue to develop the Global Self Storage internet presence through advertising and search engine optimization. We solicit tenant reviews for posting to the “Testimonials” section of our website and encourage others to view these reviews. We have found thatreferrals of current tenants to be a reliable source of new tenants is through referrals of current tenants. Existing self storage customers may also pay their storage unit rent on-lineonline through www.GlobalSelfStorage.us.
Attracting high quality, long-term tenants is a top priority for the Company and we strongly believe in tenant quality over tenant quantity. In our marketing efforts, we have seen success in our referral marketing program, through which our tenants may recommend Global Self Storage to their family, friends, and colleagues. We also believe our store managers’ attention to detail – maintaining security, cleanliness, and attentive customer service – is essential to attracting high quality tenants.
Tenant leases at all of our stores are generally “month-to-month” leases. We seek to deliver at least 30 days’ written notice of any rental rate change. Lease rates at each store may be set monthly, semi-annually, annually, or at any other time on a case-by-case basis as determined in the discretion of management. Tenants may be assessed late, administrative, and/or other fees. To date, none of the Company’s stores have experienced any material delinquencies.
Each of our stores features a rental and payment center kiosk available 24 hours a day, seven days a week, where prospective tenants can rent a unit and current tenants can pay their rent. All of our stores have on-site property managers who are committed to delivering the finest customer service. OurWe utilize a customer call center handlesto handle telephone inquiries from current and prospective tenants whenever our store managers are not available. They can respond to questions about our storesproperties and storage features, and book reservations. We seek to deliver convenience and high quality customer service to our tenants, as well as maintain clean and secure stores at all times.
Please refer to Item 7 herein for further discussion of, among other things, competitive business conditions, the Company’s competitive position in the self storage industry, methods of competition, and the effect of existing or probable government regulations on the Company’s business. The public may read and copy any materials the Company has filed with the SEC at the SEC's Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Additional information about the Company, not contained in this form or made a part hereof, may be found at www.GlobalSelfStorage.us.
Acquisitions and FinancingOur Acquisition Strategy
General
In our store acquisition strategy, we will seek to continue to focus on secondary and tertiary cities in the Mid-West, Northeast and Mid-Atlantic parts of the country where we believe there is relatively less self storage space per capita available, generally resulting in greater demand for available self storage square feet; where new self storage development and permitting through the local planning and zoning boards is typically more difficult to secure thus creating barriers to entry for new self storage competition; and where local new supply through new development is generally less threatening.prevalent.
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We continue to review available acquisition opportunities with the awareness that shouldchanges in interest rates increase, resulting store capitalizationmay impact our ability to obtain favorable rates may also increase and store prices may begin to decrease.for financing acquisitions. We will seek to continue to employ our strict acquisition underwriting standards and remain a disciplined buyer and only execute acquisitions where we believe that our management techniques and innovations can strengthen our portfolio and increase stockholder value.
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The Company currently intends to use cash, proceeds from mortgage financing, and/or proceeds from sales of its remaining portfolio of investment securities to acquire, re-develop, and/or operate additional and existing stores. For future acquisitions, the Company may useemploy various financing and capital raising alternatives including, but not limited to, debt and/or equity offerings, credit facilities, mortgage financing, and joint ventures with third parties.
We conduct or obtain environmental assessments in connection with the acquisition or redevelopment of additional stores. Whenever the environmental assessment for one of our stores indicates that a store is impacted by soil or groundwater contamination from prior owners/operators or other sources, we will work with environmental consultants and where appropriate, state governmental agencies, to ensure that the store is either cleaned up, that no cleanup is necessary because the low level of contamination poses no significant risk to public health or the environment, or that the responsibility for cleanup rests with a third party.
We continue to actively review a number of store and store portfolio acquisition opportunities and have been working to further redevelop and expand our current stores. We did not complete any self storage property acquisitions in 2023.
Our Financing Strategy
Our financing strategy is to minimize the cost of our capital in order to maximize the returns generated for our stockholders. For future acquisitions, the Company may employ various financing and capital raising alternatives including, but not limited to, debt and/or equity offerings, credit facilities, mortgage financing, and joint ventures with third parties.
On June 24, 2016, certain wholly owned subsidiaries of the Company (“Term Loan Secured Subsidiaries”) entered into a loan agreement and certain other related agreements (collectively, the “Term Loan Agreement”) between the Term Loan Secured Subsidiaries and Insurance Strategy Funding IV, LLC (the “Term Loan Lender”). Under the Term Loan Agreement, the Term Loan Secured Subsidiaries borrowed from Term Loan Lender the principal amount of $20 million pursuant to a promissory note (the “Term Loan Promissory Note”). The Term Loan Promissory Note bears interest at a rate equal to 4.192% per annum and is due to mature on July 1, 2036. Pursuant to a security agreement (the “Term Loan Security Agreement”), the obligations under the Term Loan Agreement are secured by certain real estate assets owned by the Term Loan Secured Subsidiaries. J.P. Morgan Investment Management, Inc. acted as Special Purpose Vehicle Agent of the Term Loan Lender. The Company entered into a non-recourse guaranty (the “Term Loan Guaranty” and together with the Term Loan Agreement, the Term Loan Promissory Note and the Term Loan Security Agreement, the “Term Loan Documents”) to guarantee the payment to the Term Loan Lender of certain obligations of the Term Loan Secured Subsidiaries under the Term Loan Agreement. We have used some of the proceeds from the Term Loan Agreement to acquire four self storage properties in 2016.
On December 20, 2018, certain of our wholly owned subsidiaries (“Credit Facility Secured Subsidiaries”) entered into a revolving credit loan agreement (collectively, the “Credit Facility Loan Agreement”) between the Credit Facility Secured Subsidiaries and TCF National Bank (“Credit Facility Lender”). Under the Credit Facility Loan Agreement, the Credit Facility Secured Subsidiaries may borrow from the Credit Facility Lender in the principal amount of up to $10 million pursuant to a promissory note (the “Credit Facility Promissory Note”). The Credit Facility Promissory Note bears an interest rate equal to 3.00% over the One Month U.S. Dollar London Inter-Bank Offered Rate and was due to mature on December 20, 2021. The obligations under the Credit Facility Loan Agreement are secured by certain real estate assets owned by the Credit Facility Secured Subsidiaries. We entered into a guaranty of payment on December 20, 2018 (the “Credit Facility Guaranty,” and together with the Credit Facility Loan Agreement, the Credit Facility Promissory Note and related instruments, the “Credit Facility Loan Documents”) to guarantee the payment to the Credit Facility Lender of certain obligations of the Credit Facility Secured Subsidiaries under the Credit Facility Loan Agreement. As described in more detail below, the Credit Facility Loan Agreement has been replaced in its entirety by the Amended Credit Facility Loan Agreement (as defined below) on July 6, 2021.
On December 18, 2019, we completed a rights offering whereby we sold and issued an aggregate of 1,601,291 shares of our common stock (“common stock”) at the subscription price of $4.18 per whole share of common stock, pursuant to the exercise of subscriptions and oversubscriptions from our stockholders. We raised aggregate gross proceeds of approximately $6.7 million in the rights offering.
On May 19, 2020, an affiliate of the Company (the “Borrower”) entered into a Paycheck Protection Program Term Note (“PPP Note”) with Customers Bank on behalf of itself, the Company, and certain other affiliates under the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). The Borrower received total proceeds of $486,602 from the PPP Note. On April 5, 2022, the Borrower was granted forgiveness of the entire PPP Note and any accrued interest. Upon forgiveness, the Company received $307,210 in cash from the Borrower, which was the amount attributable to the Company under the SBA's loan determination formula, and recorded a gain for such amount in its consolidated statements of operations and comprehensive income.
Not applicable.On June 25, 2021, we completed an underwritten public offering whereby we sold and issued an aggregate of 1,121,496 shares of our common stock at the price of $5.35 per share. Subsequently, the over-allotment option was exercised increasing the total number of shares sold and issued to 1,289,720. We raised aggregate gross proceeds of approximately $6.9 million in the public offering after giving effect to the exercise of the over-allotment option.
On July 6, 2021, certain wholly owned subsidiaries (“Amended Credit Facility Secured Subsidiaries”) of the Company entered into a first amendment to the Credit Facility Loan Agreement (collectively, the “Amended Credit Facility Loan Agreement”) between the Amended Credit Facility Secured Subsidiaries and The Huntington National Bank, successor by merger to TCF National Bank (“Amended Credit Facility Lender”). Under the Amended Credit Facility Loan Agreement, the Amended Credit Facility Secured Subsidiaries may borrow from the Amended Credit Facility Lender in the principal amount of up to $15 million, reduced to $14.75 million and $14.5 million in years 2 and 3, respectively, pursuant to a promissory note (the “Amended Credit Facility Promissory Note”). The Amended Credit Facility Promissory Note bears an interest rate equal to 3% plus the greater of the One Month U.S. Dollar London Inter-Bank Offered Rate or 0.25% and is due to mature on July 6, 2024. The Company is considering, among other things, refinancing or finding a suitable replacement for the revolving line of credit in light of its upcoming maturity. The publication of LIBOR ceased after June 30, 2023. The Amended Credit Facility Loan Agreement provides for a replacement index based on the Secured Overnight Financing Rate (“SOFR”). The interest rate on the Amended Credit Facility Promissory Note subsequent to June 30, 2023, is equal to 3% plus the greater of SOFR plus 0.11448% or 0.25%. As of December 31, 2023, the effective interest rate was 8.46%. The obligations under the Amended Credit Facility Loan Agreement are secured by certain real estate assets owned by the Amended Credit Facility Secured Subsidiaries. The Company entered into an amended and restated guaranty of payment on July 6, 2021 (“Amended Credit Facility Guaranty,” and together with the Amended Credit Facility Loan Agreement, the Amended Credit Facility Promissory Note and related instruments, the “Amended Credit Facility Loan Documents”) to guarantee the payment to the Amended Credit Facility Lender of certain obligations of the Amended Credit Facility Secured Subsidiaries under the Amended Credit Facility Loan Agreement. The Company and the Amended Credit Facility Secured Subsidiaries paid customary fees and expenses in connection with their entry into the Amended Credit Facility Loan Documents. The Company also maintains a bank account at the Amended Credit Facility Lender. As of December 31, 2023, we have not withdrawn proceeds under the Amended Credit Facility Loan Agreement. We currently intend to strategically withdraw proceeds available under the Amended Credit Facility Loan Agreement to fund: (i) the acquisition of additional self storage properties, (ii) expansions at existing self storage properties in our portfolio, and/or (iii) joint ventures with third parties for the acquisition and expansion of self storage properties.
On January 14, 2022, the Company entered into an At Market Offering Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (the “Agent”) pursuant to which the Company may sell, from time to time, shares of the Company’s common stock, par value $0.01 per share, having an aggregate offering price of up to $15,000,000, through the Agent. During the twelve months ended December 31, 2022, under the Sales Agreement, the Company sold and issued an aggregate of 373,833 shares of common stock and raised aggregate gross proceeds of approximately $2,272,628, less sales commissions of approximately $45,491 and other offering costs resulting in net proceeds of $2,008,436. There were no shares of common stock sold during the three and twelve months ended December 31, 2023 under the Sales Agreement.
Our Third-Party Management Platform
On October 23, 2019, we signed our first self storage client under our third-party management platform. As of December 31, 2023, the property, which was previously rebranded as “Global Self Storage,” had 137,318-leasable square feet and was comprised of 619 climate-controlled and non-climate-controlled units located in Edmond, Oklahoma.
None.We may pursue third-party management opportunities of properties owned by certain affiliates or joint venture partners for a fee, and utilize such relationships with third-party owners as a source for future acquisitions and investment opportunities.
Regulation
General
Generally, self storage properties are subject to various laws, ordinances and regulations, including those relating to lien sale rights and procedures, public accommodations, insurance, and the environment. Changes in any of these laws, ordinances or regulations could increase the potential liability existing or created by tenants or others on our properties. Laws, ordinances, or regulations affecting development, construction, operation, upkeep, safety and taxation requirements may result in significant unanticipated expenditures, loss of self storage sites or other impairments to operations, which would adversely affect our cash flows from operating activities.
Under the Americans with Disabilities Act of 1990 (the “ADA”), all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons. For additional information on the ADA, see “Item 1A. Risk Factors—Risks Related to Our Business—Costs associated with complying with the ADA may result in unanticipated expenses.”
Insurance activities are subject to state insurance laws and regulations as determined by the particular insurance commissioner for each state in accordance with the McCarran-Ferguson Act, as well as subject to the Gramm-Leach-Bliley Act and the privacy regulations promulgated by the Federal Trade Commission pursuant thereto.
Under the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended (“CERCLA”), and comparable state laws, we may be required to investigate and remediate regulated hazardous materials at one or more of our properties. For additional information on environmental matters and regulation, see “Item 1A. Risk Factors—Risks Related to Our Business—Extensive environmental regulation to which we are subject creates uncertainty regarding future environmental expenditures and liabilities.”
Property management activities are often subject to state real estate brokerage laws and regulations as determined by the particular real estate commission for each state.
REIT Qualification
We have elected and we believe that we have qualified to be taxed as a REIT under the Code, commencing with our taxable year ended on December 31, 2013. We generally will not be subject to U.S. federal income tax on our net taxable income to the extent that we distribute annually all of our net taxable income to our stockholders and maintain our qualification as a REIT. We believe that we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and we expect that our intended manner of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT. To qualify, and maintain our qualification, as a REIT, we must meet on a continuing basis, through our organization and actual investment and operating results, various requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the diversity of ownership of our shares. If we fail to qualify as a REIT in any taxable year and do not qualify for certain statutory relief provisions, we will be subject to U.S. federal income tax at regular corporate rates and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year during which we failed to qualify as a REIT. Even if we qualify for taxation as a REIT, we still may be subject to some U.S. federal, state and local taxes on our income or assets. In addition, subject to maintaining our qualification as a REIT, a portion of our business is conducted through, and a portion of our income is earned by, one or more taxable REIT subsidiaries (“TRSs”), which are subject to U.S. federal corporate income tax at regular rates. Distributions paid by us generally will not be eligible for taxation at the preferential U.S. federal income tax rates that currently apply to certain distributions received by individuals from taxable corporations, unless such distributions are attributable to dividends received by us from a TRS.
Competition
We compete with many other entities engaged in real estate investment activities for customers and acquisitions of self storage properties and other assets, including national, regional, and local owners, operators, and developers of self storage properties. We compete based on a number of factors including location, rental rates,
security, suitability of the property’s design to prospective tenants’ needs, and the manner in which the property is operated and marketed. We believe that the primary competition for potential customers comes from other self storage properties within a three to five mile radius from our stores. We have positioned our properties within their respective markets as high-quality operations that emphasize tenant convenience, security, and professionalism.
We also may compete with numerous other potential buyers when pursuing a possible property for acquisition, which can increase the potential cost of a project. These competing bidders also may possess greater resources than us and therefore be in a better position to acquire a property.
Our primary national competitors in many of our markets for both tenants and acquisition opportunities include local and regional operators, institutional investors, private equity funds, as well as the other public self storage REITs. These entities also seek financing through similar channels to the Company. Therefore, we will continue to compete for investors in a market where funds for real estate investment may decrease.
Human Capital
We seek to create a diverse and inclusive work environment that values each employee’s talents and contributions. Our success relies on the general professionalism of our property managers and staff which are contributing factors to our ability to successfully secure rentals, retain tenants and maintain clean and secure self storage properties. We seek to increase employee retention and well-being and our employees enjoy an attractive benefit package that includes medical, dental, vision, life insurance, 401(k) with matching employer contribution, cash bonuses, and long-term equity compensation. We offer competitive health benefits and encourage our employees to participate in employee health and wellness programs. We also offer individualized counseling to our employees to assist them with their journey towards better health.
We also seek to promote diversity among our employees and management team. As of December 31, 2023, approximately 40% of our non-store (including finance, human resources, accounting, tax, legal, and marketing, but excluding store-level operations) employees and independent contractors were women. As of December 31, 2023, we had 35 employees, which includes employees of our property management platform.
In order to attract and retain diverse top talent, we offer training and development opportunities for our employees. In 2023, we offered training and development for our employees, which included anti-harassment training, cybersecurity training, and site manager training. We value the safety of our employees and provide regular training for our employees to increase safety at our properties. During 2023, we continued to make masks and other personal protective equipment available to our employees.
Environmental, Social, and Governance
We are focused on building our company for the long-term to generate sustainable growth. To that end, we have established a cross-functional Environmental, Social, and Governance (“ESG”) committee, comprised of management, responsible for establishing our sustainability priorities and objectives. Management regularly evaluates sustainability risks faced by our portfolio and believe the low obsolescence, geographic diversification, and low emissions of our portfolio help to mitigate those risks. Our ESG committee reports annually to our board of directors on the status of our ESG program, our progress against the goals we have set, and provides updates on the various initiatives we have undertaken to improve our sustainability.
A key area of focus from a sustainability perspective is minimizing the impact we make on the environment. Self-storage remains a low-environmental impact business as it consumes less energy and water while emitting fewer greenhouse gases than other real estate property types. We continue to look for ways to further reduce our low impact through a variety of initiatives including solar panel installations, HVAC upgrades, high-efficiency LED lighting retrofits, energy management systems, and paper reduction through our online rental platform. Also, in 2023, we continued to explore the installation of solar panels at our properties which we expect would reduce energy consumption and costs at such locations.
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Climate Change and Environmental Stewardship
We are committed to managing climate-related risks and opportunities in relation to our business. This commitment is a key component of our recognition that we must operate in a responsible and sustainable manner that aligns with our long-term corporate strategy and promotes our best interests along with those of our stakeholders, including our tenants, investors, employees, and the communities in which we operate.
Our ESG committee guides our commitment to sustainability and has primary responsibility for climate-related activities. Our ESG committee reports annually to our board of directors, which oversees all of our sustainability initiatives.
We consider potential environmental impacts—both positive and negative—into our decision making across the business. The following features of our properties reflect our commitment to responsible environmental stewardship:
Available Information
The SEC maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Additional information about the Company, not contained in this annual report or made a part hereof, may be found at www.GlobalSelfStorage.us. The information on our website is not intended to form a part of or be incorporated by reference into this annual report.
Item 1A. Risk Factors.
Investing in our securities involves a high degree of risk. Before making an investment decision, you should carefully consider the following risk factors, together with the other information contained in this annual report. Any of these risks described could materially adversely affect our business, financial condition, liquidity, results of operations, tax status or ability to make distributions to our stockholders. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations. If this were to happen, the price of our securities could decline significantly, and you could lose a part or all of your investment.
Risks Related to our Self Storage Properties and our Business
Adverse economic or other conditions in the markets in which we do business and more broadly could negatively affect our occupancy levels and rental rates and therefore our operating results.
Our operating results are dependent upon our ability to achieve optimal occupancy levels and rental rates at our self storage properties. Adverse economic or other conditions, such as during a government shutdown, in the markets in which we do business, may lower our occupancy levels and limit our ability to maintain or increase rents or require us to offer rental discounts. No single customer represents a significant concentration of our revenues. The following adverse developments, among others, in the markets in which we do business may adversely affect the operating performance of our properties:
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Our operations may be affected bygeneral economic, political and market conditions.
Our operations may be affected by global and national economic, political and market conditions generally. Any of the following events could result in substantial impact to our business, financial condition, results of operations and cash flows:
All of these factors are beyond our control. Any negative changes in these factors could affect our business, financial condition, results of operations and cash flows.
Our storage leases are relatively short-term in nature, which exposes us to the risk that we may have to re-lease our units and we may be unable to do so on attractive terms, on a timely basis or at all.
If we are unable to promptly re-let our units or if the rates upon such re-letting are significantly lower than expected, then our business and results of operations would be adversely affected. Any delay in re-letting units as vacancies arise would reduce our revenues and harm our operating results. In addition, lower than expected rental rates upon re-letting could adversely affect our revenues and impede our growth.
Increases in taxes and regulatory compliance costs may reduce our income and adversely impact our cash flows.
Increases in income or other taxes generally are not passed through to tenants under leases and may reduce our net income, funds from operations (“FFO”), cash flows, financial condition, ability to pay or refinance our debt obligations, ability to make cash distributions to stockholders, and the trading price of our securities. Similarly, changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures, which could result in similar adverse effects.
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Our property taxes could increase due to various reasons, including a reassessment, which could adversely impact our operating results and cash flow.
The value of our properties may be reassessed for property tax purposes by taxing authorities including as a result of the acquisition of new self storage properties. Accordingly, the amount of property taxes we pay in the future may increase substantially from what we have paid in the past. Increases in property or other taxes generally are not passed through to tenants under leases and may reduce our results of operations and cash flow, and could adversely affect our ability to pay any expected dividends to our stockholders.
Increases in operating costs may adversely affect our results of operation and cash flow.
Increases in operating costs, including insurance costs, labor costs, utilities, capital improvements, real estate assessments and other taxes and costs of compliance with REIT requirements and with other laws, regulations and governmental policies could adversely affect our results of operation and cash flow.
We depend upon our on-site personnel to maximize tenant satisfaction at each of our properties, and any difficulties we encounter in hiring, training, and maintaining skilled field personnel may harm our operating performance.
We depend upon our on-site personnel to maximize tenant satisfaction at each of our properties, and any difficulties we encounter in hiring, training and maintaining skilled field personnel may harm our operating performance. The general professionalism of a site’s managers and staff are contributing factors to a site’s ability to successfully secure rentals and retain tenants. If we are unable to successfully recruit, train and retain qualified field personnel, our quality of service could be adversely affected, which could lead to decreased occupancy levels and reduced operating performance.
We face competition from other self storage properties, which may adversely impact the markets in which we invest and in which our self storage properties operate.
Increased competition in the self storage business has led to both pricing and discount pressures. This increased competition could limit our ability to increase revenues in the markets in which we operate. While some markets may be able to absorb an increase in self storage properties due to superior demographics and density, other markets may not be able to absorb additional properties and may not perform as well.
Rental revenues are significantly influenced by demand for self storage space generally, and a decrease in such demand would likely have a greater adverse effect on our rental revenues than if we owned a more diversified real estate portfolio or if we owned a larger number of self storage properties.
Because our portfolio of properties consists of only self storage properties, we are subject to risks inherent in investments in a single industry. A decrease in the demand for self storage space would have a greater adverse effect on our rental revenues than it would if we owned a more diversified real estate portfolio. Demand for self storage space has been and could be adversely affected by ongoing weakness in the national, regional and local economies, changes in supply of, or demand for, similar or competing self storage properties in an area and the excess amount of self storage space in a particular market. To the extent that any of these conditions occur, they are likely to affect market rents for self storage space, which could cause a decrease in our rental revenue. Any such decrease could impair our operating results, ability to satisfy debt service obligations and ability to make cash distributions to our stockholders.
Further, currently we invest in a limited number of self storage properties. As a result, the potential effect on our financial condition, results of operations, and cash available for distribution to stockholders, resulting from poor performance at one or more of our self storage properties could be more pronounced than if we invested in a larger number of self storage properties.
We may not be successful in identifying and consummating suitable acquisitions, or integrating and operating acquired properties, which may adversely impact our growth.
We expect to make future acquisitions of self storage properties. We may not be successful in identifying and consummating suitable acquisitions that meet our criteria, which may impede our growth. We may encounter
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competition when we seek to acquire properties, especially for brokered portfolios. Aggressive bidding practices by prospective acquirers have been commonplace and this competition also may be a challenge for our growth strategy and potentially result in our paying higher prices for acquisitions including paying consideration for certain properties that may exceed the value of such properties. Should we pay higher prices for self storage properties or other assets, our potential profitability may be reduced. Also, when we acquire any self storage properties, we will be required to integrate them into our then existing portfolio. The acquired properties may turn out to be less compatible with our growth strategy than originally anticipated, may cause disruptions in our operations or may divert management’s attention away from day-to-day operations, which could impair our results of operations. Our ability to acquire or integrate properties may also be constrained by the following additional risks:
We may not be able to develop a captive pipeline of acquisition targets without the use of non-refundable deposits.
We may be required to use non-refundable deposits to develop a captive pipeline of acquisition targets. If we are unable to raise the capital necessary to consummate such acquisitions we may be forced to abandon all or some of the acquisitions and forfeit any non-refundable deposits. If this occurs, it could adversely impact our operating results and our ability to pay any expected dividends to our stockholders.
We may acquire properties subject to liabilities which may adversely impact our operating results.
We may acquire properties subject to liabilities without any recourse, or with only limited recourse, with respect to unknown liabilities such as liabilities for clean-up of undisclosed environmental contamination, claims by persons dealing with the former owners of the properties and claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties. The costs associated with these liabilities may adversely impact our operating results.
Our investments in redevelopment projects may not yield anticipated returns which could adversely impact our economic performance.
In deciding whether to redevelop a particular property, we make certain assumptions regarding the expected future performance of that property. These assumptions are inherently uncertain, and, if they prove to be wrong, then we may be subject to certain risks including the following:
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The occurrence of such events could adversely affect the investment returns from these redevelopment projects and may adversely impact our economic performance.
Store ownership through joint ventures may limit our ability to act exclusively in our interest.
We may co-invest with third parties through joint ventures. In any such joint venture, we may not be in a position to exercise sole decision-making authority regarding the stores owned through joint ventures. Investments in joint ventures may, under certain circumstances, involve risks not present when a third party is not involved, including the possibility that joint venture partners might become bankrupt or fail to fund their share of required capital contributions. Joint venture partners may have business interests or goals that are inconsistent with our business interests or goals and may be in a position to take actions contrary to our policies or objectives. Such investments also have the potential risk of impasse on strategic decisions, such as a sale, in cases where neither we nor the joint venture partner would have full control over the joint venture. In other circumstances, joint venture partners may have the ability without our agreement to make certain major decisions, including decisions about sales, capital expenditures, and/or financing. Any disputes that may arise between us and our joint venture partners could result in litigation or arbitration that could increase our expenses and distract our officers and/or directors from focusing their time and effort on our business. In addition, we might in certain circumstances be liable for the actions of our joint venture partners, and the activities of a joint venture could adversely affect our ability to qualify as a REIT, even though we do not control the joint venture.
Our performance is subject to risks associated with the real estate industry.
An investment in us is closely linked to the performance of the real estate markets in which we own self storage properties and subject to the risks associated with the direct ownership of real estate, including fluctuations in interest rates, inflation or deflation; declines in the value of real estate; and competition from other real estate investors with significant capital. Prevailing economic conditions affecting the real estate industry may adversely affect our business, financial condition and results of operations.
Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties.
We may be unable to promptly sell one or more properties in response to changing economic, financial and investment conditions. We cannot predict whether we will be able to sell any property for the price or on the terms set by us or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We may be required to expend funds to correct defects or to make improvements before a property can be sold. We cannot give assurances that we will have funds available to correct those defects or to make those improvements. In acquiring a property, we may agree to transfer restrictions that materially restrict us from selling that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property. These transfer restrictions may impede our ability to sell a property even if we deem it necessary or appropriate. We may also have joint venture investments in certain of our properties and, consequently, our ability to control decisions relating to such properties may be limited.
Any negative perceptions of the self storage industry generally may result in a decline in our stock price.
To the extent that the investing public has a negative perception of the self storage industry, the value of our securities may be negatively impacted.
Costs associated with complying with the ADA may result in unanticipated expenses.
Our self storage properties also are subject to risks related to changes in, and changes in enforcement of, federal, state and local laws, regulations and governmental policies, including fire and safety requirements, health, zoning and tax laws, governmental fiscal policies and the ADA. Local regulations, including municipal or local ordinances, zoning restrictions and restrictive covenants imposed by community developers may restrict our use of our properties and may require us to obtain approval from local officials or community standards organizations at any time with respect to our properties, including prior to acquiring a property or when undertaking renovations of any of
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our existing properties. Further, compliance with the ADA and other regulations may require us to make unanticipated expenditures that could significantly reduce cash available for distribution to stockholders. A failure to comply with the ADA or similar state laws could lead to government imposed fines on us and/or litigation, which could also involve an award of damages to individuals affected by the noncompliance. Such noncompliance also could result in an order to correct any noncomplying feature, which could result in substantial capital expenditures.
Extensive environmental regulation to which we are subject creates uncertainty regarding future environmental expenditures and liabilities.
Under environmental regulations such as CERCLA, owners and operators of real estate may be liable for the costs of investigating and remediating certain hazardous substances or other regulated materials on or in such property. Such laws often impose liability, without regard to knowledge or fault, for removal or remediation of hazardous substances or other regulated materials upon owners and operators of contaminated property, even after they no longer own or operate the property. Moreover, the past or present owner or operator of a property from which a release emanates could be liable for any personal injuries or property damages that may result from such releases, as well as any damages to natural resources that may arise from such releases. The presence of such substances or materials, or the failure to properly remediate such substances, may adversely affect the owner’s or operator’s ability to lease, sell or rent such property or to borrow using such property as collateral.
Climate change and regulatory and other efforts to reduce climate change could adversely affect our business.
We face a number of risks associated with climate change including both transition and physical risks. The transition risks that could impact our company include those risks related to the impact of U.S. and foreign climate- and ESG-related legislation and regulation, as well as risks arising from climate-related business trends. Moreover, we are subject to risks stemming from the physical impacts of climate change.
New climate change-related regulations or interpretations of existing laws may result in enhanced disclosure obligations that could negatively affect us and materially increase our regulatory burden. Increased regulations generally increase the costs to us, and those higher costs may continue to increase if new laws require additional resources, including spending more time, hiring additional personnel or investing in new technologies.
We also face business trend-related climate risks. Investors are increasingly taking into account ESG factors, including climate risks, in determining whether to invest in companies. Additionally, our reputation and investor relationships could be damaged as a result of our involvement with activities perceived to be causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change.
Further, significant physical effects of climate change including extreme weather events can also have an adverse impact on our properties. Additionally, both transition and physical risks associated with climate change could result in increased operating costs for our properties. As the effects of climate change increase, we expect the frequency and impact of weather and climate related events and conditions to increase as well. These risks may adversely impact our business, financial condition and results of operations.
We may become subject to litigation or threatened litigation or other claims that may divert management’s time and attention, require us to pay damages and expenses or restrict the operation of our business.
We may become subject to disputes with commercial parties with whom we maintain relationships or other parties with whom we do business. Any such dispute could result in litigation between us and the other parties. Whether or not any dispute actually proceeds to litigation, we may be required to devote significant management time and attention to its successful resolution (through litigation, settlement or otherwise), which would detract from our management’s ability to focus on our business. Any such resolution could involve the payment of damages or expenses by us, which may be significant. In addition, any such resolution could involve our agreement with terms that restrict the operation of our business.
From time to time we may be required to resolve tenant claims and litigation and employment-related claims and litigation by corporate level and field personnel which could result in substantial liabilities to us. We also could
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be sued for personal injuries and/or property damage occurring at our properties. The liability insurance we maintain may not cover all costs and expenses arising from such lawsuits.
Uninsured losses or losses in excess of our insurance coverage could adversely affect our financial condition and cash flow.
We maintain comprehensive liability, fire, flood, earthquake, wind, extended coverage and rental loss insurance (as deemed necessary or as required by our lenders, if any) with respect to our properties. Certain types of losses, however, may be either uninsurable or not economically insurable, such as losses due to earthquakes, hurricanes, tornadoes, riots, acts of war or terrorism. Should an uninsured loss occur, we could lose both our investment in and anticipated profits and cash flow from a property. In addition, if any such loss is insured, we may be required to pay significant amounts on any claim for recovery of such a loss prior to our insurer being obligated to reimburse us for the loss, or the amount of the loss may exceed our coverage for the loss.
To the extent we invest in publicly traded REITs, our performance may be subject to the risks of investment in such securities.
The value of our investments in REITs may fluctuate, sometimes rapidly and unpredictably. Because REITs concentrate their assets in the real estate industry, the performance of REITs is closely linked to the performance of the real estate markets. Property values may fall due to increasing vacancies or declining rents resulting from economic, legal, cultural or technological developments, rising interest rates, and rising capitalization rates. REIT prices also may drop because of the failure of borrowers to pay their loans and poor management. In addition, there are specific risks associated with particular sectors of real estate investments such as self storage, retail, office, hotel, healthcare, and multi-family properties. Many REITs utilize leverage, which increases investment risk and could adversely affect a REIT’s operations and market value in periods of rising interest rates as well as risks normally associated with debt financing. In addition, a REIT’s failure to qualify as a REIT under the Code, or failure to maintain exemption from registration under the Investment Company Act could adversely affect our operations and our qualification as a REIT under the Code. The failure of these investments to perform as expected may have a significant effect on our performance and our ability to make distributions to stockholders.
We may be unable to make distributions in the future, maintain our current level of distributions or increase distributions over time.
There are many factors that can affect the availability and timing of cash distributions to stockholders and the determination to make distributions will fall within the discretion of our board of directors. Our board of directors’ decisions to pay distributions will depend on many factors, such as our historical and projected results of operations, financial condition, cash flows and liquidity, maintenance of our REIT qualification and other tax considerations, capital expenditure and other expense obligations, debt covenants, contractual prohibitions or other limitations and applicable law and such other matters as our board of directors may deem relevant from time to time. Actual cash available for distributions may vary substantially from estimates. We may not have sufficient available cash from operations to make a distribution required to qualify for or maintain our REIT status. We may be required to borrow or make distributions that would constitute a return of capital which may reduce the amount of capital we invest in self storage properties. We cannot assure stockholders that we will be able to make distributions in the future, be able to maintain our current level of distributions or that our distributions will increase over time, and our inability to make distributions, or to make distributions at expected levels, could result in a decrease in the market price of our common stock.
We rely on information technology in our operations, and any material failure, inadequacy, interruption or security breach through cyber-attacks, cyber-intrusions, or other methods could disrupt our information technology networks and related systems and harm our business.
We rely on information technology networks and systems, including the internet, to process, transmit and store electronic information, and to manage or support a variety of business processes, including, but not limited to, financial transactions and records, personally identifiable information, and tenant and lease data. In many cases, we rely significantly on third-party vendors to retain data, process transactions, and provide information technology and other system services. Our networks and operations could be disrupted, and sensitive data could be compromised, by
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physical or electronic security breaches, targeted against us, our vendors or other organizations, including financial markets or institutions, including by way of or through cyber-attacks or cyber-intrusions over the internet, malware, computer viruses, attachments to e-mails, phishing, employee theft or misuse, or inadequate security controls. We rely on third-party vendors and commercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential tenant and other sensitive information. Although we make efforts to protect the security and integrity of our networks and systems, there can be no assurance that these efforts and measures will be effective or that attempted security breaches or disruptions would not be successful, as such attacks and breaches may be difficult to detect (or not detected at all) and are becoming more sophisticated. In such event, we may experience business interruptions or shutdowns; data loss, ransom, misappropriation, or corruption; theft or misuse of confidential or proprietary information; or litigation and investigation by tenants, governmental or regulatory agencies, or other third parties. Such events could also have other adverse impacts on us, including, but not limited to, regulatory penalties, breaches of debt covenants or other contractual or REIT compliance obligations, late or misstated financial reports, and significant diversion of management attention and resources. As a result, such events could have a material adverse effect on our financial condition, results of operations and cash flows and harm our business reputation.
Privacy concerns could result in regulatory changes that may harm our business.
Personal privacy has become a significant issue in the jurisdictions in which we operate. Many jurisdictions in which we operate have imposed restrictions and requirements on the use of personal information by those collecting such information. Changes to law or regulations affecting privacy, if applicable to our business, could impose additional costs and liability on us and could limit our use and disclosure of such information.
Major public health issues and related disruptions in the U.S. and global economy and financial markets could adversely impact or disrupt our financial condition and results of operations.
In recent years, the outbreaks of a number of diseases, including COVID-19, avian influenza, H1N1, and other viruses have increased the risk of a pandemic or major public health issues.
We believe that our level of business activity and the profitability of our business, as well as the values of, and the cash flows from, the assets we may own could in the future be impacted by a pandemic or other major public health issue. While we have taken preventive measures and other precautions, no predictions of specific scenarios can be made with certainty and such measures may not adequately predict the impact on our business from such events.
The extent of the impact of a pandemic and any other pandemic or major health issue on us will depend on many factors, including the duration and scope of the public health emergency, the actions taken by governmental authorities to contain such pandemics or public health issues and their financial and economic impact, the implementation of travel advisories and restrictions, the efficacy and availability of vaccines, the disparities in vaccination rates and vaccine hesitancy, the rise of new variants and the severity of such variants, the impact of the public health emergency on overall supply and demand, goods and services, consumer confidence and levels of economic activity and the extent of its disruption to global, regional, and local supply chains and economic markets, all of which are uncertain and difficult to assess. Moreover, many risk factors set forth in this annual report on Form 10-K should be interpreted as heightened risks as a result of the impact of a pandemic or other major public health issue.
Risks Related to Our Organization and Structure
The ability of our board of directors to revoke our REIT election without stockholder approval may cause adverse consequences to our stockholders.
Our board of directors may revoke or otherwise terminate our REIT election without the approval of stockholders if it determines that it is no longer in our best interests to continue to qualify as a REIT. If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our taxable income and would no longer be required to distribute most of our net taxable income to stockholders, which may have adverse consequences on the total return to our stockholders.
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Our business could be harmed if key personnel with business experience in the self storage industry terminate their employment with us.
Our officers have experience in the self storage industry and our success will depend, to a significant extent, on their services. There is no guarantee that any of them will remain employed with us. We do not generally maintain key person life insurance. The loss of services of one or more members of our senior management could harm our business.
There may be conflicts of interest resulting from the relationships among us, our affiliates, and other related parties.
The outside business interests of our officers may divert their time and attention away from us, and may result in a potential conflict with respect to the allocation of business opportunities, which could harm our business. Our board of directors has adopted policies and procedures designed to mitigate these conflicts of interest, such as allocation procedures for determining the appropriate allocation of such business opportunities. Specifically, if any of our officers or directors who also serves as an officer, director, or advisor of our affiliates becomes aware of a potential transaction related primarily to the self storage business that may represent a corporate opportunity for us and one or more of our affiliates, such officer or director has no duty to present that opportunity to such affiliates and we will have the sole right to pursue the transaction if our board of directors so determines. Notwithstanding the foregoing, our officers or directors are encouraged to notify our affiliates of such an opportunity.
Certain provisions of Maryland law could inhibit changes in control of our company.
Certain “business combination” and “control share acquisition” provisions of the Maryland General Corporation Law (“MGCL”), may have the effect of deterring a third party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-prevailing market price of our common stock. Pursuant to the MGCL, our board of directors has by resolution exempted business combinations between us and any other person. Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of shares of our stock. However, there can be no assurance that these exemptions will not be amended or eliminated at any time in the future. Our charter and bylaws and Maryland law also contain other provisions that may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interest.
Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions not in your best interest.
Our charter limits the liability of our present and former directors and officers to us and our stockholders for money damages to the maximum extent permitted under Maryland law. Under current Maryland law, our present and former directors and officers will not have any liability to us or our stockholders for money damages other than liability resulting from:
Our charter authorizes us to indemnify our present and former directors and officers for actions taken by them in those capacities to the maximum extent permitted by Maryland law. Our bylaws require us to indemnify each present and former director or officer, to the maximum extent permitted by Maryland law, in connection with any proceeding to which he or she is made, or threatened to be made, a party to or witness in by reason of his or her service to us as a director or officer or in certain other capacities. In addition, we may be obligated to pay or reimburse the expenses incurred by our present and former directors and officers without requiring a preliminary determination of their ultimate entitlement to indemnification. As a result, we and our stockholders may have more limited rights against our present and former directors and officers than might otherwise exist absent the current provisions in our charter
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and bylaws or that might exist with other companies, which could limit your recourse in the event of actions not in your best interest.
Our charter contains provisions that make removal of our directors difficult, which could make it difficult for our stockholders to effect changes to our management.
Our charter provides that, subject to the rights of holders of one or more classes or series of preferred shares, a director may be removed with cause, by the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of directors. Vacancies on our board of directors generally may be filled only by a majority of the remaining directors in office, even if less than a quorum. These requirements make it more difficult to change our management by removing and replacing directors and may prevent a change in our control that is in the best interests of our stockholders.
We may change our investment and financing strategies and enter into new lines of business without stockholder consent, which may subject us to different risks.
We may change our investment and financing strategies and enter into new lines of business at any time without the consent of our stockholders, which could result in our making investments and engaging in business activities that are different from, and possibly riskier than, the investments and businesses described in this document. A change in our investment strategy or our entry into new lines of business may impact our ability to qualify or remain qualified as a REIT, or increase our exposure to other risks or real estate market fluctuations.
If other self storage companies convert to a REIT structure or if tax laws change, we may no longer have an advantage in competing for potential acquisitions.
Because we are structured as a REIT, we are a more attractive acquirer of properties to tax-motivated sellers than our competitors that are not structured as REITs. However, if other self storage companies restructure their holdings to become REITs, this competitive advantage will disappear. In addition, new legislation may be enacted or new interpretations of existing legislation may be issued by the Internal Revenue Service (the “IRS”), or the U.S. Treasury Department that could affect the attractiveness of the REIT structure so that it may no longer assist us in competing for acquisitions.
Our board of directors has the power to issue additional shares of our stock in a manner that may not be in the best interest of our stockholders.
Our charter authorizes our board of directors to issue additional authorized but unissued shares of common stock or preferred stock and to increase the aggregate number of authorized shares or the number of shares of any class or series without stockholder approval. In addition, our board of directors may classify or reclassify any unissued shares of common stock or preferred stock and set the preferences, rights and other terms of the classified or reclassified shares. Our board of directors could issue additional shares of our common stock or establish a series of preferred stock that could have the effect of delaying, deferring or preventing a change in control or other transaction that might involve a premium price for our securities or otherwise not be in the best interests of our stockholders.
Restrictions on ownership and transfer of our shares may restrict change of control or business combination opportunities in which our stockholders might receive a premium for their shares.
In order for us to qualify as a REIT for each taxable year after our taxable year ended December 31, 2013, no more than 50% in value of our outstanding shares may be owned, directly or constructively, by five or fewer individuals during the last half of any calendar year, and at least 100 persons must beneficially own our shares during at least 335 days of a taxable year of 12 months, or during a proportionate portion of a shorter taxable year. “Individuals” for this purpose include natural persons, private foundations, some employee benefit plans and trusts, and some charitable trusts. Our charter contains, among other things, such customary provisions related to our current operation as a REIT and such other provisions that are consistent with the corporate governance profile of our public peers, including certain customary ownership limitations that prohibit, among other limitations, any person from beneficially or constructively owning more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding share of our common stock or all classes and series of our capital stock. These ownership limits and the other restrictions on ownership and transfer of our shares in our charter could have the effect of discouraging
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a takeover or other transaction in which holders of our common stock might receive a premium for their shares over the then prevailing market price or which holders might believe to be otherwise in their best interests.
Risks Related to Our Debt Financings
Disruptions in the financial markets could affect our ability to obtain debt financing on reasonable terms or at all and have other adverse effects.
Uncertainty in the credit markets may negatively impact our ability to access additional debt financing or to refinance existing debt maturities on favorable terms (or at all), which may negatively affect our ability to make acquisitions. A downturn in the credit markets may cause us to seek alternative sources of potentially less attractive financing, and may require us to adjust our business plans accordingly. In addition, these factors may make it more difficult for us to sell properties or may adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of debt financing or difficulties in obtaining debt financing.
We depend on external sources of financing that are outside of our control, which could adversely affect our ability to acquire or redevelop properties, satisfy our debt obligations and/or make distributions to stockholders.
We depend on external sources of financing to acquire properties, to satisfy our debt obligations and to make distributions to our stockholders required to maintain our qualification as a REIT, and these sources of financing may not be available on favorable terms, or at all. Our access to external sources of financing depends on a number of factors, including the market’s perception of our growth potential and our current and potential future earnings and our ability to continue to qualify as a REIT for U.S. federal income tax purposes. If we are unable to obtain external sources of financing, we may not be able to acquire properties when strategic opportunities exist, satisfy our debt obligations or make cash distributions to our stockholders that would permit us to qualify as a REIT or avoid paying U.S. federal income tax on all of our net taxable income.
The terms and covenants relating to our indebtedness could adversely impact our economic performance.
The Amended Credit Facility Loan Documents and Term Loan Documents contain (and any new or amended loan and/or facility we may enter into from time to time will likely contain) customary affirmative and negative covenants, including financial covenants that, among other things, require us to comply with a minimum net worth (as defined in the Amended Credit Facility Loan Documents and Term Loan Documents) of at least the outstanding principal balance of the Term Loan and a minimum liquidity standard of at least 10% of the outstanding principal balance of the term loan (as defined in the Amended Credit Facility Loan Documents and Term Loan Documents). In the event that we fail to satisfy our covenants, we would be in default under the Amended Credit Facility Loan Documents and Term Loan Documents and may be required to repay such debt with capital from other sources. Under such circumstances, other sources of debt or equity capital may not be available to us, or may be available only on unattractive terms. Moreover, the presence of such covenants could cause us to operate our business with a view toward compliance with such covenants, which might not produce optimal returns for stockholders.
Risks Related to Our Qualification as a REIT
Our failure to qualify or remain qualified as a REIT would subject us to U.S. federal income tax and applicable state and local taxes, which would reduce the amount of operating cash flow available for distribution to stockholders.
We have elected, and believe that we have been qualified, to be taxed as a REIT commencing with the taxable year ended December 31, 2013. Qualification for treatment as a REIT involves the application of highly technical and extremely complex Code provisions for which there are only limited judicial and administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify for REIT treatment. To qualify as a REIT, we must meet, on an ongoing basis through actual operating results, various tests regarding the nature and diversification of our assets and our income, the ownership of our outstanding shares and the amount of our distributions. Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to manage successfully the composition of our income and assets on an ongoing basis. Our ability to satisfy these asset tests depends upon an analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent
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appraisals. In addition, we have held and may continue to hold investments in other publicly traded REITs. If any such publicly traded REIT fails to qualify as a REIT with respect to any period during which we hold or have held shares of such REIT, or if our interests in these REITs are otherwise not treated as equity in a REIT for U.S. federal income tax purposes, our ability to satisfy the REIT requirements could be adversely affected. Moreover, new legislation, court decisions or administrative guidance may, in each case possibly with retroactive effect, make it more difficult or impossible for us to qualify as a REIT. Thus, while we believe that we have been organized and operated and intend to operate so that we will continue to qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations and the possibility of future changes in our circumstances, no assurance can be given that we have qualified or will so qualify for any particular year. These considerations also might restrict the types of assets that we can acquire or services that we can provide in the future. We have not requested and do not plan to request a ruling from the IRS regarding our qualification as a REIT.
In order to qualify as a REIT, among other requirements, we must ensure that at least 75% of our gross income for each taxable year, excluding certain amounts, is derived from certain real property-related sources, and at least 95% of our gross income for each taxable year, excluding certain amounts, is derived from certain real property-related sources and passive income such as dividends and interest. For purposes of these rules, income from the rental of real property is generally treated as qualifying income, whereas service income is generally treated as nonqualifying income. Furthermore, for purposes of these rules, services provided to tenants at a property could cause all income from the property to be nonqualifying if the income from such services, or the costs of providing those services, exceed certain thresholds. We have provided and may continue to provide certain services to our tenants, such as access to insurance. We believe that these services have been provided in a manner that does not cause our rental income to fail to be treated as qualifying income for purposes of the REIT gross income tests. However, if the IRS were to successfully challenge our characterization of these services, our qualification as a REIT could be adversely impacted. In addition, where we have provided services that may generate nonqualifying income, we believe the income attributable to these services and the costs of providing these services are sufficiently small so as not to cause us to fail to satisfy the REIT gross income tests. However, there is limited guidance regarding what costs are taken into account for this purpose. If the IRS were to successfully assert that our income from these services or the costs of providing these services exceeded certain thresholds, we could fail to qualify as a REIT.
If we fail to qualify for treatment as a REIT at any time and do not qualify for certain statutory relief provisions, we would be required to pay U.S. federal income tax on our taxable income, and possibly could be required to borrow money or sell assets to pay that tax, thus substantially reducing the funds available for distribution for each year involved. Unless entitled to relief under specific statutory provisions, we would also be disqualified from treatment as a REIT for the four taxable years following the year during which we lost our qualification. In addition, all distributions to stockholders, including capital gain dividends, would be subject to tax as regular dividends to the extent of our earnings and profits.
Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flow.
Even though we believe that we currently qualify for U.S. federal income tax purposes as a REIT, we may face tax liabilities that will reduce our cash flow, including taxes on any undistributed income, state or local income and property and transfer taxes, including real property transfer taxes. In addition, we could, in certain circumstances, be required to pay an excise or penalty tax (which could be significant in amount) in order to utilize one or more relief provisions under the Code to maintain our qualification as a REIT. Any of these taxes would decrease operating cash flow to our stockholders. In addition, in order to meet the REIT qualification requirements, or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from dealer property or inventory, we hold some of our assets and provide certain services to our tenants through one or more TRSs, or other subsidiary corporations that will be subject to corporate-level income tax at regular corporate rates. Any TRSs or other taxable corporations in which we invest will be subject to U.S. federal, state and local corporate taxes. Furthermore, if we acquire appreciated assets from a corporation that is or has been a subchapter C corporation in a transaction in which the adjusted tax basis of such assets in the our hands is less than the fair market value of the assets, determined at the time we acquired such assets, and if we subsequently dispose of any such assets during the 5-year period following the acquisition of the assets from the C corporation, we will be subject to tax at the highest corporate tax rates on any gain from the disposition of such assets to the extent of the excess of the fair market value of the assets on the date that we acquired such assets over the basis of such assets on such date, which are referred to as built-in gains. Payment of these taxes generally could materially and adversely affect our income, cash flow, results of operations, financial condition, liquidity and prospects, and could adversely affect the value of our common stock and the ability to make distributions to stockholders.
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To maintain our REIT qualification, we may be forced to borrow funds during unfavorable market conditions.
In order to maintain our REIT qualification and avoid the payment of income and excise taxes, we may need to borrow funds to meet the REIT distribution requirements even if the then prevailing market conditions are not favorable for these borrowings. These borrowing needs could result from, among other things, timing differences between the actual receipt of cash and inclusion of income for U.S. federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments. These sources, however, may not be available on favorable terms or at all. Our access to third-party sources of capital depends on a number of factors, including the market’s perception of our growth potential, current debt levels, the per share trading price of our common stock, and our current and potential future earnings. We cannot assure you that we will have access to such capital on favorable terms at the desired times, or at all, which may cause us to curtail investment activities and/or to dispose of assets at inopportune times, and could adversely affect our financial condition, results of operations, cash flows and our ability to pay distributions on, and the per share trading price of, our common stock.
Failure to make required distributions would subject us to tax, which would reduce the operating cash flow available for distribution to stockholders.
Failure to make required distributions would subject us to tax, which would reduce the operating cash flow to our stockholders. In order to qualify as a REIT, we must distribute to our stockholders each calendar year at least 90% of our net taxable income (excluding net capital gain). To the extent that we satisfy the 90% distribution requirement, but distribute less than 100% of our net taxable income (including net capital gain), we would be subject to U.S. federal corporate income tax on our undistributed net taxable income. In addition, we will incur a 4% non-deductible excise tax on the amount, if any, by which our distributions in any calendar year are less than a minimum amount specified under U.S. federal income tax laws. Although we intend to distribute our net taxable income to our stockholders in a manner intended to satisfy the REIT 90% distribution requirement and to avoid the 4% non-deductible excise tax, it is possible that we, from time to time, may not have sufficient cash to distribute 100% of our net taxable income. There may be timing differences between our actual receipt of cash and the inclusion of items in our income for U.S. federal income tax purposes. Accordingly, there can be no assurance that we will be able to distribute net taxable income to stockholders in a manner that satisfies the REIT distribution requirements and avoids the 4% non-deductible excise tax.
Complying with the REIT requirements may cause us to forgo and/or liquidate otherwise attractive investments.
To qualify as a REIT for U.S. federal tax purposes, we must continually satisfy various requirements concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders, and the ownership of shares. Among other requirements, to qualify as a REIT, we must satisfy certain annual gross income tests and we must ensure that, at the end of each calendar quarter, at least 75% of the value of our total assets consists of cash, cash items, U.S. government securities and qualified real estate assets. The remainder of our investment in securities generally cannot include more than 10% of the outstanding voting securities of any one issuer (other than U.S. government securities, securities of corporations that are treated as TRSs and qualified real estate assets) or more than 10% of the total value of the outstanding securities of any one issuer (other than government securities, securities of corporations that are treated as TRSs and qualified real estate assets). In addition, in general, no more than 5% of the value of our assets can consist of the securities of any one issuer (other than U.S. government securities, securities of corporations that are treated as TRSs and qualified real estate assets), no more than 20% of the value of our total assets can be represented by securities of one or more TRSs and no more than 25% of the value of our assets can consist of debt instruments issued by publicly offered REITs that are not otherwise secured by real property. If we fail to comply with these asset requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences.
To meet these tests, we may be required to take or forgo taking actions that we would otherwise consider advantageous. For instance, in order to satisfy the gross income or asset tests applicable to REITs under the Code, we may be required to forgo investments that we otherwise would make. Furthermore, we may be required to liquidate from our portfolio otherwise attractive investments. In addition, we may be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution. These actions could reduce our income and amounts available for distribution to stockholders. Thus, compliance with the REIT requirements may hinder our investment performance.
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We may be subject to a 100% tax on income from “prohibited transactions,” and this tax may limit our ability to sell assets or require us to restructure certain of our activities in order to avoid being subject to the tax.
We are subject to a 100% tax on any income from a prohibited transaction. “Prohibited transactions” generally include sales or other dispositions of property (other than property treated as foreclosure property under the Code) that is held as inventory or primarily for sale to customers in the ordinary course of a trade or business by a REIT, either directly or indirectly through certain pass-through subsidiaries. The characterization of an asset sale as a prohibited transaction depends on the particular facts and circumstances.
The 100% tax will not apply to gains from the sale of inventory that is held through a TRS or other taxable corporation, although such income will be subject to tax in the hands of the corporation at regular corporate income tax rates. We have sold items such as locks, boxes, and packing materials to tenants and third parties directly rather than through a TRS, and as a result could be liable for this tax with respect to these sales. To the extent that we continue to sell such inventory items, other than through a TRS, we may be subject to this 100% tax.
Our TRSs will be subject to U.S. federal income tax and will be required to pay a 100% penalty tax on certain income or deductions if transactions with such TRSs are not conducted on arm’s length terms.
We conduct certain activities (such as selling packing supplies and locks and renting trucks or other moving equipment) through one or more TRSs.
A TRS is a corporation other than a REIT in which a REIT directly or indirectly holds stock, and that has made a joint election with such REIT to be treated as a TRS. If a TRS owns more than 35% of the total voting power or value of the outstanding securities of another corporation, such other corporation will also be treated as a TRS. Other than some activities relating to lodging and health care properties, a TRS may generally engage in any business, including the provision of customary or non-customary services to tenants of its parent REIT. A TRS is subject to U.S. federal income tax as a regular C corporation.
No more than 20% of the value of a REIT’s total assets may consist of stock or securities of one or more TRSs. This requirement limits the extent to which we can conduct our activities through TRSs. The values of some of our assets, including assets that we hold through TRSs, may not be subject to precise determination, and values are subject to change in the future. In addition, the Code imposes a 100% tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s length basis. We intend to structure transactions with any TRS on terms that we believe are arm’s length to avoid incurring the 100% excise tax described above. There can be no assurances, however, that we will be able to avoid application of the 100% tax.
We may not have cash available to make distributions.
Our taxable income may exceed our cash flow for a year, which could necessitate our borrowing funds and/or subject us to tax, thus reducing the cash available for distribution to our stockholders. We intend to make cash distributions each year sufficient to satisfy REIT distribution requirements and to avoid liability for the REIT excise tax. There can be no assurance, however, that we will be able to do so. Our taxable income may substantially exceed our net income as determined based on GAAP, as well as our cash flow, because, for example, realized capital losses will be deducted in determining GAAP net income but may not be deductible in computing taxable income or because we acquired assets that generate taxable income in excess of economic income or in advance of the corresponding cash flow from the assets. Under the Tax Cuts and Jobs Act of 2017 (the “TCJA”), which was signed into law on December 22, 2017, we generally will be required to recognize certain amounts in income no later than the time such amounts are reflected on our financial statements. Also, in certain circumstances our ability to deduct interest expenses for U.S. federal income tax purposes may be limited by provisions of the TCJA. If the cash flow we generate in a particular year is less than our taxable income, we may be required to use cash reserves, incur short-term, or possibly long-term, debt or liquidate non-cash assets at rates or at times that are unfavorable in order to make the necessary distributions.
Our REIT qualification could be adversely affected by the REIT qualification of any REIT in which we hold an interest.
In connection with our conversion from a regulated investment company (a “RIC”) to a REIT, we disposed of the majority of our assets and acquired government securities and shares of publicly traded REITs. As a result, our qualification as a REIT has depended on the REIT qualification of the publicly traded REITs in which we have invested. Furthermore, we may continue to hold interests in publicly traded REITs, and as a result our REIT qualification may continue to depend on the REIT qualification of any publicly traded REITs in which we continue to
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hold an interest. We do not generally independently investigate the REIT qualification of such REITs, but rather generally rely on statements made by such REITs in their public filings. In the event that one or more of the publicly traded REITs in which we invested was not properly treated as a REIT for U.S. federal income tax purposes, or if our interests in these REITs were otherwise not treated as equity in a REIT for U.S. federal income tax purposes, it is possible that we may not have met certain of the REIT asset and income requirements, in which case we could have failed to qualify as a REIT. Similarly, if we hold an interest in a publicly traded REIT in the future that fails to qualify as a REIT, such failure could adversely impact our REIT qualification.
We could fail to qualify as a REIT if we have not distributed any earnings and profits attributable to a taxable year before we elected to be taxed as a REIT.
A corporation does not qualify as a REIT for a given taxable year if, as of the final day of the taxable year, the corporation has any undistributed earnings and profits that accumulated during a period that the corporation was not treated as a REIT. Because we were not treated as a REIT for our entire existence (such period prior to our election to be taxed as a REIT, the “Pre-REIT period”), it is possible that we could have undistributed earnings and profits from the Pre-REIT period, in which case we would be required to pay a deficiency dividend in order to comply with this requirement or could fail to qualify as a REIT. We believe that, since December 31, 2013, we have not had any earnings and profits accumulated from the Pre-REIT period because all such earnings and profits were distributed prior to December 31, 2013. In particular, prior to December 31, 2013, we believe that we qualified as a RIC for U.S. federal income tax purposes, and as a RIC, we distributed our earnings on an annual basis in order to avoid being subject to U.S. federal income tax on our undistributed earnings. However, if it is determined that we have accumulated earnings and profits from the Pre-REIT period, we could be required to pay a deficiency dividend to stockholders after the relevant determination in order to maintain our qualification as a REIT, or we could fail to qualify as a REIT.
We may not have satisfied requirements related to the ownership of our outstanding stock, which could cause us to fail to qualify as a REIT.
In order to qualify as a REIT, not more than 50% in value of our outstanding stock may be owned, directly or indirectly, through the application of certain attribution rules under the Code, by five or fewer individuals, as defined in the Code to include specified entities, during the last half of any taxable year other than the first taxable year during which we qualified as a REIT (the “5/50 Test”). Prior to October 20, 2017, our charter did not contain customary REIT ownership restrictions and therefore did not ensure that we satisfied the 5/50 Test. Effective as of October 20, 2017, our charter was revised to include, among other things, certain customary ownership limitations that prohibit, among other limitations, any person from beneficially or constructively owning more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding share of our common stock or all classes and series of our capital stock. These provisions are intended to assist us in satisfying the 5/50 Test. With respect to the period between January 1, 2013 and October 20, 2017, we monitored purchases and transfers of shares of our common stock by regularly reviewing, among other things, ownership filings required by the federal securities laws to monitor the beneficial ownership of our shares in an attempt to ensure that we met the 5/50 Test. However, the attribution rules under the Code are broad, and we may not have had the information necessary to ascertain with certainty whether or not we satisfied the 5/50 Test during such period. As a result, no assurance can be provided that we satisfied the 5/50 Test during such period. If it were determined that we failed to satisfy the 5/50 Test, we could fail to qualify as a REIT or, assuming we qualify for a statutory relief provision under the Code, be required to pay a penalty tax.
Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.
The REIT provisions of the Code may limit our ability to hedge our assets and operations. Under these provisions, any income that we generate from transactions intended to hedge interest rate risk will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if (i) the instrument (a) hedges interest rate risk on liabilities used to carry or acquire real estate assets or (b) hedges an instrument described in clause (a) for a period following the extinguishment of the liability or the disposition of the asset that was previously hedged by the hedged instrument, and (ii) the relevant instrument is properly identified under applicable Treasury regulations. Income from hedging transactions that do not meet these requirements will generally constitute non-qualifying income for purposes of both the REIT 75% and 95% gross income tests. As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous or implement those hedges through a TRS. This could increase the cost of our hedging activities because our TRS would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in our TRS
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will generally not provide any tax benefit, except for being carried back or forward against past or future taxable income in the TRS.
Legislative or regulatory tax changes related to REITs could materially and adversely affect our business.
The U.S. federal income tax laws and regulations governing REITs and their stockholders, as well as the administrative interpretations of those laws and regulations, are constantly under review and may be changed at any time, possibly with retroactive effect. No assurance can be given as to whether, when, or in what form, the U.S. federal income tax laws applicable to us and our stockholders may be enacted. Changes to the U.S. federal income tax laws and interpretations of U.S. federal tax laws could adversely affect an investment in our common stock.
Risks Related to Our Common Stock
The future sales of shares of our common stock may depress the price of our common stock and dilute stockholders’ beneficial ownership.
We cannot predict whether future issuances of shares of our common stock or the availability of shares of our common stock for resale in the open market will decrease the market price of our common stock. Any sales of a substantial number of shares of our common stock in the public market or the perception that such sales might occur, may cause the market price of our common stock to decline. In addition, future issuances of our common stock may be dilutive to existing stockholders.
Any future offerings of debt, which would be senior to our common stock upon liquidation, and/or preferred equity securities which may be senior to our common stock for purposes of dividend distributions or upon liquidation, may adversely affect the market price of our common stock.
In the future, we may increase our capital resources by making offerings of debt or preferred equity securities, including trust preferred securities, senior or subordinated notes and preferred stock. Upon liquidation, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will receive distributions of our available assets prior to the holders of our common stock. Additional equity offerings may dilute the holdings of our existing stockholders or reduce the market price of our common stock, or both. Holders of our common stock are not entitled to preemptive rights or other protections against dilution. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future offerings reducing the market price of our common stock and diluting their stock holdings in us.
The market price and trading volume of our common stock may vary substantially.
Our common stock is listed on NASDAQ under the symbol “SELF.” The stock markets, including NASDAQ, have experienced significant price and volume fluctuations over the past several years. As a result, the market price of our common stock is likely to be similarly volatile, and investors in our common stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. Accordingly, no assurance can be given as to the ability of our stockholders to sell their common stock or the price that our stockholders may obtain for their common stock.
Some of the factors that could negatively affect the market price of our common stock include:
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Market factors unrelated to our performance could also negatively impact the market price of our common stock. One of the factors that investors may consider in deciding whether to buy or sell our common stock is our distribution rate as a percentage of our stock price relative to market interest rates. If market interest rates increase, prospective investors may demand a higher distribution rate or seek alternative investments paying higher dividends or interest. As a result, interest rate fluctuations and conditions in capital markets can affect the market value of our common stock. For instance, if interest rates rise, it is likely that the market price of our common stock will decrease as market rates on interest-bearing securities increase.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
We recognize the importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our data. Our cybersecurity risk management program includes:
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Management of Material Risks & Integration into Overall Risk Management
Our management team engages with experienced third-party service providers to assist us to develop, implement, and maintain information technology risk management measures. In addition, we have executive management with experience in areas relating to cybersecurity. We also foster a culture of cybersecurity awareness and have incorporated cybersecurity considerations into our decision-making processes. Our management team works closely with our third-party service providers to identify, evaluate and address cybersecurity risks in alignment with our business objectives and operational needs. Our collaboration with third-party service providers includes threat assessments and consultation on security enhancements. In addition, the Company provides cybersecurity and phishing awareness training to our employees periodically.
Oversight of Board of Directors
The board of directors is acutely aware of the critical nature of managing risks associated with cybersecurity threats and oversees the Company's cybersecurity risk management activities. The board of directors receive updates on the Company’s cybersecurity risks and protective measures periodically. Cybersecurity matters are reported to the board of directors so that the board of directors can effectively carry out their oversight role.
Risks from Cybersecurity Threats
We have not identified risks from known cybersecurity threats, including as a result of any cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. For more information, see the section titled "Risks Related to our Self Storage Properties and our Business - We rely on information technology in our operations, and any material failure, inadequacy, interruption or security breach through cyber-attacks, cyber-intrusions, or other methods could disrupt our information technology networks and related systems and harm our business."
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Item 2. Properties.
GLOBAL SELF STORAGE STORES
(As of December 31, 2016)2023)
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| Year Store |
| Number |
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| Net Leasable |
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| December 31, 2023 |
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| December 31, 2022 |
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Property(1) |
| Address |
| Opened / Acquired-Managed |
| of Units |
|
| Square Feet |
|
| Occupancy % |
|
| Occupancy % |
| ||||
OWNED STORES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
SSG BOLINGBROOK LLC |
| 296 North Weber Road, Bolingbrook, IL 60440 |
| 1997 / 2013 |
|
| 809 |
|
|
| 113,700 |
|
|
| 89.9 | % |
|
| 91.2 | % |
SSG CLINTON LLC |
| 6 Heritage Park Road, Clinton, CT 06413 |
| 1996 / 2016 |
|
| 182 |
|
|
| 30,408 |
|
|
| 86.8 | % |
|
| 88.5 | % |
SSG DOLTON LLC |
| 14900 Woodlawn Avenue, Dolton, IL 60419 |
| 2007 / 2013 |
|
| 652 |
|
|
| 86,590 |
|
|
| 87.6 | % |
|
| 88.7 | % |
SSG FISHERS LLC |
| 13942 East 96th Street, McCordsville, IN 46055 |
| 2007 / 2016 |
|
| 545 |
|
|
| 76,335 |
|
|
| 91.7 | % |
|
| 89.4 | % |
SSG LIMA LLC |
| 1910 West Robb Avenue, Lima, OH 60419 |
| 1996 / 2016 |
|
| 767 |
|
|
| 94,928 |
|
|
| 87.5 | % |
|
| 91.8 | % |
SSG MERRILLVILLE LLC |
| 6590 Broadway, Merrillville, IN 46410 |
| 2005 / 2013 |
|
| 569 |
|
|
| 81,270 |
|
|
| 92.2 | % |
|
| 93.0 | % |
SSG MILLBROOK LLC |
| 3814 Route 44, Millbrook, NY 12545 |
| 2008 / 2016 |
|
| 260 |
|
|
| 24,482 |
|
|
| 92.4 | % |
|
| 94.1 | % |
SSG ROCHESTER LLC |
| 2255 Buffalo Road, Rochester, NY 14624 |
| 2010 / 2012 |
|
| 649 |
|
|
| 68,311 |
|
|
| 92.5 | % |
|
| 91.7 | % |
SSG SADSBURY LLC |
| 21 Aim Boulevard, Sadsburyville, PA 19369 |
| 2006 / 2012 |
|
| 693 |
|
|
| 78,875 |
|
|
| 89.5 | % |
|
| 89.3 | % |
SSG SUMMERVILLE I LLC |
| 1713 Old Trolley Road, Summerville, SC 29485 |
| 1990 / 2013 |
|
| 569 |
|
|
| 76,460 |
|
|
| 85.3 | % |
|
| 87.4 | % |
SSG SUMMERVILLE II LLC |
| 900 North Gum Street, Summerville, SC 29483 |
| 1997 / 2013 |
|
| 248 |
|
|
| 43,110 |
|
|
| 88.0 | % |
|
| 89.5 | % |
SSG WEST HENRIETTA LLC |
| 70 Erie Station Road, West Henrietta, NY 14586 |
| 2016 / 2019 |
|
| 477 |
|
|
| 55,550 |
|
|
| 88.6 | % |
|
| 79.6 | % |
TOTAL/AVERAGE SAME-STORES |
|
|
|
|
|
| 6,420 |
|
|
| 830,019 |
|
|
| 89.3 | % |
|
| 89.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
MANAGED STORES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
TPM EDMOND LLC |
| 14000 N I 35 Service Rd, Edmond, OK 73013 |
| 2015 / 2019 |
|
| 619 |
|
|
| 137,318 |
|
|
| 96.9 | % |
|
| 94.8 | % |
TOTAL/AVERAGE MANAGED STORES |
|
|
|
|
|
| 619 |
|
|
| 137,318 |
|
|
| 96.9 | % |
|
| 94.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
TOTAL/AVERAGE ALL OWNED/MANAGED STORES |
|
|
|
|
|
| 7,039 |
|
|
| 967,337 |
|
|
| 90.4 | % |
|
| 90.4 | % |
|
|
|
| Year Store |
| Number |
|
| Net Leasable |
|
| December 31, 2016 Square Foot |
|
| December 31, 2015 Square Foot |
| ||||
Stores(1) |
| Address |
| Opened / Opened |
| of Units |
|
| Square Feet |
|
| Occupancy % |
|
| Occupancy % |
| ||||
SSG BOLINGBROOK LLC |
| 296 North Weber Road, Bolingbrook, IL 60440 |
| 1997 / 2013 |
|
| 801 |
|
|
| 110,600 |
|
|
| 62.2 | % |
|
| 93.9 | % |
SSG DOLTON LLC |
| 14900 Woodlawn Avenue, Dolton, IL 60419 |
| 2007 / 2013 |
|
| 649 |
|
|
| 86,725 |
|
|
| 94.8 | % |
|
| 93.2 | % |
SSG MERRILLVILLE LLC |
| 6590 Broadway, Merrillville, IN 46410 |
| 2005 / 2013 |
|
| 508 |
|
|
| 71,720 |
|
|
| 91.3 | % |
|
| 95.6 | % |
SSG ROCHESTER LLC |
| 2255 Buffalo Road, Rochester, NY 14624 |
| 2010 / 2012 |
|
| 650 |
|
|
| 68,017 |
|
|
| 92.8 | % |
|
| 87.1 | % |
SSG SADSBURY LLC |
| 21 Aim Boulevard, Sadsburyville, PA 19369 |
| 2006 / 2012 |
|
| 699 |
|
|
| 79,004 |
|
|
| 86.9 | % |
|
| 80.2 | % |
SSG SUMMERVILLE I LLC |
| 1713 Old Trolley Road, Summerville, SC 29485 |
| 1990 / 2013 |
|
| 557 |
|
|
| 72,700 |
|
|
| 89.9 | % |
|
| 77.9 | % |
SSG SUMMERVILLE II LLC |
| 900 North Gum Street, Summerville, SC 29483 |
| 1997 / 2013 |
|
| 254 |
|
|
| 41,608 |
|
|
| 87.6 | % |
|
| 88.2 | % |
TOTAL/AVERAGE SAME STORES |
|
|
|
|
|
| 4,118 |
|
|
| 530,374 |
|
|
| 84.9 | % |
|
| 87.9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SSG FISHERS LLC |
| 13942 East 96th Street, McCordsville, IN 46055 |
| 2007 / 2016 |
|
| 419 |
|
|
| 81,471 |
|
|
| 85.9 | % |
|
| 77.3 | % |
SSG LIMA LLC |
| 1910 West Robb Avenue, Lima, OH 60419 |
| 1996 / 2016 |
|
| 761 |
|
|
| 97,801 |
|
|
| 94.9 | % |
|
| 97.6 | % |
TUXIS SELF STORAGE I LLC |
| 6 Heritage Park Road, Clinton, CT 06413 |
| 1996 / 2016 |
|
| 185 |
|
|
| 31,059 |
|
|
| 80.8 | % |
|
| 86.4 | % |
TUXIS SELF STORAGE II LLC |
| 3814 Route 44, Millbrook, NY 12545 |
| 2008 / 2016 |
|
| 142 |
|
|
| 13,391 |
|
|
| 88.9 | % |
|
| 88.4 | % |
TOTAL/AVERAGE NON-SAME STORES |
|
|
|
|
|
| 1,507 |
|
|
| 223,722 |
|
|
| 89.3 | % |
|
| 87.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL/AVERAGE ALL STORES |
|
|
|
|
|
| 5,625 |
|
|
| 754,096 |
|
|
| 86.2 | % |
|
| 87.9 | % |
(1)
During the second quarter of 2015, SSG Bolingbrook LLC eliminated 98 parking spaces (32,700 square feet) to accommodate its new five building expansion construction project. This expansion project was completed during mid-November 2016 and added 304 climate-controlled and traditional storage units totaling 44,260 leasable square feet to the facility bringing the total to 801 storage units and 110,600 leasable square feet. Same-store occupancy includes the impact from expansion and redevelopment projects at our stores. As SSG Bolingbrook LLC’s newly-
8
constructed leasable square feet were added last November, its area occupancy dropped from mid-90% to approximately 60%. Also during 2015, upon completion of its expansion project, SSG Sadsbury LLC added 219 climate-controlled storage units comprising 16,756 leasable square feet. Certain stores’ leasable square feet in the chart above includes outside auto/RV/boat storage space: approximately 13,00012,900 square feet at SSG Sadsbury LLC; 11,3006,300 square feet at SSG Fishers LLC; 15,700 square feet at SSG Bolingbrook LLC; 9,9009,000 square feet at SSG Dolton LLC; 11,1702,100 square feet at SSG Merrillville LLC; 5,3003,800 square feet at SSG Summerville I LLC; 7,400 square feet at SSG Summerville II LLC;LLC and 9,2708,800 square feet at Tuxis Self Storage I LLC [Clinton, CT].SSG Clinton LLC. For SSG Lima LLC, included is approximately 12,6833,800 square feet of non-storage commercial and student housing space. For SSG Millbrook LLC, included is approximately 1,300 square feet of wine storage and non-storage office space. For SSG Fishers LLC, included is approximately 300 square feet of storage locker space. Approximately 34%33% of our total available units are climate-controlled, 58%59% are traditional drive-up storage, and 8% are parking.outdoor parking storage for boats, cars and recreational vehicles.
Item 3. Legal Proceedings.
From time to time, the Company or its subsidiaries may be named in legal actions and proceedings. These actions may seek substantial or indeterminate compensatory as well as punitive damages or injunctive relief. We are also subject to governmental or regulatory examinations or investigations. Examinations or investigations can result in adverse judgments, settlements, fines, injunctions, restitutions or other relief. For any such matters, the Company will seek to include in its financial statements the necessary provisions for losses that it believes are probable and estimable. Furthermore, the Company will seek to evaluate whether there exist losses which may be reasonably possible and, if material, make the necessary disclosures. The Company currently does not have any material pending
31
legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.
Item 4. Mine Safety Disclosures.
Not applicable.
32
PART II
9Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
|
|
Market Information
The Company’s shares of common stock are listed on NASDAQ under the ticker symbol SELF. The following table presents the high and low sales prices for shares of the Company’s common stock for each full quarterly period within the two most recent fiscal years.
|
| 1st Quarter |
|
| 2nd Quarter |
|
| 3rd Quarter |
|
| 4th Quarter |
| ||||||||||||||||||||
|
| High |
|
| Low |
|
| High |
|
| Low |
|
| High |
|
| Low |
|
| High |
|
| Low |
| ||||||||
2015 |
| $ | 3.77 |
|
| $ | 3.45 |
|
| $ | 3.66 |
|
| $ | 3.43 |
|
| $ | 3.92 |
|
| $ | 3.48 |
|
| $ | 3.98 |
|
| $ | 3.56 |
|
2016 |
| $ | 4.93 |
|
| $ | 3.73 |
|
| $ | 5.64 |
|
| $ | 4.59 |
|
| $ | 5.85 |
|
| $ | 5.26 |
|
|
| 5.26 |
|
|
| 4.54 |
|
Holders
As of March 23, 2017,15, 2024, there were approximately 2,8507,830 record and beneficial holders of the Company’s common stock.
Dividends
HoldersItem 6. [Reserved].
33
Item 7. Management’s Discussion and Analysis of sharesFinancial Condition and Results of the Company’s common stock are entitled to receive distributions when declared by our Board of Directors out of any assets legally available for that purpose. As a REIT, we are required to distribute at least 90% of our “REIT taxable income,” which is generally equivalent to our net taxable ordinary income, determined without regard to the deduction for dividends paid to our stockholders annually in order to maintain our REIT qualification for U.S. federal income tax purposes. The following table presents the amount of each quarterly dividend paid on the Company’s common stock for the two most recent fiscal years.Operations.
|
| 1st Quarter |
|
| 2nd Quarter |
|
| 3rd Quarter |
|
| 4th Quarter |
| ||||
2015 |
| $ | 0.065 |
|
| $ | 0.065 |
|
| $ | 0.065 |
|
| $ | 0.065 |
|
2016 |
| $ | 0.065 |
|
| $ | 0.065 |
|
| $ | 0.065 |
|
| $ | 0.065 |
|
Not applicable.
10
CAUTIONARY LANGUAGE
The following discussion and analysis should be read in conjunction with our selected consolidated historical financial data together with the consolidated pro forma financial data and historical financial statements and related notes thereto included elsewhere in this annual report. We make statements in this section that may be forward lookingforward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward lookingforward-looking statements, see the section in this annual report entitled “Statement on Forward LookingForward-looking Information.”
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements contained elsewhere in this annual report, which have been prepared in accordance with generally accepted accounting principles (“GAAP”). Our notes to the condensed consolidated financial statements contained elsewhere in this annual report describe the significant accounting policies essential to our condensed consolidated financial statements. Preparation of our financial statements requires estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions that we have used are appropriate and correct based on information available at the time they were made. These estimates, judgments and assumptions can affect our reported assets and liabilities as of the date of the financial statements, as well as the reported revenues and expenses during the period presented. If there are material differences between these estimates, judgments and assumptions and actual facts, our financial statements may be affected.
In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require our judgment in its application. There are areas in which our judgment in selecting among available alternatives would not produce a materially different result, but there are some areas in which our judgment in selecting among available alternatives would produce a materially different result. See the notes to the condensed consolidated financial statements that contain additional information regarding our accounting policies and other disclosures.
Management’s Discussion and Analysis Overview
The Company is a self-administered and self-managed REIT focused on the ownership, operation, acquisition, developmentthat owns, operates, manages, acquires, and redevelopment ofredevelops self storage facilitiesproperties (“stores” or “properties”) in the United States. Our stores are designed to offer affordable, easily accessible and secure storage space for residential and commercial customers. TheAs of December 31, 2023, the Company currently ownsowned and operates,operated, or managed, through its wholly owned subsidiaries, eleventhirteen stores located in Connecticut, Illinois, Indiana, New York, Ohio, Pennsylvania, South Carolina, and South Carolina. As previously reported in our press releaseOklahoma. The Company was formerly registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as a non-diversified, closed end management investment company. The Securities and Exchange Commission’s (“SEC”) order approving the Company’s application to deregister from the 1940 Act was granted on January 19, 2016. On January 19, 2016, on that day, the Company changed its name to Global Self Storage, Inc. from Self Storage Group, Inc., changed its SEC registration from an investment company to an operating company reporting under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and uplistedlisted its common stock on NASDAQ under the symbol “SELF”.
The Company was incorporated on December 12, 1996 under the laws of the state of Maryland. The Company has elected to NASDAQ.be treated as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). To the extent the Company continues to qualify as a REIT, it will not generally be subject to U.S. federal income tax, with certain limited exceptions, on its taxable income that is distributed to its stockholders.
Our store operations generated most of our net income for all periods presented herein. Accordingly, a significant portion of management’s time is devoted to seeking to maximize cash flows from our existing stores, as well as seeking investments in additional stores. The Company expects to continue to earn a majority of its gross income from its store operations as its current store operations continue to develop and as it makes additional store acquisitions. Over time, the Company expects to divest its remaining portfolio of investment securities and use the proceeds to acquire and operate additional stores. The Company expects its income from investment securities to continue to decrease as it continues to divest its holdings of investment securities.
34
Financial Condition and Results of Operations
Our financing strategy is to minimize the cost of our capital in order to maximize the returns generated for our stockholders. For future acquisitions, the Company may employ various financing and capital raising alternatives including, but not limited to, debt and/or equity offerings, credit facilities, mortgage financing, and joint ventures with third parties.
On June 24, 2016, certain wholly owned subsidiaries (“Secured Subsidiaries”) of the Company (“Term Loan Secured Subsidiaries”) entered into a loan agreement and certain other related agreements (collectively, the “Loan“Term Loan Agreement”) between the Term Loan Secured Subsidiaries and Insurance Strategy Funding IV, LLC (the “Lender”“Term Loan Lender”). Under the Term Loan Agreement, the Term Loan Secured Subsidiaries are borrowingborrowed from Term Loan Lender in the principal amount of $20 million pursuant to a promissory note (the “Promissory“Term Loan Promissory Note”). The Term Loan Promissory Note bears an interest at a rate equal to 4.192% per annum and is due to mature on July 1, 2036. Pursuant to a security agreement (the “Security“Term Loan Security Agreement”), the obligations under the Term Loan
11
Agreement are secured by certain real estate assets owned by the Term Loan Secured Subsidiaries. J.P. Morgan Investment Management, Inc. acted as Special Purpose Vehicle Agent of the Term Loan Lender. The Company entered into a non-recourse guaranty on June 24, 2016 (the “Guaranty,”“Term Loan Guaranty” and together with the Term Loan Agreement, the Term Loan Promissory Note and the Term Loan Security Agreement, the “Loan“Term Loan Documents”) to guarantee the payment to the Term Loan Lender of certain obligations of the Term Loan Secured Subsidiaries under the Term Loan Agreement. TheWe have used some of the proceeds from the Term Loan Documents requireAgreement to acquire four self storage properties in 2016.
On December 20, 2018, certain of our wholly owned subsidiaries (“Credit Facility Secured Subsidiaries”) entered into a revolving credit loan agreement (collectively, the “Credit Facility Loan Agreement”) between the Credit Facility Secured Subsidiaries and TCF National Bank (“Credit Facility Lender”). Under the Credit Facility Loan Agreement, the Credit Facility Secured Subsidiaries may borrow from the Credit Facility Lender in the principal amount of up to $10 million pursuant to a promissory note (the “Credit Facility Promissory Note”). The Credit Facility Promissory Note bears an interest rate equal to 3.00% over the One Month U.S. Dollar London Inter-Bank Offered Rate and was due to mature on December 20, 2021. The obligations under the Credit Facility Loan Agreement are secured by certain real estate assets owned by the Credit Facility Secured Subsidiaries. We entered into a guaranty of payment on December 20, 2018 (the “Credit Facility Guaranty,” and together with the Credit Facility Loan Agreement, the Credit Facility Promissory Note and related instruments, the “Credit Facility Loan Documents”) to guarantee the payment to the Credit Facility Lender of certain obligations of the Credit Facility Secured Subsidiaries under the Credit Facility Loan Agreement. As described in more detail below, the Credit Facility Loan Agreement has been replaced in its entirety by the Amended Credit Facility Loan Agreement (as defined below) on July 6, 2021.
On December 18, 2019, we completed a rights offering whereby we sold and issued an aggregate of 1,601,291 shares of our common stock (“common stock”) at the subscription price of $4.18 per whole share of common stock, pursuant to the exercise of subscriptions and oversubscriptions from our stockholders. We raised aggregate gross proceeds of approximately $6.7 million in the rights offering.
On May 19, 2020, an affiliate of the Company to comply(the “Borrower”) entered into a Paycheck Protection Program Term Note (“PPP Note”) with Customers Bank on behalf of itself, the Company, and certain covenants, including, among others, a minimum net worth test and other customary covenants. The Lender may accelerate amounts outstandingaffiliates under the Loan Documents uponPaycheck Protection Program of the occurrenceCoronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). The Borrower received total proceeds of $486,602 from the PPP Note. On April 5, 2022, the Borrower was granted forgiveness of the entire PPP Note and any accrued interest. Upon forgiveness, the Company received $307,210 in cash from the Borrower, which was the amount attributable to the Company under the SBA's loan determination formula, and recorded a gain for such amount in its consolidated statements of operations and comprehensive income.
On June 25, 2021, we completed an Eventunderwritten public offering whereby we sold and issued an aggregate of Default (as defined1,121,496 shares of our common stock at the price of $5.35 per share. Subsequently, the over-allotment option was exercised increasing the total number of shares sold and issued to 1,289,720. We raised aggregate gross proceeds of approximately $6.9 million in the Loan Agreement) including, but not limitedpublic offering after giving effect to the failureexercise of the over-allotment option.
35
On July 6, 2021, certain wholly owned subsidiaries (“Amended Credit Facility Secured Subsidiaries”) of the Company entered into a first amendment to pay amountsthe Credit Facility Loan Agreement (collectively, the “Amended Credit Facility Loan Agreement”) between the Amended Credit Facility Secured Subsidiaries and The Huntington National Bank, successor by merger to TCF National Bank (“Amended Credit Facility Lender”). Under the Amended Credit Facility Loan Agreement, the Amended Credit Facility Secured Subsidiaries may borrow from the Amended Credit Facility Lender in the principal amount of up to $15 million, reduced to $14.75 million and $14.5 million in years 2 and 3, respectively, pursuant to a promissory note (the “Amended Credit Facility Promissory Note”). The Amended Credit Facility Promissory Note bears an interest rate equal to 3% plus the greater of the One Month U.S. Dollar London Inter-Bank Offered Rate or 0.25% and is due to mature on July 6, 2024. The Company is considering, among other things, refinancing or commencementfinding a suitable replacement for the revolving line of bankruptcy proceedings.credit in light of its upcoming maturity. The publication of LIBOR ceased after June 30, 2023. The Amended Credit Facility Loan Agreement provides for a replacement index based on the Secured Overnight Financing Rate (“SOFR”). The interest rate on the Amended Credit Facility Promissory Note subsequent to June 30, 2023, is equal to 3% plus the greater of SOFR plus 0.11448% or 0.25%. As of December 31, 2023, the effective interest rate was 8.46%. The obligations under the Amended Credit Facility Loan Agreement are secured by certain real estate assets owned by the Amended Credit Facility Secured Subsidiaries. The Company entered into an amended and restated guaranty of payment on July 6, 2021 (“Amended Credit Facility Guaranty,” and together with the Amended Credit Facility Loan Agreement, the Amended Credit Facility Promissory Note and related instruments, the “Amended Credit Facility Loan Documents”) to guarantee the payment to the Amended Credit Facility Lender of certain obligations of the Amended Credit Facility Secured Subsidiaries under the Amended Credit Facility Loan Agreement. The Company and the Amended Credit Facility Secured Subsidiaries paid customary fees and expenses in connection with their entry into the Loan Documents. There is no material relationship between the Company, its Secured Subsidiaries, or its affiliates and the Lender, other than in respect of theAmended Credit Facility Loan Documents. The foregoing description is qualified in its entirety byCompany also maintains a bank account at the full terms and conditions of the Loan Documents, filed as Exhibits 10.1, 10.2, 10.3 and 10.4 to the Current Report on Form 8-K filed on June 30, 2016. We intend to use the proceeds of such debt financing primarily in connection with future potential store acquisitions and development.
Amended Credit Facility Lender. As of December 31, 2016,2023, we have not withdrawn proceeds under the Amended Credit Facility Loan Agreement. We currently intend to strategically withdraw proceeds available under the Amended Credit Facility Loan Agreement to fund: (i) the acquisition of additional self storage properties, (ii) expansions at existing self storage properties in our portfolio, and/or (iii) joint ventures with third parties for the acquisition and expansion of self storage properties.
On January 14, 2022, the Company entered into an At Market Offering Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (the “Agent”) pursuant to which the Company may sell, from time to time, shares of the Company’s common stock, par value $0.01 per share, having an aggregate offering price of up to $15,000,000, through the Agent. During the twelve months ended December 31, 2022, under the Sales Agreement, the Company sold and issued an aggregate of 373,833 shares of common stock and raised aggregate gross proceeds of approximately $2,272,628, less sales commissions of approximately $45,491 and other offering costs resulting in net proceeds of $2,008,436. There were no shares of common stock sold during the three and twelve months ended December 31, 2023 under the Sales Agreement.
We continue to actively review a number of store and store portfolio acquisition opportunities and have been working to further redevelop and expand our current stores. We did not make any acquisitions in the year ended December 31, 2023. In addition, we may pursue third-party management opportunities of properties owned by certain affiliates or joint venture partners for a fee, and utilize such relationships with third-party owners as a source for future acquisitions and investment opportunities. As of December 31, 2023, we managed one third-party owned property, which was previously rebranded as “Global Self Storage,” had 137,318-leasable square feet and was comprised of 619 climate-controlled and non-climate-controlled units located in Edmond, Oklahoma.
In addition to actively reviewing a number of store and portfolio acquisition opportunities, we have been working to further redevelop and expand our current stores.
We expect we will have sufficient cash from current sources to meet our liquidity needs for the next twelve months because our capital resources currently exceed our projected expenses for the next twelve months. However, we may opt to supplement our equity capital and increase potential returns to our stockholders through the use of prudent levels of borrowings. We may use debt when the available terms and conditions are favorable to long-term investing and well-aligned with our business plan.
As of December 31, 2023, we had capital resources totaling approximately $4.4$24.3 million, comprised of $2.9$7.0 million of cash, and cash equivalents, and $1.5restricted cash, $2.8 million of marketable securities.securities, and $14.5 million available for withdrawal under the Amended Credit Facility Loan Agreement. Capital resources derived from retained cash
36
flow have been and are currently expected to continue to be negligible. Retained operating cash flow represents our expected cash flow provided by operating activities, less stockholder distributions and capital expenditures to maintain stores. The Company's capital resources allow us to continue to execute our strategic business plan, which includes funding acquisitions, either directly or through joint ventures; expansion projects at our existing properties; and broadening our revenue base and pipeline of potential acquisitions through developing Global MaxManagementSM, our third-party management platform. Our board of directors regularly reviews our strategic business plan, including topics and metrices like capital formation, debt versus equity ratios, dividend policy, use of capital and debt, funds from operations (“FFO”) and adjusted funds from operations (“AFFO”) performance, and optimal cash levels.
We have been actively reviewingexpect that the results of our operations will be affected by a number of storefactors. Many of the factors that will affect our operating results are beyond our control. The Company and store portfolio acquisition candidatesits properties could be materially and have been workingadversely affected by the risks, or the public perception of the risks, related to, further developamong other things, public health crises, natural disasters and expand our current stores. On May 9, 2016, onegeopolitical events, including the ongoing conflict between Russia, Belarus and Ukraine, the ongoing conflict between Israel and Hamas, financial and credit market volatility and disruptions, inflationary pressures, rising interest rates, supply chain issues, labor shortages and recessionary concerns.
Results of our wholly owned subsidiaries entered into an agreement with Gray Eagle Development, LLP (the “Indiana Seller”) to acquire a store located in Fishers, Indiana (the “Indiana Property”)Operations for the sumYear Ended December 31, 2023 Compared with the Year Ended December 31, 2022
Revenues
Total revenues increased from $11,944,850 during the year ended December 31, 2022 to $12,190,715 during the year ended December 31, 2023, an increase of $7,700,000. On September 26, 2016, the Company completed the acquisition of the Indiana Property for approximately $7,700,000 in cash.
On June 27, 2016, another one of our wholly owned subsidiaries entered into an agreement with West Robb Ave., LLC, Wall & Ceiling Systems, Inc. and Victoria L. Strickland (collectively, the “Ohio Seller”) to acquire a store located in Lima, Ohio (the “Ohio Property”) for the sum of $5,300,000. On August 29, 2016, the Company completed the acquisition of the Ohio Property for $5,300,000 in cash.
Additionally, on November 23, 2016, the Company entered into an agreement (the “Purchase Agreement”) with Tuxis, a Company affiliate, to acquire all of the membership interests of each of Tuxis Self Storage I LLC (“TSS I”), Tuxis Self Storage II LLC (“TSS II”), and Tuxis Real Estate II LLC (“TRE II”), each a wholly owned Tuxis subsidiary (collectively, the “Tuxis Subsidiaries”), for the aggregate purchase price of $7,800,000 (the “Purchase Price”), comprised of $5,925,000 payable in cash, $975,000 in shares of the Company’s common stock, and, contingent upon the satisfaction of certain conditions described in the Purchase Agreement, an additional $900,000 cash payment. TSS I is the owner and operator of a 185 unit, 31,059 square foot store located in Clinton, Connecticut. TSS II is the owner and operator of a 142 unit, 13,391 square foot store located in Millbrook, New York. TRE II owns a 1,875 square foot commercial property located in Millbrook, New York which adjoins the property held by TSS II. TSS II and TRE II together have applied to the local municipality for permission to re-develop the parcels and properties to expand TSS II’s existing store.
On December 30, 2016, the Company completed the acquisition of the Tuxis Subsidiaries for $5,925,000 in cash and 202,703 unregistered and restricted shares of the Company’s common stock. Upon the satisfaction of certain conditions described in the Purchase Agreement in connection with expanding TSS II’s existing store, an additional $900,000 cash payment is expected to be made by the Company to Tuxis.
Revenues
2.1% or $245,865. Rental income increased from $4,141,472$11,485,511 during 2015the year ended December 31, 2022 to $4,867,414$11,719,165 during 2016,the year ended December 31, 2023, an increase of $725,942,2.0% or 17.53%$233,654. The increase in same-store revenuetotal revenues was due primarily to an increase inincreased rental rates, and occupancythe results of our proprietary revenue rate management program of raising existing tenant rates. Realized annual rent per square foot on our same-store portfolio increased 4.2% as a result of higher asking rates for new and existing customers during 2016 as compared to 2015. The remaining increase was primarily attributable to the additional income from the stores acquired in 2016, included in our non-same store portfolio.
12
Other store related income consists of late fees, administrative charges, customer insurance fees, sales of storage supplies, and other ancillary revenues. Other store related income increased from $297,825$375,571 in 2015the year ended December 31, 2022 to $377,959$392,577 in 2016,the year ended December 31, 2023, an increase of $80,134,4.5% or 21.2%. This$17,006. The increase was primarily attributable to increased fee revenue and insurance fees on the stores acquired in 2016 and a smalleran increase in same-store property related income mainly attributableinsurance administration fees at our wholly-owned properties.
Operating Expenses
Total expenses increased from $8,417,660 during the year ended December 31, 2022 to increased insurance participation$9,079,462 during the year ended December 31, 2023, an increase of 7.9% or $661,802, which was primarily due to an increase in certain general and higher average occupancy.
Operating Expenses
administrative expenses and store operating expenses. Store operating expenses increased from $1,793,319$4,169,182 in 2015the year ended December 31, 2022 to $2,155,492$4,549,038 in 2016,the year ended December 31, 2023, an increase of $362,173,9.1% or 20.2%,$379,856, which was primarily attributabledue to the increased expenses associated with newly acquired stores.employment and real estate tax expenses.
Depreciation and amortization increased from $635,226$1,619,239 in 2015the year ended December 31, 2022 to $813,796$1,634,044 in 2016,the year ended December 31, 2023, an increase of $178,570, or 28.1%. This increase was primarily attributable to depreciation and amortization expense related to the 2016 acquisitions.0.9% of $14,805.
General and administrative expenses increased from $1,191,768 in 2015$295,401 for the year ended December 31, 2023 as compared to $1,406,441 in 2016, an increase of $214,673, or 18%.the year ended December 31, 2022. The change wasis primarily attributable to $264,254 of increased legal, consultant, and payroll expenses resulting from additional and new expenses incurred to support our growth.an increase in employment expenses.
Business development, capital raising, and store acquisition expenses decreased from $48,340 to $20,080 during the year ended December 31, 2023 as compared to the year ended December 31, 2022. These costs primarily consisted of consulting costs in connection with business development, capital raising, and future potential store acquisitions, and expenses related costs increased from $0 during 2015 to $449,738 during 2016. Business development and store acquisition-related costsour third party management platform marketing initiatives. The majority of these expenses are non-recurring and fluctuate based on periodic investment activity.business development activity during the time period.
Operating Income
Operating income decreased from $3,527,190 during the year ended December 31, 2022 to $3,111,253 during the year ended December 31, 2023, a decrease of 11.8% or $415,937, which was primarily due to increased total expenses.
37
Other income (expense)
Interest expense on loans increased from $0$780,223 during the year ended December 31, 20152022 to $456,719$846,406 during the year ended December 31, 2016. The2023, an increase is primarilyof 8.5% or $66,183. This increase was attributable to a higher amountthe unrealized loss on the mark-to-market of outstanding debt during 2016 as compared to 2015. The debt balancethe interest rate cap.
Dividend and interest income was $265,046 during the year ended December 31, 2016 increased2023 as compared to $19,600,000 from $0$120,575 during the year ended December 31, 2022. The increase was attributable to the dividends earned on money market mutual fund balances.
The Company recognizes changes in the fair value of its investments in equity securities with readily determinable fair values in net income and, as such, recorded an unrealized gain of $408,876 for the same periodyear ended December 31, 2023 compared to an unrealized loss of $1,117,029 during 2015 asthe year ended December 31, 2022.
During the year ended December 31, 2022, the Company had other income of $307,210, attributable to a resultgain on the forgiveness of the Loan Agreement. a Paycheck Protection Program ("PPP") term note.
Net income
For the year ended December 31, 2016, realized gain from the sale of investment securities was $602,428 and dividend and interest income was $172,724.
Net income (loss)
For the period January 19, 2016 to December 31, 2016, the2023, net income was $384,135$2,938,769 or $0.05$0.26 per fully diluted share. For the period January 1, 2016 to January 18, 2016, the Companyyear ended December 31, 2022, net income was a registered investment company and applied the accounting guidance in ASC 946.$2,057,723 or $0.19 per fully diluted share.
Non-GAAP Financial Measures
Funds from Operations (“FFO”) and FFO per share are non-GAAP measures defined by the National Association of Real Estate Investment Trusts (“NAREIT”) and are considered helpful measures of REIT performance by REITs and many REIT analysts. NAREIT defines FFO as a REIT’s net income, excluding gains or losses from sales of property, and adding back real estate depreciation and amortization. The Company also excludes unrealized gains on marketable equity securities and gains relating to PPP loan forgiveness. FFO and FFO per share are not a substitute for net income or earnings per share. FFO is not a substitute for GAAP net cash flow in evaluating our liquidity or ability to pay dividends, because it excludes financing activities presented on our statements of cash flows. In addition, other REITs may compute these measures differently, so comparisons among REITs may not be helpful. However, the Company believes that to further understand the performance of its stores, FFO should be considered along with the net income and cash flows reported in accordance with GAAP and as presented in the Company’s financial statements.
Adjusted FFO (“AFFO”) representsand AFFO per share are non-GAAP measures that represent FFO and FFO per share excluding the effects of stock-based compensation, business development, capital raising, and acquisition related costs and non-recurring items, which we believe are not indicative of the Company’s operating results. AFFO and AFFO per share are not a substitute for net income or earnings per share. AFFO is not a substitute for GAAP net cash flow in evaluating our liquidity or ability to pay dividends, because it excludes financing activities presented on our statements of cash flows. We present AFFO because we believe it is a helpful measure in understanding our results of operations insofar as we believe that the items noted above that are included in FFO, but excluded from AFFO, are not indicative of our ongoing operating results. We also believe that the analyst community considers our AFFO (or similar measures
13
using different terminology) when evaluating us. Because other REITs or real estate companies may not compute AFFO in the same manner as we do, and may use different terminology, our computation of AFFO may not be comparable to AFFO reported by other REITs or real estate companies. However, the Company believes that to further understand the performance of its stores, AFFO should be considered along with the net income and cash flows reported in accordance with GAAP and as presented in the Company’s financial statements.
38
We believe net operating income or “NOI” is a meaningful measure of operating performance because we utilize NOI in making decisions with respect to, among other things, capital allocations, determining current store values, evaluating store performance, and in comparing period-to-period and market-to-market store operating results. In addition, we believe the investment community utilizes NOI in determining operating performance and real estate values and does not consider depreciation expense because it is based upon historical cost. NOI is defined as net store earnings before general and administrative expenses, interest, taxes, depreciation, and amortization.
NOI is not a substitute for net income, net operating cash flow, or other related GAAP financial measures, in evaluating our operating results.
GLOBAL SELF STORAGE STORES
(As of December 31, 2016)
|
|
|
| Year Store |
| Number |
|
| Net Leasable |
|
| December 31, 2016 Square Foot |
|
| December 31, 2015 Square Foot |
| ||||
Property |
| Address |
| Opened / Opened |
| of Units |
|
| Square Feet |
|
| Occupancy % |
|
| Occupancy % |
| ||||
SSG BOLINGBROOK LLC |
| 296 North Weber Road, Bolingbrook, IL 60440 |
| 1997 / 2013 |
|
| 801 |
|
|
| 110,600 |
|
|
| 62.2 | % |
|
| 93.9 | % |
SSG DOLTON LLC |
| 14900 Woodlawn Avenue, Dolton, IL 60419 |
| 2007 / 2013 |
|
| 649 |
|
|
| 86,725 |
|
|
| 94.8 | % |
|
| 93.2 | % |
SSG MERRILLVILLE LLC |
| 6590 Broadway, Merrillville, IN 46410 |
| 2005 / 2013 |
|
| 508 |
|
|
| 71,720 |
|
|
| 91.3 | % |
|
| 95.6 | % |
SSG ROCHESTER LLC |
| 2255 Buffalo Road, Rochester, NY 14624 |
| 2010 / 2012 |
|
| 650 |
|
|
| 68,017 |
|
|
| 92.8 | % |
|
| 87.1 | % |
SSG SADSBURY LLC |
| 21 Aim Boulevard, Sadsburyville, PA 19369 |
| 2006 / 2012 |
|
| 699 |
|
|
| 79,004 |
|
|
| 86.9 | % |
|
| 80.2 | % |
SSG SUMMERVILLE I LLC |
| 1713 Old Trolley Road, Summerville, SC 29485 |
| 1990 / 2013 |
|
| 557 |
|
|
| 72,700 |
|
|
| 89.9 | % |
|
| 77.9 | % |
SSG SUMMERVILLE II LLC |
| 900 North Gum Street, Summerville, SC 29483 |
| 1997 / 2013 |
|
| 254 |
|
|
| 41,608 |
|
|
| 87.6 | % |
|
| 88.2 | % |
TOTAL/AVERAGE SAME STORES |
|
|
|
|
|
| 4,118 |
|
|
| 530,374 |
|
|
| 84.9 | % |
|
| 87.9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SSG FISHERS LLC |
| 13942 East 96th Street, McCordsville, IN 46055 |
| 2007 / 2016 |
|
| 419 |
|
|
| 81,471 |
|
|
| 85.9 | % |
|
| 77.3 | % |
SSG LIMA LLC |
| 1910 West Robb Avenue, Lima, OH 60419 |
| 1996 / 2016 |
|
| 761 |
|
|
| 97,801 |
|
|
| 94.9 | % |
|
| 97.6 | % |
TUXIS SELF STORAGE I LLC |
| 6 Heritage Park Road, Clinton, CT 06413 |
| 1996 / 2016 |
|
| 185 |
|
|
| 31,059 |
|
|
| 80.8 | % |
|
| 86.4 | % |
TUXIS SELF STORAGE II LLC |
| 3814 Route 44, Millbrook, NY 12545 |
| 2008 / 2016 |
|
| 142 |
|
|
| 13,391 |
|
|
| 88.9 | % |
|
| 88.4 | % |
TOTAL/AVERAGE NON-SAME STORES |
|
|
|
|
|
| 1,507 |
|
|
| 223,722 |
|
|
| 89.3 | % |
|
| 87.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL/AVERAGE ALL STORES |
|
|
|
|
|
| 5,625 |
|
|
| 754,096 |
|
|
| 86.2 | % |
|
| 87.9 | % |
(1) Each store is directly owned by the Company’s wholly owned subsidiary listed in the table.
During the second quarter of 2015, SSG Bolingbrook LLC eliminated 98 parking spaces (32,700 square feet) to accommodate its new five building expansion construction project. This expansion project was completed during mid-November 2016 and added 304 climate-controlled and traditional storage units totaling 44,260 leasable square feet to the facility bringing the total to 801 storage units and 110,600 leasable square feet. Same-store occupancy includes the impact from expansion and redevelopment projects at our stores. As SSG Bolingbrook LLC’s newly-
14
constructed leasable square feet were added last November, its area occupancy dropped from mid-90% to approximately 60%. Also during 2015, upon completion of its expansion project, SSG Sadsbury LLC added 219 climate-controlled storage units comprising 16,756 leasable square feet. Certain stores’ leasable square feet in the chart above includes outside auto/RV/boat storage space: approximately 13,000 square feet at SSG Sadsbury LLC; 11,300 square feet at SSG Bolingbrook LLC; 9,900 square feet at SSG Dolton LLC; 11,170 square feet at SSG Merrillville LLC; 5,300 square feet at SSG Summerville II LLC; and 9,270 square feet at Tuxis Self Storage I LLC. For SSG Lima LLC, included is approximately 12,683 square feet of non-storage commercial and student housing space. Approximately 34% of our total available units are climate-controlled, 58% are traditional, and 8% are parking.
Same-Store Self Storage Operations
We consider our same-store portfolio to consist of only those stores owned and operated on a stabilized basis at the beginning and at the end of the applicable periods presented. We consider a store to be stabilized once it has achieved an occupancy rate that we believe, based on our assessment of market-specific data, is representative of similar self-storageself storage assets in the applicable market for a full year measured as of the most recent January 1 and has not been significantly damaged by natural disaster or undergone significant renovation. Same-store occupancy includes the impact from expansion projects at those stores.renovation or expansion. We believe that same-store results are useful to investors in evaluating our performance because they provide information relating to changes in store-level operating performance without taking into account the effects of acquisitions, dispositions or new ground-up developments. AtAs of December 31, 2016,2023, we owned 7twelve same-store facilitiesproperties and 4zero non-same-store facilities.properties. The Company believes that by providing same-store results from a stabilized pool of stores, with accompanying operating metrics including, but not limited to, variances in occupancy, rental revenue, operating expenses, NOI, etc., stockholders and potential investors are able to evaluate operating performance without the effects of non-stabilized occupancy levels, rent levels, expense levels, acquisitions or completed developments. Same-store results should not be used as a basis for future same-store performance or for the performance of the Company’s stores as a whole.
Same-store occupancy foras of the end of the three months and year ended December 31, 20162023 decreased by 3.0%30 basis points to 84.9%89.3% from 87.9%89.6% for the same period in 2015. This includes2022. As of March 15, 2024, occupancy at the impact from the Bolingbrook expansion project completed during the quarter. Excluding the additional vacancy created in this store, ending occupancy would have been 90.6%, an increase of 2.7% compared to the same period in 2015.Company’s same-store properties was 92.1%.
We grew our top-line resultsSame-store revenues decreased by increasing same-store revenues by 10.7%2.5% for the three months ended December 31, 20162023 versus the three months ended December 31, 2015,2022, and increased by 8.4%2.1% for the year ended December 31, 20162023 versus the year ended December 31, 2015.2022. Same-store cost of operations increased by 12.0%5.3% for the three months ended December 31, 20162023 versus the three months ended December 31, 2015,2022, and increased by 9.3%9.1% for the twelve months ended December 31, 20162023 versus the twelve months ended December 31, 2015.2022. Same-store NOI increaseddecreased by 9.9%7.1% for the three months ended December 31, 20162023 versus the three months ended December 31, 2015,2022, and decreased by 7.8%1.7% for the twelve months ended December 31, 20162023 versus the twelve months ended December 31, 2015. General and administrative expenses increased by 13.2% for the three months ended December 31, 2016 versus the three months ended December 31, 2015, and by 18.0% for the period January 19, 20162022. The decrease in same-store NOI was due primarily to December 31, 2016 versus the twelve months ended December 31, 2015. The change is primarily attributable to $264,254 of increased legal, accounting, compliance, NASDAQ listing fees, and investor relations and capital market consultingan increase in expenses. Going forward, although we currently expect some general and administrative expense reductions associated with our discontinued registration as an investment company, we are incurring and expect to incur a number of new expenses related to, among other things, the Company’s new reporting and regulatory requirements.
We believe that our results were driven by, among other things, our internet and digital marketing initiatives which helped maintain our overall average same-store occupancy maintain in the mid-to-high 80% rangeof approximately 90% as of December 31, 2016.2023. Also, contributing to our results were our customer service efforts which we believe were essential in building local brand loyalty resulting in powerful referral and word-of-mouth market demand for our storage units and services. Another significant contributing factor
39
These results are summarized as follows:
SAME - STORE PROPERTIES
Twelve Months Ended December 31, |
| 2023 |
|
| 2022 |
|
| Variance |
|
| % Change |
| ||||
Revenues |
| $ | 12,111,742 |
|
| $ | 11,861,082 |
|
| $ | 250,660 |
|
| 2.1 | % | |
Cost of operations |
| $ | 4,549,038 |
|
| $ | 4,169,182 |
|
| $ | 379,856 |
|
|
| 9.1 | % |
Net operating income |
| $ | 7,562,704 |
|
| $ | 7,691,900 |
|
| $ | (129,196 | ) |
|
| -1.7 | % |
Depreciation and amortization |
| $ | 1,449,571 |
|
| $ | 1,433,060 |
|
| $ | 16,511 |
|
|
| 1.2 | % |
Net leasable square footage at period end* |
|
| 830,019 |
|
|
| 829,448 |
|
|
| 571 |
|
|
| 0.1 | % |
Net leased square footage at period end* |
|
| 741,248 |
|
|
| 743,476 |
|
|
| (2,228 | ) |
|
| -0.3 | % |
Overall square foot occupancy at period end |
|
| 89.3 | % |
|
| 89.6 | % |
|
| -0.3 | % |
|
| -0.3 | % |
Total annualized revenue per leased square foot |
| $ | 16.34 |
|
| $ | 15.95 |
|
| $ | 0.39 |
|
|
| 2.4 | % |
Total available leasable storage units* |
|
| 6,420 |
|
|
| 6,404 |
|
|
| 16 |
|
|
| 0.2 | % |
Number of leased storage units |
|
| 5,589 |
|
|
| 5,673 |
|
|
| (84 | ) |
|
| -1.5 | % |
SAME - STORE PROPERTIES
Three Months Ended December 31, |
| 2023 |
|
| 2022 |
|
| Variance |
|
| % Change |
| ||||
Revenues |
| $ | 2,960,108 |
|
| $ | 3,037,160 |
|
| $ | (77,052 | ) |
| -2.5 | % | |
Cost of operations |
| $ | 1,174,658 |
|
| $ | 1,115,702 |
|
| $ | 58,956 |
|
|
| 5.3 | % |
Net operating income |
| $ | 1,785,450 |
|
| $ | 1,921,458 |
|
| $ | (136,008 | ) |
|
| -7.1 | % |
Depreciation and amortization |
| $ | 363,262 |
|
| $ | 358,847 |
|
| $ | 4,415 |
|
|
| 1.2 | % |
Net leasable square footage at period end* |
|
| 830,019 |
|
|
| 829,448 |
|
|
| 571 |
|
|
| 0.1 | % |
Net leased square footage at period end* |
|
| 741,248 |
|
|
| 743,476 |
|
|
| (2,228 | ) |
|
| -0.3 | % |
Overall square foot occupancy at period end |
|
| 89.3 | % |
|
| 89.6 | % |
|
| -0.3 | % |
|
| -0.3 | % |
Total annualized revenue per leased square foot |
| $ | 15.97 |
|
| $ | 16.34 |
|
| $ | (0.37 | ) |
|
| -2.3 | % |
Total available leasable storage units* |
|
| 6,420 |
|
|
| 6,404 |
|
|
| 16 |
|
|
| 0.2 | % |
Number of leased storage units |
|
| 5,589 |
|
|
| 5,673 |
|
|
| (84 | ) |
|
| -1.5 | % |
* From time to our results was our revenue rate management program which helped increase our total annualized revenue pertime, as guided by market conditions, net leasable square footage, net leased square foot by 5.0%footage and total available storage units at our properties may increase or decrease as a result of consolidation, division or reconfiguration of storage units. Similarly, leasable square footage may increase or decrease due to expansion or redevelopment of our properties.
40
The following table presents a reconciliation of same-store net operating income to net income as presented on our consolidated statements of operations for the periods indicated (unaudited):
|
| For the Three Months Ended December 31, |
|
| For the Twelve Months Ended December 31, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Net income |
| $ | 1,097,400 |
|
| $ | 440,451 |
|
| $ | 2,938,769 |
|
| $ | 2,057,723 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Management fees and other income |
|
| (16,262 | ) |
|
| (21,550 | ) |
|
| (78,973 | ) |
|
| (83,768 | ) |
General and administrative |
|
| 703,335 |
|
|
| 688,516 |
|
|
| 2,876,300 |
|
|
| 2,580,899 |
|
Depreciation and amortization |
|
| 409,420 |
|
|
| 404,897 |
|
|
| 1,634,044 |
|
|
| 1,619,239 |
|
Business development |
|
| 8,928 |
|
|
| 1,632 |
|
|
| 20,080 |
|
|
| 48,340 |
|
Dividend and interest income |
|
| (70,085 | ) |
|
| (27,681 | ) |
|
| (265,046 | ) |
|
| (120,575 | ) |
Unrealized (gain) loss on marketable equity securities |
|
| (574,142 | ) |
|
| 227,144 |
|
|
| (408,876 | ) |
|
| 1,117,029 |
|
Interest expense |
|
| 226,856 |
|
|
| 208,049 |
|
|
| 846,406 |
|
|
| 780,223 |
|
Gain on Paycheck Protection Program (PPP) loan forgiveness |
| — |
|
| — |
|
| — |
|
|
| (307,210 | ) | |||
Total same-store net operating income |
| $ | 1,785,450 |
|
| $ | 1,921,458 |
|
| $ | 7,562,704 |
|
| $ | 7,691,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| For the Three Months Ended December 31, |
|
| For the Twelve Months Ended December 31, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Same-store revenues |
| $ | 2,960,108 |
|
| $ | 3,037,160 |
|
| $ | 12,111,742 |
|
| $ | 11,861,082 |
|
Same-store cost of operations |
| $ | 1,174,658 |
|
| $ | 1,115,702 |
|
| $ | 4,549,038 |
|
| $ | 4,169,182 |
|
Total same-store net operating income |
| $ | 1,785,450 |
|
| $ | 1,921,458 |
|
| $ | 7,562,704 |
|
| $ | 7,691,900 |
|
Analysis of Same-Store Revenue
For the three and twelve months ended December 31, 2016 versus2023, revenue decreased 2.5% and increased 2.1%, respectively, as compared to the three months ended December 31, 2015, and by 2.8% forsame periods in 2022. The increase in the twelve months ended December 31, 2016 versus the twelve months ended December 31, 2015.
15
These results are summarized as follows:
SAME - STORE PROPERTIES
|
| YTD 2016 |
|
| YTD 2015 |
|
| Variance |
|
| % Change |
| ||||
Revenues |
| $ | 4,812,318 |
|
| $ | 4,439,297 |
|
| $ | 373,021 |
|
|
| 8.4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of operations |
| $ | 1,960,438 |
|
| $ | 1,793,319 |
|
| $ | 167,119 |
|
|
| 9.3 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income |
| $ | 2,851,880 |
|
| $ | 2,645,978 |
|
| $ | 205,902 |
|
|
| 7.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
| $ | 651,680 |
|
| $ | 635,226 |
|
| $ | 16,454 |
|
|
| 2.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net leasable square footage at period end |
|
| 530,374 |
|
|
| 485,578 |
|
|
| 44,796 |
|
|
| 9.2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net leased square footage at period end |
|
| 450,131 |
|
|
| 427,064 |
|
|
| 23,067 |
|
|
| 5.4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overall square foot occupancy at period end |
|
| 84.9 | % |
|
| 87.9 | % |
|
| -3.1 | % |
|
| -3.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total annualized revenue per leased square foot |
| $ | 10.69 |
|
| $ | 10.39 |
|
| $ | 0.30 |
|
|
| 2.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of leased storage units |
|
| 3,418 |
|
|
| 3,220 |
|
|
| 198 |
|
|
| 6.1 | % |
SAME - STORE PROPERTIES
|
| Q4 2016 |
|
| Q4 2015 |
|
| Variance |
|
| % Change |
| ||||
Revenues |
| $ | 1,230,266 |
|
| $ | 1,110,983 |
|
| $ | 119,283 |
|
|
| 10.7 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of operations |
| $ | 500,799 |
|
| $ | 447,015 |
|
| $ | 53,784 |
|
|
| 12.0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income |
| $ | 729,467 |
|
| $ | 663,968 |
|
| $ | 65,499 |
|
|
| 9.9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
| $ | 168,837 |
|
| $ | 161,601 |
|
| $ | 7,236 |
|
|
| 4.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net leasable square footage at period end |
|
| 530,374 |
|
|
| 485,578 |
|
|
| 44,796 |
|
|
| 9.2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net leased square footage at period end |
|
| 450,131 |
|
|
| 427,064 |
|
|
| 23,067 |
|
|
| 5.4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overall square foot occupancy at period end |
|
| 84.9 | % |
|
| 87.9 | % |
|
| -3.0 | % |
|
| -3.4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total annualized revenue per leased square foot |
| $ | 10.93 |
|
| $ | 10.41 |
|
| $ | 0.52 |
|
|
| 5.0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of leased storage units |
|
| 3,418 |
|
|
| 3,220 |
|
|
| 198 |
|
|
| 6.1 | % |
16
Analysis of Same-Store Revenue
For the three months ended December 31, 2016, the 10.7% revenue increase2023 was due primarilyattributable to, a 4.9% increase in total annualized revenue per leased square foot, a 5.4% increase in net leased square footage. For the twelve months ended December 31, 2016, the 8.4% revenue increase was due primarily to a 4.5% increase in total annualized revenue per leased square foot and a 5.4% increase in net leased square footage. The increase in total annualized revenue per leased square foot was due primarily to annual existing tenant rent increases, an increase in available climate-controlled leasable square feet compared to available leasable parking square feet, and, to a lesser extent,among other things, increased move-in rental rates, and decreased move-in rent ���specials” discounting.the results of our proprietary revenue rate management program of raising existing tenant rates. Same store average overall square foot occupancy for all of the Company’s storessame-stores combined decreased by 30 basis points to 84.9%89.3% in the twelve months ended December 31, 20162023 from 87.9%89.6% in the twelve months ended December 31, 2015 primarily due to2022. As of March 15, 2024, occupancy at the vacancy added by the addition of the 44,260 leasable square feet expansion at our Bolingbrook store during November 2016.Company’s same-store properties was 92.1%.
We believe that our focus on maintaining high occupancies helpoccupancy helps us to maximize rental income at our rental income.properties. We seek to maintain an average square foot occupancy level at aboutor above 90% by regularly adjusting the rental rates and promotions offered to attract new tenants as well as adjusting our online marketing efforts in orderseeking to generate sufficient move-in volume to replace tenants that vacate. Demand fluctuatesmay fluctuate due to various local and regional factors, including the overall economy. Demand is generally higher in the summer months than in the winter months and, as a result, rental rates charged to new tenants are typically higher in the summer months than in the winter months.
As of December 31, 2023, we observed no material degradation in rent collections. However, we believe that our bad debt losses could increase from historical levels, due to (i) cumulative stress (such as inflation, COVID-19, recession fears, etc.) on our customers’ financial capacity and (ii) reduced rent recoveries from auctioned units.
We may experience a change in the move-out patterns of our long-term customers due to economic uncertainty. This could lead to lower occupancies and rent “roll down” as long-term customers are replaced with new customers at lower rates.
We currently expect rental income growth, if any, to come from a combination of the following: (i) continued existing tenant rent increases, (ii) higher rental rates charged to new tenants, (iii) lower promotional discounts, and (iv) higher occupancies. Our future rental income growth will likely also be dependent upon many factors for each
41
market that we operate in, including, among other things, demand for self storage space, the level of competitor supply of self storage space, and the average length of stay of our tenants. Increasing existing tenant rental rates, generally on an annual basis, is a key component of our revenue growth. We typically determine the level of rental increases based upon our expectations regarding the impact of existing tenant rate increases on incremental move-outs. We currently expect existing tenant rent increases in 2017for 2024, if any, to be similar to, or slightly lessgreater than, those for the prior year.year ended December 31, 2023.
We believe that the currentIt is difficult to predict trends in move-in, move-out, in place contractual rents, and occupancy levels are consistent with our current expectation of continued revenue growth. However, suchlevels. Current trends, when viewed in the short-term, are volatile and not necessarily predictive of our revenues going forward because they may be subject to many short-term factors. Such factors include, among others, initial move-in rates, seasonal factors, the unit size and geographical mix of the specific tenants moving in or moving out, the length of stay of the tenants moving in or moving out, changes in our pricing strategies, and the degree and timing of rate increases previously passed to existing tenants.
Importantly, we continue to refine our ongoingproprietary revenue rate management program which includes regular internet data scraping of local competitors’ prices. We do this in orderseeking to maintain our competitive market price advantage for our various sized storage units at our stores. This program helps us in seeking to maximize each store’s occupancies and our self storage revenue and NOI. We believe that, through our various marketing initiatives, we can continue to attract high quality, long term tenants who we expect will be storing with us for years. Currently,As of December 31, 2023, our average tenant duration of stay iswas approximately three3.4 years, up from approximately two3.3 years for the same period in 2015.as of December 31, 2022.
Analysis of Same-Store Cost of Operations
Same-store cost of operations increased 12.0%5.3% or $53,784$58,956 for the three months ended December 31, 20162023 versus the three months ended December 31, 2015,2022, and increased 9.3%9.1% or $167,119$379,856 for the twelve months ended December 31, 20162023 versus the twelve months ended December 31, 2015.2022. This increase in same-store cost of operations for the twelve months ended December 31, 2023 was due primarily to increased store levelexpenses for employment costs, store property tax expense, repair and maintenance, and marketing expense, which were partially offset by decreases in professional, utilities, administrative, and lien administration costs.real estate taxes.
17
Employment.On-site store manager, regional manager and district payroll expense increased 12.0%3.7% or $15,585$12,218 for the three months ended December 31, 20162023 versus the three months ended December 31, 2015,2022, and increased 14.5%9.3% or $69,251$113,353 for the twelve months ended December 31, 20162023 as compared to the same period in 2015.2022. This increase was due primarily to an increaseroutine employee additions and inflationary increases in the number of store manager, regional and district manager level employees, wage increases, and higher employee health plan expenses.compensation rates for existing employees. We currently expect inflationary increases in compensation rates for existing employees and other increases in compensation costs as we potentially add new stores as well as Districtdistrict, regional, and Regional Managers.store managers.
Real Estate Property Tax.Store property tax expense increased 0.03%10.4% or $51$43,611 for the three months ended December 31, 20162023 versus the three months ended December 31, 2015,2022, and increased 5.1%14.5% or $28,818$213,519 for the twelve months ended December 31, 20162023 as compared to the same period in 2015,2022. The increase in property tax expense during the year ended December 31, 2023 is primarily due to increased property assessment valuations and the loss of our Class 8 tax incentive granted to SSG Dolton LLC. See the section titled “Property Tax Expenses at Dolton, IL” for additional detail. We currently expect same-store property tax expenses to increase during 2024, primarily due to increased property assessment valuations.
Administrative. We classify administrative expenses as bank charges related to processing the stores’ cash receipts, credit card fees, repairs and maintenance, utilities, landscaping, alarm monitoring and trash removal. Administrative expenses decreased 10.1% or $19,658 in the three months ended December 31, 2023 as compared to the same period in 2022, and decreased 5.1% or $43,210 in the twelve months ended December 31, 2023 as compared to the same period in 2022. We experienced a decrease in administrative expenses for the year ended December 31, 2023 due primarily to decreased utilities and landscaping expense. Credit card fees increased for the year ended December 31, 2023 due to an increase in rental payments received through credit cards, which is one of the results of our initiatives in building a higher assessed store property values and tax rates, in particular for our Sadsburyville, PA store.quality overall tenant base. We currently expect moderate increases in other direct store property tax expense growth of approximately the same amountcosts in 2017.2024.
Repairs and maintenance expense increased 109.6%decreased 24.1% or $25,417$10,024 for the three months ended December 31, 20162023 versus the three months ended December 31, 2015,2022, and increased 35.6%13.9% or $35,443$21,612 for the twelve months ended
42
December 31, 20162023 as compared to the same period in 20152022. We experienced an increase in repairs and maintenance expense for the year ended December 31, 2023 due primarily to performing certain mandatoryinflation and an increased number of one-off repairs as part of our mortgage loan covenants and requirements in accordance with the Loan Documents. As of December 31, 2016, the majority of these repairs have been completed. Also contributing to the increase in repair and maintenance expense is our ongoing LED light replacement program expenses in 20162023 as compared to 2015. We anticipate continued focus on our LED light replacement program throughout 2017. At our stores fully converted to LED lighting, we have realized utilities expense savings year-over-year of approximately 10% to 40%, depending on the store, due to lower kilowatt per hour usage.2022.
Our utility expenses are currently comprised of electricity, oil, and gas costs, which vary by store and are dependent upon energy prices and usage levels. Changes in usage levels are driven primarily by weather and temperature. Also, affecting our utilities expenses over time is our aforementioned ongoing LED light replacement program at all of our stores which has already resulted in lower electricity usage. Utility expense increased 21.7%decreased 10.2% or $5,068$5,731 for the three months ended December 31, 20162023 versus the three months ended December 31, 2015,2022, and decreased 4.8%4.2% or $6,233$11,293 for the twelve months ended December 31, 20162023 as compared to the same period in 20152022, primarily due to 2016’s milder winterlower energy usage during the three and twelve months ended December 31, 2023 versus the same periods in most of our stores’ areas and the benefit of lower electricity usage due to our LED light replacement program.2022. It is difficult to estimate future utility costs because weather, temperature, and energy prices are volatile and unpredictable. However, based upon current trends and expectations regarding commercial electricity rates, we currently expect inflationary increases in rates combined with lower usage resulting in higher net lower utility costs in 2017.2024.
Landscaping expenses, which include snow removal costs, increased 37.9%decreased 19.2% or $5,726$5,685 for the three months ended December 31, 20162023 versus the three months ended December 31, 2015,2022, and increased 6.3%decreased 43.0% or $4,697$74,916 in the twelve months ended December 31, 20162023 compared to the same period in 2015.2022. The decrease in landscaping expense in the twelve months ended December 31, 2023 versus the same period in 2022 is primarily due to lower snow removal costs. Landscaping expense levels are dependent upon many factors such as weather conditions, which can impact landscaping needs including, among other things, snow removal, inflation in material and labor costs, and random events. We currently expect inflationary increases in landscaping expense in 2017,2024, excluding snow removal expense, which is primarily weather dependent and unpredictable.
Marketing. Marketing expense is comprised principally of internet advertising and the operating costs of our 24/7 kiosk and telephone call and reservation center. Marketing expense varies based upon demand, occupancy levels, and other factors. Internet advertising, in particular, can increase or decrease significantly in the short term in response to these factors. Marketing expense increased 15.9%decreased 7.8% or $6,198$6,862 for the three months ended December 31, 20162023 versus the three months ended December 31, 2015,2022, and increased 28.8%decreased 14.6% or $48,847$43,131 for the twelve months ended December 31, 20162023 as compared to the same period in 20152022. The decrease in marketing expense in the twelve months ended December 31, 2023 versus the same period in 2022 is primarily due to the increaseddecreased marketing costs and internet advertising expenses andduring the one-time costs associated with the production and addition of size estimator and locations videos to our stores’ website, www.GlobalSelfStorage.us.year ended 2023. Based upon current trends in move-ins, move-outs, and occupancies, we currently expect marketing expense to increase at a somewhat lesser rate in 2017.2024.
General. Other direct store costs include general and administrative expenses incurred at the stores,stores. General expenses include items such as store insurance, business license costs, bank charges related to processing the stores’ cash receipts, credit card fees, and the cost of operating each store’s rental office including supplies and telephone and data communication lines. These costs decreased 8.2%General expenses increased 33.4% or $3,343$27,522 in the three months ended December 31, 20162023 as compared to the same period in
18
2015, 2022, and decreased 1.1%increased 10.8% or $1,648$34,330 in the twelve months ended December 31, 20162023 as compared to the same period in 2015. Lien administration expenses decreased 25.7% or $1,158 in the three months ended December 31, 2016 as compared to the same period in 2015, and decreased 28.5% or $5,220 in the twelve months ended December 31, 2016 as compared to the same period in 2015. Increased store level cost efficiencies and fewer tenants’ stored items auctions contributed to the decreased expenses, which were partially offset by increases in our credit card or merchant fees. Credit card fees increased2022, primarily due to a higher proportion of rental payments being received through credit cards, which is one of the results of our initiatives in building a higher quality overall tenant base.increased insurance expense. We currently expect moderate increases in other direct store costs in 2017.2024.
Combined Same-Store and Non Same-Store Self Storage Operations
At December 31, 2016, we owned 7 same-store facilities and 4 non same-store facilities. The non same-store facilities are SSG Fishers LLC, SSG Lima LLC, Tuxis Self Storage I LLC, and Tuxis Self Storage II LLC.
Combined same-store and non same-store average overall square foot occupancy for the three months and year ended December 31, 2016 decreased by 1.7% to 86.2% from 87.9% for the same periodLien Administration. Lien administration expenses increased 64.9% or $2,126 in 2015. This includes the impact from the Bolingbrook expansion project completed during the fourth quarter of 2016. Excluding the additional vacancy created in this store, ending occupancy would have been 90.2%, an increase of 2.3% compared to the same period in 2015.
We grew our top-line results by increasing combined same-store and non same-store (“Combined store”) revenues by 40.1% for the three months ended December 31, 2016 versus the three months ended December 31, 2015, and by 18.2% for the twelve months ended December 31, 2016 versus the twelve months ended December 31, 2015. Combined store cost of operations increased by 45.9% for the three months ended December 31, 2016 versus the three months ended December 31, 2015, and by 20.2% for the twelve months ended December 31, 2016 versus the twelve months ended December 31, 2015. Combined store NOI increased by 36.2% for the three months ended December 31, 2016 versus the three months ended December 31, 2015, and by 16.8% for the twelve months ended December 31, 2016 versus the twelve months ended December 31, 2015. General and administrative expense increased by 13.2% for the three months ended December 31, 2016 versus the three months ended December 31, 2015, and by 18.0% for the period January 19, 2016 to December 31, 2016 versus the twelve months ended December 31, 2015. The increase in the general and administrative expense during the most recent quarter can be primarily attributed to an increase in legal, accounting, compliance, NASDAQ listing fees, and investor relations and capital market consulting expenses. Going forward, although we currently expect some general and administrative expense reductions associated with our discontinued registration as an investment company, we are incurring and expect to incur a number of new expenses related to, among other things, the Company’s new reporting and regulatory requirements.
We believe that our results were driven by, among other things, our internet and digital marketing initiatives which helped our overall average occupancy maintain in the mid-to-high 80% range as of December 31, 2016. Also, contributing to our strong results were our customer service efforts which we believe were essential in building local brand loyalty resulting in referral and word-of-mouth market demand for our storage units and services.
19
These results are summarized as follows:
COMBINED SAME - STORE AND NON SAME - STORE PROPERTIES
|
| YTD 2016 |
|
| YTD 2015 |
|
| Variance |
|
| % Change |
| ||||
Revenues |
| $ | 5,245,373 |
|
| $ | 4,439,297 |
|
| $ | 806,076 |
|
|
| 18.2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of operations |
| $ | 2,155,492 |
|
| $ | 1,793,319 |
|
| $ | 362,173 |
|
|
| 20.2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income |
| $ | 3,089,881 |
|
| $ | 2,645,978 |
|
| $ | 443,903 |
|
|
| 16.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
| $ | 813,796 |
|
| $ | 635,226 |
|
| $ | 178,570 |
|
|
| 28.1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net leasable square footage at period end |
|
| 754,095 |
|
|
| 485,578 |
|
|
| 268,517 |
|
|
| 55.3 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net leased square footage at period end |
|
| 649,897 |
|
|
| 427,064 |
|
|
| 222,833 |
|
|
| 52.2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overall square foot occupancy at period end |
|
| 86.2 | % |
|
| 87.9 | % |
|
| -1.7 | % |
|
| -1.9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available leasable storage units |
|
| 5,625 |
|
|
| 3,813 |
|
|
| 1,812 |
|
|
| 47.5 | % |
COMBINED SAME - STORE AND NON SAME - STORE PROPERTIES
|
| Q4 2016 |
|
| Q4 2015 |
|
| Variance |
|
| % Change |
| ||||
Revenues |
| $ | 1,556,214 |
|
| $ | 1,110,983 |
|
| $ | 445,231 |
|
|
| 40.1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of operations |
| $ | 652,069 |
|
| $ | 447,015 |
|
| $ | 205,054 |
|
|
| 45.9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income |
| $ | 904,145 |
|
| $ | 663,968 |
|
| $ | 240,177 |
|
|
| 36.2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
| $ | 306,177 |
|
| $ | 161,601 |
|
| $ | 144,576 |
|
|
| 89.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net leasable square footage at period end |
|
| 754,095 |
|
|
| 485,578 |
|
|
| 268,517 |
|
|
| 55.3 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net leased square footage at period end |
|
| 649,897 |
|
|
| 427,064 |
|
|
| 222,833 |
|
|
| 52.2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overall square foot occupancy at period end |
|
| 86.2 | % |
|
| 87.9 | % |
|
| -1.7 | % |
|
| -1.9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available leasable storage units |
|
| 5,625 |
|
|
| 3,813 |
|
|
| 1,812 |
|
|
| 47.5 | % |
Analysis of Combined Same-Store and Non Same-Store Revenue
Combined same-store and non same-store average overall square foot occupancy for the three months and year ended December 31, 2016 decreased by 1.7% to 86.2% from 87.9% for the same period in 2015. This includes the impact from the Bolingbrook expansion project completed during the fourth quarter of 2016. Excluding the additional vacancy created in this store, ending occupancy would have been 90.2%, an increase of 2.3% compared to the same period in 2015.
For the three months ended December 31, 2016, the 40.1% revenue increase was due primarily to a 52.1% increase in net leased square footage and the results of our revenue rate management program of raising existing tenant rates. This increase in net leased square feet, as a result of our Fishers, IN, Lima, OH, Clinton, CT, and Millbrook, NY acquisitions, is expected to positively affect combined revenues in 2017. For the twelve months ended December 31, 2016, the 18.2% revenue increase was due primarily to a 52.1% increase in net leased square
20
footage and the results of our revenue rate management program of raising existing tenant rates. Combined revenues benefited from existing tenant rent increases, an increase in available climate-controlled leasable square feet compared to available leasable parking square feet, and, to a lesser extent, increased move-in rental rates, and decreased move-in rent “specials” discounting.
We believe that high occupancies help maximize our rental income. We seek to maintain an average square foot occupancy level at or above 90% by regularly adjusting the rental rates and promotions offered to attract new tenants as well as adjusting our marketing efforts on the internet in order to generate sufficient move-in volume to replace tenants that vacate. Demand fluctuates due to various local and regional factors, including the overall economy. Demand is typically higher in the summer months than in the winter months and, as a result, rental rates charged to new tenants are typically higher in the summer months than in the winter months.
We currently expect rental income growth, if any, to come from a combination of the following: (i) continued existing tenant rent increases, (ii) higher rental rates charged to new tenants, (iii) lower promotional discounts and (iv) higher occupancies. Our future rental income growth will likely also be dependent upon many factors for each market that we operate in, including demand for self storage space, the level of competitor supply of self storage space, and the average length of stay of our tenants. Increasing existing tenant rental rates, generally on an annual basis, is a key component of our revenue growth. We typically determine the level of rental increases based upon our expectations regarding the impact of existing tenant rate increases on incremental move-outs. We currently expect existing tenant rent increases in 2017 to be slightly less than the prior year.
We believe that the current trends in move-in, move-out, in place contractual rents and occupancy levels are consistent with our current expectation of continued revenue growth. However, such trends, when viewed in the short-term, are volatile and not necessarily be predictive of our revenues going forward because they are subject to many short-term factors. Such factors include, among others, initial move-in rates, seasonal factors, the unit size and geographical mix of the specific tenants moving in or moving out, the length of stay of the tenants moving in or moving out, changes in our pricing strategies, and the degree and timing of rate increases previously passed to existing tenants.
Importantly, we continue to refine our ongoing revenue management program which includes regular internet data scraping of local competitors’ prices. We do this in order to maintain our competitive market price advantage for our various sized storage units at our stores. This program helps us seek to maximize each store’s occupancies and our self storage revenue and NOI. We believe that through our various marketing initiatives, we can seek to continue to attract high quality, long term tenants who we expect will be storing with us for years. Currently, our average tenant duration of stay is approximately three years, up from approximately two years for the same period in 2015.
Analysis of Combined Same-Store and Non Same-Store Cost of Operations
Combined same-store and non same-store cost of operations increased 45.9% or $205,054 for the three months ended December 31, 2016 versus the three months ended December 31, 2015, and increased 20.2% or $362,173 for the twelve months ended December 31, 2016 versus the twelve months ended December 31, 2015. This increase in combined same-store and non same-store cost of operations was due primarily to increased store level employment costs including rising employee health plan expenses, store property tax expense, repair and maintenance, and marketing expense due to our new store acquisitions, which were partially offset by decreases in professional, administrative, and lien administration costs.
On-site store manager payroll expense increased 40.3% or $52,294 for the three months ended December 31, 2016 versus the three months ended December 31, 2015, and increased 24.0% or $114,108 for the twelve months ended December 31, 20162023 as compared to the same period in 2015. This increase was due primarily to an increase in the number of store level employees due to our new store acquisitions, wage increases, and higher employee health plan expenses. We currently expect inflationary increases in compensation rates for existing employees and other increases in compensation costs as we potentially add new stores as well as District and Regional Managers.
21
Store property tax expense increased 37.9% or $56,305 for the three months ended December 31, 2016 versus the three months ended December 31, 2015,2022, and increased 18.3%51.1% or $104,045$6,751 in the twelve months ended December 31, 20162023 as compared to the same period in 2015, primarily due2022.
Property Tax Expenses at Dolton, IL
Late in the third quarter of 2017, our Dolton, IL property was reassessed by the municipality and separately, our Class 8 tax incentive renewal hearing was held. As a result of those two events, our Dolton, IL property was reassessed at approximately 52% higher and the Class 8 tax incentive was not renewed. These events were applied retroactively to take effect on January 1, 2017. Property tax expenses have increased such costs associated with our new store acquisitionsto $399,000 during 2020, $417,000 during 2021, $532,000 during 2022, and to higher assessed store property values$559,000 during 2023. The Class 8 tax incentive phased out over the years 2017, 2018, 2019, 2020, and tax rates, in particular for our Sadsburyville, PA store. We currently expect store2021. Both the property tax expense growth of approximately the same amount in 2017.
Repairsreassessment and maintenance expense increased 126.5% or $29,344 for the three months ended December 31, 2016 versus the three months ended December 31, 2015, and increased 41.2% or $40,962 for the twelve months ended December 31, 2016 as compared to the same period in 2015 primarily due to increased such costs associated with our new store acquisitions and to performing certain mandatory repairs as part of our mortgage loan covenants and requirements in accordance with the Loan Documents. As of December 31, 2016, the majority of these repairs have been completed. Also contributing to the increase in repair and maintenance expense is our ongoing LED light replacement program expenses in 2016 as compared to 2015. We anticipate continued focus on our LED light replacement program throughout 2017. At our stores fully converted to LED lighting, we have realized utilities expense savings year-over-year of approximately 10% to 40% depending on the store due to lower kilowatt per hour usage.
Our utility expensesClass 8 tax incentive renewal status are currently comprised of electricity, oil, and gas costs, which vary by store and are dependent upon energy prices and usage levels. Changes in usage levels are driven primarily by weather and temperature. Also, affecting our utilities expenses over timeunder appeal. However, there is our aforementioned ongoing LED light replacement program at all of our stores which has already resulted in lower electricity usage. Utility expense increased 97.5% or $22,779 forno guarantee that either the three months ended December 31, 2016 versus the three months ended December 31, 2015, and increased 11.7% or $15,289 for the twelve months ended December 31, 2016 as compared to the same period in 2015 primarily due to increased such costs associated with our new store acquisitions. It is difficult to estimate future utility costs because weather, temperature, and energy prices are volatile and unpredictable. However, based upon current trends and expectations regarding commercial electricity rates, we currently expect inflationary increases in rates combined with lower usage resulting in net lower utility costs in 2017.
Landscaping expenses, which include snow removal costs, increased 45.3% or $6,854 for the three months ended December 31, 2016 versus the three months ended December 31, 2015, and increased 7.8% or $5,824 in the twelve months ended December 31, 2016 compared to the same period in 2015 primarily due to increased such costs associated with our new store acquisitions. Landscaping expense levels are dependent upon many factors such as weather conditions, which can impact landscaping needs including, among other things, snow removal, inflation in material and labor costs, and random events. We currently expect inflationary increases in landscaping expense in 2017, excluding snow removal expense, which is primarily weather dependent and unpredictable.
Marketing expense is comprised principally of internet advertising and the operating costs of our 24/7 kiosk and telephone call and reservation center. Marketing expense varies based upon demand, occupancy levels, and other factors. Internet advertising, in particular, can increase or decrease significantly in the short term in response to these factors. Marketing expense increased 54.8% or $21,392 for the three months ended December 31, 2016 versus the three months ended December 31, 2015, and increased 40.4% or $68,589 for the twelve months ended December 31, 2016 as compared to the same period in 2015 primarily due to increased such costs associated with our new store acquisitions and to the increased internet advertising expenses and the one-time costs associated with the production and addition of size estimator and locations videos to our stores’ website, www.GlobalSelfStorage.us. Based upon current trends in move-ins, move-outs, and occupancies, we currently expect marketing expense to increase at a somewhat lesser rate in 2017.
Other direct store costs include general and administrative expenses incurred at the stores, such as store insurance, business license costs, bank charges related to processing the stores’ cash receipts, credit card fees, and the cost of operating each store’s rental office including supplies and telephone data communication lines. These costs increased 27.1% or $11,052 in the three months ended December 31, 2016 as compared to the same period in 2015, and increased 10.9% or $17,001 in the twelve months ended December 31, 2016 as compared to the same period in 2015 primarily due to increased such costs associated with our new store acquisitions. Increased store level costs efficiencies and fewer tenants’ stored items auctions contributed to the decreased expenses, which were partially offset by increases in our credit card or merchant fees. Credit card fees increased due to a higher proportion of rental payments being received through credit cards, which is one of the results of our initiatives in building a higher quality overall tenant base. We currently expect moderate increases in other direct store costs in 2017.
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Analysis of General and Administrative Expenses
General and administrative expenses represent direct and allocated expenses for shared general corporate functions, which are allocated to store operations to the extent they are related to store operations. Such functions include, among other things, data processing, human resources, legal, corporate and operational accounting and finance, marketing, and compensation of senior executives.
Three Months Ended December 31, |
| 2016 |
|
| 2015 |
|
| Variance |
|
| % Change | |||
General and administrative |
| $ | 351,426 |
|
| $ | 310,378 |
|
| $ | 41,048 |
|
| +13.2% |
For the Period January 19, 2016 to December 31, 2016 compared to the year ended December 31, 2015
|
| 2016 |
|
| 2015 |
|
| Variance |
|
| % Change | |||
General and administrative |
| $ | 1,406,441 |
|
| $ | 1,191,768 |
|
| $ | 214,673 |
|
| +18.0% |
General and administrative expenses increased 13.2% or $41,048 for the three months ended December 31, 2016 versus the three months ended December 31, 2015, and increased 18.0% or $214,673 for the period January 19, 2016 to December 31, 2016 as compared to the twelve months ended December 31, 2015. Most of the increase in the general and administrative expense during the most recent quarter is attributable to an increase in legal, accounting, compliance, NASDAQ listing fees, and investor relations and capital market consulting expenses. We experienced certain cost reductions due to our transition from an investment company to an operating company, such as costs associated with fund accounting, custodian, registration, and quarterly appraisals. Concomitantly, we experienced increased legal, accounting, regulatory compliance, and investor relations expenses. Going forward, although we currently expect some general and administrative expense reductions associated with our discontinued registration as an investment company, we are incurring and expect to incur a number of new expenses related to, among other things, the Company’s new reporting and regulatory requirements.
The Company incurred fees and expenses of approximately $646,000 associated with the Loan Documents, the of which were capitalized and are amortized over the term of the loan.
Analysis of Business Development and Store Acquisition Expenses
Business development and store acquisition expenses increased from $0 during the three and twelve months ended December 31, 2015 to $52,167 and $449,738 during the three and twelve months ended December 31, 2016, respectively. These costs primarily consisted of legal and consulting costs in connection with business development activities and future potential store acquisitions. The majority of these expenses are non-recurring and fluctuate based on business development activity during the time period.
Analysis of Loan Interest and Amortization Expense
Loan interest expense payments relating to the aforementioned $20 million loan increased from $0 for the three and twelve months ended December 31, 2015 to $220,209 and $456,719 for the three and twelve months ended December 31, 2016. Going forward the cash payments for this expenseassessment will be $69,867 per month until June 2018 at which point the monthly interest and amortization payment duereduced or our Class 8 tax incentive status will increase to $107,699 where it will remain payable every month until June 2036.be reinstated.
23
Analysis of Global Self Storage Funds from Operations (“FFO”)FFO and Funds from Operations as Adjusted (“AFFO”)AFFO
43
The following tables present a reconciliation and computation of net income to FFOfunds from operations (“FFO”) and AFFOadjusted funds from operations (“AFFO”) and earnings per share to FFO and AFFO per share:share (unaudited):
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| ||||||||||||||||
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|
| For the Period |
| |||||||||||||||||
|
| Three Months |
|
| January 19, 2016 |
|
| Three Months |
| Three Months |
| Twelve Months |
|
| Twelve Months |
| ||||||||
|
| Ended |
|
| to |
|
| Ended |
| Ended |
| Ended |
|
| Ended |
| ||||||||
|
| December 31, 2016 |
|
| December 31, 2016 |
|
| December 31, 2023 |
|
| December 31, 2022 |
|
| December 31, 2023 |
|
| December 31, 2022 |
| ||||||
Net income |
| $ | 564,687 |
|
| $ | 384,135 |
|
| $ | 1,097,400 |
|
| $ | 440,451 |
|
| $ | 2,938,769 |
|
| $ | 2,057,723 |
|
Eliminate items excluded from FFO: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Unrealized (gain) loss on marketable equity securities |
|
| (574,142 | ) |
|
| 227,144 |
|
|
| (408,876 | ) |
|
| 1,117,029 |
| ||||||||
Depreciation and amortization |
|
| 357,567 |
|
|
| 952,507 |
|
|
| 409,420 |
|
|
| 404,897 |
|
|
| 1,634,044 |
|
|
| 1,619,239 |
|
Realized gain on investment securities |
|
| (602,428 | ) |
|
| (602,428 | ) | ||||||||||||||||
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|
|
|
|
| ||||||||||||||||
Gain on Paycheck Protection Program (PPP) loan forgiveness |
| — |
|
| — |
|
| — |
|
|
| (307,210 | ) | |||||||||||
FFO attributable to common stockholders |
|
| 319,826 |
|
|
| 734,214 |
|
|
| 932,678 |
|
|
| 1,072,492 |
|
|
| 4,163,937 |
|
|
| 4,486,781 |
|
Adjustments: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Business development and property acquisition costs |
|
| 52,167 |
|
|
| 449,738 |
| ||||||||||||||||
Compensation expense related to stock-based awards |
|
| 73,324 |
|
|
| 42,809 |
|
|
| 199,752 |
|
|
| 173,921 |
| ||||||||
Business development, capital raising, and property acquisition costs |
|
| 8,928 |
|
|
| 1,632 |
|
|
| 20,080 |
|
|
| 48,340 |
| ||||||||
AFFO attributable to common stockholders |
| $ | 1,014,930 |
|
| $ | 1,116,933 |
|
| $ | 4,383,769 |
|
| $ | 4,709,042 |
| ||||||||
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|
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| |||||||
AFFO |
| $ | 371,993 |
|
| $ | 1,183,952 |
| ||||||||||||||||
Earnings per share attributable to common stockholders - basic |
| $ | 0.10 |
|
| $ | 0.04 |
|
| $ | 0.26 |
|
| $ | 0.19 |
| ||||||||
Earnings per share attributable to common stockholders - diluted |
| $ | 0.10 |
|
| $ | 0.04 |
|
| $ | 0.26 |
|
| $ | 0.19 |
| ||||||||
FFO per share - diluted |
| $ | 0.08 |
|
| $ | 0.10 |
|
| $ | 0.38 |
|
| $ | 0.41 |
| ||||||||
AFFO per share - diluted |
| $ | 0.09 |
|
| $ | 0.10 |
|
| $ | 0.40 |
|
| $ | 0.43 |
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| |||||||
FFO and FFO as adjusted per weighted average shares outstanding |
|
|
|
|
|
|
|
| ||||||||||||||||
Net income |
| $ | 0.08 |
|
| $ | 0.05 |
| ||||||||||||||||
Eliminate items excluded from FFO: |
|
|
|
|
|
|
|
| ||||||||||||||||
Depreciation and amortization |
|
| 0.05 |
|
|
| 0.13 |
| ||||||||||||||||
Realized gain on investment securities |
|
| (0.08 | ) |
|
| (0.08 | ) | ||||||||||||||||
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|
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|
|
| ||||||||||||||||
FFO per share attributable to common stockholders |
|
| 0.04 |
|
|
| 0.10 |
| ||||||||||||||||
Adjustments: |
|
|
|
|
|
|
|
| ||||||||||||||||
Business development and property acquisition costs |
|
| 0.01 |
|
|
| 0.06 |
| ||||||||||||||||
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|
|
|
|
|
|
|
| ||||||||||||||||
AFFO per share attributable to common stockholders |
| $ | 0.05 |
|
| $ | 0.16 |
| ||||||||||||||||
Weighted average shares outstanding - basic |
|
| 11,057,928 |
|
|
| 11,025,477 |
|
|
| 11,045,699 |
|
|
| 10,845,884 |
| ||||||||
Weighted average shares outstanding - diluted |
|
| 11,096,619 |
|
|
| 11,071,042 |
|
|
| 11,087,217 |
|
|
| 10,900,041 |
|
Analysis of Global Self Storage Store OperationsExpansions
In addition to actively reviewing a number of store and portfolio acquisition candidates, we have been working to further developredevelop and expand our current stores.
At our Sadsburyville, PA store in 2015, In 2020, we completed construction of a state-of-the-art, all climate-controlled two story storage building, adding 16,756three expansion / conversion projects at our properties located in Millbrook, NY, McCordsville, IN, and West Henrietta, NY. In 2021 and 2023, we completed conversion projects at our property located in Lima, OH.
In 2019, the Company broke ground on the Millbrook, NY expansion, which added approximately 11,800 leasable square feet featuringof all-climate-controlled units. Upon completion in February 2020, the Millbrook, NY store's area occupancy dropped from approximately 88.6% to approximately 45.5%. As of June 30, 2021, the Millbrook, NY store’s total area occupancy was approximately 95.4%.
In the first quarter of 2020, the Company began reviewing plans to convert certain commercially-leased space to all-climate-controlled units at the McCordsville, IN property. In April 2020, the Company commenced such conversion, which resulted in a numbernew total of unique drive-up, climate-controlled units. This expansion appears to535 units and 76,360 leasable square feet at the McCordsville, IN property. Upon completion in June 2020, the McCordsville, IN store's total area occupancy dropped from what would have been well received by the local market.approximately 97.4% to approximately 79.1%. As of December 31, 2016,June 30, 2021, the McCordsville, IN store’s total area occupancy was approximately 18 months after construction was94.7%.
Our West Henrietta, NY store expansion project, completed and lease-up commenced, 100%in August 2020, added approximately 7,300 leasable square feet of the first floor and 82% of the entire building have been leased.
At our Bolingbrook, IL store in 2016, all site work, construction, and final inspections and approvalsdrive-up storage units. Upon completion of the expansion project, in Bolingbrook, IL were completed. This expansion has addedWest Henrietta, NY’s total area occupancy dropped from approximately 44,26089.6% to approximately 77.9%. As of June 30, 2021, the West Henrietta, NY store’s total area occupancy was approximately 89.1%.
44
In 2021, the Company began reviewing plans to convert certain commercially-leased spaces to approximately 3,000 leasable square feet of all-climate-controlled units at the Lima, OH property. In July 2021, the Company completed such conversion, resulting in a new total of 756 units and 304 of climate-controlled and traditional storage units bringing the total to 110,60096,883 leasable square feet and 801 storage units. The project costat the Lima, OH property. Upon completion, total area occupancy was approximately $2,600,000, which equates to an all-in cost of94.8%. This conversion did not constitute a significant renovation or expansion because it only added approximately $59 per square foot. As of December 31, 2016, 21.3% or 9,3603,000 leasable square feet of self storage to the five building expansionproperty. As such, our Lima, OH property remained a same store property.
In 2022, the Company began reviewing plans to convert certain commercially-leased spaces to approximately 2,500 leasable square feet had been leased.of all-climate-controlled units at the Lima, OH property. In January 2023, the Company completed such conversion, resulting in a new total of 767 units and 94,928 leasable square feet at the Lima, OH property. Upon completion, total area occupancy was approximately 91.1%. This lease-up has been faster than expected.conversion did not constitute a significant renovation or expansion because it only added approximately 2,500 leasable square feet of self storage to the property. As such, our Lima, OH property remained a same store property.
We are currently reviewing our Merrillville, IN store for the possible expansion construction of three new traditional drive-up storage unit buildings totaling 13,300 square feet.
24
Analysis of Realized and Unrealized Gains (Losses)
Realized gainsUnrealized gains/(losses) on the Company’s investment in marketable equity securities for the periodthree and twelve months ended December 31, 20162023 were $602,428 compared to $900,368$574,142 and $408,876, respectively, and for the periodthree and twelve months ended December 31, 2015.2022 were $(227,144) and $(1,117,029), respectively. As we continue to acquire and/or developredevelop additional stores, as part of the funding for such activities, we plan tomay liquidate our investment in marketable equity securities holdings and potentially realize gains or losses. As of December 31, 2016,2023, our cumulative unrealized gain on investmentmarketable equity securities available-for-sale was $718,463.
Distributions and Closing Market Prices
Distributions for the three months ended December 31, 2016 totaled $0.065 per share and$2,019,542. There were no realized gains or losses for the twelve months ended December 31, 2016 totaled $0.26 per share. The Company’s closing market price as of2023 and December 31, 2016 was $4.772022.
Item 7A. Quantitative and as of December 31, 2015 was $3.92. Past performance does not guarantee future results.Qualitative Disclosures About Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
The financial statements are included in this annual report beginning on page F-3.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
There were no changes in or disagreements with our accountants on accounting and financial disclosures during the last two fiscal years.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures.Procedures
We maintain disclosure controls and procedures to ensure that information required to be disclosed in the reports we file pursuant to the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” in Rule 13a-15(e) of the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide a reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
We have a disclosure controls and procedures committee, comprised of the Chief Executive Officer and Chief Financial Officer, which meets as necessary and is responsible for considering the materiality of information and determining our disclosure obligations on a timely basis.
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The disclosure controls and procedures committee carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Management’s Annual Report on Internal Control Over Financial Reporting.Reporting
This annual report does not includeOur management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a reportprocess designed by, or under the supervision of, management's assessmentour principal executive and principal financial officers and effected by our board of directors, audit committee, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that:
Because of its inherent limitations, internal control over financial reporting may not prevent or an attestation reportdetect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, our management used criteria set forth by the Committee of Sponsoring Organizations of the Company's registered public accounting firm due to a transition period established by rulesTreadway Commission in Internal Control-Integrated Framework (2013 Framework).
Based on this assessment, our management believes that, as of the Securities and Exchange Commission for newly public companies.December 31, 2023, our internal control over financial reporting was effective based on those criteria.
25
Changes in Control Over Financial Reporting.Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) under the Exchange Act) that occurred during our fiscal fourth quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
On March 25, 2024, the Company entered into a second amended and restated employment agreement (the Agreement") with its Chief Executive Officer and President, Mark C. Winmill.
The Agreement has an initial term of three years and is subject to automatic one-year extensions thereafter, unless either party provides at least 90 days’ notice of non-renewal.
The Agreement provides for:
The following table sets forth certain information concerning the directors currently serving•
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The Agreement provides that, if Mr. Winmill’s employment is terminated by the Company without “cause” or by Mr. Winmill for “good reason” (each as defined in the Agreement), or as a result of the Company. Company’s notice of non-renewal of the employment term, Mr. Winmill will be entitled to the following severance payments and benefits, subject to the execution and non-revocation of a general release of claims:
In the event Mr. Winmill’s employment terminates by reason of his death or disability he or his estate shall receive:
The Agreement contains standard confidentiality provisions, which apply indefinitely, and both non-competition and non-solicitation of employees and customers covenants, which apply during the term of the Class I director shall last until theemployment and for a period of twelve months thereafter.
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information regarding our executive officers and certain other matters required by Item 401 of Regulation S-K is incorporated herein by reference to our definitive proxy statement relating to our annual meeting of stockholders held in 2017 and until his successor is elected and qualifies. (the “Proxy Statement”), to be filed with the SEC within 120 days after December 31, 2023.
The term of the Class II directors shall last until the annual meeting of stockholders held in 2018 and until their successors are elected and qualify. The term of the Class III directors shall last until the annual meeting of stockholders held in 2019 and until their successors are elected and qualify. At each annual meeting of the stockholders of the Company, the successors to the class of directors whose term expires at that meeting shall be elected to hold office for a term continuing until the annual meeting of stockholders held in the third year following the year of their election and until their successors are elected and qualify.
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The executive and other officers, other than those who serve as directors, and their relevant biographical information are set forth below.
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We have adopted a Code of Conduct and Ethics inregarding compliance with rules of the SEC that applies to all of our personnel, including our Board of Directors, Chief Executive Officer, and Chief Financial Officer. The Code of Conduct and Ethics is available free of charge on the “Governance Documents” section of our website at http://ir.globalselfstorage.us/. We intend to satisfy any disclosure requirements under Item 5.05 of Form 8-K regarding amendments to, or waivers from, provisions of our Code of Conduct and Ethics by posting such information on our web site at the address specified above.
29
Section 16(a) Beneficial Ownership Reporting Compliance
Based on the Company’s review of Forms 3 and 4 and amendments thereto furnished to the Company during its most recent fiscal year and Forms 5 and amendments thereto furnished to the Company with respect to its most recent fiscal year, the Company believes that its directors and officers, and any beneficial owners of more than 10% of the Company’s common stock complied with the filing requirements of Section 16(a) of the Exchange Act except with respectrequired by Item 405 of Regulation S-K is incorporated herein by reference to the following:
Name of Filer |
| Form Type |
|
| Number of Late Reports |
|
| Number of Transactions |
| |||
Russell E. Burke III |
|
| 4 |
|
|
| 1 |
|
|
| — |
|
Bruce B. Huber |
|
| 5 |
|
|
| 1 |
|
|
| 2 |
|
George. B. Langa |
|
| 4 |
|
|
| 1 |
|
|
| — |
|
Mark C. Winmill |
|
| 4 |
|
|
| 1 |
|
|
| 1 |
|
William C. Zachary |
|
| 4 |
|
|
| 1 |
|
|
| — |
|
Audit Committee Financial Expert
The Company’s Board of Directors has determined that it has three “audit committee financial experts” (as that term is defined underProxy Statement to be filed with the SEC rules implementing Section 407 of the Sarbanes-Oxley Act) serving on its Audit Committee, each of whom are “independent” directors that satisfy the heightened audit committee independence requirements under the NASDAQ Listing Rules and Rule 10A-3 of the Exchange Act. Further, each member of the Audit Committee possesses the requisite financial sophistication, as defined under the applicable rules and regulations of NASDAQ.
The following is a description of the material elements of compensation for our named executive officers listed below:
Mark C. Winmill, President and Chief Executive Officer; and
Thomas O’Malley, Chief Financial Officer, Treasurer, and Vice President.
For the years endedwithin 120 days after December 31, 20152023.
The information regarding our Code of Business Conduct and Ethics required by Item 406 of Regulation S-K is incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2016, respectively, no other Company officer’s total compensation exceeded $100,000.2023.
Summary Compensation Table
The following table provides summary information concerning compensation paid or accruedregarding certain matters pertaining to our corporate governance required by the Company to or on behalfItem 407(c)(3), (d)(4) and (d)(5) of our named executive officers for services providedRegulation S-K is incorporated by reference to the Company duringProxy Statement to be filed with the years endedSEC within 120 days after December 31, 20162023.
Item 11. Executive Compensation.
The information regarding executive compensation and 2015. other compensation related matters required by Items 402 and 407(e)(4) and (e)(5) of Regulation S-K is incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2023.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The Company has not granted or paid any stock awards, option awards, nonequity incentivetables on equity compensation plan compensation, or nonqualified deferred compensation earnings to any of its employees, officers, or directors.
Name and Principal Position |
| Year |
| Salary ($) |
|
| Bonus ($) |
|
| All Other Compensation (1) ($) |
|
| Total ($) |
| ||||
Mark C. Winmill |
| 2016 |
|
| 270,000 |
|
|
| 20,385 |
|
|
| 49,054 |
|
|
| 339,439 |
|
President and Chief Executive Officer |
| 2015 |
|
| 255,000 |
|
|
| 10,385 |
|
|
| 43,868 |
|
|
| 309,253 |
|
Thomas O’Malley |
| 2016 |
|
| 114,327 |
|
|
| 9,918 |
|
|
| 7,502 |
|
|
| 131,747 |
|
Chief Financial Officer, Treasurer, and Vice President |
| 2015 |
|
| 75,278 |
|
|
| 3,825 |
|
|
| 4,918 |
|
|
| 84,021 |
|
30
|
|
Name |
| 401 (k) Match ($) |
|
| Benefits ($) |
|
| Auto Lease and Insurance ($) |
|
| Total of All Other Compensation ($) |
| ||||
Mark C. Winmill |
|
| 8,648 |
|
|
| 19,305 |
|
|
| 21,101 |
|
|
| 49,054 |
|
Thomas O’Malley |
|
| 6,663 |
|
|
| 839 |
|
|
| — |
|
|
| 7,502 |
|
Mr. Winmill’s compensation as Presidentinformation and CEObeneficial ownership of the Company is determinedrequired by the Compensation CommitteeItems 201(d) and consists of a salary, bonus, employee benefits, and/or reimbursement of reasonable business expenses. The Compensation Committee reviews and approves corporate goals and objectives relevant to Mr. Winmill’s compensation, evaluates his performance relative to those goals and objectives, and sets his compensation annually. As of December 31, 2016, Messrs. Winmill and O’Malley’s compensation plan generally consisted of base salary, employee benefits plan participation, qualified retirement plan participation, bonuses, and certain prerequisites. A portion of Messrs. Winmill and O’Malley’s compensation may be deferred at their election.
Mr. Winmill’s base salary is typically determined annually by the Compensation Committee by level of responsibility and tenure at the Company. For 2015 and 2016, the Board directed that non-CEO employee compensation, including Mr. O’Malley’s, be set based on a general methodology used in prior years whereby the total level of compensation for each employee that is concurrently employed by the Company and its affiliates is set by Mark Winmill, as CEO of the Company and Tuxis, and Thomas Winmill, as CEO of the Company’s other affiliates, and then allocated based on time allocation reports of each such non-CEO employee or other means deemed appropriate by Messrs. Mark and Thomas Winmill.
The primary components of Mark Winmill and Thomas O’Malley’s bonuses are typically based on, among other things, (i) number of weeks’ salary paid as bonuses to Company employees generally, and/or (ii) the financial performance of the Company. A subjective component of Mark Winmill and Thomas O’Malley’s bonuses may be based on their overall contribution to management of the Company.
Benefits consist of premiums paid by the Company for medical, dental, vision, life, and long term disability insurances. The Company and its affiliates (as detailed below) participate in a 401(k) retirement savings plan for substantially all qualified employees. A matching expense based upon a percentage of contributions to the plan by eligible employees is incurred and allocated among the Company and its affiliates. The matching expense is accrued and funded on a current basis and may not exceed the amount permitted as a deductible expense under the IRC. The Company’s allocated matching expense to Mark Winmill and Thomas O’Malley under the plan was $8,648 and $6,663, respectively, for the year ended December 31, 2016.
The Company provides a maximum monthly automobile allowance of $1,000 per month to Mark C. Winmill. To the extent that the monthly maximum payment under the Company’s automobile lease exceeds the monthly allowance, Mr. Winmill must reimburse the Company for the excess amount. In this regard, Mr. Winmill has reimbursed the Company $1,878 for the automobile payments paid and due in 2016.
The Company previously had an employment agreement with Mr. Winmill (the “Employment Agreement”) which terminated upon the Company’s deregistration as an investment company on January 19, 2016. Under the Employment Agreement, Mr. Winmill held the title of President and Chief Executive Officer of the Company and his compensation, with respect to the Company, consisted of a salary at a rate of $22,500 per month, bonus, employee benefits, and/or reimbursement of reasonable business expenses. Upon termination of the Employment Agreement, the Board elected to retain Mr. Winmill as President and Chief Executive Officer of the Company.
31
Currently, the independent directors are paid an annual retainer of $2,000, payable semi-annually, a fee of $6,000 for each semi-annual Board meeting attended, $250 for each special Board meeting attended, $250 for each committee meeting attended, and $500 per annum per committee chaired. Each independent director is reimbursed for reasonable travel and out-of-pocket expenses associated with attending Board and committee meetings.
A summary of the compensation and benefits for the directors of the Company for the fiscal year ended December 31, 2016 is shown in the following table:
Name |
| Fees earned or paid in cash ($) |
|
| All other compensation ($) |
|
| Total ($) |
| |||
Independent Directors: |
|
|
|
|
|
|
|
|
|
|
|
|
Russell E. Burke III |
| $ | 12,250 |
|
| $ | — |
|
| $ | 12,250 |
|
George B. Langa |
| $ | 12,250 |
|
| $ | — |
|
| $ | 12,250 |
|
William C. Zachary |
| $ | 12,250 |
|
| $ | — |
|
| $ | 12,250 |
|
Interested Directors: |
|
|
|
|
|
|
|
|
|
|
|
|
Thomas B. Winmill |
| $ | — |
|
| $ | — |
|
| $ | — |
|
32
|
|
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of February 28, 2017 for:
•each shareholder known by us to be a beneficial owner of more than 5% of our capital stock;
•each of our directors;
•each of our named executive officers; and
•all of our directors and officers as a group.
We have determined beneficial ownership in accordance with the rules of the SEC. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. There are no shares of common stock subject to options or other rights exercisable outstanding as of the date of this annual report. Except as indicated in the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole or shared voting and investment power with respect to all of the common stock that they beneficially own.
Applicable percentage ownership is based on 7,619,469 shares of common stock outstanding as of February 28, 2017. Unless otherwise indicated, the address of each beneficial owner in the table is: Global Self Storage, Inc., 11 Hanover Square, New York, NY 10005.
Name |
| Amount and Nature of Beneficial Ownership |
|
|
| Percentage of Outstanding Shares |
| ||
5% Shareholder: |
|
|
|
|
|
|
|
|
|
Financial & Investment Management Group, Ltd. 111 Cass St. Traverse City, MI 49684 |
|
| 925,892 |
| (1) |
|
| 12.48 | % |
Named Executive Officers and Directors: |
|
|
|
|
|
|
|
|
|
Mark C. Winmill |
|
| 401,879 |
| (2) |
|
| 5.27 | % |
Thomas B. Winmill PO Box 4 Walpole, NH 03608 |
|
| 357,204 |
| (3) |
|
| 4.69 | % |
Winmill Family Trust |
| 351,993 |
| (4) |
|
| 4.62 | % | |
Winmill & Co. Incorporated |
| 351,993 |
| (5) |
|
| 4.62 | % | |
Tuxis Corporation |
|
| 223,766 |
|
|
|
| 2.94 | % |
Russell E. Burke |
|
| 15,160 |
|
|
| * |
| |
William C. Zachary |
|
| 1,000 |
|
|
| * |
| |
George B. Langa |
|
| 156 |
|
|
| * |
| |
Thomas O'Malley |
| — |
|
|
| * |
| ||
Directors and officers as a group (11) |
|
| 419,080 |
|
|
|
| 5.50 | % |
|
|
|
|
33
|
|
|
|
|
|
|
Equity Compensation Plan Information
Not applicable.
There are no currently proposed transactions nor have there been any transactions during the Company’s last two fiscal years in which the Company was or is to be a participant and the amount involved exceeds $120,000, and in which any related person (as defined in Item 404403 of Regulation S-K are incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2023.
The information regarding transactions with related persons, promoters and certain control persons and trustee independence required by Items 404 and 407(a) of Regulation S-K is incorporated herein by reference to the Exchange Act) had or will have a direct or indirect material interest, except forProxy Statement to be filed with the transaction with Tuxis described below. SEC within 120 days after December 31, 2023.
Item 14. Principal Accounting Fees and Services.
The Company has not had a promoter at any time during the past five fiscal yearsinformation concerning principal accounting fees and does not have a parent.
Transaction with Tuxis
On November 23, 2016, the Company entered into the Purchase Agreement with Tuxis, a Company affiliate, to acquire all of the membership interests of the Tuxis Subsidiaries, for the aggregate purchase price of $7,800,000, comprised of $5,925,000 payable in cash, $975,000 in shares of the Company’s common stock, and, contingent upon the satisfaction of certain conditions described in the Purchase Agreement, an additional $900,000 cash payment.
On November 21, 2016, upon the unanimous recommendations of a special committee of independent disinterested directors (the “Special Committee”) of the Board, the Board authorized the acquisition of all of the membership interests of the Tuxis Subsidiariesservices and the Company’s entry into the Purchase Agreement by and between the Company and Tuxis. Tuxis has the same Chairman of the Board, President, and Chief Executive Officer as the Company. In addition, Tuxis has substantially the same officers as the Company and also has a number of employees in common with the Company. Mark Winmill is a director, Chairman of the Board, President, and Chief Executive Officer of the Company and Tuxis. Thomas O’Malley is Treasurer, Chief Financial Officer, and a Vice President of the Company and Tuxis. John Ramírez is Secretary, General Counsel, and a Vice President of the Company and Tuxis. Thomas Winmill, the brother of Mark Winmill, is a Vice President of Tuxis and a director and Vice President of the Company.
Each of Mark Winmill and Thomas Winmill is a trustee of the Winmill Family Trust, which owns all of the voting stock of Winco. As of October 11, 2016, the record date for Tuxis’ stockholder meeting (the “Record Date”) to consider, among other things, the Purchase Agreement, Midas Securities, a wholly owned subsidiary of Winco, owned 234,665 shares (or approximately 19%) of Tuxis’ outstanding shares of common stock. Additionally, as of the Record Date, Winco and Tuxis owned approximately 1.7% and 0.3%, respectively, of the Company’s outstanding common stock. Mark Winmill and Thomas Winmill may be deemed to have indirect beneficial
34
ownership of the Company’s shares owned by Midas Securities, Winco, and Tuxis, respectively, as a result of their status as controlling persons of the Winmill Family Trust. Each of Mark Winmill and Thomas Winmill disclaims beneficial ownership of these shares. Pursuant to the recommendation of a special committee of independent disinterested directors of Winco’s Board of Directors, Winco voted all of the Tuxis shares held by Midas Securities in favor of the sale of the Tuxis Subsidiaries.
On November 18, 2016, the Tuxis Board of Directors authorized a special dividend to Tuxis stockholders of $0.10 per share of Tuxis common stock contingent upon the Closing (as defined herein) of the Purchase Agreement. Accordingly, Midas Securities received a cash dividend of approximately $23,467 following the Closing. In addition, upon Closing, Tuxis used a portion of the proceeds to pay down its liabilities due to certain affiliates, including Winco, in the amount of approximately $1 million.
Among other things, due to the commonality of a director and the officers of the Company and Tuxis, the Board formed the Special Committee in seeking to ensure that the acquisition was fair to Company stockholders and in the best interests of the Company. The Special Committee was comprised of Russell E. Burke III, George B. Langa, and William C. Zachary, each an independent disinterested director of the Company. The Special Committee was granted the power to retain counsel and other advisers, to review, negotiate, and evaluate the terms of the acquisition of the Tuxis Subsidiaries pursuant to the Purchase Agreement and determine whether to recommend to the Board that the Board approve the acquisition of the Tuxis Subsidiaries and the Purchase Agreement. The Special Committee and the Board each met four times to consider the acquisition of the Tuxis Subsidiaries.
After careful consideration, the SpecialAudit Committee’s unanimous recommendations were determined based on a number of factors including, among other things: negotiations between the Company and Tuxis overseen by the Special Committee and a special committee of Tuxis’ independent disinterested directors, Susan Parker and Timothy Taft, that took place from February 2016 to November 2016; valuation analyses by independent financial advisors; independent third party real estate appraisals; and market capitalization rates. The Special Committee received a fairness opinion from an independent financial advisor, Akin Bay Company LLC (“Akin Bay”), that the consideration paid by the Company for the acquisition of the Tuxis Subsidiaries pursuant to the Purchase Agreement was fair, from a financial metrics point of view, to the Company’s stockholders. In connection with Akin Bay’s fairness opinion, among other things, Akin Bay: analyzed Tuxis’ historical financial statements; reviewed the Company’s capital investment plan to expand TSS II’s existing self storage facility; analyzed multi-year financial projections; conducted traditional valuation analyses of the properties owned by the Tuxis Subsidiaries, which included discounted cash flow, present value, comparable public company valuation and independent third party real estate appraisals; conducted a personal site survey of the Properties; reviewed valuation statistics for selected publicly traded real estate investment trusts that focus on investing in self-storage real estate; discussed with Company management the current and prospective performance of the Company, the Properties, market conditions and pricing parameters for properties similar to the Properties owned by the Company; reviewed the Purchase Agreement and the registration rights agreement (the "Registration Rights Agreement") between the Company and Tuxis; and conducted such other analyses that were deemed appropriate.
On December 30, 2016, the Company completed the acquisition of the Tuxis Subsidiaries (the “Acquisition”) for $5,925,000 in cash and 202,703 unregistered and restricted shares of the Company's common stock and entered into the Registration Rights Agreement which permits Tuxis to request the registration of such shares. Upon re-development and expansion approval at the Millbrook store and satisfaction of other conditions, including construction groundbreaking, pursuant to the Purchase Agreement, an additional $900,000 cash payment is expected to be made by the Company to Tuxis.
35
Certain officers of the Company also serve as officers and/or directors of Winco, Bexil, Tuxis, and their affiliates (collectively with the Company, the “Winco Affiliates”). As of December 31, 2016, certain of the Winco Affiliates owned approximately 4% of the Company’s outstanding common stock. There may be conflicts of interest resulting from the relationships among the Company, the Winco Affiliates, and other related parties. The outside business interests of the Company’s officers may divert their time and attention away from the Company, and may result in a potential conflict with respect to the allocation of business opportunities, which could harm its business. The Board has adoptedpre-approval policies and procedures designed to mitigate these conflicts of interest, such as allocation procedures for determining the appropriate allocation of such business opportunities. Specifically, if any officer or director of the Company who also serves as an officer, director, or advisor of the Winco Affiliates becomes aware of a potential transaction related primarilyrequired by Item 14 is incorporated herein by reference to the self storage business that may represent a corporate opportunity for the Company and one or more of the Winco Affiliates, such officer or director has no dutyProxy Statement to present that opportunity to such Winco Affiliates and the Company will have the sole right to pursue the transaction if the Board of Directors so determines. Notwithstanding the foregoing, officers or directors of the Company are encouraged to notify the Winco Affiliates of such an opportunity.
Director Independence
The rules of NASDAQ generally require that a majority of the members of a listed company’s board of directors be independent. In addition, the listing rules generally require that, subject to specified exceptions, each member of a listed company’s audit, compensation, and governance committees be independent.
Accordingly, our Board of Directors has evaluated the independence of its members based upon the rules of the NASDAQ Stock Market andfiled with the SEC and the transactions referenced under “Certain Relationships and Related Party Transactions” discussed above. Applying these standards, our Board of Directors determined that none of the directors who currently serve, other than Messrs. Mark and Thomas Winmill, have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that Messrs. Burke, Langa, and Zachary are “independent” as that term is defined under Rule 5605(a)(2) of the NASDAQ Listing Rules. Messrs. Mark and Thomas Winmill are not considered independent because they are officers of the Company. Our Board of Directors also determined that each non-employee director who serves as a member of the Audit, Compensation, and Nominating Committees satisfies the independence standards for such committee established by the SEC and the NASDAQ Listing Rules, as applicable.
Our Audit Committee has appointed the firm of Tait, Weller & Baker LLP (“Tait, Weller”) to serve as our independent registered public accounting firm for the year endingwithin 120 days after December 31, 2016. Tait, Weller has acted as the Company’s independent registered public accounting firm since 1996, and our management considers the firm to be well qualified.2023.
48
PART IV
We have been advised by Tait, Weller that it is a registered public accounting firm with the PCAOB and complies with the auditing, quality control and independence standards and rules of the PCAOB and the SEC.Item 15. Exhibits, Financial Statement Schedules.
36
The following table presents the aggregate fees for professional audit services rendered for the integrated audits of our annual financial statements for the years ended December 31, 2016 and 2015, for the reviews of the financial statements included in our Quarterly Reports on Form 10-Q for those fiscal years, if applicable, and for the testing of our internal control over financial reporting pursuant to Section 404(a) of the Sarbanes-Oxley Act of 2002, and fees billed for other services rendered during those periods.
|
| 2016 |
|
| 2015 |
| ||
Audit fees (1) |
| $ | 52,500 |
|
| $ | 29,000 |
|
Audit - related fees (2) |
|
| 9,750 |
|
|
| 1,500 |
|
Tax fees (3) |
|
| 16,250 |
|
|
| 10,750 |
|
All other fees |
|
| — |
|
|
| 6,250 |
|
Total |
| $ | 78,500 |
|
| $ | 47,500 |
|
|
|
|
|
|
|
Audit Committee Pre-Approval of Services by the Independent Registered Public Accounting Firm
In accordance with its charter and applicable rules and regulations adopted by the SEC, the Company’s Audit Committee reviews and pre-approves any engagement of the independent registered public accounting firm to provide audit, review or attest services or non-audit services and the fees for any such services. The Audit Committee annually considers and, if appropriate, approves the provision of audit services by the independent registered public accounting firm. In addition, the Audit Committee periodically considers and, if appropriate, approves the provision of any additional audit and non-audit services by our independent registered public accounting firm that are neither pre-approved by the Audit Committee on an annual basis nor prohibited by applicable rules and regulations of the SEC. The Audit Committee has delegated to the chairman of the Audit Committee, Mr. Zachary, the authority to pre-approve, on a case-by-case basis, any such additional audit and non-audit services to be performed by our independent registered public accounting firm. Mr. Zachary reports any decision to pre-approve such services to the Audit Committee at its next regular meeting. All of the fees described in the table above were pre-approved by the Audit Committee.
37
(a) Documents filed as part of this report:
1. Financial Statements.
(1) and (2). All Financial Statements and Financial Statement Schedules filed as part of this Annual Report on 10-Kannual report are included in Part II, Item 8—“”Financial Statements and Supplementary Data” of this Annual Report on 10-Kannual report and reference is made thereto.
(3) The list of exhibits filed with this annual report is set forth in response to Item 15(b).
(b) Exhibits. The following documents are filed or incorporated by references as exhibits to this report:
Exhibit Item | Number and Description | Incorporated by Reference | Filed Herewith | |||||
3.1.1. |
| |||||||
3.1.2. |
| |||||||
|
|
| ||||||
|
|
| ||||||
|
|
| ||||||
|
|
| ||||||
|
| X | ||||||
4.1 |
| X | ||||||
4.2 | X | |||||||
4.3 | Form of Registration Rights Agreement by and between the Company and Tuxis |
| X | |||||
| X | |||||||
10.1 |
| X | ||||||
10.2 |
| X | ||||||
10.3 |
|
38
|
|
|
| |||
49
10.4 | ||||||||
| Form of Mortgage, Assignment of Leases and Rents and Security Agreement |
| X | |||||
10.5 |
| |||||||
|
|
| ||||||
|
|
| ||||||
|
|
| ||||||
|
|
| ||||||
|
|
| ||||||
| Restated Employment Agreement between Mark C. Winmill and the Company dated |
| X | |||||
| X | |||||||
10.7 | X | |||||||
10.8 | X | |||||||
10.9 | X | |||||||
10.10 | X | |||||||
10.11 | X | |||||||
10.12 | X | |||||||
10.13 | X | |||||||
21.1 | X | |||||||
|
| X | ||||||
| Powers of Attorney (included as part of the signature pages hereto) | |||||||
31.1 | X | |||||||
31.2 | X | |||||||
32.1 | X | |||||||
50
32.2 | X | |||||
|
| X |
101. | The following materials from Global Self Storage, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2023, are formatted in Inline XBRL (eXtensible Business Reporting Language): (1) consolidated balance sheets; (2) consolidated statements of operations; (3) consolidated statements of comprehensive income (loss); (4) consolidated statement of changes in equity; (5) consolidated statements of cash flows; (6) notes to consolidated financial statements; and (7) financial statement schedule III. | X | ||||
104 | The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 has been formatted in Inline XBRL (eXtensible Business Reporting Language) and in included in Exhibit 101. | X | ||||
|
|
|
Item 16. Form 10-K Summary.
Not applicable.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GLOBAL SELF STORAGE, INC. | ||
Date: March | /s/ Mark C. Winmill | |
By: Mark C. Winmill Chief Executive Officer, President and Chairman of the Board of Directors (Principal Executive Officer) | ||
| ||
|
| |
| ||
|
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Mark C. Winmill, Donald Klimoski II, and Russell Kamerman, and each of them, with full power to act without the other, such person’s true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign this Form 10-K and any and all amendments thereto, and to file the same, with exhibits and schedules thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or desirable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby
51
ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: March 26, 2024 | ||
| /s/ Mark C. Winmill | |
By: Mark C. Winmill | ||
| ||
Date: March | /s/ Thomas O’Malley | |
By: Thomas O’Malley | ||
| ||
Date: March | /s/ Thomas B. Winmill | |
By: Thomas B. Winmill | ||
Director | ||
| ||
Date: March 26, 2024 | /s/ Russell E. Burke III | |
By: Russell E. Burke III | ||
Director | ||
Date: March 26, 2024 | /s/ George B. Langa | |
By: George B. Langa | ||
Director | ||
Date: March 26, 2024 | /s/ William C. Zachary | |
By: William C. Zachary | ||
|
|
| /s/ Sally C. Carroll | |
| By: Sally C. Carroll | |
Director |
52
*Pursuant to authority granted by powers of attorney, copies of which are filed herewith.
40
Financial StatementsStatements`
Table of Contents
F-2 | ||
Consolidated Balance | F-3 | |
F-4 | ||
Consolidated | F-5 | |
F-6 | ||
| ||
|
| |
| ||
| ||
|
| |
|
| |
| ||
|
F-1
F-1
Report of Independent RegisteredRegistered Public Accounting Firm
Audit Committee of
Stockholders and the Board of Directors
Global Self Storage, Inc.
New York, New York
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet (successor basis)sheets of Global Self Storage, Inc. and its subsidiaries (the Company) as of December 31, 20162023 and 2022, the related consolidated statements (successor basis) of operations and comprehensive loss,income, stockholders’ equity and cash flows for the period January 19, 2016 throughyears then ended, and the related notes to the consolidated financial statements and schedule (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2016,2023 and 2022, and the statements (predecessor basis)results of its operations changes in net assets, and its cash flows for the period January 1, 2016 through January 18, 2016, andyears then ended in conformity with accounting principles generally accepted in the statementUnited States of assets and liabilities (predecessor basis) of Global Self Storage, Inc. includingAmerica.
Basis for Opinion
These financial statements are the schedule of portfolio investments as of December 31, 2015 and the related statements (predecessor basis) of operations, changes in net assets, and cash flows for the year then ended. In connection with our auditsresponsibility of the consolidated financial statements, we have also audited financial statement Schedule III. Global Self Storage, Inc.’s management is responsible for these financial statements and financial statement Schedule III.Company's management. Our responsibility is to express an opinion on thesethe Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included considerationAs part of our audits we are required to obtain an understanding of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’sCompany’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.
In our opinion,Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements referredthat were communicated or required to above present fairly, in allbe communicated to the audit committee and that: (1) relate to accounts or disclosures that are material respects,to the financial position (successor basis) of Global Self Storage, Inc.statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ RSM US LLP
We have served as of December 31, 2016, and the results (successor basis) of its operations and its cash flows for the period January 19, 2016 through December 31, 2016, the results of its operations, changes in net assets, and its cash flows for the period January 1, 2016 through January 18, 2016 (predecessor basis), and the financial position (predecessor basis) of Global Self Storage, Inc. as of December 31, 2015 and the results of its operations, changes in net assets, and its cash flows for the year then ended (predecessor basis) in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion the related financial statement schedule when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.Company's auditor since 2019.
Dallas, Texas
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
March 30, 201726, 2024
F-2
GLOBAL SELF STORAGE, INC.
CONSOLIDATED BALANCE SHEET (Successor Basis)SHEETS
December 31, 2016
|
| December 31, 2023 |
|
| December 31, 2022 |
| ||
Assets |
|
|
|
|
|
| ||
Real estate assets, net |
| $ | 55,481,220 |
|
| $ | 56,884,160 |
|
Cash and cash equivalents |
|
| 6,921,779 |
|
|
| 6,363,610 |
|
Restricted cash |
|
| 106,767 |
|
|
| 151,397 |
|
Investments in securities |
|
| 2,775,029 |
|
|
| 2,366,153 |
|
Accounts receivable |
|
| 169,410 |
|
|
| 168,299 |
|
Prepaid expenses and other assets |
|
| 629,196 |
|
|
| 479,458 |
|
Interest rate cap |
|
| 50,881 |
|
|
| 123,152 |
|
Line of credit issuance costs, net |
|
| 50,801 |
|
|
| 152,402 |
|
Goodwill |
|
| 694,121 |
|
|
| 694,121 |
|
Total assets |
| $ | 66,879,204 |
|
| $ | 67,382,752 |
|
Liabilities and stockholders' equity |
|
|
|
|
|
| ||
Note payable, net |
| $ | 16,901,219 |
|
| $ | 17,420,854 |
|
Accounts payable and accrued expenses |
|
| 1,731,958 |
|
|
| 1,622,784 |
|
Total liabilities |
|
| 18,633,177 |
|
|
| 19,043,638 |
|
Commitments and contingencies |
|
|
|
|
|
| ||
Stockholders' equity |
|
|
|
|
|
| ||
Preferred stock, $0.01 par value: 50,000,000 shares authorized, no shares outstanding |
|
| — |
|
|
| — |
|
Common stock, $0.01 par value: 450,000,000 shares authorized; 11,153,513 shares and 11,109,077 shares issued and outstanding at December 31, 2023 and 2022, respectively |
|
| 111,535 |
|
|
| 111,091 |
|
Additional paid in capital |
|
| 49,229,020 |
|
|
| 49,029,712 |
|
Accumulated deficit |
|
| (1,094,528 | ) |
|
| (801,689 | ) |
Total stockholders' equity |
|
| 48,246,027 |
|
|
| 48,339,114 |
|
Total liabilities and stockholders' equity |
| $ | 66,879,204 |
|
| $ | 67,382,752 |
|
Assets |
|
|
|
|
Real estate assets, net |
| $ | 55,775,068 |
|
Cash and cash equivalents |
|
| 2,911,640 |
|
Restricted cash |
|
| 54,054 |
|
Investments in securities |
|
| 1,473,950 |
|
Accounts receivable |
|
| 157,607 |
|
Prepaid expenses and other assets |
|
| 265,045 |
|
Intangible assets, net |
|
| 317,140 |
|
Goodwill |
|
| 694,121 |
|
Total assets |
| $ | 61,648,625 |
|
Liabilities and equity |
|
|
|
|
Note payable |
| $ | 19,374,971 |
|
Accounts payable and accrued expenses |
|
| 1,723,458 |
|
|
|
|
|
|
Total liabilities |
|
| 21,098,429 |
|
Commitments and contingencies |
|
|
|
|
Equity |
|
|
|
|
Common stock, $0.01 par value, 19,900,000 shares authorized; 7,619,469 issued and outstanding |
|
| 76,195 |
|
Series A participating preferred stock, $0.01 par value, 100,000 shares authorized: zero shares issued and outstanding |
|
| — |
|
Additional paid in capital |
|
| 33,881,863 |
|
Accumulated comprehensive income |
|
| 718,463 |
|
Retained earnings |
|
| 5,873,675 |
|
Total equity |
|
| 40,550,196 |
|
Total liabilities and equity |
| $ | 61,648,625 |
|
See notes to consolidated financial statements.
F-3
GLOBAL SELF STORAGE, INC.
STATEMENTCONSOLIDATED STATEMENTS OF ASSETSOPERATIONS AND LIABILITIES (Predecessor Basis)COMPREHENSIVE INCOME
December 31, 2015
|
| Year Ended |
|
| Year Ended |
| ||
|
| December 31, |
|
| December 31, |
| ||
Revenues |
|
|
|
|
|
| ||
Rental income |
| $ | 11,719,165 |
|
| $ | 11,485,511 |
|
Other property related income |
|
| 392,577 |
|
|
| 375,571 |
|
Management fees and other income |
|
| 78,973 |
|
|
| 83,768 |
|
Total revenues |
|
| 12,190,715 |
|
|
| 11,944,850 |
|
Expenses |
|
|
|
|
|
| ||
Property operations |
|
| 4,549,038 |
|
|
| 4,169,182 |
|
General and administrative |
|
| 2,876,300 |
|
|
| 2,580,899 |
|
Depreciation and amortization |
|
| 1,634,044 |
|
|
| 1,619,239 |
|
Business development |
|
| 20,080 |
|
|
| 48,340 |
|
Total expenses |
|
| 9,079,462 |
|
|
| 8,417,660 |
|
Operating income |
|
| 3,111,253 |
|
|
| 3,527,190 |
|
Other income (expense) |
|
|
|
|
|
| ||
Dividend and interest income |
|
| 265,046 |
|
|
| 120,575 |
|
Unrealized gain (loss) on marketable equity securities |
|
| 408,876 |
|
|
| (1,117,029 | ) |
Interest expense |
|
| (846,406 | ) |
|
| (780,223 | ) |
Gain on Paycheck Protection Program (PPP) loan forgiveness |
| — |
|
|
| 307,210 |
| |
Total other expense, net |
|
| (172,484 | ) |
|
| (1,469,467 | ) |
Net income and comprehensive income |
| $ | 2,938,769 |
|
| $ | 2,057,723 |
|
Earnings per share |
|
|
|
|
|
| ||
Basic |
| $ | 0.26 |
|
| $ | 0.19 |
|
Diluted |
| $ | 0.26 |
|
| $ | 0.19 |
|
Weighted average shares outstanding |
|
|
|
|
|
| ||
Basic |
|
| 11,045,699 |
|
|
| 10,845,884 |
|
Diluted |
|
| 11,087,217 |
|
|
| 10,900,041 |
|
Assets |
|
|
|
|
Investments, at value |
|
|
|
|
Wholly owned subsidiaries (cost $27,749,573) |
| $ | 34,624,573 |
|
Unaffiliated issuers (cost $5,974,192) |
|
| 7,809,137 |
|
|
|
| 42,433,710 |
|
Cash |
|
| 29,763 |
|
Dividends receivable |
|
| 14,403 |
|
Other assets |
|
| 12,320 |
|
Total assets |
|
| 42,490,196 |
|
Liabilities |
|
|
|
|
Accounts payable and accrued expenses |
|
| 139,025 |
|
Due to affiliates |
|
| 64,649 |
|
Total liabilities |
|
| 203,674 |
|
Net Assets |
| $ | 42,286,522 |
|
Net Asset Value Per Share |
|
|
|
|
(applicable to 7,416,766 shares outstanding: 20,000,000 shares of $.01 par value authorized) |
| $ | 5.70 |
|
Net Assets Consist of |
|
|
|
|
Paid in capital |
| $ | 32,983,056 |
|
Undistributed net investment income |
|
| 593,521 |
|
Net unrealized appreciation on investments |
|
| 8,709,945 |
|
|
| $ | 42,286,522 |
|
See notes to consolidated financial statements.
F-4
GLOBAL SELF STORAGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Successor Basis)STOCKHOLDERS’ EQUITY
For the Period January 19, 2016 through December 31, 2016
Revenues |
|
|
|
|
Rental income |
| $ | 4,816,835 |
|
Other property related income |
|
| 159,529 |
|
|
|
|
|
|
Total revenues |
|
| 4,976,364 |
|
|
|
|
|
|
Expenses |
|
|
|
|
Property operations |
|
| 2,101,976 |
|
General and administrative |
|
| 1,406,441 |
|
Depreciation and amortization |
|
| 952,507 |
|
Business development and property acquisition costs |
|
| 449,738 |
|
|
|
|
|
|
Total expenses |
|
| 4,910,662 |
|
|
|
|
|
|
Operating income |
|
| 65,702 |
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
Dividend and interest income |
|
| 172,724 |
|
Realized gain on investment securities |
|
| 602,428 |
|
Interest expense |
|
| (456,719 | ) |
|
|
|
|
|
Total other income, net |
|
| 318,433 |
|
|
|
|
|
|
Net income |
| $ | 384,135 |
|
|
|
|
|
|
Earnings per share - basic and diluted |
| $ | 0.05 |
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted |
|
| 7,417,320 |
|
|
|
|
|
|
|
|
|
|
|
| Retained |
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
| earnings |
|
| Total |
| |||||
|
| Common stock |
|
| Paid in |
|
| (accumulated |
|
| stockholders' |
| ||||||||
|
| Shares |
|
| Par value |
|
| capital |
|
| deficit) |
|
| equity |
| |||||
Balance at December 31, 2021 |
|
| 10,708,613 |
|
| $ | 107,086 |
|
| $ | 46,851,360 |
|
| $ | 159,651 |
|
| $ | 47,118,097 |
|
Restricted stock grants issued |
|
| 29,944 |
|
|
| 299 |
|
|
| (299 | ) |
| — |
|
| — |
| ||
Restricted stock grants forfeiture |
|
| (3,313 | ) |
|
| (33 | ) |
|
| 33 |
|
| — |
|
| — |
| ||
Issuance of common stock, net of expenses |
|
| 373,833 |
|
|
| 3,739 |
|
|
| 2,004,697 |
|
| — |
|
|
| 2,008,436 |
| |
Stock-based compensation |
| — |
|
| — |
|
|
| 173,921 |
|
| — |
|
|
| 173,921 |
| |||
Net income |
| — |
|
| — |
|
| — |
|
|
| 2,057,723 |
|
|
| 2,057,723 |
| |||
Dividends |
| — |
|
| — |
|
| — |
|
|
| (3,019,063 | ) |
|
| (3,019,063 | ) | |||
Balance at December 31, 2022 |
|
| 11,109,077 |
|
|
| 111,091 |
|
|
| 49,029,712 |
|
|
| (801,689 | ) |
|
| 48,339,114 |
|
Restricted stock grants issued |
|
| 49,455 |
|
|
| 494 |
|
|
| (494 | ) |
| — |
|
| — |
| ||
Restricted stock grants forfeiture |
|
| (5,019 | ) |
|
| (50 | ) |
|
| 50 |
|
| — |
|
| — |
| ||
Stock-based compensation |
| — |
|
| — |
|
|
| 199,752 |
|
| — |
|
|
| 199,752 |
| |||
Net income |
| — |
|
| — |
|
| — |
|
|
| 2,938,769 |
|
|
| 2,938,769 |
| |||
Dividends |
| — |
|
| — |
|
| — |
|
|
| (3,231,608 | ) |
|
| (3,231,608 | ) | |||
Balance at December 31, 2023 |
|
| 11,153,513 |
|
| $ | 111,535 |
|
| $ | 49,229,020 |
|
| $ | (1,094,528 | ) |
| $ | 48,246,027 |
|
See notes to consolidated financial statements.
F-5
GLOBAL SELF STORAGE, INC.
STATEMENTCONSOLIDATED STATEMENTS OF OPERATIONS (Predecessor Basis)CASH FLOWS
For the Period January 1, 2016 through January 18, 2016
Investment Income |
|
|
|
|
Dividends |
|
|
|
|
Unaffiliated issuers |
| $ | 5,165 |
|
|
|
|
|
|
Total investment income |
|
| 5,165 |
|
|
|
|
|
|
Expenses |
|
|
|
|
Compensation and benefits |
|
| 39,109 |
|
Auditing |
|
| 6,570 |
|
Occupancy and other office expenses |
|
| 4,091 |
|
Directors |
|
| 2,070 |
|
Bookkeeping and pricing |
|
| 1,440 |
|
Custodian |
|
| 720 |
|
Insurance |
|
| 720 |
|
Transfer agent |
|
| 630 |
|
Stockholder communications |
|
| 360 |
|
Registration |
|
| 77 |
|
|
|
|
|
|
Total expenses |
|
| 55,787 |
|
|
|
|
|
|
Net investment loss |
|
| (50,622 | ) |
|
|
|
|
|
Realized and Unrealized Gain (Loss) |
|
|
|
|
Net unrealized depreciation unaffiliated issuers |
|
| (22,605 | ) |
|
|
|
|
|
Net unrealized loss |
|
| (22,605 | ) |
|
|
|
|
|
Net decrease in net assets resulting from operations |
| $ | (73,227 | ) |
|
| Year Ended |
|
| Year Ended |
| ||
|
| December 31, |
|
| December 31, |
| ||
Cash flows from operating activities |
|
|
|
|
|
| ||
Net income |
| $ | 2,938,769 |
|
| $ | 2,057,723 |
|
Adjustments to reconcile net income to net cash provided by operating activities |
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 1,634,044 |
|
|
| 1,619,239 |
|
Unrealized (gain) loss on marketable equity securities |
|
| (408,876 | ) |
|
| 1,117,029 |
|
Unrealized loss (gain) on interest rate cap premium |
|
| 72,271 |
|
|
| (113,744 | ) |
Amortization of loan procurement costs |
|
| 138,735 |
|
|
| 139,895 |
|
Stock-based compensation |
|
| 199,752 |
|
|
| 173,921 |
|
Gain on PPP loan forgiveness |
|
| — |
|
|
| (307,210 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
| ||
Accounts receivable |
|
| (1,111 | ) |
|
| (47,658 | ) |
Prepaid expenses and other assets |
|
| (131,265 | ) |
|
| 108,861 |
|
Accounts payable and accrued expenses |
|
| 81,779 |
|
|
| 48,999 |
|
Net cash provided by operating activities |
|
| 4,524,098 |
|
|
| 4,797,055 |
|
Cash flows from investing activities |
|
|
|
|
|
| ||
Improvements and equipment additions |
|
| (231,104 | ) |
|
| (113,333 | ) |
Net cash used in investing activities |
|
| (231,104 | ) |
|
| (113,333 | ) |
Cash flows from financing activities |
|
|
|
|
|
| ||
Principal payments on note payable |
|
| (556,769 | ) |
|
| (533,952 | ) |
Dividends paid |
|
| (3,222,686 | ) |
|
| (3,014,108 | ) |
Issuance of common stock, net of expenses |
|
| — |
|
|
| 2,008,436 |
|
Proceeds received on PPP loan forgiveness |
|
| — |
|
|
| 307,210 |
|
Net cash used in financing activities |
|
| (3,779,455 | ) |
|
| (1,232,414 | ) |
Net increase in cash, cash equivalents, and restricted cash |
|
| 513,539 |
|
|
| 3,451,308 |
|
Cash, cash equivalents, and restricted cash, beginning of period |
|
| 6,515,007 |
|
|
| 3,063,699 |
|
Cash, cash equivalents, and restricted cash, end of period |
| $ | 7,028,546 |
|
| $ | 6,515,007 |
|
Supplemental cash flow and noncash information |
|
|
|
|
|
| ||
Cash paid for interest |
| $ | 735,620 |
|
| $ | 758,439 |
|
Supplemental disclosure of noncash activities: |
|
|
|
|
|
| ||
Dividends payable |
| $ | 8,923 |
|
| $ | 4,955 |
|
See notes to consolidated financial statements.
F-6
GLOBAL SELF STORAGE, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS (Successor Basis)
For the Period January 19, 2016 through December 31, 2016
Net income |
| $ | 384,135 |
|
Other comprehensive income (loss) |
|
|
|
|
Unrealized loss on investment securities available-for-sale |
|
| (1,093,877 | ) |
Comprehensive loss |
| $ | (709,742 | ) |
See notes to consolidated financial statements.
F-7
STATEMENT OF OPERATIONS (Predecessor Basis)
Year Ended December 31, 2015
Investment Income |
|
|
|
|
Dividends |
|
|
|
|
Wholly owned subsidiaries |
| $ | 2,600,000 |
|
Unaffiliated issuers |
|
| 131,431 |
|
Total investment income |
|
| 2,731,431 |
|
Expenses |
|
|
|
|
Compensation and benefits |
|
| 757,213 |
|
Occupancy and other office expenses |
|
| 125,259 |
|
Bookkeeping and pricing |
|
| 79,005 |
|
Registration |
|
| 62,956 |
|
Auditing |
|
| 48,140 |
|
Directors |
|
| 38,505 |
|
Stockholder communications |
|
| 21,992 |
|
Legal |
|
| 19,600 |
|
Custodian |
|
| 12,080 |
|
Insurance |
|
| 11,790 |
|
Transfer agent |
|
| 11,430 |
|
Other |
|
| 3,798 |
|
Total expenses |
|
| 1,191,768 |
|
Net investment income |
|
| 1,539,663 |
|
Realized and Unrealized Gain (Loss) |
|
|
|
|
Net realized gain on investments in unaffiliated issuers |
|
| 903,061 |
|
Net unrealized appreciation |
|
|
|
|
Wholly owned subsidiaries |
|
| 3,320,002 |
|
Unaffiliated issuers |
|
| 351,247 |
|
Net realized and unrealized gain |
|
| 4,574,310 |
|
Net increase in net assets resulting from operations |
| $ | 6,113,973 |
|
See notes to consolidated financial statements.
F-8
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Successor Basis)
For the Period January 19, 2016 through December 31, 2016
Net assets to allocate to stockholders' equity at January 18, 2016 |
| $ | 42,213,295 |
|
|
|
|
|
|
Common stock, par value |
|
|
|
|
Allocated balance as of January 18, 2016; 7,416,766 shares, $0.01 par value (Predecessor Basis) |
|
| 74,168 |
|
Restricted stock issued in conjunction with acquisitions; 202,703 shares, $0.01 par value |
|
| 2,027 |
|
Balance as of December 31, 2016 (7,619,469 shares, $0.01 par value) |
|
| 76,195 |
|
|
|
|
|
|
Paid in capital |
|
|
|
|
Allocated balance as of January 18, 2016 (Predecessor Basis) |
|
| 32,908,888 |
|
Restricted stock issued in conjunction with acquisitions; 202,703 shares, $0.01 par value |
|
| 972,975 |
|
Balance as of December 31, 2016 |
|
| 33,881,863 |
|
|
|
|
|
|
Accumulated other comprehensive income |
|
|
|
|
Unrealized gain on available-for-sale securities as of January 18, 2016 (Predecessor Basis) |
|
| 1,812,340 |
|
Unrealized loss on available-for-sale securities |
|
| (1,093,877 | ) |
Balance as of December 31, 2016 |
|
| 718,463 |
|
|
|
|
|
|
Retained earnings |
|
|
|
|
Allocated balance as of January 18, 2016 (Predecessor Basis) |
|
| 9,230,239 |
|
Reclassification of unrealized gain on available for sale securities (Predecessor Basis) |
|
| (1,812,340 | ) |
Transitional adjustment for net unrealized gain of wholly owned subsidiaries (Predecessor Basis) |
|
| (6,875,000 | ) |
Adjustment of wholly owned subsidiaries on the effective date of the change in status |
|
| 7,967,086 |
|
Combined accumulated deficit of wholly owned subsidiaries prior to the change in status |
|
| (1,092,086 | ) |
Net income |
|
| 384,135 |
|
Dividends |
|
| (1,928,359 | ) |
Balance as of December 31, 2016 |
|
| 5,873,675 |
|
|
|
|
|
|
Total stockholders' equity as of December 31, 2016 |
| $ | 40,550,196 |
|
See notes to consolidated financial statements.
F-9
STATEMENTS OF CHANGES IN NET ASSETS (Predecessor Basis)
|
| For the Period |
|
| Year Ended |
| ||
|
| January 1, 2016 to |
|
| December 31, |
| ||
|
| January 18, 2016 |
|
| 2015 |
| ||
Operations |
|
|
|
|
|
|
|
|
Net investment income (loss) |
| $ | (50,622 | ) |
| $ | 1,539,663 |
|
Net realized gain |
|
| — |
|
|
| 903,061 |
|
Unrealized appreciation (depreciation) |
|
| (22,605 | ) |
|
| 3,671,249 |
|
Net increase (decrease) in net assets resulting from operations |
|
| (73,227 | ) |
|
| 6,113,973 |
|
Distributions to Stockholders |
|
|
|
|
|
|
|
|
Net investment income |
|
| — |
|
|
| (848,415 | ) |
Net realized gains |
|
| — |
|
|
| (903,061 | ) |
Return of capital |
|
| — |
|
|
| (176,883 | ) |
Total distributions |
|
| — |
|
|
| (1,928,359 | ) |
Total increase (decrease) in net assets |
|
| (73,227 | ) |
|
| 4,185,614 |
|
Net Assets |
|
|
|
|
|
|
|
|
Beginning of period |
|
| 42,286,522 |
|
|
| 38,100,908 |
|
End of period |
| $ | 42,213,295 |
|
| $ | 42,286,522 |
|
|
|
|
|
|
|
|
|
|
End of period net assets include undistributed net investment income |
| $ | 542,899 |
|
| $ | 593,521 |
|
See notes to consolidated financial statements.
F-10
CONSOLIDATED STATEMENT OF CASH FLOWS (Successor Basis)
For the Period January 19, 2016 through December 31, 2016
Cash flows from operating activities |
|
|
|
|
Net income |
| $ | 384,135 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities |
|
|
|
|
Depreciation and amortization |
|
| 952,507 |
|
Amortization of loan procurement costs |
|
| 21,217 |
|
Cash from wholly owned subsidiaries consolidated upon change of status |
|
| 464,586 |
|
Realized gain from sale of investment securities |
|
| (602,428 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
Restricted cash |
|
| (54,054 | ) |
Accounts receivable |
|
| 15,416 |
|
Prepaid expenses and other assets |
|
| (47,295 | ) |
Accounts payable and accrued expenses |
|
| 174,196 |
|
Net cash provided by operating activities |
|
| 1,308,280 |
|
Cash flows from investing activities |
|
|
|
|
Acquisition of self storage facilities |
|
| (18,924,998 | ) |
Proceeds from sale of investments |
|
| 5,724,686 |
|
Construction |
|
| (2,470,685 | ) |
Improvements and equipment additions |
|
| (180,801 | ) |
Net cash used in investing activities |
|
| (15,851,798 | ) |
Cash flows from financing activities |
|
|
|
|
Proceeds from note payable, net |
|
| 19,353,754 |
|
Dividends paid |
|
| (1,928,359 | ) |
Net cash provided by financing activities |
|
| 17,425,395 |
|
Net increase in cash and cash equivalents |
|
| 2,881,877 |
|
Cash and cash equivalents, January 18, 2016 |
|
| 29,763 |
|
Cash and cash equivalents, December 31, 2016 |
| $ | 2,911,640 |
|
Supplemental schedule of cash flow information |
|
|
|
|
Interest paid |
| $ | 435,502 |
|
Supplemental schedule of noncash investing and financing activities |
|
|
|
|
Acquisitions of real estate assets: |
|
|
|
|
Real estate assets, net |
| $ | 1,875,002 |
|
Accounts payable and accrued expenses |
|
| (900,000 | ) |
Common stock and paid in capital |
|
| (975,002 | ) |
See notes to consolidated financial statements.
F-11
STATEMENT OF CASH FLOWS (Predecessor Basis)
For the Period January 1, 2016 through January 18, 2016
Cash Flows From Operating Activities |
|
|
|
|
Net decrease in net assets resulting from operations |
| $ | (73,227 | ) |
Adjustments to reconcile decrease in net assets resulting from operations to net cash provided by (used in) operating activities: |
|
|
|
|
Unrealized depreciation of investments |
|
| 22,605 |
|
Net sales of short term investments |
|
| 96,448 |
|
Decrease in dividends receivable |
|
| 9,232 |
|
Decrease in other assets |
|
| 715 |
|
Decrease in accrued expenses |
|
| (69,986 | ) |
Increase in due to affiliates |
|
| 14,213 |
|
|
|
|
|
|
Net cash provided by operating activities |
|
| — |
|
|
|
|
|
|
Cash |
|
|
|
|
Beginning of period, December 31, 2015 |
|
| 29,763 |
|
|
|
|
|
|
End of period, January 18, 2016 |
| $ | 29,763 |
|
See notes to consolidated financial statements.
F-12
STATEMENT OF CASH FLOWS (Predecessor Basis)
Year Ended December 31, 2015
Cash Flows From Operating Activities |
|
|
|
|
Net increase in net assets resulting from operations |
| $ | 6,113,973 |
|
Adjustments to reconcile increase in net assets resulting from operations to net cash provided by (used in) operating activities: |
|
|
|
|
Unrealized appreciation of investments |
|
| (3,671,249 | ) |
Net realized gain on sales of investment securities |
|
| (903,061 | ) |
Capital invested in wholly owned subsidiaries |
|
| (474,573 | ) |
Proceeds from sales of investment securities |
|
| 933,999 |
|
Net purchases of short term investments |
|
| (105,144 | ) |
Decrease in due from subsidiaries |
|
| 3,372 |
|
Increase in dividends receivable |
|
| (1,201 | ) |
Increase in other assets |
|
| (2,125 | ) |
Increase in accounts payable and accrued expenses |
|
| 13,802 |
|
Increase in due to affiliates |
|
| 20,575 |
|
Net cash provided by operating activities |
|
| 1,928,368 |
|
Cash Flows from Financing Activities |
|
|
|
|
Cash distributions paid |
|
| (1,928,359 | ) |
Net cash used in financing activities |
|
| (1,928,359 | ) |
Net change in cash |
|
| 9 |
|
Cash |
|
|
|
|
Beginning of period, December 31, 2014 |
|
| 29,754 |
|
End of period, December 31, 2015 |
| $ | 29,763 |
|
See notes to consolidated financial statements.
F-13
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 2015
Member |
|
|
|
|
|
|
| |
Equity Interest |
|
|
|
| Value |
| ||
|
|
|
| WHOLLY OWNED SUBSIDIARIES (81.88%) |
|
|
|
|
|
|
|
| Real Estate Owned (81.82%) |
|
|
|
|
|
|
|
| Self Storage Properties (81.82%) |
|
|
|
|
| 100 | % |
| SSG Bolingbrook LLC (a) (b) |
| $ | 6,100,000 |
|
| 100 | % |
| SSG Dolton LLC (a) (b) |
|
| 5,900,000 |
|
| 100 | % |
| SSG Merrillville LLC (a) (b) |
|
| 5,700,000 |
|
| 100 | % |
| SSG Rochester LLC (a) (b) |
|
| 5,950,000 |
|
| 100 | % |
| SSG Sadsbury LLC (a) (b) |
|
| 5,700,000 |
|
| 100 | % |
| SSG Summerville I LLC (a) (b) |
|
| 3,400,000 |
|
| 100 | % |
| SSG Summerville II LLC (a) (b) |
|
| 1,850,000 |
|
|
|
|
| Total real estate owned (Cost $27,725,000) |
|
| 34,600,000 |
|
|
|
|
| Other (0.06%) |
|
|
|
|
| 100 | % |
| SSG Operations LLC (a) (b) (Cost $24,573) |
|
| 24,573 |
|
|
|
|
| Total wholly owned subsidiaries (Cost $27,749,573) |
|
| 34,624,573 |
|
Shares |
|
| COMMON STOCKS (7.34%) |
|
|
|
| |
|
|
|
| Real Estate Investment Trusts (7.34%) |
|
|
|
|
|
|
|
| Diversified (1.58%) |
|
|
|
|
| 2,700 |
|
| Public Storage |
|
| 668,790 |
|
|
|
|
| Industrial (5.76%) |
|
|
|
|
| 24,000 |
|
| CubeSmart |
|
| 734,880 |
|
| 12,000 |
|
| Extra Space Storage, Inc. |
|
| 1,058,520 |
|
| 6,000 |
|
| Sovran Self Storage, Inc. |
|
| 643,860 |
|
|
|
|
|
|
|
| 2,437,260 |
|
|
|
|
| Total common stocks (Cost $ 1,360,102) |
|
| 3,106,050 |
|
|
|
|
| PREFERRED STOCKS (2.79%) |
|
|
|
|
|
|
|
| Real Estate Investment Trusts (2.79%) |
|
|
|
|
|
|
|
| Industrial (0.93%) |
|
|
|
|
| 15,000 |
|
| CubeSmart 7.75%, Series A |
|
| 392,250 |
|
|
|
|
| Retail (1.86%) |
|
|
|
|
| 15,000 |
|
| Pennsylvania Real Estate Investment Trust, 8.25%, Series A |
|
| 387,150 |
|
| 15,000 |
|
| Realty Income Corp., 6.625%, Series F |
|
| 397,350 |
|
|
|
|
|
|
|
| 784,500 |
|
|
|
|
| Total preferred stocks (Cost $1,087,753) |
|
| 1,176,750 |
|
|
|
|
| OTHER (0%) |
|
|
|
|
| 2 |
|
| RMR Asia Pacific Fund Fractional shares (b) (Cost $0) |
|
| 0 |
|
|
|
|
| SHORT TERM INVESTMENT (8.34%) |
|
|
|
|
| 3,526,337 |
|
| SSgA Money Market Fund, 7 day annualized yield 0.01% (Cost $3,526,337) |
|
| 3,526,337 |
|
|
|
|
| Total investments (Cost $33,723,765) (100.35%) |
|
| 42,433,710 |
|
|
|
|
| Liabilities in excess of other assets (-0.35%) |
|
| (147,188 | ) |
|
|
|
| Net assets (100.00%) |
| $ | 42,286,522 |
|
|
|
|
|
See notes to consolidated financial statements.
F-14
1. ORGANIZATION
Global Self Storage, Inc. (the “Company”“Company,” “we,” “our,” “us”) is a self-administered and self-managed REIT, formed as a Maryland corporationreal estate investment trust (“REIT”) that owns, operates, manages, acquires, and is focused on the ownership, operation, acquisition, development and redevelopment ofredevelops self storage facilitiesproperties (“stores” or “properties”). The Company’s stores are located in the Northeast, Mid-Atlantic and Mid-West regions of the United States. The Company was formerly registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as a non-diversified, closed end management investment company. The Securities and Exchange Commission’s (“SEC”) order approving the Company’s application to deregister from the 1940 Act was granted on January 19, 2016. Accordingly, effective January 19, 2016, the Company changed its name to Global Self Storage, Inc. from Self Storage Group, Inc., changed its SEC registration to a reporting company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) from an investment company under the 1940 Act, and listed its common stock on the Nasdaq Capital Market (“NASDAQ”) under the symbol “SELF”.
The Company has elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended (the “IRC”). To the extent the Company continues to qualify as a REIT, it will not be subject to tax, with certain limited exceptions, on the taxable income that is distributed to its stockholders.
The Company invests in self storage facilities by acquiring stores throughThrough its wholly owned subsidiaries. At December 31, 2016,subsidiaries, the Company ownedowns and/or manages 13 self-storage properties in Connecticut, Illinois, Indiana, New York, Ohio, Pennsylvania, South Carolina, and operated 11 stores.Oklahoma. The Company operates primarily in one segment: rental operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Upon deregistration as an investment company, the Company's status changed to an operating company from an investment company since it no longer met the assessment of an investment company under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 (“ASC 946”). The Company discontinued applying the guidance in ASC 946 and began to account for the change in status prospectively by accounting for its investments in accordance with other U.S. generally accepted accounting principles (“GAAP”) topics as of the date of the change in status.
The Company financial statements for the period subsequent to the deregistration are prepared on a consolidated basis to include the financial position, results of operations, and cash flows of the Company and its wholly-owned subsidiaries, rather than by the investment company fair valuation approach. This change in status and the concomitant accounting policies affect the comparability of the financial statements for directly presenting corresponding items for 2016 and 2015. As such, for the year ended December 31, 2016, the consolidated statements of operations and cash flows have been presented on the Predecessor Basis of accounting as an investment company from January 1, 2016 through January 18, 2016, and on the current basis of accounting as a REIT from January 19, 2016 through December 31, 2016. Similarly, separate statements of operations and cash flows are presented on the Predecessor Basis of accounting as an investment company for the periods ended December 31, 2015. The consolidated balance sheet at December 31, 2016 has been presented on the successor basis of accounting as a REIT and at December 31, 2015 the statement of assets and liabilities has been presented on the Predecessor Basis of accounting as an investment company.
The consolidated financial statements of the Company are presented on the accrual basis of accounting in accordance with GAAP and include the accounts of the Company and its wholly-ownedwholly owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. The statement of assets and liabilities as of December 31, 2015 has been derived from the Company’s audited financial statements as of that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form N-CSR for the year ended December 31, 2015, as filed with the SEC.
F-15
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses primarily consist of property tax accruals, unearned rental income, and trade payables.
Cash, and Cash Equivalents, and Restricted Cash
CashThe Company’s cash is deposited with financial institutions located throughout the United States and cash equivalents consist ofat times may exceed federally insured limits. The Company considers all highly liquid investments, andwhich may include money market fund shares, purchased with an originala maturity of three months or less. The carrying amount reported onless at the balance sheet fortime of purchase, to be cash and cash equivalents approximates fair value.
Restricted Cash
equivalents. Restricted cash is comprised of escrowed funds deposited with a bank relating to capital expenditures.
The carrying amount reported on the balance sheet for cash, cash equivalents, and restricted cash approximates fair value.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash in our consolidated balance sheets to the total amount shown in our consolidated statements of cash flows:
|
| December 31, 2023 |
|
| December 31, 2022 |
| ||
Cash and cash equivalents |
| $ | 6,921,779 |
|
| $ | 6,363,610 |
|
Restricted cash |
| $ | 106,767 |
|
|
| 151,397 |
|
Total cash, cash equivalents, and restricted cash as shown in our consolidated statements of cash flows |
| $ | 7,028,546 |
|
| $ | 6,515,007 |
|
Income Taxes
The Company has elected to be treated as a REIT under the IRC.Internal Revenue Code ("IRC"). In order to maintain its qualification as a REIT, among other things, the Company is required to distribute at least 90%90% of its REIT taxable income to its stockholders and meet certain tests regarding the nature of its income and assets. As a REIT, the Company is not subject to federal income tax with respect to that portion of its income which meets certain criteria and is distributed annually to stockholders. The Company plans to continue to operate so that it meets the requirements for taxation as a REIT. Many of these requirements, however, are highly technical and complex. If the Company were to fail to meet these requirements, it would be subject to federal income tax. In management’s opinion, the requirements to maintain these elections are being met. The Company is subject to certain state and local taxes.
The Company has elected to treat its corporate subsidiary, SSG TRS LLC, as a taxable REIT subsidiary (“TRS”). In general, the Company’s TRS may perform additional services for tenants and may engage in any real estate or non-real estate related business. A TRS is subject to federal and state and local corporate income tax.
The Company recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The Company has reviewed its tax positions and has concluded that no liability for unrecognized tax benefits should be recorded or disclosed related to uncertain tax
F-7
positions taken on federal, state, and local income tax returns for open tax years (2013(2020 – 2015)2022), or is expected to be taken in the Company’s 20162023 tax returns.
Marketable Equity Securities
Investments in Securities
Investments in equity securities that have readily determinable fair values are accounted for as available-for-sale. Available-for-sale securities are measured at fair value. Gains or losses from changes in the fair value of available-for-saleequity securities are recorded in accumulated other comprehensivenet income, until the investment is sold or otherwise disposed of, or until the investment is determined to be other-than-temporarily impaired, at which time the cumulative gain or loss previously reported in equity is included in income.disposed. The specific identification method is used to determine the realized gain or loss on investments sold or otherwise disposed.
Fair value is determined using a valuation hierarchy generally by reference to an active trading market, using quoted closing or bid prices. Judgment is used to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive.
Prior to January 19, 2016, gains and losses from the changes in fair value of investment securities were recorded in the Statement of Operations.
F-16
Real estate assets are carried at the appreciated value as of January 19, 2016, the effective date of the change in status. Purchases subsequent to the effective date of the change in status are carried at cost less accumulated depreciation. Direct and allowable internal costs associated with the development, construction, renovation, and improvement of real estate assets are capitalized. Property taxes and other costs associated with development incurred during thea construction period are capitalized. TheA construction period begins when expenditures for thea real estate assetsasset have been made and activities that are necessary to prepare the asset for its intended use are in progress. TheA construction period ends when thean asset is substantially complete and ready for its intended use.
We allocate
Acquisition costs are generally capitalized for acquisitions that qualify as asset acquisitions. When properties are acquired, the net acquisition cost of acquired operating self-storage facilitiespurchase price is allocated to the underlying land, buildings, identified intangible assets, and any noncontrolling interests that remain outstanding based upon their respective individual estimated fair values. Any difference between the net acquisition cost and the estimated fair value of the net tangible and intangible assets acquired and liabilities assumed based on estimated fair values. Allocations to land, building and improvements, and equipment are recorded based upon their respective fair values as estimated by management.
In allocating the purchase price for an acquisition, the Company determines whether the acquisition includes intangible assets or liabilities. The Company allocates a portion of the purchase price to an intangible asset attributed to the value of in-place leases. This intangible is recordedgenerally amortized to expense over the expected remaining term of the respective leases. Substantially all of the leases in place at acquired properties are at market rates, as goodwill.
Internal and external transaction costs associated with acquisitions or dispositionsthe majority of real estate, as well as repairsthe leases are month-to-month contracts.
Repairs and maintenance costs are charged to expense as incurred. Major replacements and betterments that improve or extend the life of the asset are capitalized and depreciated over their estimated useful lives. Depreciation is computed using the straight-line method over the estimated useful lives of the buildings and improvements, which are generally between 5 and 39 years.
Derivative Financial Instruments
The Company carries all derivative financial instruments on the balance sheet at fair value. Fair value of derivatives is determined by reference to observable prices that are based on inputs not quoted on active markets, but corroborated by market data. The accounting for changes in the fair value of a derivative instrument depends on whether the derivative has been designated and qualifies as part of a hedging relationship. The Company’s use of derivative instruments has been limited to an interest rate cap agreement. For derivative instruments not designated as cash flow hedges, the unrealized gains and losses are included in interest expense in the accompanying statements of operations. For derivatives designated as cash flow hedges, the effective portion of the changes in the fair value of the derivatives is initially reported in accumulated other comprehensive income (loss) in the Company’s balance sheets and subsequently reclassified into earnings when the hedged transaction affects earnings. The valuation analysis of
F-8
the interest rate cap reflects the contractual terms of derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses primarily consist of property tax accruals, unearned rental income, and trade payables.
Revenue and Expense Recognition
Revenues from stores, which are primarily composed of rental income earned pursuant to month-to-month leases for storage space, as well as associated late charges and administrative fees, are recognized as earned.earned in accordance with ASC Topic 842, Leases. Promotional discounts reduce rental income over the promotional period. Ancillary revenues from sales of merchandise and tenant insurance and other income are recognized when earned.as earned in accordance with ASC Topic 606, Revenue from Contracts with Customers ("ASC 606").
The Company's management fees are earned subject to the terms of the related property management services agreements (“PSAs”). These PSAs provide that the Company will perform management services, which include leasing and operating the property and providing accounting, marketing, banking, maintenance and other services. These services are provided in exchange for monthly management fees, which are based on a percentage of revenues collected from stores owned by third parties. PSAs generally have original terms of three years, after which management services are provided on a month-to-month basis unless terminated. Management fees are due on the last day of each calendar month that management services are provided.
The Company accounts for the management services provided to a customer as a single performance obligation which are rendered over time each month in accordance with ASC 606. The total amount of consideration from the contract is variable as it is based on monthly revenues, which are influenced by multiple factors, some of which are outside the Company's control. No disaggregated information relating to PSAs is presented as the Company currently has only one contract.
General and administrative expenses and property operations expenses, which may include among other expenses, property taxes, utilities, repairs and maintenance, and other expenses, are expensed as incurred. The Company accrues for property tax expense based upon actual amounts billed and, in some circumstances, estimates and historical trends when bills or assessments have not been received from the taxing authorities or such bills and assessments are in dispute. Cost of operations and general and administrative expense are expensed as incurred.
Credit Risk
Financial assets that are exposed to credit risk consist primarily of cash and cash equivalents and certain portions of accounts receivable including rents receivable from our tenants. Cash and cash equivalents are on deposit with highly rated commercial banks.
Evaluation of Asset Impairment
The Company evaluates its real estate assets and intangible assets, consistingif any, for indicators of in-place lease, and goodwill for impairment annually.impairment. If there are indicators of impairment and we determine that the asset is not recoverable from future undiscounted cash flows to be received through the asset’s remaining life (or, if earlier, the expected disposal date), we record an impairment charge to the extent the carrying amount exceeds the asset’s estimated fair value or net proceeds from expected disposal.
The Company evaluates goodwill for impairment annually and whenever relevant events, circumstances, and other related factors indicate that fair value may be less that carrying amounts. If it is determined that the carrying amount of goodwill exceeds the amount that would be allocated to goodwill if the reporting unit were acquired for estimated fair value, an impairment charge is recorded. There were no indicators of impairment to goodwill and real estate assets and no impairment charges were recorded during 2023 or 2022.
Stock-based Compensation
The measurement and recognition of compensation expense for all stock-based compensation awards to employees and independent directors are based on estimated fair values. Awards granted are measured at fair value and any compensation expense is recognized over the service periods of each award. For awards granted which contain a graded vesting schedule and the only condition for vesting is a service condition, compensation cost is recognized as an expense on a straight-line basis over the requisite service period as if the award was, in substance, a single award. For awards granted for which vesting is subject to a performance condition, compensation cost is recognized over the requisite service period if and when the Company concludes it is probable that the performance condition will be
F-9
achieved. The estimated number of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised.
Loan Procurement Costs
Loan procurement costs on the Company's note payable are presented as a direct deduction from the carrying amount of the related debt liability. The loan procurement costs related to the note payable are amortized using the effective interest method over the life of the loan. If there is not an associated debt liability recorded on the consolidated balance sheets, the costs are recorded as an asset net of accumulated amortization. Loan procurement costs associated with the Company's revolving credit facility remain in line of credit issuance costs, net of amortization on the Company's consolidated balance sheets. The costs related to the line of credit facility are amortized using the straight-line method, which approximates the effective interest method, over the estimated life of the related debt.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from management’s estimates.
F-17
Recently Issued Accounting Standards
In August 2016,March 2020, the FASB issued ASU No. 2016-15 - Statement2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. ASU 2020-04 is effective upon issuance, and the provisions generally can be applied prospectively as of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows.January 1, 2020 through December 31, 2024. The eight items that the ASU provides classification guidance on include (1) debt prepayment and extinguishment costs, (2) settlement of zerocoupon debt instruments, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, (6) distributions received from equity method investments, (7) beneficial interests in securitization transactions, and (8) separately identifiable cash flows and applicationadoption of the predominance principle. The standard is effective on January 1, 2018, however early adoption is permitted. The standard requires the use of the retrospective transition method. The Company is in the process of evaluating the impact of this new guidance.
In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which is intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. The new guidance allows for entities to makedid not have an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. In addition, the guidance allows employers to withhold shares to satisfy minimum statutory tax withholding requirements up to the employees’ maximum individual tax rate without causing the award to be classified as a liability. The guidance also stipulates that cash paid by an employer to a taxing authority when directly withholding shares for tax-withholding purposes should be classified as a financing activity on the statement of cash flows. The standard is effective on January 1, 2017, however early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance.
In February 2016, the FASB issued ASU No. 2016-02 - Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either financing or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The standard is effective on January 1, 2019, however early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance.
In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which amends the current business combination guidance to require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined, as opposed to having to revise prior period information. The standard also requires additional disclosure about the impact on current-period income statement line items of adjustments that would have been recognized in prior periods if prior period information had been revised. The new standard became effective for the Company on January 1, 2016. The adoption of this guidance did not have a material impact on the Company’s consolidated financial position or results of operations as there have been no measurement-period adjustments recorded.operations.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, an update to the accounting standard relating to the presentation of debt issuance costs. Under the new guidance, debt issuance costs related to a recognized debt liability will be presented on the balance sheet as a direct deduction from the debt liability. In the event that there is not an associated debt liability recorded in the consolidated financial statements, the debt issuance costs will continue to be recorded on the consolidated balance sheet as an asset until the debt liability is recorded. The new standard became effective for the Company on January 1, 2016. The adoption of this guidance did not have a material impact on the Company’s consolidated financial position or results of operations as the update only related to changes in financial statement presentation.
F-18
In August, 2014, the FASB issued new accounting guidance which is intended to define management's responsibility to evaluate whether there is substantial doubt about an organization's ability to continue as a going concern for a period of one year after the date that the financial statements are issued. This guidance is effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted. The Company anticipates no impact upon adoption of the new accounting guidance on its consolidated financial statements.
In February 2015, the FASB issued ASU No. 2015-02, Consolidation – Amendments to the Consolidation Analysis, which amends the current consolidation guidance affecting both the variable interest entity (“VIE”) and voting interest entity (“VOE”) consolidation models. The standard does not add or remove any of the characteristics in determining if an entity is a VIE or VOE, but rather enhances the way the Company assesses some of these characteristics. The new standard became effective for the Company on January 1, 2016. As discussed under Basis of Presentation above, the adoption of this guidance did not have a material impact on the Company’s consolidated financial position or results of operations as none of its existing consolidation conclusions were changed.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance under GAAP when it becomes effective. The new standard will be effective for the Company beginning on January 1, 2018, however early application beginning on January 1, 2017 is permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company has not yet selected a transition method nor has it determined the effect of the standard on its financial statements and related disclosures.
3. CHANGE IN STATUS
Prior to the January 19, 2016 change in status as a registered investment company, the Company recorded its investment in the self storage facilities at fair value and recorded the changes in the fair value as an unrealized gain or loss. Upon the effective date of the deregistration of the Company as a registered investment company, the fair value accounting as a registered investment company was no longer applicable to the Company, rather the Company began presenting on a consolidated basis, the underlying assets and liabilities of the self storage facilities. The Company’s initial carrying value of the net assets of the self storage properties was the fair value on the effective date of the change in status determined as follows:
Fair value of self storage properties on the effective date of the change in status |
|
|
|
|
| $ | 34,624,573 |
|
Total net assets of the combined self storage properties |
|
|
|
|
|
|
|
|
Property plant and equipment - self storage |
| $ | 26,388,167 |
|
|
|
|
|
Cash and cash equivalents |
|
| 464,585 |
|
|
|
|
|
Accounts receivable |
|
| 87,103 |
|
|
|
|
|
Prepaid expenses and other assets |
|
| 206,146 |
|
|
|
|
|
Accounts payable and accrued expenses |
|
| (488,514 | ) |
|
| 26,657,487 |
|
Increase to the initial carrying value of the net assets of the self storage properties on the effective date of the change in status |
|
|
|
|
| $ | 7,967,086 |
|
F-19
Investments in securities as of December 31, 2016, consisted of the following:
|
|
|
|
|
| Gross Unrealized |
|
|
|
|
| |||||
|
| Cost Basis |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
Investment securities, available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stocks |
| $ | 755,487 |
|
| $ | 718,463 |
|
| $ | — |
|
| $ | 1,473,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment in securities |
| $ | 755,487 |
|
| $ | 718,463 |
|
| $ | — |
|
| $ | 1,473,950 |
|
During the year ended December 31, 2016, the Company recorded realized gains from the sale of available-for-sale securities of $602,428. Proceeds from the sale of those securities was $2,294,796.
5.3. REAL ESTATE ASSETS
The carrying value of the Company’s real estate assets is summarized as follows:
|
| December 31, |
|
| December 31, |
| ||
Land |
| $ | 6,122,065 |
|
| $ | 6,122,065 |
|
Buildings, improvements, and equipment |
|
| 60,915,497 |
|
|
| 60,684,393 |
|
Self storage properties |
|
| 67,037,562 |
|
|
| 66,806,458 |
|
Less: accumulated depreciation and amortization |
|
| (11,556,342 | ) |
|
| (9,922,298 | ) |
Real estate assets, net |
| $ | 55,481,220 |
|
| $ | 56,884,160 |
|
Buildings, improvements, and equipment, at cost: |
|
|
|
|
Beginning balance |
| $ | 30,795,900 |
|
Acquisition of self storage facilities |
|
| 17,612,576 |
|
Newly developed facilities opened for operation |
|
| 2,567,424 |
|
Improvements and equipment additions |
|
| 180,801 |
|
Ending balance |
|
| 51,156,701 |
|
|
|
|
|
|
Land |
|
|
|
|
Beginning balance |
|
| 3,413,814 |
|
Acquisition of self storage facilities |
|
| 2,080,000 |
|
Ending balance |
|
| 5,493,814 |
|
|
|
|
|
|
Accumulated depreciation: |
|
|
|
|
Beginning balance |
|
| — |
|
Depreciation expense |
|
| (875,447 | ) |
Ending balance |
|
| (875,447 | ) |
|
|
|
|
|
Construction in progress: |
|
|
|
|
Beginning balance |
|
| 145,539 |
|
Current development |
|
| 2,470,685 |
|
Newly developed facilities opened for operation |
|
| (2,567,424 | ) |
Transfer to prepaid expenses and other assets |
|
| (48,800 | ) |
Ending balance |
|
| — |
|
|
|
|
|
|
Total real estate facilities at December 31, 2016 |
| $ | 55,775,068 |
|
F-10
4. MARKETABLE EQUITY SECURITIES
Investments in marketable equity securities consisted of the following:
|
|
|
|
| Gross Unrealized |
|
|
|
| |||||||
December 31, 2023 |
| Cost Basis |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
Investment in marketable equity securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Common stocks |
| $ | 755,487 |
|
| $ | 2,019,542 |
|
| $ | — |
|
| $ | 2,775,029 |
|
Total investment in marketable equity securities |
| $ | 755,487 |
|
| $ | 2,019,542 |
|
| $ | — |
|
| $ | 2,775,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
| Gross Unrealized |
|
|
|
| |||||||
December 31, 2022 |
| Cost Basis |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
Investment in marketable equity securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Common stocks |
| $ | 755,487 |
|
| $ | 1,610,666 |
|
| $ | — |
|
| $ | 2,366,153 |
|
Total investment in marketable equity securities |
| $ | 755,487 |
|
| $ | 1,610,666 |
|
| $ | — |
|
| $ | 2,366,153 |
|
5. FAIR VALUE MEASUREMENTS
The real estate assets asCompany applies the methods of December 31, 2016 have been adjusted to reflect the appreciateddetermining fair value to value its financial assets and liabilities. The application of fair value measurements may be on a recurring or nonrecurring basis depending on the self storage facilities as of the date of the change in status from an investment company.
During 2016, the Company completed the construction to expand its Bolingbrook, IL store. The new development adds approximately 44,260 leasable square feet of climate-controlled and traditional storage units, for an aggregate cost of approximately $2,600,000.
F-20
The following table shows the Company’s acquisitions of operating stores for the year ended December 31, 2016, and does not include purchases of construction or improvements made to existing assets:
|
|
|
|
|
| Consideration Paid |
| |||||||||||||
|
| Number of |
| Date of |
|
|
|
|
|
|
|
|
| Common Stock |
|
| Contingent |
| ||
Property Location |
| Stores |
| Acquisition |
| Total |
|
| Cash Paid |
|
| Issued |
|
| Consideration |
| ||||
Ohio |
| 1 |
| 8/29/2016 |
| $ | 5,300,000 |
|
| $ | 5,300,000 |
|
| $ | — |
|
| $ | — |
|
Indiana |
| 1 |
| 9/26/2016 |
|
| 7,700,000 |
|
|
| 7,700,000 |
|
|
| — |
|
|
| — |
|
New York/ Connecticut |
| 2 |
| 12/30/2016 |
|
| 7,800,000 |
|
|
| 5,924,998 |
|
|
| 975,002 |
|
|
| 900,000 |
|
Totals |
| 4 |
|
|
| $ | 20,800,000 |
|
| $ | 18,924,998 |
|
| $ | 975,002 |
|
| $ | 900,000 |
|
During the year ended December 31, 2016, the Company acquired 4 stores, including 2 stores from Tuxis Corporation (“Tuxis”), an affiliate of the Company, for an aggregate purchase price of $20,800,000. Approximately $1,100,000 of the purchase price was allocated to intangible assets. There were no acquisitions during the fiscal year 2015. The estimated life of in-place leases was 12 months and the amortization expense that was recorded during the year ended December 31, 2016 was $77,060. The Company expensed professional fees/closing costs of $449,738 in connection with these acquisitions.
The additional $900,000 cash payment to Tuxis is contingent upon the New York store receiving local permission to expand the existing store and the commencement of construction.
The following table summarizes the revenues and earnings relatedaccounting principles applicable to the 4 stores acquired during 2016 since their acquisition dates, which are included inspecific asset or liability or whether management has elected to carry the Company’s consolidated statementsitem at its estimated fair value.
The hierarchy of operations for the year ended December 31, 2016. There were no acquisitions during 2015.
|
| Year Ended |
| |
|
| December 31, 2016 |
| |
Total revenue |
| $ | 433,054 |
|
Net income |
|
| 75,883 |
|
Pro Forma Financial Information
During the year ended December 31, 2016, the Company acquired 4 operating stores. The following pro forma financial information includes all 4 stores acquired and reflects adjustments to the Company’s historical financial data to give effect to each of the acquisitions that occurred during 2016 as if each had occurred as of January 19, 2016 to December 31, 2016. Pro forma financial information has not been provided for 2015and for the period January 1, 2016 to January 18, 2016, since the Company was an investment company and applied the accounting guidance in ASC 946. The unaudited pro forma information presented below does not purport to represent what the Company’s actual results of operations would have been for the periods indicated, nor does it purport to represent the Company’s future results of operations.
|
| For the Period |
| |
|
| January 19, 2016 |
| |
|
| to |
| |
|
| December 31, 2016 |
| |
Pro forma revenue |
| $ | 6,881,146 |
|
Pro forma net income |
| $ | 1,116,895 |
|
Basic and diluted per share net income - as reported |
| $ | 0.05 |
|
Basic and diluted per share net income - pro forma |
| $ | 0.15 |
|
F-21
GAAP establishes a valuation hierarchy for disclosure oftechniques is based on whether the inputs to valuation used to measurethose techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value. This hierarchy prioritizes the inputs into three broad levels as follows. value hierarchy:
Level 1 inputs are quoted— Quoted prices (unadjusted) in active markets for identical assetsinstruments or liabilities.
Level 2 — Prices determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of the Company. These may include quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, and market-corroborated inputs.
Level 3 — Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Company’s own assumptions about the factors that market participants use in active markets or inputs that are observable for thepricing an asset or liability either directly or indirectly through market corroboration. Level 3 inputsand are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level inputbest information available in the circumstances.
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when estimating fair value. The valuation method used to estimate fair value may produce a fair value measurement that is significantmay not be indicative of ultimate realizable value. Furthermore, while management believes its valuation methods are appropriate and consistent with those used by other market participants, the use of different methods or assumptions to estimate the fair value measurement.of certain financial instruments could result in a different estimate of fair value at the reporting date. Those estimated values may differ significantly from the values that would have been used had a readily available market for such loans or investments existed, or had such loans or investments been liquidated, and those differences could be material to the financial statements.
Fair valued assets consist of shares of marketable equity securities and an interest rate cap. The value of the equity securities is based on a traded market price and is considered to be a level 1 measurement, and the value of the interest rate cap is based on its maturity, observable market-based inputs including interest rate curves and is considered to be a level 2 measurement.
F-11
The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 20162023 and December 31, 2015:2022:
December 31, 2016 |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||||||||||||||
December 31, 2023 |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Investment in securities |
| $ | 1,473,950 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,473,950 |
| ||||||||||||||||
Marketable equity securities |
| $ | 2,775,029 |
|
| $ | — |
|
| $ | — |
|
| $ | 2,775,029 |
| ||||||||||||||||
Interest rate cap |
| — |
|
|
| 50,881 |
|
| — |
|
|
| 50,881 |
| ||||||||||||||||||
Total assets at fair value |
| $ | 1,473,950 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,473,950 |
|
| $ | 2,775,029 |
|
| $ | 50,881 |
|
| $ | — |
|
| $ | 2,825,910 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
December 31, 2022 |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Marketable equity securities |
| $ | 2,366,153 |
|
| $ | — |
|
| $ | — |
|
| $ | 2,366,153 |
| ||||||||||||||||
Interest rate cap |
| — |
|
|
| 123,152 |
|
| — |
|
|
| 123,152 |
| ||||||||||||||||||
Total assets at fair value |
| $ | 2,366,153 |
|
| $ | 123,152 |
|
| $ | — |
|
| $ | 2,489,305 |
|
December 31, 2015 |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments, at value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholly owned subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self storage facilities |
| $ | — |
|
| $ | — |
|
| $ | 34,600,000 |
|
| $ | 34,600,000 |
|
Other |
|
| — |
|
|
| — |
|
|
| 24,573 |
|
|
| 24,573 |
|
Common stocks |
|
| 3,106,050 |
|
|
| — |
|
|
| — |
|
|
| 3,106,050 |
|
Preferred stocks |
|
| 1,176,750 |
|
|
| — |
|
|
| — |
|
|
| 1,176,750 |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Short term investments |
|
| 3,526,337 |
|
|
| — |
|
|
| — |
|
|
| 3,526,337 |
|
Total assets at fair value |
| $ | 7,809,137 |
|
| $ | — |
|
| $ | 34,624,573 |
|
| $ | 42,433,710 |
|
The following is a reconciliation of level 3 assets:
|
| Wholly Owned Subsidiaries |
| |
Balance at December 31, 2015 |
| $ | 34,624,573 |
|
Transfer out of level 3 effective change in status |
|
| (34,624,573 | ) |
Balance at December 31, 2016 |
| $ | - |
|
There were no assets transferred from level 1 to level 2 during the years ended December 31, 2023 or December 31, 2022. The Company did not have any level 3 assets or liabilities as of December 31, 20162023 or December 31, 2015. The Company did not have any assets or liabilities that are re-measured on a recurring basis using significant unobservable inputs as of December 31, 2016 or December 31, 2015.2022.
The fair values of financial instruments including cash and cash equivalents, restricted cash, accounts receivable, and accounts payable approximated their respective carrying values as of December 31, 2016.2023 and 2022. The aggregate carrying value of the Company’s debt was $20,000,000 as of December 31, 2016. The estimated fair value of the Company’s debt was $20,000,000$14,956,981 and $15,645,769 as of December 31, 2016. This estimate was2023 and 2022, respectively. These estimates were based on market interest rates for comparable obligations. Rates take into considerationobligations, general market conditions and maturity.
6.DERIVATIVES
The Company’s debtobjective in using an interest rate derivative is classifiedto add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company uses an interest rate cap to manage interest rate risk. The Company carries the premium paid for the interest rate cap as level 2an asset on the balance sheet at fair value. The change in the unrealized gain or loss of the fair value hierarchy.premium is recorded as an increase or decrease to interest expense.
The following table summarizes the terms of the Company’s derivative financial instrument:
8.
|
| Notional Amount |
|
|
|
|
| Effective |
| Maturity | ||||||
Product |
| December 31, 2023 |
|
| December 31, 2022 |
|
| Strike |
|
| Date |
| Date | |||
Cap Agreement |
| $ | 7,500,000 |
|
| $ | 7,500,000 |
|
|
| 3.75 | % |
| 12/20/2021 |
| 7/6/2024 |
The Company is potentially exposed to credit loss in the event of non-performance by the counterparty. The Company does not anticipate the counterparty to fail to meet its obligations as they become due.
7. NOTE PAYABLE AND REVOLVING LINE OF CREDIT
Note Payable
On June 24, 2016, certain wholly owned subsidiaries (the “Secured Subsidiaries”) of the Company entered into a loan agreement (the “Loan Agreement”) borrowing the principal amount of $20$20 million pursuant to a promissory note (the “Promissory Note”). The Promissory Note bears an interest rate equal to 4.192%4.192% per annum (effective interest rate 4.40%) and is due to maturematures on July 1, 2036.2036. Pursuant to a security agreement (the “Security
F-22
Agreement”), the obligations under the Loan Agreement are secured by certain real estate assets owned by the Secured Subsidiaries.
The Company entered into a non-recourse guaranty on June 24, 2016 (the “Guaranty,” and together with the Loan Agreement, the Promissory Note and the Security Agreement, the “Loan Documents”) to guarantee the payment to the Lender of certain obligations of the Secured Subsidiaries under the Loan Agreement.
F-12
The Loan Documents require the Secured Subsidiaries and the Company to comply with certain covenants, including, among others, a minimum net worth test and other customary covenants. The Lender may accelerate amounts outstanding under the Loan Documents upon the occurrence of an Event of Default (as defined in the Loan Agreement) including, but not limited to, the failure to pay amounts due or commencement of bankruptcy proceedings. As of December 31, 2023 and 2022, the Company was in compliance with these covenants.
The Company incurred loan procurement costs of $646,246$646,246 and such costs have been recorded net of the note payable on the consolidated balance sheetsheets. The costs are amortized over the term of the loan using the effective interest method and are amortizedrecorded as an adjustment to interest expense. The Company recorded amortization expense overof $37,134 and $38,293 for the term of the loan.years ended December 31, 2023 and 2022, respectively.
As of December 31, 2016,2023 and 2022 the carrying value of the Company’s note payable is summarized as follows:
Note Payable |
| Carrying Value |
|
| December 31, |
|
| December 31, 2022 |
| |||
Principal balance outstanding |
| $ | 20,000,000 |
|
| $ | 17,244,687 |
|
| $ | 17,801,456 |
|
Less: Loan procurement costs, net |
|
| (625,029 | ) |
|
| (343,468 | ) |
|
| (380,602 | ) |
Total note payable, net |
| $ | 19,374,971 |
|
| $ | 16,901,219 |
|
| $ | 17,420,854 |
|
As of December 31, 2016,2023, the note payable was secured by certain of its self storage facilitiesproperties with an aggregate net book value of approximately $36.3$23.9 million. The note payable pays interest only from August 1, 2016 through June 30, 2018. The following table represents the future principal payment requirements on the note payable as of December 31, 2016:2023:
2024 |
| $ | 582,591 |
|
2025 |
|
| 607,488 |
|
2026 |
|
| 633,449 |
|
2027 |
|
| 660,519 |
|
2028 |
|
| 688,746 |
|
2029 and thereafter |
|
| 14,071,894 |
|
Total principal payments |
| $ | 17,244,687 |
|
Revolving Line of Credit
2017 |
| $ | — |
|
2018 |
|
| 228,987 |
|
2019 |
|
| 472,600 |
|
2020 |
|
| 492,797 |
|
2021 |
|
| 513,857 |
|
2022 and thereafter |
|
| 18,291,759 |
|
Total principal payments |
|
| 20,000,000 |
|
Less: Loan procurement costs, net |
|
| (625,029 | ) |
Total note payable |
| $ | 19,374,971 |
|
F-23
9. INVESTMENTS IN WHOLLY OWNED SUBSIDIARIES
On July 6, 2021, certain wholly owned subsidiaries (“Amended Credit Facility Secured Subsidiaries”) of the Company entered into a first amendment to the Credit Facility Loan Agreement (collectively, the “Amended Credit Facility Loan Agreement”) between the Amended Credit Facility Secured Subsidiaries and The following summary sets forthHuntington National Bank, successor by merger to TCF National Bank (“Amended Credit Facility Lender”). Under the Company’s membership equity ownership including membership equity capital additionsAmended Credit Facility Loan Agreement, the Amended Credit Facility Secured Subsidiaries may borrow from the Amended Credit Facility Lender in the principal amount of up to $15 million, reduced to $14.75 million and reductions, cash dividends received$14.5 million in years 2 and 3, respectively, pursuant to a promissory note (the “Amended Credit Facility Promissory Note”). The Amended Credit Facility Promissory Note bears an interest rate equal to 3% plus the greater of the One Month U.S. Dollar London Inter-Bank Offered Rate or one-quarter of one percent (0.25%) and is due to mature on July 6, 2024. The Company is considering, among other things, refinancing or finding a suitable replacement for the revolving line of credit in light of its upcoming maturity. The publication of LIBOR ceased immediately after June 30, 2023. The Amended Credit Facility Loan Agreement provides for a replacement index based on the Secured Overnight Financing Rate (“SOFR”). The interest rate on the Amended Credit Facility Promissory Note subsequent to June 30, 2023, is equal to 3% plus the greater of SOFR plus 0.11448% or 0.25%. As of December 31, 2023 , the effective interest rate under the replacement index was approximately 8.46%. The obligations under the Amended Credit Facility Loan Agreement are secured by certain real estate assets owned by the Amended Credit Facility Secured Subsidiaries. The Company entered into an amended and restated guaranty of payment on July 6, 2021 (“Amended Credit Facility Guaranty,” and together with the Amended Credit Facility Loan Agreement, the Amended Credit Facility Promissory Note and related instruments, the “Amended Credit Facility Loan Documents” or the “Revolver”) to guarantee the payment to the Amended Credit Facility Lender of certain obligations of the Amended Credit Facility Secured Subsidiaries under the Amended Credit Facility Loan Agreement. The Company and the valueAmended Credit Facility
F-13
Secured Subsidiaries paid customary fees and expenses in connection with their entry into the Amended Credit Facility Loan Documents.
The Revolver requires the Subsidiaries and the Company to comply with certain covenants, including, among others, customary financial covenants. The Lender may accelerate amounts outstanding under the Loan Documents upon the occurrence of each unconsolidated wholly owned subsidiary, predecessor basis, in aggregate as recordedan Event of Default (as defined in the scheduleAgreement) including, but not limited to, the failure to pay amounts due to the Lender or commencement of portfolio investments asbankruptcy proceedings.
The Company incurred issuance costs of $231,926and $477,981 for the yearJuly 6, 2021 Revolver extension and entry into the Revolver in December 18, 2018, respectively, and such costs are amortized as an adjustment to interest expense using the straight-line method, which approximates the effective interest method, over the term of the loan. The Company recorded amortization expense of $101,602 and $101,602 for the years ended December 31, 2015.2023 and 2022, respectively. The was no outstanding loan balance under the Revolver as of December 31, 2023 and 2022, respectively.
|
| Beginning |
|
| Membership Equity |
|
| Ending |
|
|
|
|
|
|
|
|
| |||||||
|
| Equity Interest |
|
| Gross |
|
| Gross |
|
| Equity Interest |
|
| Dividend |
|
| Value |
| ||||||
|
| Percentage |
|
| Additions |
|
| Reductions |
|
| Percentage |
|
| Income |
|
| December 31, 2015 |
| ||||||
SSG Bolingbrook LLC |
|
| 100 | % |
| $ | — |
|
| $ | — |
|
|
| 100 | % |
| $ | — |
|
| $ | 6,100,000 |
|
SSG Dolton LLC |
|
| 100 | % |
|
| — |
|
|
| — |
|
|
| 100 | % |
|
| — |
|
|
| 5,900,000 |
|
SSG Merrillville LLC |
|
| 100 | % |
|
| — |
|
|
| — |
|
|
| 100 | % |
|
| — |
|
|
| 5,700,000 |
|
SSG Rochester LLC |
|
| 100 | % |
|
| — |
|
|
| — |
|
|
| 100 | % |
|
| — |
|
|
| 5,950,000 |
|
SSG Sadsbury LLC |
|
| 100 | % |
|
| 450,000 |
|
|
| — |
|
|
| 100 | % |
|
| — |
|
|
| 5,700,000 |
|
SSG Summerville I LLC |
|
| 100 | % |
|
| — |
|
|
| — |
|
|
| 100 | % |
|
| — |
|
|
| 3,400,000 |
|
SSG Summerville II LLC |
|
| 100 | % |
|
| — |
|
|
| — |
|
|
| 100 | % |
|
| — |
|
|
| 1,850,000 |
|
SSG Operations LLC |
|
| 100 | % |
|
| 24,573 |
|
|
| — |
|
|
| 100 | % |
|
| — |
|
|
| 24,573 |
|
|
|
|
|
|
| $ | 474,573 |
|
| $ | — |
|
|
|
|
|
| $ | — |
|
| $ | 34,624,573 |
|
8. LEASES
Global Self Storage as Lessor
The following table sets forth unaudited summarized informationCompany's property rental revenue is primarily related to rents received from tenants at its operating stores. The Company's leases with its self storage tenants are generally on month-to-month terms, include automatic monthly renewals, allow flexibility to increase rental rates over time as to assets, liabilities,market conditions permit, and selected operating informationprovide for the unconsolidated wholly subsidiariescollection of contingent fees such as late fees. These leases do not include any terms or conditions that allow the tenants to purchase the leased space. All self-storage leases for which the Company acts as lessor have been classified as operating leases. The real estate assets related to the Company's stores are included in aggregate"Real estate assets, net" on the Company's consolidated balance sheets and are presented at historical cost less accumulated depreciation and impairment, if any. Rental income related to these operating leases is included in property rental revenue on the Company's consolidated statements of operations, and is recognized each month during the month-to-month terms at the rental rate in place during each month.
Global Self Storage as Lessee
The Company is a lessee in a lease agreement for an automobile entered into November 2022 with a lease term of 3 years. The lease agreement does not contain any material residual value guarantees or material restrictive covenants. As a result of the Company’s election of the package of practical expedients permitted within ASC Topic 842, which among other things, allows for the carryforward of historical lease classification, all of the Company’s lease agreements have been classified as operating leases. Lease expense for payments related to the Company’s operating leases is recognized on a straight-line basis over the lease term.
Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments as specified in the lease. Right-of-use assets and lease liabilities related to the Company’s operating leases are recognized at the lease commencement date based on the present value of the remaining lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available surrounding the Company’s secured borrowing rates and implied secured spread at the lease commencement date in determining the present value of lease payments. The right-of-use asset also includes any lease payments made at or before lease commencement less any lease incentives. The Company had right-of-use assets and lease liabilities related to its operating leases of $35,726 and $35,726 as of December 31, 2023 and $54,199 and $54,199 as of December 31, 2022. Such amounts are amortized using a straight-line method over the term of the lease and are included in prepaid expenses and other assets and accounts payable and accrued expenses on the Company’s consolidated balance sheets, respectively. Amortization expense for the yearyears ended December 31, 2015:
2023 and 2022 was $18,473 and $14,814, respectively. As of December 31, 2023, the Company’s weighted average remaining lease term and weighted average discount rate related to its operating leases were approximately 1.8 years and 3.77%, respectively.
Dollars in thousands |
|
|
|
|
OPERATING DATA |
|
|
|
|
Year ended December 31, 2015 |
|
|
|
|
Rental revenues |
| $ | 4,439 |
|
Costs of operations |
|
| 1,801 |
|
Income from operations |
| $ | 2,638 |
|
Depreciation and amortization |
| $ | 636 |
|
Net income |
| $ | 1,950 |
|
|
|
|
|
|
BALANCE SHEET DATA |
|
|
|
|
December 31, 2015 |
|
|
|
|
Real estate assets, net |
| $ | 26,428 |
|
Total assets |
| $ | 26,965 |
|
Total liabilities |
| $ | 403 |
|
F-14
The total lease payments under the automobile lease are $37,031 as of December 31, 2023 and the future minimum lease payments are $20,198, and $16,833 for the years ending December 31, 2024 and 2025, respectively.
10.F-15
9. EARNINGS PER SHARE
Basic earnings per share is computed using the weighted average number of shares outstanding. Diluted earnings per share is computed using the weighted average number of shares outstanding adjusted for the incremental shares attributed to potentially diluted securities. The following table sets forth the computation of basic and diluted earnings per share:
|
| For the Year Ended December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Net income |
| $ | 2,938,769 |
|
| $ | 2,057,723 |
|
Earnings and dividends allocated to participating securities |
|
| (24,425 | ) |
|
| (23,567 | ) |
Net income attributable to common stockholders |
| $ | 2,914,344 |
|
| $ | 2,034,156 |
|
Weighted average common shares outstanding: |
|
|
|
|
|
| ||
Average number of common shares outstanding - basic |
|
| 11,045,699 |
|
|
| 10,845,884 |
|
Net effect of dilutive unvested restricted stock awards included for treasury stock method |
|
| 41,518 |
|
|
| 54,157 |
|
Average number of common shares outstanding - diluted |
|
| 11,087,217 |
|
|
| 10,900,041 |
|
Earnings per common share |
|
|
|
|
|
| ||
Basic |
| $ | 0.26 |
|
| $ | 0.19 |
|
Diluted |
| $ | 0.26 |
|
| $ | 0.19 |
|
Common stock dividends totaled $3,231,608 ($0.29 per share) and $3,019,063 ($0.275 per share) for the years ended December 31, 2023 and 2022, respectively.
Net income |
| $ | 384,135 |
|
Basic and diluted weighted average common shares outstanding |
|
| 7,417,320 |
|
Basic and diluted per share net income |
| $ | 0.05 |
|
F-24
11.10. RELATED PARTY TRANSACTIONS
Certain officers and directors of the Company also serve as officers and directors of Winmill & Co. Incorporated (“Winco”), Bexil Corporation (“Bexil”), Tuxis Corporation (“Tuxis”), and their affiliates (collectively with the Company, the “Affiliates”). As of December 31, 2016,2023, certain of the Affiliates ownedand the Company's directors and employees may be deemed to own, in aggregate, approximately 5%8.1% of the Company’s outstanding common stock.
Pursuant to an arrangement between a professional employer organization (“PEO”) and the Affiliates, the PEO provides payroll, benefits, compliance, and related services for employees of the Affiliates in accordance with applicable rules and regulations under the IRCCode and, in connection therewith, Midas Management Corporation (“MMC”), a subsidiary of Winco, acts as a conduit payer of compensation and benefits to the Affiliates’ employees including those who are concurrently employed by the Company and its Affiliates. Rent expense of concurrently used office spaceThe aggregate compensation and overhead expensesbenefits accrued and paid by the Company to MMC were $2,883,067 and $2,465,326 for the years ended December 31, 2023 and 2022, respectively. Expenses for various concurrently used administrative and support functions incurred by the Affiliates are allocated at cost among them. The aggregate administrative and support function expenses accrued and paid by the Company to Winco were $31,243 and $24,183 for the years ended December 31, 2023 and 2022, respectively. The Affiliates participate in a 401(k) retirement savings plan for substantially all qualified employees. A matching expense based upon a percentage of contributions to the plan by eligible employees is incurred and allocated among the Affiliates. The matching expense is accrued and funded on a current basis and may not exceed the amount permitted as a deductible expense under the IRC.Code. The aggregate rentCompany's allocated matching expense was $102,219 and overhead accrued and paid by the Company to Winco$87,238 for the years ended December 31, 20162023 and 2015 was $69,5992022, respectively. As of December 31, 2023 and $62,403, respectively. The2022, the Company had reimbursements payable to MMC and Winco for compensation, and benefits, and rentadministrative and overheadsupport function expenses of $2,933$23,523 and $64,649 as of December 31, 2016 and 2015,$16,835, respectively.
F-16
The Company provides a maximumcurrently reimburses monthly automobile allowanceexpenses of $1,000$1,000 per month to its President, Mark C. Winmill. To the extent that the monthly maximum payment under the Company’s automobile lease exceeds the current monthly allowance,reimbursement amount, Mr. Winmill must reimbursevoluntarily reimburses the Company for the excess amount. In this regard, Mr. Winmill has reimbursed the Company $1,878$8,198 and $1,878 for each of the years ended December 31, 2016automobile payments paid and 2015,due in 2023 and 2022, respectively.
The Company leasedleases office space from Tuxisand storage to certain Affiliates under a rental agreement through December 30, 2016. For the years ended December 31, 2016 and 2015, the total rent paid by the Company to Tuxis was $12,000 and $14,000 respectively.
On December 30, 2016, the Company leased office space to Tuxis under a rental agreement.agreements. The terms of occupancy are month to month and automatically renew unless terminated by either party on ten days’thirty days’ written notice. The monthlyCompany earned rental charges are $1,000 per month dueincome of $4,800 and payable$18,000 for the years ended December 31, 2023 and December 31, 2022, respectively.
During 2020, MMC (the “Borrower”) entered into a Paycheck Protection Program Term Note (“PPP Note”) with Customers Bank on behalf of itself and the first dayAffiliates under the Paycheck Protection Program of each month.the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). The Borrower received total proceeds of $486,602 from the PPP Note of which $307,210 was attributable to the Company under the SBA’s loan determination formula. In accordance with the requirements of the CARES Act, the Affiliates used the proceeds from the PPP Note primarily for payroll and other eligible costs. On April 5, 2022, the Borrower was granted forgiveness of the entire PPP Note and any accrued interest. Upon forgiveness, the Company received $307,210 in cash from the borrower, which was the amount attributable to the Company under the SBA's loan determination formula, and recorded a gain for such amount, in its consolidated statements of operations and comprehensive income.
12.11. CAPITAL STOCK
TheAs of December 31, 2023, the Company iswas authorized to issue 19,900,000450,000,000 shares of $0.01$0.01 par value common stock.stock of which 11,153,513 shares were issued and outstanding. The Company was also has 100,000authorized to issue 50,000,000 shares of Series A participating preferred stock, $0.01$0.01 par value, authorized, of which none has been issued.
On December 30, 2016 (the “Closing Date”),January 14, 2022, the Company issued 202,703entered into an At Market Offering Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (the “Agent”) pursuant to which the Company may sell, from time to time, shares of common stock valued at $975,002having an aggregate offering price of up to Tuxis in conjunction with$15,000,000, through the Tuxis Subsidiaries acquisition. The common stock issued is unregistered and therefore subject to certain restrictions. The Company and Tuxis have entered into a Registration Rights Agreement, which permits Tuxis to request the registration of the Company’s unregistered common stock.
F-25
On January 28, 2016, the Company announced that its Board of Directors has adopted a stockholders rights plan (the “Rights Plan”). To implement the Rights Plan, the Board of Directors declared a dividend distribution of one right for each outstanding share of Company common stock, par value $.01 per share, to holders of record of theAgent. There were no shares of common stock atsold during the close of business on January 29, 2016. Each right entitlesyear ended December 31, 2023 under the registered holder to purchase fromsales agreement. For the year ended December 31, 2022, under the Sales Agreement, the Company one one-thousandthsold and issued an aggregate of a share373,833 shares of preferred stock, par value $.01 per share. The rights were distributed as a non-taxable dividend and will expire on January 29, 2026. The rights were evidenced by the underlying Company common stock and no separate preferred stock purchase rights certificates have been distributed.raised aggregate gross proceeds of approximately $2,272,628, less sales commissions of approximately $45,491 and other offering costs resulting in net proceeds of $2,008,436.
12. STOCK-BASED COMPENSATION
On October 16, 2017 (“Effective Date”), the Company’s stockholders approved the Company’s 2017 Equity Incentive Plan (the “Plan”). The rightsPlan is designed to acquire preferred stock are not immediately exercisable and will become exercisable only if a person or group, other than Exempt Persons (asprovide equity-based incentives to certain eligible persons, as defined in the Rights Plan, agreement), acquiresin the form of options, share appreciation rights, restricted stock, restricted stock units, dividend equivalent rights or commences a tender offer for 9.8% or moreother forms of equity-based compensation as determined in the discretion of the Company’s common stock. If a person or group, other than an Exempt Person, acquires or commences a tender offer for 9.8% or moreCompany's board of directors, the compensation committee of the Company’s common stock, each holderCompany's board of a right, except the acquirer, will be entitled, subject to the Company’s right to redeemdirectors, or exchange the right, to exercise, at an exercise price of $12, the right to purchase one one-thousandth of a share of the Company’s newly created Series A Participating Preferred Stock, or theother designee thereof. The total number of shares of Company common stock equalreserved and available for issuance under the Plan on the Effective Date was 760,000.
The Company recorded $199,752 and $173,921 of expense in general and administrative expense in its consolidated statements of operations related to restricted stock awards for the holder’s numberyears ended December 31, 2023 and 2022, respectively. As of rights multiplied byDecember 31, 2023, there was $157,097 and $204,806 of unrecognized compensation expense related to unvested time-based and performance-based restricted stock awards, respectively. That cost is expected to be recognized over a weighted—average period of 2.1 years and 2.7 years for time-based and performance-based awards, respectively. The fair value of common stock awards is determined based on the exercise price and divided by 50% of the marketclosing trading price of the Company’s common stock on the grant date.
F-17
Time-Based Restricted Stock Grants
These time-based grants vest solely based on continued employment, with 6.25% of the shares eligible to vest on each three-month anniversary of the grant date during the four-year vesting period. Time-based restricted stock cannot be transferred during the vesting period. Grants of time-based restricted stock entitle the holder to dividends paid by the Company on shares of its common stock, including unvested shares.
A summary of the Company’s time-based restricted stock grant activity is as follows:
|
|
|
|
| Weighted-Average |
| ||
|
|
|
|
| Grant-Date |
| ||
Time-Based Restricted Stock Grants |
| Shares |
|
| Fair Value |
| ||
Unvested at December 31, 2021 |
|
| 61,201 |
|
| $ | 4.45 |
|
Granted |
|
| 11,000 |
|
| $ | 5.52 |
|
Vested |
|
| (23,645 | ) |
| $ | 4.50 |
|
Forfeited |
|
| (3,313 | ) |
| $ | 4.74 |
|
Unvested at December 31, 2022 |
|
| 45,243 |
|
| $ | 4.66 |
|
Granted |
|
| 19,238 |
|
| $ | 5.01 |
|
Vested |
|
| (26,362 | ) |
| $ | 4.62 |
|
Forfeited |
|
| (5,019 | ) |
| $ | 5.02 |
|
Unvested at December 31, 2023 |
|
| 33,100 |
|
| $ | 4.84 |
|
Performance-Based Restricted Stock Grants
Performance-based restricted stock grants vest based on continued employment and the achievement of certain Funds from Operations, as adjusted (“AFFO”) and same store revenue growth (“SSRG”) goals by the Company during 2023. Between 0% and 200% of these shares will be earned based on achievement of the AFFO and SSRG goals in 2023, and the shares which are earned will remain subject to quarterly vesting during the remaining four-year time vesting period. Dividends paid by the Company prior to the determination of how many shares are earned will be retained by the Company and released only with respect to earned shares. If a Change in Control (as defined in the Plan) occurs the number of shares earned will equal the greater of the number of shares granted and the number of shares which would have been earned based on the AFFO and SSRG through the date of the occurrence of such an event. The Company’s Board of Directors may terminateChange in Control. If following a Change in Control, a grantee is terminated by the Rights Plan at any timeCompany without Cause or redeemby the rights, for $0.01 per right, at any time before a person acquires 9.8% or moregrantee with Good Reason (as each is defined in the Plan), all unvested restricted stock will fully vest. Performance-based restricted stock earned during 2023 and 2022 were 30,217 shares and 18,944 shares, respectively.
A summary of the Company’s common stock. This Rights Plan replacedperformance-based restricted stock grant activity is as follows:
|
|
|
|
| Weighted-Average |
| ||
|
|
|
|
| Grant-Date |
| ||
Performance-based Stock Grants |
| Shares |
|
| Fair Value |
| ||
Unvested at December 31, 2021 |
|
| 22,535 |
|
| $ | 4.34 |
|
Granted |
|
| 18,944 |
|
| $ | 5.52 |
|
Vested |
|
| (15,588 | ) |
| $ | 4.57 |
|
Unvested at December 31, 2022 |
|
| 25,891 |
|
| $ | 5.07 |
|
Granted |
|
| 30,217 |
|
| $ | 5.11 |
|
Vested |
|
| (16,084 | ) |
| $ | 4.96 |
|
Unvested at December 31, 2023 |
|
| 40,024 |
|
| $ | 5.14 |
|
|
|
|
|
|
|
|
Forfeitures are accounted for as they occur, compensation cost previously recognized for an award that is forfeited because of a failure to satisfy a service or performance condition is reversed in the Company’s stockholders rights plan dated November 25, 2015, which expired on its own terms on March 24, 2016.period of the forfeiture.
14.F-18
13. COMMITMENTS AND CONTINGENCIES
The Company enters into contracts that contain a variety of representations and warranties and which may provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown as it involves future claims that may be made against the Company under circumstances that have not occurred.
14. RISKS AND UNCERTANTIES
General Market Risks
The Company’s portfolio and the success of its investment activities are affected by global and national economic, political and market conditions generally and also by the local economic conditions where its assets are located. Certain external events such as public health crises, including the novel coronavirus (“COVID-19”) and its variants, natural disasters and geopolitical events, including the ongoing conflict between Russia, Belarus and Ukraine and the ongoing conflict between Israel and Hamas, have recently led to increased financial and credit market volatility and disruptions, leading to record inflationary pressure, rising interest rates, supply chain issues, labor shortages and recessionary concerns. The full impact of such external events on the financial and credit markets and consequently on the Company’s financial conditions and results of operations is uncertain and cannot be fully predicted. The Company leases an automobile underwill continue to monitor these events and will adjust its operations as necessary.
Credit Risk
Credit risk - Financial assets that are exposed to credit risk consist primarily of cash, cash equivalents, and restricted cash and certain portions of accounts receivable including rents receivable from our tenants. Risk to collection of rents receivable is mitigated by: (i) dispersion of rents receivable across many tenants, (ii) marketing targeted to tenants that have established credit, (iii) use of autopay, and (iv) use of collection procedures. Cash, cash equivalents and restricted cash are on deposit with highly rated commercial banks and financial institutions.
Market Risk
Investments in securities subject the Company to market risk. Investments in securities may decline in value. The Company monitors the stock prices of the investments and the financial performance of the related companies.
15. SUBSEQUENT EVENTS
On March 1, 2024, the Company declared a lease expiringcash dividend of $0.0725 per common share payable on January 3, 2020. The future minimum lease paymentsMarch 28, 2024 to stockholders of record as of March 15, 2024.
On March 25, 2024, the Company entered into a second amended and restated employment agreement with its Chief Executive Officer and President, Mark C. Winmill.
On March 25, 2024, the Company approved restricted share awards under the leasePlan to certain of its officers and employees in the aggregate amount of 108,374 shares, of which 23,726 shares are $45,684 comprised of annual payments of $15,288 in eachperformance-based grants and the remainder of the years ending December 31, 2017, 2018,shares are time-based grants. Between 0% and 2019, respectively.200% of these shares will be earned based on achievement of the AFFO and SSRG goals in 2024, and the shares which are earned will remain subject to quarterly vesting during the remaining four-year time vesting period. Dividends paid by the Company prior to the determination of how many shares are earned will be retained by the Company and released only with respect to earned shares. If a Change in Control (as defined in the Plan) occurs during 2024, the number of shares earned will equal the greater of the number of shares granted and the number of shares which would have been earned based on the AFFO and SSRG through the date of the Change in Control. If following a Change in Control, a grantee is terminated by the Company without Cause or by the grantee with Good Reason (as each is defined in the Plan), all unvested restricted shares will fully vest.
F-26
F-19
GLOBAL SELF STORAGE, INC.
SCHEDUELSCHEDULE III
REAL ESTATE AND RELATED DEPRECIATION
December 31, 20162023
|
|
|
|
| Initial cost |
|
|
|
|
| Gross Carrying Amount |
|
|
|
|
|
|
| ||||||||||||||
Description |
| Square |
|
| Land |
|
| Buildings & |
|
| Costs |
|
| Land |
|
| Buildings & |
|
| Total |
|
| Accumulated |
| ||||||||
Clinton, CT (A) |
|
| 30,408 |
|
|
| 356,040 |
|
|
| 3,108,285 |
|
|
| 43,528 |
|
|
| 356,040 |
|
| $ | 3,151,813 |
|
| $ | 3,507,853 |
|
| $ | 545,116 |
|
Bolingbrook, IL (B) |
|
| 113,700 |
|
|
| 633,914 |
|
|
| 5,491,409 |
|
|
| 2,488,142 |
|
|
| 633,914 |
|
|
| 7,979,551 |
|
|
| 8,613,465 |
|
|
| 1,631,687 |
|
Dolton, IL (B) |
|
| 86,590 |
|
|
| 614,413 |
|
|
| 5,227,313 |
|
|
| 52,466 |
|
|
| 614,413 |
|
|
| 5,279,779 |
|
|
| 5,894,192 |
|
|
| 1,113,932 |
|
McCordsville, IN (A) |
|
| 76,335 |
|
|
| 770,000 |
|
|
| 6,776,000 |
|
|
| 497,478 |
|
|
| 770,000 |
|
|
| 7,273,478 |
|
|
| 8,043,478 |
|
|
| 1,276,122 |
|
Merrillville, IN (B) |
|
| 81,270 |
|
|
| 597,229 |
|
|
| 5,104,011 |
|
|
| 477,001 |
|
|
| 597,229 |
|
|
| 5,581,012 |
|
|
| 6,178,241 |
|
|
| 1,153,502 |
|
Millbrook, NY (A) |
|
| 24,482 |
|
|
| 423,960 |
|
|
| 2,900,895 |
|
|
| 2,366,532 |
|
|
| 423,960 |
|
|
| 5,267,427 |
|
|
| 5,691,387 |
|
|
| 736,409 |
|
Rochester, NY (B) |
|
| 68,311 |
|
|
| 571,583 |
|
|
| 5,227,630 |
|
|
| 34,843 |
|
|
| 571,583 |
|
|
| 5,262,473 |
|
|
| 5,834,056 |
|
|
| 1,074,892 |
|
Lima, OH (A) |
|
| 94,928 |
|
|
| 530,000 |
|
|
| 4,664,000 |
|
|
| 389,070 |
|
|
| 530,000 |
|
|
| 5,053,070 |
|
|
| 5,583,070 |
|
|
| 881,873 |
|
Sadsburyville, PA (B) |
|
| 78,875 |
|
|
| 462,749 |
|
|
| 5,146,579 |
|
|
| 41,067 |
|
|
| 462,749 |
|
|
| 5,187,646 |
|
|
| 5,650,395 |
|
|
| 1,101,215 |
|
Summerville, SC (B) (1) |
|
| 76,460 |
|
|
| 345,160 |
|
|
| 2,989,159 |
|
|
| 103,589 |
|
|
| 345,160 |
|
|
| 3,092,748 |
|
|
| 3,437,908 |
|
|
| 626,833 |
|
Summerville, SC (B) (2) |
|
| 43,110 |
|
|
| 188,766 |
|
|
| 1,605,405 |
|
|
| 32,614 |
|
|
| 188,766 |
|
|
| 1,638,019 |
|
|
| 1,826,785 |
|
|
| 333,809 |
|
West Henrietta, NY (A) |
|
| 55,550 |
|
|
| 628,251 |
|
|
| 5,229,481 |
|
|
| 278,128 |
|
|
| 628,251 |
|
|
| 5,507,609 |
|
|
| 6,135,860 |
|
|
| 447,705 |
|
|
|
| 830,019 |
|
| $ | 6,122,065 |
|
| $ | 53,470,167 |
|
| $ | 6,804,458 |
|
| $ | 6,122,065 |
|
| $ | 60,274,625 |
|
| $ | 66,396,690 |
|
| $ | 10,923,095 |
|
|
|
|
|
|
|
|
|
| Initial cost |
|
|
|
|
|
| Gross Carrying Amount at December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Description |
| Square Footage |
|
|
| Encumbrances |
| Land |
|
| Buildings & Improvements |
|
| Costs Subsequent to Acquisition |
|
| Land |
|
| Buildings & Improvements |
|
| Total |
|
| Accumulated Depreciation |
|
| Year Acquired | ||||||||
Clinton, CT |
|
| 31,059 |
|
|
|
|
| $ | 356,040 |
|
| $ | 3,108,285 |
|
| $ | — |
|
| $ | 356,040 |
|
| $ | 3,108,285 |
|
| $ | 3,464,325 |
|
| $ | 211 |
|
| 2016 |
Bolingbrook, IL |
|
| 110,600 |
|
|
| (A) |
|
| 633,914 |
|
|
| 5,491,409 |
|
|
| 2,422,760 |
|
|
| 633,914 |
|
|
| 7,914,169 |
|
|
| 8,548,083 |
|
|
| 178,620 |
|
| 2013 |
Dolton, IL |
|
| 86,725 |
|
|
| (A) |
|
| 614,413 |
|
|
| 5,227,313 |
|
|
| 9,611 |
|
|
| 614,413 |
|
|
| 5,236,924 |
|
|
| 5,851,337 |
|
|
| 141,594 |
|
| 2013 |
McCordsville, IN |
|
| 81,471 |
|
|
|
|
|
| 770,000 |
|
|
| 6,776,000 |
|
|
| 14,573 |
|
|
| 770,000 |
|
|
| 6,790,573 |
|
|
| 7,560,573 |
|
|
| 44,703 |
|
| 2016 |
Merrillville, IN |
|
| 71,720 |
|
|
| (A) |
|
| 597,229 |
|
|
| 6,104,011 |
|
|
| 94,605 |
|
|
| 597,229 |
|
|
| 5,198,616 |
|
|
| 5,795,845 |
|
|
| 133,910 |
|
| 2013 |
Millbrook, NY |
|
| 13,391 |
| (1) |
|
|
|
| 313,950 |
|
|
| 2,723,468 |
|
|
| — |
|
|
| 313,950 |
|
|
| 2,723,468 |
|
|
| 3,037,418 |
|
|
| 184 |
|
| 2016 |
Millbrook, NY |
|
| 1,875 |
| (2) |
|
|
|
| 110,010 |
|
|
| 177,427 |
|
|
| — |
|
|
| 110,010 |
|
|
| 177,427 |
|
|
| 287,437 |
|
|
| 60 |
|
| 2016 |
Rochester, NY |
|
| 68,017 |
|
|
| (A) |
|
| 571,583 |
|
|
| 5,227,630 |
|
|
| — |
|
|
| 571,583 |
|
|
| 5,227,630 |
|
|
| 5,799,213 |
|
|
| 102,071 |
|
| 2012 |
Lima, OH |
|
| 97,801 |
|
|
|
|
|
| 530,000 |
|
|
| 4,664,000 |
|
|
| 28,898 |
|
|
| 530,000 |
|
|
| 4,692,898 |
|
|
| 5,222,898 |
|
|
| 39,867 |
|
| 2016 |
Sadsburyville, PA |
|
| 79,004 |
|
|
| (A) |
|
| 462,749 |
|
|
| 5,146,679 |
|
|
| — |
|
|
| 462,749 |
|
|
| 5,146,579 |
|
|
| 5,609,328 |
|
|
| 133,153 |
|
| 2012 |
Summerville, SC |
|
| 72,700 |
| (3) |
| (A) |
|
| 345,160 |
|
|
| 2,989,159 |
|
|
| 5,475 |
|
|
| 345,160 |
|
|
| 2,994,634 |
|
|
| 3,339,794 |
|
|
| 63,506 |
|
| 2013 |
Summerville, SC |
|
| 41,608 |
| (4) |
| (A) |
|
| 188,766 |
|
|
| 1,493,814 |
|
|
| 14,725 |
|
|
| 188,766 |
|
|
| 1,620,130 |
|
|
| 1,808,896 |
|
|
| 35,108 |
|
| 2013 |
|
|
| 755,971 |
|
|
|
|
| $ | 5,493,814 |
|
| $ | 49,129,195 |
|
| $ | 2,590,647 |
|
| $ | 5,493,814 |
|
| $ | 50,831,333 |
|
| $ | 56,325,147 |
|
| $ | 872,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity in storage properties during the period January 19, 2016 toyears ended December 31, 20162023 and 2022 is as follows:
|
| 2023 |
|
| 2022 |
| ||
Storage properties * |
|
|
|
|
|
| ||
Balance at beginning of period |
| $ | 66,806,458 |
|
| $ | 66,693,125 |
|
Improvements |
|
| 231,104 |
|
|
| 113,333 |
|
Balance at end of period |
|
| 67,037,562 |
|
|
| 66,806,458 |
|
|
|
|
|
|
|
| ||
Accumulated depreciation |
|
|
|
|
|
| ||
Balance at beginning of period |
|
| (9,922,298 | ) |
|
| (8,303,059 | ) |
Depreciation expense |
|
| (1,634,044 | ) |
|
| (1,619,239 | ) |
Balance at end of period |
|
| (11,556,342 | ) |
|
| (9,922,298 | ) |
Storage properties, net |
| $ | 55,481,220 |
|
| $ | 56,884,160 |
|
* These amounts include equipment that is housed at the Company’s properties which is excluded from Schedule III above.
As of December 31, 2023, the aggregate cost of real estate for U.S. federal income tax purposes was as follows:$62,766,523.
F-20
Storage properties * |
|
|
|
|
Balance at beginning of period |
| $ | 34,355,253.00 |
|
Acquisitions and improvements |
|
| 22,295,262 |
|
Balance at end of period |
| $ | 56,650,515 |
|
|
|
|
|
|
Accumulated depreciation |
|
|
|
|
Balance at beginning of period |
| $ | — |
|
Depreciation expense |
|
| (875,447 | ) |
Balance at end of period |
| $ | (875,447 | ) |
Storage properties, net |
| $ | 55,775,068 |
|
|
|
F-27