UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Amendment No. 1
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Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 25, 2008
Strategic Storage Trust, Inc.
(Exact name of Company as specified in its charter)
Commission File Number: 333- 146959
Maryland 32-0211624
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
111 Corporate Drive, Suite 120, Ladera Ranch, California 92694
(Address of principal executive offices)
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(877) 327-3485
(Company's telephone number)
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None
(Former name or former address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Company under any of the following provisions:
| [ ] | | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [ ] | | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| [ ] | | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Table of Contents
EXPLANATORY NOTE:
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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, Strategic Storage Trust, Inc., a Maryland Corporation (the “Company”), hereby amends its Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 25, 2008, for the purpose of filing the financial statements and pro forma financial information required by item 9.01 of Form 8-K with respect to the Company’s acquisition of two self-storage facilities from U-Store-It, L.P. in accordance with Rule 3-14 and Article 11 of Regulation S-X, respectively.
In accordance with Rule 3-14 and Article 11 of Regulation S-X, the Company hereby files the following financial statements and pro forma financial information, respectively.
| Item 9.01. Financial Statements | | |
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| | | | | Page |
| (a) | | Financial Statements Applicable to Gulf Breeze and Biloxi Properties | | |
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| | | Independent Auditors’ Report | | 3 |
| | | Combined Statement of Revenues and Certain Operating Expenses | | 4 |
| | | Notes to Combined Statement of Revenues and Certain Operating Expenses | | 5 |
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| (b) | | Unaudited Pro Forma Financial Information | | |
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| | | Unaudited Pro Forma Consolidated Statement of Operations | | 7 |
| | | Notes to Unaudited Pro Forma Consolidated Statement of Operations | | 9 |
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[Letterhead of Reznick Group, P.C.]
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INDEPENDENT AUDITORS’ REPORT
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To the Board of Directors and Stockholders
Strategic Storage Trust, Inc.
Ladera Ranch, California
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We have audited the accompanying combined statement of revenues and certain operating expenses (the “Historical Summary”) of the two properties located at McClure Drive, Gulf Breeze, Florida and Pass Road, Biloxi, Mississippi acquired from U-Store-It, Inc. (the “Gulf Breeze and Biloxi Properties”) for the year ended December 31, 2007. The Historical Summary is the responsibility of the Gulf Breeze and Biloxi Properties’ management. Our responsibility is to express an opinion on the Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall Historical Summary presentation. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in Form 8-K/A and in the registration statement on Form S-11 of Strategic Storage Trust, Inc.) as described in Note 1 and is not intended to be a complete presentation of the Gulf Breeze and Biloxi Properties revenues and expenses.
In our opinion, the Historical Summary referred to above present fairly, in all material respects, the combined revenues and certain operating expenses described in Note 1 of the Gulf Breeze and Biloxi Properties for the year ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.
Baltimore, Maryland
December 1, 2008
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GULF BREEZE AND BILOXI PROPERTIES
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COMBINED STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES
Year Ended December 31, 2007
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| Revenues: | | | | |
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| Net rental revenue | | $ 1,209,104 | | |
| Other operating income | | 66,879 | | |
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| Total revenues | | | | $ 1,275,983 |
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| Certain operating expenses: | | | | |
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| Property operating expenses | | 142,359 | | |
| Salaries and related expense | | 140,143 | | |
| Marketing expense | | 11,306 | | |
| Real estate taxes | | 77,899 | | |
| Property insurance | | 31,485 | | |
| General and administrative | | 24,201 | | |
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| Total certain operating expenses | | | | 427,393 |
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| Revenues in excess of certain operating expenses | | | | $ 848,590 |
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See notes to combined statement of revenues and certain operating expenses.
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GULF BREEZE AND BILOXI PROPERTIES
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NOTES TO COMBINED STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES
Year Ended December 31, 2007
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Note 1. Organization and Basis of Presentation
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The accompanying combined statement of revenues and certain operating expenses includes the combined revenues and certain operating expenses of two properties located at McClure Drive, Gulf Breeze Florida and Pass Road, Biloxi, Mississippi acquired from U-Store-It, Inc. (the “Gulf Breeze and Biloxi Properties”). Strategic Storage Trust, Inc. acquired the Properties on September 25, 2008 for a total purchase price of $10.76 million, plus closing costs and acquisition fees. On the date of acquisition, the Biloxi and Gulf Breeze Properties contained 596 storage units and 705 storage units, respectively.
The accompanying combined statement of revenues and certain operating expenses (the “Historical Summary”) was prepared for the purpose of complying with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission for the acquisition of real estate properties. The combined statement of revenues and certain operating expenses is not representative of the actual operations of the Gulf Breeze and Biloxi Properties for the period presented, because certain operating expenses that may not be comparable to the expenses to be incurred in the proposed future operations of the Gulf Breeze and Biloxi Properties have been excluded. Expenses excluded generally consist of management fees, interest and debt related costs, depreciation and amortization expense, interest income, income taxes and certain other allocated corporate expenses not directly related to the operations of the Gulf Breeze and Biloxi Properties. Therefore the combined statement of revenues and certain operating expenses may not be comparable to a combined statement of operations for the Gulf Breeze and Biloxi Properties after their acquisition by the Company. Except as noted above, the management of the Gulf Breeze and Biloxi Properties is not aware of any material factors relating to the Gulf Breeze and Biloxi Properties for the year ended December 31, 2007, that would cause the reported combined financial information not to be indicative of future operating results.
Note 2. Summary of Significant Accounting Policies
The combined statement of revenues and certain operating expenses has been prepared using the accrual method of accounting on the basis of presentation described in Note 1. As such, revenue is recorded when earned and expenses are recognized when incurred.
Rental revenue is recognized when due over the lease terms, which are generally month-to-month leases. Other operating income, consisting primarily of late fees and ancillary revenue, is recognized when earned.
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Property operating expenses represent the direct expenses of operating the Gulf Breeze and Biloxi Properties and consist primarily of common area maintenance, utilities, real estate taxes, insurance, general and administrative and other operating expenses that are expected to continue in the ongoing operation of the Gulf Breeze and Biloxi Properties.
The preparation of the Historical Summary in accordance with accounting principles generally accepted in the United States of America requires management of the Gulf Breeze and Biloxi Properties to make certain estimates and assumptions that affect the reported amounts of revenues and certain operating expenses during the reporting period. Actual results could differ from those estimates.
STRATEGIC STORAGE TRUST, INC.
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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 2008
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The following unaudited pro forma consolidated statement of operations is based on the historical consolidated statement of operations of Strategic Storage Trust, Inc., a Maryland corporation (the “Company”), and the historical statement of operations of two self storage facilities purchased from U-Store-It, L.P. on September 25, 2008 and the related indebtedness incurred on this transaction. The unaudited pro forma consolidated statement of operations for the nine months ended September 30, 2008, gives effect to these acquisitions as if they were completed as of January 1, 2008.
The information included in the “Strategic Storage Trust, Inc. Historical” column of the unaudited pro forma consolidated statement of operations for the nine months ended September 30, 2008 sets forth the Company’s historical consolidated statement of operations which are derived from the Company’s unaudited consolidated financials statements included in the Company’s Quarterly Report on Form 10-Q filed with the SEC for the period ended September 30, 2008 (“Third Quarter Form 10-Q”).
The unaudited pro forma adjustments are based on available information and certain assumptions that the Company believes are reasonable and factually supportable. These unaudited pro forma financial statements do not purport to represent what the actual results of operations of the Company would have been assuming such transactions had been completed as set forth above nor does it purport to represent the results of operations of the Company for future periods.
Unaudited pro forma financial information for 2007 was not presented because the Company did not have any substantive operations until 2008. The Company did not present an unaudited pro forma balance sheet because the acquisition has been reflected in the Company’s Third Quarter Form 10-Q.
You should read the unaudited pro forma consolidated financial statements set forth below in conjunction with the unaudited consolidated financial statements and related notes of the Company included in the SEC filing discussed above.
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| | | Strategic | | | | | | | | |
| | | Storage | | Completed | | | | | | |
| | | Trust, Inc. | | Facility | | Pro Forma | | | | Strategic Storage |
| | | Historical | | Acquisitions | | Adjustments | | | | Trust, Inc. |
| | | Note 1 | | Note 2 | | Note 3 | | | | Pro Forma |
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| Revenues: | | | | | | | | | | |
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| Self storage rental income | | $ 21,383 | | $ 931,611 | | $ — | | | | $ 952,994 |
| Ancillary operating income | | 692 | | 10,465 | | — | | | | 11,157 |
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| Total revenues | | 22,075 | | 942,076 | | — | | | | 964,151 |
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| Operating expenses: | | | | | | | | | | |
| Property operating expenses | | 9,446 | | 344,233 | | 87,512 | | (1) | | 441,191 |
| General and administrative | | 810,188 | | — | | — | | | | 810,188 |
| Depreciation | | 18,819 | | 298,069 | | (85,948) | | (2) | | 230,940 |
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| Total operating expenses | | 838,453 | | 642,302 | | 1,564 | | | | 1,482,319 |
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| Operating income (loss) | | (816,378) | | 299,774 | | (1,564) | | | | (518,168) |
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| Other income (expense): | | | | | | — | | | | |
| Interest expense | | (8,667) | | — | | (251,333) | | (3) | | (260,000) |
| Deferred financing amortization expense | | (5,527) | | — | | (160,273) | | (4) | | (165,800) |
| Interest income | | 19,124 | | — | | — | | | | 19,124 |
| Other financing costs | | (48,490) | | — | | — | | | | (48,490) |
| Other | | (10,529) | | — | | — | | | | (10,529) |
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| Income (loss) before minority interest in loss of | | | | | | | | | | |
| subsidiary | | (870,467) | | 299,774 | | (413,170) | | | | (983,863) |
| Minority interest in loss of subsidiary | | 82,051 | | — | | 159,184 | | (5) | | 241,235 |
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| Net income (loss) | | $ (788,416) | | $ 299,774 | | $ (253,986) | | | | $ (742,628) |
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| Net loss per share - basic and diluted | | $ (3.04) | | | | | | | | $ (2.87) |
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| Weighted average shares outstanding | | 259,001 | | | | | | | | |
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| See notes to unaudited pro forma consolidated statement of operations. |
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STRATEGIC STORAGE TRUST, INC.
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 2008
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On September 25, 2008, the Company through two wholly-owned subsidiaries of Strategic Storage Operating Partnership, L.P. (the “Operating Partnership”) closed on the purchase of self storage facilities located in Biloxi, Mississippi (the “Biloxi Property”) and Gulf Breeze, Florida (the “Gulf Breeze Property”) from an unaffiliated third party for a purchase price of $10,760,000 exclusive of closing costs and acquisition fees.
The Biloxi Property is a 596-unit self storage facility that sits on approximately 5.9 acres and contains approximately 66,600 rentable square feet of self storage space. The Gulf Breeze Property is a 705-unit self storage facility that sits on approximately 3.0 acres and contains approximately 80,000 rentable square feet of self storage space.
On September 25, 2008, in connection with the acquisition of the Biloxi Property and the Gulf Breeze Property, the Company entered into a $4 million secured promissory note with Spectrum Realty Mezzanine Fund I, LLC (the “Spectrum Promissory Note”).
The Spectrum Promissory Note matures on March 25, 2009, with the entire principal balance and all accrued interest coming due on such date, subject to three one-month extensions upon mutual consent for an additional fee. The Spectrum Promissory Note bears a fixed interest rate of 13.0%, and the Company paid a loan fee in the amount of 3.0% of the funded loan amount at the loan closing. The Spectrum Promissory Note provides for interest-only payments payable monthly. The Company may repay all or a portion (in at least $500,000 increments) of the Spectrum Promissory Note without penalty, at any time, upon 15 days written notice. The Spectrum Promissory Note is secured by a deed of trust on the Company’s interest in the Biloxi Property, a mortgage on the Company’s interest in the Gulf Breeze Property and certain of the assets of the borrowing entities. In addition, the Company and the Operating Partnership both executed a guaranty in favor of the lender guaranteeing the payment of the Spectrum Promissory Note.
Note 2. Statement of Operations – Completed Facility Acquisitions
This acquisition was completed on September 25, 2008. Therefore, these amounts reflect the historical unaudited operating results of the two self-storage facilities, excluding the results of operations for these facilities that are already included in the Company’s historical results of operations for the nine months ended September 30, 2008.
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Note 3. Statement of Operations – Pro Forma Adjustments
(1) Adjustment reflects the additional fees the Company’s advisor or its affiliates are entitled to pursuant to the Company’s advisory agreement and property management agreement as compared to historical amounts. The Company’s advisor is paid an asset management fee of one-twelfth on one-percent of average invested assets calculated on a monthly basis. The Company’s property manager is paid a monthly fee of 6% of gross revenues received from the Company’s properties.
(2) Adjustment reflects the change in depreciation expense resulting from the properties acquired on September 25, 2008. Such deprecation expense was based on a preliminary purchase price allocation of $2,463,000 to land and $8,677,000 to building. Depreciation expense on the purchase price allocated to building is recognized using the straight-line method over a 30 year life. The purchase price allocation, and therefore depreciation expense, is preliminary and is subject to change.
(3) Adjustment reflects the additional interest expense on the $4 million of indebtedness incurred on the acquisitions. Such indebtedness bears interest at 13% and has a six month term.
(4) Adjustment represents the additional amortization of the deferred financing costs related to the indebtedness incurred on the acquisition. Such deferred financing costs totaled $165,800 and were amortized over the six month term of the indebtedness.
(5) Minority interest is adjusted based on the additional pro forma earnings. Such adjustment was based upon a monthly calculation of pro forma net income and shares outstanding.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| | | Strategic Storage Trust, Inc. |
| | | Date: December 5, 2008 |
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| By: | | /s/ Michael S. McClure |
| | | Michael S. McClure |
| | | Chief Financial Officer |
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