SmartStop Self Storage REIT, Inc. ((SMA)) has held its Q3 earnings call. Read on for the main highlights of the call.
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SmartStop Self Storage REIT, Inc. recently held its earnings call, revealing a blend of achievements and challenges. The company showcased sector-leading revenue growth and strategic acquisitions, despite facing unexpected costs and market hurdles. The overall sentiment was optimistic, with SmartStop positioning itself well for future growth.
Sector-leading Same-store Revenue Growth
SmartStop reported a robust third quarter, achieving sector-leading same-store revenue growth of 2.5% and maintaining an average occupancy rate of 92.6%. These figures were largely in line with expectations, underscoring the company’s strong market position.
Successful Entry into Canadian Maple Bond Market
The company successfully returned to the Canadian Maple bond market, raising CAD 200 million at a 3.89% coupon with a 5-year maturity. This move underscores SmartStop’s strategic financial maneuvers to bolster its capital structure.
Acquisition of Argus Professional Storage Management
SmartStop completed the acquisition of Argus, significantly expanding its footprint by doubling the store count to over 460 self-storage properties across North America. This acquisition also increased the company’s overall owned and managed net rental square feet to over 35 million.
Inclusion in MSCI U.S. REIT Index
SmartStop’s inclusion in the MSCI U.S. REIT Index, known as the RMZ, marks a significant milestone, enhancing its visibility and credibility within the investment community.
Record Lead Conversion and Tenant Protection Hit Rate
The company achieved record lead conversion statistics and the highest hit rate on tenant protection in its history, reflecting its operational efficiency and customer service excellence.
FFO as Adjusted Per Share Below Expectations
Despite the positive developments, SmartStop reported FFO as adjusted per share of $0.47, which was slightly below expectations. This shortfall was attributed to an unexpected vacate of an industrial tenant and a one-time equity-based compensation expense.
Challenges in the Toronto Market
The Toronto market posed challenges due to a significant influx of new supply, affecting about half of SmartStop’s properties. However, the company anticipates this impact to diminish in the coming years.
Industrial Tenant Default
An industrial tenant defaulted on their lease at one of SmartStop’s non-same-store properties, vacating space that accounted for approximately $730,000 of annual NOI. This incident contributed to the financial challenges faced during the quarter.
Forward-looking Guidance
Looking ahead, SmartStop maintained its full-year FFO guidance midpoint and highlighted its strategic initiatives, including the acquisition of Argus and raising CAD 200 million in the bond market. The company deployed a total of $106 million of capital in the quarter, focusing on expansion and strengthening its market position. SmartStop’s inclusion in the MSCI U.S. REIT Index and its broader strategic vision for growth amid a recovering self-storage market were also emphasized.
In conclusion, SmartStop Self Storage REIT, Inc.’s earnings call reflected a positive outlook despite some challenges. The company’s strategic moves, including acquisitions and market entries, position it well for sustained growth. Investors can look forward to SmartStop’s continued expansion and market presence.