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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Amendment No. 1
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 16, 2012
Strategic Storage Trust, Inc.
(Exact name of Company as specified in its charter)
Commission File Number: 000-53644
| 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)
(877) 327-3485
(Company’s telephone number)
None
(Former name or former address, if changed since last report)
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)) |
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EXPLANATORY NOTE:
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, Strategic Storage Trust, Inc., a Maryland Corporation (the “Registrant”), hereby amends its Current Report on Form 8-K dated August 16, 2012 for the purpose of filing the financial statements and pro forma financial information with respect to the Registrant’s acquisition of ten self storage facilities and the pending acquisition of six self storage facilities from unaffiliated third parties 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 Registrant hereby files the following financial statements and pro forma financial information, respectively.
| Item 9.01. | Financial Statements |
| Page | ||||
| (a) Financial Statements Applicable to the Stockade Portfolio |
||||
| 3 | ||||
| • Combined Statements of Revenue and Certain Operating Expenses |
4 | |||
| • Notes to Combined Statements of Revenue and Certain Operating Expenses |
5 | |||
| (b) Unaudited Pro Forma Financial Information |
||||
| 8 | ||||
| 9 | ||||
| • Notes to Unaudited Pro Forma Consolidated Financial Statements |
11 | |||
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To the Board of Directors and Stockholders
Strategic Storage Trust, Inc.
Ladera Ranch, California
We have audited the accompanying combined statements of revenue and certain operating expenses (the “Historical Summary”) of the 16 self storage properties located in Georgia, South Carolina, and Florida (together, the “Stockade Portfolio”), for the year ended December 31, 2011. The Historical Summary is the responsibility of the management of the sellers of the Stockade Portfolio. 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 presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the 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 Stockade Portfolio’s revenue and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the combined revenue and certain operating expenses as described in Note 1 of the Stockade Portfolio for the year ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.
| /s/ CohnReznick LLP |
| Los Angeles, California |
| October 31, 2012 |
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Stockade Portfolio
Combined Statements of Revenue and
Certain Operating Expenses
| Year Ended December 31, 2011 |
Period from January 1, 2012 - June 30, 2012 (unaudited) |
|||||||
| REVENUE |
||||||||
| Net rental revenue |
$ | 6,253,295 | $ | 3,368,408 | ||||
| Other operating income |
238,621 | 160,528 | ||||||
|
|
|
|
|
|||||
| Total revenue |
6,491,916 | 3,528,936 | ||||||
|
|
|
|
|
|||||
| CERTAIN OPERATING EXPENSES |
||||||||
| Property operating expenses |
920,140 | 466,689 | ||||||
| Salaries and related expenses |
761,043 | 386,619 | ||||||
| Marketing expense |
116,875 | 31,729 | ||||||
| Real estate taxes |
618,401 | 276,522 | ||||||
| Property insurance |
109,651 | 54,396 | ||||||
|
|
|
|
|
|||||
| Total certain operating expenses |
2,526,110 | 1,215,955 | ||||||
|
|
|
|
|
|||||
| Revenue in excess of certain operating expenses |
$ | 3,965,806 | $ | 2,312,981 | ||||
|
|
|
|
|
|||||
See notes to combined statements of revenue and certain operating expenses.
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Stockade Portfolio
Notes to Combined Statements of Revenue and Certain Operating Expenses
Year Ended December 31, 2011 and Period from January 1, 2012 through June 30, 2012
(unaudited)
Note 1—Organization and Basis of Presentation
The accompanying combined statements of revenue and certain operating expenses include the revenue and certain operating expenses of 16 self storage properties located in Georgia, South Carolina, and Florida (together, the “Stockade Portfolio”). Strategic Storage Trust, Inc. (the “Company”) acquired the first phase (eight properties for $25 million) of this multi-phase acquisition on August 16, 2012, the second phase (two properties for $11.4 million) on October 1, 2012, and the third phase (six properties for approximately $38.7 million) is anticipated to close in the fourth quarter. Total consideration will be approximately $75.1 million, plus closing costs and acquisition fees. The Stockade Portfolio contains approximately 8,560 storage units.
The accompanying combined statements of revenue and certain operating expenses were 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 statements of revenue and certain operating expenses are not representative of the actual operations of the Stockade Portfolio for the periods presented, because certain operating expenses that may not be comparable to the expenses to be incurred in the proposed future operations of the Stockade Portfolio 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 Stockade Portfolio. Therefore, the combined statements of revenue and certain operating expenses may not be comparable to a combined statement of operations for the Stockade Portfolio after its acquisition by the Company. Except as noted above, management of the sellers of the Stockade Portfolio are not aware of any material factors relating to the Stockade Portfolio for the year ended December 31, 2011 or the period from January 1, 2012 through June 30, 2012 (unaudited), that would cause the reported combined financial information not to be indicative of future operating results.
Note 2—Summary of Significant Accounting Policies
Basis of Accounting
The combined statements of revenue and certain operating expenses have 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.
Revenue Recognition
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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Stockade Portfolio
Notes to Combined Statements of Revenue and Certain Operating Expenses
Year Ended December 31, 2011 and Period from January 1, 2012 through June 30, 2012
(unaudited)
Property Operations
Certain operating expenses represent the direct expenses of operating the Stockade Portfolio and consist primarily of repairs and maintenance, utilities, real estate taxes, insurance, general and administrative and other operating expenses that are expected to continue in the ongoing operation of the Stockade Portfolio.
Use of Estimates
The preparation of the accompanying combined statements of revenue and certain operating expenses in accordance with accounting principles generally accepted in the United States of America requires management of the sellers of the Stockade Portfolio to make certain estimates and assumptions that affect the reported amounts of revenue and certain operating expenses during the reporting periods. Actual results could differ from those estimates.
Advertising
Advertising costs are charged to expense as incurred.
6
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STRATEGIC STORAGE TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2012 and for the Year Ended December 31, 2011 and the Period Ended June 30, 2012 (unaudited)
The following unaudited pro forma consolidated balance sheet gives effect to a multi-phase acquisition of 16 self storage facilities (the “Stockade Portfolio”) from unaffiliated entities as if it was fully completed as of June 30, 2012 by Strategic Storage Trust, Inc., a Maryland Corporation (the “Company”). The Company closed the first two phases of the acquisition on August 16, 2012 and October 1, 2012 closing eight and two properties, respectively; the remaining six properties are expected to close in the fourth quarter of 2012. The following unaudited pro forma consolidated statements of operations are based on the historical consolidated statements of operations of the Company and the historical statements of operations of the Stockade Portfolio. The unaudited pro forma consolidated statement of operations for the year ended December 31, 2011 gives effect to this acquisition as if it had been fully completed as of January 1, 2011. The unaudited pro forma consolidated statement of operations for the period ended June 30, 2012 gives effect to this acquisition as if it had been fully completed as of January 1, 2012.
The information included in the “Strategic Storage Trust, Inc. Historical” column of the unaudited pro forma consolidated statement of operations for the year ended December 31, 2011 sets forth the Company’s historical consolidated statement of operations which are derived from the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC for the period ended December 31, 2011. The information included in the “Strategic Storage Trust, Inc. Historical” column of the unaudited pro forma consolidated balance sheet as of June 30, 2012 and the unaudited pro forma consolidated statement of operations for the period ended June 30, 2012 sets forth the Company’s historical consolidated balance sheet and consolidated statement of operations which are derived from the Company’s unaudited consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q filed with the SEC for the period ended June 30, 2012.
The unaudited pro forma adjustments are based on available information and certain estimates and assumptions that the Company believes are reasonable and factually supportable. These unaudited pro forma financial statements do not purport to represent what the actual financial position or results of operations of the Company would have been assuming such transaction had been completed as set forth above nor does it purport to represent the results of operations of the Company for future periods.
You should read the unaudited pro forma consolidated financial statements set forth below in conjunction with the audited and unaudited consolidated financial statements and related notes of the Company included in the SEC filings discussed above.
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STRATEGIC STORAGE TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 2012
| Strategic Storage Trust, Inc. Historical |
Facility Acquisition Note (2) |
Strategic Storage Trust, Inc. Pro Forma Note (3) |
||||||||||||
| ASSETS |
||||||||||||||
| Cash and cash equivalents |
$ | 51,405,755 | $ | (41,440,311 | ) | a | $ | 9,965,444 | ||||||
| Real estate facilities: |
||||||||||||||
| Land |
149,879,531 | 26,234,000 | b | 176,113,531 | ||||||||||
| Buildings |
336,257,656 | 40,124,086 | b | 376,381,742 | ||||||||||
| Site improvements |
31,301,158 | 3,706,914 | b | 35,008,072 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| 517,438,345 | 70,065,000 | 587,503,345 | ||||||||||||
| Accumulated depreciation |
(22,584,923 | ) | — | (22,584,923 | ) | |||||||||
|
|
|
|
|
|
|
|||||||||
| 494,853,422 | 70,065,000 | 564,918,422 | ||||||||||||
| Construction in process |
3,836,825 | — | 3,836,825 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Real estate facilities, net ($16,955,639 related to VIEs) |
498,690,247 | 70,065,000 | 568,755,247 | |||||||||||
| Deferred financing costs, net of accumulated amortization |
5,752,126 | 743,127 | c | 6,495,253 | ||||||||||
| Intangible assets, net of accumulated amortization |
10,735,041 | 5,060,000 | b | 15,795,041 | ||||||||||
| Restricted cash |
5,511,725 | 775,825 | d | 6,287,550 | ||||||||||
| Investments in unconsolidated joint ventures |
8,790,428 | — | 8,790,428 | |||||||||||
| Other assets |
4,752,109 | 17,678 | e | 4,769,787 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Total assets |
$ | 585,637,431 | $ | 35,221,319 | $ | 620,858,750 | ||||||||
|
|
|
|
|
|
|
|||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||||||
| Secured debt ($10,184,743 related to VIEs) |
$ | 314,451,560 | $ | 37,562,500 | f | $ | 352,014,060 | |||||||
| Accounts payable and accrued liabilities |
11,812,450 | 296,831 | e | 12,109,281 | ||||||||||
| Due to affiliates |
1,146,342 | — | 1,146,342 | |||||||||||
| Distributions payable |
2,475,044 | — | 2,475,044 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Total liabilities |
329,885,396 | 37,859,331 | 367,744,727 | |||||||||||
| Commitments and contingencies |
||||||||||||||
| Redeemable common stock |
— | — | — | |||||||||||
| Stockholders’ equity: |
||||||||||||||
| Strategic Storage Trust, Inc. stockholders’ equity: |
||||||||||||||
| Common stock, $0.001 par value; 700,000,000 shares authorized; 43,279,973 shares issued and outstanding at June 30, 2012 |
43,280 | — | 43,280 | |||||||||||
| Additional paid-in capital |
359,610,984 | — | 359,610,984 | |||||||||||
| Distributions |
(55,719,976 | ) | — | (55,719,976 | ) | |||||||||
| Accumulated deficit |
(53,474,601 | ) | (2,638,012 | ) | g | (56,112,613 | ) | |||||||
| Accumulated other comprehensive loss |
(1,108,852 | ) | — | (1,108,852 | ) | |||||||||
|
|
|
|
|
|
|
|||||||||
| Total Strategic Storage Trust, Inc. stockholders’ equity |
249,350,835 | (2,638,012 | ) | 246,712,823 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Noncontrolling interest in Operating Partnership |
471,100 | — | 471,100 | |||||||||||
| Other noncontrolling interests |
5,930,100 | — | 5,930,100 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Total noncontrolling interests |
6,401,200 | — | 6,401,200 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Total stockholders’ equity |
255,752,035 | (2,638,012 | ) | 253,114,023 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Total liabilities and stockholders’ equity |
$ | 585,637,431 | $ | 35,221,319 | $ | 620,858,750 | ||||||||
|
|
|
|
|
|
|
|||||||||
See notes to unaudited pro forma consolidated financial statements.
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STRATEGIC STORAGE TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 2011
| Strategic Storage Trust, Inc. Historical |
Facility Acquisition Note (4) |
Pro Forma Adjustments Note (5) |
Strategic Storage Trust, Inc. Pro Forma |
|||||||||||||||
| Revenues: |
||||||||||||||||||
| Self storage rental income |
$ | 48,109,145 | $ | 6,253,295 | $ | — | $ | 54,362,440 | ||||||||||
| Ancillary operating income |
1,286,933 | 238,621 | — | 1,525,554 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total revenues |
49,396,078 | 6,491,916 | — | 55,887,994 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating expenses: |
||||||||||||||||||
| Property operating expenses |
19,402,185 | 2,526,110 | 139,980 | 1 | 22,068,275 | |||||||||||||
| Property operating expenses—affiliates |
5,702,921 | — | 449,515 | 2 | 6,152,436 | |||||||||||||
| General and administrative |
2,405,218 | — | — | 2,405,218 | ||||||||||||||
| Depreciation |
9,422,606 | — | 1,517,094 | 3 | 10,939,700 | |||||||||||||
| Intangible amortization expense |
13,935,903 | — | 2,248,889 | 3 | 16,184,792 | |||||||||||||
| Property acquisition expenses—affiliates |
5,706,838 | — | 1,878,125 | 4 | 7,584,963 | |||||||||||||
| Other property acquisition expenses |
2,036,196 | — | 699,888 | 4 | 2,736,084 | |||||||||||||
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|
|
|
|
|
|
|
|
|||||||||||
| Total operating expenses |
58,611,867 | 2,526,110 | 6,933,491 | 68,071,468 | ||||||||||||||
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|
|
|
|
|
|
|
|||||||||||
| Operating income (loss) |
(9,215,789 | ) | 3,965,806 | (6,933,491 | ) | (12,183,474) | ||||||||||||
| Other income (expense): |
||||||||||||||||||
| Interest expense |
(11,859,146 | ) | — | (1,766,019 | ) | 5 | (13,625,165) | |||||||||||
| Deferred financing amortization expense |
(1,331,514 | ) | — | (74,313 | ) | 6 | (1,405,827) | |||||||||||
| Equity in earnings of real estate ventures |
852,728 | — | — | 852,728 | ||||||||||||||
| Other |
(280,516 | ) | — | — | (280,516) | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income (loss) |
(21,834,237 | ) | 3,965,806 | (8,773,823 | ) | (26,642,254) | ||||||||||||
| Less: Net loss attributable to the noncontrolling interests in our Operating Partnership |
118,601 | — | 26,205 | 7 | 144,806 | |||||||||||||
| Net loss attributable to other noncontrolling interests |
358,207 | — | — | 358,207 | ||||||||||||||
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|
|
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|
|
|
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| Net income (loss) attributable to Strategic Storage Trust, Inc. |
$ | (21,357,429 | ) | $ | 3,965,806 | $ | (8,747,618 | ) | $ | (26,139,241) | ||||||||
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|
|||||||||||
| Net loss per share—basic |
$ | (0.68 | ) | $ | (0.73) | |||||||||||||
| Net loss per share—diluted |
$ | (0.68 | ) | $ | (0.73) | |||||||||||||
|
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|
|
|
|||||||||||||||
| Weighted average shares outstanding—basic |
31,243,109 | 4,695,967 | 8 | 35,939,076 | ||||||||||||||
| Weighted average shares outstanding—diluted |
31,243,109 | 4,695,967 | 8 | 35,939,076 | ||||||||||||||
|
|
|
|
|
|
|
|||||||||||||
See notes to unaudited pro forma consolidated financial statements.
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STRATEGIC STORAGE TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For The Period Ended June 30, 2012
| Strategic Storage Trust, Inc. Historical |
Facility Acquisition Note (4) |
Pro Forma Adjustments Note (5) |
Strategic Storage Trust, Inc. Pro Forma |
|||||||||||||||
| Revenues: |
||||||||||||||||||
| Self storage rental income |
$ | 30,046,543 | $ | 3,368,408 | $ | — | $ | 33,414,951 | ||||||||||
| Ancillary operating income |
1,010,648 | 160,528 | — | 1,171,176 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total revenues |
31,057,191 | 3,528,936 | — | 34,586,127 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating expenses: |
||||||||||||||||||
| Property operating expenses |
12,798,196 | 1,215,955 | 99,551 | 1 | 14,113,702 | |||||||||||||
| Property operating expenses—affiliates |
3,968,016 | — | 271,736 | 2 | 4,239,752 | |||||||||||||
| General and administrative |
1,208,002 | — | — | 1,208,002 | ||||||||||||||
| Depreciation |
6,788,033 | — | 752,312 | 3 | 7,540,345 | |||||||||||||
| Intangible amortization expense |
6,087,914 | — | 1,124,444 | 3 | 7,212,358 | |||||||||||||
| Property acquisition expenses—affiliates |
263,150 | — | 1,878,125 | 4 | 2,141,275 | |||||||||||||
| Other property acquisition expenses |
478,776 | — | 637,766 | 4 | 1,116,542 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total operating expenses |
31,592,087 | 1,215,955 | 4,763,934 | 37,571,976 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating income (loss) |
(534,896 | ) | 2,312,981 | (4,763,934 | ) | (2,985,849 | ) | |||||||||||
| Other income (expense): |
||||||||||||||||||
| Interest expense |
(9,070,272 | ) | — | (875,752 | ) | 5 | (9,946,024 | ) | ||||||||||
| Deferred financing amortization expense |
(1,987,328 | ) | — | (36,851 | ) | 6 | (2,024,179 | ) | ||||||||||
| Equity in earnings of real estate ventures |
454,003 | — | — | 454,003 | ||||||||||||||
| Gain on sale of investment in unconsolidated joint venture |
815,000 | — | — | 815,000 | ||||||||||||||
| Other |
(218,785 | ) | — | — | (218,785 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income (loss) |
(10,542,278 | ) | 2,312,981 | (5,676,537 | ) | (13,905,834 | ) | |||||||||||
| Less: Net loss attributable to the noncontrolling interests in our Operating Partnership |
49,696 | — | 15,304 | 7 | 65,000 | |||||||||||||
| Net (income) loss attributable to other noncontrolling interests |
(26,586 | ) | — | — | (26,586) | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income (loss) attributable to Strategic Storage Trust, Inc. |
$ | (10,519,168 | ) | $ | 2,312,981 | $ | (5,661,233 | ) | $ | (13,867,420) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Net loss per share—basic |
$ | (0.28 | ) | $ | (0.34) | |||||||||||||
| Net loss per share—diluted |
$ | (0.28 | ) | $ | (0.34) | |||||||||||||
|
|
|
|
|
|||||||||||||||
| Weighted average shares outstanding—basic |
37,667,172 | 2,688,373 | 8 | 40,355,545 | ||||||||||||||
| Weighted average shares outstanding—diluted |
37,667,172 | 2,688,373 | 8 | 40,355,545 | ||||||||||||||
|
|
|
|
|
|
|
|||||||||||||
See notes to unaudited pro forma consolidated financial statements.
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STRATEGIC STORAGE TRUST, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2012 and for the Year Ended December 31, 2011 and the Period Ended June 30, 2012
Note 1. Acquisition
On August 16, 2012 and October 1, 2012 the Company closed on the acquisition of eight self storage facilities (acquisition price of $25.0 million) and two self storage facilities (acquisition price of $11.4 million), respectively, of the 16 facilities located in South Carolina, Georgia, and Florida (the “Stockade Portfolio”). The remaining six properties (acquisition price of approximately $38.7 million) are expected to close in the fourth quarter of 2012. The Stockade Portfolio facilities were collectively under common control and were owned by unaffiliated entities. The combined consideration for the Stockade Portfolio is approximately $75.1 million plus closing costs and acquisition fees. Assuming the remaining properties close, the Company will incur approximately $1.9 million in acquisition fees in connection with the completion of all the phases of this acquisition, payable to its advisor. The Stockade Portfolio contains approximately 8,560 storage units, totaling approximately 1.1 million square feet.
In connection with the acquisition of the Stockade Portfolio, on October 1, 2012, the Company entered into a portfolio loan (“Citi Loan—1”) with Citigroup Global Markets Realty Corp with a principal amount of $18.2 million, which encumbered the first ten facilities acquired. Citi Loan—1 bears a fixed interest rate of 4.60%, based on a 30-year amortization schedule, with an initial 2 year interest-only period.
The Company anticipates closing a second portfolio loan (“Citi Loan—2”) with a principal amount of approximately $19.4 million, which would encumber the six facilities expected to close in the fourth quarter of 2012. These loans are collectively known as the “Citi Loans”.
Note 2. Balance Sheet –Facility Acquisition
The unaudited pro forma consolidated balance sheet of the Company reflects pro forma adjustments related to the assumed full acquisition of the Stockade Portfolio and the assumed closing of the Citi Loans as if they had occurred on June 30, 2012.
Note 3. Balance Sheet – Pro Forma Adjustments
| (a) | The Stockade Portfolio was assumed to have been acquired using cash and proceeds from the loans described above at June 30, 2012. This adjustment reflects the use of cash on hand at June 30, 2012. |
| (b) | Adjustment reflects the combined purchase price of $75,125,000 allocated to land, building, site improvements and intangible assets. The purchase price allocation is preliminary; therefore the allocation between land, building, site improvements and intangible assets is subject to change. |
| (c) | Adjustment reflects the estimated deferred financing costs related to the Citi Loans. |
| (d) | Adjustment reflects estimated lender-required reserves for property taxes, insurance, and required capital expenditure reserves, related to the Citi Loans. |
| (e) | Adjustment to other assets primarily reflects estimated prepaid insurance related to the Stockade Portfolio. Adjustment to accounts payable and accrued liabilities reflects estimated unearned rent related to the Stockade Portfolio. |
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STRATEGIC STORAGE TRUST, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2012 and for the Year Ended December 31, 2011 and the Period Ended June 30, 2012
| (f) | Adjustment reflects Citi Loan—1 entered into on October 1, 2012 and the anticipated closing of Citi Loan—2, assumed to close in the fourth quarter of 2012. |
| (g) | Adjustment reflects the expensing of acquisition-related costs which are required to be expensed as incurred under GAAP. Such amounts include the actual expenses incurred in closing the first ten facilities and estimated expenses for the acquisition of the remaining six facilities. |
Note 4. Statement of Operations – Facility Acquisition
The first two phases of this acquisition were completed on August 16, 2012 and October 1, 2012. We believe that it is probable that the remaining facilities will close in the fourth quarter of 2012, although there can be no assurance thereof. Based on the aforementioned, the results of the entire Stockade Portfolio have been included herein. These historical amounts represent the audited results of the Stockade Portfolio for the year ended December 31, 2011 and the unaudited results for the period ended June 30, 2012.
Note 5. Statement of Operations – Pro Forma Adjustments
| (1) | Adjustments for the year ended December 31, 2011 and the period ended June 30, 2012 reflect the estimated increased cost of property taxes as compared to the Stockade Portfolio historical results. |
| (2) | Adjustment for the year ended December 31, 2011 and the period ended June 30, 2012 reflects the additional fees pursuant to the Company’s property management agreement as compared to historical amounts. The Company’s property manager is paid a monthly fee of 6% of gross revenues, as defined, received from the Company’s properties. The Company’s advisor is entitled to an asset management fee of one-twelfth of one-percent of average invested assets, as defined, which was waived for the Stockade Portfolio for the quarter ending September 30, 2012. Given such waiver, the Company has assumed that no asset management fees would have been incurred for the periods presented. |
| (3) | Adjustment for the year ended December 31, 2011 and the period ended June 30, 2012 reflects the depreciation and amortization expense resulting from the Stockade Portfolio acquisition. Such depreciation and amortization expense was based on a preliminary purchase price allocation of approximately $26.2 million to land, approximately $3.7 million to site improvements, approximately $40.1 million to building, and approximately $5.1 million to intangible assets. Depreciation expense on the purchase price allocated to building is recognized using the straight-line method over a 35-year life and the depreciation for the site improvements are recognized straight-lined over a 10-year life. Amortization expense on the purchase price allocated to intangible assets is recognized using the straight-line method over an estimated benefit period of approximately 27 months. The purchase price allocation, and therefore depreciation and amortization expense, is preliminary and is subject to change. |
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STRATEGIC STORAGE TRUST, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2012 and for the Year Ended December 31, 2011 and the Period Ended June 30, 2012
| (4) | Adjustment for the year ended December 31, 2011 and the period ended June 30, 2012 reflects the expensing of acquisition-related costs, consisting of acquisition expenses payable to affiliates of approximately $1.9 million and approximately $1.9 million, respectively and other property acquisition expenses of approximately $700,000, and $638,000, respectively which are required to be expensed as incurred under GAAP. The difference in the adjustment for other property acquisition expenses for the period ended June 30, 2012 is attributable to approximately $62,000 of acquisition expenses incurred and expensed by the Company in accordance with GAAP as of June 30, 2012. Such amounts include the actual expenses incurred through the closing of the first two phases and estimated expenses for the pending phase, based on the previous closings. |
| (5) | Adjustment reflects the interest expense on the Citi Loans. For Citi Loan – 2, we have estimated an interest rate of 4.75%. |
| (6) | Adjustments reflect the estimated amortization of the deferred financing costs related to the Citi Loans. |
| (7) | Minority interest is adjusted based on the additional pro forma earnings and the pro forma shares outstanding. Such adjustment was based upon a calculation of pro forma net income and pro forma shares outstanding. |
| (8) | The pro forma weighted average shares outstanding were computed based on the weighted average number of shares outstanding during the period adjusted to give effect to the shares assumed to be issued had the acquisition been completed on January 1, 2011 or January 1, 2012, as applicable. |
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Signature(s)
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: November 1, 2012 | By: | /s/ Michael S. McClure | ||||
| Michael S. McClure | ||||||
| Executive Vice President and Chief Financial Officer | ||||||
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