What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-02 compared with 2024-05-03 · 66 added, 57 removed, 231 unchanged (35% of the section changed)

32 unchanged sentences

We consider a store to be in the lease-up stage after it has been issued a certificate of occupancy, but before it has achieved stabilization.

We consider a store

to be stabilized once it has achieved either an 80% occupancy rate for a full year measured as of January 1 of the current year, or has been open for three years prior to January 1 of the current year.

As of March 31, 2024, we owned or had ownership interests in 2,384 operating stores.

Of these stores, 1,909 are wholly-owned, three in consolidated joint ventures and 472 are in unconsolidated joint ventures.

We consider a store to be stabilized once it has achieved either an 80% occupancy rate for a full year measured as of January 1 of the current year, or has been open for three years prior to January 1 of the current year.

As of June 30, 2024, we owned or had ownership interests in 2,389 operating stores.

Of these stores, 1,912 are wholly-owned, five are in consolidated joint ventures, and 472 are in unconsolidated joint ventures.

In addition, we managed an additional 1,423 stores for third parties bringing the total number of stores which we own and/or manage to 3,812.

3 unchanged sentences

Our acquisitions have given us an increased scale in many core markets as well as a foothold in many markets where we had no previous presence.

As of March 31, 2024, approximately 2,155,000 tenants were leasing storage units at the operating stores that we own and/or manage, primarily on a month-to-month basis, providing the flexibility to increase rental rates over time as market conditions permit.

As of June 30, 2024, approximately 2,235,000 tenants were leasing storage units at the operating stores that we own and/or manage, primarily on a month-to-month basis, providing the flexibility to increase rental rates over time as market conditions permit.

Existing tenants generally receive rate increases at least annually, for which no direct correlation has been drawn to our vacancy trends.

Although leases are short-term in duration, the typical tenant tends to remain at our stores for an extended period of time.

For stores that were stabilized as of March 31, 2024, the average length of stay was approximately 17.4 months.

The average annual rent per square foot for our existing customers at stabilized stores, net of discounts and bad debt, was $20.36 for the three months ended March 31, 2024, compared to $20.41 for the three months ended March 31, 2023.

Average annual rent per square foot for new leases was $13.60 for the three months ended March 31, 2024, compared to $16.00 for the three months ended March 31, 2023.

For stores that were stabilized as of June 30, 2024, the average length of stay for tenants who have vacated was approximately 17.5 months.

The average annual rent per square foot for our existing customers at stabilized stores, net of discounts and bad debt, was $20.38 for the three months ended June 30, 2024 and 2023.

Average annual rent per square foot for new leases was $15.60 for the three months ended June 30, 2024, compared to $17.15 for the three months ended June 30, 2023.

The average discounts, as a percentage of rental revenues, at all stabilized properties during these periods were 2.3% and 2.7%, respectively.

1 unchanged sentence

Most often sites are what we consider “hybrid” stores, a mix of drive-up and multi-floor buildings.

We have a number of multi-floor buildings with elevator access only, and a number of stores featuring ground-floor access only.

The following table presents additional information regarding net rentable square feet and the number of stores by state.

March 31, 2024

June 30, 2024

REIT Owned Joint Venture Owned Managed Total

45 unchanged sentences

Totals 1,917 144,409,733 472 36,792,171 1,423 110,866,948 3,812 292,068,852

(1) Includes three consolidated joint ventures and excludes approximately 18,000 units related to Bargold.

(1) Includes five consolidated joint ventures and excludes approximately 18,000 units related to Bargold.

RESULTS OF OPERATIONS

Amounts in thousands, except store and share data

Comparison of the three months ended March 31, 2024 and 2023

Results for the three months ended March 31, 2024 included the operations of 2,384 stores (1,909 wholly-owned, three in consolidated joint ventures, and 472 in joint ventures accounted for using the equity method) compared to the results for the three months ended March 31, 2023, which included the operations of 1,457 stores (1,133 wholly-owned, one in a consolidated joint venture, and 323 in joint ventures accounted for using the equity method).

Comparison of the three and six months ended June 30, 2024 and 2023

Results for the three and six months ended June 30, 2024 included the operations of 2,389 stores (1,912 wholly-owned, five in consolidated joint ventures, and 472 in joint ventures accounted for using the equity method) compared to the results for the three and six months ended June 30, 2023, which included the operations of 1,457 stores (1,133 wholly-owned, one in a consolidated joint venture, and 323 in joint ventures accounted for using the equity method).

The following table presents information on revenues earned for the periods indicated:

For the Three Months Ended March 31,

2024 2023 $ Change % Change

For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 $ Change % Change 2024 2023 $ Change % Change

Property rental $ 697,100 $ 440,747 $ 256,353 58.2 % $ 1,385,144 $ 874,709 $ 510,435 58.4 %

2 unchanged sentences

Total revenues $ 810,663 $ 511,386 $ 299,277 58.5 % $ 1,610,202 $ 1,014,436 $ 595,766 58.7 %

Property Rental— The increase in property rental revenues for the three months ended March 31, 2024 was primarily the result of an increase of $248,455 associated with the merger of Life Storage, other acquisitions completed in 2023, and acquisitions completed in the first quarter of 2024.

We acquired 771 wholly-owned stores in 2023 and an additional six wholly-owned stores during the three months ended March 31, 2024.

Property Rental— The increase in property rental revenues for the three and six months ended June 30, 2024 was primarily the result of an increase of $501,213 associated with the merger of Life Storage (the “Life Storage Merger”), other acquisitions completed in 2023, and acquisitions completed in the first six months of 2024.

We acquired 761 wholly-owned stores in 2023 and an additional nine wholly-owned stores during the six months ended June 30, 2024.

Tenant Reinsurance— The increase in tenant reinsurance revenues was due primarily to an increase in the number of stores operated.

We operated 3,793 stores at March 31, 2024 compared to 2,388 stores at March 31, 2023.

We operated 3,812 stores at June 30, 2024 compared to 2,388 stores at June 30, 2023.

Management Fees and Other Income— Management fees and other income primarily represent the fees collected for our management of stores owned by third parties and unconsolidated joint ventures and other transaction fee income.

The increase for the three months ended March 31, 2024 was due to both an increase in the number of stores managed and an increase in the overall revenue of stores under management when compared to the same period last year.

As of March 31, 2024, we managed 1,884 stores for joint ventures and third parties, compared to 1,255 stores as of March 31, 2023.

The increase for the three and six months ended June 30, 2024 was due to both an increase in the number of stores managed and an increase in the overall revenue of stores under management when compared to the same period last year.

As of June 30, 2024, we managed 1,895 stores for joint ventures and third parties, compared to 1,254 stores as of June 30, 2023.

The following table presents information on expenses for the periods indicated:

For the Three Months Ended March 31,

2024 2023 $ Change % Change

For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 $ Change % Change 2024 2023 $ Change % Change

Property operations $ 196,902 $ 114,637 $ 82,265 71.8 % $ 401,420 $ 231,803 $ 169,617 73.2 %

3 unchanged sentences

Total expenses $ 451,243 $ 238,047 $ 213,196 89.6 % $ 914,954 $ 477,555 $ 437,399 91.6 %

Property Operations— The increase in property operations expense during the three months ended March 31, 2024 consists primarily of an increase of $79,051 related to the Life Storage Merger, other acquisitions completed in 2023, and acquisitions completed in the first quarter of 2024.

We acquired 771 wholly-owned stores in 2023 and an additional six wholly-owned stores during the three months ended March 31, 2024.

Additionally, for the three months ended March 31, 2024 there was an increase of $8,451 at our stabilized stores primarily due to payroll, marketing and insurance, partially offset by utilities.

Property Operations— The increase in property operations expense during the three and six months ended June 30, 2024 consists primarily of an increase of $152,504 related to the Life Storage Merger, other acquisitions completed in 2023, and acquisitions completed in the first six months of 2024.

We acquired 761 wholly-owned stores in 2023 and an additional nine wholly-owned stores during the six months ended June 30, 2024.

Additionally, for the three and six months ended June 30,

2024 there was an increase of $17,340 at our stabilized stores primarily due to property and casualty insurance, payroll, marketing, and property tax, partially offset by utilities.

Tenant Reinsurance— Tenant reinsurance expense represents the costs that are incurred to provide tenant reinsurance.

These increases are primarily related to an increase in stores.

We operated 3,793 stores at March 31, 2024 compared to 2,388 stores at March 31, 2023.

We operated 3,812 stores at June 30, 2024 compared to 2,388 stores at June 30, 2023.

General and Administrative— General and administrative expenses primarily include all expenses not directly related to our stores, including corporate payroll, office expense, office rent, travel and professional fees.

These expenses are recognized as incurred.

Our overall expense has increased primarily as a result of our increased size through acquisitions, business combinations and growth through our joint venture partners and managed portfolio.

Our overall General and Administrative expense has increased primarily as a result of our increased size through acquisitions, business combinations and growth through our joint venture partners and managed portfolio.

Depreciation and Amortization— Depreciation and amortization expense increased as a result of the acquisition of new stores.

We acquired 771 wholly-owned stores in 2023 and an additional six wholly-owned stores during the three months ended March 31, 2024.

We acquired 761 wholly-owned stores in 2023 and an additional nine wholly-owned stores during the six months ended June 30, 2024.

Additionally, the increase relates to the amortization of intangibles recorded as part of the Life Storage Merger.

1 unchanged sentence

The following table presents information on other revenues and expenses for the periods indicated:

For the Three Months Ended March 31,

2024 2023 $ Change % Change

For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 $ Change % Change 2024 2023 $ Change % Change

Loss on real estate assets held for sale $ (54,659) $ — $ (54,659) 100.0 % $ (54,659) $ — $ (54,659) 100.0 %

Interest expense (137,133) (86,372) (50,761) 58.8 % (270,020) (166,471) (103,549) 62.2 %

4 unchanged sentences

Total other revenues & expenses, net $ (164,008) $ (58,027) $ (105,981) 182.6 % $ (275,762) $ (112,691) $ (163,071) 144.7 %

Interest Expense— The increase in interest expense during the three months ended March 31, 2024 was primarily the result of a higher debt balance and higher weighted average interest rate compared to the same period in the prior year.

As of March 31, 2024, we had approximately $11.5 billion in total face value of debt, compared to approximately $7.4 billion at March 31, 2023.

Loss on real estate assets held for sale— During the three months ended June 30, 2024, the Company listed seven properties for sale.

The properties have been recorded at current fair value less selling costs which resulted in an estimated loss of $54,659.

Interest Expense— The increase in interest expense during the three and six months ended June 30, 2024 was primarily the result of a higher debt balance and higher weighted average interest rate compared to the same period in the prior year.

As of June 30, 2024, we had approximately $11.8 billion in total face value of debt, compared to approximately $7.5 billion at June 30, 2023.

The increase in the face value of debt is due to the Life Storage Merger.

The weighted average interest rate of the total of fixed- and variable-rate debt was 4.5% at March 31, 2024, compared to 4.3% at March 31, 2023.

Non-cash Interest Expense Related to Amortization of Discount on Life Storage Unsecured Senior Notes— Represents the amortization of the discount assigned in order to present the fair value of the Life Storage unsecured senior notes assumed as part of the Life Storage Merger.

The weighted average interest rate of the total of fixed- and variable-rate debt was 4.6% at June 30, 2024, compared to 4.5% at June 30, 2023.

Non-cash Interest Expense Related to Amortization of Discount on Life Storage Unsecured Senior Notes— Represents the amortization of the discount assigned to the fair value of the Life Storage unsecured senior notes assumed as part of the Life Storage Merger.

Interest Income— Interest income represents interest earned on variable interest rate bridge loans, debt securities and on notes receivable from Common and Preferred Operating Partnership unit holders.

The increase in interest income during the three months ended March 31, 2024 was primarily the result of an increase in amount of bridge loans held combined with an increase in interest rates.

The balance of bridge loans was $752,336 as of March 31, 2024, compared to $507,885 as of March 31, 2023.

The increase in interest income during the three and six months ended June 30, 2024 was primarily the result of an increase in amount of bridge loans held combined with an increase in interest rates.

The balance of bridge loans was $1,136,306 as of June 30, 2024, compared to $540,355 as of June 30, 2023.

Equity in Earnings and Dividend Income from Unconsolidated Real Estate Entities— Equity in earnings of unconsolidated real estate entities represents the income earned through our ownership interests in unconsolidated joint ventures.

In these joint ventures, we and our joint venture partners generally receive a preferred return on our invested capital.

To the extent that cash or profits in excess of these preferred returns are generated, we receive a higher percentage of the excess

cash or profits.

To the extent that cash or profits in excess of these preferred returns are generated, we receive a higher percentage of the excess cash or profits.

We added a total of 154 stores to new and existing joint ventures (145 stores from the Life Storage Merger) during 2023.

2 unchanged sentences

and Strategic Storage Trust VI, Inc.

Income Tax Expense —The increase in income tax expense for the three months ended March 31, 2024 was primarily the result of an increase in book income and a decrease in permanent tax deductions related to stock awards.

Income Tax Expense —The increase in income tax expense for the three and six months ended June 30, 2024 was primarily the result of an increase in book income and a decrease in permanent tax deductions related to stock awards.

FUNDS FROM OPERATIONS

10 unchanged sentences

The following table presents the calculation of FFO for the periods indicated:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 2024 2023

Net income attributable to common stockholders $ 185,872 $ 202,410 $ 398,984 $ 398,714

1 unchanged sentence

Amortization of intangibles 28,137 3,609 57,421 7,779

Loss on real estate assets held for sale 54,659 — 54,659 —

Unconsolidated joint venture real estate depreciation and amortization 8,009 4,722 15,849 9,661

9 unchanged sentences

The following table presents operating data for our same-store portfolio.

For the Three Months Ended March 31, Percent

2024 2023 Change

For the Three Months Ended June 30, Percent For the Six Months Ended June 30, Percent

2024 2023 Change 2024 2023 Change

Same-store rental revenues

13 unchanged sentences

Same-store square foot occupancy as of year end 94.3% 94.0% 94.3% 94.0%

Average same-store square foot occupancy 94.1% 93.7% 93.6% 93.2%

Properties included in same-store 1,078 1,078 1,078 1,078

The following table presents a reconciliation of same-store net operating income to net income as presented on our condensed consolidated statements of operations for the periods indicated:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 2024 2023

Net Income $ 195,412 $ 215,312 $ 419,486 $ 424,190

Adjusted to exclude:

Loss on real estate assets held for sale 54,659 — 54,659 —

Equity in earnings and dividend income from unconsolidated real estate entities (17,255) (13,254) (32,262) (23,559)

12 unchanged sentences

Same-store net operating income $ 313,322 $ 316,776 $ 620,129 $ 625,166

Cash flows from operating activities for the three months ended March 31, 2024 increased when compared to the same period in the prior year.

Cash flows from operating activities for the six months ended June 30, 2024 increased when compared to the same period in the prior year.

Cash flows used in investing activities relate primarily to our acquisition and development of new stores, sales of stores, investments in unconsolidated real estate entities and notes receivable from bridge loans, and fluctuate depending on our actions in those areas.

1 unchanged sentence

A summary of cash flows along with significant components are as follows:

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Net cash provided by operating activities $ 1,010,800 $ 629,527

4 unchanged sentences

Depreciation and amortization 391,775 157,576

Accounts payable and accrued expenses 1,112 4,724

Loss on real estate assets held for sale 54,659 —

Accounts payable, accrued expenses and other liabilities 113,469 66,587

Acquisition and development of real estate assets (226,713) (164,660)

Investment in unconsolidated real estate entities (10,789) (171,126)

Issuance and purchase of notes receivable (158,005) (58,378)

Proceeds from sale of notes receivable 7 39,261

Principal payments received from notes receivable 11,823 21,828

Issuance and purchase of notes receivable, net of principal payments (521,813) (77,637)

Proceeds from unsecured term loans and senior notes and revolving lines of credit 3,263,470 2,479,592

8 unchanged sentences

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2024, we had $50,816 available in cash and cash equivalents.

As of June 30, 2024, we had $76,973 available in cash and cash equivalents.

Our cash and cash equivalents are held in accounts managed by third party financial institutions and consist of invested cash and cash in our operating accounts.

1 unchanged sentence

however, there can be no assurance that access to our cash and cash equivalents will not be impacted by adverse conditions in the financial markets.

As of March 31, 2024, we had $11,479,914 face value of debt, resulting in a debt to total enterprise value ratio of 27.0%.

As of March 31, 2024, the ratio of total fixed-rate debt and other instruments to total debt was 77.2% ($8,858,252 total fixed-rate debt including $1,384,038 on which we have interest rate swaps that have been included as fixed-rate debt).

The weighted average interest rate of the total of fixed- and variable-rate debt at March 31, 2024 was 4.5%.

Certain of our real estate assets

are pledged as collateral for our debt.

As of June 30, 2024, we had $11,803,723 face value of debt, resulting in a debt to total enterprise value ratio of 25.5%.

As of June 30, 2024, the ratio of total fixed-rate debt and other instruments to total debt was 75.0% ($8,857,343 total fixed-rate debt including $1,383,303 on which we have interest rate swaps that have been included as fixed-rate debt).

The weighted average interest rate of the total of fixed- and variable-rate debt at June 30, 2024 was 4.6%.

Certain real estate assets are pledged as collateral for our debt.

We are subject to certain restrictive covenants relating to our outstanding debt.

We were in compliance with all financial covenants at March 31, 2024.

We were in compliance with all financial covenants at June 30, 2024.

We expect to fund our short-term liquidity requirements, including operating expenses, recurring capital expenditures, dividends to stockholders, distributions to holders of Operating Partnership units and interest on our outstanding indebtedness, out of our operating cash flow, cash on hand and borrowings under our revolving lines of credit.

3 unchanged sentences

Certain of our real estate assets are pledged as collateral for our debt.

As of March 31, 2024, we had a total of 1,677 unencumbered stores as defined by our public bonds.

As of June 30, 2024, we had a total of 1,680 unencumbered stores as defined by our public bonds.

Our unencumbered asset value was calculated as $32,357,105 and our total asset value was calculated as $38,192,174 according to the calculations as defined by our public bonds.

4 unchanged sentences

We may also use Operating Partnership units as currency to fund acquisitions from self-storage owners.

On April 15, 2024, we entered into equity distribution agreement (the “Equity Distribution Agreement”) with certain sales agents and forward purchasers named therein.

Under the terms of the Equity Distribution Agreement, we may issue and sell, and the forward purchasers may sell, from time to time through or to the sales agents, shares of our common stock having an aggregate offering price of up to $800 million.

The shares of common stock will be offered pursuant to our effective registration statement on Form S-3 (Registration Statement No.

333-278690) previously filed with and declared effective by the Securities and Exchange Commission (the “SEC”) and a prospectus supplement and accompanying prospectus, filed with the SEC.

As of June 30, 2024, no shares have been sold under the Equity Distribution Agreement, which we refer to as our "at the market" equity program.

OFF-BALANCE SHEET ARRANGEMENTS

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis