Extra Space Storage Purchases Additional $50 Million of SmartStop Self Storage REIT Preferred Stock

October 27, 2020 | James Sprow | Blue Vault

Extra Space Storage Inc. subsidiary Extra Space Storage LP acquired an additional $50 million of SmartStop Self Storage REIT Inc.‘s series A convertible preferred stock.

The self-storage real estate investment trust unit initially purchased $150 million of the preferred stock on October 29, 2019. Extra Space Storage committed to purchase up to an additional $50 million, at the option of SmartStop, which SmartStop subsequently exercised. Accordingly, on October 26, 2020, Extra Space purchased the remaining $50 million in shares of Series A Preferred Stock.

SmartStop will use the net proceeds from the transaction to repay debt, fund self-storage acquisitions, and for working capital or other general corporate purposes.

As of June 30, 2020, SmartStop Self Storage REIT, Inc. had total assets with a book value of $1.238 billion and net long term debt with a book value of $710 million.  As of June 30, 2020, the REIT owned 112 operating self storage facilities located in 17 states and Ontario, Canada (the Greater Toronto Area). Based on the REIT’s original offering price of $10.00 per share, the distribution rate for Class A common stock was 6.00% annualized and 5.34% annualized for Class T common stock after fees. The net asset value per share was reported by Blue Vault for Q2 2020 at $10.40 for both common share classes.

The terms of the Series A Preferred Stock, including the payment of dividends, liquidation preference, redemption rights, conversion rights, and negative covenants, were not affected by this closing. The shares of Series A Convertible Preferred Stock rank senior to all other shares of the Company’s capital stock, including its common stock, with respect to rights to receive dividends and to participate in distributions or payments upon any voluntary or involuntary liquidation, dissolution or winding up of the Company. Dividends payable on each share of Series A Convertible Preferred Stock will initially be equal to a rate of 6.25% per annum. If the Series A Convertible Preferred Stock has not been redeemed on or prior to the fifth anniversary date of the Initial Closing, the dividend rate will increase an additional 0.75% per annum each year thereafter to a maximum of 9.0% per annum until the tenth anniversary of the Initial Closing, at which time the dividend rate shall increase 0.75% per annum each year thereafter until the Series A Convertible Preferred Stock is redeemed or repurchased in full.

Sources:  SEC, Blue Vault