SmartStop Self Storage REIT, Inc. - Quarter Report: 2019 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-55617

Strategic Storage Trust II, Inc.

(Exact name of Registrant as specified in its charter)

Maryland

46-1722812

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

10 Terrace Road

Ladera Ranch, California 92694

(Address of principal executive offices)

(877) 327-3485

(Registrant’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on Which Registered
None		None		None

As of May 13, 2019, there were 50,549,579 outstanding shares of Class A common stock and 7,569,049 outstanding shares of Class T common stock of the registrant.

FORM 10-Q

STRATEGIC STORAGE TRUST II, INC.

TABLE OF CONTENTS

		Page No.
	Cautionary Note Regarding Forward-Looking Statements	3

PART I.	FINANCIAL INFORMATION	4

Item 1.	Consolidated Financial Statements:	4
	Consolidated Balance Sheets as of March 31, 2019 (unaudited) and December 31, 2018	5
	Consolidated Statements of Operations for the Three Months Ended March 31, 2019 and 2018 (unaudited)	6
	Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2019 and 2018 (unaudited)	7
	Consolidated Statements of Equity for the Three Months Ended March 31, 2019 and 2018 (unaudited)	8
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018 (unaudited)	10
	Notes to Consolidated Financial Statements (unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	51

PART II.	OTHER INFORMATION	51

Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	52
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	52
Item 6.	Exhibits	52

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-Q of Strategic Storage Trust II, Inc., other than historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable. Such statements include, in particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, including known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “seek,” “continue,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the Securities and Exchange Commission. We cannot guarantee the accuracy of any such forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Any such forward-looking statements are subject to risks, uncertainties, and other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or impossible to predict accurately. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations and provide distributions to stockholders, and our ability to find suitable investment properties, may be significantly hindered. See the risk factors identified in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission, as supplemented by the risk factors included in Part II, Item 1A of this Form 10-Q, for a discussion of some, although not all, of the risks and uncertainties that could cause actual results to differ materially from those presented in our forward-looking statements.

PART I. FINANCIAL INFORMATION

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The information furnished in the accompanying unaudited consolidated balance sheets and related consolidated statements of operations, comprehensive loss, equity and cash flows reflects all adjustments (consisting of normal and recurring adjustments) that are, in management’s opinion, necessary for a fair and consistent presentation of the aforementioned consolidated financial statements.

The accompanying consolidated financial statements should be read in conjunction with the notes to our consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this report on Form 10-Q. The accompanying consolidated financial statements should also be read in conjunction with our consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2018. Our results of operations for the three months ended March 31, 2019 are not necessarily indicative of the operating results expected for the full year.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31, 2019 (Unaudited)			December 31, 2018
ASSETS
Real estate facilities:
Land	$	332,461,393		$	269,522,776
Buildings		770,768,742			507,580,145
Site improvements		59,488,022			43,193,105
		1,162,718,157			820,296,026
Accumulated depreciation		(61,223,043	)		(54,264,685	)
		1,101,495,114			766,031,341
Construction in process		7,084,957			130,383
Real estate facilities, net		1,108,580,071			766,161,724
Cash and cash equivalents		13,929,024			10,272,020
Restricted cash		5,957,748			3,740,188
Other assets, net		5,905,599			14,580,417
Debt issuance costs, net of accumulated amortization		—			36,907
Intangible assets, net of accumulated amortization		13,440,173			1,562,781
Total assets	$	1,147,812,615		$	796,354,037
LIABILITIES AND EQUITY
Debt, net	$	764,221,647		$	406,084,103
Accounts payable and accrued liabilities		13,790,983			7,691,990
Due to affiliates		1,937,803			2,203,837
Distributions payable		2,922,647			2,890,395
Total liabilities		782,873,080			418,870,325
Commitments and contingencies (Note 7)
Redeemable common stock		34,146,207			32,226,815
Equity:
Strategic Storage Trust II, Inc. equity:
Preferred stock, $0.001 par value; 200,000,000 shares authorized; none issued and outstanding at March 31, 2019 and December 31, 2018		—			—
Class A common stock, $0.001 par value; 350,000,000 shares authorized; 50,639,639 and 50,437,059 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively		50,640			50,437
Class T common stock, $0.001 par value; 350,000,000 shares authorized; 7,562,103 and 7,533,790 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively		7,563			7,534
Additional paid-in capital		500,494,346			500,474,807
Distributions		(102,659,752	)		(94,248,326	)
Accumulated deficit		(71,231,711	)		(62,340,153	)
Accumulated other comprehensive income		95,942			1,390,354
Total Strategic Storage Trust II, Inc. equity		326,757,028			345,334,653
Noncontrolling interests in our Operating Partnership		4,036,300			(77,756	)
Total equity		330,793,328			345,256,897
Total liabilities and equity	$	1,147,812,615		$	796,354,037

See notes to consolidated financial statements.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,
	2019			2018
Revenues:
Self storage rental revenue	$	23,231,649		$	19,432,415
Ancillary operating revenue		651,676			434,042
Total revenues		23,883,325			19,866,457
Operating expenses:
Property operating expenses		8,199,046			5,946,103
Property operating expenses – affiliates		3,224,716			2,556,377
General and administrative		1,654,184			1,202,934
Depreciation		6,868,408			5,066,544
Intangible amortization expense		1,726,976			1,180,502
Acquisition expenses – affiliates		38,941			8,305
Other property acquisition expenses		221,932			49,351
Total operating expenses		21,934,203			16,010,116
Operating income		1,949,122			3,856,341
Other income (expense):
Interest expense		(8,561,502	)		(4,362,065	)
Interest expense – accretion of fair market value of secured debt		32,468			114,360
Interest expense – debt issuance costs		(841,533	)		(319,383	)
Net loss on extinguishment of debt		(1,487,867	)		—
Other		(39,005	)		43,700
Net loss		(8,948,317	)		(667,047	)
Net loss attributable to the noncontrolling interests in our Operating Partnership		56,759			5,844
Net loss attributable to Strategic Storage Trust II, Inc. common stockholders	$	(8,891,558	)	$	(661,203	)
Net loss per Class A share – basic and diluted	$	(0.15	)	$	(0.01	)
Net loss per Class T share – basic and diluted	$	(0.15	)	$	(0.01	)
Weighted average Class A shares outstanding – basic and diluted		50,506,558			49,501,089
Weighted average Class T shares outstanding – basic and diluted		7,545,712			7,375,319

See notes to consolidated financial statements.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

	Three Months Ended March 31,
	2019			2018
Net loss	$	(8,948,317	)	$	(667,047	)
Other comprehensive income (loss):
Foreign currency translation adjustment		867,261			(2,059,805	)
Foreign currency forward contract gains (losses)		(846,581	)		2,073,290
Interest rate swap and cap contract gains (losses)		(1,315,092	)		437,629
Other comprehensive income (loss)		(1,294,412	)		451,114
Comprehensive loss		(10,242,729	)		(215,933	)
Comprehensive loss attributable to noncontrolling interests:
Comprehensive loss attributable to the noncontrolling interests in our Operating Partnership		64,969			1,892
Comprehensive loss attributable to Strategic Storage Trust II, Inc. common stockholders	$	(10,177,760	)	$	(214,041	)

See notes to consolidated financial statements.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

	Common Stock
	Class A						Class T
	Number of Shares			Common Stock Par Value			Number of Shares			Common Stock Par Value			Additional Paid-in Capital			Distributions			Accumulated Deficit			Accumulated Other Comprehensive Income			Total Strategic Storage Trust II, Inc. Equity			Noncontrolling Interests in our Operating Partnership			Total Equity			Redeemable Common Stock
Balance as of December 31, 2017		49,386,092		$	49,386			7,350,142		$	7,351		$	496,287,890		$	(60,561,504	)	$	(58,641,776	)	$	1,369,208		$	378,510,555		$	4,427,469		$	382,938,024		$	24,497,059
Offering costs		—			—			—			—			(1,973	)		—			—			—			(1,973	)		—			(1,973	)		—
Changes to redeemable common stock		—			—			—			—			(3,970,960	)		—			—			—			(3,970,960	)		—			(3,970,960	)		3,970,960
Redemptions of common stock		(69,411	)		(69	)		(2,640	)		(3	)		—			—			—			—			(72	)		—			(72	)		(1,126,591	)
Distributions		—			—			—			—			—			(8,238,414	)		—			—			(8,238,414	)		—			(8,238,414	)		—
Distributions to noncontrolling interests		—			—			—			—			—			—			—			—			—			(74,446	)		(74,446	)		—
Issuance of shares for distribution reinvestment plan		337,155			337			51,602			52			3,970,960			—			—			—			3,971,349			—			3,971,349			—
Stock compensation expense		—			—			—			—			14,968			—			—			—			14,968			—			14,968			—
Net loss attributable to Strategic Storage Trust II, Inc.		—			—			—			—			—			—			(661,203	)		—			(661,203	)		—			(661,203	)		—
Net loss attributable to the noncontrolling interests in our Operating Partnership		—			—			—			—			—			—			—			—			—			(5,844	)		(5,844	)		—
Foreign currency translation adjustment		—			—			—			—			—			—			—			(2,059,805	)		(2,059,805	)		—			(2,059,805	)		—
Foreign currency forward contract gains		—			—			—			—			—			—			—			2,073,290			2,073,290			—			2,073,290			—
Interest rate swap and cap contract gains		—			—			—			—			—			—			—			437,629			437,629			—			437,629			—
Balance as of March 31, 2018		49,653,836		$	49,654			7,399,104		$	7,400		$	496,300,885		$	(68,799,918	)	$	(59,302,979	)	$	1,820,322		$	370,075,364		$	4,347,179		$	374,422,543		$	27,341,428

	Common Stock
	Class A						Class T
	Number of Shares			Common Stock Par Value			Number of Shares			Common Stock Par Value			Additional Paid-in Capital			Distributions			Accumulated Deficit			Accumulated Other Comprehensive Income			Total Strategic Storage Trust II, Inc. Equity			Noncontrolling Interests in our Operating Partnership			Total Equity			Redeemable Common Stock
Balance as of December 31, 2018		50,437,059		$	50,437			7,533,790		$	7,534		$	500,474,807		$	(94,248,326	)	$	(62,340,153	)	$	1,390,354		$	345,334,653		$	(77,756	)	$	345,256,897		$	32,226,815
Offering costs		—			—			—			—			(2,418	)		—			—			—			(2,418	)		—			(2,418	)		—
Issuance of limited partnership units in our Operating Partnership		—			—			—			—			—			—			—			—			—			4,217,399			4,217,399			—
Changes to redeemable common stock		—			—			—			—			(3,963,393	)		—			—			—			(3,963,393	)		—			(3,963,393	)		3,963,393
Redemptions of common stock		(120,000	)		(120	)		(21,291	)		(21	)		—			—			—			—			(141	)		—			(141	)		(2,044,001	)
Distributions		—			—			—			—			—			(8,411,426	)		—			—			(8,411,426	)		—			(8,411,426	)		—
Distributions to noncontrolling interests		—			—			—			—			—			—			—			—			—			(46,584	)		(46,584	)		—
Issuance of shares for distribution reinvestment plan		322,580			323			49,604			50			3,963,393			—			—			—			3,963,766			—			3,963,766			—
Stock compensation expense		—			—			—			—			21,957			—			—			—			21,957			—			21,957			—
Net loss attributable to Strategic Storage Trust II, Inc.		—			—			—			—			—			—			(8,891,558	)		—			(8,891,558	)		—			(8,891,558	)		—
Net loss attributable to the noncontrolling interests in our Operating Partnership		—			—			—			—			—			—			—			—			—			(56,759	)		(56,759	)		—
Foreign currency translation adjustment		—			—			—			—			—			—			—			867,261			867,261			—			867,261			—
Foreign currency forward contract loss		—			—			—			—			—			—			—			(846,581	)		(846,581	)		—			(846,581	)		—
Interest rate swap and cap contract loss		—			—			—			—			—			—			—			(1,315,092	)		(1,315,092	)		—			(1,315,092	)		—
Balance as of March 31, 2019		50,639,639		$	50,640			7,562,103		$	7,563		$	500,494,346		$	(102,659,752	)	$	(71,231,711	)	$	95,942		$	326,757,028		$	4,036,300		$	330,793,328		$	34,146,207

See notes to consolidated financial statements.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,
	2019			2018
Cash flows from operating activities:
Net loss	$	(8,948,317	)	$	(667,047	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		8,595,384			6,247,046
Accretion of fair market value adjustment of secured debt		(32,468	)		(114,360	)
Amortization of debt issuance costs		841,533			319,383
Net loss on extinguishment of debt		1,487,867			—
Stock compensation expense		21,957			14,968
Unrealized foreign currency and derivative gains		(231,142	)		(21,779	)
Increase (decrease) in cash from changes in assets and liabilities:
Other assets, net		(221,600	)		(1,386,198	)
Accounts payable and accrued liabilities		(534,875	)		(90,185	)
Due to affiliates		(98,620	)		135,724
Net cash provided by operating activities		879,719			4,437,552
Cash flows from investing activities:
SSGT Mergers, net of cash acquired		(345,538,596	)		—
Additions to real estate		(1,764,315	)		(148,990	)
Deposits on acquisition of real estate		—			(203,596	)
Settlement of foreign currency hedges		1,586,484			2,132,261
Settlement of company owned life insurance		3,122,962			—
Sale of Real Estate Joint Venture		3,357,814			—
Net cash provided by (used in) investing activities		(339,235,651	)		1,779,675
Cash flows from financing activities:
Gross proceeds from issuance of debt		501,565,138			—
Repayment of debt		(141,088,724	)		(2,200,000	)
Scheduled principal payments on debt		(55,299	)		(542,300	)
Debt issuance costs		(8,299,823	)		—
Debt defeasance costs		(1,690,703	)		—
Offering costs		(169,834	)		(171,758	)
Redemption of common stock		(1,291,379	)		(723,733	)
Distributions paid to common stockholders		(4,435,585	)		(4,249,477	)
Distributions paid to noncontrolling interests in our Operating Partnership		(26,407	)		(74,446	)
Net cash provided by (used in) financing activities		344,507,384			(7,961,714	)
Impact of foreign exchange rate changes on cash and restricted cash		(276,888	)		(68,720	)
Change in cash, cash equivalents, and restricted cash		5,874,564			(1,813,207	)
Cash, cash equivalents, and restricted cash beginning of period		14,012,208			11,868,412
Cash, cash equivalents, and restricted cash end of period	$	19,886,772		$	10,055,205
Supplemental disclosures and non-cash transactions:
Cash paid for interest	$	7,177,930		$	4,359,495
Supplemental disclosure of noncash activities:
Issuance of shares pursuant to distribution reinvestment plan	$	3,963,766		$	3,971,349
Distributions payable	$	2,922,647		$	2,869,687
Redemption of common stock included in accounts payable and accrued liabilities	$	2,044,143		$	1,126,591
Issuance of units in our Operating Partnership in SSGT Mergers	$	4,217,399		$	—
Debt assumed in SSGT Mergers	$	5,038,435		$	—
Net liabilities assumed in SSGT Mergers	$	3,067,051		$	—
Write-off of unamortized debt issuance costs	$	356,519		$	—
Transfer of other assets to debt issuance costs	$	1,075,000		$	—
Foreign currency contracts, interest rate swaps, and interest rate cap contract in accounts payable and accrued liabilities and other assets	$	774,290		$	311,328
Real estate and construction in process included in accounts payable and accrued liabilities	$	432,353		$	—

See notes to consolidated financial statements.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

Note 1. Organization

Strategic Storage Trust II, Inc., a Maryland corporation (the “Company”), was formed on January 8, 2013 under the Maryland General Corporation Law for the purpose of engaging in the business of investing in self storage facilities. The Company’s year-end is December 31. As used in this report, “we,” “us,” “our,” and “Company” refer to Strategic Storage Trust II, Inc. and each of our subsidiaries.

SmartStop Asset Management, LLC, a Delaware limited liability company (our “Sponsor”) organized in 2013, was the sponsor of our Offering of shares of common stock, as described below. Our Sponsor is a company focused on providing real estate advisory, asset management, and property management services. Our Sponsor owns 97.5% of the economic interests (and 100% of the voting membership interests) of Strategic Storage Advisor II, LLC (our “Advisor”) and owns 100% of Strategic Storage Property Management II, LLC (the “T2 Property Manager”). In addition, as a result of the SSGT Mergers (defined below), certain of our properties are managed by SS Growth Property Management, LLC, which is also 100% owned by our Sponsor (the “GT Property Manager” and together with the T2 Property Manager, our “Property Manager”).

On October 1, 2015, SmartStop Self Storage, Inc. (“SmartStop”) and Extra Space Storage Inc. (“Extra Space”), along with subsidiaries of each of SmartStop and Extra Space, closed on a merger transaction (the “Extra Space Merger”) in which SmartStop was acquired by Extra Space for $13.75 per share in cash, representing an enterprise value of approximately $1.4 billion. At the closing of the Extra Space Merger, our Sponsor, which was previously owned by SmartStop, was sold to an entity controlled by H. Michael Schwartz, our Chairman of the Board of Directors and Chief Executive Officer, and became our Sponsor. The former executive management team of SmartStop continued to serve on the executive management team for our Sponsor. In addition, the majority of our management team at the time of the Extra Space Merger continues to serve on our management team, as well as the management team of our Advisor and Property Manager.

We have no employees. Our Advisor, a Delaware limited liability company, was formed on January 8, 2013. Our Advisor is responsible for managing our affairs on a day-to-day basis and identifying and making acquisitions and investments on our behalf under the terms of the advisory agreement we have with our Advisor (our “Advisory Agreement”). The officers of our Advisor, as well as a majority of the officers of our Sponsor, are also officers of us.

Our Articles of Amendment and Restatement, as amended, authorized 350,000,000 shares of Class A common stock, $0.001 par value per share (the “Class A Shares”) and 350,000,000 shares of Class T common stock, $0.001 par value per share (the “Class T Shares”) and 200,000,000 shares of preferred stock with a par value of $0.001. We offered a maximum of $1.0 billion in common shares for sale to the public (the “Primary Offering”) and $95.0 million in common shares for sale pursuant to our distribution reinvestment plan (collectively, the “Offering”).

On January 10, 2014, the Securities and Exchange Commission (“SEC”) declared our registration statement effective. On May 23, 2014, we satisfied the $1.5 million minimum offering requirements of our Offering and commenced formal operations. On January 9, 2017, our Offering terminated. We sold approximately 48 million Class A Shares and approximately 7 million Class T Shares for approximately $493 million and $73 million respectively, in our Offering. On November 30, 2016, prior to the termination of our Offering, we filed with the SEC a Registration Statement on Form S-3, which registered up to an additional $100.9 million in shares under our distribution reinvestment plan (our “DRP Offering”). The DRP Offering may be terminated at any time upon 10 days’ prior written notice to stockholders. As of March 31, 2019, we had sold approximately 3.0 million Class A Shares and approximately 0.5 million Class T Shares for approximately $31.3 million and $4.8 million, respectively, in our DRP Offering.

On October 1, 2018, we, our Operating Partnership, and SST II Growth Acquisition, LLC, our wholly-owned subsidiary (“Merger Sub”), entered into an Agreement and Plan of Merger (the “SSGT Merger Agreement”) with Strategic Storage Growth Trust, Inc. (“SSGT”), a non-traded REIT sponsored by our Sponsor, and SS Growth Operating Partnership, L.P. (“SSGT OP”). Pursuant to the terms and conditions set forth in the Merger Agreement, on January 24, 2019: (i) we acquired SSGT by way of a merger of SSGT with and into Merger Sub, with Merger Sub being the surviving entity (the “SSGT REIT Merger”); and (ii) immediately after the SSGT REIT Merger, SSGT OP merged with and into our Operating Partnership, with the Operating Partnership continuing as the surviving entity and remaining a subsidiary of the Company (the “SSGT Partnership Merger” and, together with the SSGT REIT Merger, the “SSGT Mergers”). SSGT was a REIT focused on opportunistic self storage properties, including development, and lease-up properties. See Note 3, Real Estate Facilities—Merger with Strategic Storage Growth Trust, Inc., for additional information related to the SSGT Mergers.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

We invested the net proceeds from our Offering primarily in self storage facilities. As of March 31, 2019, we owned 111 operating self storage facilities and one facility under development located in 17 states (Alabama, Arizona, California, Colorado, Florida, Illinois, Indiana, Maryland, Massachusetts, Michigan, New Jersey, Nevada, North Carolina, Ohio, South Carolina, Texas and Washington) and Ontario, Canada (the Greater Toronto Area).

On April 19, 2018, our board of directors, upon recommendation of our Nominating and Corporate Governance Committee, approved an estimated value per share of our common stock of $10.65 for our Class A Shares and Class T Shares based on the estimated value of our assets less the estimated value of our liabilities, or net asset value, divided by the number of shares outstanding on a fully diluted basis, calculated as of December 31, 2017.

As a result of the calculation of our estimated value per share, beginning in May 2018, shares sold pursuant to our distribution reinvestment plan are being sold at the estimated value per share of $10.65 for both Class A Shares and Class T Shares.

Our operating partnership, Strategic Storage Operating Partnership II, L.P., a Delaware limited partnership (our “Operating Partnership”), was formed on January 9, 2013. During 2013, our Advisor purchased limited partnership interests in our Operating Partnership for $200,000 and on August 2, 2013, we contributed the initial $1,000 capital contribution we received to our Operating Partnership in exchange for the general partner interest. In conjunction with the acquisition, by way of merger, of five properties in the Greater Toronto, Canada area (the “Toronto Merger”) we issued an aggregate of approximately 483,197 Class A Units of our Operating Partnership to the common stockholders of Strategic Storage Toronto Properties REIT, Inc. (“SS Toronto”), consisting of Strategic 1031, LLC (“Strategic 1031”), a subsidiary of our Sponsor, and SS Toronto REIT Advisors, Inc., an affiliate of our Sponsor. On October 1, 2018, in conjunction with the amalgamation of our Canadian entities, Strategic 1031 exchanged 483,124 Class A Units of our Operating Partnership for 483,124 shares of our Class A common stock.

In conjunction with the SSGT Mergers we issued an aggregate of approximately 396,000 Class A Units of our Operation Partnership to SSGT’s advisor, SS Growth Advisor, LLC. Our Operating Partnership owns, directly or indirectly through one or more special purpose entities, all of the self storage properties that we acquire. As of March 31, 2019, we owned approximately 99.3% of the common units of limited partnership interests of our Operating Partnership. The remaining approximately 0.7% of the common units are owned by our Advisor, SS Toronto REIT Advisors, Inc., and SS Growth Advisor, LLC. As the sole general partner of our Operating Partnership, we have the exclusive power to manage and conduct the business of our Operating Partnership. We conduct certain activities through our taxable REIT subsidiary, Strategic Storage TRS II, Inc., a Delaware corporation (the “TRS”), which is a wholly-owned subsidiary of our Operating Partnership.

The T2 Property Manager was formed on January 8, 2013 to manage our properties, and the GT Property Manager was formed on March 12, 2013 to manage SSGT’s properties. An affiliate of our Property manager owns the rights to the “SmartStop® Self Storage” brand and our Property Manager derives substantially all of its income from the property management services it performs for us. Our Property Manager may enter into sub-property management agreements with third party management companies and pay part of its management fee to such sub-property manager. Please see Note 6 – Related Party Transactions – Property Management Agreement.

Our dealer manager is Select Capital Corporation, a California corporation (our “Dealer Manager”). Our Dealer Manager was responsible for marketing our shares offered pursuant to our Primary Offering. Our Sponsor owns a 15% non-voting equity interest in our Dealer Manager. Affiliates of our Dealer Manager own a 2.5% non-voting membership interest in our Advisor.

Our Sponsor owns 100% of the membership interests of Strategic Transfer Agent Services, LLC, our transfer agent (our “Transfer Agent”). On May 31, 2018, the Company executed an agreement (the “Transfer Agent Agreement”), with our Transfer Agent to provide transfer agent and registrar services to us that are substantially similar to what a third party transfer agent would provide in the ordinary course of performing its functions as a transfer agent. Our Transfer Agent may retain and supervise third party vendors in its efforts to administer certain services. Please see Note 6 – Related Party Transactions – Transfer Agent Agreement.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

As we accepted subscriptions for shares of our common stock, we transferred all of the net offering proceeds to our Operating Partnership as capital contributions in exchange for additional units of interest in our Operating Partnership. However, we were deemed to have made capital contributions in the amount of gross proceeds received from investors, and our Operating Partnership was deemed to have simultaneously paid the sales commissions and other costs associated with the Offering. In addition, our Operating Partnership is structured to make distributions with respect to limited partnership units that are equivalent to the distributions made to holders of common stock. Finally, a limited partner in our Operating Partnership may later exchange his or her limited partnership units in our Operating Partnership for shares of our common stock at any time after one year following the date of issuance of their limited partnership units, subject to certain restrictions outlined in our Operating Partnership’s limited partnership agreement (the “Operating Partnership Agreement”). Our Advisor is prohibited from exchanging or otherwise transferring the limited partnership units it received in connection with its initial $200,000 investment so long as it is acting as our Advisor pursuant to our Advisory Agreement.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC.

Principles of Consolidation

Our financial statements, and the financial statements of our Operating Partnership, including its wholly-owned subsidiaries, are consolidated in the accompanying consolidated financial statements. The portion of these entities not wholly-owned by us is presented as noncontrolling interests. All significant intercompany accounts and transactions have been eliminated in consolidation.

Consolidation Considerations

Current accounting guidance provides a framework for identifying a variable interest entity (“VIE”) and determining when a company should include the assets, liabilities, noncontrolling interests, and results of activities of a VIE in its consolidated financial statements. In general, a VIE is an entity or other legal structure used to conduct activities or hold assets that either (1) has an insufficient amount of equity to carry out its principal activities without additional subordinated financial support, (2) has a group of equity owners that are unable to make significant decisions about its activities, or (3) has a group of equity owners that do not have the obligation to absorb losses or the right to receive returns generated by its operations. Generally, a VIE should be consolidated if a party with an ownership, contractual, or other financial interest in the VIE (a variable interest holder) has the power to direct the VIE’s most significant activities and the obligation to absorb losses or right to receive benefits of the VIE that could be significant to the VIE. A variable interest holder that consolidates the VIE is called the primary beneficiary. Upon consolidation, the primary beneficiary generally must initially record all of the VIE’s assets, liabilities, and noncontrolling interest at fair value and subsequently account for the VIE as if it were consolidated based on majority voting interest. Our Operating Partnership is deemed to be a VIE and is consolidated by the Company as the primary beneficiary.

As of March 31, 2019, we were not a party to any other contracts/interest that would be deemed to be variable interest in VIEs other than our tenant insurance joint venture, which is accounted for under the equity method of accounting.

As of December 31, 2018, we were not a party to any other contracts/interest that would be deemed to be variable interest in VIEs other than our tenant insurance joint venture and a real estate joint venture, both of which are accounted for under the equity method of accounting. In January 2019, we sold our interest in the real estate joint venture to Strategic Storage Trust IV, Inc. (“SST IV”), a REIT sponsored by our Sponsor. Please see Note 3 – Real Estate Facilities for further discussion regarding our joint venture with SmartCentres and Note 6 – Related Party Transactions for further discussions regarding our tenant insurance joint venture. Other than these joint ventures, we did not have any variable interest relationships with unconsolidated entities or financial partnerships.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

Under the equity method, our investments in real estate joint ventures will be stated at cost and adjusted for our share of net earnings or losses and reduced by distributions. Equity in earnings will generally be recognized based on our ownership interest in the earnings of each of the unconsolidated investment.

Noncontrolling Interest in Consolidated Entities

We account for the noncontrolling interest in our Operating Partnership in accordance with the related accounting guidance. Due to our control through our general partnership interest in our Operating Partnership and the limited rights of the limited partner, our Operating Partnership, including its wholly-owned subsidiaries, are consolidated with the Company and the limited partner interest is reflected as a noncontrolling interest in the accompanying consolidated balance sheets. The noncontrolling interest shall be attributed its share of income and losses, even if that attribution results in a deficit noncontrolling interest balance.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. Management will adjust such estimates when facts and circumstances dictate. Actual results could materially differ from those estimates. The most significant estimates made include the allocation of property purchase price to tangible and intangible assets acquired and liabilities assumed at relative fair value, the determination if certain entities should be consolidated, the evaluation of potential impairment of long-lived assets, and the estimated useful lives of real estate assets and intangibles.

Cash and Cash Equivalents

We consider all short-term, highly liquid investments that are readily convertible to cash with a maturity of three months or less at the time of purchase to be cash equivalents.

We may maintain cash and cash equivalents in financial institutions in excess of insured limits, but believe this risk will be mitigated by only investing in or through major financial institutions.

Restricted Cash

Restricted cash consists primarily of impound reserve accounts for property taxes, insurance and capital improvements in connection with the requirements of certain of our loan agreements.

Real Estate Purchase Price Allocation

We account for acquisitions in accordance with GAAP which requires that we allocate the purchase price of a property to the tangible and intangible assets acquired and the liabilities assumed based on their relative fair values. This guidance requires us to make significant estimates and assumptions, including fair value estimates, which requires the use of significant unobservable inputs as of the acquisition date.

The value of the tangible assets, consisting of land and buildings is determined as if vacant. Substantially all of the leases in place at acquired properties are at market rates, as the majority of the leases are month-to-month contracts. We also consider whether in-place, market leases represent an intangible asset. We recorded approximately $13.6 million and none in intangible assets to recognize the value of in-place leases related to our acquisitions during the three months ended March 31, 2019 and 2018, respectively. We do not expect, nor to date have we recorded, intangible assets for the value of customer relationships because we expect we will not have concentrations of significant customers and the average customer turnover will be fairly frequent.

Allocation of purchase price to acquisitions of portfolios of facilities are allocated to the individual facilities based upon an income approach or a cash flow analysis using appropriate risk adjusted capitalization rates which take into account the relative size, age, and location of the individual facility along with current and projected occupancy and rental rate levels or appraised values, if available.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

Acquisitions of integrated sets of assets and activities that do not meet the definition of a business, as defined under current GAAP, are accounted for as asset acquisitions. During the three months ended March 31, 2019 and 2018, our acquisitions have not met the definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets) or because the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay. As a result, once an acquisition is deemed probable, transaction costs are capitalized rather than expensed.

During the three months ended March 31, 2019, we acquired 29 properties by way of merger with SSGT that did not meet the definition of a business, and we capitalized approximately $1.4 million of acquisition-related transaction costs. We did not acquire any properties during the three months ended March 31, 2018.

During the three months ended March 31, 2019 and 2018, we expensed approximately $260,000 and $60,000, respectively, of acquisition-related transaction costs that did not meet our capitalization policy during the respective periods.

Evaluation of Possible Impairment of Long-Lived Assets

Management monitors events and changes in circumstances that could indicate that the carrying amounts of our long-lived assets may not be recoverable. When indicators of potential impairment are present that indicate that the carrying amounts of the assets may not be recoverable, we will assess the recoverability of the assets by determining whether the carrying value of the long-lived assets will be recovered through the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying value, we will adjust the value of the long-lived assets to the fair value and recognize an impairment loss. For the three months ended March 31, 2019 and 2018, no impairment losses were recognized.

Revenue Recognition

Management believes that all of our leases are operating leases. Rental income is recognized in accordance with the terms of the leases, which generally are month-to-month. Revenues from any long-term operating leases are recognized on a straight-line basis over the term of the lease. The excess of rents received over amounts contractually due pursuant to the underlying leases is included in accounts payable and accrued liabilities in our consolidated balance sheets and contractually due but unpaid rent is included in other assets.

Real Estate Facilities

Real estate facilities are recorded based on relative fair value as of the date of acquisition. We capitalize costs incurred to develop, construct, renovate and improve properties, including interest and property taxes incurred during the construction period. The construction period begins when expenditures for the real estate assets have been made and activities that are necessary to prepare the asset for its intended use are in progress. The construction period ends when the asset is substantially complete and ready for its intended use.

Depreciation of Real Property Assets

Our management is required to make subjective assessments as to the useful lives of our depreciable assets. We consider the period of future benefit of the asset to determine the appropriate useful lives.

Depreciation of our real property assets is charged to expense on a straight-line basis over the estimated useful lives
as follows:

Description		Standard Depreciable Life
Land		Not Depreciated
Buildings		30-35 years
Site Improvements		7-10 years

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

Depreciation of Personal Property Assets

Personal property assets consist primarily of furniture, fixtures and equipment and are depreciated on a straight-line basis over the estimated useful lives generally ranging from 3 to 5 years, and are included in other assets on our consolidated balance sheets.

Intangible Assets

We have allocated a portion of our real estate purchase price to in-place lease intangibles. We are amortizing in-place lease intangibles on a straight-line basis over the estimated future benefit period. As of March 31, 2019, the gross amounts allocated to in-place lease intangibles was approximately $47.1 million and accumulated amortization of in-place lease intangibles totaled approximately $33.7 million. As of December 31, 2018, the gross amounts allocated to in-place lease intangibles was approximately $33.4 million and accumulated amortization of in-place lease intangibles totaled approximately $31.9 million.

The total estimated future amortization expense of intangible assets for the years ending December 31, 2019, 2020, 2021, 2022, 2023, and thereafter is approximately $6.9 million, $5.2 million, $0.1 million, $0.1 million, $0.1 million, and $1.0 million respectively.

Debt Issuance Costs

The net carrying value of costs incurred in connection with our former revolving credit facility were presented as debt issuance costs on our consolidated balance sheets. Debt issuance costs were amortized on a straight-line basis over the term of the related loan, which was not materially different than the effective interest method. As of March 31, 2019 and December 31, 2018, accumulated amortization of debt issuance costs related to our former revolving credit facility totaled none and approximately $45,000, respectively.

The net carrying value of costs incurred in connection with obtaining non revolving debt are presented on the balance sheet as a deduction from debt (see Note 4). Debt issuance costs are amortized on a straight-line basis over the term of the related loan, which is not materially different than the effective interest method. As of March 31, 2019 and December 31, 2018, accumulated amortization of debt issuance costs related to non-revolving debt totaled approximately $1.5 million and $1.0 million, respectively.

Offering Costs

We pay our Dealer Manager an ongoing stockholder servicing fee that is payable monthly and accrues daily in an amount equal to 1/365th of 1% of the purchase price per share of the Class T Shares sold in the Primary Offering. We will cease paying the stockholder servicing fee with respect to the Class T Shares sold in the Primary Offering at the earlier of (i) the date we list our shares on a national securities exchange, merge or consolidate with or into another entity, or sell or dispose of all or substantially all of our assets, (ii) the date at which the aggregate underwriting compensation from all sources equals 10% of the gross proceeds from the sale of both Class A Shares and Class T Shares in our Primary Offering (i.e., excluding proceeds from sales pursuant to our distribution reinvestment plan), which calculation shall be made by us with the assistance of our Dealer Manager commencing after the termination of the Primary Offering; (iii) the fifth anniversary of the last day of the fiscal quarter in which our Primary Offering (i.e., excluding our distribution reinvestment plan offering) terminated; and (iv) the date that such Class T Share is redeemed or is no longer outstanding. Our Dealer Manager entered into participating dealer agreements with certain other broker-dealers which authorized them to sell our shares. Upon sale of our shares by such broker-dealers, our Dealer Manager re-allowed all of the sales commissions and, subject to certain limitations, the stockholder servicing fees paid in connection with sales made by these broker-dealers. Our Dealer Manager was also permitted to re-allow to these broker-dealers a portion of their dealer manager fee as marketing fees, reimbursement of certain costs and expenses of attending training and education meetings sponsored by our Dealer Manager, payment of attendance fees required for employees of our Dealer Manager or other affiliates to attend retail seminars and public seminars sponsored by these broker-dealers, or to defray other distribution-related expenses. Our Dealer Manager also received reimbursement of bona fide due diligence expenses; however, to the extent the due diligence expenses could not be justified, any excess over actual due diligence expenses would have been considered underwriting compensation subject to a 10% FINRA limitation and, when aggregated with all other non-accountable expenses in connection with our Public Offering, could not exceed 3% of gross offering proceeds from sales in the Public Offering. We recorded a liability within Due to affiliates for the future estimated stockholder servicing fees at the time of sale of Class T Shares as an offering cost.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

Foreign Currency Translation

For non-U.S. functional currency operations, assets and liabilities are translated to U.S. dollars at current exchange rates. Revenues and expenses are translated at the average rates for the period. All adjustments related to amounts classified as long term equity investments are recorded in accumulated other comprehensive income (loss) as a separate component of equity. Transactions denominated in a currency other than the functional currency of the related operation are recorded at rates of exchange in effect at the date of the transaction. Changes in equity investments not classified as long term are recorded in other income (expense) and represented a gain of approximately $340,000 and none for the three months ended March 31, 2019 and 2018, respectively.

Redeemable Common Stock

We adopted a share redemption program that enables stockholders to sell their shares to us in limited circumstances.

We record amounts that are redeemable under the share redemption program as redeemable common stock in the accompanying consolidated balance sheets since the shares are redeemable at the option of the holder and therefore their redemption is outside our control. The maximum amount redeemable under our share redemption program is limited to the number of shares we can repurchase with the amount of the net proceeds from the sale of shares under the distribution reinvestment plan. However, accounting guidance states that determinable amounts that can become redeemable should be presented as redeemable when such amount is known. Therefore, the net proceeds from the distribution reinvestment plan are considered to be temporary equity and are presented as redeemable common stock in the accompanying consolidated balance sheets.

In addition, current accounting guidance requires, among other things, that financial instruments that represent a mandatory obligation of us to repurchase shares be classified as liabilities and reported at settlement value. Our redeemable common shares are contingently redeemable at the option of the holder. When we determine we have a mandatory obligation to repurchase shares under the share redemption program, we reclassify such obligations from temporary equity to a liability based upon their respective settlement values.

For the year ended December 31, 2018, we received redemption requests totaling approximately $8.3 million (approximately 0.9 million shares), approximately $7.0 million of which were fulfilled during the year ended December 31, 2018, with the remaining approximately $1.3 million included in accounts payable and accrued liabilities as of December 31, 2018 and fulfilled in January 2019. For the three months ended March 31, 2019, we received redemption requests totaling approximately $2.0 million (approximately 200,000 shares), all of which were included in accounts payable and accrued liabilities as of March 31, 2019, and fulfilled in April 2019.

Accounting for Equity Awards

The cost of restricted stock is required to be measured based on the grant date fair value and the cost recognized over the relevant service period.

Fair Value Measurements

Under GAAP, we are required to measure certain financial instruments at fair value on a recurring basis. In addition, we are required to measure other financial instruments and balances at fair value on a non-recurring basis. Fair value is defined by the accounting standard for fair value measurements and disclosures as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels. The following summarizes the three levels of inputs and hierarchy of fair value we use when measuring fair value:

•

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access;

•

Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as interest rates and yield curves that are observable at commonly quoted intervals; and

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

•

Level 3 inputs are unobservable inputs for the assets or liabilities that are typically based on an entity’s own assumptions as there is little, if any, related market activity.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the fair value measurement will fall within the lowest level that is significant to the fair value measurement in its entirety.

The accounting guidance for fair value measurements and disclosures provides a framework for measuring fair value and establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. In determining fair value, we will utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value. Considerable judgment will be necessary to interpret Level 2 and 3 inputs in determining fair value of our financial and non-financial assets and liabilities. Accordingly, there can be no assurance that the fair values we will present will be indicative of amounts that may ultimately be realized upon sale or other disposition of these assets.

Financial and non-financial assets and liabilities measured at fair value on a non-recurring basis in our consolidated financial statements consist of real estate and related liabilities assumed related to our acquisitions. The fair values of these assets and liabilities were determined as of the acquisition dates using widely accepted valuation techniques, including (i) discounted cash flow analysis, which considers, among other things, leasing assumptions, growth rates, discount rates and terminal capitalization rates, (ii) income capitalization approach, which considers prevailing market capitalization rates, and (iii) comparable sales activity. In general, we consider multiple valuation techniques when measuring fair values. However, in certain circumstances, a single valuation technique may be appropriate. All of the fair values of the assets and liabilities as of the acquisition dates were derived using Level 3 inputs.

The carrying amounts of cash and cash equivalents, restricted cash, other assets, variable-rate debt, accounts payable and accrued liabilities, distributions payable and amounts due to affiliates approximate fair value.

The table below summarizes our fixed rate notes payable at March 31, 2019 and December 31, 2018. The estimated fair value of financial instruments is subjective in nature and is dependent on a number of important assumptions, including discount rates and relevant comparable market information associated with each financial instrument. The fair value of the fixed rate notes payable was estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented below are not necessarily indicative of the amounts we would realize in a current market exchange.

	March 31, 2019				December 31, 2018
	Fair Value		Carrying Value		Fair Value		Carrying Value
Fixed Rate Secured Debt	$	298,500,000	$	298,941,648	$	200,600,000	$	207,357,391

As of March 31, 2019, and December 31, 2018, we had interest rate swaps, interest rate caps, and a net investment hedge (See Notes 4 and 5). The valuations of these instruments were determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivative. The analysis reflected the contractual terms of the derivative, including the period to maturity, and used observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. The fair value of the interest rate swaps were determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash payments. Our fair values of our net investment hedges are based on the change in the spot rate at the end of the period as compared with the strike price at inception.

To comply with GAAP, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of derivative contracts for the effect of non-performance risk, we will consider the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

Although we had determined that the majority of the inputs used to value our derivatives were within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilized Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, through March 31, 2019, we had assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of our derivatives. As a result, we determined that our derivative valuations in their entirety were classified in Level 2 of the fair value hierarchy.

Derivative Instruments and Hedging Activities

We record all derivatives on our balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. We may enter into derivative contracts that are intended to economically hedge certain of our risks, even though hedge accounting does not apply or we elect not to apply hedge accounting.

For derivatives designated as net investment hedges, the effective portion of changes in the fair value of the derivatives are reported in accumulated other comprehensive income. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. Amounts are reclassified out of other comprehensive income into earnings when the hedged net investment is either sold or substantially liquidated.

Income Taxes

We made an election to be taxed as a Real Estate Investment Trust (“REIT”), under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2014. To qualify as a REIT, we must continue to meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the REIT’s ordinary taxable income to stockholders (which is computed without regard to the dividends paid deduction or net capital gains and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax on taxable income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will then be subject to federal income taxes on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the IRS grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to stockholders. However, we believe that we are organized and operate in such a manner as to qualify for treatment as a REIT and intend to operate in the foreseeable future in such a manner that we will remain qualified as a REIT for federal income tax purposes.

Even if we continue to qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, and federal income and excise taxes on our undistributed income.

We filed an election to treat our TRS as a taxable REIT subsidiary effective January 1, 2014. In general, the TRS performs additional services for our customers and generally engages in any real estate or non-real estate related business. The TRS is subject to corporate federal and state income tax. The TRS follows accounting guidance which requires the use of the asset and liability method. Deferred income taxes represent the tax effect of future differences between the book and tax bases of assets and liabilities.

Per Share Data

Basic earnings per share attributable to our common stockholders for all periods presented are computed by dividing net income (loss) attributable to our common stockholders by the weighted average number of shares outstanding during the period, excluding unvested restricted stock. Diluted earnings per share is computed by including the dilutive effect of unvested restricted stock, utilizing the treasury stock method. For all periods presented, the dilutive effect of unvested restricted stock was not included in the diluted weighted average shares as such shares were antidilutive.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

Recently Issued Accounting Guidance

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 amends the guidance on accounting for leases. Under ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under ASU 2016-02, lessor accounting is largely unchanged. It also includes extensive amendments to the disclosure requirements. ASU 2016-02 is effective for fiscal years and interim periods beginning after December 15, 2018. We adopted this standard on January 1, 2019 using the modified retrospective approach, without applying the provisions to comparative periods presented. Its adoption did not have a material impact on our consolidated financial statements as substantially all of our lease revenues are derived from month-to-month leases and, as lessee, we have no significant leases. In addition, the new standard requires our expected loss related to collectability of rental payments, previously reflected in property operating expenses as bad debt expense, to be reflected as a reduction to self storage rental revenue. The impact of this was a reduction in both self storage rental revenue and property operating expenses of approximately $360,000 for the three months ended March 31, 2019. During the three months ended March 31, 2018, bad debt expense totaled approximately $260,000 and is included in property operating expenses.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”. ASU 2017-12 is intended to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and to simplify the application of the hedge accounting guidance under previous GAAP. ASU 2017-12 is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted. For cash flow and net investment hedges existing at the date of adoption, a reporting entity must apply the amendments in ASU 2017-12 using the modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. The Company adopted ASU 2017-12 effective beginning January 1, 2019, and its adoption did not have a material impact on our financial statements.

Note 3. Real Estate Facilities

The following summarizes the activity in real estate facilities during the three months ended March 31, 2019:

Real estate facilities
Balance at December 31, 2018	$	820,296,026
Facilities acquired through merger with SSGT		338,918,943
Impact of foreign exchange rate changes		2,896,196
Improvements and additions		606,992
Balance at March 31, 2019	$	1,162,718,157
Accumulated depreciation
Balance at December 31, 2018	$	(54,264,685	)
Depreciation expense		(6,799,061	)
Impact of foreign exchange rate changes		(159,297	)
Balance at March 31, 2019	$	(61,223,043	)

Merger with Strategic Storage Growth Trust, Inc.

On October 1, 2018, we, our Operating Partnership, and SST II Growth Acquisition, LLC, our wholly-owned subsidiary (“Merger Sub”), entered into an Agreement and Plan of Merger (the “SSGT Merger Agreement”) with Strategic Storage Growth Trust, Inc. (“SSGT”), a non-traded REIT sponsored by our Sponsor, and SS Growth Operating Partnership, L.P. (“SSGT OP”). Pursuant to the terms and conditions set forth in the SSGT Merger Agreement, on January 24, 2019: (i) we acquired SSGT by way of a merger of SSGT with and into Merger Sub, with Merger Sub being the surviving entity (the “SSGT REIT Merger”); and (ii) immediately after the SSGT REIT Merger, SSGT OP merged with and into our Operating Partnership, with the Operating Partnership continuing as the surviving entity and remaining a subsidiary of the Company (the “SSGT Partnership Merger” and, together with the SSGT REIT Merger, the “SSGT Mergers”).

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

At the effective time of the SSGT REIT Merger (the “SSGT REIT Merger Effective Time”), each share of SSGT common stock, par value $0.001 per share (the “SSGT Common Stock”), outstanding immediately prior to the SSGT REIT Merger Effective Time (other than shares owned by SSGT and its subsidiaries or us and our subsidiaries) was automatically converted into the right to receive an amount in cash equal to $12.00, without interest and less any applicable withholding taxes. The proceeds used to fund the SSGT Mergers and the repayment of approximately $141 million of our outstanding debt were funded by the SSGT Merger Financings, totaling approximately $500 million, as described in Note 4.

Immediately prior to the SSGT REIT Merger Effective Time, all shares of SSGT Common Stock that were subject to vesting and other restrictions also became fully vested and converted into the right to receive cash equal to $12.00 per share upon the SSGT REIT Merger.

At the effective time of the SSGT Partnership Merger, each outstanding unit of partnership interest in SSGT OP was converted automatically into 1.127 units of partnership interest in our Operating Partnership, which resulted in approximately 396,000 Class A Units of our Operating Partnership being issued to SS Growth Advisor, LLC, an entity 97.5% owned by our Sponsor.

SSGT was a REIT focused on opportunistic self storage properties, including development, and lease-up properties. As a result of the SSGT Mergers, we acquired all of the real estate owned by SSGT, consisting of 28 operating self storage facilities located in 10 states and in the Greater Toronto, Canada area, and one development property in the Greater Toronto Area. Additionally, we obtained the rights to acquire a self storage facility currently under development located in Gilbert, Arizona that was previously under contract with SSGT. See Note 9 – Potential Acquisitions for further detail.

The following table reconciles the total consideration transferred during the SSGT Mergers:

Fair value of consideration transferred:
Cash	$346,231,561	⁽¹⁾
Issuance of limited partnership units in our Operating Partnership to SS Growth Advisor, LLC	4,217,399
Total consideration transferred	$350,448,960

⁽¹⁾

The approximately $346 million cash consideration consisted of approximately $320 million paid to the SSGT shareholders, approximately $19 million of SSGT debt that was repaid at closing, approximately $5 million of other SSGT liabilities paid at closing, and approximately $1 million in transaction costs.

The following table summarizes the fair values of the assets acquired and liabilities assumed in the SSGT Mergers:

Assets Acquired:
Land	$	62,261,573
Buildings		260,523,414
Site improvements		16,133,956
Construction in process		5,370,773
Intangible assets		13,571,765
Cash and cash equivalents		692,965
Other assets		1,757,191
Total assets acquired	$	360,311,637
Liabilities assumed:
Debt	$	5,038,435
Accounts payable and accrued liabilities		4,824,242
Total liabilities assumed	$	9,862,677
Total net assets acquired	$	350,448,960

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

The following table summarizes the purchase price allocation for the real estate related assets acquired in the SSGT Mergers:

Acquisition

Date

Real Estate

Assets

Construction in Process⁽⁴⁾

Intangibles

Total⁽¹⁾

2019

Revenue⁽²⁾

2019

Property

Operating

Income⁽²⁾⁽³⁾

SSGT Mergers

1/24/2019

338,918,943

5,370,773

13,571,765

357,861,481

4,116,193

2,040,786

⁽⁵⁾

⁽¹⁾	The allocations noted above are based on a determination of the relative fair value of the total consideration provided and represent the amount paid including capitalized acquisition costs.

⁽²⁾	The operating results of the self storage properties acquired in the SSGT Mergers have been included in our consolidated statement of operations since their respective acquisition date.

⁽³⁾	Property operating income excludes corporate general and administrative expenses, asset management fees, interest expenses, depreciation, amortization and acquisition expenses.

⁽⁴⁾	Construction in process relates to the Torbarrie property in Toronto, Canada, which is a self storage property under construction with an expected completion date in the fourth quarter of 2019 or first quarter of 2020.

⁽⁵⁾	SSGT was a REIT focused on opportunistic self storage properties, including development, and lease-up properties. As a result, many of its properties were not physically and/or economically stabilized as of the date of the SSGT Mergers.

Potential Sale of San Antonio II Property

The San Antonio II Property was acquired by us in the SSGT Mergers. On February 5, 2019, we executed a purchase and sale agreement (the “San Antonio II Sale Agreement”) with an unaffiliated third party (the “Buyer”) for the sale of the self storage facility and industrial warehouse/office space we own in San Antonio, Texas (the “San Antonio II Property”).

The sale price for the San Antonio II Property is approximately $16.1 million, less closing costs. The Buyer made a deposit of $400,000 in connection with the execution of the San Antonio II Sale Agreement and the estimated closing date is during the second half of 2019. The San Antonio II Sale Agreement is subject to various contingencies and we cannot provide assurance whether or when this transaction will occur.

Joint Venture with SmartCentres

In January 2018, a subsidiary of our Sponsor entered into a contribution agreement (the “Contribution Agreement”) with a subsidiary of SmartCentres Real Estate Investment Trust, an unaffiliated third party (“SmartCentres”), for a tract of land owned by SmartCentres and located in East York, Ontario (the “East York Lot”) in Canada. In March 2018, the interest in the Contribution Agreement was assigned to one of our subsidiaries.

On June 28, 2018, we closed on the East York Lot, which is owned by a limited partnership (the “Limited Partnership”), in which we (through our subsidiary) and SmartCentres (through its subsidiary) were each a 50% limited partner and each had an equal ranking general partner in the Limited Partnership. At closing, we subscribed for 50% of the units in the Limited Partnership at an agreed upon subscription price of approximately $3.8 million CAD, representing a contribution equivalent to 50% of the agreed upon fair market value of the land. The Limited Partnership intends to develop a self storage facility on the East York Lot. The value of the land contributed to the Limited Partnership had an agreed upon fair market value of approximately $7.6 million CAD. In January 2019, we sold our interest in the Limited Partnership to SST IV for approximately $4.7 million CAD, which represented our total cost incurred related to the Limited Partnership. Of this amount, approximately $4.6 million CAD related to the acquisition of land and development costs incurred, and approximately $100,000 CAD related to acquisition costs that were expensed during 2018, which were recorded in other income in the consolidated statement of operations for the three months ended March 31, 2019.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

Note 4. Debt

The Company’s debt is summarized as follows:

Encumbered Property	March 31, 2019			December 31, 2018			Interest Rate			Maturity Date
Raleigh/Myrtle Beach promissory note⁽¹⁾	$	—		$	11,878,396			5.73	%	N/A
Amended KeyBank Credit Facility⁽²⁾	—				98,782,500			5.00	%	N/A
Oakland and Concord loan⁽³⁾	—				19,483,127			3.95	%	N/A
$11M KeyBank Subordinate Loan⁽⁴⁾	—				11,000,000			6.25	%	N/A
KeyBank CMBS Loan⁽⁵⁾		95,000,000			95,000,000			3.89	%	8/1/2026
KeyBank Florida CMBS Loan⁽⁶⁾		52,000,000			52,000,000			4.65	%	5/1/2027
Midland North Carolina CMBS Loan⁽⁷⁾		47,249,999			47,249,999			5.31	%	8/1/2024
Canadian CitiBank Loan⁽⁸⁾		75,114,670			72,846,480			4.35	%	10/9/2020
CMBS SASB Loan⁽⁹⁾		235,000,000		—				5.49	%	2/9/2022
CMBS Loan⁽¹⁰⁾		104,000,000		—				5.00	%	2/1/2029
Secured Loan⁽¹¹⁾		89,178,000		—				5.10	%	1/24/2022
Senior Term Loan⁽¹²⁾		72,000,000		—				6.85	%	1/24/2022
Stoney Creek Loan⁽¹³⁾		5,037,762		—				5.90	%	10/1/2021
Torbarrie Loan⁽¹⁴⁾		638,052		—				5.90	%	3/1/2023
Premium on secured debt, net		691,648			1,228,996
Debt issuance costs, net		(11,688,484	)		(3,385,395	)
Total debt	$	764,221,647		$	406,084,103

⁽¹⁾	Fixed rate debt with principal and interest payments due monthly. This promissory note was encumbered by five properties, Morrisville, Cary, Raleigh, Myrtle Beach I, and Myrtle Beach II. This loan was repaid in conjunction with the SSGT Merger financing.

⁽²⁾

As of December 31, 2018, this facility encumbered 21 properties (Xenia, Sidney, Troy, Greenville, Washington Court House, Richmond, Connersville, Vallejo, Port St. Lucie I, Sacramento, Sonoma, Las Vegas I, Las Vegas II, Las Vegas III, Baltimore, Aurora II, Plantation, Wellington, Naples, Port St. Lucie II, and Doral). This loan was repaid in conjunction with the SSGT Merger financing.

⁽³⁾	This loan was assumed during the acquisition of the Oakland and Concord properties, along with an interest rate swap with USAmeriBank that fixed the interest rate at 3.95%. This loan was repaid in conjunction with the SSGT Merger financing.

⁽⁴⁾

This variable rate loan encumbered 49% of the equity interest in the entities that own the 34 properties (the 29 properties encumbered by the KeyBank CMBS Loan and the five properties encumbered by the KeyBank Florida CMBS Loan), and was subordinate to the existing KeyBank CMBS Loan and KeyBank Florida CMBS Loan. This loan was repaid in conjunction with the SSGT Merger financing.

⁽⁵⁾

This fixed rate loan encumbers 29 properties (Whittier, La Verne, Santa Ana, Upland, La Habra, Monterey Park, Huntington Beach, Chico, Lancaster I, Riverside, Fairfield, Lompoc, Santa Rosa, Federal Heights, Aurora, Littleton, Bloomingdale, Crestwood, Forestville, Warren I, Sterling Heights, Troy, Warren II, Beverly, Everett, Foley, Tampa, Boynton Beach, and Lancaster II) with monthly interest only payments until September 2021, at which time both interest and principal payments will be due monthly. The separate assets of these encumbered properties are not available to pay our other debts.

⁽⁶⁾

This fixed rate loan encumbers five properties (Pompano Beach, Lake Worth, Jupiter, Royal Palm Beach, and Delray) with monthly interest only payments until June 2022, at which time both interest and principal payments will be due monthly. The separate assets of these encumbered properties are not available to pay our other debts.

⁽⁷⁾

This fixed rate loan encumbers 11 self storage properties (Asheville I, Arden, Asheville II, Hendersonville I, Asheville III, Asheville IV, Asheville V, Asheville VI, Asheville VII, Asheville VIII, and Hendersonville II) with monthly interest only payments until September 2019, at which time both interest and principal payments will be due monthly.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

⁽⁸⁾

This variable rate loan encumbers 10 of our Canadian properties and the amount shown above is in USD based on the foreign exchange rate in effect as of March 31, 2019. We have CAD $100.3 million in interest rate caps that cap CDOR at 3.0% until October 15, 2021. The separate assets of these encumbered properties are not available to pay our other debts.

⁽⁹⁾

This variable rate loan encumbers 29 properties (Morrisville, Cary, Raleigh, Vallejo, Xenia, Sidney, Troy, Greenville, Washington Court House, Richmond, Connersville, Port St Lucie, Sacramento, Concord, Oakland, Wellington, Doral, Naples, Baltimore, Aurora, Jones Blvd - Las Vegas, Russell Rd - Las Vegas, Riverside, Stockton, Azusa, Romeoville, Elgin, San Antonio, Kingwood). We have $235 million in interest rate caps, whereby LIBOR is capped at 3% through February 15, 2022. The separate assets of these encumbered properties are not available to pay our other debts.

⁽¹⁰⁾	This fixed rate loan encumbers 10 properties (Myrtle Beach I, Myrtle Beach II, Port St. Lucie, Plantation, Sonoma, Las Vegas I, Las Vegas II, Las Vegas III, Ft Pierce, Nantucket Island). The separate assets of these encumbered properties are not available to pay our other debts.

⁽¹¹⁾

This variable rate loan encumbers 16 properties (Colorado Springs, Aurora, San Antonio, Phoenix, 3173 Sweeten Creek Rd - Asheville, Elk Grove, Garden Grove, Deaverview Rd - Asheville, Highland Center Blvd - Asheville, Sarasota, Mount Pleasant, Pembroke Pines, Riverview, Eastlake, McKinney, Hualapai Way - Las Vegas). We have an interest rate swap whereby LIBOR is fixed at approximately 2.6% until August 1, 2020. The separate assets of these encumbered properties are not available to pay our other debts.

⁽¹²⁾	This variable rate loan is encumbered by a pledge of 49% of the equity interests in our property-owning special purpose entities, other than those encumbered by the CMBS SASB Loan. We have an interest rate swap whereby LIBOR is fixed at approximately 2.6% until August 1, 2020.

⁽¹³⁾

This variable rate loan bears interest at a rate of 1.95% plus Royal Bank of Canada Prime Rate, which was approximately 3.95% as of March 31, 2019, and in no event shall the total interest rate fall below 4.65% per annum. The Stoney Creek loan was assumed in the SSGT Mergers and had a balance of approximately $5 million USD as of the SSGT Mergers date. The Stoney Creek loan is secured by a first lien deed of trust on the Stoney Creek property and all improvements thereto, is cross-collateralized with the Torbarrie property, and is guaranteed by the Company. The amount shown above is in USD based on the foreign exchange rate in effect as of March 31, 2019.

⁽¹⁴⁾

This variable rate loan bears interest at a rate of 1.95% plus Royal Bank of Canada Prime Rate, which was approximately 3.95% as of March 31, 2019, and in no event shall the total interest rate fall below 4.65% per annum. The Torbarrie loan was assumed in the SSGT Mergers and had no outstanding balance as of the date of the SSGT Mergers. The Torbarrie loan is a construction loan, which allows for borrowings up to approximately $10.3 million CAD and is secured by a first lien deed of trust on the Torbarrie property and all improvements thereto, is cross-collateralized with the Stoney Creek property, and is guaranteed by the Company. The amount shown above is in USD based on the foreign exchange rate in effect as of March 31, 2019.

The weighted average interest rate on our consolidated debt as of March 31, 2019 was approximately 5.1%.

As of March 31, 2019, we provided recourse guarantees totaling approximately $5.7 million in connection with certain of our loans. We are subject to certain restrictive covenants relating to the outstanding debt. As of March 31, 2019, we were in compliance with all such covenants.

On January 24, 2019, in conjunction with the SSGT Mergers, we, through certain wholly-owned special purpose entities, entered into various financings (“SSGT Merger Financings”), as follows:

Merger Financings	Principal Borrowing as of Merger Date
CMBS SASB Loan	$	235,000,000
CMBS Loan		104,000,000
Secured Loan		89,178,000
Senior Term Loan		72,000,000
Total	$	500,178,000

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

The proceeds from the SSGT Merger Financings were primarily used to facilitate the SSGT Mergers as previously described, including the payment of the SSGT merger consideration and the repayment, in full, of certain of our debt, as follows:

Merger Financings	Principal Repaid
Raleigh/Myrtle Beach promissory note	$	11,862,471
Amended KeyBank Credit Facility		98,782,500
Oakland and Concord loan		19,443,753
$11M KeyBank Subordinate Loan		11,000,000
Total	$	141,088,724

In conjunction with the SSGT Merger Financings, we recognized a loss on extinguishment of debt of approximately $1.5 million, primarily attributable to prepayment penalties related to the early payoff of the Raleigh/Myrtle Beach promissory note and the write-off of the unamortized loan premium and debt issuance costs on the repaid loans.

CMBS SASB Loan

This loan is a $235 million commercial mortgage-backed securities (“CMBS”), single-asset/single-borrower (“SASB”) financing (the “CMBS SASB Loan”) with KeyBank, National Association (“KeyBank”) and Citi Real Estate Funding Inc. or its affiliates (“Citibank”), as lender (together, the “CMBS SASB Lenders”), comprised of (A) a mortgage loan in the amount of $180 million (the “CMBS SASB Mortgage Loan”) and (B) a mezzanine loan in the amount of $55 million (the “CMBS SASB Mezzanine Loan”). The CMBS SASB Mortgage Loan is secured by a first mortgage or deed of trust on each of 29 wholly owned properties (the “CMBS SASB Properties”), and the CMBS SASB Mezzanine Loan is secured by a pledge of the equity interests in the 29 special purpose entities that own the CMBS SASB Properties. Each loan has a maturity date of February 9, 2022, which may, in certain circumstances, be extended at the option of the respective borrower for two consecutive terms of one year each, as set forth in the respective loan agreement (collectively, the “CMBS SASB Loan Agreements”). Monthly payments due under the CMBS SASB Loan Agreements are interest-only, with the full principal amount becoming due and payable on the respective maturity date.

The amounts outstanding under the CMBS SASB Loan Agreements bear interest at an annual rate equal to LIBOR plus 3%. In addition, pursuant to the requirements of the CMBS SASB Loan Agreements: (a) the borrower with respect to the CMBS SASB Mortgage Loan has purchased an interest rate cap with a notional amount of $180 million, with an effective date of January 24, 2019, whereby LIBOR is capped at 3% through February 15, 2022 and (b) the borrower with respect to the CMBS SASB Mezzanine Loan has purchased an interest rate cap with a notional amount of $55 million, with an effective date of January 24, 2019, whereby LIBOR is capped at 3% through February 15, 2022. None of the CMBS SASB Loan may be prepaid, in whole or in part, without satisfying certain conditions as set forth in the respective CMBS SASB Loan Agreements, such as the payment of a spread maintenance premium if the prepayment is made within the first two years. Thereafter the CMBS SASB Loan may be prepaid in whole or in part at par without penalty.

The loan documents for the CMBS SASB Loan contain: customary affirmative, negative and financial covenants; agreements; representations; warranties and borrowing conditions; reserve requirements and events of default all as set forth in such loan documents. In addition, and pursuant to the terms of the limited recourse guaranties, with respect to the CMBS SASB Mortgage Loan (the “CMBS SASB Mortgage Loan Guaranty”), and with respect to the CMBS SASB Mezzanine Loan (the “CMBS SASB Mezzanine Loan Guaranty” and collectively the “CMBS SASB Guarantees”), each dated January 24, 2019, in favor of the CMBS SASB Lenders, the Company serves as a non-recourse guarantor with respect to each of the CMBS SASB Mortgage Loan and the CMBS SASB Mezzanine Loan and is subject to certain net worth and liquidity requirements, each as described in the CMBS SASB Guarantees.

CMBS Loan

The CMBS loan is a $104 million CMBS financing with KeyBank as lender (the “CMBS Lender”) pursuant to a mortgage loan (the “CMBS Loan”), and is secured by a first mortgage or deed of trust on each of 10 wholly owned properties. The loan has a maturity date of February 1, 2029. Monthly payments due under the loan agreement (the “CMBS Loan Agreement”) are interest-only, with the full principal amount becoming due and payable on the maturity date.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

The amounts outstanding under the CMBS Loan bear interest at an annual fixed rate equal to 5%. Commencing two years after securitization, the CMBS Loan may be defeased in whole, but not in part, subject to certain conditions as set forth in the CMBS Loan Agreement.

The loan documents for the CMBS Loan contain: customary affirmative, negative and financial covenants; agreements; representations; warranties and borrowing conditions; reserve requirements and events of default all as set forth in such loan documents. In addition, and pursuant to the terms of the limited recourse guaranty dated January 24, 2019, in favor of the CMBS Lender, the Company serves as a non-recourse guarantor with respect to the CMBS Loan.

Secured Loan

This represents secured financing with KeyBank, Fifth Third Bank (“Fifth Third”), and SunTrust Bank (“SunTrust”) as equal co-lenders (the “Secured Lenders”) for an amount up to approximately $96.4 million pursuant to a mortgage loan (the “Secured Loan”). The Secured Loan is secured by a first mortgage or deed of trust on each of 16 wholly owned properties. An additional property will be mortgaged upon its anticipated acquisition later this year, subject to the terms of the loan agreement (the “Secured Loan Agreement”) and we will have the right to draw an additional approximately $5.7 million. The loan has a maturity date of January 24, 2022, which may, in certain circumstances, be extended at the option of the borrower for one additional term equal to one year, as set forth in the Secured Loan Agreement. Monthly payments due under the Secured Loan Agreement are interest-only, with the full principal amount becoming due and payable on the maturity date. On January 24, 2019, an initial borrowing of approximately $89.2 million was made under the Secured Loan.

The amounts outstanding under the Secured Loan Agreement bear interest at an annual rate equal to LIBOR plus 2.5%. On January 24, 2019, the borrowers entered into an interest rate swap arrangement with a notional amount of approximately $89.2 million, such that LIBOR is fixed at approximately 2.6% until August 1, 2020, resulting in an annual effective interest rate equal to approximately 5.1%. The Secured Loan may be prepaid at any time, subject to certain conditions as set forth in the Secured Loan Agreement.

The loan documents for the Secured Loan contain: customary affirmative, negative and financial covenants; agreements; representations; warranties and borrowing conditions; reserve requirements and events of default all as set forth in such loan documents. In particular, the Secured Loan Agreement imposes certain requirements on the Company such as a total leverage ratio, tangible net worth and liquidity requirements, fixed charge coverage ratios and limits on the amount of unhedged variable rate debt exposure. In addition, and pursuant to the terms of the full recourse guaranty (the “Secured Loan Guaranty”), dated January 24, 2019, in favor of the Secured Lenders, we, along with our Operating Partnership serve as full recourse guarantors with respect to the Secured Loan.

Senior Term Loan

We along with our Operating Partnership entered into a financing for an amount up to $87.7 million with KeyBank and SunTrust, as co-lenders (the “Senior Term Lenders”), pursuant to a senior term loan (the “Senior Term Loan”). The Senior Term Loan is secured by a pledge of 49% of the equity interests in our property-owning special purpose entities, other than those that own the CMBS SASB Properties. The net proceeds from certain capital events (after payment of transaction costs) must be applied to repayment of the Senior Term Loan, except in certain transactions whereby up to $50 million in equity issuances by us and our Operating Partnership may be excluded (the “Capital Event Net Proceeds”). In addition, the Senior Term Loan is secured by a pledge of the Capital Event Net Proceeds. The Senior Term Loan was made pursuant to a loan agreement with a maturity date of January 24, 2022 (the “Senior Term Loan Agreement”). Monthly payments due under the Senior Term Loan Agreement are interest-only, with the full principal amount becoming due and payable on the maturity date. On January 24, 2019, an initial borrowing of $72.0 million was made under the Senior Term Loan and we have the right to draw an additional $15.7 million as set forth in the Senior Term Loan Agreement.

The amounts outstanding under the Senior Term Loan Agreement bear interest at an annual rate equal to LIBOR plus 4.25%. On January 24, 2019, we entered into an interest rate swap arrangement with a notional amount of $72 million, such that LIBOR is fixed at approximately 2.6% until August 1, 2020, resulting in an annual effective interest rate equal to approximately 6.85%. The Senior Term Loan may be prepaid at any time, subject to certain conditions as set forth in the Senior Term Loan Agreement.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

The loan documents for the Senior Term Loan contain: customary affirmative, negative and financial covenants; agreements; representations; warranties and borrowing conditions; reserve requirements and events of default all as set forth in such loan documents. In particular, the Senior Loan Agreement imposes certain requirements such as a total leverage ratio, tangible net worth and liquidity requirements, fixed charge coverage ratios and limits on the amount of unhedged variable rate debt exposure. The Senior Term Loan is fully recourse to us and our Operating Partnership.

Canadian CitiBank Loan

On October 11, 2018, we, through 10 special purpose entities wholly owned by our Operating Partnership, entered into a loan agreement with CitiBank, N.A. (“CitiBank”), as lender. Under the terms of the loan agreement (the “CitiBank Loan Agreement”), we have a maximum borrowing capacity of $112 million CAD, of which we initially borrowed $99.3 million CAD (the “Initial Proceeds”). The Initial Proceeds were primarily used to pay off all of the existing loans encumbering 10 of our properties located in the greater Toronto area, Canada, all of which now serve as collateral under the CitiBank Loan Agreement. As of March 31, 2019, we had an outstanding balance of $100.3 million CAD, and have the right to receive future advances in the aggregate amount of up to $11.7 million CAD, subject to certain conditions as set forth in the CitiBank Loan Agreement.

The CitiBank Loan Agreement is a term loan that matures on October 9, 2020, which may, in certain circumstances, be extended at our option for three consecutive terms of one year each. Monthly payments due under the CitiBank Loan Agreement are interest-only, with the full principal amount becoming due and payable on the maturity date.

The amounts outstanding under the CitiBank Loan Agreement bear interest at a rate equal to the sum of the “CDOR” (as defined in the CitiBank Loan Agreement) and 2.25%. If we exercise our third extension option, the interest rate shall be increased by 0.25%. In addition, pursuant to the requirements of the CitiBank Loan Agreement, we have purchased interest rate caps with a combined notional amount of $100.3 million CAD, with an effective date of October 11, 2018, whereby the CDOR is capped at 3.00% through October 15, 2021.

Amended KeyBank Credit Facility

On December 22, 2015, we, through our Operating Partnership, and certain affiliated entities entered into an amended and restated revolving credit facility (the “Amended KeyBank Credit Facility”) with KeyBank National Association (“KeyBank”), as administrative agent and KeyBanc Capital Markets, LLC, as the sole book runner and sole lead arranger, and Texas Capital Bank, N.A., and Comerica Bank as co-lenders. The Amended KeyBank Credit Facility was a revolving loan with an initial term of three years, initially set to mature on December 22, 2018, with two one-year extension options subject to certain conditions outlined further in the credit agreement for the Amended KeyBank Credit Facility. On October 29, 2018, we amended our Amended KeyBank Credit Facility to extend the maturity date until February 20, 2019 and reduce the maximum borrowing capacity from $145 million to $110 million. As of December 31, 2018, we had approximately $98.8 million in borrowings outstanding under the Amended KeyBank Credit Facility. On January 24, 2019, we paid off and terminated the Amended KeyBank Credit Facility in conjunction with the SSGT Mergers.

The following table presents the future principal payment requirements on outstanding debt as of March 31, 2019:

2019	$	201,712
2020		75,742,081
2021		6,247,433
2022		399,004,091
2023		3,929,955
2024 and thereafter		290,093,211
Total payments		775,218,483
Premium on secured debt, net		691,648
Debt issuance costs, net		(11,688,484	)
Total	$	764,221,647

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

Note 5. Derivative Instruments

Interest Rate Derivatives

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we use interest rate swaps and caps as part of our interest rate risk management strategy. The effective portion of the change in the fair value of the derivative that qualifies as a cash flow hedge is recorded in accumulated other comprehensive income (“AOCI”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt.

We do not use derivatives for trading or speculative purposes. Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks but we have elected not to apply hedge accounting. Changes in the fair value of interest rate derivatives not designated in hedging relationships are recorded in other income (expense) as income within our consolidated statements of operations and were none and approximately $20,000 for the three months ended March 31, 2019 and 2018, respectively.

Foreign Currency Forward

Our objectives in using foreign currency derivatives are to add stability to potential fluctuations in exchange rates between foreign currencies and the U.S. dollar and to manage our exposure to exchange rate movements. To accomplish this objective, we use foreign currency forwards as part of our exchange rate risk management strategy. A foreign currency forward contract is a commitment to deliver a certain amount of currency at a certain price on a specific date in the future. By entering into the forward contract and holding it to maturity, we are locked into a future currency exchange rate in an amount equal to and for the term of the forward contract. For derivatives designated as net investment hedges, the changes in the fair value of the derivatives are reported in accumulated other comprehensive income. Amounts are reclassified out of accumulated other comprehensive income into earnings when the hedged net investment is either sold or substantially liquidated.

The following table summarizes the terms of our derivative financial instruments as of March 31, 2019:

	Notional Amount			Strike			Effective Date or Date Assumed	Maturity Date
Interest Rate Swaps:
LIBOR Swap	$	161,178,000			2.61	%	January 24, 2019	August 1, 2020
Interest Rate Cap:
CDOR Cap	$	99,300,000	⁽¹⁾		3.00	%	October 11, 2018	October 15, 2021
CDOR Cap		1,000,000	⁽¹⁾		3.00	%	March 28, 2019	October 15, 2021
LIBOR Caps		235,000,000			3.00	%	January 24, 2019	February 15, 2022
Foreign Currency Forward:
Denominated in CAD	$	95,000,000	⁽¹⁾		1.3173		January 25, 2019	December 20, 2019

⁽¹⁾	Notional amounts shown are denominated in CAD.

On March 28, 2018 we settled our existing $101 million CAD foreign currency forward contract, receiving a net settlement of approximately $2.2 million and simultaneously entered into a $90 million CAD foreign currency forward. We settled the $90 million CAD foreign currency forward on January 25, 2019, receiving a net settlement of approximately $2.1 million and simultaneously entered into a $95 million CAD foreign currency forward. A portion of our gain (loss) from our settled and unsettled foreign currency hedges is recorded net in foreign currency forward contract gain (loss) in our consolidated statements of comprehensive loss, and a loss of approximately $430,000 and gain of $65,000 related to the ineffective portion is recorded in other income (expense) within our consolidated statements of operations for the three months ended March 31, 2019 and 2018, respectively.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

The following table summarizes the terms of our derivative financial instruments as of December 31, 2018:

Notional

Amount

Strike

Effective Date or

Date Assumed

Maturity Date

Interest Rate Swaps:

Oakland and Concord loan

19,483,127

⁽²⁾

3.95

May 18, 2016

April 10, 2023

Interest Rate Cap:

CDOR Cap

99,300,000

⁽¹⁾

3.00

October 11, 2018

October 15, 2021

Foreign Currency Forward:

Denominated in CAD

90,000,000

⁽¹⁾

1.2846

March 28, 2018

January 28, 2019 (3)

(1)	Notional amount shown is denominated in CAD.

(2)	The Oakland and Concord loan interest rate swap was settled on January 24, 2019 in conjunction with the SSGT Mergers.

(3)	We settled this foreign currency forward on January 25, 2019 and received a settlement of approximately $2.1 million.

The following table presents a gross presentation of the fair value of our derivative financial instruments as well as their classification on our consolidated balance sheets as of March 31, 2019 and December 31, 2018

	Asset/Liability Derivatives
	Fair Value
Balance Sheet Location	March 31, 2019		December 31, 2018
Interest Rate Swaps
Other assets	$	—	$	361,802
Accounts payable and accrued liabilities		606,727	—
Interest Rate Cap
Other assets	$	261,575	$	87,808
Foreign Currency Forward
Other assets	$	600,073	$	4,016,806

Note 6. Related Party Transactions

Fees to Affiliates

Our Advisory Agreement with our Advisor, our dealer manager agreement, as amended ("Dealer Manager Agreement") with our Dealer Manager, our Property Management Agreements with our Property Managers and our Transfer Agent Agreement with our Transfer Agent entitle such affiliates to specified fees upon the provision of certain services with regard to the Offering and investment of funds in real estate properties, among other services, as well as certain reimbursements, as described below.

Advisory Agreement

We do not have any employees. Our Advisor is primarily responsible for managing our business affairs and carrying out the directives of our board of directors. Our Advisor receives various fees and expenses under the terms of our Advisory Agreement.

Our Advisory Agreement also required our Advisor to reimburse us to the extent that offering expenses, including sales commissions, dealer manager fees, stockholder servicing fees and organization and offering expenses, were in excess of 15% of gross proceeds from the Offering. However, subsequent to the termination of our Primary Offering on January 9, 2017, we determined offering expenses were not in excess of 15% of gross proceeds from the Offering, and thus there was no reimbursement.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

Our Advisor receives acquisition fees equal to 1.75% of the contract purchase price of each property we acquire plus reimbursement of any acquisition expenses incurred by our Advisor. Our Advisor also receives a monthly asset management fee equal to 0.05208%, which is one-twelfth of 0.625%, of our aggregate asset value, as defined in the Advisory Agreement.

Under our Advisory Agreement, our Advisor receives disposition fees in an amount equal to the lesser of (i) one-half of the competitive real estate commission or (ii) 1% of the contract sale price for each property we sell, as long as our Advisor provides substantial assistance in connection with the sale. The total real estate commissions paid (including the disposition fee paid to our Advisor) may not exceed the lesser of a competitive real estate commission or an amount equal to 6% of the contract sale price of the property.

Our Advisor is also entitled to various subordinated distributions pursuant to our Operating Partnership Agreement if we (1) list our shares of common stock on a national exchange, (2) terminate our Advisory Agreement (other than a voluntary termination), (3) liquidate our portfolio, or (4) enter into an Extraordinary Transaction, as defined in the Operating Partnership Agreement.

Our Advisory Agreement provides for reimbursement of our Advisor’s direct and indirect costs of providing administrative and management services to us. Pursuant to the Advisory Agreement, our Advisor is obligated to pay or reimburse us the amount by which our aggregate annual operating expenses, as defined, exceed the greater of 2% of our average invested assets or 25% of our net income, as defined, unless a majority of our independent directors determine that such excess expenses were justified based on unusual and non-recurring factors. For any fiscal quarter for which total operating expenses for the 12 months then ended exceed the limitation, we will disclose this fact in our next quarterly report or within 60 days of the end of that quarter and send a written disclosure of this fact to our stockholders. In each case the disclosure will include an explanation of the factors that the independent directors considered in arriving at the conclusion that the excess expenses were justified. For the three months ended March 31, 2019 and 2018, our aggregate annual operating expenses, as defined, did not exceed the thresholds described above.

Dealer Manager Agreement

In connection with our Primary Offering, our Dealer Manager received a sales commission of up to 7.0% of gross proceeds from sales of Class A Shares and up to 2.0% of gross proceeds from the sales of Class T Shares in the Primary Offering and a dealer manager fee up to 3.0% of gross proceeds from sales of both Class A Shares and Class T Shares in the Primary Offering under the terms of the Dealer Manager Agreement. In addition, our Dealer Manager receives an ongoing stockholder servicing fee that is payable monthly and accrues daily in an amount equal to 1/365th of 1% of the purchase price per share of the Class T Shares sold in the Primary Offering. We will cease paying the stockholder servicing fee with respect to the Class T Shares sold in the Primary Offering at the earlier of (i) the date we list our shares on a national securities exchange, merge or consolidate with or into another entity, or sell or dispose of all or substantially all of our assets, (ii) the date at which the aggregate underwriting compensation from all sources equals 10% of the gross proceeds from the sale of both Class A Shares and Class T Shares in our Primary Offering (i.e., excluding proceeds from sales pursuant to our distribution reinvestment plan), which calculation shall be made by us with the assistance of our Dealer Manager commencing after the termination of the Primary Offering; (iii) the fifth anniversary of the last day of the fiscal quarter in which our Primary Offering (i.e., excluding our distribution reinvestment plan offering) terminated; and (iv) the date that such Class T Share is redeemed or is no longer outstanding. Our Dealer Manager entered into participating dealer agreements with certain other broker-dealers which authorized them to sell our shares. Upon sale of our shares by such broker-dealers, our Dealer Manager re-allowed all of the sales commissions and, subject to certain limitations, the stockholder servicing fees paid in connection with sales made by these broker-dealers. Our Dealer Manager could also re-allow to these broker-dealers a portion of their dealer manager fee as marketing fees, reimbursement of certain costs and expenses of attending training and education meetings sponsored by our Dealer Manager, payment of attendance fees required for employees of our Dealer Manager or other affiliates to attend retail seminars and public seminars sponsored by these broker-dealers, or to defray other distribution-related expenses. Our Dealer Manager also received reimbursement of bona fide due diligence expenses; however, to the extent these due diligence expenses could not be justified, any excess over actual due diligence expenses would have been considered underwriting compensation subject to a 10% FINRA limitation and, when aggregated with all other non-accountable expenses in connection with our Offering, could not exceed 3% of gross offering proceeds from sales in the Offering.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

Affiliated Dealer Manager

Our Sponsor owns a 15% non-voting equity interest in our Dealer Manager. Affiliates of our Dealer Manager own a 2.5% non-voting membership interest in our Advisor.

Transfer Agent Agreement

Our Sponsor is the owner and manager of our Transfer Agent, which is a registered transfer agent with the SEC. Effective in June 2018, our Transfer Agent provides transfer agent and registrar services to our stockholders. These services include, among other things, processing payment of any sales commission and dealer manager fees associated with a particular purchase, as well as processing the distributions and any servicing fees with respect to our shares. Additionally, our Transfer Agent may retain and supervise third party vendors in its efforts to administer certain services. We believe that our Transfer Agent, through its knowledge and understanding of the direct participation program industry which includes non-traded REITs, is particularly suited to provide us with transfer agent and registrar services. Our Transfer Agent also conducts transfer agent and registrar services for other non-traded REITs sponsored by our Sponsor.

It is the duty of our board of directors to evaluate the performance of our Transfer Agent. In connection with the engagement of our Transfer Agent, we paid a one-time initial setup fee of $50,000. In addition, the other fees to be paid to our Transfer Agent are based on a fixed quarterly fee, one-time account setup fees and monthly open account fees. In addition, we will reimburse our Transfer Agent for all reasonable expenses or other changes incurred by it in connection with the provision of its services to us, and we will pay our Transfer Agent fees for any additional services we may request from time to time, in accordance with its rates then in effect. Upon the request of our Transfer Agent, we may also advance payment for substantial reasonable out-of-pocket expenditures to be incurred by it.

The initial term of the transfer agent agreement is three years, which term will be automatically renewed for one year successive terms, but either party may terminate the transfer agent agreement upon 90 days’ prior written notice. In the event that we terminate the transfer agent agreement, other than for cause, we will pay our transfer agent all amounts that would have otherwise accrued during the remaining term of the transfer agent agreement; provided, however, that when calculating the remaining months in the term for such purposes, such term is deemed to be a 12 month period starting from the date of the most recent annual anniversary date.

Property Management Agreements

Since inception, our T2 Property Manager has served as the property manager for each of our properties pursuant to separate property management agreements. In addition, the GT Property Manager will continue to manage the properties we acquired in the SSGT Mergers.

Pursuant to the amended property management agreements, our Property Manager receives: (i) a monthly management fee for each property equal to the greater of $3,000 or 6% of the gross revenues from the properties plus reimbursement of the Property Manager’s costs of managing the properties and (ii) a construction management fee equal to 5% of the cost of construction or capital improvement work in excess of $10,000. In addition, we have agreed with our Property Manager or an affiliate to share equally in the net revenue attributable to the sale of tenant insurance at our properties. The property management agreements have a three year term and automatically renew for successive three year periods thereafter, unless we or our Property Manager provide prior written notice at least 90 days prior to the expiration of the term. After the end of the initial three year term, either party may terminate a property management agreement generally upon 60 days prior written notice. With respect to each new property we acquire for which we enter into a property management agreement with our Property Manager we will also pay our Property Manager a one-time start-up fee in the amount of $3,750.

Our self storage properties located in Canada are subject to separate property management agreements with our Property Manager on terms substantially the same as the amended property management agreements described above.

All of our properties in the United States and Canada are operated under the “SmartStop® Self Storage” brand.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

Pursuant to the terms of the agreements described above, the following table summarizes related party costs incurred and paid by us for the year ended December 31, 2018 and the three months ended March 31, 2019, as well as any related amounts payable as of December 31, 2018 and March 31, 2019:

	Year Ended December 31, 2018						Three Months Ended March 31, 2019
	Incurred		Paid		Payable		Incurred		Paid		Payable
Expensed
Operating expenses (including organizational costs)	$	2,199,596	$	2,336,075	$	209,385	$	651,726	$	861,111	$	—
Transfer Agent fees		352,300		302,839		49,461		112,924		119,131		43,254
Asset management fees		5,445,528		5,445,528		—		1,763,871		1,650,875		112,996
Property management fees		4,809,106		4,809,106		—		1,460,845		1,456,870		3,975
Acquisition expenses		72,179		72,179		—		38,941		38,941		—
Capitalized
Acquisition costs		48,664		48,664		—		50,000		50,000		—
Additional Paid-in Capital
Stockholder servicing fee⁽¹⁾		—		675,049		1,944,991		—		167,413		1,777,578
Total	$	12,927,373	$	13,689,440	$	2,203,837	$	4,078,307	$	4,344,341	$	1,937,803

(1)	We pay our Dealer Manager an ongoing stockholder servicing fee that is payable monthly and accrues daily in an amount equal to 1/365^th of 1% of the purchase price per share of the Class T Shares sold in the Primary Offering.

Tenant Insurance

We offer a tenant insurance plan to customers at our properties. In connection with the property management agreement amendments effective as of October 1, 2017, we agreed with our Property Manager or an affiliate to share equally in the net revenue attributable to the sale of tenant insurance at our properties. To facilitate such revenue sharing, we and an affiliate of our Property Manager agreed to transfer our respective rights in such tenant insurance revenue to a newly created joint venture in March 2018, Strategic Storage TI Services II JV, LLC (the “TI Joint Venture”), a Delaware limited liability company owned 50% by our TRS subsidiary and 50% by our Property Manager’s affiliate SmartStop TI II, LLC (“SS TI II”). Under the terms of the TI Joint Venture agreement, the TRS receives 50% of the net economics generated from such tenant insurance and SS TI II receives the other 50% of such net economics. The TI Joint Venture further provides, among other things, that if a member or its affiliate terminates all or substantially all of the property management agreements or defaults in its material obligations under the agreement or undergoes a change of control, as defined, (the “Triggering Member”), the other member generally shall have the right (but not the obligation) to either (i) sell its 50% interest in the TI Joint Venture to the Triggering Member at fair market value (as agreed upon or as determined under an appraisal process) or (ii) purchase the Triggering Member’s 50% interest in the TI Joint Venture at 95% of fair market value. For the three months ended March 31, 2019 and 2018, we recorded net revenues of approximately $0.5 million and $0.3 million, respectively, related to tenant insurance which was included in ancillary operating revenue in the consolidated statements of operations. In addition, we share equally in the net revenue attributable to the sale of tenant insurance at the properties we acquired in the SSGT Mergers on substantially similar terms as set forth above.

Storage Auction Program

Our Sponsor owns a minority interest in a company that owns 50% of an online auction company (the “Auction Company”) that serves as a web portal for self storage companies to post their auctions for the contents of abandoned storage units online instead of using live auctions conducted at the self storage facilities. The Auction Company receives a service fee for such services. During the three months ended March 31, 2019 and 2018, we paid approximately $14,000 and $4,000, respectively, in fees to the Auction Company related to our properties. Our properties receive the proceeds from such online auctions.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

Note 7. Commitments and Contingencies

Distribution Reinvestment Plan

We have adopted an amended and restated distribution reinvestment plan that allows both our Class A and Class T stockholders to have distributions otherwise distributable to them invested in additional shares of our Class A and Class T Shares, respectively. The purchase price per share pursuant to our distribution reinvestment plan is equivalent to the estimated value per share approved by our board of directors and in effect on the date of purchase of shares under the plan. In conjunction with the board of directors’ declaration of a new estimated value per share of our common stock on April 19, 2018, beginning in May 2018, shares sold pursuant to our distribution reinvestment plan are sold at the new estimated value per share of $10.65 per Class A Share and Class T Share. On November 30, 2016, we filed with the SEC a Registration Statement on Form S-3, which registered up to an additional $100.9 million in shares under our distribution reinvestment plan (our “DRP Offering”). We may amend or terminate the amended and restated distribution reinvestment plan for any reason at any time upon 10 days’ prior written notice to stockholders. No sales commissions, dealer manager fee, or stockholder servicing fee will be paid on shares sold through the amended and restated distribution reinvestment plan. Through the termination of our Offering on January 9, 2017, we had sold approximately 1.1 million Class A shares and 0.1 million Class T Shares through our original distribution reinvestment plan. As of March 31, 2019, we had sold approximately 3.0 million Class A Shares and approximately 0.5 million Class T Shares through our DRP Offering.

Share Redemption Program

We adopted a share redemption program that enables stockholders to sell their shares to us in limited circumstances. As long as our common stock is not listed on a national securities exchange or over-the-counter market, our stockholders who have held their stock for at least one year may be able to have all or any portion of their shares of stock redeemed by us. We may redeem the shares of stock presented for redemption for cash to the extent that we have sufficient funds available to fund such redemption.

Our board of directors may amend, suspend or terminate the share redemption program with 30 days’ notice to our stockholders. We may provide this notice by including such information in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC, or by a separate mailing to our stockholders. The complete terms of our share redemption program are described in our prospectus.

The amount that we may pay to redeem stock for redemptions is the redemption price set forth in the following table which is based upon the number of years the stock is held:

Number Years Held		Redemption Price
Less than 1		No Redemption Allowed
1 or more but less than 3		90.0% of Redemption Amount
3 or more but less than 4		95.0% of Redemption Amount
4 or more		100.0% of Redemption Amount

At any time we are engaged in an offering of shares, the Redemption Amount for shares purchased under our share redemption program will always be equal to or lower than the applicable per share offering price. As long as we are engaged in an offering, the Redemption Amount shall be the lesser of the amount the stockholder paid for their shares or the price per share in the current offering. If we are no longer engaged in an offering, our board of directors will announce any redemption price adjustment and the time period of its effectiveness as a part of its regular communications with our stockholders. At any time the redemption price during an offering is determined by any method other than the offering price, if we have sold property and have made one or more special distributions to our stockholders of all or a portion of the net proceeds from such sales, the per share redemption price will be reduced by the net sale proceeds per share distributed to investors prior to the redemption date as a result of the sale of such property in the special distribution. Our board of directors will, in its sole discretion, determine which distributions, if any, constitute a special distribution. While our board of directors does not have specific criteria for determining a special distribution, we expect that a special distribution will only occur upon the sale of a property and the subsequent distribution of the net sale proceeds.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

There are several limitations on our ability to redeem shares under the share redemption program including, but not limited to:

•

Unless the shares are being redeemed in connection with a stockholder’s death, “qualifying disability” (as defined under the share redemption program) or bankruptcy, we may not redeem shares until the stockholder has held his or her shares for one year.

•

During any calendar year, we will not redeem in excess of 5% of the weighted-average number of shares outstanding during the prior calendar year.

•

The cash available for redemption is limited to the proceeds from the sale of shares pursuant to our distribution reinvestment plan, less any prior redemptions.

•

We have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.

For the year ended December 31, 2018, we received redemption requests totaling approximately $8.3 million (approximately 0.9 million shares), approximately $7.0 million of which were fulfilled during the year ended December 31, 2018, with the remaining approximately $1.3 million included in accounts payable and accrued liabilities as of December 31, 2018 and fulfilled in January 2019. For the three months ended March 31, 2019, we received redemption requests totaling approximately $2.0 million (approximately 200,000 shares), which were included in accounts payable and accrued liabilities as of March 31, 2019 and fulfilled in April 2019.

Operating Partnership Redemption Rights

The limited partners of our Operating Partnership have the right to cause our Operating Partnership to redeem their limited partnership units for cash equal to the value of an equivalent number of our shares, or, at our option, we may purchase their limited partnership units by issuing one share of our common stock for each limited partnership unit redeemed. These rights may not be exercised under certain circumstances that could cause us to lose our REIT election. Furthermore, limited partners may exercise their redemption rights only after their limited partnership units have been outstanding for one year. Our Advisor is prohibited from exchanging or otherwise transferring the limited partnership units it received in connection with its initial $200,000 investment so long as our Advisor is acting as our advisor pursuant to our Advisory Agreement.

Other Contingencies

From time to time, we are party to legal proceedings that arise in the ordinary course of our business. We are not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by governmental authorities.

Note 8. Declaration of Distributions

On March 18, 2019, our board of directors declared a distribution rate for the second quarter of 2019 of approximately $0.001644 per day per share on the outstanding shares of common stock payable to both Class A and Class T stockholders of record of such shares as shown on our books at the close of business on each day during the period, commencing on April 1, 2019 and continuing on each day thereafter through and including June 30, 2019. In connection with this distribution, after the stockholder servicing fee is paid, approximately $0.0014 per day will be paid per Class T share. Such distributions payable to each stockholder of record during a month will be paid the following month.

Note 9. Potential Acquisitions

Gilbert, Arizona

On January 24, 2019, we, by way of the SSGT Mergers, obtained the rights to acquire a property that is being developed into a self storage facility located in Gilbert, Arizona (the “Riggs Road Property”). The purchase price for the Riggs Road Property is $10 million, plus closing costs and acquisition fees. We expect the acquisition of the Riggs Road Property to close in the second quarter of 2019 after construction is complete on the self storage facility and a certificate of occupancy has been issued. We expect to fund such acquisition through draws on the Senior Term Loan and the Secured Loan. If we fail to acquire the Riggs Road Property, we may forfeit earnest money of $1.0 million.

STRATEGIC STORAGE TRUST II, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

Note 10. Selected Quarterly Data

The following is a summary of quarterly financial information for the periods shown below:

	Three months ended
	March 31, 2018			June 30, 2018			September 30, 2018			December 31, 2018			March 31, 2019
Total revenues	$	19,866,457		$	20,045,516		$	20,313,069		$	20,187,215		$	23,883,325
Total operating expenses	$	16,010,116		$	16,605,713		$	15,836,436		$	15,808,549		$	21,934,203
Operating income	$	3,856,341		$	3,439,803		$	4,476,633		$	4,378,666		$	1,949,122
Net loss	$	(667,047	)	$	(1,437,330	)	$	(457,278	)	$	(1,159,075	)	$	(8,948,317	)
Net loss attributable to common stockholders	$	(661,203	)	$	(1,427,056	)	$	(451,424	)	$	(1,158,694	)	$	(8,891,558	)
Net loss per Class A Share-basic and diluted	$	(0.01	)	$	(0.02	)	$	(0.01	)	$	(0.02	)	$	(0.15	)
Net loss per Class T Share-basic and diluted	$	(0.01	)	$	(0.02	)	$	(0.01	)	$	(0.02	)	$	(0.15	)

Note 11. Subsequent Events

Distribution Reinvestment Plan Offering

As of May 13, 2019, we have issued approximately 3.1 million Class A shares of our common stock and approximately 0.5 million Class T Shares of our common stock for gross proceeds of approximately $32.4 million and approximately $4.9 million, pursuant to our DRP Offering.

Draw on Senior Term Loan

On April 25, 2019, we made a draw of $3 million on our Senior Term Loan, which increased the outstanding balance to $75 million.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our financial statements and notes thereto contained elsewhere in this report. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should also be read in conjunction with our financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2018. See also “Cautionary Note Regarding Forward-Looking Statements” preceding Part I.

Overview

Strategic Storage Trust II, Inc., a Maryland corporation (the “Company”), was formed on January 8, 2013 under the Maryland General Corporation Law for the purpose of engaging in the business of investing in self storage facilities and related self storage real estate investments. Our year-end is December 31. As used in this report, “we,” “us,” “our,” and “Company” refer to Strategic Storage Trust II, Inc. and each of our subsidiaries.

On January 10, 2014, we commenced a public offering of a maximum of $1.0 billion in common shares for sale to the public (the “Primary Offering”) and $95.0 million in common shares for sale pursuant to our distribution reinvestment plan (collectively, the “Offering”). On May 23, 2014, we satisfied the $1.5 million minimum offering requirements of our Offering and commenced formal operations. On September 28, 2015, we revised our Primary Offering and offered two classes of shares of common stock: Class A common stock, $0.001 par value per share (the “Class A Shares”) and Class T common stock, $0.001 par value per share (the “Class T Shares”). Our Primary Offering terminated on January 9, 2017. We sold approximately 48 million Class A Shares and approximately 7 million Class T Shares in our Offering for gross proceeds of approximately $493 million and approximately $73 million, respectively. On November 30, 2016, prior to the termination of our Offering, we filed with the SEC a Registration Statement on Form S-3, which registered up to an additional $100.9 million in shares under our distribution reinvestment plan (our “DRP Offering”). The DRP Offering may be terminated at any time upon 10 days’ prior written notice to stockholders. As of March 31, 2019, we had sold approximately 3.0 million Class A Shares and approximately 0.5 million Class T Shares for approximately $31.3 million and $4.8 million, respectively, in our DRP Offering.

On October 1, 2018, we, our Operating Partnership, and SST II Growth Acquisition, LLC, our wholly-owned subsidiary (“Merger Sub”), entered into an Agreement and Plan of Merger (the “SSGT Merger Agreement”) with Strategic Storage Growth Trust, Inc. (“SSGT”), a non-traded REIT sponsored by our Sponsor, and SS Growth Operating Partnership, L.P. (“SSGT OP”). Pursuant to the terms and conditions set forth in the Merger Agreement, on January 24, 2019: (i) we acquired SSGT by way of a merger of SSGT with and into Merger Sub, with Merger Sub being the surviving entity (the “SSGT REIT Merger”); and (ii) immediately after the SSGT REIT Merger, SSGT OP merged with and into our Operating Partnership, with the Operating Partnership continuing as the surviving entity and remaining a subsidiary of the Company (the “SSGT Partnership Merger” and, together with the SSGT REIT Merger, the “SSGT Mergers”). SSGT was focused on opportunistic self storage properties, including development, and lease-up properties. See Note 3, Real Estate Facilities—Merger with Strategic Storage Growth Trust, Inc., for additional information related to the SSGT Mergers.

As of March 31, 2019, we owned 111 operating self storage facilities and one facility under development located in 17 states (Alabama, Arizona, California, Colorado, Florida, Illinois, Indiana, Maryland, Massachusetts, Michigan, New Jersey, Nevada, North Carolina, Ohio, South Carolina, Texas and Washington) and Ontario, Canada (the Greater Toronto Area).

As of March 31, 2019, our self storage portfolio was comprised as follows:

State	No. of Properties		Units⁽¹⁾		Sq. Ft. (net)⁽²⁾		% of Total Rentable Sq. Ft.			Physical Occupancy %⁽³⁾			Rental Income %⁽⁴⁾
Alabama		1		1,080		159,000		1.9	%		86	%		1.1	%
Arizona		1		840		94,000		1.1	%		94	%		1.1	%
California		24		15,230		1,588,000		19.3	%		87	%		23.9	%
Colorado		6		3,190		348,500		4.2	%		84	%		3.7	%
Florida		17		13,260		1,512,300		18.4	%		85	%		21.1	%
Illinois		5		2,920		305,800		3.7	%		86	%		2.8	%
Indiana		2		1,000		112,100		1.4	%		89	%		0.9	%
Massachusetts		1		840		93,000		1.1	%		85	%		2.8	%
Maryland		2		1,610		172,900		2.1	%		82	%		2.3	%
Michigan		4		2,180		261,000		3.2	%		89	%		2.9	%
New Jersey		1		460		51,000		0.6	%		90	%		0.6	%
Nevada		6		5,040		623,500		7.6	%		85	%		6.2	%
North Carolina		17		7,230		1,019,300		12.4	%		86	%		9.3	%
Ohio		5		2,210		272,300		3.3	%		92	%		2.1	%
South Carolina		3		1,920		242,600		3.0	%		83	%		2.4	%
Texas		4		2,130		314,200		3.8	%		86	%		3.7	%
Washington		1		490		48,100		0.6	%		93	%		0.7	%
Ontario, Canada		12		9,540		1,006,700		12.3	%		86	%		12.4	%
Total		112		71,170		8,224,300		100	%		86	%		100	%

⁽¹⁾	Includes all rentable units, consisting of storage units and parking (approximately 2,400 units).

⁽²⁾	Includes all rentable square feet, consisting of storage units and parking (approximately 695,000 square feet).

⁽³⁾

Represents the occupied square feet of all facilities we owned in a state or province divided by total rentable square feet of all the facilities we owned in such state or area as of March 31, 2019. As of March 31, 2019, the following properties were not physically and/or economically stabilized: Elk Grove, Garden Grove, Sarasota, Mount Pleasant, Pembroke Pines, Riverview, Eastlake, 3173 Sweeten Creek Rd—Asheville, Stoney Creek, and the Hualapai Way—Las Vegas properties. Excluding these properties, our physical occupancy as of March 31, 2019 was approximately 88%.

⁽⁴⁾	Represents rental income (excludes administrative fees, late fees, and other ancillary income) for all facilities we owned in a state or province divided by our total rental income for the month ended March 31, 2019.

Critical Accounting Policies

We have established accounting policies which conform to generally accepted accounting principles (“GAAP”). Preparing financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. Following is a discussion of the estimates and assumptions used in setting accounting policies that we consider critical in the presentation of our financial statements. Many estimates and assumptions involved in the application of GAAP may have a material impact on our financial condition or operating performance, or on the comparability of such information to amounts reported for other periods, because of the subjectivity and judgment required to account for highly uncertain items or the susceptibility of such items to change. These estimates and assumptions affect our reported amounts of assets and liabilities, our disclosure of contingent assets and liabilities at the dates of the financial statements and our reported amounts of revenue and expenses during the period covered by this report. If management’s judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied or different amounts of assets, liabilities, revenues and expenses would have been recorded, thus resulting in a materially different presentation of the financial statements or materially different amounts being reported in the financial statements. Additionally, other companies may use different estimates and assumptions that may impact the comparability of our financial condition and results of operations to
those companies.

We believe that our critical accounting policies include the following: real estate purchase price allocations; the evaluation of whether any of our long-lived assets have been impaired; the determination of the useful lives of our long-lived assets; and the evaluation of the consolidation of our interests in joint ventures. The following discussion of these policies supplements, but does not supplant the description of our significant accounting policies, as contained in Note 2 of the Notes to the Consolidated Financial Statements contained in this report, and is intended to present our analysis of the uncertainties involved in arriving upon and applying each policy.

Real Estate Purchase Price Allocation

The value of the tangible assets, consisting of land and buildings is determined as if vacant. Because we believe that substantially all of the leases in place at properties we will acquire will be at market rates, as the majority of the leases are month-to-month contracts, we do not expect to allocate any portion of the purchase prices to above or below market leases. We also consider whether in-place, market leases represent an intangible asset. Acquisitions of portfolios of facilities are allocated to the individual facilities based upon an income approach or a cash flow analysis using appropriate risk adjusted capitalization rates which take into account the relative size, age, and location of the individual facility along with current and projected occupancy and rental rate levels or appraised values, if available.

Our allocations of purchase prices are based on certain significant estimates and assumptions, variations in such estimates and assumptions could result in a materially different presentation of the consolidated financial statements or materially different amounts being reported in the consolidated financial statements.

Impairment of Long-Lived Assets

The majority of our assets consist of long-lived real estate assets as well as intangible assets related to our acquisitions. We evaluate such assets for impairment based on events and changes in circumstances that may arise in the future and that may impact the carrying amounts of our long-lived assets. When indicators of potential impairment are present, we will assess the recoverability of the particular asset by determining whether the carrying value of the asset will be recovered, through an evaluation of the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. This evaluation is based on a number of estimates and assumptions. Based on this evaluation, if the expected undiscounted future cash flows do not exceed the carrying value, we will adjust the value of the long-lived asset and recognize an impairment loss. Our evaluation of the impairment of long-lived assets could result in a materially different presentation of the financial statements or materially different amounts being reported in the financial statements, as the amount of impairment loss, if any, recognized may vary based on the estimates and assumptions we use.

Estimated Useful Lives of Long-Lived Assets

We assess the useful lives of the assets underlying our properties based upon a subjective determination of the period of future benefit for each asset. We record depreciation expense with respect to these assets based upon the estimated useful lives we determine. Our determinations of the useful lives of the assets could result in a materially different presentation of the financial statements or materially different amounts being reported in the financial statements, as such determinations, and the corresponding amount of depreciation expense, may vary dramatically based on the estimates and assumptions we use.

Consolidation of Investments in Joint Ventures

We evaluate the consolidation of our investments in joint ventures in accordance with relevant accounting guidance. This evaluation requires us to determine whether we have a controlling interest in a joint venture through a means other than voting rights, and, if so, such joint venture may be required to be consolidated in our financial statements. Our evaluation of our joint ventures under such accounting guidance could result in a materially different presentation of the financial statements or materially different amounts being reported in the financial statements, as the joint venture entities included in our financial statements may vary based on the estimates and assumptions we use.

REIT Qualification

We made an election under Section 856(c) of the Internal Revenue Code of 1986 (the Code) to be taxed as a REIT under the Code, commencing with the taxable year ended December 31, 2014. By qualifying as a REIT for federal income tax purposes, we generally will not be subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which our qualification is denied. Such an event could materially and adversely affect our net income and could have a material adverse impact on our financial condition and results of operations. However, we believe that we are organized and operate in a manner that will enable us to continue to qualify for treatment as a REIT for federal income tax purposes, and we intend to continue to operate as to remain qualified as a REIT for federal income tax purposes.

Results of Operations

Overview

We derive revenues principally from: (i) rents received from tenants who rent storage units under month-to-month leases at each of our self storage facilities; and (ii) sales of packing- and storage-related supplies at our storage facilities; and (iii) our tenant insurance program. Therefore, our operating results depend significantly on our ability to retain our existing tenants and lease our available self storage units to new tenants, while maintaining and, where possible, increasing the prices for our self storage units. Additionally, our operating results depend on our tenants making their required rental payments to us, and, to a lesser degree, the success of our tenant insurance program.

Competition in the market areas in which we operate is significant and affects the occupancy levels, rental rates, rental revenues and operating expenses of our facilities. Development of any new self storage facilities would intensify competition of self storage operators in markets in which we operate.

As of March 31, 2019 and 2018, we owned 111 and 83 operating self storage facilities, respectively. Our operating results for the three months ended March 31, 2018 include full quarter results for 83 self storage facilities. Our operating results for the three months ended March 31, 2019 include full quarter results for 83 self storage facilities and partial quarter results for 28 operating self storage facilities acquired during the quarter ended March 31, 2019. Operating results in future periods will depend on the results of operations of these properties and of the real estate properties that we acquire in the future.

SSGT Mergers

On January 24, 2019, we merged with SSGT, a REIT focused on opportunistic self storage properties, including development, and lease-up properties. Through the SSGT Mergers, we acquired 28 operating self storage facilities which had a physical occupancy of approximately 78% at acquisition (80% as of March 31, 2019), along with one development property in the Greater Toronto, Canada area and the rights to acquire another property under development in Gilbert, Arizona. While the SSGT portfolio generated positive operating income in the first quarter of 2019, the properties are not yet physically and/or economically stabilized. Furthermore, the Toronto and Gilbert developments will begin at 0% physical occupancy once each property opens, and the operating income from those properties will increase as each location leases up. Over the next 24 to 36 months, we believe the SSGT properties will provide accretive operating income and cash flows as occupancy grows and the properties approach economic stabilization. While the results of the SSGT Mergers and the associated increase in debt negatively impacted our results of operations in the current quarter, we anticipate improving results of operations in future quarters as the SSGT properties approach physical and/or economic stability.

Comparison of Operating Results for the Three Months Ended March 31, 2019 and 2018

Total Revenues

Total revenues for the three months ended March 31, 2019 and 2018 were approximately $23.9 million and $19.9 million, respectively. The increase in total revenues of approximately $4.0 million or 20%, is primarily attributable to the 28 operating self storage facilities acquired in January 2019 in connection with the SSGT Mergers (approximately $4.1 million), offset by the impact of adopting ASU 2016-02, which reduced total revenues by approximately $360,000 as amounts previously recorded to bad debt expense within property operating expenses are now presented as a reduction to self storage rental revenue.

Property Operating Expenses

Property operating expenses for the three months ended March 31, 2019 and 2018 were approximately $8.2 million and $5.9 million, respectively. Property operating expenses includes the cost to operate our facilities including payroll, utilities, insurance, real estate taxes, and marketing. The increase in property operating expenses of approximately $2.3 million, is primarily attributable to the 28 operating self storage facilities acquired in January 2019 in connection with the SSGT Mergers (approximately $2.1 million) and an increase in same-store operating expenses of approximately $0.4 million, primarily attributable to increases in repairs and maintenance, payroll and property taxes, offset by the impact of adopting ASU 2016-02, which reduced property operating expenses by approximately $360,000 as amounts previously recorded to bad debt expense within property operating expenses are now presented as a reduction to self storage rental revenue.

Property Operating Expenses – Affiliates

Property operating expenses – affiliates for the three months ended March 31, 2019 and 2018 were approximately $3.2 million and $2.6 million, respectively. Property operating expenses – affiliates includes property management fees and asset management fees. The increase in property operating expenses – affiliates of approximately $0.6 million is primarily attributable to the 28 operating self storage facilities acquired in January 2019 in connection with the SSGT Mergers.

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2019 and 2018 were approximately $1.7 million and $1.2 million, respectively. General and administrative expenses consist primarily of legal expenses, transfer agent fees, directors’ and officers’ insurance expense, an allocation of a portion of our Advisor’s payroll related costs, accounting expenses and board of directors related costs. The increase in general and administrative expenses of approximately $0.5 million is primarily attributable to increases in accounting expenses related to the SSGT Mergers and payroll related costs.

Depreciation and Amortization Expenses

Depreciation and amortization expenses for the three months ended March 31, 2019 and 2018 were approximately $8.6 million and $6.2 million, respectively. Depreciation expense consists primarily of depreciation on the buildings and site improvements at our properties. Amortization expense consists of the amortization of intangible assets resulting from our acquisitions. The increase in depreciation and amortization expense is primarily attributable to the 28 operating self storage facilities acquired in January 2019 in connection with the SSGT Mergers.

Acquisition Expenses – Affiliates

Acquisition expenses – affiliates for the three months ended March 31, 2019 and 2018 were approximately $39,000 and $8,000, respectively. The acquisition expenses during 2019 primarily relate to the costs associated with the SSGT Mergers prior to such merger becoming probable in accordance with our capitalization policy.

Other Property Acquisition Expenses

Other property acquisition expenses for the three months ended March 31, 2019 and 2018 were approximately $0.2 million and $50,000, respectively. These acquisition expenses include property acquisition expenses incurred by third parties. The increase in other property acquisition expenses is primarily related to costs for the SSGT Mergers and other potential acquisitions prior to them becoming probable in accordance with our capitalization policy.

Interest Expense and Accretion of Fair Market Value of Secured Debt

Interest expense and the accretion of fair market value of secured debt for the three months ended March 31, 2019 and 2018 were approximately $8.5 million and $4.2 million, respectively. The increase of approximately $4.3 million is primarily attributable to the additional debt obtained in connection with the SSGT Mergers during the first quarter of 2019. We expect interest expense to fluctuate in future periods commensurate with our future debt level and interest rates.

Interest Expense – Debt Issuance Costs

Interest expense – debt issuance costs for the three months ended March 31, 2019 and 2018 were approximately $0.8 million and $0.3 million, respectively. The increase in interest expense – debt issuance costs of $0.5 million is primarily attributable to loan fees related to the new debt obtained in connection with the SSGT Mergers. We expect debt issuance costs to fluctuate commensurate with our future financing activity.

Net Loss on Extinguishment of Debt

Net loss on extinguishment of debt for the three months ended March 31, 2019 and 2018 was approximately $1.5 million and none, respectively. The increase in net loss on debt extinguishment is primarily attributable to prepayment penalties related to the early payoff of the Raleigh/Myrtle Beach promissory note, and the write-off of unamortized debt issuance costs on loans that were paid off in connection with the SSGT Mergers.

Same-Store Facility Results - Three Months Ended March 31, 2019 and 2018

The following table sets forth operating data for our same-store facilities (those properties included in the consolidated results of operations since January 1, 2018 excluding Centennial (which was a lease up facility during 2018), for the three months ended March 31, 2019 and 2018. We consider the following data to be meaningful as this allows for the comparison of results without the effects of acquisition or development activity.

	Same-Store Facilities											Non Same-Store Facilities					Total
	2019			2018				% Change				2019		2018		% Change	2019			2018			% Change
Revenue ⁽²⁾	$	19,569,900		$	19,720,267				(0.8	)%	⁽¹⁾	$	4,313,425	$	146,190	N/M	$	23,883,325		$	19,866,457			20.2	%
Property operating expenses ⁽³⁾		7,456,540			7,012,549				6.3	%	⁽¹⁾		2,203,351		122,800	N/M		9,659,891			7,135,349			35.4	%
Property operating income	$	12,113,360		$	12,707,718				(4.7	)%		$	2,110,074	$	23,390	N/M	$	14,223,434		$	12,731,108			11.7	%
Number of facilities		82			82								30		1			112			83
Rentable square feet ⁽⁴⁾		5,963,100			5,963,100								2,261,200		66,500			8,224,300			6,029,600
Average physical occupancy ⁽⁵⁾		87.9	%		88.7	%						N/M		N/M				84.6	%		88.5	%
Annualized rent per occupied square foot ⁽⁶⁾	$	15.73		$	15.73		⁽¹⁾					N/M		N/M			$	15.32		$	15.70

N/M Not meaningful

⁽¹⁾

The adoption of ASU 2016-02 Leases (Topic 842) on January 1, 2019, requires our expected loss related to collectability of rental payments, previously reflected in property operating expenses as bad debt expense, to be reflected as a reduction to self storage rental revenue. If we had applied this ASU to our 2018 results, same-store revenue and property operating expenses for the three months ended March 31, 2018 would have been approximately $19.5 million and $6.8 million, respectively. This would have resulted in an increase in same-store revenue for the three months ended March 31, 2019 of approximately $0.1 million, or 0.6%, and an increase in same-store property operating expenses for the same period of approximately $0.7 million, or 10.4%. In addition, annualized rent per occupied square foot would have been $15.51, resulting in an annual increase of approximately 1.4% for the three months ended March 31, 2019.

⁽²⁾	Revenue includes rental revenue, ancillary revenue, and administrative and late fees.

⁽³⁾	Property operating expenses excludes corporate general and administrative expenses, asset management fees, interest expense, depreciation, amortization expense, and acquisition expenses, but includes property management fees.

⁽⁴⁾	Of the total rentable square feet, parking represented approximately 695,000 square feet and 540,000 square feet as of March 31, 2019 and 2018, respectively. On a same-store basis, for the same periods, parking represented approximately 540,000 square feet.

⁽⁵⁾	Determined by dividing the sum of the month-end occupied square feet for the applicable group of facilities for each applicable period by the sum of their month-end rentable square feet for the period.

⁽⁶⁾

Determined by dividing the aggregate realized rental revenue for each applicable period by the aggregate of the month-end occupied square feet for the period. Properties are included in the respective calculations in their first full month of operations, as appropriate. We have excluded the realized rental revenue and occupied square feet related to parking herein for the purpose of calculating annualized rent per occupied square foot.

Our same-store property operating expenses increased by approximately $0.4 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to an increase in repairs and maintenance, payroll and property taxes, offset by approximately $0.3 million of bad debt expense recorded in property operating expenses for the three months ended March 31, 2018, prior to the adoption of ASU 2016-02.

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

	For the Three Months Ended March 31,
	2019			2018
Net loss	$	(8,948,317	)	$	(667,047	)
Adjusted to exclude:
Asset management fees ⁽¹⁾		1,763,871			1,367,131
General and administrative		1,654,184			1,202,934
Depreciation		6,868,408			5,066,544
Intangible amortization expense		1,726,976			1,180,502
Acquisition expenses—affiliates		38,941			8,305
Other property acquisition expenses		221,932			49,351
Interest expense		8,561,502			4,362,065
Interest expense—accretion of fair market value of secured debt		(32,468	)		(114,360	)
Interest expense—debt issuance costs		841,533			319,383
Net loss on extinguishment of debt		1,487,867			—
Other		39,005			(43,700	)
Total property operating income	$	14,223,434		$	12,731,108

⁽¹⁾	Asset management fees are included in Property operating expenses – affiliates in the consolidated statements of operations.

Non-GAAP Financial Measures

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a measure known as funds from operations, or FFO, which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income (loss) as determined under GAAP.

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, or the White Paper. The White Paper defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property and asset impairment write downs, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Diminution in value may occur if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances or other measures necessary to maintain the assets are not undertaken. However, we believe that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. In addition, in the determination of FFO, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying value, or book value, exceeds the total estimated undiscounted future cash flows (including net rental revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset.

Testing for impairment is a continuous process and is analyzed on a quarterly basis. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and that we intend to have a relatively limited term of our operations; it could be difficult to recover any impairment charges through the eventual sale of the property. To date, we have not recognized any impairments.

Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization and impairments, assists in providing a more complete understanding of our performance to investors and to our management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income (loss).

However, FFO or modified funds from operations (“MFFO”), discussed below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss) or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be considered a more relevant measure of operational performance and is, therefore, given more prominence than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

Changes in the accounting and reporting rules under GAAP that were put into effect and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses. Prior to January 1, 2018, when we adopted new accounting guidance, such costs were entirely expensed as operating expenses under GAAP. Subsequent to January 1, 2018, certain of such costs continue to be expensed. We believe these fees and expenses do not affect our overall long-term operating performance. Publicly registered, non-traded REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. The purchase of properties, and the corresponding expenditures associated with that process, is a key feature of our business plan in order to generate operational income and cash flow in order to make distributions to investors. While other start-up entities may also experience significant acquisition activity during their initial years, we believe that publicly registered, non-traded REITs are unique in that they typically have a limited life with targeted exit strategies within a relatively limited time frame after the acquisition activity ceases. We have used the proceeds raised in our Offering, including our DRP Offering, to acquire properties, and we expect to begin the process of achieving a liquidity event (i.e., listing of our shares of common stock on a national securities exchange, a merger or sale, the sale of all or substantially all of our assets, or another similar transaction) within three to five years after the completion of our Primary Offering, which is generally comparable to other publicly registered, non-traded REITs. Thus, we do not intend to continuously purchase assets and intend to have a limited life. The decision whether to engage in any liquidity event is in the sole discretion of our board of directors. Due to the above factors and other unique features of publicly registered, non-traded REITs, the Investment Program Association, or the IPA, an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registered, non-traded REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a publicly registered, non-traded REIT having the characteristics described above. MFFO is not equivalent to our net income (loss) as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not ultimately engage in a liquidity event. We believe that, because MFFO excludes any acquisition fees and expenses that affect our operations only in periods in which properties are acquired and that we consider more reflective of investing activities, as well as other non-operating items included in FFO, MFFO can provide, on a going-forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is in place. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our Primary Offering has been completed and our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by the publicly registered, non-traded REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our Primary Offering and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our Primary Offering has been completed and properties have been acquired, as it excludes any acquisition fees and expenses that have a negative effect on our operating performance during the periods in which properties are acquired.

We define MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds From Operations (the “Practice Guideline”) issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items included in the determination of GAAP net income (loss): acquisition fees and expenses; amounts relating to straight line rents and amortization of above or below intangible lease assets and liabilities; accretion of discounts and amortization of premiums on debt investments; non-recurring impairments of real estate related investments; mark-to-market adjustments included in net income; non-recurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, adjustments relating to contingent purchase price obligations included in net income, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income (loss) in calculating cash flows from operations and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized.

Our MFFO calculation complies with the IPA’s Practice Guideline described above. In calculating MFFO, we exclude acquisition related expenses, the amortization of fair value adjustments related to debt, non-recurring gains or losses included in net income from the extinguishment or sale of debt, mark to market adjustments recorded in net income related to our derivatives, adjustments from changes in foreign currency rates, and the adjustments of such items related to noncontrolling interests. The other adjustments included in the IPA’s Practice Guideline are not applicable to us for the periods presented. Acquisition fees and expenses are paid in cash by us, and we have not set aside or put into escrow any specific amount of proceeds from our Offering to be used to fund acquisition fees and expenses. We do not intend to fund acquisition fees and expenses in the future from operating revenues and cash flows, nor from the sale of properties and subsequent re-deployment of capital and concurrent incurrence of acquisition fees and expenses. Acquisition fees and expenses include payments to our Advisor and third parties. Certain acquisition related expenses under GAAP are considered operating expenses and as expenses included in the determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under GAAP. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. In the future, if we are not able to raise additional proceeds from our DRP Offering or other offerings, this could result in us paying acquisition fees or reimbursing acquisition expenses due to our Advisor, or a portion thereof, with net proceeds from borrowed funds, operational earnings or cash flows, net proceeds from the sale of properties, or ancillary cash flows. As a result, the amount of proceeds available for investment and operations would be reduced, or we may incur additional interest expense as a result of borrowed funds.

Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income (loss) in determining cash flows from operations. In addition, we view fair value adjustments of derivatives and the amortization of fair value adjustments related to debt as items which are unrealized and may not ultimately be realized or as items which are not reflective of on-going operations and are therefore typically adjusted for when assessing operating performance.

We use MFFO and the adjustments used to calculate it in order to evaluate our performance against other publicly registered, non-traded REITs which intend to have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate it allow us to present our performance in a manner that reflects certain characteristics that are unique to publicly registered, non-traded REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures may be useful to investors. For example, acquisition fees and expenses are intended to be funded from the proceeds of our Offering and other financing sources and not from operations. By excluding any expensed acquisition fees and expenses, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such charges that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and MFFO the same way, so comparisons with other REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations, which is an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with other measurements as an indication of our performance. MFFO may be useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete.

Neither the SEC, NAREIT, nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the publicly registered, non-traded REIT industry and we would have to adjust our calculation and characterization of FFO or MFFO. The following is a reconciliation of net income (loss), which is the most directly comparable GAAP financial measure, to FFO and MFFO for each of the periods presented below:

	Three Months Ended March 31, 2019			Three Months Ended March 31, 2018
Net loss (attributable to common stockholders)	$	(8,891,558	)	$	(661,203	)
Add:
Depreciation of real estate		6,799,061			5,003,587
Amortization of intangible assets		1,726,976			1,180,502
Deduct:
Adjustment for noncontrolling interests		(52,057	)		(54,240	)
FFO (attributable to common stockholders)		(417,578	)		5,468,646
Other Adjustments:
Acquisition expenses⁽¹⁾		260,873			57,656
Accretion of fair market value of secured debt⁽²⁾		(32,468	)		(114,360	)
Net loss on extinguishment of debt⁽³⁾		1,487,867		—
Foreign currency and interest rate derivative (gains) losses, net⁽⁴⁾		90,883			(91,055	)
Adjustment for noncontrolling interests		(12,123	)		1,508
MFFO (attributable to common stockholders)	$	1,377,454		$	5,322,395

As discussed in the Results of Operations, our 2019 results have been significantly impacted by the SSGT Mergers and additional debt incurred to finance such acquisition. The information below should be read in conjunction with the discussion regarding the SSGT Mergers.

⁽¹⁾

In evaluating investments in real estate, we differentiate the costs to acquire the investment from the operations derived from the investment. Such information would be comparable only for publicly registered, non-traded REITs that have generally completed their acquisition activity and have other similar operating characteristics. By excluding expensed acquisition related expenses, we believe MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our Advisor and third parties. Acquisition related expenses under GAAP are considered operating expenses and as expenses included in the determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under GAAP. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property.

⁽²⁾

This represents the difference between the stated interest rate and the estimated market interest rate on assumed notes as of the date of acquisition. Such amounts have been excluded from MFFO because we believe MFFO provides useful supplementary information by focusing on operating fundamentals, rather than events not related to our normal operations. We are responsible for managing interest rate risk and do not rely on another party to manage such risk.

⁽³⁾	The net loss associated with the extinguishment of debt includes prepayment penalties, the write-off of unamortized deferred financing fees, and other fees incurred. We believe that adjusting for such non-recurring items provides useful

supplemental information because such losses may not be reflective of on-going transactions and operations and is consistent with management’s analysis of our operating performance.

⁽⁴⁾

This represents the mark-to-market adjustment for our derivative instruments not designated for hedge accounting and the ineffective portion of the change in fair value of derivatives recognized in earnings, as well as changes in foreign currency related to our foreign equity investments not classified as long term. These derivative contracts are intended to manage the Company’s exposure to interest rate and foreign currency risk which may not be reflective of our ongoing performance and may reflect unrealized impacts on our operating performance. Such amounts are recorded in “Other” within our consolidated statements of operations.

Non-cash Items Included in Net Loss:

Provided below is additional information related to selected non-cash items included in net loss above, which may be helpful in assessing our operating results:

•

Interest expense - debt issuance costs of approximately $0.8 million and $0.3 million, respectively, were recognized for the three months ended March 31, 2019 and 2018.

Cash Flows

A comparison of cash flows for operating, investing and financing activities for the three months ended March 31, 2019 and 2018 is as follows:

	Three Months Ended
	March 31, 2019			March 31, 2018			Change
Net cash flow provided by (used in):
Operating activities	$	879,719		$	4,437,552		$	(3,557,833	)
Investing activities		(339,235,651	)		1,779,675			(341,015,326	)
Financing activities		344,507,384			(7,961,714	)		352,469,098

Cash flows provided by operating activities for the three months ended March 31, 2019 and 2018 were approximately $0.9 million and $4.4 million, respectively, a decrease of approximately $3.5 million. The decrease in cash provided by our operating activities is primarily the result of a decrease in net income when excluding depreciation, amortization, and net loss on extinguishment of debt of approximately $3.9 million.

Cash flows provided by (used in) investing activities for the three months ended March 31, 2019 and 2018 were approximately ($339.2) million and $1.8 million, respectively, a change of approximately $341.0 million. The change in cash provided by (used in) investing activities primarily relates to cash consideration paid of approximately $346 million for the SSGT Mergers during the three months ended March 31, 2019.

Cash flows provided by (used in) financing activities for the three months ended March 31, 2019 and 2018 were approximately $344.5 million and ($8.0 million), respectively, a change of approximately $352.5 million. The change in cash provided by (used in) financing activities is primarily attributable to the approximately $358 million increase in net debt issued during the three months ended March 31, 2019.

Liquidity and Capital Resources

Short-Term Liquidity and Capital Resources

Our Primary Offering terminated on January 9, 2017. We generally expect that we will meet our short-term liquidity requirements from the combination of the proceeds from secured or unsecured financing from banks or other lenders, net cash provided by property operations and advances from our Advisor which will be repaid, without interest, as funds are available after meeting our current liquidity requirements, subject to the limitations on reimbursement set forth in our Advisory Agreement with our Advisor. Per the Advisory Agreement, all advances from our Advisor shall be reimbursed no less frequently than monthly, although our Advisor has indicated that it may waive such a requirement on a month-by-month basis.

Distribution Policy and Distributions

Historically, we have primarily made distributions to our stockholders using proceeds of the Offering in anticipation of future cash flow. As such, this reduced the amount of capital we ultimately had available to invest in properties. Because substantially all of our operations will be performed indirectly through our Operating Partnership, our ability to pay distributions depends in large part on our Operating Partnership’s ability to pay distributions to its partners, including to us. In the event we do not have enough cash from operations to fund cash distributions, we may borrow, issue additional securities or sell assets in order to fund the distributions. Though we presently intend to pay only cash distributions, and potentially stock distributions, we are authorized by our charter to pay in-kind distributions of readily marketable securities, distributions of beneficial interests in a liquidating trust established for our dissolution and the liquidation of our assets in accordance with the terms of the charter or distributions that meet all of the following conditions: (a) our board of directors advises each stockholder of the risks associated with direct ownership of the property; (b) our board of directors offers each stockholder the election of receiving such in-kind distributions; and (c) in-kind distributions are only made to those stockholders who accept such offer.

For some period after our Offering, we may not be able to pay distributions from our cash flows from operations, in which case distributions may be paid in part from debt financing.

Distributions are paid to our stockholders based on the record date selected by our board of directors. We currently declare and pay distributions monthly based on daily declaration and record dates so that investors may be entitled to distributions immediately upon purchasing our shares. We expect to continue to regularly pay distributions unless our results of operations, our general financial condition, general economic conditions, or other factors inhibit us from doing so. Distributions are authorized at the discretion of our board of directors, which are directed, in substantial part, by its obligation to cause us to comply with the REIT requirements of the Code. Our board of directors may increase, decrease or eliminate the distribution rate that is being paid at any time. Distributions are made on all classes of our common stock at the same time. The per share amount of distributions on Class A Shares and Class T Shares differ because of different allocations of class-specific expenses. Specifically, distributions on Class T Shares are lower than distributions on Class A Shares because Class T Shares are subject to ongoing stockholder servicing fees. The funds we receive from operations that are available for distribution may be affected by a number of factors, including the following:

•

our operating and interest expenses;

•

the amount of distributions or dividends received by us from our indirect real estate investments;

•

our ability to keep our properties occupied;

•

our ability to maintain or increase rental rates;

•

construction defects or capital improvements;

•

capital expenditures and reserves for such expenditures;

•

the issuance of additional shares; and

•

financings and refinancings.

The following shows our distributions paid and the sources of such distributions for the respective periods presented:

	Three Months Ended March 31, 2019				Three Months Ended March 31, 2018
Distributions paid in cash — common stockholders	$	4,435,585			$	4,249,477
Distributions paid in cash — Operating Partnership unitholders		26,407				74,446
Distributions reinvested		3,963,766				3,971,349
Total distributions	$	8,425,758			$	8,295,272
Source of distributions
Cash flows provided by operations	$	879,719	10	%	$	4,437,552	53	%
Cash provided by financing activities		3,582,273	43	%		—	0	%
Offering proceeds from distribution reinvestment plan		3,963,766	47	%		3,857,720	47	%
Total sources	$	8,425,758	100	%	$	8,295,272	100	%

From our inception through March 31, 2019, we paid cumulative distributions of approximately $104.7 million, as compared to cumulative FFO of approximately $23.9 million. For the three months ended March 31, 2019, we paid distributions of approximately $8.4 million, as compared to an FFO of approximately ($0.4) million, which reflects acquisition related expenses of approximately $260,000 and net loss on extinguishment of debt of approximately $1.5 million. For the three months ended March 31, 2018, we paid distributions of approximately $8.3 million, as compared to FFO of approximately $5.5 million which reflects acquisition related expenses of approximately $60,000. The payment of distributions from sources other than FFO may reduce the amount of proceeds available for investment and operations or cause us to incur additional interest expense as a result of borrowed funds.

We must distribute to our stockholders at least 90% of our taxable income each year in order to meet the requirements for being treated as a REIT under the Code. Our directors may authorize distributions in excess of this percentage as they deem appropriate. Because we may receive income from interest or rents at various times during our fiscal year, distributions may not reflect our income earned in that particular distribution period, but may be made in anticipation of cash flow that we expect to receive during a later period and may be made in advance of actual receipt of funds in an attempt to make distributions relatively uniform. To allow for such differences in timing between the receipt of income and the payment of expenses, and the effect of required debt payments, among other things, we could be required to borrow funds from third parties on a short-term basis, issue new securities, or sell assets to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT. We are not prohibited from undertaking such activities by our charter, bylaws or investment policies, and we may use an unlimited amount from any source to pay our distributions. These methods of obtaining funding could affect future distributions by increasing operating costs and decreasing available cash, which could reduce the value of our stockholders’ investment in our shares. In addition, such distributions may constitute a return of investors’ capital.

We may not be able to pay distributions from our cash flows from operations, in which case distributions may be paid in part from debt financing and pursuant to our distribution reinvestment plan. The payment of distributions from sources other than cash flows from operations may reduce the amount of proceeds available for investment and operations or cause us to incur additional interest expense as a result of borrowed funds.

Over the long-term, we expect that a greater percentage of our distributions will be paid from cash flows from operations. However, our operating performance cannot be accurately predicted and may deteriorate in the future due to numerous factors, including our ability to raise and invest capital at favorable yields, the financial performance of our investments in the current real estate and financial environment and the types and mix of investments in our portfolio. As a result, future distributions declared and paid may exceed cash flow from operations.

Indebtedness

As of March 31, 2019, our total indebtedness was approximately $764.2 million, which included approximately $298 million in fixed rate debt, $477 million in variable rate debt and approximately $0.7 million in net debt premium less approximately $11.7 million in net debt issuance costs. Some of our loans have maturity dates within the next year. We intend to repay these loans through loan extensions or other debt financing. See Note 4 of the Notes to the Consolidated Financial Statements for more information about our indebtedness.

Long-Term Liquidity and Capital Resources

On a long-term basis, our principal demands for funds will be for property acquisitions, either directly or through entity interests, for the payment of operating expenses and distributions, and for the payment of interest on our outstanding indebtedness, if any.

Long-term potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders, issuance of equity instruments, undistributed funds from operations, and additional public or private offerings. To the extent we are not able to secure requisite financing in the form of a credit facility or other debt, we will be dependent upon proceeds from the issuance of equity securities and cash flows from operating activities in order to meet our long-term liquidity requirements and to fund our distributions.

Contractual Obligations

The following table summarizes our contractual obligations as of March 31, 2019:

	Payments due during the years ending December 31:
	Total		2019		2020-2021		2022-2023		Thereafter
Debt interest⁽¹⁾	$	184,464,971	$	30,283,757	$	76,498,170	$	31,535,812	$	46,147,232
Debt principal⁽²⁾		775,218,483		201,712		81,989,514		402,934,046		290,093,211
Total contractual obligations	$	959,683,454	$	30,485,469	$	158,487,684	$	434,469,858	$	336,240,443

⁽¹⁾	Interest expense for fixed rate debt was calculated based upon the contractual rate and the interest expense on variable rate debt was calculated based on the rate in effect on March 31, 2019. Debt denominated in foreign currency has been converted based on the rate in effect as of March 31, 2019.

⁽²⁾	Amount represents principal payments only, excluding debt premium and debt issuance costs.

Off-Balance Sheet Arrangements

Other than our tenant insurance joint venture, which is accounted for using the equity method of accounting, we do not currently have any relationships with unconsolidated entities or financial partnerships. Such entities are often referred to as structured finance or special purpose entities, which typically are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Subsequent Events

Please see Note 11 of the Notes to the Consolidated Financial Statements contained in this report.

Seasonality

We believe that we will experience minor seasonal fluctuations in the occupancy levels of our facilities, which we believe will be slightly higher over the summer months due to increased moving activity.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business plan, we expect that the primary market risk to which we will be exposed is interest rate risk and to a lesser extent, foreign currency risk. We may be exposed to the effects of interest rate changes primarily as a result of borrowings used to maintain liquidity and fund acquisition, expansion, and financing of our real estate investment portfolio and operations. Our interest rate risk management objectives will be to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve our objectives, we may borrow at fixed rates or variable rates. We may also enter into derivative financial instruments such as interest rate swaps and caps in order to mitigate our interest rate risk on a related financial instrument. We will not enter into derivative or interest rate transactions for speculative purposes.

As of March 31, 2019, our total indebtedness was approximately $764.2 million, which included approximately $298.2 million in fixed rate debt, $477.0 million in variable rate debt and approximately $0.7 million in net debt premium less approximately $11.7 million in net debt issuance costs. As of December 31, 2018, our total indebtedness was approximately $406.1 million, which included approximately $225.6 million in fixed rate debt, $182.6 million in variable rate debt and approximately $1.2 million in net debt premium less approximately $3.4 million in net debt issuance costs. Our debt instruments were entered into for other than trading purposes. Changes in interest rates have different impacts on the fixed and variable debt. A change in interest rates on fixed rate debt impacts its fair value but has no impact on interest incurred or cash flows. A change in interest rates on variable debt could impact the interest incurred and cash flows and its fair value. If the underlying rate of the related index on our variable rate debt were to increase by 100 basis points, the increase in interest would decrease future earnings and cash flows by approximately $1.9 million annually.

Interest rate risk amounts were determined by considering the impact of hypothetical interest rates on our financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.

The following table summarizes future debt maturities and average interest rates on our outstanding debt as of March 31, 2019:

	Year Ending December 31,
	2019			2020			2021			2022			2023			Thereafter			Total
Fixed rate debt	$	201,712		$	627,411		$	1,209,672		$	2,826,091		$	3,291,903		$	290,093,211		$	298,250,000
Average interest rate⁽¹⁾		4.63	%		4.63	%		4.63	%		4.63	%		4.64	%		4.64	%
Variable rate debt	$	—		$	75,114,670		$	5,037,761		$	396,178,000		$	638,052		$	—		$	476,968,483
Average interest rate⁽¹⁾		5.41	%		5.45	%		5.61	%		5.58	%		5.90	%		—

⁽¹⁾	Interest expense for fixed rate debt was calculated based upon the contractual rate and the interest expense on variable rate debt was calculated based on the rate in effect on March 31, 2019. Debt denominated in foreign currency has been converted based on the rate in effect as of March 31, 2019.

Currently, our only foreign exchange rate risk comes from our Canadian properties and the Canadian Dollar (“CAD”). Our existing foreign currency hedge mitigates most of our foreign currency exposure of our net CAD denominated investments; however, we generate all of our revenues and expend essentially all of our operating expenses and third party debt service costs related to our Canadian properties in CAD. As a result of fluctuations in currency exchange, our cash flows and results of operations could be affected.

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this report, management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

None.

ITEM 1A.

RISK FACTORS

The following should be read in conjunction with the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2018. With the exception of the risk factor set forth below, there have been no material changes from the risk factors set forth in our 2018 Annual Report on Form 10-K for the year ended December 31, 2018.

We have incurred a net loss to date, have an accumulated deficit, and it is possible that our operations may not be profitable in 2019.

We incurred a net loss of approximately $8.9 million for the three months ended March 31, 2019. Our accumulated deficit was approximately $71.2 million as of March 31, 2019.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)

None.

(b)

None.

(c)

Our share redemption program enables our stockholders to have their shares redeemed by us, subject to the significant conditions and limitations described in our prospectus. As of March 31, 2019, approximately $34.1 million of common stock was available for redemption and approximately $2.0 million was included in accrued expenses and other liabilities in the consolidated balance sheets as of March 31, 2019. During the three months ended March 31, 2019, we redeemed shares as follows:

For the Month Ended	Total Number of Shares Redeemed		Average Price Paid per Share		Total Number of Shares Redeemed as Part of Publicly Announced Plans or Programs		Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs
January 31, 2019		141,291	$	9.72		141,291	2,725,920⁽¹⁾
February 28, 2019		—	$	—		—	2,725,920⁽¹⁾
March 31, 2019		—	$	—		—	2,725,920⁽¹⁾

⁽¹⁾	A description of the maximum number of shares that may be purchased under our share redemption program is included in the narrative preceding this table.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS

The exhibits required to be filed with this report are set forth on the Exhibit Index hereto and incorporated by
reference herein.

EXHIBIT INDEX

The following exhibits are included in this report on Form 10-Q for the period ended March 31, 2019 (and are numbered in accordance with Item 601 of Regulation S-K).

Exhibit No.		Description

3.1		First Articles of Amendment and Restatement of Strategic Storage Trust II, Inc., incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K, filed on March 31, 2014, Commission File No. 333-190983

3.2		Articles of Amendment of Strategic Storage Trust II, Inc., incorporated by reference to Exhibit 3.1 to Post-Effective Amendment No. 7 to the Company’s Registration Statement on Form S-11, filed on September 28, 2015, Commission File No. 333-190983

3.3		Articles Supplementary of Strategic Storage Trust II, Inc., incorporated by reference to Exhibit 3.2 to Post-Effective Amendment No. 7 to the Company’s Registration Statement on Form S-11, filed on September 28, 2015, Commission File No. 333-190983

3.4		Bylaws of Strategic Storage Trust II, Inc., incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-11, filed on September 4, 2013, Commission File No. 333-190983

3.5		Amendment No. 1 to the Amended and Restated Bylaws, incorporated by reference for Exhibit 3.1 to the Company’s Form 8-K, filed on August 6, 2018, Commission File No. 000-55617

4.1		Distribution Reinvestment Plan Enrollment Form (included as Appendix A to prospectus), incorporated by reference to the Company’s Registration Statement on Form S-3, filed on November 30, 2016, Commission File No. 333-214848

4.2		Second Amended and Restated Distribution Reinvestment Plan (included as Appendix B to prospectus), incorporated by reference to the Company’s Registration Statement on Form S-3, filed on November 30, 2016, Commission File No. 333-214848

10.1		CMBS SASB Mortgage Loan Agreement, dated January 24, 2019, incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.2		CMBS SASB Mortgage Promissory Note A-1, dated January 24, 2019, incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.3		CMBS SASB Mortgage Promissory Note A-2, dated January 24, 2019, incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.4		CMBS SASB Mortgage Guaranty Agreement, dated January 24, 2019, incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.5		CMBS SASB Mezzanine Loan Agreement, dated January 24, 2019, incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.6		CMBS SASB Mezzanine Promissory Note A-1, dated January 24, 2019, incorporated by reference to Exhibit 10.6 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.7		CMBS SASB Mezzanine Promissory Note A-2, dated January 24, 2019, incorporated by reference to Exhibit 10.7 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.8		CMBS SASB Mezzanine Guaranty Agreement, dated January 24, 2019, incorporated by reference to Exhibit 10.8 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.9		CMBS Loan Agreement, dated January 24, 2019, incorporated by reference to Exhibit 10.9 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.10		CMBS Promissory Note A-1, dated January 24, 2019, incorporated by reference to Exhibit 10.10 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.11		CMBS Promissory Note A-2, dated January 24, 2019, incorporated by reference to Exhibit 10.11 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

Exhibit No.		Description

10.12		CMBS Promissory Note A-3, dated January 24, 2019, incorporated by reference to Exhibit 10.12 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.13		CMBS Promissory Note A-4, dated January 24, 2019, incorporated by reference to Exhibit 10.13 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.14		CMBS Guaranty Agreement, dated January 24, 2019, incorporated by reference to Exhibit 10.14 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.15		Secured Loan Agreement, dated January 24, 2019, incorporated by reference to Exhibit 10.15 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.16		Secured Note (KeyBank), dated January 24, 2019, incorporated by reference to Exhibit 10.16 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.17		Secured Note (SunTrust), dated January 24, 2019, incorporated by reference to Exhibit 10.17 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.18		Secured Guaranty, dated January 24, 2019, incorporated by reference to Exhibit 10.18 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.19		Senior Term Loan Agreement, dated January 24, 2019, incorporated by reference to Exhibit 10.19 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.20		Senior Note (KeyBank), dated January 24, 2019, incorporated by reference to Exhibit 10.20 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.21		Senior Note (SunTrust), dated January 24, 2019, incorporated by reference to Exhibit 10.21 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.22		Pledge and Security Agreement, dated January 24, 2019, incorporated by reference to Exhibit 10.22 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.23		Pledge and Security Agreement (Capital Events), dated January 24, 2019, incorporated by reference to Exhibit 10.23 to the Company’s Form 8-K, filed on January 30, 2019, Commission File No. 000-55617

10.24		First Amendment to CMBS SASB Mortgage Loan Agreement, dated February 12, 2019, incorporated by reference to Exhibit 10.40 to the Company’s Form 10-K, filed on March 22, 2019, Commission File No. 000-55617

10.25		First Amendment to CMBS SASB Mezzanine Loan Agreement, dated February 12, 2019, incorporated by reference to Exhibit 10.41 to the Company’s Form 10-K, filed on March 22, 2019, Commission File No. 000-55617

31.1*		Certification of Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

101*		The following Strategic Storage Trust II, Inc. financial information for the quarter ended March 31, 2019 formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Loss (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

*	Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	STRATEGIC STORAGE TRUST II, INC. (Registrant)

Dated: May 15, 2019	By:	/s/ Matt F. Lopez
		Matt F. Lopez
		Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)