SmartStop Self Storage REIT, Inc. - Quarter Report: 2021 September (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 September 30, 2021

☐	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

SmartStop Self Storage REIT, 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)

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

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 ☒

As of November 4, 2021, there were 76,874,399 outstanding shares of Class A common stock and 8,033,196 outstanding shares of Class T common stock of the registrant.

FORM 10-Q

SMARTSTOP SELF STORAGE REIT, 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 September 30, 2021 (unaudited) and December 31, 2020	5
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)	6
	Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)	7
	Consolidated Statements of Equity for the Three Months Ended March 31, 2020, June 30, 2020, and September 30, 2020 (unaudited)	8
	Consolidated Statements of Equity for the Three Months Ended March 31, 2021, June 30, 2021, and September 30, 2021 (unaudited)	12
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (unaudited)	14
	Notes to Consolidated Financial Statements (unaudited)	16
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	61
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	81
Item 4.	Controls and Procedures	82

PART II.	OTHER INFORMATION	83

Item 1.	Legal Proceedings	83
Item 1A.	Risk Factors	83
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	84
Item 3.	Defaults Upon Senior Securities	84
Item 4.	Mine Safety Disclosures	84
Item 5.	Other Information	84
Item 6.	Exhibits	84

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-Q of SmartStop Self Storage REIT, 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, including without limitation changes in the political and economic climate, economic conditions and fiscal imbalances in the United States, and other major developments, including wars, natural disasters, epidemics and pandemics, including the outbreak of COVID-19, military actions, and terrorist attacks. The occurrence or severity of any such event or circumstance is difficult or impossible to predict accurately. To the extent that our assumptions differ from actual results, our ability to realize the plans, strategies and prospects contemplated by 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.

For further information regarding risks and uncertainties associated with our business, and important factors that could cause our actual results to vary materially from those expressed or implied in such forward-looking statements, please refer to the factors listed and described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Risk Factors” sections of the documents we file from time to time with the U.S. Securities and Exchange Commission, including, but not limited to, our Annual Report on Form 10-K for the year ended December 31, 2020, 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.

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 income (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, 2020. Our results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the operating results expected for the full year.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 30, 2021 (Unaudited)			December 31, 2020
ASSETS
Real estate facilities:
Land	$	395,335,230		$	335,800,354
Buildings		1,100,318,293			810,480,845
Site improvements		77,793,874			63,821,383
		1,573,447,397			1,210,102,582
Accumulated depreciation		(145,213,522	)		(115,903,045	)
		1,428,233,875			1,094,199,537
Construction in process		1,718,223			1,761,303
Real estate facilities, net		1,429,952,098			1,095,960,840
Cash and cash equivalents		29,247,388			72,705,624
Restricted cash		8,491,787			7,952,052
Investments in unconsolidated real estate ventures (Note 4)		18,494,815			—
Investments in and advances to Managed REITs		12,332,654			15,624,389
Other assets, net		18,331,410			7,734,276
Intangible assets, net of accumulated amortization		17,472,470			12,406,427
Trademarks, net of accumulated amortization		16,088,235			16,194,118
Goodwill		53,643,331			53,643,331
Debt issuance costs, net of accumulated amortization		2,049,573			—
Total assets	$	1,606,103,761		$	1,282,221,057
LIABILITIES AND EQUITY
Debt, net	$	848,818,212		$	717,952,233
Accounts payable and accrued liabilities		26,552,056			23,038,976
Due to affiliates		538,805			667,429
Distributions payable		8,135,131			6,650,317
Contingent earnout		20,600,000			28,600,000
Deferred tax liabilities		7,240,713			8,380,215
Total liabilities		911,884,917			785,289,170
Commitments and contingencies (Note 12)
Redeemable common stock		67,684,603			57,335,575
Preferred stock, $0.001 par value; 200,000,000 shares authorized:
Series A Convertible Preferred Stock, $0.001 par value; 200,000 shares authorized; 200,000 and 200,000 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively, with aggregate liquidation preferences of $203,150,685 and $202,928,620 at September 30, 2021 and December 31, 2020, respectively		196,356,107			196,356,107
Equity:
SmartStop Self Storage REIT, Inc. equity:
Class A common stock, $0.001 par value; 350,000,000 shares authorized; 76,856,872 and 52,660,402 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		76,857			52,661
Class T common stock, $0.001 par value; 350,000,000 shares authorized; 8,027,159 and 7,903,911 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		8,027			7,904
Additional paid-in capital		724,585,663			492,408,006
Distributions		(198,291,010	)		(163,953,169	)
Accumulated deficit		(161,445,849	)		(141,444,880	)
Accumulated other comprehensive loss		(1,189,529	)		(3,834,228	)
Total SmartStop Self Storage REIT, Inc. equity		363,744,159			183,236,294
Noncontrolling interests in our Operating Partnership		66,423,075			59,982,111
Other noncontrolling interests		10,900			21,800
Total noncontrolling interests		66,433,975			60,003,911
Total equity		430,178,134			243,240,205
Total liabilities and equity	$	1,606,103,761		$	1,282,221,057

See notes to consolidated financial statements.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenues:
Self storage rental revenue	$	40,695,622		$	26,706,201		$	108,303,763		$	77,221,013
Ancillary operating revenue		2,007,411			1,431,952			5,591,882			3,768,213
Managed REIT Platform revenue		1,263,029			2,051,021			4,609,060			5,687,701
Reimbursable costs from Managed REITs		972,551			1,173,948			3,250,213			4,453,863
Total revenues		44,938,613			31,363,122			121,754,918			91,130,790
Operating expenses:
Property operating expenses		12,593,191			9,816,774			35,416,441			28,686,843
Managed REIT Platform expenses		587,704			329,280			1,223,736			2,512,103
Reimbursable costs from Managed REITs		972,551			1,173,948			3,250,213			4,453,863
General and administrative		5,232,950			4,012,072			16,797,252			11,829,732
Depreciation		10,748,337			8,003,587			30,035,065			23,562,701
Intangible amortization expense		3,710,736			1,587,899			8,623,964			8,475,682
Acquisition expenses		211,985			468,577			548,083			593,903
Contingent earnout adjustment		700,000			1,600,000			3,219,744			(5,100,000	)
Impairment of goodwill and intangible assets		—			—			—			36,465,732
Impairment of investments in Managed REITs		—			—			—			4,376,879
Write-off of equity interest and preexisting relationships in SST IV upon acquisition of control		—			—			8,389,573			—
Total operating expenses		34,757,454			26,992,137			107,504,071			115,857,438
Gain on sale of real estate		—			—			178,631			—
Income (loss) from operations		10,181,159			4,370,985			14,429,478			(24,726,648	)
Other income (expense):
Interest expense		(7,818,311	)		(8,093,476	)		(23,744,477	)		(24,717,208	)
Interest expense – accretion of fair market value of secured debt		29,228			32,788			92,344			98,337
Interest expense – debt issuance costs		(499,132	)		(952,479	)		(1,668,502	)		(2,832,240	)
Net loss on extinguishment of debt		—			—			(2,444,788	)		—
Other		(833,702	)		185,685			780,883			2,914,840
Net income (loss)		1,059,242			(4,456,497	)		(12,555,062	)		(49,262,919	)
Net (income) loss attributable to the noncontrolling interests in our Operating Partnership		(119,678	)		585,360			1,903,408			6,550,455
Less: Distributions to preferred stockholders		(3,150,685	)		(2,387,977	)		(9,349,315	)		(7,112,022	)
Net loss attributable to SmartStop Self Storage REIT, Inc. common stockholders	$	(2,211,121	)	$	(6,259,114	)	$	(20,000,969	)	$	(49,824,486	)
Net loss per Class A share – basic and diluted	$	(0.03	)	$	(0.10	)	$	(0.26	)	$	(0.84	)
Net loss per Class T share – basic and diluted	$	(0.03	)	$	(0.10	)	$	(0.26	)	$	(0.84	)
Weighted average Class A shares outstanding – basic and diluted		76,407,968			52,019,749			69,674,568			51,654,459
Weighted average Class T shares outstanding – basic and diluted		8,003,062			7,827,572			7,964,237			7,776,909

See notes to consolidated financial statements.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Net income (loss)	$	1,059,242		$	(4,456,497	)	$	(12,555,062	)	$	(49,262,919	)
Other comprehensive income (loss):
Foreign currency translation adjustment		(1,395,240	)		1,069,449			(744	)		(1,538,451	)
Foreign currency hedge contract gains (losses)		1,136,903			(988,609	)		(266,809	)		1,645,735
Interest rate swap and cap contract gains (losses)		1,034,813			1,293,513			3,254,316			(3,509,682	)
Other comprehensive income (loss)		776,476			1,374,353			2,986,763			(3,402,398	)
Comprehensive income (loss)		1,835,718			(3,082,144	)		(9,568,299	)		(52,665,317	)
Comprehensive income (loss) attributable to noncontrolling interests:
Comprehensive (income) loss attributable to the noncontrolling interests in our Operating Partnership		(203,677	)		404,742			1,561,344			7,005,492
Comprehensive income (loss) attributable to SmartStop Self Storage REIT, Inc. common stockholders	$	1,632,041		$	(2,677,402	)	$	(8,006,955	)	$	(45,659,825	)

See notes to consolidated financial statements.

SMARTSTOP SELF STORAGE REIT, 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 (Loss)			Total SmartStop Self Storage REIT, Inc. Equity			Noncontrolling Interests			Total Equity			Preferred Stock			Redeemable Common Stock
Balance as of December 31, 2019		51,435,124		$	51,435			7,699,893	$	7,700	$	491,433,240		$	(128,642,787	)	$	(87,090,486	)	$	(1,955,335	)	$	273,803,767		$	72,010,056		$	345,813,823		$	146,426,164		$	43,391,362
Offering costs		—			—			—		—		(28,822	)		—			—			—			(28,822	)		—			(28,822	)		—			—
Preferred equity issuance costs		—			—			—		—		—			—			—			—			—			—			—			(46,456	)		—
Changes to redeemable common stock		—			—			—		—		(3,979,539	)		—			—			—			(3,979,539	)		—			(3,979,539	)		—			3,979,539
Redemptions of common stock		(42,040	)		(42	)		—		—		—			—			—			—			(42	)		—			(42	)		—			—
Issuance of restricted stock		47,842			48			—		—		—			—			—			—			48			—			48			—			—
Distributions		—			—			—		—		—			(8,668,726	)		—			—			(8,668,726	)		—			(8,668,726	)		—			—
Distributions to noncontrolling interests		—			—			—		—		—			—			—			—			—			(1,356,799	)		(1,356,799	)		—			—
Issuance of shares for distribution reinvestment plan		322,411			322			50,046		50		3,979,167			—			—			—			3,979,539			—			3,979,539			—			—
Equity based compensation expense		—			—			—		—		219,603			—			—			—			219,603			—			219,603			—			—
Net loss attributable to SmartStop Self Storage REIT, Inc. common stockholders		—			—			—		—		—			—			(35,073,951	)		—			(35,073,951	)		—			(35,073,951	)		—			—
Net loss attributable to the noncontrolling interests in our Operating Partnership		—			—			—		—		—			—			—			—			—			(5,031,652	)		(5,031,652	)		—			—
Foreign currency translation adjustment		—			—			—		—		—			—			—			(3,959,904	)		(3,959,904	)		(607,216	)		(4,567,120	)		—			—
Foreign currency forward contract gain		—			—			—		—		—			—			—			3,959,594			3,959,594			607,201			4,566,795			—			—
Interest rate swap and cap contract loss		—			—			—		—		—			—			—			(4,747,520	)		(4,747,520	)		(728,029	)		(5,475,549	)		—			—
Balance as of March 31, 2020		51,763,337		$	51,763			7,749,939	$	7,750	$	491,623,649		$	(137,311,513	)	$	(122,164,437	)	$	(6,703,165	)	$	225,504,047		$	64,893,561		$	290,397,608		$	146,379,708		$	47,370,901

See notes to consolidated financial statements.

	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 (Loss)			Total SmartStop Self Storage REIT, Inc. Equity			Noncontrolling Interests			Total Equity			Preferred Stock		Redeemable Common Stock
Balance as of March 31, 2020		51,763,337		$	51,763			7,749,939	$	7,750	$	491,623,649		$	(137,311,513	)	$	(122,164,437	)	$	(6,703,165	)	$	225,504,047		$	64,893,561		$	290,397,608		$	146,379,708	$	47,370,901
Offering costs		—			—			—		—		(22	)		—			—			—			(22	)		—			(22	)		—		—
Changes to redeemable common stock		—			—			—		—		(4,011,353	)		—			—			—			(4,011,353	)		—			(4,011,353	)		—		4,011,353
Redemptions of common stock		(750	)		(1	)		—		—		—			—			—			—			(1	)		—			(1	)		—		(7,500	)
Issuance of restricted stock		23,725			24			—		—		—			—			—			—			24			—			24			—		—
Distributions		—			—			—		—		—			(8,782,766	)		—			—			(8,782,766	)		—			(8,782,766	)		—		—
Distributions to noncontrolling interests		—			—			—		—		—			—			—			—			—			(1,356,800	)		(1,356,800	)		—		—
Issuance of shares for distribution reinvestment plan		332,570			333			51,277		51		4,010,969			—			—			—			4,011,353			—			4,011,353			—		—
Equity based compensation expense		—			—			—		—		247,323			—			—			—			247,323			176,060			423,383			—		—
Net loss attributable to SmartStop Self Storage REIT, Inc. common stockholders		—			—			—		—		—			—			(8,491,421	)		—			(8,491,421	)		—			(8,491,421	)		—		—
Net loss attributable to the noncontrolling interests in our Operating Partnership		—			—			—		—		—			—			—			—			—			(933,443	)		(933,443	)		—		—
Foreign currency translation adjustment		—			—			—		—		—			—			—			1,700,259			1,700,259			258,961			1,959,220			—		—
Foreign currency forward contract loss		—			—			—		—		—			—			—			(1,677,000	)		(1,677,000	)		(255,451	)		(1,932,451	)		—		—
Interest rate swap and cap contract gain		—			—			—		—		—			—			—			583,475			583,475			88,879			672,354			—		—
Balance as of June 30, 2020		52,118,882		$	52,119			7,801,216	$	7,801	$	491,870,566		$	(146,094,279	)	$	(130,655,858	)	$	(6,096,431	)	$	209,083,918		$	62,871,767		$	271,955,685		$	146,379,708	$	51,374,754

See notes to consolidated financial statements.

	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 (Loss)			Total SmartStop Self Storage REIT, Inc. Equity			Noncontrolling Interests			Total Equity			Preferred Stock		Redeemable Common Stock
Balance as of June 30, 2020		52,118,882	$	52,119		7,801,216	$	7,801	$	491,870,566		$	(146,094,279	)	$	(130,655,858	)	$	(6,096,431	)	$	209,083,918		$	62,871,767		$	271,955,685		$	146,379,708	$	51,374,754
Offering costs		—		—		—		—		(4,966	)		—			—			—			(4,966	)		—			(4,966	)		—		—
Changes to redeemable common stock		—		—		—		—		(4,011,063	)		—			—			—			(4,011,063	)		—			(4,011,063	)		—		4,011,063
Redemptions of common stock		—		—		—		—		—			—			—			—			—			—			—			—		(1,269,644	)
Distributions		—		—		—		—		—			(8,919,040	)		—			—			(8,919,040	)		—			(8,919,040	)		—		—
Distributions to noncontrolling interests		—		—		—		—		—			—			—			—			—			(1,406,034	)		(1,406,034	)		—		—
Issuance of shares for distribution reinvestment plan		334,693		335		51,614		52		4,010,676			—			—			—			4,011,063			—			4,011,063			—		—
Equity based compensation expense		—		—		—		—		291,252			—			—			—			291,252			231,779			523,031			—		—
Net loss attributable to SmartStop Self Storage REIT, Inc. common stockholders		—		—		—		—		—			—			(6,259,114	)		—			(6,259,114	)		—			(6,259,114	)		—		—
Net loss attributable to the noncontrolling interests in our Operating Partnership		—		—		—		—		—			—			—			—			—			(585,360	)		(585,360	)		—		—
Foreign currency translation adjustment		—		—		—		—		—			—			—			928,902			928,902			140,547			1,069,449			—		—
Foreign currency forward contract loss		—		—		—		—		—			—			—			(858,687	)		(858,687	)		(129,922	)		(988,609	)		—		—
Interest rate swap and cap contract gain		—		—		—		—		—			—			—			1,123,520			1,123,520			169,993			1,293,513			—		—
Balance as of September 30, 2020		52,453,575	$	52,454		7,852,830	$	7,853	$	492,156,465		$	(155,013,319	)	$	(136,914,972	)	$	(4,902,696	)	$	195,385,785		$	61,292,770		$	256,678,555		$	146,379,708	$	54,116,173

See notes to consolidated financial statements.

	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 (Loss)			Total SmartStop Self Storage REIT, Inc. Equity			Noncontrolling Interests			Total Equity			Preferred Stock		Redeemable Common Stock
Balance as of December 31, 2020		52,660,402		$	52,661			7,903,911		$	7,904		$	492,408,006		$	(163,953,169	)	$	(141,444,880	)	$	(3,834,228	)	$	183,236,294		$	60,003,911		$	243,240,205		$	196,356,107	$	57,335,575
Gross proceeds from issuance of operating partnership units in SST VI OP		—			—			—			—			—			—			—			—			—			50,000			50,000			—		—
Issuance of common stock in connection with SST IV Merger		23,137,540			23,138			—			—			231,389,332			—			—			—			231,412,470			—			231,412,470			—		—
Offering costs		—			—			—			—			(150,000	)		—			—			—			(150,000	)		—			(150,000	)		—		—
Issuance of Class A-1 Units in our Operating Partnership in connection with the contingent earnout related to the Self Administration Transaction		—			—			—			—			—			—			—			—			—			11,219,744			11,219,744			—		—
Acquisition of noncontrolling interest related to the Tenant Programs joint ventures		—			—			—			—			—			—			—			—			—			(10,900	)		(10,900	)		—		—
Changes to redeemable common stock		—			—			—			—			(3,737,890	)		—			—			—			(3,737,890	)		—			(3,737,890	)		—		3,737,890
Redemptions of common stock		(66,238	)		(66	)		(4,110	)		(4	)		—			—			—			—			(70	)		—			(70	)		—		(684,947	)
Issuance of restricted stock		54,192			54			—			—			—			—			—			—			54			—			54			—		—
Distributions		—			—			—			—			—			(9,375,185	)		—			—			(9,375,185	)		—			(9,375,185	)		—		—
Distributions to noncontrolling interests		—			—			—			—			—			—			—			—			—			(1,393,957	)		(1,393,957	)		—		—
Issuance of shares for distribution reinvestment plan		310,860			311			48,553			49			3,737,530			—			—			—			3,737,890			—			3,737,890			—		—
Equity based compensation expense		—			—			—			—			244,187			—			—			—			244,187			246,843			491,030			—		—
Net loss attributable to SmartStop Self Storage REIT, Inc. common stockholders		—			—			—			—			—			—			(13,908,664	)		—			(13,908,664	)		—			(13,908,664	)		—		—
Net loss attributable to the noncontrolling interests in our Operating Partnership		—			—			—			—			—			—			—			—			—			(1,476,994	)		(1,476,994	)		—		—
Foreign currency translation adjustment		—			—			—			—			—			—			—			513,632			513,632			74,097			587,729			—		—
Foreign currency forward contract loss		—			—			—			—			—			—			—			(701,823	)		(701,823	)		(101,246	)		(803,069	)		—		—
Interest rate swap and cap contract gain		—			—			—			—			—			—			—			1,084,678			1,084,678			156,756			1,241,434			—		—
Balance as of March 31, 2021		76,096,756		$	76,098			7,948,354		$	7,949		$	723,891,165		$	(173,328,354	)	$	(155,353,544	)	$	(2,937,741	)	$	392,355,573		$	68,768,254		$	461,123,827		$	196,356,107	$	60,388,518

See notes to consolidated financial statements.

	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 (Loss)			Total SmartStop Self Storage REIT, Inc. Equity			Noncontrolling Interests			Total Equity			Preferred Stock		Redeemable Common Stock
Balance as of March 31, 2021		76,096,756		$	76,098			7,948,354		$	7,949		$	723,891,165		$	(173,328,354	)	$	(155,353,544	)	$	(2,937,741	)	$	392,355,573		$	68,768,254		$	461,123,827		$	196,356,107	$	60,388,518
Gross proceeds from issuance of operating partnership units in SST VI OP		—			—			—			—			—			—			—			—			—			4,711,315			4,711,315			—		—
Offering costs of SST VI OP		—			—			—			—			—			—			—			—			—			(1,239,194	)		(1,239,194	)		—		—
Deconsolidation of SST VI OP		—			—			—			—			—			—			—			—			—			(3,170,238	)		(3,170,238	)		—		—
Offering costs		—			—			—			—			(11,478	)		—			—			—			(11,478	)		—			(11,478	)		—		—
Changes to redeemable common stock		—			—			—			—			(5,111,955	)		—			—			—			(5,111,955	)		—			(5,111,955	)		—		5,111,955
Redemptions of common stock		(47,973	)		(48	)		(19,070	)		(19	)		—			—			—			—			(67	)		—			(67	)		—		(1,472,369	)
Issuance of restricted stock		24,000			24			—			—			—			—			—			—			24			—			24			—		—
Distributions		—			—			—			—			—			(12,471,352	)		—			—			(12,471,352	)		—			(12,471,352	)		—		—
Distributions to noncontrolling interests		—			—			—			—			—			—			—			—			—			(1,586,551	)		(1,586,551	)		—		—
Issuance of shares for distribution reinvestment plan		443,498			443			49,667			49			5,111,463			—			—			—			5,111,955			—			5,111,955			—		—
Equity based compensation expense		—			—			—			—			413,776			—			—			—			413,776			385,923			799,699			—		—
Net loss attributable to SmartStop Self Storage REIT, Inc. common stockholders		—			—			—			—			—			—			(3,881,184	)		—			(3,881,184	)		—			(3,881,184	)		—		—
Net loss attributable to the noncontrolling interests in our Operating Partnership		—			—			—			—			—			—			—			—			—			(546,092	)		(546,092	)		—		—
Foreign currency translation adjustment		—			—			—			—			—			—			—			719,064			719,064			87,703			806,767			—		—
Foreign currency forward contract loss		—			—			—			—			—			—			—			(535,452	)		(535,452	)		(65,191	)		(600,643	)		—		—
Interest rate swap and cap contract gain		—			—			—			—			—			—			—			872,123			872,123			105,946			978,069			—		—
Balance as of June 30, 2021		76,516,281		$	76,517			7,978,951		$	7,979		$	724,292,971		$	(185,799,706	)	$	(159,234,728	)	$	(1,882,006	)	$	377,461,027		$	67,451,875		$	444,912,902		$	196,356,107	$	64,028,104

See notes to consolidated financial statements.

	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 (Loss)			Total SmartStop Self Storage REIT, Inc. Equity			Noncontrolling Interests			Total Equity			Preferred Stock		Redeemable Common Stock
Balance as of June 30, 2021		76,516,281		$	76,517			7,978,951		$	7,979		$	724,292,971		$	(185,799,706	)	$	(159,234,728	)	$	(1,882,006	)	$	377,461,027		$	67,451,875		$	444,912,902		$	196,356,107	$	64,028,104
Changes to redeemable common stock		—			—			—			—			(5,388,138	)		—			—			—			(5,388,138	)		—			(5,388,138	)		—		5,388,138
Redemptions of common stock		(127,686	)		(128	)		(1,722	)		(2	)		—			—			—			—			(130	)		—			(130	)		—		(1,731,639	)
Distributions		—			—			—			—			—			(12,491,304	)		—			—			(12,491,304	)		—			(12,491,304	)		—		—
Distributions to noncontrolling interests		—			—			—			—			—			—			—			—			—			(1,722,832	)		(1,722,832	)		—		—
Issuance of shares for distribution reinvestment plan		468,277			468			49,930			50			5,387,620			—			—			—			5,388,138			—			5,388,138			—		—
Equity based compensation expense		—			—			—			—			293,210			—			—			—			293,210			501,255			794,465			—		—
Net loss attributable to SmartStop Self Storage REIT, Inc. common stockholders		—			—			—			—			—			—			(2,211,121	)		—			(2,211,121	)		—			(2,211,121	)		—		—
Net income attributable to the noncontrolling interests in our Operating Partnership		—			—			—			—			—			—			—			—			—			119,678			119,678			—		—
Foreign currency translation adjustment		—			—			—			—			—			—			—			(1,244,164	)		(1,244,164	)		(151,076	)		(1,395,240	)		—		—
Foreign currency forward contract gain		—			—			—			—			—			—			—			1,013,913			1,013,913			122,990			1,136,903			—		—
Interest rate swap and cap contract gain		—			—			—			—			—			—			—			922,728			922,728			112,085			1,034,813			—		—
Balance as of September 30, 2021		76,856,872		$	76,857			8,027,159		$	8,027		$	724,585,663		$	(198,291,010	)	$	(161,445,849	)	$	(1,189,529	)	$	363,744,159		$	66,433,975		$	430,178,134		$	196,356,107	$	67,684,603

See notes to consolidated financial statements.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities:
Net loss	$	(12,555,062	)	$	(49,262,919	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		38,659,029			32,038,383
Change in deferred tax liability		(2,220,688	)		(3,299,330	)
Accretion of fair market value adjustment of secured debt		(92,344	)		(98,337	)
Amortization of debt issuance costs		1,668,502			2,832,240
Equity based compensation expense		2,085,194			1,166,017
Contingent earnout adjustment		3,219,744			(5,100,000	)
Impairment of goodwill and intangible assets		—			36,465,732
Impairment of investments in Managed REITs		—			4,376,879
Equity in loss of unconsolidated joint ventures		724,306			—
Unrealized foreign currency and derivative (gain) loss		(367,811	)		163,216
Net loss on extinguishment of debt		2,444,788			—
Write-off of equity interest and preexisting relationships in SST IV upon acquisition of control		8,389,573			—
Gain on deconsolidation of SST VI OP		(169,533	)		—
Gain on sale of real estate		(178,631	)		—
Increase (decrease) in cash from changes in assets and liabilities, net of acquisitions:
Other assets, net		569,525			558,553
Accounts payable and accrued liabilities		2,559,848			3,077,198
Managed REITs receivables		(1,268,125	)		(48,302	)
Due to affiliates		(741,064	)		(320,134	)
Net cash provided by operating activities		42,727,251			22,549,196
Cash flows from investing activities:
SST IV Merger, net of cash acquired		(46,486,510	)		—
Purchase of real estate		(47,073,530	)		(612,892	)
Additions to real estate		(7,048,576	)		(11,761,393	)
Investments in unconsolidated real estate entities, net		(5,228,372	)		—
Deconsolidation of SST VI OP		(3,011,368	)		—
Purchase of other investments		(1,967,476	)		—
Deposits on acquisition of real estate		(1,118,818	)		(148,367	)
Net proceeds from the sale of real estate		256,237			—
Redemption of (investment in) preferred equity investment in SSGT II		13,500,000			(6,435,000	)
Settlement of foreign currency hedges		(3,190,899	)		398,951
Net cash used in investing activities		(101,369,312	)		(18,558,701	)
Cash flows from financing activities:
Gross proceeds from issuance of non-revolver debt		271,675,995			338,466
Net proceeds from issuance of revolver debt		205,505,250			—
Repayment of non-revolver debt		(422,190,754	)		—
Scheduled principal payments on non-revolver debt		(689,481	)		(516,897	)
Debt issuance costs		(5,367,981	)		(4,494	)
Debt defeasance costs		(525,417	)		—
Preferred stock issuance costs		—			(46,457	)
Offering costs		(641,374	)		(519,456	)
Redemption of common stock		(2,890,238	)		(438,783	)
Gross proceeds from issuance of equity in SST VI OP		4,015,815			—
Offering costs related to issuance of equity in SST VI OP		(373,067	)		—
Distributions paid to preferred stockholders		(9,127,250	)		(6,305,722	)
Distributions paid to common stockholders		(18,996,252	)		(14,311,105	)
Distributions paid to noncontrolling interest in OP		(4,542,828	)		(4,124,617	)
Net cash provided by (used in) financing activities		15,852,418			(25,929,065	)
Impact of foreign exchange rate changes on cash and restricted cash		(128,858	)		(98,343	)
Change in cash, cash equivalents, and restricted cash		(42,918,501	)		(22,036,913	)
Cash, cash equivalents, and restricted cash beginning of period		80,657,676			68,571,123
Cash, cash equivalents, and restricted cash end of period	$	37,739,175		$	46,534,210

Supplemental disclosures and non-cash transactions:
Cash paid for interest	$	23,445,112	$	25,021,817
Supplemental disclosure of noncash activities:
Issuance of shares pursuant to distribution reinvestment plan	$	14,237,983	$	12,001,955
Distributions payable	$	8,135,131	$	6,017,893
Deposits applied to the acquisition of unconsolidated real estate entities	$	156,940	$	—
Additions to real estate and construction in process included in accounts payable	$	68,717	$	250,172
Debt assumed in the SST IV Merger	$	81,165,978	$	—
Issuance of common stock in connection with the SST IV Merger	$	231,412,470	$	—
Redemption of common stock included in accounts payable and accrued liabilities	$	1,731,639	$	1,269,644
Conversion of A-2 Units into A-1 Units	$	11,219,744	$	—
Deposits applied to the purchase of real estate	$	—	$	200,000

See notes to consolidated financial statements.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

Note 1. Organization

SmartStop Self Storage REIT, Inc., a Maryland corporation (the “Company”), is a self-managed and fully-integrated self storage real estate investment trust (“REIT”), formed on January 8, 2013 under the Maryland General Corporation Law. Our year-end is December 31. As used in this report, “we,” “us,” “our,” and “Company” refer to SmartStop Self Storage REIT, Inc. and each of our subsidiaries.

We acquire, own and operate self storage facilities—including facilities owned by us as well as those owned by the entities sponsored by us. As of September 30, 2021, we owned 138 self storage facilities located in 18 states (Alabama, Arizona, California, Colorado, Florida, Illinois, Indiana, Maryland, Massachusetts, Michigan, New Jersey, Nevada, North Carolina, Ohio, South Carolina, Texas, Virginia, and Washington) and the Greater Toronto Area of Ontario, Canada.

As discussed herein, we, through our subsidiaries, also served as the sponsor of Strategic Storage Trust IV, Inc., a public non-traded REIT (“SST IV”) through March 17, 2021, and currently serve as the sponsor of Strategic Storage Growth Trust II, Inc., a private REIT (“SSGT II”) and Strategic Storage Trust VI, Inc., a private REIT (“SST VI”) (SSGT II, SST VI, and prior to March 17, 2021, SST IV, the “Managed REITs”), and operate the properties owned by the Managed REITs, consisting of, as of September 30, 2021, 15 properties and approximately 11,000 units and 1.2 million rentable square feet. Through our Managed REIT Platform (as defined below), we have the internal capability to originate, structure, and manage additional investment products.

The square footage, unit count, and occupancy percentage data and related disclosures included in these notes to the consolidated financial statements are outside the scope of our independent registered accounting firm’s review.

Significant Acquisitions and Transactions

SST IV Merger

On March 17, 2021, we closed on our merger with SST IV (the “SST IV Merger”). As a result, we acquired all of the real estate owned by SST IV, consisting of (i) 24 self storage facilities located in 9 states comprising approximately 18,000 self storage units and approximately 2.0 million net rentable square feet, and (ii) SST IV’s 50% equity interest in six unconsolidated real estate ventures located in the Greater Toronto Area of Ontario, Canada (the “JV Properties”). The JV Properties consisted of three operating self storage properties and three parcels of land in various stages of development into self storage facilities as of the merger date, jointly owned with subsidiaries of SmartCentres Real Estate Investment Trust, an unaffiliated third party (“SmartCentres”).

At the effective time of the SST IV Merger (the “SST IV Merger Effective Time”), each share of SST IV common stock, par value $0.001 per share (the “SST IV Common Stock”), outstanding immediately prior to the SST IV Merger Effective Time (other than shares owned by SST IV and its subsidiaries or us and our subsidiaries) was automatically converted into 2.1875 Class A Shares. Immediately prior to the SST IV Merger Effective Time, all shares of SST IV Common Stock that were subject to vesting and other restrictions also became fully vested. As a result of the SST IV Merger, approximately 10.6 million shares of SST IV Common Stock were converted into approximately 23.1 million Class A Shares.

New Credit Facility

On March 17, 2021, we, through SmartStop OP, L.P. (our “Operating Partnership”), entered into a credit facility with KeyBank, National Association as administrative agent, with an initial aggregate commitment of $500 million (the “Credit Facility”), which consisted of a $250 million revolving credit facility and a $250 million term loan. We used the initial draw proceeds of approximately $451 million primarily to pay off certain existing indebtedness as well as indebtedness of SST IV in connection with the SST IV Merger.

On October 7, 2021, we amended the Credit Facility to increase the commitments on the revolving credit facility by $200 million, to $450 million. As a result of this amendment, the aggregate commitment under the Credit Facility is now $700 million. See Note 6 – Debt, for additional information.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

Equity

The Company was formed on January 8, 2013, under the Maryland General Corporation Law. We commenced our initial public offering in January 2014, in which 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”). At the termination of our offering in January 2017, we had sold approximately 48 million Class A Shares and approximately 7 million Class T Shares for approximately $493 million and $73 million respectively.

In November 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”). The DRP Offering may be terminated at any time upon 10 days’ prior written notice to stockholders. As of September 30, 2021, we had sold approximately 6.5 million Class A Shares and approximately 1.0 million Class T Shares for approximately $68.2 million and $10.1 million, respectively, in our DRP Offering.

Prior to the termination of our Primary Offering, Select Capital Corporation, a California corporation (our “Former Dealer Manager”), was responsible for marketing our shares offered pursuant to our Primary Offering. SmartStop Asset Management, LLC, our former sponsor (“SAM”), indirectly owns a 15% non-voting equity interest in our Former Dealer Manager. Now that our Primary Offering has terminated, our Former Dealer Manager no longer provides such services for us. However, we pay our Former Dealer Manager an ongoing stockholder servicing fee with respect to the Class T Shares sold. Please see Note 10 – Related Party Transactions – Former Dealer Manager Agreement.

On October 29, 2019 (the “Commitment Date”), we entered into a preferred stock purchase agreement (the “Purchase Agreement”) with Extra Space Storage LP (the “Investor”), a subsidiary of Extra Space Storage Inc. (NYSE: EXR), pursuant to which the Investor committed to purchase up to $200 million in shares (the aggregate shares to be purchased, the “Preferred Shares”) of our new Series A Convertible Preferred Stock (the “Series A Convertible Preferred Stock”), in one or more closings (each, a “Closing,” and collectively, the “Closings”). The initial closing (the “Initial Closing”) in the amount of $150 million occurred on the Commitment Date, and the second and final closing in the amount of $50 million occurred on October 26, 2020.

The shares of Series A Convertible Preferred Stock rank senior to all other shares of our capital stock, including our common stock, with respect to rights to receive dividends and to participate in distributions or payments upon any voluntary or involuntary liquidation, dissolution or winding up of the Company. Dividends payable on each share of Series A Convertible Preferred Stock will initially be equal to a rate of 6.25% per annum. If the Series A Convertible Preferred Stock has not been redeemed on or prior to the fifth anniversary date of the Initial Closing, the dividend rate will increase an additional 0.75% per annum each year thereafter to a maximum of 9.0% per annum until the tenth anniversary of the Initial Closing, at which time the dividend rate shall increase 0.75% per annum each year thereafter until the Series A Convertible Preferred Stock is redeemed or repurchased in full. See Note 7 – Preferred Equity, for additional information.

On October 19, 2021, our board of directors, upon recommendation of our Nominating and Corporate Governance Committee, approved an estimated net asset value per share of our common stock of $15.08 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 June 30, 2021.

As a result of the calculation of our estimated value per share, beginning in October 2021, shares sold pursuant to our distribution reinvestment plan are being sold at the estimated net asset value per share of $15.08 for both Class A Shares and Class T Shares.

In connection with the determination of the estimated net asset value per share in October 2021, the redemption price under our share redemption program is equal to $15.08 for both Class A shares and Class T shares, effective beginning with redemption requests submitted during the third quarter of 2021. The share redemption program remains suspended other than for redemptions sought in connection with a stockholder’s death, qualifying disability, confinement to a long-term care facility or other exigent circumstances.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

Other Corporate History

Our Operating Partnership was formed on January 9, 2013. During 2013, Strategic Storage Advisor II, LLC, our former external advisor (“Former External 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. See Note 5 – Self Administration Transaction, for additional information.

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.

Our Operating Partnership owns, directly or indirectly through one or more subsidiaries, all of the self storage properties that we own. As of September 30, 2021, we owned approximately 89.2% of the common units of limited partnership interests of our Operating Partnership. The remaining approximately 10.8% of the common units are owned by certain members of our executive management team or indirectly by SAM and affiliates of our Former Dealer Manager. 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 SmartStop TRS, Inc. (our “TRS”), or other taxable REIT subsidiaries which are directly or indirectly wholly-owned subsidiaries of our Operating Partnership.

COVID-19

Our rental revenue and operating results depend significantly on the demand for self storage space. Since the beginning of the COVID-19 pandemic in late March 2020, our operations have adjusted to meet the needs of our customers and employees, while striving to create a safe environment at our properties and our corporate offices. The operational and financial impact associated with COVID-19 was most significant to our business in the second quarter of 2020, with customer demand for self storage resuming at or above normalized levels during the second half of 2020 and continuing into 2021. Future governmental orders causing restrictions on our business or broad economic weakness could adversely impact our business, financial condition, liquidity and results of operations. However, the extent and duration to which our operations will be impacted is highly uncertain and cannot be predicted.

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 were eliminated in consolidation during that period.

Strategic Storage Operating Partnership VI, L.P. (“SST VI OP”), the operating partnership of SST VI, and its wholly-owned subsidiaries, were consolidated by us until May 1, 2021. From March 10, 2021 (the date of our initial investment in SST VI OP) until May 1, 2021, the portion not wholly-owned by us was presented as noncontrolling interests, and all significant intercompany accounts and transactions were eliminated in consolidation during that period.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

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 we are currently the primary beneficiary. Our sole significant asset is our investment in our Operating Partnership; as a result, substantially all of our assets and liabilities represent those assets and liabilities of our Operating Partnership and its wholly-owned subsidiaries. Additionally, from March 10, 2021 until May 1, 2021, we were deemed to be the primary beneficiary of SST VI OP, and their operations were therefore consolidated by us. Subsequent to May 1, 2021, we are no longer the primary beneficiary, and their operations are no longer consolidated by us.

As of September 30, 2021, we were not a party to any other contracts/interests that would be deemed to be variable interests in VIEs other than our joint ventures with SmartCentres acquired in the SST IV Merger, which are all accounted for under the equity method of accounting (see Note 4 for additional information), and our Tenant Programs joint venture with SSGT II and SST VI, which are consolidated.

As of December 31, 2020, we were also a party to and consolidated our Tenant Programs joint venture with SST IV, which became a wholly-owned entity as a result of the SST IV Merger.

Equity Investments

Under the equity method, our investments are stated at cost and adjusted for our share of net earnings or losses and reduced by distributions and impairments, as applicable. Equity in earnings will generally be recognized based on our ownership interest in the earnings of each of the unconsolidated investments.

Investments in and Advances to Managed REITs

As of September 30, 2021 and December 31, 2020, we owned equity and debt investments with a carrying value of approximately $10.0 million and $15.1 million, respectively, in the Managed REITs; such amounts are included in Investments in and advances to Managed REITs within our consolidated balance sheets. We account for the equity investments using the equity method of accounting as we have the ability to exercise significant influence, but not control, over the Managed REITs’ operating and financial policies through our advisory and property management agreements with the respective Managed REITs. The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for our share of equity in the respective Managed REIT’s earnings and reduced by distributions. We record the interest on the debt investments on the accrual basis and such income is included in other in our consolidated statements of operations.

Also included in Investments in and advances to Managed REITs as of September 30, 2021 are receivables from the Managed REITs of approximately $2.3 million. As of December 31, 2020, receivables from the Managed REITs approximated $0.5 million. For additional discussion, see Note 10 – Related Party Transactions.

Noncontrolling Interest in Consolidated Entities

We account for the noncontrolling interests in our Operating Partnership and the noncontrolling interests in our Tenant Programs joint ventures with SSGT II and SST VI 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 partners, our Operating Partnership, including its wholly-owned subsidiaries, are consolidated with the Company and the limited partner interests are reflected as noncontrolling interests in the accompanying consolidated balance sheets. We also consolidate our

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

interests in the SSGT II and SST VI Tenant Programs and present the minority interests as noncontrolling interests in the accompanying consolidated balance sheets. The noncontrolling interests shall be attributed their 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 ongoing fair value determination of contingent liabilities, the determination if certain entities should be consolidated, the evaluation of potential impairment of indefinite and long-lived assets and goodwill, 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 as of the date of acquisition. 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 $20.8 million and none in intangible assets to recognize the value of in-place leases related to our acquisitions during the nine months ended September 30, 2021 and 2020, 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.

Acquisitions that do not meet the definition of a business, as defined under current GAAP, are accounted for as asset acquisitions. During the nine months ended September 30, 2021 and 2020, our property acquisitions, including the SST IV Merger, did not meet the definition of a business because substantially all of the fair value was concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets) or because the acquisitions did 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 September 30, 2021 and 2020, we expensed approximately $210,000 and $470,000, respectively, of acquisition-related transaction costs that did not meet our capitalization policy during the respective periods.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

During the nine months ended September 30, 2021 and 2020, we expensed approximately $550,000 and $595,000, respectively, of acquisition-related transaction costs that did not meet our capitalization policy during the respective periods.

Purchase Price Allocation for the Acquisition of a Business

Should the initial accounting for an acquisition that meets the definition of a business be incomplete by the end of a reporting period that falls within the measurement period, we report provisional amounts in our financial statements. During the measurement period, we adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date and we record those adjustments to our consolidated financial statements. We apply those measurement period adjustments in the period in which the provisional amounts are finalized.

As discussed in Note 5 – Self Administration Transaction, the Self Administration Transaction was an acquisition of a business.

Evaluation of Possible Impairment of Real Property Assets

Management monitors events and changes in circumstances that could indicate that the carrying amounts of our real property 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 real property 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 real property assets to the fair value and recognize an impairment loss. For the three and nine months ended September 30, 2021 and 2020, no real property asset impairment losses were recognized.

Goodwill Valuation

We initially recorded goodwill as a result of the Self Administration Transaction. Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible assets and other intangible assets acquired. Goodwill is allocated to various reporting units, as applicable, and is not amortized. We perform an annual impairment test for goodwill, and between annual tests, we evaluate the recoverability of goodwill whenever events or changes in circumstances indicate that the carrying amount of goodwill may not be fully recoverable. In our impairment test of goodwill, we perform a quantitative analysis to compare the fair value of each reporting unit to its respective carrying amount. If the carrying amount of goodwill exceeds its fair value, an impairment charge will be recognized.

See Note 5 – Self Administration Transaction, for additional information.

Trademarks

In connection with the Self Administration Transaction, we recorded the fair value associated with the two primary trademarks acquired therein. Prior thereto we had no amounts recorded related to trademarks.

We used the following significant projections and assumptions to determine fair value under the relief from royalty method: revenues; royalty rate; tax expense; terminal growth rate; and discount rate. For the SmartStop^® trademark, the projections underlying this relief from royalty model were forecasted for eight years and then a terminal value calculation was applied. For the Strategic Storage^® trademark, the projections underlying the relief from royalty model were forecasted for seven years. Applying the selected pretax royalty rates to the applicable revenue base in each period yielded pretax income for each of our trademarks. These pretax totals were tax effected utilizing the applicable tax rate to arrive at net, after-tax cash flows. The net, after-tax cash flows were then discounted to present value utilizing an appropriate discount rate. The present value of the after-tax cash flows were then added to the present value of the amortization tax benefit (considering the 15-year amortization of intangible assets pursuant to U.S. tax legislation) to arrive at the recommended fair values for the trademarks.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

As of September 30, 2021 and December 31, 2020, $15.7 million was recorded related to the SmartStop® Self Storage trademark, which is an indefinite lived trademark. As of September 30, 2021 and December 31, 2020, approximately $0.4 million and $0.5 million, respectively, was recorded to the “Strategic Storage^®” trademark, which is a definite lived trademark. The total estimated future amortization expense of the “Strategic Storage^®” trademark asset for the years ending December 31, 2021, 2022, 2023, 2024, and thereafter is approximately $35,000, $140,000, $140,000, $70,000 and none, respectively.

We qualitatively evaluate whether any triggering events or changes in circumstances have occurred subsequent to our annual impairment test that would indicate an impairment condition may exist. If any change in circumstance or triggering event occurs, and results in a significant impact to our revenue and profitability projections, or any significant assumption in our valuation methods is adversely impacted, the impact could result in a material impairment charge in the future.

See Note 5 - Self Administration Transaction for additional information.

Revenue Recognition

Self Storage Operations

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.

Managed REIT Platform

We earn property management and asset management revenue, pursuant to the respective property management and advisory agreement contracts, in connection with providing services to the Managed REITs. We have determined under ASC 606 – Revenue from Contracts with Customers (“ASC 606”), that the performance obligation for the property management services and asset management services are satisfied as the services are rendered. While we are compensated for our services on a monthly basis, these services represent a series of distinct daily services in accordance with ASC 606. Such revenue is recorded in the Managed REIT Platform revenue line within our consolidated statements of operations.

The Managed REITs’ advisory agreements also provide for reimbursement to us of our direct and indirect costs of providing administrative and management services to the Managed REITs. These reimbursements include costs incurred in relation to organization and offering services provided to the Managed REITs and the reimbursement of salaries, bonuses, and other expenses related to benefits paid to our employees while performing services for the Managed REITs. The Managed REITs’ property management agreements also provide reimbursement to us for the property manager’s costs of managing the properties. Reimbursable costs include wages and salaries and other expenses that arise in operating, managing and maintaining the Managed REITs’ properties.

Under ASC 606, direct reimbursement of such costs does not represent a separate performance obligation from our obligation to perform property management and asset management services. The reimbursement income is considered variable consideration, and is recognized as the costs are incurred, subject to limitations on the Managed REIT Platform’s ability to incur offering costs or limitations imposed by the advisory agreements. We have elected to separately record such revenue in the Reimbursable costs from Managed REITs line within our consolidated statements of operations.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

Additionally, we earn revenue in connection with our Tenant Programs joint ventures with our Managed REITs. We also earn development and construction management revenue from services we provide in connection with the project design, coordination and oversite of development and certain capital improvement projects undertaken by the Managed REITs. We recognize such revenue in the Managed REIT Platform revenue line within our consolidated statements of operations. See Note 10 – Related Party Transactions, for additional information regarding revenue generated from our Managed REIT Platform.

Allowance for Doubtful Accounts

Tenant accounts receivable is reported net of an allowance for doubtful accounts. Management records this general reserve estimate based upon a review of the current status of accounts receivable. It is reasonably possible that management’s estimate of the allowance will change in the future.

Real Estate Facilities

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		30-40 years
Site Improvements		7-10 years

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 amortize in-place lease intangibles on a straight-line basis over the estimated future benefit period. As of September 30, 2021, the gross amount allocated to in-place lease intangibles was approximately $68.0 million and accumulated amortization of in-place lease intangibles totaled approximately $53.2 million. As of December 31, 2020, the gross amounts allocated to in-place lease intangibles were approximately $47.3 million and accumulated amortization of in-place lease intangibles totaled approximately $45.7 million.

The total estimated future amortization expense of intangible assets related to our self storage properties for the years ending December 31, 2021, 2022, 2023, 2024, 2025 and thereafter is approximately $3.5 million, $10.0 million, $0.1 million, $0.1 million, $0.1 million, and $1.0 million, respectively.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

As of September 30, 2021, the gross amount of the intangible assets related to the Managed REITs contracts and the customer relationships related to the Tenant Programs joint ventures was approximately $6.8 million and accumulated amortization of those intangibles totaled approximately $4.1 million. As of December 31, 2020, the gross amount of the intangible assets related to the Managed REITs contracts and the customer relationships related to the Tenant Programs joint ventures was approximately $18.1 million and accumulated amortization of those intangibles totaled approximately $7.3 million.

The total estimated future amortization expense for such intangible assets for the years ending December 31, 2021, 2022, 2023, 2024 and 2025 is approximately $0.2 million, $0.7 million, $0.7 million, $0.7 million, and $0.3 million, respectively.

We evaluate whether any triggering events or changes in circumstances have occurred subsequent to our annual impairment test that would indicate an impairment condition may exist. If any change in circumstance or triggering event occurs, and results in a significant impact to our revenue and profitability projections, or any significant assumption in our valuations methods is adversely impacted, the impact could result in a material impairment charge in the future.

See Note 5 – Self Administration Transaction and Note 10 – Related Party Transactions for additional information.

Debt Issuance Costs

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; amounts incurred related to obtaining revolving debt are included in the debt issuance costs line on our consolidated balance sheet (see Note 6). Debt issuance costs are amortized using the effective interest method.

As of September 30, 2021, the gross amount of debt issuance costs related to our revolving credit facility totaled approximately $2.5 million and accumulated amortization of debt issuance costs related to our revolving credit facility totaled approximately $0.5 million. As of December 31, 2020, the gross amount of debt issuance costs related to our revolving credit facility totaled none, and accumulated amortization of debt issuance costs related to our revolving credit facility totaled none.

As of September 30, 2021, the gross amount allocated to debt issuance costs related to non-revolving debt totaled approximately $5.8 million and accumulated amortization of debt issuance costs related to non-revolving debt totaled approximately $2.2 million. As of December 31, 2020, the gross amount allocated to debt issuance costs related to non-revolving debt totaled approximately $12.0 million and accumulated amortization of debt issuance costs related to non-revolving debt totaled approximately $7.9 million.

Organizational and Offering Costs

We pay our Former 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 Former 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 Former 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 Former 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 Former 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 Former Dealer Manager, payment of attendance fees required for employees of our Former Dealer Manager or other affiliates to attend retail seminars and public seminars sponsored by these broker-dealers, or to defray other distribution-related expenses. 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.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(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 net 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 investments not classified as long term are recorded in other income (expense) and represented a loss of approximately $3.6 million and a gain of approximately $0.3 million for the three months ended September 30, 2021 and 2020, respectively, and represented a loss of approximately $3.9 million and $0.3 million for the nine months ended September 30, 2021 and 2020, respectively.

Redeemable Common Stock

We adopted a share redemption program (“SRP”) that enables stockholders to sell their shares to us in limited circumstances.

We record amounts that are redeemable under the SRP 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 SRP 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. When we determine we have a mandatory obligation to repurchase shares under the SRP, we reclassify such obligations from temporary equity to a liability based upon their respective settlement values.

On August 26, 2019, our board of directors approved a partial suspension of our SRP, effective as of September 27, 2019, so that common shares were redeemable at the option of the holder only in connection with (i) death or disability of a stockholder, (ii) confinement to a long-term care facility, or (iii) other exigent circumstances. In order to preserve cash in light of the uncertainty relating to COVID-19 and its potential impact on our overall financial results, on March 30, 2020, our board of directors approved the complete suspension of our SRP, effective on April 29, 2020. Due to the complete suspension, we were unable to honor redemption requests made during the quarter ended March 31, 2020 or the quarter ended June 30, 2020.

On August 20, 2020, our board of directors determined that it would be in our best interests to partially reinstate the SRP, effective as of September 23, 2020.

Currently, our redemption program remains suspended other than for redemptions sought in connection with a stockholder’s death, qualifying disability, confinement to a long-term care facility or other exigent circumstances.

During the nine months ended September 30, 2021, approximately 320,000 shares, or $3.9 million, were requested to be redeemed in accordance with our policies; $2.2 million of which were fulfilled in April and July 2021, and $1.7 million of which were included in accounts payable and accrued liabilities as of September 30, 2021, and fulfilled in October 2021.

For the year ended December 31, 2020, we received redemption requests in accordance with our policies totaling approximately $2.0 million (approximately 0.2 million shares), approximately $1.3 million of which were fulfilled during the year ended December 31, 2020, with the remaining approximately $0.7 million included in accounts payable and accrued liabilities as of December 31, 2020 and fulfilled in January 2021.

Accounting for Equity Awards

We issue equity based awards in two forms: (1) restricted stock awards consisting of shares of our common stock and (2) long-term incentive plan units of our Operating Partnership (“LTIP Units”), both of which may be issued subject to either time based vesting criteria or performance based vesting criteria restrictions. For time based awards granted which contain a graded vesting schedule, compensation cost is recognized as an expense on a straight-line basis over the requisite service period as if the award was, in substance, a single award. For performance based awards, compensation cost is recognized

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

over the requisite service period if and when we determine the performance condition is probable of being achieved. We record the cost of such equity based awards based on the grant date fair value, and have elected to record forfeitures as they occur.

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

•

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 along with the assets and liabilities described in Note 3 – Real Estate Facilities and Note 5 – Self Administration Transaction. 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. Additionally, certain such assets and liabilities are required to be fair valued periodically or valued pursuant to ongoing fair value requirements and impairment analyses and have been valued subsequently utilizing the same techniques noted above. 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.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

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 September 30, 2021 and December 31, 2020. 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.

	September 30, 2021				December 31, 2020
	Fair Value		Carrying Value		Fair Value		Carrying Value
Fixed Rate Secured Debt	$	357,100,000	$	341,590,867	$	316,000,000	$	301,988,969

As of September 30, 2021, and December 31, 2020, we had interest rate swaps, interest rate caps, and net investment hedges (See Notes 6 and 8). 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 analyses reflect the contractual terms of the derivatives, 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 consider the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

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 September 30, 2021, 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 (loss). The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. Amounts are reclassified out of other comprehensive (loss) income into earnings (loss) when the hedged net investment is either sold or substantially liquidated.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

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 equal net income as calculated in accordance with GAAP). For income tax purposes, distributions to common stockholders are characterized as ordinary dividends, capital gain dividends, or as nontaxable distributions. To the extent that we make a distribution in excess of our current or accumulated earnings and profits, the distribution will be a non-taxable return of capital, reducing the tax basis in each U.S. stockholder’s shares, and the amount of each distribution in excess of a U.S. stockholder’s tax basis in its shares will be taxable as gain realized from the sale of its shares. 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, local, and foreign 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, our TRS performs additional services for our customers and provides the advisory and property management services to the Managed REITs and otherwise generally engages in any real estate or non-real estate related business. The TRS is subject to corporate federal and state income tax.

Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities. As of September 30, 2021, the net deferred tax liability of approximately $7.2 million was comprised of a deferred tax liability of approximately $0.6 million related to our intangible assets acquired in the Self Administration Transaction, and a net deferred tax liability of approximately $6.6 million recorded at certain of our Canadian entities’ properties. The $6.6 million net deferred tax liability is comprised of a gross deferred tax liability of approximately $10.0 million, net of a gross deferred tax asset of approximately $3.4 million.

As of December 31, 2020, the net deferred tax liability of approximately $8.4 million was comprised of a deferred tax liability of approximately $2.6 million related to our intangible assets acquired in the Self Administration Transaction, and a net deferred tax liability of approximately $5.8 million recorded at certain of our Canadian entities’ properties. The $5.8 million net deferred tax liability is comprised of a gross deferred tax liability of approximately $9.6 million, net of a gross deferred tax asset of approximately $3.8 million.

The income tax benefit for the nine months ended September 30, 2021 and 2020 includes a deferred tax benefit of approximately $2.1 million and $3.1 million, respectively, and a current tax expense of approximately $0.1 million and 0.1, respectively.

The Company recorded a net combined foreign, federal, and state income tax benefit of approximately $0.1 million and $0.1 million for the three months ended September 30, 2021 and 2020, respectively, which are included in other in our consolidated statements of operations. At September 30, 2021 and December 31, 2020, there were no material unrecognized tax benefits. Interest and penalties relating to uncertain tax positions will be recognized in income tax expense when incurred. As of September 30, 2021 and December 31, 2020, the Company had no interest or penalties related to uncertain tax positions. Income taxes payable are classified within accounts payable and accrued liabilities in the consolidated balance sheets. As of November 4, 2021, the tax years 2017-2020 remain open to examination by the major taxing jurisdictions to which we are subject.

Concentration

No single self storage customer represents a significant concentration of our revenues. For the month of September 2021, approximately 21%, 21%, and 12% of our rental income was concentrated in California, Florida, and the Greater

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

Toronto Area of Canada, respectively. Our properties within the aforementioned geographic areas are dispersed therein, operating in multiple different regions and sub-markets.

Segment Reporting

Our business is composed of two reportable segments: (i) self storage operations and (ii) the Managed REIT Platform business. Please see Note 9 – Segment Disclosures for additional detail.

Convertible Preferred Stock

We classify our Series A Convertible Preferred Stock on our consolidated balance sheets using the guidance in ASC 480‑10‑S99. Our Series A Convertible Preferred Stock can be redeemed by us on or after the fifth anniversary of its issuance, or if certain events occur, such as the listing of our common stock on a national securities exchange, a change in control, or if a redemption would be required to maintain our REIT status. Additionally, if we do not maintain our REIT status the holder can require redemption. As the shares are contingently redeemable, and under certain circumstances not solely within our control, we have classified our Series A Convertible Preferred Stock as temporary equity.

We have analyzed whether the conversion features in our Series A Convertible Preferred Stock should be bifurcated under the guidance in ASC 815‑10 and have determined that bifurcation is not necessary.

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 common shares outstanding during the period, excluding unvested restricted stock. Diluted earnings per share is computed by including the dilutive effect of the conversion of all potential common stock equivalents (which includes unvested restricted stock and convertible preferred stock) and the adding back of the Series A Convertible Preferred Stock dividends. For all periods presented, the dilutive effect of convertible preferred stock and unvested restricted stock was not included in the diluted weighted average shares as such impact was antidilutive.

Recently Issued Accounting Guidance

In August 2020, the FASB issued ASU 2020-06, "Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)." The new guidance simplifies the accounting for convertible instruments and amends the guidance for the derivatives scope exception for contracts in an entity’s own equity. Additionally, this standard amends the related earnings per share guidance. The guidance in ASU 2020-06 becomes effective for fiscal years beginning after December 15, 2021. The Company has evaluated and determined that there will be no material impact upon adoption of the new standard on its consolidated financial statements and related disclosures.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)." ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

Note 3. Real Estate Facilities

The following summarizes the activity in real estate facilities during the nine months ended September 30, 2021:

Real estate facilities
Balance at December 31, 2020	$	1,210,102,582
Facilities acquired through merger with SST IV		324,344,636
Facility acquisitions		30,277,691
Impact of foreign exchange rate changes		(319,507	)
Improvements and additions⁽¹⁾		9,041,995
Other facility acquisitions⁽²⁾		15,689,143
Disposition due to deconsolidation⁽²⁾		(15,689,143	)
Balance at September 30, 2021	$	1,573,447,397
Accumulated depreciation
Balance at December 31, 2020	$	(115,903,045	)
Depreciation expense		(29,455,038	)
Disposition due to deconsolidation⁽²⁾		62,466
Impact of foreign exchange rate changes		82,095
Balance at September 30, 2021	$	(145,213,522	)

⁽¹⁾Included herein is an addition to our Riverview, Florida property of approximately $2.3 million, which added approximately 25,400 net rentable square feet and approximately 150 additional units, and opened in June of 2021. The remainder consists primarily of solar panel installations, LED lighting conversions, and other general capital improvements.

⁽²⁾Such activity represents the acquisition of a property completed by SST VI OP, which as of the acquisition date was consolidated within our consolidated financial statements. On May 1, 2021, we deconsolidated SST VI OP as we were no longer the primary beneficiary, which resulted in the removal of such facility from our consolidated balance sheet. Our investment in SST VI OP is now included within “Investments in and advances to managed REITs” within our consolidated balance sheet as of September 30, 2021.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

Merger with Strategic Storage Trust IV, Inc.

On November 10, 2020, we, SST IV Merger Sub, LLC, a Maryland limited liability company and our wholly-owned subsidiary (“SST IV Merger Sub”), and SST IV entered into an agreement and plan of merger (the “SST IV Merger Agreement”). Pursuant to the terms and conditions set forth in the SST IV Merger Agreement, on March 17, 2021 (the “SST IV Merger Date”), we acquired SST IV by way of a merger of SST IV with and into SST IV Merger Sub, with SST IV Merger Sub being the surviving entity.

On the SST IV Merger Date, each share of SST IV Common Stock outstanding immediately prior to the SST IV Merger Date (other than shares owned by SST IV and its subsidiaries or us and our subsidiaries) was automatically converted into 2.1875 Class A Shares (the “SST IV Merger Consideration”). Immediately prior to the SST IV Merger Effective Time, all shares of SST IV Common Stock that were subject to vesting and other restrictions also became fully vested and converted into the right to receive the SST IV Merger Consideration.

As a result of the SST IV Merger, we acquired all of the real estate owned by SST IV, consisting of 24 wholly-owned self storage facilities located across 9 states and 6 self storage real estate joint ventures located in the Greater Toronto Area of Ontario, Canada. As of the SST IV Merger Date, the real estate joint ventures consisted of three operating properties and three properties in various stages of development.

The following table reconciles the total consideration transferred in the SST IV Merger:

Fair value of consideration transferred:
Common stock issued	$	231,412,470
Cash⁽¹⁾		54,250,000
Other		365,703
Total consideration transferred	$	286,028,173

⁽¹⁾The approximately $54.3 million in cash was primarily used to pay off approximately $54.0 million of SST IV debt that we did not assume in the Merger, as well as approximately $0.3 million in transaction costs.

We issued approximately 23.1 million Class A Shares to the former SST IV stockholders in connection with the SST IV Merger. The estimated fair value of our common stock issued was determined primarily based on an income approach to value the properties as well as our Managed REIT Platform, adjusted for market related adjustments and illiquidity discounts, less the estimated fair value of our debt and other liabilities.

These fair value measurements are based on significant inputs not observable in the market and thus represent a Level 3 measurement as discussed in Note 2. The key assumptions used in estimating the fair value of our common stock included a marketability discount of 6%, and projected annual net operating income.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

The following table summarizes the relative fair values of the assets acquired and liabilities assumed in the SST IV Merger:

Assets Acquired:
Land	$	54,385,560
Buildings		257,618,228
Site improvements		12,340,848
Construction in process		1,467,090
Intangible assets		20,052,449
Investments in real estate joint ventures		17,495,254
Cash and cash equivalents, and restricted cash		7,763,490
Other assets		4,145,394
Total assets acquired	$	375,268,313
Liabilities assumed:
Debt⁽¹⁾	$	81,165,978
Accounts payable and other liabilities		8,074,162
Total liabilities assumed	$	89,240,140
Total net assets acquired	$	286,028,173

⁽¹⁾Debt assumed includes approximately $40.5 million of debt on the KeyBank SST IV CMBS Loan, a $0.1 million fair market value discount on such debt, and the approximately $40.8 million SST IV TCF Loan. See Note 6 – Debt for additional information.

Self Storage Facility Acquisitions

On April 16, 2021, we purchased a self storage facility (the “Oakville III Property”) located in the Greater Toronto Area of Ontario, Canada. We acquired the Oakville III Property from an unaffiliated third party for a purchase price of approximately CAD $25.0 million, plus closing costs. Upon acquisition, the property was approximately 42% occupied.

On May 27, 2021, we purchased a self storage facility located in Riverside, California (the “Riverside III Property”). The purchase price for the Riverside III Property was approximately $10.7 million, plus closing costs. Upon acquisition, the property was approximately 95% occupied.

The following table summarizes the purchase price allocation for the real estate related assets acquired during the nine months ended September 30, 2021:

Acquisition	Acquisition Date	Real Estate Assets		Construction in Process		Investments in Real Estate Joint Ventures		Intangibles		Total⁽¹⁾		2021 Revenue⁽²⁾		2021 Net Operating Income⁽²⁾⁽³⁾
SST IV Merger	3/17/2021	$	324,344,636	$	1,467,090	$	17,495,254	$	20,052,449	$	363,359,429	$	16,639,098	$	11,371,421
Oakville III	4/16/2021	$	20,061,046	$	-	$	-	$	332,840	$	20,393,886	$	337,612	$	147,672
Riverside III	5/27/2021	$	10,216,645	$	-	$	-	$	450,145	$	10,666,790	$	286,170	$	188,706

⁽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 have been included in our consolidated statements of operations since their respective acquisition dates. Such amount does not include activity from our investments in real estate joint ventures, which are included in Other in our consolidated statements of operations. For additional information. See Note 4 – Investments in Unconsolidated Real Estate Ventures.

⁽³⁾	Net operating income excludes corporate general and administrative expenses, interest expenses, depreciation, amortization and acquisition related expenses.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

Potential Acquisitions

On September 27, 2021, one of our subsidiaries executed a purchase and sale agreement with a group of third parties unaffiliated with us for the acquisition of a portfolio consisting of: (i) existing operating self storage facilities, (ii) a self storage facility currently under construction, and (iii) a parcel of land (the “Toronto Portfolio”). The Toronto Portfolio is located in and around the Greater Toronto Area of Ontario, Canada. The purchase price for the Toronto Portfolio is approximately $158.7 million Canadian Dollars (“CAD”), plus closing costs. There can be no assurance that we will complete this acquisition. If we fail to acquire the Toronto Portfolio, in addition to the incurred acquisition costs, we may also forfeit earnest money as a result.

On September 29, 2021, one of our subsidiaries executed a purchase and sale agreement with an unaffiliated third party for the acquisition of an existing operating self storage facility located in the city of Bradenton, Florida (the “Bradenton Property”). The purchase price for the Bradenton Property is approximately $15.7 million, plus closing costs. There can be no assurance that we will complete this acquisition. If we fail to acquire the Bradenton Property, in addition to the incurred acquisition costs, we may also forfeit earnest money as a result.

On October 26, 2021, one of our subsidiaries executed a purchase and sale agreement with an unaffiliated third party for the acquisition of a parcel of land currently under development into a self storage facility that will include approximately 45,000 rentable square feet of storage space and approximately 11,000 square feet of boat/RV parking (the “Apopka Property”). The Apopka Property is located in the city of Apopka, Florida. The purchase price for the Apopka Property is approximately $11.6 million, plus closing costs. There can be no assurance that we will complete this acquisition. If we fail to acquire the Apopka Property, in addition to the incurred acquisition costs, we may also forfeit earnest money as a result.

We may assign certain of the above purchase and sale agreements in part or in full to one of our Managed REITs.

Acquisition Completed by SST VI OP and Other SST VI OP Events

On March 10, 2021, SmartStop OP made an investment of $5.0 million in SST VI OP, in exchange for common units of limited partnership interest in SST VI OP.

On March 11, 2021, SST VI OP, through a wholly-owned subsidiary, used these funds, in part, to acquire its first self storage facility in Phoenix, Arizona for approximately $16 million. In connection with SST VI OP’s acquisition of the Phoenix property, we provided a $3.5 million mezzanine loan to a wholly-owned subsidiary of SST VI OP with an initial interest rate of 8.5% and term of six months; as well as a 180 day extension option which was exercised and increased the interest rate to 9.25% for the remainder of the term.

In addition to the mezzanine loan, SST VI financed the acquisition, in part, by obtaining a third party mortgage loan on the property of approximately $9 million, which had an initial interest rate of 3.5%, and a three year term, with two one year extension options.

SST VI commenced its private offering in the first quarter of 2021. Given our level of ownership as of March 31, 2021, SST VI OP and its subsidiaries were consolidated in our financial statements, and all related intercompany transactions were eliminated. SST VI raised sufficient equity through its private offering such that, since May 1, 2021, we are now no longer the primary beneficiary, and their operations are no longer consolidated by us.

On April 16, 2021, in connection with SST VI OP’s investment in a real estate joint venture property located in North York, Ontario Canada, we provided an additional $2.1 million mezzanine loan with similar terms as the mezzanine loan discussed above.

Note 4. Investments in Unconsolidated Real Estate Ventures

As a result of the SST IV Merger, we acquired six self storage real estate joint ventures located in the Greater Toronto Area of Ontario, Canada. The real estate joint ventures consist of three operating properties and three properties in various stages of development. These joint venture agreements are with a subsidiary of SmartCentres, an unaffiliated third party, to acquire tracts of land and develop and operate the properties as self storage facilities.

We account for these investments using the equity method of accounting and they are stated at cost and adjusted for our share of net earnings or losses and reduced by distributions. Equity in earnings (loss) will generally be recognized based on our ownership interest in the earnings (loss) of each of the unconsolidated investments.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

The following table summarizes our investments in unconsolidated real estate ventures:

JV Property

Location

Date Real Estate

Venture Acquired

Land

Date Real Estate Venture Became Operational

Equity

Ownership %

Carrying Value

of Investment as of

September 30, 2021

Oshawa

Oshawa, Ontario

September 2018

July 2020

50%

1,653,387

East York

East York, Ontario

January 2019

November 2020

50%

6,383,405

Brampton

Brampton, Ontario

September 2019

January 2021

50%

2,364,348

Vaughan

Vaughan, Ontario

August 2019

August 2021

50%

2,940,716

Scarborough

Scarborough, Ontario

August 2020

Under Development

50%

2,571,606

Kingspoint

Kingspoint, Ontario

February 2021

Under Development

50%

2,581,353

18,494,815

Financing Agreement

We, through our acquisition of the Oshawa, East York, Brampton, Vaughan, and Scarborough joint venture partnerships, also became party to a master mortgage commitment agreement (the “MMCA”) with SmartCentres Storage Finance LP (the “SmartCentres Lender”) (collectively, the “SmartCentres Financing”). The SmartCentres Lender is an affiliate of SmartCentres. The initial maximum amount available is approximately CAD $60 million, however, the SmartCentres Financing includes an accordion feature such that borrowings pursuant thereto may be increased up to approximately CAD $120 million subject to certain conditions set forth in the MMCA. On August 18, 2021, the Kingspoint property was added to the MMCA, increasing the available capacity to approximately CAD $68.5 million. As of September 30, 2021, approximately CAD $62.6 million was outstanding on the SmartCentres Financing. The proceeds of the SmartCentres Financing will be used to finance the development and construction of the JV Properties.

The SmartCentres Financing is secured by first mortgages on each of the JV Properties. Interest on the SmartCentres Financing is a variable annual rate equal to the aggregate of: (i) the BA Equivalent Rate, plus: (ii) a margin based on the External Credit Rating, plus (iii) a margin under the Senior Credit Facility, each as defined and described further in the MMCA. As of September 30, 2021, the total interest rate was approximately 2.6%.

The SmartCentres Financing had an original maturity date of May 11, 2021. On April 30, 2021, the SmartCentres Financing was amended and the maturity date was extended until May 11, 2024, and contains two one year extension options. Monthly interest payments are initially capitalized on the outstanding principal balance. Upon a JV Property generating sufficient Net Cash Flow (as defined in the MMCA), the SmartCentres Financing provides for the commencement of quarterly payments of interest. As of September 30, 2021, no such payments had commenced. The borrowings advanced pursuant to the SmartCentres Financing may be prepaid without penalty, subject to certain conditions set forth in the MMCA.

The SmartCentres Financing contains customary affirmative and negative covenants, agreements, representations, warranties and borrowing conditions (including a loan to value ratio of no greater than 70% with respect to each JV Property) and events of default, all as set forth in the MMCA. We serve as a full recourse guarantor with respect to 50% of the SmartCentres Financing.

Note 5. Self Administration Transaction

Overview

On June 28, 2019, we, our Operating Partnership and our TRS entered into a series of transactions, agreements, and amendments to our existing agreements and arrangements with our then-sponsor SAM and SmartStop OP Holdings, LLC (“SS OP Holdings”), a subsidiary of SAM, pursuant to which, effective June 28, 2019, we acquired the self storage advisory, asset management and property management businesses and certain joint venture interests of SAM, along with certain other assets of SAM.

As a result of the Self Administration Transaction, SAM is no longer our sponsor, and we became self-managed and succeeded to the advisory, asset management and property management businesses and certain joint ventures previously in place for us, SST IV (until the SST IV Merger Date), SSGT II, and we acquired the internal capability to originate, structure

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

and manage additional future investment products which would be sponsored by SmartStop REIT Advisors, LLC (“SRA”), our indirect subsidiary.

Agreements

Contribution Agreement

On June 28, 2019, we along with our Operating Partnership, as contributee, and SAM and SS OP Holdings, as contributor, entered into a Contribution Agreement (the “Contribution Agreement”) whereby the Operating Partnership acquired the Self Storage Platform and certain other assets, including (a) SAM’s, or its subsidiaries’, 100% membership interests in our Former External Advisor and Former External Property Managers, the advisor and property manager for SST IV, the advisor and property manager for SSGT II, entities related to the Tenant Programs joint ventures, and certain entities related to SAM’s self storage business in Canada; (b) all equipment, furnishings, fixtures and computer equipment as set forth in the Contribution Agreement; (c) certain personal property as set forth in the Contribution Agreement; (d) all intellectual property, goodwill, licenses and sublicenses granted and obtained with respect thereto (including all rights to the “SmartStop®” brand and “Strategic Storage®” related trademarks); (e) SAM’s processes, practices, procedures and workforce related to the self storage business (then consisting of a total of approximately 350 on-site self storage employees, regional and district managers, other personnel and the then current executive management team of the Company), and (f) certain other assets as set forth in the Contribution Agreement, in exchange for $769,126 in cash, assumption of existing debt in the amount of $15 million, and 8,698,956 Class A-1 limited partnership units of the Operating Partnership (“Class A-1 Units”) and 3,283,302 Class A-2 limited partnership units of the Operating Partnership (“Class A-2 Units”). For a description of the Class A-1 Units and Class A-2 Units, see below under the heading “Third Amended and Restated Limited Partnership Agreement and Redemption of Limited Partner Interest Agreement.”

Third Amended and Restated Limited Partnership Agreement and Redemption of Limited Partner Interest Agreement

On June 28, 2019, we entered into the Third Amended and Restated Limited Partnership Agreement of the Operating Partnership (as amended, the “Operating Partnership Agreement”), which amended and superseded the Second Amended and Restated Limited Partnership Agreement (the “Former OP Agreement”), and a Redemption of Limited Partner Interest Agreement (the “Redemption of Limited Partner Interest Agreement”) with the Former External Advisor and the Operating Partnership, pursuant to which the Operating Partnership redeemed all of the limited partnership interests held by the Former External Advisor in the Operating Partnership. As a result of the Redemption of Limited Partner Interest Agreement and the Self Administration Transaction, the Former External Advisor’s parent entity, SAM and its affiliates no longer hold either their previously existing 20,000 limited partnership units or their special limited partnership interest in the Operating Partnership; however, SAM received cash of $200,000 and Class A-1 Units and Class A-2 Units in the Operating Partnership, as further described below.

In addition, the revised Operating Partnership Agreement created two new classes of units issued to SS OP Holdings in connection with the Self Administration Transaction: Class A-1 Units and Class A-2 Units.

The Class A-1 Units are subject to the general restrictions on transfer contained in the Operating Partnership Agreement. In addition, through June 28, 2021 (the “Lock-Up Expiration”), the Class A-1 Units could not be sold, pledged, or otherwise transferred or encumbered except in certain limited circumstances set forth in the Contribution Agreement. The Class A-1 Units were and are now otherwise entitled to all rights and duties of the Class A limited partnership units in the Operating Partnership, including cash distributions and the allocation of any profits or losses in the Operating Partnership. The Class A-2 Units may convert into Class A-1 Units as earnout consideration, as described below. The Class A-2 Units are not entitled to cash distributions or the allocation of any profits or losses in the Operating Partnership until the Class A-2 Units are converted into Class A-1 Units.

The conversion features of the Class A-2 Units are as follows: (A) the first time the aggregate incremental assets under management, as amended (“AUM”) (as defined in the Operating Partnership Agreement) of the Operating Partnership equals or exceeds $300,000,000, one-third of the Class A-2 Units will automatically convert into Class A-1 Units, (B) the first time the incremental AUM of the Operating Partnership equals or exceeds $500,000,000, an additional one-third of the Class A-2 Units will automatically convert into Class A-1 Units, and (C) the first time the incremental AUM equals or exceeds $700,000,000, the remaining one-third of the Class A-2 Units will automatically convert into Class A-1 Units (each an “Earnout Achievement Date”). On each Earnout Achievement Date, the Class A-2 Units will automatically convert into Class A-1 Units based on an earnout exchange ratio, which is equal to $10.66 divided by the then current value of our Class A-1 Units, as provided in the Operating Partnership Agreement. On March 24, 2021, 1,094,434 Class A-2 Units held by SS OP Holdings were converted into 1,121,795 Class A-1 Units pursuant to the achievement of the first tier of earnout consideration.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

On October 19, 2021, the Nominating and Corporate Governance Committee of our board of directors and our board of directors approved resolutions providing that the denominator in the calculation of the earnout exchange ratio will be $10.66 (the value of the Class A common stock at the time of the Self Administration Transaction, pursuant to which the earnout was established) for the next 12 months, until October 19, 2022. Thereafter, the denominator in the calculation of the earnout exchange ratio will be as provided in the Operating Partnership Agreement.

The Class A-2 Units conversion rights will expire seven years following the closing date of the Self Administration Transaction. Notwithstanding the foregoing, the earnout consideration will be earned and automatically convert in the event of an “Earnout Acceleration Event” (as defined in the Operating Partnership Agreement), which includes each of the following: certain change of control events (as described in the Operating Partnership Agreement), or H. Michael Schwartz being removed either as a member of our board of directors or as one of our executive officers for any reason other than for cause. For additional information, see the Accounting Considerations Subsequent to Acquisition section further below.

Fair Value of Consideration Transferred

We accounted for the Contribution Agreement and Membership Interest Purchase Agreement discussed above as a business combination under the acquisition method of accounting. The estimated fair value of the consideration transferred totaled approximately $111.3 million and consisted of the following:

Estimated Fair Value of Consideration Transferred
Cash⁽¹⁾	$	3,918,185
Class A-1 Units		63,643,000
Class A-2 Units (contingent earnout)		30,900,000
Total Consideration Transferred		98,461,185
Fair value of our preexisting 50% equity interests		12,800,000
Total	$	111,261,185

⁽¹⁾We assumed a net asset of approximately $0.5 million, which per the Contribution Agreement we were required to pay to SAM the value thereof and such amount was included above as cash consideration.

As a result of this acquisition, we remeasured the book value of our preexisting 50% equity method investments in our Tenant Programs joint ventures to fair value, which resulted in a gain of approximately $8.0 million which was presented in the gain resulting from acquisition of unconsolidated affiliates line-item in our consolidated statements of operations as of the date of the acquisition. The fair values of the Tenant Programs joint ventures were determined based on a discounted cash flow valuation of the projected cash flows.

The estimated fair value of the Class A-1 Units issued was determined using the Company’s then current net asset value, which was based on an income approach to value the properties and the valuation of the assets acquired in the Self Administration Transaction, as described herein, adjusted for market related adjustments and illiquidity discounts.

These fair value measurements are based on significant inputs not observable in the market and thus represent a Level 3 measurement as discussed in Note 2. The key assumptions used in estimating the fair value of the Class A-1 Units and Class A-2 Units consideration included (i) a marketability discount of 5%, (ii) a capitalization rate of 5.16% and (iii) annual net operating income.

The estimated fair value of the contingent earnout, Class A-2 Units, was determined using the net asset value calculation described above and further adjusted based on a discounted probability weighted forecast of achieving the requisite AUM thresholds. Subsequent to the completion of the Self Administration Transaction, such liability is required to be recorded at fair value.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

Allocation of Consideration

The consideration transferred pursuant to the Self Administration Transaction was allocated to the assets acquired and liabilities assumed, based upon their estimated fair values as of the acquisition date. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed:

Identifiable Assets Acquired at Fair Value
Cash and cash equivalents	$	36,443
Restricted cash		94,999
Land		975,000
Building		5,389,000
Site Improvements		136,000
Equipment, furniture and fixtures		651,000
Investments in Managed REITs		5,600,000
Other assets		1,084,629
Intangibles - customer relationships		1,600,000
Trademarks		19,800,000
Intangibles - management contracts		24,900,000
Total identifiable assets acquired	$	60,267,071

Identifiable Liabilities Assumed at Fair Value
Debt	$	19,219,126
Accounts payable and accrued expenses		722,286
Deferred tax liabilities, net		7,415,654
Total liabilities assumed	$	27,357,066
Net identifiable assets acquired	$	32,910,005
Goodwill		78,372,980
Non-controlling interest related to consolidated Tenant Programs joint ventures		(21,800	)
Net assets acquired	$	111,261,185

The fair value estimate of property and equipment utilized a combination of the income, cost and market approaches, depending on the characteristics of the asset classification. The fair value of land was determined using the market approach, which considers sales of comparable assets and applies compensating factors for any differences specific to the particular assets. Equipment was valued based on estimated replacement cost. Building and site improvements were valued using the cost approach using a direct cost model built on estimates of replacement cost.

The intangible assets acquired primarily consist of trademarks and the property management and advisory contracts related to the Managed REITs. The value of the property management and advisory contracts were determined based on a discounted cash flow valuation of the projected cash flows of the acquired contracts. The deferred tax liability is the result of differences between the GAAP carrying value of certain amortizing assets and the carrying value for tax purposes related to activities which are conducted through our TRS.

The goodwill recognized was supported by several factors, including the Company becoming self-managed; additionally, the Managed REIT Platform business brings an established management platform with numerous strategic benefits including growth from new income streams and the ability to offer new products.

The results of the acquisition have been included in our consolidated statements of operations since the closing date of the transaction.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

Administrative Services Agreement

On June 28, 2019, we along with our Operating Partnership, the TRS and SSA (collectively, the “Company Parties”) entered into an Administrative Services Agreement with SAM (the “Administrative Services Agreement”), which, as amended, requires that the Company Parties will be reimbursed for providing certain operational and administrative services to SAM which may include, without limitation, accounting and financial support, IT support, HR support, advisory services and operations support, and administrative support as set forth in the Administrative Services Agreement and SAM will be reimbursed for providing certain operational and administrative services to the Company Parties which may include, without limitation, due diligence support, marketing, fulfillment and offering support, events support, insurance support, and administrative and facilities support. SAM and the Company Parties will reimburse one another based on the actual costs of providing their respective services. Additionally, SAM will pay the Company Parties an allocation of rent and overhead for the portion it occupies in the Ladera Office. Such agreement has a term of three years and is subject to certain adjustments as defined in the agreement.

Accounting Considerations Subsequent to Acquisition

The emergence and spread of the COVID-19 pandemic caused significant volatility and disruption in the economy and the capital markets beginning in the first quarter of 2020. The increase in consumer and investor uncertainty had an impact on our Managed REITs, specifically the Managed REITs’ ability to attract investor equity in the face of economic weakness and volatility. The volatility and uncertainty in the economy caused various broker dealers that our Managed REITs had selling agreements with to temporarily halt non-traded REIT sales within their advisory networks. Effective April 30, 2020, the Managed REITs suspended their offerings. Given the disruption that COVID-19 had on the capital markets and our Managed REITs and their ability to raise additional equity, accordingly we evaluated the various intangible assets and liabilities associated with the sponsorship of the Managed REITs for impairment as of March 31, 2020.

Based on the above facts, we revised our capital raise projections for the Managed REITs. We then evaluated the revised projected undiscounted future cash flows of our amortizing intangible assets to determine if they exceeded their respective carrying values and we determined that certain trademarks and management contracts acquired in the Self Administration Transaction were impaired. For such assets we recorded impairments to reduce their carrying value to their respective fair values. For our indefinite-lived trademark we determined that the carrying value was in excess of its fair value and therefore recorded an impairment equal to the difference. As a result, we recorded impairment charges totaling approximately $11.7 million to intangible assets, consisting of approximately $3.3 million related to our trademarks, approximately $2.2 million related to the management contracts of SST IV and approximately $6.2 million related to the management contracts of SSGT II during the quarter ended March 31, 2020. We similarly evaluated goodwill for impairment and determined that the carrying value of the goodwill related to our Managed REIT segment was in excess of fair value, and therefore impaired and we recognized an impairment charge of approximately $24.7 million during the quarter ended March 31, 2020. Goodwill related to our self storage operations was not impaired.

In connection with the Self Administration Transaction, we acquired a special limited partnership interest in SST IV and SSGT II. This interest, in certain situations, may entitle us to various subordinated distributions under SST IV’s and SSGT II’s operating partnership agreements. Given the revised capital projections noted above, the projected future subordinated distributions had revised estimated fair values less than their carrying values. We deemed this difference to be an other than temporary decline in value and have therefore recorded an impairment charge of approximately $4.4 million during the quarter ended March 31, 2020.

As a result of the Self Administration Transaction, we recorded a deferred tax liability, which is the result of differences between the GAAP carrying value of certain amortizing assets and the carrying value for tax purposes of certain assets related to activities which are conducted through our TRS. As the impairment charge reduced the GAAP carrying value of such assets, primarily the Managed REIT management contracts, we adjusted the value of our deferred tax liabilities by pro-rata amounts, reducing the deferred tax liabilities in aggregate by approximately $2.4 million, and recorded such adjustment as other income within the other line-item in our consolidated statement of operations during the quarter ended March 31, 2020.

In connection with the Self Administration Transaction, we issued the Class A-2 Units, as a form of contingent consideration, which is required to be revalued at each reporting period, based on the discounted probability weighted forecast of achieving the requisite AUM thresholds or the occurrence of an Earnout Acceleration Event. The revised capital raise projections discussed above reduced the probability of the Class A-2 Units converting, which had the result of decreasing the estimated fair value of the contingent earnout liability from approximately $31.1 million as of December 31, 2019 to approximately $23.9 million as of the date of the impairment analysis.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

On March 24, 2021, we, as the general partner of our Operating Partnership, entered into Amendment No. 3 (the “Amendment”) to the Operating Partnership Agreement, to make certain revisions to Exhibit D (Description of Class A-2 Units) to the Operating Partnership Agreement.

The Amendment (i) revised the definition of “AUM” in connection with the earnout of the Class A-2 Units so that it (A) includes assets acquired by us and our affiliates and (B) includes 100% of any joint venture assets, rather than a pro rata percentage, and (ii) clarifies that the Class A-2 Units may be transferred after the two-year holding period.

On March 24, 2021, 1,094,434 Class A-2 Units held by SS OP Holdings, were converted into 1,121,795 Class A-1 Units pursuant to the achievement of the first tier of earnout consideration. The fair value of the contingent earnout liability was reduced as the Class A-2 Units were converted into Class A-1 Units in our Operating Partnership and the fair value of such units was reclassified to the noncontrolling interest in our Operating Partnership line in the equity section of our consolidated balance sheet.

As of September 30, 2021, pursuant to the revised definition of “AUM” as described above, we had added incremental assets under management of approximately $398 million, and the estimated fair value of the contingent earnout liability was approximately $20.6 million.

Note 6. Debt

The Company’s debt is summarized as follows:

Loan	September 30, 2021			December 31, 2020			Interest Rate			Maturity Date
KeyBank CMBS Loan⁽¹⁾	$	94,870,683		$	95,000,000			3.89	%	8/1/2026
KeyBank Florida CMBS Loan⁽²⁾		52,000,000			52,000,000			4.65	%	5/1/2027
Midland North Carolina CMBS Loan⁽³⁾		45,931,091			46,427,994			5.31	%	8/1/2024
Canadian CitiBank Loan^(4)(10)	-				87,337,110
CMBS SASB Loan^(5)(11)(10)	-				235,000,000
CMBS Loan⁽⁶⁾		104,000,000			104,000,000			5.00	%	2/1/2029
Secured Loan^{(7) (8)(10)}	-				85,512,000
Stoney Creek Loan^(9)(10)	-				5,712,058
Torbarrie Loan^(9)(10)	-				6,423,863
SST IV CMBS Loan		40,500,000			-			3.56	%	2/1/2030
SST IV TCF Loan		40,782,500			-			3.75	%	3/30/2023
Credit Facility Term Loan - USD⁽¹²⁾		250,000,000			-			1.88	%	3/17/2026
Credit Facility Revolver - USD⁽¹²⁾		207,201,288			-			1.93	%	3/17/2024
Oakville III BMO Loan⁽¹¹⁾		12,783,875			-			2.66	%	5/16/2024
Ladera Office Loan		4,035,891			4,099,152			4.29	%	11/1/2026
Premium on secured debt, net		253,202			461,823
Debt issuance costs, net		(3,540,318	)		(4,021,767	)
Total debt	$	848,818,212		$	717,952,233

⁽¹⁾

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 became due monthly. The separate assets of these encumbered properties are not available to pay our other debts.

⁽²⁾

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.

⁽³⁾

This fixed rate loan encumbers 11 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 became due monthly.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

⁽⁴⁾	This variable rate loan encumbered 10 of our Canadian properties and the amounts shown above are in USD based on the foreign exchange rate in effect of the date presented. We purchased interest rate caps that cap CDOR at 3.0% until October 15, 2021.

⁽⁵⁾

This variable rate loan encumbered 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).

⁽⁶⁾	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.

⁽⁷⁾

This variable rate loan encumbered 16 properties (Colorado Springs, Aurora, 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, Gilbert).

⁽⁸⁾

This loan had an $85.5 million interest rate swap that effectively fixed the interest rate on the Secured Loan at 5.1% until August 1, 2020. To continue hedging our interest rate risk related to this loan, we purchased an interest rate cap on August 3, 2020 with a notional amount of $80 million that effectively capped LIBOR at 0.5% through August 2, 2021.

⁽⁹⁾

This variable rate loan bore interest at a rate of 1.95% plus Royal Bank of Canada Prime Rate, which was approximately 2.45% as of December 31, 2020, and in no event would the total interest rate have fallen below 4.65% per annum. The amounts shown above are in USD based on the foreign exchange rate in effect as of December 31, 2020.

⁽¹⁰⁾	On March 17, 2021, these loans were paid off in full in conjunction with the SST IV Merger, and an aggregate net loss on extinguishment of debt of approximately $2.4 million was recorded.

⁽¹¹⁾	The amounts shown above are in USD based on the foreign exchange rate in effect as of the date presented.

⁽¹²⁾	For additional information regarding the Credit Facility, see below.

The weighted average interest rate on our consolidated debt, excluding the impact of our interest rate hedging activities, as of September 30, 2021 was approximately 3.04%. We are subject to certain restrictive covenants relating to the outstanding debt, and as of September 30, 2021, we were in compliance with all such covenants.

Credit Facility

On March 17, 2021, we, through our Operating Partnership (the “Borrower”), entered into a credit facility with KeyBank, National Association, as administrative agent, KeyBanc Capital Markets, LLC, Wells Fargo Securities, Citibank, N.A., and BMO Capital Markets, as joint book runners and joint lead arrangers, and certain other lenders party thereto (the “Credit Facility”).

The initial aggregate amount of the Credit Facility was $500 million, which consisted of a $250 million revolving credit facility (the “Credit Facility Revolver”) and a $250 million term loan (the “Credit Facility Term Loan”). The Borrower had the right to increase the amount available under the Credit Facility by an additional $350 million (the “Accordion Feature”), for an aggregate amount of $850 million, subject to certain conditions. The Credit Facility also includes sublimits of (a) up to $25 million for letters of credit and (b) up to $25 million for swingline loans; each of these sublimits are part of, and not in addition to, the amounts available under the Credit Facility Revolver. Borrowings under the Credit Facility may be in either U.S. dollars (each, a “US Borrowing”) or Canadian dollars (each, a “CAD Borrowing”). Upon the closing of the Credit Facility, the Borrower immediately made the following drawdowns: (i) under the Credit Facility Revolver (A) $199 million in USD Borrowings and (B) CAD $2.5 million in CAD Borrowings (approximately $2 million equivalent in U.S. dollars), and (ii) under the Credit Facility Term Loan (A) $150 million in USD Borrowings and (B) CAD $124.7 million in CAD Borrowings (approximately $100 million equivalent in U.S. dollars), for an aggregate amount of approximately $451 million. We used the initial proceeds primarily to pay off certain existing indebtedness as well as indebtedness of SST IV in connection with the SST IV Merger.

The maturity date of the Credit Facility Revolver is March 17, 2024, subject to a one-year extension option. The maturity date of the Credit Facility Term Loan is March 17, 2026, which cannot be extended. The Credit Facility may be prepaid or terminated at any time without penalty; provided, however, that the lenders shall be indemnified for certain breakage costs.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

Amounts borrowed under the Credit Facility Revolver and Credit Facility Term Loan bear interest based on both the type of borrowing (either ABR Loans or Eurodollar Loans, each as defined in the Credit Facility), as well as the currency of the borrowing. ABR Loans bear interest at the lesser of (x) the alternate base rate plus the applicable rate, or (y) the maximum rate. Eurodollar Loans bear interest at the lesser of (a) the adjusted LIBO rate or CDOR rate (depending on whether the loan is a US Borrowing or a CAD Borrowing, respectively) for the interest period in effect plus the applicable rate, or (b) the maximum rate. The corresponding applicable rate varies depending on the type of borrowing and our consolidated leverage ratio. As of September 30, 2021, advances under the Credit Facility Term Loan bear interest at 180 basis points over 30-day LIBOR or 30-day CDOR, while advances under the Credit Facility Revolver bear interest at 185 basis points over 30-day LIBOR or 30-day CDOR. The Credit Facility is also subject to an annual unused fee based upon the average amount of the unused portion of the Credit Facility Revolver, which varies from 15 bps to 25 bps, depending on the size of the unused amount, as well as whether a Security Interest Termination Event (defined below) has occurred.

The Credit Facility is fully recourse, jointly and severally, to us, our Operating Partnership, and certain of our subsidiaries (the “Subsidiary Guarantors”). In connection with this, we, our Operating Partnership, and our Subsidiary Guarantors executed guarantees in favor of the lenders. The Credit Facility is also cross-defaulted to (i) any recourse debt of ours, our Operating Partnership, or the Subsidiary Guarantors and (ii) any non-recourse debt of ours, our Operating Partnership, or the Subsidiary Guarantors of at least $75 million.

The Credit Facility is initially secured by a pledge of equity interests in the Subsidiary Guarantors. However, upon the achievement of certain security interest termination conditions, the pledges shall be released and the Credit Facility shall become unsecured (the “Security Interest Termination Event”). The Security Interest Termination Event occurs at the Borrower’s election, once the Borrower satisfies the following security interest termination conditions: (i) a fixed charge coverage ratio of no less than 1.50:1.00; (ii) an unsecured interest coverage ratio of not less than 2.00:1.00; (iii) a consolidated capitalization rate leverage ratio of not greater than 60%; and (iv) a secured debt ratio of no greater than 40%. Following the occurrence of the Security Interest Termination Event, certain terms and conditions of the Credit Facility are modified, including, but not limited to: (i) in certain circumstances, a reduction in the applicable interest rate under the Credit Facility, (ii) the modification or addition of certain financial covenants, (iii) the addition of a floor of at least $25 million for any cross-defaulted recourse debt of ours, our Operating Partnership, or any Subsidiary Guarantor, and (iv) in certain circumstances, a reduction in the annual unused fee for the Credit Facility Revolver.

The Credit Facility contains certain customary representations and warranties, affirmative, negative and financial covenants, borrowing conditions, and events of default. In particular, the financial covenants imposed include: a maximum leverage ratio, a minimum fixed charge coverage ratio, a minimum tangible net worth, certain limits on both secured debt and secured recourse debt, certain payout ratios of dividends paid to core funds from operations, limits on unhedged variable rate debt, and minimum liquidity. If an event of default occurs and continues, the Borrower is subject to certain actions by the administrative agent, including, without limitation, the acceleration of repayment of all amounts outstanding under the Credit Facility.

On March 30, 2021, we paid down $15 million in USD borrowings on the Credit Facility Revolver, and on April 16, 2021 and May 25, 2021, we made US Borrowing draws of $4.5 million and $15 million, respectively, on the Credit Facility Revolver. Additionally, on May 3, 2021, we converted all of our CAD Borrowings to USD Borrowings. As of September 30, 2021, we had an aggregate of approximately $457.2 million outstanding on the Credit Facility, all of which was in USD Borrowings.

On October 7, 2021, the Borrower and lenders who were party to the Credit Facility amended the Credit Facility to increase the commitment on the Credit Facility Revolver by $200 million for a total commitment of $450 million. In connection with the increased commitments, additional lenders were added to the Credit Facility. The commitments on the Credit Facility Term Loan remain unchanged. As a result of this amendment, the aggregate commitment on the Credit Facility is now $700 million. In addition, the Accordion Feature was also amended such that Borrower has the right to increase the aggregate amount of the Credit Facility by an additional $350 million, for an aggregate amount of up to $1.05 billion, subject to certain conditions.

As of October 15, 2021, the Borrower has borrowed approximately $227 million of the $450 million current capacity of the Credit Facility Revolver and all $250 million of the $250 million current capacity of the Credit Facility Term Loan.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

SST IV CMBS Loan

On March 17, 2021, in connection with the SST IV Merger, we assumed a $40.5 million CMBS financing with KeyBank as the initial lender pursuant to a mortgage loan (the “SST IV CMBS Loan”). The SST IV CMBS Loan is secured by a first mortgage or deed of trust on each of seven properties owned by us (Jensen Beach, Texas City, Riverside, Las Vegas IV, Puyallup, Las Vegas V, and Plant City). The separate assets of these encumbered properties are not available to pay our other debt. The loan has a maturity date of February 1, 2030. Monthly payments due under the loan agreement (the “SST IV CMBS Loan Agreement”) are interest-only, with the full principal amount becoming due and payable on the maturity date.

The amounts outstanding under the SST IV CMBS Loan bear interest at an annual fixed rate equal to 3.56%. 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 SST IV CMBS Loan Agreement.

The loan documents for the SST IV CMBS Loan contain: customary affirmative and negative 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 in favor of KeyBank, we serve as a non-recourse guarantor with respect to the SST IV CMBS Loan.

SST IV TCF Loan

On March 17, 2021, in connection with the SST IV Merger, we assumed a term loan with TCF National Bank, a national banking association (“TCF”), as lead arranger and administrative agent for up to $40.8 million (the “SST IV TCF Loan”). The SST IV TCF Loan is secured by a first mortgage on each of the Ocoee Property, the Ardrey Kell Property, the Surprise Property, the Escondido Property, and the Punta Gorda Property (the “SST IV TCF Properties”).

The interest rate on the SST IV TCF Loan is equal to the greater of (i) 3.75% per annum or (ii) an adjustable annual rate equal to LIBOR plus 3.00%. Upon achievement of certain financial conditions, the interest rate will be equal to the greater of (i) 3.50% per annum or (ii) an adjustable annual rate equal to LIBOR plus 2.50%. As of September 30, 2021, the interest rate on the SST IV TCF Loan was 3.75%. In connection with the SST IV Merger, we also assumed an interest rate cap with a notional amount of $30.5 million, such that in no event will LIBOR exceed 0.75% thereon through May 2022.

The SST IV TCF Loan matures on March 30, 2023, with two one-year extension options subject to certain conditions outlined further in the SST IV TCF Loan documents. During the initial term, monthly payments are interest only; during any extension periods, monthly payments are principal and interest. The SST IV TCF Loan may be prepaid in whole or in part, subject to certain conditions as set forth in the SST IV TCF loan agreement.

The SST IV TCF loan agreement also contains a debt service coverage ratio covenant applicable to the borrowers whereby, commencing on March 31, 2022, the SST IV TCF Properties must have a debt service coverage ratio of not less than 1.20 to 1.00. The SST IV TCF loan agreement also contains: customary affirmative, negative and financial covenants; agreements; representations; warranties and borrowing conditions; and events of default all as set forth in such loan agreement.

We serve as a limited recourse guarantor with respect to the SST IV TCF Loan during the initial term. Our obligations as guarantor may decrease based on the debt service coverage ratio on the SST IV TCF Properties.

Oakville III BMO Loan

On April 15, 2021, we purchased the Oakville III Property. We partially financed the Oakville III property acquisition with a loan from Bank of Montreal (the “Oakville III BMO Loan”), which is secured by a first lien on the Oakville III property. The loan is denominated in Canadian dollars and the proceeds from the loan were approximately CAD $16.3 million. We provided a full recourse guaranty on the loan, which will remain in effect until the property achieves 75% physical occupancy, at which point such guaranty will be reduced to 50% of the loan balance. The interest only loan is prepayable at any time without penalty, and bears interest at a rate of 2.25% + CDOR. The Oakville III BMO Loan contains customary affirmative and negative covenants, agreements, representations, warranties and borrowing conditions.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

The following table presents the future principal payment requirements on outstanding debt as of September 30, 2021:

2021	$	605,061
2022		2,914,430
2023		44,166,657
2024		267,028,340
2025		2,869,187
2026 and thereafter		534,521,653
Total payments		852,105,328
Premium on secured debt, net		253,202
Debt issuance costs, net		(3,540,318	)
Total	$	848,818,212

Note 7. Preferred Equity

Series A Convertible Preferred Stock

On October 29, 2019 (the “Commitment Date”), we entered into a preferred stock purchase agreement (the “Purchase Agreement”) with Extra Space Storage LP (the “Investor”), a subsidiary of Extra Space Storage Inc. (NYSE: EXR), pursuant to which the Investor committed to purchase up to $200 million in preferred shares (the aggregate shares to be purchased, the “Preferred Shares”) of our new Series A Convertible Preferred Stock (the “Series A Convertible Preferred Stock”), in one or more closings (each, a “Closing,” and collectively, the “Closings”). The initial closing (the “Initial Closing”) in the amount of $150 million occurred on the Commitment Date, and the second and final closing in the amount of $50 million occurred on October 26, 2020. We incurred approximately $3.6 million in issuance costs related to the Series A Convertible Preferred Stock, which were recorded as a reduction to Series A Convertible Preferred stock on our consolidated balance sheets.

The shares of Series A Convertible Preferred Stock rank senior to all other shares of our capital stock, including our common stock, with respect to rights to receive dividends and to participate in distributions or payments upon any voluntary or involuntary liquidation, dissolution or winding up of the Company. Dividends payable on each share of Series A Convertible Preferred Stock will initially be equal to a rate of 6.25% per annum. If the Series A Convertible Preferred Stock has not been redeemed on or prior to the fifth anniversary date of the Initial Closing, the dividend rate will increase an additional 0.75% per annum each year thereafter to a maximum of 9.0% per annum until the tenth anniversary of the Initial Closing, at which time the dividend rate shall increase 0.75% per annum each year thereafter until the Series A Convertible Preferred Stock is redeemed or repurchased in full. The dividends are payable in arrears for the prior calendar quarter on or before the 15^th day of March, June, September and December of each year.

Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of Series A Convertible Preferred Stock will be entitled to receive a payment equal to the greater of (i) aggregate purchase price of all outstanding Preferred Shares, plus any accrued and unpaid dividends (the “Liquidation Amount”) and (ii) the amount that would have been payable had the Preferred Shares been converted into common stock pursuant to the terms of the Purchase Agreement immediately prior to such liquidation.

Subject to certain additional redemption rights, as described herein, we have the right to redeem the Series A Convertible Preferred Stock for cash at any time following the fifth anniversary of the Initial Closing. The amount of such redemption will be equal to the Liquidation Amount. Upon the listing of our common stock on a national securities exchange (the “Listing”), we have the right to redeem any or all outstanding Series A Convertible Preferred Stock at an amount equal to the greater of (i) the amount that would have been payable had such Preferred Shares been converted into common stock pursuant to the terms of the Purchase Agreement immediately prior to the Listing, and then all of such Preferred Shares were sold in the Listing, or (ii) the Liquidation Amount, plus a premium amount (the “Premium Amount”) of 10%, 8%, 6%, 4%, or 2% if redeemed prior to the first, second, third, fourth, or fifth anniversary dates of issuance, respectively, or 0% if redeemed thereafter, as set forth in the Articles Supplementary. Upon a change of control event, we have the right to redeem any or all outstanding Series A Convertible Preferred Stock at an amount equal to the greater of (i) the amount that would have been payable had the Preferred Shares been converted into common stock pursuant to the terms of the Purchase Agreement immediately prior to such change of control or (ii) the Liquidation Amount, plus the Premium Amount, as set forth in the Articles Supplementary. In addition, subject to certain cure provisions, if we fail to maintain our status as a real estate investment trust, the holders of Series A Convertible Preferred Stock have the right to require us to repurchase the Series A Convertible Preferred Stock at an amount equal to the Liquidation Amount with no Premium Amount.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

At any time after the earlier to occur of (i) the second anniversary of the Initial Closing or (ii) 180 days after a Listing, the holders of Series A Convertible Preferred Stock have the right to convert any or all of the Series A Convertible Preferred Stock held by such holders into common stock at a rate per share equal to the quotient obtained by dividing the Liquidation Amount by the conversion price. The conversion price is $10.66, as may be adjusted in connection with stock splits, stock dividends and other similar transactions.

The holders of Series A Convertible Preferred Stock are not entitled to vote on any matter submitted to a vote of our stockholders, except that in the event that the dividend for the Series A Convertible Preferred Stock has not been paid for at least four quarters (whether or not consecutive), the holders of Series A Convertible Preferred Stock have the right to vote together with our stockholders on any matter submitted to a vote of our stockholders, upon which the holders of the Series A Convertible Preferred Stock and holders of common stock shall vote together as a single class. The number of votes applicable to a share of Series A Convertible Preferred Stock will be equal to the number of shares of common stock a share of Series A Convertible Preferred Stock could have been converted into as of the record date set for purposes of such stockholder vote. This foregoing limited voting right shall cease when all past dividend periods have been paid in full. In addition, the affirmative vote of the holders of a majority of the outstanding shares of Series A Convertible Preferred Stock is required in certain customary circumstances, as well as other circumstances, such as (i) our real estate portfolio exceeding a leverage ratio of 60% loan-to-value, (ii) entering into certain transactions with our Executive Chairman as of the Commitment Date, or his affiliates, (iii) effecting a merger (or similar) transaction with an entity whose assets are not at least 80% self storage related and (iv) entering into any line of business other than self storage and ancillary businesses, unless such ancillary business represents revenues of less than 10% of our revenues for our last fiscal year.

In connection with the issuance of the Series A Convertible Preferred Stock, we and the Investor also entered into an investors’ rights agreement (the “Investors’ Rights Agreement”) which provides the Investor with certain customary protections, including demand registration rights and “piggyback” registration rights with respect to our common stock issued to the Investor upon conversion of the Preferred Shares.

As of September 30, 2021, there were 200,000 Preferred Shares outstanding with an aggregate liquidation preference of approximately $203.2 million, which consists of $150 million from the Initial Closing, $50 million from a closing on October 26, 2020 and approximately $3.2 million of accumulated and unpaid distributions. As of December 31, 2020, there were 200,000 Preferred Shares outstanding with an aggregate liquidation preference of approximately $202.9 million, which consists of $150 million from the Initial Closing, $50 million from a closing on October 26, 2020 and approximately $2.9 million of accumulated and unpaid distributions.

Note 8. 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 (loss) (“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 interest rate 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) within our consolidated statements of operations.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

Foreign Currency Hedges

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 and foreign currency options 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. A foreign currency option contract is a commitment by the seller of the option to deliver, solely at the option of the buyer, a certain amount of currency at a certain price on a specific date. 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 (loss) 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 September 30, 2021:

Notional

Amount

Strike

Effective Date

or Date Assumed

Maturity Date

Interest Rate Swaps:

LIBOR Swap

235,000,000

1.79

June 15, 2019

February 15, 2022

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

CDOR Cap

11,700,000

⁽¹⁾

3.00

May 28, 2019

October 15, 2021

Foreign Currency Forward:

Denominated in CAD

125,925,000

⁽¹⁾

1.2593

April 12, 2021

April 12, 2023

Denominated in CAD

122,020,000

⁽¹⁾

1.2202

May 6, 2021

April 12, 2022

⁽¹⁾	Notional amounts shown are denominated in CAD.

On February 10, 2020, we settled an existing CAD currency forward, receiving a net settlement of approximately $0.5 million and simultaneously entered into a one year CAD $95 million foreign currency forward. On February 10, 2021, we rolled this currency forward into a two month CAD $95 million foreign currency forward, with a settlement date of April 12, 2021. On April 12, 2021, we settled this foreign currency forward, paying a net settlement of approximately $4.5 million, and simultaneously entered into a new CAD $125.9 million currency forward with a settlement date of April 12, 2023. On May 6, 2021, we entered into a second currency forward, for approximately CAD $122 million, with a settlement date of April 12, 2022.

A portion of our gain (loss) from our settled and unsettled foreign currency hedges is recorded net in foreign currency hedge contract gain (loss) in our consolidated statements of comprehensive income (loss), the other portion, a gain of approximately $3.1 million and $3.8 million related to the portion that is not designated for hedge accounting, is recorded in other income (expense) within our consolidated statements of operations for the three and nine months ended September 30, 2021, respectively.

The following table summarizes the terms of our derivative financial instruments as of December 31, 2020:

	Notional Amount			Strike			Effective Date or Date Assumed	Maturity Date
Interest Rate Swaps:
LIBOR Swap	$	235,000,000			1.79	%	June 15, 2019	February 15, 2022
Interest Rate Cap:
LIBOR Cap	$	80,000,000			0.50	%	August 3, 2020	August 2, 2021
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
CDOR Cap		11,700,000	⁽¹⁾		3.00	%	May 28, 2019	October 15, 2021
Foreign Currency Forward:
Denominated in CAD	$	95,000,000	⁽¹⁾		1.3340		February 10, 2020	February 10, 2021

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

⁽¹⁾	Notional amount shown is denominated in CAD.

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 September 30, 2021 and December 31, 2020:

	Asset/Liability Derivatives
	Fair Value
Balance Sheet Location	September 30, 2021		December 31, 2020
Interest Rate Swaps
Accounts payable and accrued liabilities	$	1,501,310	$	4,379,424
Foreign Currency Hedges
Other assets	$	4,720,605	$	—
Accounts payable and accrued liabilities		—		3,270,910

Note 9. Segment Disclosures

We operate in two reportable business segments: (i) self storage operations and (ii) our Managed REIT Platform business.

Management evaluates performance based upon property net operating income (“NOI”). For our self storage operations, NOI is defined as leasing and related revenues, less property level operating expenses. NOI for the Company’s Managed REIT Platform business represents Managed REIT Platform revenues less Managed REIT Platform expenses.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

The following tables summarize information for the reportable segments for the periods presented:

	Three Months Ended September 30, 2021
				Managed REIT			Corporate
	Self Storage			Platform			and Other			Total
Revenues:
Self storage rental revenue	$	40,695,622		$	—		$	—		$	40,695,622
Ancillary operating revenue		2,007,411			—			—			2,007,411
Managed REIT Platform revenue		—			1,263,029			—			1,263,029
Reimbursable costs from Managed REITs		—			972,551			—			972,551
Total revenues		42,703,033			2,235,580			—			44,938,613
Operating expenses:
Property operating expenses		12,593,191			—			—			12,593,191
Managed REIT Platform expense		—			587,704			—			587,704
Reimbursable costs from Managed REITs		—			972,551			—			972,551
General and administrative		—			—			5,232,950			5,232,950
Depreciation		10,561,402			—			186,935			10,748,337
Intangible amortization expense		3,495,615			215,121			—			3,710,736
Acquisition expenses		211,985			—			—			211,985
Contingent earnout adjustment		—			700,000			—			700,000
Total operating expenses		26,862,193			2,475,376			5,419,885			34,757,454
Income (loss) from operations		15,840,840			(239,796	)		(5,419,885	)		10,181,159
Other income (expense):
Interest expense		(7,759,485	)		—			(58,826	)		(7,818,311	)
Interest expense – accretion of fair market value of secured debt		29,228			—			—			29,228
Interest expense – debt issuance costs		(499,132	)		—			—			(499,132	)
Other		(536,428	)		(11,340	)		(285,934	)		(833,702	)
Net income (loss)	$	7,075,023		$	(251,136	)	$	(5,764,645	)	$	1,059,242

	Nine Months Ended September 30, 2021
				Managed REIT			Corporate
	Self Storage			Platform			and Other			Total
Revenues:
Self storage rental revenue	$	108,303,763		$	—		$	—		$	108,303,763
Ancillary operating revenue		5,591,882			—			—			5,591,882
Managed REIT Platform revenue		—			4,609,060			—			4,609,060
Reimbursable costs from Managed REITs		—			3,250,213			—			3,250,213
Total revenues		113,895,645			7,859,273			—			121,754,918
Operating expenses:
Property operating expenses		35,416,441			—			—			35,416,441
Managed REIT Platform expense		—			1,223,736			—			1,223,736
Reimbursable costs from Managed REITs		—			3,250,213			—			3,250,213
General and administrative		—			—			16,797,252			16,797,252
Depreciation		29,483,726			—			551,339			30,035,065
Intangible amortization expense		7,550,981			1,072,983			—			8,623,964
Acquisition expenses		548,083			—			—			548,083
Contingent earnout adjustment		—			3,219,744			—			3,219,744
Write-off of equity interest and preexisting relationships in SST IV upon acquisition of control		—			8,389,573			—			8,389,573
Total operating expenses		72,999,231			17,156,249			17,348,591			107,504,071
Gain on sale of real estate		178,631			—			—			178,631
Income (loss) from operations		41,075,045			(9,296,976	)		(17,348,591	)		14,429,478
Other income (expense):
Interest expense		(23,612,271	)		—			(132,206	)		(23,744,477	)
Interest expense – accretion of fair market value of secured debt		92,344			—			—			92,344
Interest expense – debt issuance costs		(1,668,502	)		—			—			(1,668,502	)
Net loss on extinguishment of debt		(2,444,788	)		—			—			(2,444,788	)
Other		(110,879	)		1,761,763			(870,001	)		780,883
Net income (loss)	$	13,330,949		$	(7,535,213	)	$	(18,350,798	)	$	(12,555,062	)

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

	Three Months Ended September 30, 2020
				Managed REIT			Corporate
	Self Storage			Platform			and Other			Total
Revenues:
Self storage rental revenue	$	26,706,201		$	—		$	—		$	26,706,201
Ancillary operating revenue		1,431,952			—			—			1,431,952
Managed REIT Platform revenue		—			2,051,021			—			2,051,021
Reimbursable costs from Managed REITs		—			1,173,948			—			1,173,948
Total revenues		28,138,153			3,224,969			—			31,363,122
Operating expenses:
Property operating expenses		9,816,774			—			—			9,816,774
Managed REIT Platform expense		—			329,280			—			329,280
Reimbursable costs from Managed REITs		—			1,173,948			—			1,173,948
General and administrative		—			—			4,012,072			4,012,072
Depreciation		7,863,351			—			140,236			8,003,587
Intangible amortization expense		561,601			1,026,298			—			1,587,899
Acquisition expenses		468,577			—			—			468,577
Contingent earnout adjustment		—			1,600,000			—			1,600,000
Total operating expenses		18,710,303			4,129,526			4,152,308			26,992,137
Income (loss) from operations		9,427,850			(904,557	)		(4,152,308	)		4,370,985
Other income (expense):
Interest expense		(8,048,225	)		—			(45,251	)		(8,093,476	)
Interest expense – accretion of fair market value of secured debt		32,788			—			—			32,788
Interest expense – debt issuance costs		(950,120	)		—			(2,359	)		(952,479	)
Other		(139,829	)		325,514			—			185,685
Net income (loss)	$	322,464		$	(579,043	)	$	(4,199,918	)	$	(4,456,497	)

	Nine Months Ended September 30, 2020
				Managed REIT			Corporate
	Self Storage			Platform			and Other			Total
Revenues:
Self storage rental revenue	$	77,221,013		$	—		$	—		$	77,221,013
Ancillary operating revenue		3,768,213			—			—			3,768,213
Managed REIT Platform revenue		—			5,687,701			—			5,687,701
Reimbursable costs from Managed REITs		—			4,453,863			—			4,453,863
Total revenues		80,989,226			10,141,564			—			91,130,790
Operating expenses:
Property operating expenses		28,686,843			—			—			28,686,843
Managed REIT Platform expense		—			2,512,103			—			2,512,103
Reimbursable costs from Managed REITs		—			4,453,863			—			4,453,863
General and administrative		—			—			11,829,732			11,829,732
Depreciation		23,185,178			—			377,523			23,562,701
Intangible amortization expense		4,950,285			3,525,397			—			8,475,682
Acquisition expenses		593,903			—			—			593,903
Contingent earnout adjustment		—			(5,100,000	)		—			(5,100,000	)
Impairment of goodwill and intangible assets		—			36,465,732			—			36,465,732
Impairment of investments in Managed REITs		—			4,376,879			—			4,376,879
Total operating expenses		57,416,209			46,233,974			12,207,255			115,857,438
Income (loss) from operations		23,573,017			(36,092,410	)		(12,207,255	)		(24,726,648	)
Other income (expense):
Interest expense		(24,581,790	)		—			(135,418	)		(24,717,208	)
Interest expense – accretion of fair market value of secured debt		98,337			—			—			98,337
Interest expense – debt issuance costs		(2,825,162	)		—			(7,078	)		(2,832,240	)
Other		(544,296	)		3,312,206			146,930			2,914,840
Net loss	$	(4,279,894	)	$	(32,780,204	)	$	(12,202,821	)	$	(49,262,919	)

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

The following table summarizes our total assets by segment:

Segments	September 30, 2021			December 31, 2020
Self Storage⁽¹⁾	$	1,534,628,097	⁽¹⁾	$	1,172,178,148	⁽¹⁾
Managed REIT Platform⁽¹⁾		24,762,699	⁽¹⁾		44,482,625	⁽¹⁾
Corporate and Other		46,712,965			65,560,284
Total assets	$	1,606,103,761		$	1,282,221,057

(1)	Included in the assets of the Self Storage and the Managed REIT Platform segments as of September 30, 2021, are approximately $49.8 million and $3.9 million of goodwill, respectively. As of December 31, 2020, such amounts were approximately $45.3 million and $8.4 million of goodwill, respectively.

Note 10. Related Party Transactions

Through the closing of the Self Administration Transaction on June 28, 2019, we incurred expenses under advisory and property management agreements with SAM; commencing on such closing and continuing thereafter we no longer incur such expenses. The Former Dealer Manager Agreement and the Transfer Agent Agreement described below were not impacted by the Self Administration Transaction.

Former Dealer Manager Agreement

In connection with our Primary Offering, our Former 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 of 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 Former Dealer Manager Agreement. In addition, our Former Dealer Manager receives an ongoing stockholder servicing fee as discussed in Note 2 – Summary of Significant Accounting Policies – Organization and Offering Costs.

Affiliated Former Dealer Manager

SAM indirectly owns a 15% non-voting equity interest in our Former Dealer Manager. Affiliates of our Former Dealer Manager own limited partnership interests in our Operating Partnership.

Transfer Agent Agreement

SAM owns 100% of the membership interests of Strategic Transfer Agent Services, LLC, our transfer agent (“Transfer Agent”), which is a registered transfer agent with the SEC. Pursuant to our transfer agent agreement, our Transfer Agent provides transfer agent and registrar services to us. These services are substantially similar to what a third party transfer agent would provide in the ordinary course of performing its functions as a transfer agent, including, but not limited to: providing customer service to our stockholders, processing the distributions and any servicing fees with respect to our shares and issuing regular reports to our stockholder. 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 SRA.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

Fees paid to our Transfer Agent include a fixed quarterly fee, one-time account setup fees, monthly open account fees and fees for investor inquiries. 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 was three years, which term is 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.

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, 2020 and the nine months ended September 30, 2021, as well as any related amounts payable as of December 31, 2020 and September 30, 2021:

	Year Ended December 31, 2020						Nine Months Ended September 30, 2021
	Incurred		Paid		Payable		Incurred		Paid		Payable
Expensed
Transfer Agent fees	$	525,108	$	489,108	$	36,000	$	607,592	$	598,592	$	45,000
Additional paid-in capital
Transfer Agent fees		—		—		—		150,000		150,000		—
Stockholder servicing fee⁽¹⁾		—		645,911		631,429		—		478,603		152,826
Stockholder servicing fee - SST IV⁽²⁾		—		—		—		1,155,887		814,908		340,979
Total	$	525,108	$	1,135,019	$	667,429	$	1,913,479	$	2,042,103	$	538,805

⁽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.

⁽²⁾	Represents the stockholder servicing fee liability assumed in the SST IV Merger.

Please see Note 3 – Real Estate Facilities and Note 5 – Self Administration Transaction for detail regarding additional related party transactions.

Acquisition of Self Storage Platform from SmartStop Asset Management, LLC and Other Transactions

As a result of the Self Administration Transaction, we acquired the self storage sponsorship platform of SmartStop Asset Management, LLC. Accordingly, the advisor and property manager entities of SST IV and SSGT II became our indirect subsidiaries, and we became entitled to receive various fees and expense reimbursements under the terms of the SST IV and SSGT II advisory and property management agreements as described below. In addition, we also own the advisor and property manager entities of SST VI and are entitled to receive various fees and expense reimbursements under the terms of the SST VI advisory and property management agreements as described below.

Advisory Agreement Fees

Our indirect subsidiaries, Strategic Storage Advisor IV, LLC, the advisor to SST IV (the “SST IV Advisor”), SS Growth Advisor II, LLC, the advisor to SSGT II (the “SSGT II Advisor”), and Strategic Storage Advisor VI, LLC, the advisor to SST VI (the “SST VI Advisor”) are or were entitled to receive various fees and expense reimbursements under the terms of the SST IV, SSGT II, and SST VI advisory agreements.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

SST IV Advisory Agreement

The SST IV Advisor provided acquisition and advisory services to SST IV pursuant to an advisory agreement (the “SST IV Advisory Agreement”) to SST IV up until the SST IV Merger on March 17, 2021.

Effective April 30, 2020, SST IV suspended its offering due to various factors, including the uncertainty relating to the ongoing COVID-19 outbreak and its potential economic impact, the status of fundraising in the non-traded REIT industry due to such uncertainty and the termination of their dealer manager agreement. SST IV’s public offering terminated on September 11, 2020.

The SST IV Advisor received a monthly asset management fee equal to 0.0833%, which is one-twelfth of 1%, of SST IV’s aggregate asset value, as defined. The SST IV Advisor was potentially also entitled to various subordinated distributions under SST IV’s operating partnership agreement pursuant to the special limited partnership interest and its cash flow participation distribution rights if SST IV (1) listed its shares of common stock on a national exchange, (2) terminated the SST IV Advisory Agreement, (3) liquidated its portfolio, or (4) entered into an Extraordinary Transaction, as defined in the SST IV operating partnership agreement.

Effective March 17, 2021, in connection with the SST IV Merger, the SST IV Advisory Agreement was terminated and none of the aforementioned subordinated distributions or fees were paid. As a result of us acquiring SST IV and terminating such contracts, we recorded a write-off of approximately $5.3 million related to the carrying value of the SST IV Advisory Agreement contract. Similarly, we recorded a write-off of approximately $1.2 million related to our special limited partnership interest, which per the terms of the SST IV Merger Agreement, terminated without consideration.

As a result of the Self Administration Transaction, we recorded a deferred tax liability, which was the result of the difference between the GAAP carrying value of the SST IV Advisory Agreement and its carrying value for tax purposes. As we reduced the GAAP carrying value of such intangible asset, as noted above, we adjusted the value of our deferred tax liabilities by pro-rata amounts, reducing the deferred tax liabilities in aggregate by approximately $1.3 million, and recorded such adjustment as other income within the other line-item in our consolidated statements of operations.

SSGT II Advisory Agreement

The SSGT II Advisor provides acquisition and advisory services to SSGT II pursuant to an advisory agreement (the “SSGT II Advisory Agreement”). In connection with the SSGT II private placement offering, SSGT II is required to reimburse the SSGT II Advisor for organization and offering costs from the SSGT II private offering pursuant to the SSGT II Advisory Agreement.

Effective as of April 30, 2020, SSGT II suspended its offering due to various factors, including the uncertainty relating to the ongoing COVID-19 outbreak and its potential economic impact, the status of fundraising in the non-traded REIT industry due to such uncertainty and the termination of their dealer manager agreement.

The SSGT II Advisor receives a monthly asset management fee equal to 0.1042%, which is one-twelfth of 1.25%, of SSGT II’s aggregate asset value, as defined.

The SSGT II Advisor may also be potentially entitled to various subordinated distributions under SSGT II’s operating partnership agreement pursuant to the special limited partnership interest and its cash flow participation distribution rights. So long as the SSGT II Advisory Agreement has not been terminated (including by means of non-renewal), SSGT II is required to pay the SSGT II Advisor a distribution from its operating partnership (other than net sale proceeds), pursuant to a special limited partnership interest, equal to 10.0% of any amount distributed to stockholders in excess of the amount required to provide stockholders with an annual aggregate distribution equal to 5.0% (reflective of the weighted average purchase price per share), cumulative within the subject calendar year (as adjusted for partial periods outstanding). Such distribution will be reconciled and paid annually. The cash flow participation distribution may be payable in cash or operating partnership units (or any combination thereof), at the election of the SSGT II Advisor.

Pursuant to SSGT II’s operating partnership agreement if SSGT II (1) lists its shares of common stock on a national exchange, (2) terminates the SSGT II Advisory Agreement, (3) liquidates its portfolio, or (4) merges with another entity or enters into an Extraordinary Transaction, as defined in the SSGT II operating partnership agreement, the SSGT II Advisor may potentially be entitled to various subordinated distributions.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

The SSGT II Advisory Agreement provides for reimbursement of the SSGT II Advisor’s direct and indirect costs of providing administrative and management services to SSGT II.

SST VI Advisory Agreement

The SST VI Advisor provides acquisition and advisory services to SST VI pursuant to an advisory agreement (the “SST VI Advisory Agreement”). In connection with the SST VI private placement offering, SST VI is required to reimburse the SST VI Advisor for organization and offering costs from the SST VI private offering pursuant to the SST VI Advisory Agreement.

Pursuant to the SST VI Advisory Agreement, the SST VI Advisor will receive acquisition fees equal to 1.00% of the contract purchase price of each property SST VI acquires plus reimbursement of any acquisition expenses that SST VI Advisor incurs. The SST VI Advisor also receives a monthly asset management fee equal to 0.0625%, which is one-twelfth of 0.75%, of SST VI’s aggregate asset value, as defined.

The SST VI Advisor may also be potentially entitled to various subordinated distributions under SST VI’s operating partnership agreement if SST VI (1) lists its shares of common stock on a national exchange, (2) terminates the SST VI Advisory Agreement, (3) liquidates its portfolio, or (4) merges with another entity or enters into an Extraordinary Transaction, as defined in the SST VI operating partnership agreement.

The SST VI Advisory Agreement provides for reimbursement of the SST VI Advisor’s direct and indirect costs of providing administrative and management services to SST VI.

Managed REIT Property Management Agreements

Our indirect subsidiaries, Strategic Storage Property Management IV, LLC, SS Growth Property Management II, LLC, and Strategic Storage Property Management VI, LLC (collectively the “Managed REITs Property Managers”), are entitled to receive fees for their services in managing the properties owned by the Managed REITs pursuant to property management agreements entered into between the owner of the property and the applicable Managed REIT’s Property Manager. The Managed REITs’ Property Managers will receive a property management fee equal to 6% of the gross revenues from the properties, generally subject to a monthly minimum of $3,000 per property, plus reimbursement of the costs of managing the properties, and a one-time fee of $3,750 for each property acquired that would be managed by the Managed REITs’ Property Managers. Reimbursable costs and expenses include wages and salaries and other expenses of employees engaged in operating, managing and maintaining such properties. Pursuant to the property management agreements, we through our Operating Partnership employ the on-site staff for the Managed REITs’ properties.

The SST IV and SST VI property managers are entitled to a construction management fee equal to 5% of the cost of a related construction or capital improvement work project in excess of $10,000.

Effective March 17, 2021, in connection with the SST IV Merger, the SST IV property management contracts were terminated. As a result of us acquiring SST IV and terminating such contracts, we recorded a write-off of approximately $1.9 million related to the carrying value of the SST IV property management contracts.

In connection with the Self Administration Transaction, we previously recorded a deferred tax liability, which is the result of the difference between the GAAP carrying value of the SST IV property management contracts and their carrying value for tax purposes. As we reduced the GAAP carrying value of such intangible assets, we adjusted the value of our deferred tax liabilities by pro-rata amounts, reducing the deferred tax liabilities in aggregate by approximately $0.5 million, and recorded such adjustment as other income within the other line-item in our consolidated statement of operations.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

Summary of Fees and Revenue Related to the Managed REITs

Pursuant to the terms of the various agreements described above for the Managed REITs, the following summarizes the related party fees for the three and nine months ended September 30, 2021 and 2020:

	Three Months Ended				Nine Months Ended
Managed REIT Platform Revenues	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Advisory agreement – SST IV⁽¹⁾	$	—	$	813,052	$	716,278	$	2,358,906
Advisory agreement – SSGT II		462,178		281,839		1,383,298		788,932
Advisory agreement – SST VI		59,290		—		87,335		—
Property management agreement – SST IV⁽¹⁾		—		367,256		346,179		1,039,753
Property management agreement – SSGT II		202,523		90,069		499,085		241,624
Property management agreement – SST VI		30,515		—		46,908		—
Tenant Program revenue – SST IV⁽²⁾		—		252,885		285,959		610,635
Tenant Program revenue – SSGT II		158,798		73,011		425,009		152,624
Tenant Program revenue – SST VI		56,259		—		88,496		—
Other Managed REIT revenue⁽³⁾		293,466		172,909		730,513		495,227
Total Managed REIT Platform Revenue	$	1,263,029	$	2,051,021	$	4,609,060	$	5,687,701

⁽¹⁾On March 17, 2021, we acquired SST IV and no longer earn such fees.

₍₂₎

On March 17, 2021, we acquired SST IV and such revenue is now included in ancillary operating revenue in our consolidated statements of operations.

₍₃₎

Such revenues primarily include construction management, development fees, acquisition fees, and other miscellaneous revenues.

Reimbursable costs from Managed REITs includes reimbursement of SST IV (until the SST IV Merger Date), SSGT II, and SST VI Advisors’ direct and indirect costs of providing administrative and management services to the Managed REITs. Additionally, reimbursable costs includes reimbursement pursuant to the property management agreements for reimbursement of the costs of managing the Managed REITs’ properties, including wages and salaries and other expenses of employees engaged in operating, managing and maintaining such properties.

As of September 30, 2021 and December 31, 2020 we had receivables due from the Managed REITs totaling approximately $2.3 million and $0.6 million, respectively. Such amounts are included in investments in and advances to the Managed REITs line-item in our consolidated balance sheets. Such amounts included unpaid amounts relative to the above table, in addition to other direct routine expenditures of the Managed REITs that we directly funded.

Investment in SSGT II OP

On September 21, 2020, a wholly-owned subsidiary of our Operating Partnership (the “Preferred Investor”), entered into a preferred unit purchase agreement (the “SSGT II Unit Purchase Agreement”) with SS Growth Operating Partnership II, L.P. (the “SSGT II OP”) and SSGT II. Pursuant to the terms of the SSGT II Unit Purchase Agreement, the Preferred Investor agreed to purchase, in one or more tranches, up to 1.6 million units of limited partnership interest in SSGT II OP (the “SSGT II Preferred Units”) for an aggregate of up to $40 million (the “SSGT II Investment”). Upon the closing of each tranche of the SSGT II Investment, the Preferred Investor was due an investment fee equal to 1% of the investment amount of such tranche. The Preferred Investor received distributions, payable monthly in arrears, at a rate of 7.25% per annum from the date of investment until 180 days after the date of investment, 8.25% per annum from 181 days after the date of investment until 360 days after the date of investment, and 9.25% per annum thereafter (collectively, the “Pay Rate”). The proceeds of the SSGT II Investment may be used by SSGT II OP to finance self storage acquisition, development, and improvement activities, and working capital or other general partnership purposes. Each SSGT II Preferred Unit had a liquidation preference of $25.00, plus all accumulated and unpaid distributions. The foregoing distributions are payable monthly, and calculated on an actual/360 day basis, and any unpaid distributions accrue at the applicable Pay Rate.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

On September 21, 2020, October 29, 2020, and November 4, 2020, the Preferred Investor invested approximately $6.5 million, $13 million, and $13 million, respectively, in the SSGT II Operating Partnership. On November 12, 2020, SSGT II redeemed $19 million of our SSGT II Preferred Units, reducing our investment in SSGT II Preferred Units to $13.5 million, which was recorded in investments in and advances to Managed REITs in our consolidated balance sheets as of December 31, 2020.

On January 21, 2021, SSGT II redeemed the remaining $13.5 million of our outstanding SSGT II Preferred Units.

As of September 30, 2021 and December 31, 2020, we were potentially required to purchase an additional $7.5 million in SSGT II Preferred Units.

For the three and nine months ended September 30, 2021, we recorded income related to the SSGT II Preferred Units totaling none and approximately $0.1 million, which is recorded within the Other line item in our consolidated statements of operations.

Administrative Services Agreement

For the three and nine months ended September 30, 2021, we incurred fees payable to SAM under the Administrative Services Agreement of approximately $365,000, and $380,000, respectively, which were recorded in the Managed REIT Platform expenses line item in our consolidated statement of operations. For the three and nine months ended September 30, 2020, we incurred fees payable to SAM under the Administrative Services Agreement of approximately $82,000, and $1.9 million, respectively, which were recorded in the Managed REIT Platform expenses line item in our consolidated statements of operations.

We recorded reimbursements from SAM of approximately $155,000 and $420,000 during the three and nine months ended September 30, 2021, respectively, related to services provided to SAM as well as reimbursements of rent and overhead for the portion of the Ladera Office occupied by SAM, which were included in Managed REIT Platform revenue in our consolidated statements of operations. We recorded reimbursements from SAM of approximately $60,000 and $340,000 during the three and nine months ended September 30, 2020, respectively, related to services provided to SAM as well as reimbursements of rent and overhead for the portion of the Ladera Office occupied by SAM, which were included in Managed REIT Platform revenue in our consolidated statement of operations.

As of September 30, 2021 and December 31, 2020, a payable of approximately $7,000 and a receivable of approximately $50,000 was due from SAM related to the Administrative Services Agreement, respectively.

Note 11. Equity Based Compensation

We issue equity based compensation pursuant to the employee and director long-term incentive plan of SmartStop Self Storage REIT, Inc. (the “Plan”). Pursuant to the Plan, we are able to issue various forms of equity based compensation. Through September 30, 2021, we have issued equity based awards in two forms: (1) restricted stock awards consisting of shares of our common stock and (2) long-term incentive plan units of our Operating Partnership (“LTIP Units”).

Through March 2020, we had only issued restricted stock, which shares are subject to a time based vesting period. In April 2020, the Compensation Committee of the Board of Directors approved additional awards for our executive officers, which include (1) performance based awards, and (2) time based awards. For both such awards, the recipient could choose either LTIP Units or restricted stock consisting of shares of our common stock.

The fair value of the restricted stock and the LTIP Units are determined based on an estimated value per share, adjusted for an illiquidity discount due to the illiquid nature of the underlying equity. The fair value of the LTIP Units are further adjusted by applying an additional discount as the LTIP Units are not initially economically equivalent to our restricted stock. For the performance based awards, a fair value was determined for each performance ranking scenario, with stock compensation expense recorded using the fair value of the scenario determined to be probable of achievement.

Time Based Awards

We have granted various time based awards, which generally vest ratably over either one, three, or four years commencing in the year of grant, subject to the recipient’s continued employment or service through the applicable vesting date. All grants of time based restricted stock have limitations on transferability during the vesting period, and the grantee does not have the ability to vote any unvested shares. Transferability during the vesting period depends upon when the grant

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

was made, as follows (i) with respect to grants of time based restricted stock made prior to April 2020, the restriction on transfers applies to the entirety of the grant, regardless of vesting, and (ii) with respect to grants of time based restricted stock made in or subsequent to April 2020, the restriction on transfer applies only to the unvested portion of the restricted stock.

With respect to grants of time based LTIP Units made to our executive officers in 2020 and 2021, distributions began to accrue effective January 1, 2020 and January 1, 2021, respectively, and are payable as distributions are paid on our Class A Shares without regard to whether the underlying awards have vested. With respect to time based restricted stock, distributions accrue on non-vested shares granted and are paid when the underlying restricted shares vest.

Holders of time based LTIP Units receive allocations of profits and losses with respect to the LTIP Units as of the effective date, distributions from the effective date in an amount equivalent to the distributions declared and paid on our Class A Shares, and the same voting rights as holders of common units, voting as a class with each LTIP Unit holder having one vote per LTIP Unit held. Prior to vesting, time based LTIP Units generally may not be transferred, other than by laws of descent and distribution.

The following table summarizes the activity related to our time based awards:

	Restricted Stock					LTIP Units
Time Based Award Grants	Shares			Weighted-Average Grant-Date Fair Value		Units			Weighted-Average Grant-Date Fair Value
Unvested at December 31, 2019		265,806		$	9.53		—		$	—
Granted		72,383		$	9.78		214,521		$	9.09
Vested		(82,351	)	$	9.55		(53,630	)	$	9.09
Forfeited		(6,567	)	$	9.78		—		$	—
Unvested at December 31, 2020		249,271		$	9.58		160,891		$	9.09
Granted		78,192		$	9.85		222,581		$	9.30
Vested		(104,595	)	$	9.64	-			$	—
Forfeited		(2,189	)	$	9.78	-			$	—
Unvested at September 30, 2021		220,679		$	9.64		383,472		$	9.21

Performance Based Awards

With respect to performance based awards, the number of shares of restricted stock granted as of the grant date equaled 100% of the targeted award, whereas the number of LTIP Units granted as of the grant date equaled 200% of the targeted award. The targeted award for each executive was determined and approved by the Compensation Committee of our Board of Directors. The actual number of shares of restricted stock or LTIP Units, as applicable, to be issued upon vesting may range from 0% to 200% of the targeted award, such determination being based upon the results of the performance measure. Performance based awards vest based upon our performance as ranked amongst a peer group of self storage related companies. This comparison will be conducted using a performance measure of average annual same-store revenue growth, analyzed over a three-year period. Earned awards for the 2020 and 2021 grants will vest, as applicable, no later than March 31, 2023 and March 31, 2024, respectively.

Recipients of performance based restricted stock accrue distributions during the performance period, and such distributions will only be payable on the date that any such shares of restricted stock vest, based upon the performance level attained. Recipients of performance based LTIP Units are issued LTIP Units at 200% of the targeted award and are entitled to receive distributions and allocations of profits and losses with respect to the performance based LTIP Units as of the effective date of each award in an amount equal to 10% of the distributions and allocations available to such LTIP Units, until the Distribution Participation Date (as defined in the Operating Partnership Agreement). The remaining 90% of distributions will accrue and will be payable on the Distribution Participation Date based upon the performance level attained and number of performance based LTIP Units that vest. Following the Distribution Participation Date, recipients will be entitled to receive the full amount of distributions and allocations of profits and losses with respect to the vested performance-based LTIP Units, such amount being equivalent to distributions declared and paid on our Class A Shares.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

The following table summarizes our activity related to our performance based awards:

	Restricted Stock				LTIP Units
Performance Based Award Grants	Shares		Weighted-Average Grant-Date Fair Value		Units			Weighted-Average Grant-Date Fair Value
Unvested at December 31, 2019		—	$	—		—		$	—
Granted		5,752	$	9.78		130,638		$	9.09
Vested		—	$	—		—		$	—
Forfeited		—	$	—		—		$	—
Unvested at December 31, 2020		5,752	$	9.78		130,638		$	9.09
Granted		—	$	—		148,387		$	9.30
Vested		—	$	—		—		$	—
Forfeited		—	$	—		(11,918	)	$	9.09
Unvested at September 30, 2021		5,752	$	9.78		267,107		$	9.21

Holders of performance based restricted stock do not have any rights as a stockholder with respect to the unvested portion of such restricted stock awards. Prior to vesting, shares of performance based restricted stock generally may not be transferred, other than by laws of descent and distribution.

Holders of performance based LTIP Units have the same voting rights as holders of common units, voting as a class with each LTIP Unit holder having one vote per LTIP Unit held. Prior to vesting, performance based LTIP Units generally may not be transferred, other than by laws of descent and distribution.

LTIP Units are designed to qualify as “profits interests” in the Operating Partnership for federal income tax purposes. The profits interests’ characteristics of the LTIP Units mean that initially they will not be treated as economically equivalent in value to a common unit and the issuance of LTIP Units will not be a taxable event to the Operating Partnership or the recipient. If and when certain events occur pursuant to applicable tax regulations and in accordance with the Operating Partnership Agreement, LTIP Units may become economically equivalent to common units of limited partnership interest of our Operating Partnership on a one-for-one basis.

As of September 30, 2021, 7,342,685 shares of stock were available for issuance under the Plan.

We recorded approximately $0.8 million and $2.0 million of equity based compensation expense in general and administrative expense during the three and nine months ended September 30, 2021, respectively, compared to approximately $0.5 million and $1.2 million during the three and nine months ended September 30, 2020, respectively. We recorded approximately $20,000 and $60,000 of equity based compensation expense in property operating expenses, within our consolidated statements of operations for the three and nine months ended September 30, 2021, respectively, compared to none during the three and nine months ended September 30, 2020. As of September 30, 2021, there was approximately $5.3 million of total unrecognized compensation expense related to non-vested equity awards. Such cost is expected to be recognized over a weighted-average period of approximately 2.3 years.

On February 26, 2021, we announced the retirement of Michael S. McClure, then our Chief Executive Officer, effective as of April 15, 2021 (the “Transition Date”). In connection with Mr. McClure’s retirement, and in order to provide an orderly transition, we entered into an Executive Transition Services Agreement with Mr. McClure (the “Agreement”) on February 26, 2021, pursuant to which Mr. McClure will provide consulting services to the Company for a twelve-month period (the “Transition Period”) commencing on the Transition Date.

Pursuant to the Agreement, during the Transition Period and subject to the early termination provisions contained in the Agreement, we will pay Mr. McClure a monthly fee as well as provide reimbursement for costs of continuing group health insurance coverage. Mr. McClure’s existing time-based equity awards will continue to vest during the Transition Period and, upon successful completion of the Transition Period, any remaining outstanding unvested time-based equity awards will immediately vest in full. Mr. McClure’s existing performance-based equity awards will remain outstanding and vest on a pro rata basis at the rate of two-thirds of the amount that would have otherwise vested based on the terms of the awards and actual performance of the Company during the performance period.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

In April 2021, the compensation committee of our board of directors approved the 2021 executive compensation terms for our executives, which included (1) performance-based equity grants in the form of either, at the election of the executive, restricted stock awards, or LTIP Units, and (2) time-based equity grants in the form of either, at the election of the executive, restricted stock awards or LTIP Units.

In April 2021, an aggregate of approximately 148,400 LTIP Units were issued to our executive officers in connection with performance-based equity grants. With respect to performance-based equity grants, the number of LTIP Units granted as of the grant date was equal to 200% of the targeted award. These are non-vested grants which shall vest based on ranges from a threshold of 0% to a maximum of 200% of the targeted equity award set for each executive by the compensation committee, with such percentage being determined based upon our ranking as compared to a peer group of publicly traded self storage REITs in terms of the average same-store revenue growth, analyzed over a three-year period.

Similarly, in April 2021 an aggregate of approximately 222,600 LTIP Units were issued to our executive officers in connection with time-based equity grants. These are non-vested grants which shall vest ratably over four years commencing on December 31, 2021, subject to the recipient’s continued employment through the applicable vesting date.

Note 12. 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 October 19, 2021, beginning in October 2021, shares sold pursuant to our distribution reinvestment plan were and will continue to be sold at our new estimated value per share of $15.08 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 $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 September 30, 2021, we had sold approximately 6.5 million Class A Shares and approximately 1.0 million Class T Shares through our DRP Offering.

Share Redemption Program

As described in Note 2 – Redeemable Common Stock, we have an SRP, which is partially suspended. Please refer to Note 2 for additional details. Pursuant to the SRP, we may redeem the shares of stock presented for redemption for cash to the extent that such requests comply with the below terms of our SRP and we have sufficient funds available to fund such redemption.

Our board of directors may amend, suspend or terminate the SRP 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.

On August 20, 2020, our board of directors determined that it would be in the best interests of the Company to amend the terms of the SRP to revise the redemption price per share for all redemptions under the SRP to be equal to the most recently published estimated net asset value per share of the applicable share class (the “SRP Amendment”). Prior to the SRP Amendment, the redemption amount was the lesser of the amount the stockholders paid for their shares or the price per share in the current offering. On October 19, 2021, we declared a new estimated net asset value per share and the redemption price under our SRP immediately changed to $15.08 (our current estimated net asset value per share).

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

There are several limitations in addition to those noted above on our ability to redeem shares under the SRP including, but not limited to:

•

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, 2020, we received redemption requests totaling approximately $2.0 million (approximately 0.2 million shares), approximately $1.3 million of which were fulfilled during the year ended December 31, 2020, with the remaining approximately $0.7 million included in accounts payable and accrued liabilities as of December 31, 2020 and fulfilled in January 2021.

During the nine months ended September 30, 2021, we received redemption requests totaling approximately $3.9 million (approximately 0.3 million shares), of which approximately $2.2 million were fulfilled in April and July 2021. The remainder (approximately $1.7 million) were included in accounts payable and accrued liabilities as of September 30, 2021 and fulfilled in October 2021.

Operating Partnership Redemption Rights

Generally, the limited partners of our Operating Partnership, excluding any limited partners with respect to their A-2 Units, 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.

Additionally, the Class A-1 Units issued in connection with the Self Administration Transaction are subject to the general restrictions on transfer contained in the Operating Partnership Agreement. The Class A-1 Units are otherwise entitled to all rights and duties of the Class A limited partnership units in the Operating Partnership, including cash distributions and the allocation of any profits or losses in the Operating Partnership.

Other Contingencies

From time to time, we are party to legal, regulatory and other proceedings that arise in the ordinary course of our business. In accordance with applicable accounting guidance, management accrues an estimated liability when those matters present loss contingencies that are both probable and reasonably estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. We are not aware of any such proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition.

Note 13. Declaration of Distributions

On September 23, 2021, our board of directors declared a distribution rate for the fourth quarter of 2021 of approximately $0.00164 per day per share on the outstanding shares of common stock payable to Class A and Class T stockholders of record of such shares as shown on our books at the close of business on each day of the period commencing on October 1, 2021 and ending December 31, 2021. Such distributions payable to each stockholder of record during a month will be paid the following month.

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

Note 14. Selected Quarterly Data

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

	Three months ended
	September 30, 2020			December 31, 2020			March 31, 2021			June 30, 2021			September 30, 2021
Total revenues	$	31,363,122		$	32,893,573		$	34,564,655		$	42,251,650		$	44,938,613
Total operating expenses	$	26,992,137		$	29,307,135		$	37,250,644		$	35,495,973		$	34,757,454
Income (loss) from operations	$	4,370,985		$	3,586,438		$	(2,685,989	)	$	6,934,308		$	10,181,159
Net income (loss)	$	(4,456,497	)	$	(1,943,884	)	$	(12,303,466	)	$	(1,310,838	)	$	1,059,242
Net loss attributable to common stockholders	$	(6,259,114	)	$	(4,529,908	)	$	(13,908,664	)	$	(3,881,184	)	$	(2,211,121	)
Net loss per Class A Share-basic and diluted	$	(0.10	)	$	(0.08	)	$	(0.22	)	$	(0.05	)	$	(0.03	)
Net loss per Class T Share-basic and diluted	$	(0.10	)	$	(0.08	)	$	(0.22	)	$	(0.05	)	$	(0.03	)

Note 15. Subsequent Events

On October 7, 2021 we amended our Credit Facility to increase the commitment on the Credit Facility Revolver by $200 million, for a total commitment of $450 million. See Note 6 – Debt, for additional information.

On October 15, 2021, we borrowed an additional $20.0 million on the Credit Facility Revolver, which was primarily used to acquire the Lakewood Property (defined below).

Acquisition of Lakewood Property

On October 19, 2021, we purchased a self storage facility (the “Lakewood Property”) located in Lakewood, Colorado. We acquired the Lakewood Property from an unaffiliated third party for a purchase price of approximately $17.5 million, plus closing costs. Upon acquisition, the Lakewood Property was approximately 91% occupied.

New Estimated Net Asset Value Per Share and Other

On October 19, 2021, our board of directors, upon the recommendation of the Nominating and Corporate Governance Committee, unanimously approved and established an estimated net asset value per share of $15.08 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 June 30, 2021.

We provide the estimated net asset value per share to assist broker-dealers in connection with their obligations under Financial Industry Regulatory Authority (“FINRA”) Rule 2231, with respect to customer account statements. This valuation was performed in accordance with the provisions of the Investment Program Association Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued in April 2013 (the “IPA Valuation Guidelines”). Our board of directors previously approved an estimated value per share of our Class A Shares and Class T Shares of $10.40 as of December 31, 2019.

The price per share pursuant to our DRP is equal to the estimated net asset value per share approved by the board and in effect on the date of purchase of shares under the DRP. In connection with the determination of the estimated net asset value per share, the board approved a share price for the purchase of shares under the DRP equal to the estimated net asset value per share of $15.08 for both Class A shares and Class T shares, to be effective for distribution payments being paid beginning in October 2021.

The redemption price for share repurchases under the SRP is equal to the most recently published estimated net asset value of the applicable share class. In connection with the determination of the net asset value per share approved on October 19, 2021, the redemption price under the SRP is equal to $15.08 for both Class A shares and Class T shares, effective beginning with redemption requests submitted during the third quarter of 2021, which were redeemed in October 2021. The

SMARTSTOP SELF STORAGE REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(Unaudited)

SRP remains suspended other than for redemptions sought in connection with a stockholder’s death, qualifying disability, confinement to a long-term care facility or other exigent circumstances.

Also on October 19, 2021, the Nominating and Corporate Governance Committee of our board of directors and our board of directors approved resolutions providing that the denominator in the calculation of the earnout exchange ratio will be $10.66 (the value of the Class A common stock at the time of the Self Administration Transaction, pursuant to which the earnout was established) for the next 12 months, until October 19, 2022. Thereafter the denominator in the calculation of the earnout exchange ratio will be as provided in the Operating Partnership Agreement.

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 consolidated 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 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, 2020. See also “Cautionary Note Regarding Forward-Looking Statements” preceding Part I.

Overview

SmartStop Self Storage REIT, Inc., a Maryland corporation (the “Company”), is a self-managed and fully-integrated self storage real estate investment trust (“REIT”). Our year-end is December 31. As used in this report, “we,” “us,” “our,” and “Company” refer to SmartStop Self Storage REIT, Inc. and each of our subsidiaries.

We acquire, own and operate self storage facilities—including facilities owned by us as well as those owned by the entities sponsored by us. As of September 30, 2021, we wholly-owned 138 operating self storage properties located in 18 states (Alabama, Arizona, California, Colorado, Florida, Illinois, Indiana, Maryland, Massachusetts, Michigan, New Jersey, Nevada, North Carolina, Ohio, South Carolina, Texas, Virginia and Washington) and Ontario, Canada (the Greater Toronto Area) comprising approximately 90,000 units and 10.5 million net rentable square feet, as well as 50% equity interests in six unconsolidated real estate ventures located in the Greater Toronto Area. Our unconsolidated real estate ventures consist of four operating self storage properties and two parcels of land in various stages of development into self storage facilities, with subsidiaries of SmartCentres owning the other 50% of such entities.

As discussed herein, as of September 30, 2021, we, through our subsidiaries, serve as the sponsor of Strategic Storage Growth Trust II, Inc., a private REIT (“SSGT II”), and Strategic Storage Trust VI, Inc., a private REIT focused on acquiring income and growth self storage properties (“SST VI”), and operate properties owned by SSGT II and SST VI, consisting of 15 properties and approximately 11,000 units and 1.2 million square feet.

On June 28, 2019, we acquired the self storage advisory, asset management and property management businesses and certain joint venture interests (the “Self Storage Platform”) of SmartStop Asset Management, LLC, our former sponsor (“SAM”), along with certain other assets of SAM (collectively, the “Self Administration Transaction”). As a result of the Self Administration Transaction, we became self-managed and the sponsor of Strategic Storage Trust IV, Inc. (“SST IV”), a public non-traded REIT (collectively with SSGT II and SST VI, the “Managed REITs”). In addition, we have the internal capability to originate, structure and manage additional investment products (the “Managed REIT Platform”) which would be sponsored by SmartStop REIT Advisors, LLC (“SRA”). See Note 5 – Self Administration Transaction and Note 10 – Related Party Transactions of the notes to the consolidated financial statements for additional information.

In our initial public offering, which commenced on January 10, 2014, and ended on January 9, 2017, 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”) and sold approximately 48 million Class A Shares and approximately 7 million Class T Shares for approximately $493 million and $73 million, respectively.

SST IV Merger

On November 10, 2020, we entered into a merger agreement with Strategic Storage Trust IV, Inc., pursuant to which SST IV would merge with and into our wholly-owned subsidiary (the “SST IV Merger”). The SST IV Merger was approved by SST IV’s stockholders on March 10, 2021, and was completed on March 17, 2021.

New Credit Facility

On March 17, 2021, we, through SmartStop OP, L.P. (our “Operating Partnership”), entered into a credit facility with KeyBank, National Association as administrative agent, with an initial aggregate commitment of $500 million (the “Credit Facility”), which consists of a $250 million revolving credit facility and a $250 million term loan. We used the initial draw proceeds of approximately $451 million primarily to pay off certain existing indebtedness as well as indebtedness of SST IV in connection with the SST IV Merger.

On October 7, 2021, we amended the Credit Facility to increase the commitment on the Credit Facility revolver by $200 million for a total commitment of $450 million. In connection with the increased commitments, additional lenders were

added to the Credit Facility. The commitments on the Credit Facility term loan remain unchanged. As a result of this amendment, the aggregate commitment on the Credit Facility is now $700 million. In addition, the accordion feature was also amended such that we have the right to increase the aggregate amount of the Credit Facility by an additional $350 million, for an aggregate amount of up to $1.05 billion, subject to certain conditions.

As of September 30, 2021, our wholly-owned 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		1,090		163,300		1.6	%		94.1	%		0.9	%
Arizona		3		2,540		265,000		2.5	%		96.4	%		2.2	%
California		27		17,190		1,824,700		17.5	%		95.8	%		21.2	%
Colorado		6		3,240		349,000		3.3	%		96.0	%		2.8	%
Florida		22		17,010		2,049,800		19.6	%		95.9	%		21.4	%
Illinois		5		2,880		315,600		3.0	%		95.8	%		2.4	%
Indiana		2		1,030		112,700		1.1	%		94.1	%		0.7	%
Massachusetts		1		840		93,200		0.9	%		97.2	%		1.8	%
Maryland		2		1,610		169,500		1.6	%		96.5	%		1.7	%
Michigan		4		2,220		266,100		2.5	%		96.8	%		2.2	%
North Carolina		19		9,190		1,192,400		11.4	%		96.0	%		8.8	%
New Jersey		2		2,350		205,100		1.4	%		93.0	%		2.4	%
Nevada		8		6,210		757,100		7.3	%		96.3	%		6.9	%
Ohio		5		2,310		279,700		2.7	%		94.9	%		1.7	%
South Carolina		3		1,940		246,000		2.4	%		95.9	%		1.8	%
Texas		11		6,320		844,600		8.1	%		95.9	%		6.6	%
Virginia		1		830		71,100		0.7	%		94.5	%		0.9	%
Washington		3		1,680		196,600		1.9	%		94.4	%		2.0	%
Ontario, Canada		13		10,610		1,092,300		10.5	%		92.8	%		11.5	%
Total		138		91,090		10,493,800		100	%		95.5	%		100	%

⁽¹⁾	Includes all rentable units, consisting of storage units and parking (approximately 3,100 units).

⁽²⁾	Includes all rentable square feet, consisting of storage units and parking (approximately 940,000 square feet).

⁽³⁾	Represents the occupied square feet of all facilities in a state or province divided by total rentable square feet of all the facilities in such state or area as of September 30, 2021.

⁽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 September 30, 2021.

Additionally, we own our office located at 10 Terrace Rd, Ladera Ranch, California (the “Ladera Office”) which houses our corporate headquarters.

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 consolidated 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 valuation of goodwill and related impairment considerations, the valuation of our trademarks and related impairment considerations, the valuation of our contingent consideration liability, 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

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. 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.

Real Property Assets Valuation

We evaluate our real property assets for impairment based on events and changes in circumstances that may arise in the future and that may impact the carrying amounts of such 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 real property asset and recognize an impairment loss. Our evaluation of the impairment of real property 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.

Intangible Assets Valuation

In connection with the Self Administration Transaction, we allocated a portion of the consideration to the contracts that we acquired related to the Managed REITs and the customer relationships related to the tenant programs joint ventures “Tenant Programs”. For these intangibles, we are amortizing such amounts on a straight-line basis over the estimated benefit period of the contracts and customer relationships. We evaluate these intangible assets for impairment when an event occurs or circumstances change that indicate the carrying value may not be recoverable. In such an event, an impairment charge is recognized and the intangible asset is marked down to its fair value.

See Note 5 – Self Administration Transaction of the consolidated financial statements contained within this report for additional information.

Goodwill Valuation

Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible assets and other intangible assets acquired. Goodwill is allocated to various reporting units, as applicable, and is not amortized. We perform an annual impairment test for goodwill and between annual tests, we evaluate the recoverability of goodwill whenever events or changes in circumstances indicate that the carrying amount of goodwill may not be fully recoverable. If circumstances indicate the carrying amount may not be fully recoverable, we perform a quantitative impairment test of goodwill to compare the fair value of each reporting unit to its respective carrying amount. If the carrying amount of goodwill exceeds its fair value, an impairment charge will be recognized.

See Note 5 – Self Administration Transaction of the consolidated financial statements contained within this report for additional information.

Trademarks Valuation

Trademarks are based on the value of our brands. Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademarks, we would have to make a stream of payments to a brand or franchise owner in return for the right to use their name. By virtue of this asset, we avoid any such payments and record the related intangible value of our ownership of the brand name. We used the following significant projections and assumptions to determine value under the relief from royalty method: revenues; royalty rate; tax expense; terminal growth rate; and discount rate. For the SmartStop^® trademark, the projections underlying this relief from royalty model were forecasted for eight years and then a terminal value calculation was applied. For the Strategic Storage^® trademark, the projections underlying the relief from royalty model were forecasted for seven years. Applying the selected pretax royalty rates to the applicable revenue base in each period yielded pretax income for each of our trademarks. These pretax totals were tax effected utilizing the applicable tax rate to arrive at net, after-tax cash flows. The net, after-tax cash flows were then discounted to present value utilizing an appropriate discount rate. The present value of the after-tax cash flows were then added to the present value of the amortization tax benefit (considering the 15-year amortization of intangible assets pursuant to U.S. tax legislation) to arrive at the estimated fair values for the trademarks.

See Note 5 – Self Administration Transaction of the consolidated financial statements contained within this report for additional information.

Contingent Earnout Valuation

Estimated Useful Lives of Real Property 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 consolidated financial statements or materially different amounts being reported in the consolidated financial statements, as such determinations, and the corresponding amount of depreciation expense, may vary dramatically based on the estimates and assumptions we use.

Consolidation Considerations

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 consolidated 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.

COVID-19 Pandemic

Our rental revenue and operating results depend significantly on the demand for self storage space. Since the beginning of the COVID-19 pandemic in late March 2020, our operations have adjusted to meet the needs of our customers and employees, while striving to create a safe environment for everyone at our properties and corporate offices. We also adjusted our in-store operations in order to comply with the various governmental orders, and, in certain cases, we had to temporarily close some of our offices. Additionally, we have expanded our options for customers to rent units via contactless means, including directly through our website and call center. The operational and financial impacts associated with COVID-19 were most significant to our business in the second quarter of 2020, with customer demand for self storage resuming at or above normalized levels during the second half of 2020 and continuing into 2021.

The challenges associated with the COVID-19 pandemic were partially offset by other trends that helped maintain the demand for self storage. The broader shift of people working from home, elevated migration patterns and strength in the housing market helped drive continued growth in self storage demand through the third quarter of 2021.

As rental activity, occupancy levels, and rental rates recovered during the second half of 2020 and through the third quarter of 2021, our financial performance has continued to improve. Same-store and overall results are expected to normalize over the coming quarters as the comparable periods change.

The underlying relative strength in the self storage industry in the midst of the COVID-19 pandemic continued into 2021. The ultimate extent and duration of the COVID-19 pandemic could still affect the self storage industry and/or us, potentially by the impact of governmental orders or broader economic conditions, which impact our customers, and in turn could affect our financial condition, collections, liquidity, and results of operations. These potential future developments are uncertain and cannot be predicted. This includes new information that may also emerge concerning the breadth of the COVID-19 outbreak, as well as the actions to contain or treat its impact, including the distribution and broad acceptance of various vaccines for COVID-19 or the efficacy of those vaccines against new COVID-19 variants.

Results of Operations

Overview

We derive revenues principally from: (i) rents received from our self storage tenant leases; (ii) fees generated from our Managed REITs; (iii) our Tenant Programs; and (iv) sales of packing- and storage-related supplies at our storage facilities. 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, management fees earned from our Managed REITs, and the success of our Tenant Programs.

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 September 30, 2021 and 2020, we wholly-owned 138 and 112 operating self storage facilities, respectively. Our operating results for the three months ended September 30, 2021 include full quarter results for 138 self storage facilities. Our operating results for the three months ended September 30, 2020 include full quarter results for 112 self storage facilities. 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.

Our operating results for the nine months ended September 30, 2021 include nine months of results for 112 self storage facilities and partial period results for 26 operating self storage facilities acquired during the nine months ended September 30, 2021. Our operating results for the nine months ended September 30, 2020 include a full nine months of results for 111 operating self storage facilities and partial period results for one operating property that completed development and was placed in service during the nine months ended September 30, 2020. 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.

As discussed previously, the results of operations presented herein cover a period of time prior to the SST IV Merger. We expect our 2021 operating results to be significantly impacted by the SST IV Merger as a result of acquiring 24 operating self storage facilities and 50% equity interests in six unconsolidated real estate ventures, as well as the elimination of fees that we previously earned from SST IV.

SST IV Merger

On March 17, 2021, we acquired SST IV by way of merger. Through the SST IV Merger, we acquired 24 operating self storage facilities and six real estate joint ventures. The 24 former SST IV operating properties had an aggregate physical occupancy of 89.1%, 92.6%, 96.1%, and 95.6% as of December 31, 2020, March 31, 2021, June 30, 2021, and September 30, 2021, respectively.

We expect the SST IV Merger to continue to have a positive impact in the short term and long term on our statement of operations and strategic plans, due to a variety of factors, including but not limited to:

•

Utilization of our Class A Common Stock as an efficient source of capital to complete the transaction;

•

Addition of a high quality portfolio of self storage assets already branded as SmartStop® Self Storage locations;

•

Addition to strategically important regions in the United States, including expansion in the state of Texas;

•

Further consolidation of our portfolio in high growth markets, including California, Florida, and the Greater Toronto Area of Ontario, Canada;

•

Lower leverage and lower cost of capital, given the new Credit Facility closed concurrently with the SST IV Merger;

•

Further economies of scale as well as other efficiencies, with additional properties in the aggregate and in certain markets; and

•

Improved positioning of the Company, including facilitating an eventual liquidity event, as a result of our increased size and scale.

We expect the SST IV Merger to be accretive to FFO, as adjusted as we continue to recognize a lower cost of capital, as the former SST IV properties reach higher levels of physical and economic occupancy and continued growth from the six joint venture properties in various stages of lease up and development.

Comparison of the Three Months Ended September 30, 2021 and 2020

Total Self Storage Revenues

Total self storage related revenues for the three months ended September 30, 2021 and 2020 were approximately $42.7 million and $28.1 million, respectively. The increase in total self storage revenues of approximately $14.6 million, or approximately 52%, is primarily attributable to the 24 operating self storage facilities acquired in connection with the SST IV Merger (approximately $8.1 million) and an increase in same-store revenues (approximately $5.1 million, or approximately 19%).

We expect self storage revenues to increase in future periods as the properties we acquired in the SSGT mergers, SST IV Merger, and other lease up properties continue to increase occupancy and/or rates, and we expect revenues will otherwise fluctuate depending on the overall economic environment, including the impact of COVID-19, and increased supply of self storage facilities from continued development.

Managed REIT Platform Revenue

Managed REIT Platform revenue for the three months ended September 30, 2021 and 2020 was approximately $1.3 million and $2.1 million, respectively. The decrease in Managed REIT Platform revenue of approximately $0.8 million is primarily attributable to the SST IV Merger in March of 2021. We expect Managed REIT Platform Revenue to increase in future periods, as compared to the three months ended September 30, 2021, as our Managed REITs further expand their portfolios, generating additional property management and advisory fees.

Reimbursable Costs from Managed REITs

Reimbursable costs from Managed REITs for the three months ended September 30, 2021 and 2020 were approximately $1.0 million and $1.2 million, respectively. Such revenues consist of costs incurred by us as we provide property management and advisory services to the Managed REITs, which are reimbursed by our Managed REITs, pursuant to our related contracts with the Managed REITs. We expect reimbursable costs from Managed REITs to increase as compared to the three months ended September 30, 2021, as the Managed REITs increase their operations and we receive reimbursement for providing such services.

Property Operating Expenses

Property operating expenses for the three months ended September 30, 2021 and 2020 were approximately $12.6 million (or 29.5% of self storage revenue) and $9.8 million (or 34.9% of self storage revenue), respectively. Property operating expenses include the costs to operate our facilities including payroll expense, utilities, insurance, real estate taxes, and marketing. The increase in property operating expenses of approximately $2.8 million is primarily attributable to the 24 operating self storage facilities acquired in connection with the SST IV Merger (approximately $2.4 million). We expect property operating expenses to decrease as a percentage of revenue as revenues increase.

Managed REIT Platform Expenses

Managed REIT Platform expenses for the three months ended September 30, 2021 and 2020 were approximately $0.6 million and $0.3 million, respectively. Such expenses include expenses related to the Administrative Services Agreement (as discussed in Note 5 – Self Administration Transaction, of the notes to consolidated financial statements contained in this report), and other non-reimbursable costs associated with the operation of the Managed REIT Platform. Managed REIT Platform expenses increased primarily due to an increase in costs as a result of the suspension of the Managed REITs’ offerings in 2020, and the commencement of a new offering for SST VI in March of 2021.

Reimbursable Costs from Managed REITs

Reimbursable costs from Managed REITs for the three months ended September 30, 2021 and 2020 were approximately $1.0 million and $1.2 million, respectively. Such expenses consist of costs incurred by us as we provide property management and advisory services to the Managed REITs, which are reimbursed by our Managed REITs, pursuant to our related contracts with the Managed REITs. We expect reimbursable costs from Managed REITs to increase as compared to the three months ended September 30, 2021, as the Managed REITs increase their operations and we receive reimbursement for providing such services.

General and Administrative Expenses

General and administrative expenses for the three months ended September 30, 2021 and 2020 were approximately $5.2 million and $4.0 million, respectively. These expenses consist primarily of compensation-related costs, legal expenses, accounting expenses, transfer agent fees, directors’ and officers’ insurance expense and board of directors-related costs. The increase is primarily attributable to increased board of directors’ related costs, other professional costs and compensation-related expenses. We expect general and administrative expenses to decrease as a percentage of total revenues over time.

Depreciation and Amortization Expenses

Depreciation and amortization expenses for the three months ended September 30, 2021 and 2020 were approximately $14.5 million and $9.6 million, respectively. Depreciation expense consists primarily of depreciation on the buildings and site improvements at our properties. Amortization expense consists of the amortization of our in place lease intangible assets resulting from our self storage acquisitions and amortization of certain intangible assets acquired in the Self Administration Transaction. The increase in depreciation and amortization expense is primarily attributable to additional depreciation and amortization on the properties and intangible assets acquired in the SST IV Merger.

Acquisition Expenses

Acquisition expenses for the three months ended September 30, 2021 and 2020 were approximately $0.2 million and $0.5 million respectively. These acquisition expenses were incurred prior to acquisitions becoming probable in accordance with our capitalization policy.

Contingent Earnout Adjustment

The contingent earnout adjustments for the three months ended September 30, 2021 and 2020 reflects increases in the contingent earnout liability of approximately $0.7 million and $1.6 million, respectively. The contingent earnout adjustment reflects the change in the liability on a net basis based on an updated discounted probability weighted forecast of our projected assets under management (as defined in the Operating Partnership Agreement, as amended) in the Managed REIT Platform.

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 September 30, 2021 and 2020 were approximately $7.8 million and $8.1 million, respectively. The decrease of approximately $0.3 million is primarily attributable to lower rates on a year over year basis, partially offset by an increase in the average outstanding principal balance, primarily as a result of the SST IV Merger. We expect interest expense to fluctuate in future periods commensurate with our future debt levels and interest rates.

Interest Expense – Debt Issuance Costs

Interest expense – debt issuance costs for the three months ended September 30, 2021 and 2020 were approximately $0.5 million and $1.0 million, respectively. We expect interest expense - debt issuance costs to fluctuate commensurate with our future financing activity.

Other

Other income (expense) for the three months ended September 30, 2021 and 2020 were approximately ($0.8) million of expense, and $0.2 million of income, respectively. Other consists primarily of state and federal tax expense, adjustments to deferred tax liabilities, foreign currency fluctuations, changes in value related to our foreign currency and interest rate hedges not designated for hedge accounting, and equity in earnings attributable to our unconsolidated joint ventures.

Same-Store Facility Results - Three Months Ended September 30, 2021 and 2020

The following table sets forth operating data for our same-store facilities (those properties included in the consolidated results of operations since January 1, 2020, excluding nine lease-up properties we owned as of January 1, 2020) for the three months ended September 30, 2021 and 2020. We consider the following data to be meaningful as this allows for the comparison of results without the effects of acquisition, lease up, or development activity.

	Same-Store Facilities									Non Same-Store Facilities					Total
	2021			2020			% Change			2021		2020		% Change	2021			2020			% Change
Revenue ⁽¹⁾	$	31,556,940		$	26,419,911			19.4	%	$	11,146,093	$	1,718,242	N/M	$	42,703,033		$	28,138,153			51.8	%
Property operating expenses ⁽²⁾		9,027,676			8,827,519			2.3	%		3,565,515		989,255	N/M		12,593,191			9,816,774			28.3	%
Net operating income	$	22,529,264		$	17,592,392			28.1	%	$	7,580,578	$	728,987	N/M	$	30,109,842		$	18,321,379			64.3	%
Number of facilities		103			103						35		9			138			112
Rentable square feet ⁽³⁾		7,595,600			7,557,300						2,898,200		680,300			10,493,800			8,237,600
Average physical occupancy ⁽⁴⁾		95.9	%		91.7	%				N/M		N/M				95.6	%		90.9	%
Annualized rent per occupied square foot ⁽⁵⁾	$	16.92		$	14.67					N/M		N/M			$	16.67		$	14.39

N/M Not meaningful

⁽¹⁾	Revenue includes rental revenue, Tenant Programs revenue, ancillary revenue, and administrative and late fees.

⁽²⁾	Property operating expenses excludes corporate general and administrative expenses, interest expense, depreciation, amortization expense, and acquisition expenses.

⁽³⁾	Of the total rentable square feet, parking represented approximately 940,000 square feet and 680,000 square feet as of September 30, 2021 and 2020, respectively. On a same-store basis, for the same periods, parking represented approximately 680,000 square feet.

⁽⁴⁾	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.

⁽⁵⁾

Determined by dividing the aggregate realized rental income 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 revenue increased by approximately $5.1 million or approximately 19% for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to higher annualized rent per occupied square foot as well as increased occupancy.

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

	For the Three Months Ended September 30,
	2021			2020
Net income (loss)	$	1,059,242		$	(4,456,497	)
Adjusted to exclude:
Managed REIT Platform revenue		(1,263,029	)		(2,051,021	)
Managed REIT Platform expenses		587,704			329,280
General and administrative		5,232,950			4,012,072
Depreciation		10,748,337			8,003,587
Intangible amortization expense		3,710,736			1,587,899
Acquisition expenses		211,985			468,577
Contingent earnout adjustment		700,000			1,600,000
Gain on sale of real estate		—			—
Interest expense		7,818,311			8,093,476
Interest expense – accretion of fair market value of secured debt		(29,228	)		(32,788	)
Interest expense – debt issuance costs		499,132			952,479
Other		833,702			(185,685	)
Total net operating income	$	30,109,842		$	18,321,379

Comparison of the Nine Months Ended September 30, 2021 and 2020

Total Self Storage Revenues

Total self storage related revenues for the nine months ended September 30, 2021 and 2020, were approximately $113.9 million and $81.0 million, respectively. The increase in total self storage revenues of approximately $32.9 million, or 41%, is partly attributable to the 24 operating self storage facilities acquired in connection with the SST IV Merger (approximately $16.6 million) and increased same-store revenues (approximately $12.9 million or 16.9%).

Managed REIT Platform Revenue

Managed REIT Platform revenue for the nine months ended September 30, 2021 and 2020 was approximately $4.6 million and $5.7 million, respectively. The decrease in Managed REIT Platform revenues of approximately $1.1 million is primarily attributable to the SST IV Merger in March of 2021. We expect Managed REIT Platform revenues to initially

decrease in future periods as a result of the SST IV Merger as we will no longer receive fees from SST IV, and subsequently increase as our other Managed REITs grow their assets under management.

Reimbursable Costs from Managed REITs

Reimbursable costs from Managed REITs for the nine months ended September 30, 2021 and 2020 were approximately $3.3 million and $4.5 million, respectively. Such revenues consist of costs incurred by us as we provide property management and advisory services to the Managed REITs, which are reimbursed by our Managed REITs, pursuant to our related contracts with the Managed REITs. We expect reimbursable costs from Managed REITs to decrease initially as a result of the SST IV Merger, and subsequently increase as our remaining Managed REITs grow their assets under management.

Property Operating Expenses

Property operating expenses for the nine months ended September 30, 2021 and 2020 were approximately $35.4 million (or 31.1% of self storage revenue) and $28.7 million (or 35.4% of self storage revenue), respectively. Property operating expenses include the costs to operate our facilities including payroll expense, utilities, insurance, real estate taxes, and marketing. The increase in property operating expenses of approximately $6.7 million is primarily attributable to the 24 operating self storage facilities acquired in connection with the SST IV Merger (approximately $5.3 million). We expect property operating expenses to decrease as a percentage of revenue as revenues increase.

Managed REIT Platform Expenses

Managed REIT Platform expenses for the nine months ended September 30, 2021 and 2020 were approximately $1.2 million and $2.5 million, respectively. Such expenses include expenses related to the Administrative Services Agreement (as discussed in Note 5 – Self Administration Transaction, of the notes to consolidated financial statements contained in this report), and other non-reimbursable costs associated with the operation of the Managed REIT Platform we acquired on June 28, 2019. Managed REIT Platform expenses decreased primarily due to a reduction in the level of services provided through the Administrative Services Agreement as a result of the suspension of the Managed REITs’ offerings, and the commencement of a new offering for SST VI in March of 2021.

Reimbursable Costs from Managed REITs

Reimbursable costs from Managed REITs for the nine months ended September 30, 2021 and 2020 were approximately $3.3 million and $4.5 million, respectively. Such expenses consist of costs incurred by us as we provide property management and advisory services to the Managed REITs, which are reimbursed by our Managed REITs, pursuant to our related contracts with the Managed REITs. We expect reimbursable costs from Managed REITs to decrease initially as a result of the SST IV Merger, and subsequently increase as our other Managed REITs grow their assets under management.

General and Administrative Expenses

General and administrative expenses for the nine months ended September 30, 2021 and 2020 were approximately $16.8 million and $11.8 million, respectively. These expenses consist primarily of compensation-related costs, legal expenses, accounting expenses, transfer agent fees, directors’ and officers’ insurance expense and board of directors-related costs. The increase is primarily attributable to increased board of directors’ related costs, other professional costs, compensation-related expenses and the impact of the SST IV Merger. We expect general and administrative expenses to decrease as a percentage of total revenues over time.

Depreciation and Amortization Expenses

Depreciation and amortization expenses for the nine months ended September 30, 2021 and 2020 were approximately $38.7 million and $32.0 million, respectively. Depreciation expense consists primarily of depreciation on the buildings and site improvements at our properties. Amortization expense consists of the amortization of our in place lease intangible assets resulting from our self storage acquisitions and amortization of certain intangible assets acquired in the Self Administration Transaction. The increase in depreciation and amortization expense is primarily attributable to additional depreciation and amortization on the properties and intangibles acquired in the SST IV Merger.

Acquisition Expenses

Acquisition expenses for the nine months ended September 30, 2021 and 2020 were approximately $0.5 million and $0.6 million, respectively. These acquisition expenses were incurred prior to acquisitions becoming probable in accordance with our capitalization policy.

Contingent Earnout Adjustment

The contingent earnout adjustments for the nine months ended September 30, 2021 and 2020 reflects an expense or increase in the contingent earnout liability of approximately $3.2 million, and a decrease of the contingent earn out liability of approximately $5.1 million, respectively. The change of $8.3 million was due to the determination that the liability had increased in value on a net basis based on an updated discounted probability weighted forecast of our projected assets under management (as defined in the Operating Partnership Agreement, as amended) in the Managed REIT Platform during the nine months ended September 30, 2021 as compared to a decrease for the nine months ended September 30, 2020.

Impairment of Goodwill and Intangible Assets

Impairment of goodwill and intangible assets for the nine months ended September 30, 2021 and 2020 was none and approximately $36.5 million, respectively. The impairment charge incurred in the first quarter of 2020 was the result of the impairment of certain intangible assets and goodwill associated with the Managed REIT Platform.

Impairment of Investments in Managed REITs

Impairment of investments in Managed REITs for the nine months ended September 30, 2021 and 2020 was none and approximately $4.4 million, respectively. Certain of our equity investments in the Managed REITs derive their value from the potential to receive certain subordinated distributions based on certain performance criteria of the Managed REITs, and we determined in the first quarter of 2020 that those criteria were less likely to be met, causing a reduction in the fair value of the related equity investments. We determined that such reduction in fair value was other than temporary, therefore requiring the impairment charge recorded.

Write-off of equity interest and preexisting relationships in SST IV upon acquisition of control

Write-off of equity interest and preexisting relationships in SST IV upon the SST IV Merger for the nine months ended September 30, 2021 and 2020 was approximately $8.4 million and none, respectively. Such expense represents the Company’s write-off of the SST IV special limited partnership interest we held in SST IV, which per the terms of the SST IV Merger, terminated without consideration, as well as the write-off of the intangible assets related to the SST IV advisory agreement and property management contracts due to the termination of such contracts with the SST IV Merger.

Gain on Sale of Real Estate

Gain on sale of real estate for the nine months ended September 30, 2021 and 2020 was approximately $0.2 million and none, respectively. The gain was related to a sale of a parcel of excess land attached to the self storage facility we own in McKinney, Texas. The sale of this parcel did not affect the operations of our McKinney, Texas property.

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 nine months ended September 30, 2021 and 2020 were approximately $23.7 million and $24.6 million, respectively. The decrease of approximately $1.0 million is primarily attributable to lower rates on a year over year basis, partially offset by an increase in the average outstanding principal balance, primarily as a result of the SST IV Merger. We expect interest expense to fluctuate in future periods commensurate with our future debt levels and interest rates.

Interest Expense – Debt Issuance Costs

Interest expense – debt issuance costs for the nine months ended September 30, 2021 and 2020 were approximately $1.7 million and $2.8 million, respectively. We expect interest expense - 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 nine months ended September 30, 2021 and 2020 were approximately $2.4 million and none, respectively. The increase in net loss on debt extinguishment is primarily attributable to the write-off of unamortized debt issuance costs on loans that were paid off in connection with the new Credit Facility that was obtained in conjunction with the SST IV Merger.

Other

Other income for the nine months ended September 30, 2021 and 2020 was approximately $0.8 million and approximately $2.9 million, respectively. Other consists primarily of state and federal tax expense, adjustments to deferred tax liabilities, foreign currency fluctuations, changes in value related to our foreign currency and interest rate hedges not designated for hedge accounting, and equity in earnings attributable to our unconsolidated joint ventures. The change is primarily the difference between a decrease in the deferred tax liabilities of approximately $2.2 million during the nine months ended September 30, 2021 as a result of the write-off of the asset management and property management intangible assets in connection with the SST IV Merger, compared to a reduction in the deferred tax liabilities of approximately $3.3 million during the nine months ended September 30, 2020 related to the intangible impairments in 2020, noted above, and additional equity method losses recorded related to SST VI and our SmartCentres joint ventures in 2021.

Same-Store Facility Results - Nine months ended September 30, 2021 and 2020

The following table sets forth operating data for our same-store facilities (those properties included in the consolidated results of operations since January 1, 2020, excluding nine lease-up properties we owned as of January 1, 2020) for the nine months ended September 30, 2021 and 2020. We consider the following data to be meaningful as this allows for the comparison of results without the effects of acquisition, lease up, or development activity.

	Same-Store Facilities									Non Same-Store Facilities						Total
	2021			2020			% Change			2021			2020		% Change	2021				2020			% Change
Revenue ⁽¹⁾	$	89,439,876		$	76,527,018			16.9	%	$	24,455,769		$	4,462,208	N/M	$	113,895,645			$	80,989,226			40.6	%
Property operating expenses ⁽²⁾		26,724,027			25,823,677			3.5	%		8,692,414			2,863,166	N/M		35,416,441				28,686,843			23.5	%
Net operating income	$	62,715,849		$	50,703,341			23.7	%	$	15,763,355		$	1,599,042	N/M	$	78,479,204			$	52,302,383			50.0	%
Number of facilities		103			103						36	⁽⁶⁾		9			139		⁽⁶⁾		112
Rentable square feet ⁽³⁾		7,595,600			7,557,300						2,982,400			680,300			10,578,000		⁽⁶⁾		8,237,600
Average physical occupancy ⁽⁴⁾		94.9	%		90.1	%				N/M			N/M				94.1	%			88.6	%
Annualized rent per occupied square foot ⁽⁵⁾	$	16.11		$	14.66					N/M			N/M			$	15.89			$	14.40

N/M Not meaningful

⁽¹⁾	Revenue includes rental revenue, Tenant Programs revenue, ancillary revenue, and administrative and late fees.

⁽²⁾

Property operating expenses excludes corporate general and administrative expenses, interest expense, depreciation, amortization expense, and acquisition expenses. Property operating expenses for the nine months ended September 30, 2020 also includes COVID-19 related costs, including specialized cleaning costs, the purchase of personal protective equipment, and bonuses to our store personnel, totaling approximately $0.6 million. On a same-store basis, COVID-19 related costs represented approximately $0.5 million of the total property operating expenses for the nine months ended September 30, 2020.

⁽³⁾	Of the total rentable square feet, parking represented approximately 940,000 square feet and 680,000 square feet as of September 30, 2021 and 2020, respectively. On a same-store basis, for the same periods, parking represented approximately 680,000 square feet.

⁽⁴⁾	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.

⁽⁵⁾	Determined by dividing the aggregate realized rental income 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.

⁽⁶⁾	Included in the non same-store data is a self storage facility consisting of approximately 84,000 square feet owned by SST VI OP, which was consolidated for approximately three months in 2021.

Our same-store revenue increased by approximately $12.9 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 due to higher annualized rent per occupied square foot and increased occupancy.

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

	For the Nine Months Ended September 30,
	2021			2020
Net loss	$	(12,555,062	)	$	(49,262,919	)
Adjusted to exclude:
Managed REIT Platform revenue		(4,609,060	)		(5,687,701	)
Managed REIT Platform expenses		1,223,736			2,512,103
General and administrative		16,797,252			11,829,732
Depreciation		30,035,065			23,562,701
Intangible amortization expense		8,623,964			8,475,682
Acquisition expenses		548,083			593,903
Contingent earnout adjustment		3,219,744			(5,100,000	)
Impairment of goodwill and intangible assets		—			36,465,732
Impairment of investments in Managed REITs		—			4,376,879
Write-off of equity interest and preexisting relationships in SST IV upon acquisition of control		8,389,573			—
Gain on sale of real estate		(178,631	)		—
Interest expense		23,744,477			24,717,208
Interest expense – accretion of fair market value of secured debt		(92,344	)		(98,337	)
Interest expense – debt issuance costs		1,668,502			2,832,240
Net loss on extinguishment of debt		2,444,788			—
Other		(780,883	)		(2,914,840	)
Total net operating income	$	78,479,204		$	52,302,383

Non-GAAP Financial Measures

Funds from Operations

Funds from operations (“FFO”) is an industry wide metric promulgated by the National Association of Real Estate Investment Trusts, or NAREIT, 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.

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 real estate related asset impairment write downs, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Additionally, gains and losses from change in control are excluded from the determination of FFO. 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.

FFO, as Adjusted

We use FFO, as adjusted, as an additional non-GAAP financial measure to evaluate our operating performance. We previously used Modified Funds from Operations (“MFFO”) (as defined by the Institute for Portfolio Alternatives) as a non-GAAP measure of operating performance. Management replaced the MFFO measure with FFO, as adjusted, because FFO, as adjusted, provides investors with supplemental performance information that is consistent with the performance models and analysis used by management. In addition, FFO, as adjusted, is a measure used among our peer group, which includes publicly traded REITs. Further, we believe FFO, as adjusted, is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies.

In determining FFO, as adjusted, we make further adjustments to the NAREIT computation of FFO to exclude the effects of non-real estate related asset impairments and intangible amortization, acquisition related costs, other write-offs incurred in connection with acquisitions, contingent earnout expenses, accretion of fair value of debt adjustments, gains or losses from extinguishment of debt, adjustments of deferred tax liabilities, realized and unrealized gains/losses on foreign exchange transactions, and gains/losses on foreign exchange and interest rate derivatives not designated for hedge accounting, which we believe are not indicative of the Company’s overall long-term operating performance. We exclude these items from GAAP net income (loss) to arrive at FFO, as adjusted, as they are not the primary drivers in our decision-making process and excluding these items provides investors a view of our continuing operating portfolio performance over time and makes our results more comparable period to period and to other REITs, which in any respective period may experience fluctuations in such acquisition, merger or other similar activities that are not of a long-term operating performance nature. FFO, as adjusted, also reflects adjustments for unconsolidated partnerships and jointly owned investments. We use FFO, as adjusted, as one measure of our operating performance when we formulate corporate goals and evaluate the effectiveness of our strategies.

Presentation of FFO and FFO, as adjusted, 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 FFO, as adjusted, the same way, so comparisons with other REITs may not be meaningful. Furthermore, FFO and FFO, as adjusted, 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 FFO, as adjusted, should not be considered as an alternative to net income (loss) (determined in accordance with GAAP) and should be reviewed in conjunction with other measurements as an indication of our performance.

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 FFO, as adjusted. 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 FFO, as adjusted. The following is a reconciliation of net income (loss), which is the most directly comparable GAAP financial measure, to FFO and FFO, as adjusted, for each of the periods presented below:

	Three Months Ended September 30, 2021			Three Months Ended September 30, 2020			Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
Net loss (attributable to common stockholders)	$	(2,211,121	)	$	(6,259,114	)	$	(20,000,969	)	$	(49,824,486	)
Add:
Depreciation of real estate		10,556,270			7,843,237			29,455,038			23,136,367
Depreciation and amortization of real estate and intangible assets from unconsolidated entities		256,233			—			487,229			—
Amortization of real estate related intangible assets		3,469,777			537,179			7,473,006			4,880,209
Gain on deconsolidation		—			—			(169,533	)		—
Gain on sale of real estate		—			—			(178,631	)		—
Deduct:
Adjustment for noncontrolling interests		(1,545,084	)		(1,101,471	)		(4,162,008	)		(3,704,678	)
FFO (attributable to common stockholders)		10,526,075			1,019,831			12,904,132			(25,512,588	)
Other Adjustments:
Intangible amortization expense - contracts⁽¹⁾		240,959			1,050,720			1,150,958			3,595,473
Acquisition expenses⁽²⁾		211,985			468,577			548,083			593,903
Acquisition expenses and foreign currency (gains) losses, net from unconsolidated entities		27,767			—			135,155			—
Contingent earnout adjustment⁽³⁾		700,000			1,600,000			3,219,744			(5,100,000	)
Impairment of goodwill and intangible assets⁽⁴⁾		—			—			—			36,465,732
Impairment of investments in Managed REITs⁽⁴⁾		—			—			—			4,376,879
Write-off of equity interest and preexisting relationships in SST IV upon acquisition of control		—			—			8,389,573			—
Accretion of fair market value of secured debt⁽⁵⁾		(29,228	)		(32,788	)		(92,344	)		(98,337	)
Net loss on extinguishment of debt⁽⁶⁾		—			—			2,444,788			—
Foreign currency and interest rate derivative losses, net⁽⁷⁾		536,428			53,503			110,879			163,346
Adjustment of deferred tax liabilities⁽¹⁾		(290,942	)		(276,216	)		(2,220,688	)		(3,299,329	)
Adjustment for noncontrolling interests		(151,463	)		(375,841	)		(1,586,543	)		(4,864,455	)
FFO, as adjusted (attributable to common stockholders)	$	11,771,581		$	3,507,786		$	25,003,737		$	6,320,624

⁽¹⁾

These items represent the amortization, accretion, or adjustment of intangible assets or deferred tax liabilities. As these items are non-cash and not primary drivers in our decision-making process, FFO is adjusted for their effect to arrive at FFO, as adjusted, as a means of determining a comparable sustainable operating performance metric to other real estate companies.

⁽²⁾

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.

⁽³⁾

The contingent earnout adjustment represents the adjustment to the fair value of the Class A-2 Units issued in connection with the Self Administration Transaction. FFO is adjusted to arrive at FFO, as adjusted, as this acquisition related item is not a primary driver in our decision-making process and excluding this provides investors a view of our continuing operating portfolio performance over time.

⁽⁴⁾	The impairment charges relate to our goodwill, intangible assets and investments in the Managed REIT Platform acquired in the Self Administration Transaction. We believe that adjusting for such non-recurring items provides useful

supplemental information because such expenses may not be reflective of on-going operations and is consistent with management’s analysis of our operating performance and provides for a means of determining a comparable sustainable operating performance metric.

⁽⁵⁾

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 FFO, as adjusted, because we believe FFO, as adjusted, 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.

⁽⁶⁾

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.

⁽⁷⁾

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.

Cash Flows

A comparison of cash flows for operating, investing and financing activities for the nine months ended September 30, 2021 and 2020 is as follows:

	Nine Months Ended
	September 30, 2021			September 30, 2020			Change
Net cash flow provided by (used in):
Operating activities	$	42,727,251		$	22,549,196		$	20,178,055
Investing activities		(101,369,312	)		(18,558,701	)		(82,810,611	)
Financing activities		15,852,418			(25,929,065	)		41,781,483

Cash flows provided by operating activities for the nine months ended September 30, 2021 and 2020 were approximately $42.7 million and $22.5 million, respectively, an increase of approximately $20.2 million. The increase in cash provided by our operating activities is primarily the result of an increase in net income when excluding the impact of non-cash items included in the determination of net income, which resulted in an increase in cash provided by operating activities of approximately $22.3 million, offset by a decrease of approximately $2.1 million resulting from a change in working capital accounts.

Cash flows used in investing activities for the nine months ended September 30, 2021 and 2020 were approximately $101.4 million and $18.6 million, respectively, an increase in the use of cash of approximately $82.8 million. The increase in cash used in investing activities primarily relates to the SST IV Merger and the acquisitions of Oakville III and Riverside III, all of which were completed during the nine months ended September 30, 2021 as compared to only normal capital improvement and development activities with no self storage acquisitions during the nine months ended September 30, 2020.

Cash flows provided by (used in) financing activities for the nine months ended September 30, 2021 and 2020 were approximately $15.9 million and ($25.9) million, respectively, a change of approximately $41.8 million. The change in financing activities is primarily attributable to the approximately $49.1 million of additional net debt proceeds during the nine months ended September 30, 2021.

Liquidity and Capital Resources

Short-Term Liquidity and Capital Resources

We generally expect that we will meet our short-term liquidity requirements from the combination of existing cash balances and net cash provided from property operations and the Managed REIT Platform. Alternatively, we may issue additional secured or unsecured financing from banks or other lenders, or we may enter into various other forms of financing. On March 17, 2021, we entered into a new debt facility (the “Credit Facility”), which was further expanded in October 2021. As a result of the increased capacity on the Credit Facility, we have additional operational flexibility and are better positioned to take advantage of additional opportunities, while meeting our liquidity needs.

COVID-19 initially caused significant volatility in the debt and equity markets and the continued and/or further impact will depend on future developments, which are highly uncertain. While we do not expect such events to have a material impact upon our liquidity in the short-term, continued uncertainty or deterioration in the debt and equity markets over an extended period of time could potentially impact our liquidity over the long-term.

Distribution Policy and Distributions

Preferred Stock Dividends

The shares of Series A Convertible Preferred Stock rank senior to all other shares of our capital stock, including our common stock, with respect to rights to receive dividends and to participate in distributions or payments upon any voluntary or involuntary liquidation, dissolution or winding up of the Company. Dividends payable on each share of Series A Convertible Preferred Stock will initially be equal to a rate of 6.25% per annum, which accrues daily but is payable quarterly in arrears. If the Series A Convertible Preferred Stock has not been redeemed on or prior to the fifth anniversary date of the Initial Closing, the dividend rate will increase an additional 0.75% per annum each year thereafter to a maximum of 9.0% per annum until the tenth anniversary of the Initial Closing, at which time the dividend rate shall increase 0.75% per annum each year thereafter until the Series A Convertible Preferred Stock is either converted or repurchased in full.

Common Stock Distributions

On September 23, 2021, our board of directors declared a distribution rate for the fourth quarter of 2021, of approximately $0.00164 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 October 1, 2021 and continuing on each day thereafter through and including December 31, 2021. In connection with these distributions, 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.

Background and History of Common Stock Distributions

Since substantially all of our operations are 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. The terms of the Series A Convertible Preferred Stock place certain restrictions on our ability to pay distributions to our common stockholders. In general, we are prohibited from paying distributions to our common stockholders other than regular cash dividends on a basis consistent with past practice and dividends payable in shares of common stock in connection with an initial listing of such shares. Accordingly, we are presently only permitted to pay cash distributions, which may be reinvested in stock pursuant to our DRP, unless otherwise approved by the holder of the Series A Convertible Preferred Stock. Absent the foregoing restrictions, our charter allows our board of directors to authorize payments to stockholders in cash or other assets of the Company or in stock, including in stock of one class payable to holders of stock of another class.

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 or other financing sources.

Distributions are paid to our common stockholders based on the record date selected by our board of directors. Such distributions are based on daily declaration and record dates. 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. Absent the restrictions noted above, our board of directors may increase, decrease or eliminate the distribution rate that is being paid on our common stock 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 that are available for distribution may be affected by a number of factors, including the following:

•

our operating and interest expenses;

•

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;

•

financings and refinancings; and

•

dividends with respect to the outstanding shares of our Series A Convertible Preferred Stock.

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

	Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
Distributions paid in cash — common stockholders	$	18,996,252		$	14,311,105
Distributions paid in cash — Operating Partnership unitholders		4,542,828			4,124,617
Distributions paid in cash — preferred stockholders		9,127,250			6,305,722
Distributions reinvested		14,237,983			12,001,955
Total distributions	$	46,904,313		$	36,743,399
Source of distributions
Cash flows provided by operations	$	42,727,251	91%	$	22,549,196	61%
Cash on hand		—	0%		2,192,248	6%
Offering proceeds from distribution reinvestment plan		4,177,062	9%		12,001,955	33%
Total sources	$	46,904,313	100%	$	36,743,399	100%

From our inception through September 30, 2021, we paid cumulative distributions of approximately $229 million, of which approximately $194 million were paid to common stockholders, as compared to cumulative FFO of approximately $15.5 million.

For the nine months ended September 30, 2021, we paid distributions of approximately $46.9 million, of which approximately $33.2 million were paid to common stockholders, as compared to FFO of approximately $12.9 million, which reflects a write-off of equity interest and preexisting relationships of approximately $8.4 million and acquisition related expenses of approximately $0.5 million.

For the nine months ended September 30, 2020, we paid distributions of approximately $36.7 million, as compared to FFO of approximately ($25.5) million, which reflects impairment of goodwill, intangible assets, and our investments in Managed REITs, net of deferred tax liability and contingent earnout adjustments, of approximately $32.4 million, and acquisition related expenses of approximately $0.6 million.

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 available funds or 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

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 September 30, 2021:

	Payments due during the years ending December 31:
	Total		2021		2022-2023		2024-2025		Thereafter
Debt interest⁽¹⁾	$	125,745,962	$	6,553,491	$	51,247,879	$	38,072,161	$	29,872,431
Debt principal⁽²⁾		852,105,328		605,061		47,081,087		269,897,527		534,521,653
Total contractual obligations	$	977,851,290	$	7,158,552	$	98,328,966	$	307,969,688	$	564,394,084

⁽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 September 30, 2021. Debt denominated in foreign currency has been converted based on the rate in effect as of September 30, 2021.

⁽²⁾

Amount represents principal payments only, excluding net debt premium and debt issuance costs.

Off-Balance Sheet Arrangements

We do not currently have any relationships with off-balance sheet 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 15 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 September 30, 2021, our net debt was approximately $849 million, which included approximately $341 million in fixed rate debt, $511 million in variable rate debt and approximately $0.3 million in net debt premium less approximately $3.5 million in net debt issuance costs. As of December 31, 2020, our net debt was approximately $718 million, which included approximately $302 million in fixed rate debt, $420 million in variable rate debt and approximately $0.5 million in net debt premium less approximately $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 $4.1 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 annual debt maturities and average interest rates on our outstanding debt as of September 30, 2021:

	Year Ending December 31,
	2021			2022			2023			2024			2025			Thereafter			Total
Fixed rate debt	$	605,061		$	2,914,430		$	3,384,157		$	47,043,177		$	2,869,187		$	284,521,653		$	341,337,665
Average interest rate⁽¹⁾		4.50	%		4.50	%		4.50	%		4.46	%		4.38	%		4.47	%
Variable rate debt	$	—		$	—		$	40,782,500		$	219,985,163		$	—		$	250,000,000		$	510,767,663
Average interest rate⁽¹⁾		2.07	%		2.07	%		1.96	%		1.90	%		1.88	%		1.88	%

⁽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 September 30, 2021.

Currently, our only foreign exchange rate risk comes from our Canadian properties and the Canadian Dollar (“CAD”). Our existing foreign currency hedges mitigate 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 September 30, 2021 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, 2020. With the exception of the risk factors set forth below, there have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2020.

We may only calculate the value per share for our shares annually and, therefore, our stockholders may not be able to determine the net asset value of their shares on an ongoing basis.

On October 19, 2021, our board of directors approved an estimated value per share for our Class A shares and Class T shares of $15.08. Our board of directors approved this estimated value per share pursuant to rules promulgated by FINRA. When determining the estimated value per share there are currently no SEC, federal and state rules that establish requirements specifying the methodology to employ in determining an estimated value per share; provided, however, that the determination of the estimated value per share must be conducted by, or with the material assistance or confirmation of, a third-party valuation expert or service and must be derived from a methodology that conforms to standard industry practice.

We intend to use this estimated per share value of our shares until the next net asset valuation approved by our board of directors, which we are required to approve at least annually. We may not calculate the net asset value per share for our shares more than annually. Therefore, you may not be able to determine the net asset value of your shares on an ongoing basis.

In determining our estimated value per share, we primarily relied upon a valuation of our portfolio of properties as of June 30, 2021. Valuations and appraisals of our properties are estimates of fair value and may not necessarily correspond to realizable value upon the sale of such properties; therefore our estimated net asset value per share may not reflect the amount that would be realized upon a sale of each of our properties.

For the purposes of calculating the estimated value per share, an independent third party appraiser valued our properties as of June 30, 2021. The valuation methodologies used to value our properties involved certain subjective judgments. Ultimate realization of the value of an asset depends to a great extent on economic and other conditions beyond our control and the control of our independent appraiser. Further, valuations do not necessarily represent the price at which an asset would sell, since market prices of assets can only be determined by negotiation between a willing buyer and seller. Therefore, the valuations of our properties and our investments in real estate related assets may not correspond to the timely realizable value upon a sale of those assets. Because our share prices are primarily based on the estimated net asset value per share, our stockholders may pay more than realizable value when such shares are purchased or receive less than realizable value when such shares are sold.

We have incurred a net loss to date, have an accumulated deficit, and it is possible that our operations may not be profitable in 2021.

We incurred a net loss attributable to common stockholders of approximately $20 million for the nine months ended September 30, 2021. Our accumulated deficit was approximately $161 million as of September 30, 2021.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)

None.

(b)

None.

(c)	Our share redemption program enabled our stockholders to have their shares redeemed by us, subject to the significant conditions and limitations described in our publicly filed documents. During the three months ended September 30, 2021, 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
July 31, 2021		129,408	$	10.40		129,408	2,784,369⁽¹⁾
August 31, 2021		—	$	—		—	2,784,369⁽¹⁾
September 30, 2021		—	$	—		—	2,784,369⁽¹⁾

⁽¹⁾	A description of the maximum number of shares that may be purchased under our share redemption program is included in Note 12 – Commitments and Contingencies, of the Notes to the Consolidated Financial Statements contained in this report.

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 September 30, 2021 (and are numbered in accordance with Item 601 of Regulation S-K).

Exhibit No.		Description

3.1		Second Articles of Amendment and Restatement of SmartStop Self Storage REIT, Inc., incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on September 19, 2019, Commission File No. 000-55617

3.2		Articles Supplementary for Series A Convertible Preferred Stock of SmartStop Self Storage REIT, Inc., incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on October 30, 2019, Commission File No. 000-55617

3.3		Articles of Amendment to the Second Articles of Amendment and Restatement of SmartStop Self Storage REIT, Inc., incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on June 23, 2021, Commission File No. 000-55617

3.4		Amended and Restated Bylaws of SmartStop Self Storage REIT, Inc., incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed on September 19, 2019, 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

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 SmartStop Self Storage REIT, Inc. financial information for the three and nine months ended September 30, 2021 formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (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.

104*		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 has been formatted in Inline XBRL.

*	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.

	SMARTSTOP SELF STORAGE REIT, INC. (Registrant)

Dated: November 5, 2021	By:	/s/ James R. Barry
		James R. Barry
		Chief Financial Officer and Treasurer (Principal Financial Officer)