SmartStop Self Storage REIT (SMA) risk factors, 2025 10-K

Risks Related to an Investment in SmartStop Self Storage REIT, Inc

1. 01We have historically incurred net losses, have an accumulated deficit, and it is possible that our operations may not be profitable, or maintain profitability, in the future
2. 02We have paid, and may continue to pay, distributions from sources other than cash flow from operations; therefore, we will have fewer funds available for the acquisition of properties, and our stockholders’ overall return may be reduced
3. 03There is currently no public trading market for our shares and there may never be one; therefore, it will be difficult for our stockholders to sell their shares. Our charter does not require us to pursue a liquidity transaction at any time
4. 04Presently, our share redemption program is suspended
5. 05We have issued Series A Convertible Preferred Stock that ranks senior to all common stock and grants the holder superior rights compared to common stockholders, which may have the effect of diluting our stockholders’ interests in us and discouraging a takeover or other similar transaction
6. 06We may only calculate the estimated value per share for our shares annually and, therefore, our stockholders may not be able to determine the estimated net asset value of their shares on an ongoing basis
7. 07We may be unable to pay or maintain cash distributions or increase distributions over time
8. 08If we lose or are unable to retain our executive officers, our business could be harmed
9. 09Our Executive Severance and Change of Control Plan and the related agreements with our executive officers may result in significant expense for us and may deter a third party from engaging in a change of control transaction with us that might otherwise result in a premium price to our stockholders
10. 10Impairment of goodwill or other intangible assets resulting from the Self Administration Transaction may adversely affect our financial condition and results of operations
11. 11If we fail to maintain an effective system of internal control over financial reporting and disclosure controls, we may not be able to accurately and timely report our financial results
12. 12Our trademarks are important, and the loss of or our inability to enforce trademark and other proprietary intellectual property rights could harm our business
13. 13We are the subject of various claims and legal proceedings and may become the subject of claims, litigation or investigations which could have a material adverse effect on our business, financial condition or results of operations
14. 14Privacy concerns could result in regulatory changes that may harm our business
15. 15Certain of our officers and key personnel will face competing demands relating to their time and will face conflicts of interest related to the positions they hold with affiliated entities, which could cause our business to suffer
16. 16Revenue and earnings from the Managed REIT Platform are uncertain
17. 17Because the revenue streams from the advisory agreements with the Managed REITs are subject to limitation or cancellation, any such termination could adversely affect our financial condition, cash flow and the amount available for distributions to our common stockholders
18. 18If the Managed REITs are unable to repay certain loans made to them by us or redeem certain preferred equity investments made in them by us, our liquidity, financial condition, cash flow, and the amount available for distributions to our common stockholders could be adversely affected
19. 19A subsidiary of ours is the sponsor of the Managed REITs and it or its affiliates sponsor Other Programs. As a result, we could be subject to any litigation that may arise by investors in those entities or the respective operations of those entities

Risks Related to Our Corporate Structure

1. 20The limit on the number of shares a person may own may discourage a takeover that could otherwise result in a premium price to our stockholders
2. 21Our charter permits our board of directors to issue stock with terms that may subordinate the rights of common stockholders or discourage a third party from acquiring us in a manner that might result in a premium price to our stockholders
3. 22Stockholders are bound by the majority vote on matters on which our stockholders are entitled to vote and, therefore, a stockholder vote on a particular matter may be superseded by the vote of other stockholders
4. 23We have opted out of provisions of the MGCL relating to deterring or defending hostile takeovers
5. 24an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding stock of the corporation
6. 25Our rights and the rights of our stockholders to recover claims against our officers and directors are limited, which could reduce our stockholders’ and our recovery against them if they cause us to incur losses
7. 26Future offerings of debt securities, which would be senior to our common stock, or equity securities, which would dilute our existing stockholders and may be senior to our common stock, may adversely affect our stockholders, and our stockholders’ interests in us will be diluted as we issue additional shares

Risks Related to the Self Storage Industry

1. 27Because we are focused on the self storage industry, our rental revenues will be significantly influenced by demand for self storage space generally, and a decrease in such demand would likely have a greater adverse effect on our rental revenues than if we owned a more diversified real estate portfolio
2. 28We face significant competition in the self storage industry, which may increase the cost of acquisitions or developments or impede our ability to retain customers or re-let space when existing customers vacate
3. 29We may not be successful in identifying and consummating suitable acquisitions, or integrating and operating acquired properties, which may adversely impact our growth and results of operations
4. 30The acquisition of new properties may give rise to difficulties in predicting revenue potential
5. 31We depend on our on-site personnel to maximize customer satisfaction at each of our facilities, and any difficulties we encounter in hiring, training, and retaining skilled field personnel may adversely affect our rental revenues
6. 32Delays in development and lease-up of our properties would reduce our profitability
7. 33The risks associated with storage contents may increase our operating costs or expose us to potential liability that may not be covered by insurance, which may have adverse effects on our business, financial condition, and results of operations
8. 34Our operating results may be affected by regulatory changes that have an adverse impact on our specific facilities, including our ability to obtain required permits and approvals, which may adversely affect our business, financial condition, and results of operations
9. 35In certain cases, we protect our customers’ goods pursuant to our tenant protection program or other arrangements that may, in some cases, be subject to governmental regulation, which may adversely affect our results
10. 36Our use of or failure to adopt advancements in information technology may hinder or prevent us from achieving strategic objectives or otherwise harm our business
11. 37We may be unable to promptly re-let units within our facilities at satisfactory rental rates
12. 38We face risks related to an epidemic, pandemic or other health crisis, which could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects

Risks Related to Investments in Real Estate

1. 39A high concentration of our properties in a particular geographic area would magnify the effects of downturns in that geographic area
2. 40We may obtain only limited warranties when we purchase a property
3. 41We may acquire or finance properties with yield maintenance or defeasance provisions, which may restrict our operational and financial flexibility
4. 42Rising expenses could reduce cash available for future acquisitions
5. 43Our real estate assets may decline in value and be subject to significant impairment losses, which may reduce our net income
6. 44Adverse economic conditions will negatively affect our returns and profitability
7. 45changes in interest rates and the availability of financing, which may render the sale or refinance of a property or loan difficult or unattractive
8. 46Our inability to sell a property when we desire to do so could adversely impact our business and financial condition, and our inability to sell our properties at a price equal to, or greater than, the price for which we purchased such properties may lead to a decrease in the value of our assets
9. 47In addition, we may be required to expend funds to correct defects or to make improvements before a property can be sold. We cannot assure our stockholders that we will have funds available to correct such defects or to make such improvements
10. 48If we suffer losses that are not covered by insurance or that are in excess of insurance coverage, we could lose invested capital and anticipated profits
11. 49Our joint venture investments could be adversely affected by our lack of sole decision-making authority
12. 50Costs of complying with governmental laws and regulations, including those relating to environmental matters, may adversely affect our income and the cash available for distribution
13. 51Climate change may adversely affect our business, financial condition, cash flows and results of operations
14. 52Costs of complying with governmental laws and regulations, including those relating to regulations accommodating disabilities, may affect cash available for distribution
15. 53Property taxes and insurance premiums may increase, which would adversely affect our net operating income and cash available for distributions
16. 54Investments in properties or other real estate investments outside the United States subject us to foreign currency risks, which may adversely affect distributions and our REIT status
17. 55Changes in the Canadian Dollar/USD exchange rate could have a material adverse effect on our operating results and value of the investment of our stockholders
18. 56other global or regional political, economic, or financial events and situations
19. 57We are subject to additional risks due to the location of any of the properties that we either own or operate in Canada
20. 58We have broad authority to incur debt, and high debt levels could hinder our ability to continue to pay distributions at the current rate and could decrease the value of our stockholders’ investments
21. 59We have incurred and intend to continue to incur, mortgage indebtedness and other borrowings, which may increase our business risks
22. 60If we or the other parties to our loans or secured notes payable, as applicable, breach covenants thereunder, such loan or loans or secured notes payable could be deemed in default, which could accelerate our repayment date and materially adversely affect the value of our stockholders’ investment in us
23. 61Our obligation to make balloon payments could increase the risk of default
24. 62Lenders have required and will likely continue to require us to enter into restrictive covenants relating to our operations, which could limit our ability to continue to pay distributions to our stockholders
25. 63Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to continue to pay distributions at the current rate to our stockholders
26. 64Disruptions in the credit markets could have a material adverse effect on our results of operations, financial condition, and ability to pay distributions to our stockholders
27. 65Failure to continue to qualify as a REIT would adversely affect our operations and our ability to continue to pay distributions at our current level as we will incur additional tax liabilities
28. 66of up to five years following our acquisition, we would be subject to U.S. federal corporate income tax with respect to any built-in gain inherent in such asset as of the closing of our acquisition
29. 67Our stockholders may have tax liability on distributions they elect to reinvest in our common stock
30. 68If any of our partnerships fails to maintain its status as a partnership for federal income tax purposes, its income would be subject to taxation and our REIT status may be terminated
31. 69In certain circumstances, we may be subject to federal and state income taxes as a REIT, which would reduce our cash available for distribution to our stockholders
32. 70We may be required to pay some taxes due to actions of our taxable REIT subsidiaries, which would reduce our cash available for distribution to our stockholders
33. 71Distributions to tax-exempt investors may be classified as unrelated business taxable income
34. 72Complying with the REIT requirements may cause us to forego otherwise attractive opportunities
35. 73To maintain our REIT qualification, we may be forced to borrow funds during unfavorable market conditions
36. 74Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends
37. 75Foreign purchasers of our common stock may be subject to FIRPTA tax upon the sale of their shares
38. 76Legislative or other actions affecting REITs materially and adversely affect our stockholders and us
39. 77If our assets are deemed to be plan assets, we may be exposed to liabilities under Title I of Employee Retirement Income Security Act of 1974, or ERISA, and the Code
40. 78There are special considerations that apply to qualified pension or profit-sharing trusts or IRAs investing in our shares which could cause an investment in our company to be a prohibited transaction and could result in additional tax consequences
41. 79Persons investing the assets of employee benefit plans, IRAs, and other tax-favored benefit accounts should consider ERISA and related risks of investing in the shares