SmartStop Self Storage REIT (SMA) risk factors, FY2025 10-K

Summary of Principal Risk Factors

1. 01Below is a summary of the principal risk factors we face. Please read it carefully and refer to the more detailed descriptions of the risk factors below this summaryNew
2. 02If 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 results100% rewritten
3. 03A subsidiary of ours is the sponsor of the Managed REITs and it and its affiliates sponsor Other Programs (as defined below). As a result, we could be subject to any litigation that may arise by investors in those entities or the respective operations of those entitiesNew
4. 04We have incurred and intend to continue to incur, mortgage indebtedness and other borrowings, which may increase our business risks100% rewritten

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

1. 05We 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 future51% rewritten
2. 06If we pay distributions from sources other than our cash flows from operations, we may not be able to sustain our distribution rate, we may have fewer funds available for investment in real estate and other assets and our stockholders’ overall returns may be reducedNew
3. 07An active trading market for our common stock may not be maintainedNew
4. 08The market price and trading volume of shares of our common stock may be volatileNew
5. 09Broad market fluctuations could negatively impact the market price of shares of our common stockNew
6. 10Increases in market interest rates may result in a decrease in the value of shares of our common stockNew
7. 11Our distributions to stockholders may change, which could adversely affect the market price of shares of our common stockNew
8. 12If we lose or are unable to retain our executive officers, our business could be harmed
9. 13Our 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. 14Impairment of goodwill or other intangible assets may adversely affect our financial condition and results of operations63% rewritten
11. 15Our trademarks are important, and the loss of or our inability to enforce trademark and other proprietary intellectual property rights could harm our business
12. 16We 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
13. 17Privacy concerns could result in regulatory changes that may harm our business
14. 18Certain 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 suffer49% rewritten
15. 19Because 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
16. 20If the Managed REITs and the DSTs they have sponsored are unable to repay certain loans made to them by us, our liquidity, financial condition, cash flow, and the amount available for distributions to our common stockholders could be adversely affected80% rewritten
17. 21A 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
18. 22We may experience difficulties in integrating the operations of Argus Professional Storage Management, LLC and in realizing the expected benefits of the acquisition thereof, and we may experience similar difficulties in connection with any future acquisitionsNew
19. 23Changes in U.S. trade policy, including significant tariffs or other restrictions imposed on imports by the U.S. and related countermeasures taken by impacted foreign countries, could have a material adverse effect on our businessNew
20. 24We may be unable to raise additional capital needed to grow our businessNew
21. 25Future 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 shares46% rewritten
22. 26A downgrade in our credit ratings could materially adversely affect our business and financial condition and the market value of our outstanding notesNew
23. 27Prior to our recent listing on the NYSE, we had no operating history as a publicly traded company and may not be able to successfully operate as a publicly traded companyNew
24. 28If securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could declineNew

Risks Related to Our Corporate Structure

1. 29The 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. 30Our 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 stockholders33% rewritten
3. 31Stockholders 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. 32We have opted out of provisions of the Maryland General Corporate Law (“MGCL”) relating to deterring or defending hostile takeovers64% rewritten
5. 33These prohibitions are intended to prevent a change of control by interested stockholders who do not have the support of our Board. Pursuant to the statute, our Board has by resolution exempted business combinations between us and any person, provided that the business combination is first approved by our BoardNew
6. 34Our 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

Risks Related to the Self Storage Industry

1. 35Because 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. 36We 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. 37We 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. 38The acquisition of new properties may give rise to difficulties in predicting revenue potential
5. 39We 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. 40Delays in development and lease-up of our properties would reduce our profitability
7. 41The 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. 42Local or federal governments may adopt regulations that may adversely affect our business, financial condition, and results of operationsNew
9. 43In 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. 44Our 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. 45We may be unable to promptly re-let units within our facilities at satisfactory rental rates
12. 46We 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. 47A high concentration of our properties in a particular geographic area would magnify the effects of downturns in that geographic area49% rewritten
2. 48We may obtain only limited warranties when we purchase a property
3. 49We may acquire or finance properties with yield maintenance or defeasance provisions, which may restrict our operational and financial flexibility
4. 50Rising expenses could reduce cash available for future acquisitions
5. 51Our real estate assets may decline in value and be subject to significant impairment losses, which may reduce our net income
6. 52Adverse economic conditions will negatively affect our returns and profitability
7. 53Our 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
8. 54In 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
9. 55If 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
10. 56Our joint venture investments could be adversely affected by our lack of sole decision-making authority
11. 57Costs of complying with governmental laws and regulations, including those relating to environmental matters, may adversely affect our income and the cash available for distribution
12. 58Climate change may adversely affect our business, financial condition, cash flows and results of operations
13. 59Costs of complying with governmental laws and regulations, including those relating to regulations accommodating disabilities, may affect cash available for distribution
14. 60Property taxes and insurance premiums may increase, which would adversely affect our net operating income and cash available for distributions
15. 61Investments 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
16. 62Changes 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
17. 63We are subject to additional risks due to the location of any of the properties that we either own or operate in Canada
18. 64We 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’ investments82% rewritten
19. 65If 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
20. 66Our obligation to make balloon payments could increase the risk of default
21. 67Lenders 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 stockholders21% rewritten
22. 68Increases 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
23. 69Disruptions 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

Federal Income Tax Risks

1. 70Failure 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
2. 71If 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
3. 72In 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
4. 73We 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
5. 74Distributions to tax-exempt investors may be classified as unrelated business taxable income
6. 75Complying with the REIT requirements may cause us to forego otherwise attractive opportunities
7. 76To maintain our REIT qualification, we may be forced to borrow funds during unfavorable market conditions
8. 77Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends
9. 78Foreign purchasers of our common stock may be subject to FIRPTA tax upon the sale of their shares
10. 79Legislative or other actions affecting REITs materially and adversely affect our stockholders and us

ERISA Risks

1. 80If 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
2. 81There 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
3. 82Persons 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