SmartStop’s Strategic Storage Trust VI Closes SSGT III Merger, Topping $1B in Assets

Strategic Storage Trust VI, Inc. has completed its all-stock acquisition of Strategic Storage Growth Trust III, Inc., combining two self-storage real estate investment trusts sponsored by an affiliate of SmartStop Self Storage REIT, Inc. into a nontraded REIT with more than $1 billion in total assets, the company said.

The merger closed Nov. 1. SSGT III stockholders received one share of SST VI Class A common stock for each SSGT III share. Legacy SST VI stockholders now own approximately 59% of the combined company, legacy SSGT III stockholders approximately 38%, and other operating partnership unitholders approximately 3%. SST VI said the transaction values SSGT III’s real estate portfolio at approximately $500 million.

SST VI acquired SSGT III’s 12 wholly owned self-storage facilities in Florida, California, New Jersey, Texas, Ontario, Alberta, and British Columbia, comprising approximately 9,215 units and 981,465 net rentable square feet, with 93% physical occupancy as of Sept. 30, according to the company. It also took on SSGT III’s 50% interests in three joint ventures with subsidiaries of SmartCentres Real Estate Investment Trust, an unaffiliated third party: an operating facility in Laval, Quebec, and two development sites in Victoria and New Westminster, British Columbia, expected to be completed in 2027. The deal also included SSGT III’s beneficial interests in three Delaware statutory trust programs, Blue Door I, II, and III, which own eight properties totaling approximately 5,370 units.

Following the merger, SST VI owns 37 wholly owned operating properties in 10 states and three Canadian provinces, totaling approximately 29,400 units and 3.2 million rentable square feet. The company said the transaction grew its unit count by roughly 45% and extended its U.S. footprint from seven states to 10 with its entry into California, New Jersey, and Texas.

“With 37 wholly-owned facilities and over a billion dollars in total assets, we are positioned to operate more efficiently, borrow on better terms and pursue growth from a position of strength,” said H. Michael Schwartz, SST VI president and chief executive officer.

SST VI said former SSGT III stockholders are expected to receive a distribution rate more than 20% higher following the merger.

Preferred Stock Terms

SSGT III’s Series A convertible preferred stock converted into a newly designated Series G convertible preferred stock of SST VI. The holder, Extra Space Storage LP, a subsidiary of Extra Space Storage Inc., received 100,000 Series G shares carrying a $1,000-per-share liquidation amount, or $100 million in aggregate. The shares rank senior to SST VI’s common stock and its Series E preferred stock and on parity with its Series B convertible preferred stock, which Extra Space also holds.

The Series G shares pay an initial dividend rate of 8.85% a year. If they are not redeemed by Feb. 4, 2030, the rate steps up 0.75 percentage points annually to a maximum of 11% until Feb. 4, 2035, after which the annual increases resume until the shares are redeemed. SST VI may redeem the shares for cash after Feb. 4, 2028. The holder may convert into Class A common stock at $10.75 per share after the earlier of that date or 180 days after an initial exchange listing, subject to a cap on the value of shares issued on conversion.

Approval from holders of a majority of the Series G shares is required for certain actions, including taking the company’s real estate portfolio above 60% loan-to-value, merging with an entity whose assets are less than 80% self-storage related, and permitting anyone other than Schwartz to serve as chairman. SST VI also granted the holder up to four demand registrations of at least $15 million each, for Class A shares received on conversion, beginning one year after those shares are issued, as well as piggyback registration rights.

Before the merger closed, SSGT III terminated its advisory agreement with SS Growth Advisor III, LLC, a SmartStop affiliate. As AltsWire previously reported, the adviser received $2 million in SSGT III operating partnership units in lieu of the disposition fee otherwise payable under the agreement.

The merger extends SmartStop’s pattern of consolidating its sponsored vehicles. SmartStop’s predecessor, Strategic Storage Trust II, acquired Strategic Storage Growth Trust in January 2019, and SmartStop merged with Strategic Storage Trust IV in March 2021 and with Strategic Storage Growth Trust II in June 2022.

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