Press Release|Corporates

KBRA Revises SmartStop OP, L.P. Issuer and Senior Note Ratings to Watch Developing

28 Mar 2025   |   New York

Contacts

KBRA has revised the Watch Downgrade status for SmartStop OP, L.P.'s BBB- issuer and senior secured note ratings to Developing. The Watch placement revision follows KBRA's review of parent company SmartStop Self Storage REIT, Inc.'s ('SMA') updated S-11 filing, which indicates that the company intends to raise approximately $800 million of equity in an initial public offering.

The prior Watch Downgrade placement reflected an increase in leverage used to fund acquisitions and high usage under SMA's revolving credit facility. Proceeds from the IPO are expected to improve the company's leverage profile through a reduction in revolving credit facility borrowings, repayment of a $175 million acquisition bridge facility, and full redemption of a $200 million preferred stock issue.

Assuming completion of the IPO as outlined above, KBRA estimates Net Debt/EBITDA in the low 5x range on a pro forma basis (reduced from over 9x at year-end 2024) with additional improvement noted in fixed charge coverage and dividend payout ratios. Usage under SmartStop's $700 million revolving credit facility would decrease from over 90% drawn to approximately 35%, providing the company with improved liquidity and funding capacity for future growth.

Following completion of the IPO, KBRA will conduct a review of SmartStop's post-closing balance sheet and ability to manage leverage within a company-guided range of 5.0x - 6.0x. KBRA will also consider the outlook for the storage sector's key spring leasing season, as well as SmartStop's acquisition-related growth plans as the company seeks to build on the $270 million of properties acquired over the last twelve months.

Headquartered in Ladera Ranch, CA, SmartStop Self Storage REIT, Inc. is a $3 billion non-traded equity REIT specializing in the ownership and management of over 200 storage properties in 22 states and Canada. The company is the tenth largest operator of storage facilities in the U.S. according to published sources and among the largest operators in Canada.

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Methodologies

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1008691

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