2016 ANNUAL REPORT
TABLE
of Contents
Corporate Information
Financial Highlights
Letter to Shareholders
Our Board Members
Financial Statements
Management Discussion and Analysis
2
4
5
8
9
57
Corporate Information
Phone: 1-877-622-0205
Website: storagevaultcanada.com
Email: ir@storagevaultcanada.com
Address: 100 Canadian Road, Scarborough Ontario, M1R 4Z5
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2016 Annual Report
2016 Annual Report
3
FINANCIAL
Highlights
SHARE PRICE CHANGE
YOY
2.0
1.0
0
2015
2016
2017
REVENUE
NOI
FFO
150%
192%
435%
ASSET OVERVIEW - GROWTH
10 STORES
14 STORES
29 STORES
31 STORES
49 STORES
Q4/2014
Q2/2015
Q4/2015
Q2/2016
Q4/2016
4
STORAGEVAULT WAS RECOGNIZED AS A TSX VENTURE
50TM COMPANY IN 2017
TSX Venture 50 is a trademark of TSX Inc. and is used under license.
2016 Annual Report
CUBEIT CONTAINER ON THE RIDEAU CANAL, OTTAWA, AS PART OF THE CANADA 150 CELEBRATION
LETTER
to Shareholders
Dear fellow Shareholders,
StorageVault continued
its strong growth
in 2016 being
recognized as one of the Top 50 performers on the TSX Venture
Exchange. The successful implementation of our management
and operating systems resulted in dramatically improved cash
flows and a significant increase in shareholder value. With
our robust acquisition pipeline and continued operational
improvements we are on track to achieve our goal of becoming
the leading storage platform in Canada.
WE GREW TO OVER
2.6 MILLION SQFT OF
RENTABLE SPACE IN
24,000 STORAGE UNITS
$178.4 MILLION
IN ACQUISITIONS
2016 Annual Report
5
REVENUE GROWTH OF
150% TO
$27.8 MILLION
FROM $11.1 MILLION
NOI GROWTH TO
$17.0 MILLION
FROM $5.8 MILLION
ACQUIRED 7 STORES
IN GREATER
MONTREAL AREA
SHARE CAPITAL
INCREASED BY
$118.9 MILLION
ANOTHER YEAR OF GROWTH
We acquired twenty one stores for $178.4 million and increased
share capital by $118.9 million in fiscal 2016. Our acquisitions
launched us into the Montreal market and continued our
expansion in Calgary and the Greater Toronto Area. These
acquisitions increased our portfolio to forty nine stores across
Canada. These stores, in addition to our portable storage units,
total over 2.6 million square feet of rentable storage space in over
24,000 rental units.
2016 RESULTS
Fiscal 2016 was a very successful year in both growth and
operating performance. We exceeded same store NOI projections
as professional management and
revenue management
initiatives took effect. Revenue and NOI grew by 150% and 192%
respectively in 2016. We expect both to increase an additional
50% in 2017 as we benefit from our revenue management
program and continue streamlining operations. Our funds from
operations increased by 435% to $7.3 million. Annualizing the
results from the acquisitions in 2016 would have resulted in a net
operating income of $25.5 million and funds from operations of
$14.0 million.
Our net loss went from $4.6 million in 2015 to $21.2 million in 2016,
a direct result of acquisition and integration costs of $1.9 million
and $27.3 million of depreciation, amortization and goodwill
adjustment in 2016. Of note, we have booked an $11.7 million
adjustment to goodwill on the income statement. In certain
cases, we issued shares to acquire stores with the share price
being fixed at the time of the signing of the purchase agreement.
IFRS requires us to increase the value of the purchased assets by
the amount the share price has increased between the signing
date and the closing date. As our share price has continued to
increase, we were required to record an $11.7 million increase
to the assets purchased in 2016. We then adjusted the assets
down to the actual purchase price and as a result the amount
of this reduction was recorded as a goodwill adjustment in the
income statement. All of this was required to comply with the
requirements of IFRS and has no impact on the actual value and
financial results of our business.
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2016 Annual Report
OUR STRATEGY
in February 2015. With a larger geographic and operating footprint
achieved through our growth strategy, we believe the margins for
We continue to focus on owning and operating multiple stores
this segment of our business will continue to improve. For 2017,
in Canada’s top markets and adding complementary portable
we have ordered 200 new units that are expected to be placed
storage units to take advantage of economies of scale. Our
into service this summer.
growth strategy is focused on acquisitions, organic growth,
expansion of our existing stores and expansion of our portable
LOOKING FORWARD
storage business – all with an eye to increasing cash flow.
ACQUISITIONS
Following another solid year, we are well positioned to take
advantage of our momentum, scale and strong balance sheet to
drive revenues, increase cash flow and acquire more stores.
As we showed in 2016 and 2015, the combination of our corporate
platform, industry relationships and storage experience provide
We expect significant growth in revenue and net operating income
StorageVault with a unique advantage in the Canadian market
in 2017 as we streamline and integrate operations, increase rates
place. This advantage allows us to identify accretive and strategic
through our revenue management systems, continue to reduce
purchasing opportunities at attractive prices that provide
costs and add 50,000 square feet of demand based expansion to
synergies in operations, marketing and revenue maximization.
the portfolio. Our strong balance sheet will allow us to lower our
ORGANIC GROWTH
cost of capital and access cash for future acquisitions.Including
transactions already announced, we expect to add between
$450 and $490 million of assets to our portfolio in 2017, while
Scale has become increasingly important in the storage business
maintaining our disciplined acquisition philosophy.
and our size provides a significant advantage in negotiating
better rates on our operating costs. Efficiencies are also gained
As of the date of this letter, we have closed on $32 million of
through cross promoting and marketing of the self storage and
acquisitions and announced a further $412 million. We have also
portable storage platforms due to a larger national footprint,
internalized management and acquired a significant third party
offering different but complementary product choices at various
revenue stream at a very accretive rate for StorageVault that also
price points to our customers. These efficiencies translate into
provides an excellent growth funnel.
improved margins and increased free cash flow.
EXISTING STORE EXPANSION
With our commitment to excellence and your continued support,
we are well on our way to achieving our goal of being Canada’s
leading storage company.
When the market conditions are suitable and high occupancies
indicate pent up demand, we expect to expand a number of
Sincerely,
our existing locations. There is over 700,000 square feet of
development potential on the lands currently owned and
Steven Scott
operated by StorageVault. In 2017, we expect to build out a total
Chief Executive Officer
of 50,000 square feet in the Vancouver and Montreal markets.
EXPANSION OF OUR PORTABLE STORAGE BUSINESS
Much like the self storage business 20 years ago, the portable
storage business is on the rise and has significant growth
EXPECTING $450 TO $490 MILLION
IN ACQUISITIONS FOR 2016
potential. Canada’s largest pension plan purchased the world’s
largest portable storage business in one of their long-term funds
ADDING 50,000 SQUARE FEET OF DEMAND
BASED EXPANSION
2016 Annual Report
7
OUR Board Members
MEET OUR
BOARD
MEMBERS
STEVEN SCOTT
Director
CEO
Mr. Simpson’s career has focused
on start-ups. He co-founded and
was President and Chief
Executive Officer of StorageVault
Canada and led its transition to
the TSX Venture Exchange. He
now serves the corporation as
Executive Vice Chairman and
Acquisition Committee Chair.
IQBAL KHAN
Director
CFO
Chairman and CEO of the
Corporation, Mr. Scott has
been a Principal and Chief
Executive Officer of The Access
Group of Companies focusing
on the ownership, acquisition,
development and management
of self storage and other real
estate assets.
The CFO of the Corporation,
Mr. Khan, has been a Principal
and Chief Financial Officer of
The Access Group of Companies
focusing on the ownership,
acquisition, development and
management of self storage and
other real estate assets.
ALAN SIMPSON
Director
Mr. Duguid is Founding Partner
and CEO of PFM Capital Inc.
Besides serving as the Vice
President Investments and CFO
of many of PFM’s funds, Rob is a
director of numerous private and
public Canadian companies.
ROB DUGUID
Director
BLAIR TAMBLYN
Director
Mr. Tamblyn is Senior Managing
Director, CEO and Co- Founder of
Timbercreek Asset Management.
Chairman of the Board for
Timbercreek Financial.
"
Our growth strategy is
focused on acquisitions,
organic growth,
expansion of our existing
stores and expansion
of our portable storage
business – all with an eye
to increasing cash flow.
"
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2016 Annual Report
FINANCIAL
Statements
2016 Annual Report
9
StorageVault Canada Inc.
Consolidated Financial Statements
For the Years ended December 31, 2016 and 2015
Management’s Responsibility
To the Shareholders of StorageVault Canada Inc.:
Management is responsible for the preparation and presentation of the accompanying consolidated financial
statements, including responsibility for significant accounting judgments and estimates in accordance with
International Financial Reporting Standards. This responsibility includes selecting appropriate accounting principles
and methods, and making decisions affecting the measurement of transactions in which objective judgment is
required.
In discharging its responsibilities for the integrity and fairness of the consolidated financial statements, management
designs and maintains the necessary accounting systems and related internal controls to provide reasonable assurance
that transactions are authorized, assets are safeguarded and financial records are properly maintained to provide
reliable information for the preparation of financial statements.
The Board of Directors, acting through an Audit Committee composed primarily of directors who are neither
management nor employees of the Corporation, is responsible for overseeing management in the performance of its
financial reporting responsibilities, and for approving the financial information included in the annual report. The
Board fulfils these responsibilities by reviewing the financial information prepared by management and discussing
relevant matters with management and external auditors. The Board is also responsible for recommending the
appointment of the Corporation’s external auditors.
MNP LLP, an independent firm of Chartered Professional Accountants, is appointed by the shareholders to audit the
financial statements and report directly to them. Their report follows. The external auditors have full and free access
to, and meet periodically and separately with, both the Audit Committee and management to discuss their audit
findings.
March 31, 2017
“signed” Steven Scott
Chief Executive Officer
“signed” Iqbal Khan _
Chief Financial Officer
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2016 Annual Report
Independent Auditors’ Report
To the Shareholders of StorageVault Canada Inc.:
We have audited the accompanying consolidated financial statements of StorageVault Canada Inc., which comprise the
consolidated statement of financial position as at December 31, 2016 and December 31, 2015, and the consolidated
statements of income (loss) and comprehensive income (loss) and cash flows for the years then ended, and a summary of
significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards, and for such internal control as management determines is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud
or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted
our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply
with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of
material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the
consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
StorageVault Canada Inc. as at December 31, 2016, December 31, 2015 and its financial performance and its cash flows
for the years then ended in accordance with International Financial Reporting Standards.
Calgary, Alberta
March 31, 2017
Chartered Professional Accountants
2016 Annual Report
11
StorageVault Canada Inc.
Consolidated Statements of Financial Position
As at December 31
Assets
Real estate and equipment, net (Note 6)
Goodwill and intangible assets, net (Note 7)
Short term investments
Accounts receivable
Prepaid expenses and other current assets
Cash and short term deposits
Liabilities and Shareholders' Equity
Long term debt (Note 8)
Lines of credit (Note 8)
Unearned revenue
Accounts payable and accrued liabilities
Shareholders' Equity
Share capital (Note 9)
Dividends paid (Note 9)
Contributed surplus (Note 9)
Deficit
Commitments and Contingencies (Note 15)
Subsequent Events (Note 16)
2016
2015
$
325,491,723
3,425,090
-
1,354,796
662,080
11,869,892
$
163,461,926
3,427,490
1,384,253
560,828
270,590
2,381,390
$
342,803,581
$
171,486,477
$
164,023,513
18,483,081
1,202,785
3,406,008
$
88,136,041
23,483,083
320,884
982,551
187,115,387
112,922,559
185,768,388
(1,795,638)
2,243,239
(30,527,795)
155,688,194
66,867,412
-
1,034,865
(9,338,359)
58,563,918
$
342,803,581
$
171,486,477
Approved on behalf of the Board:
"signed" Steven Scott
Director
"signed" Iqbal Khan
Director
The accompanying notes are an integral part of these consolidated financial statements.
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2016 Annual Report
StorageVault Canada Inc.
Consolidated Statements of Financial Position
As at December 31
StorageVault Canada Inc.
Consolidated Statements of Changes in Equity
For the Years Ended December 31
Assets
Real estate and equipment, net (Note 6)
Goodwill and intangible assets, net (Note 7)
Short term investments
Accounts receivable
Prepaid expenses and other current assets
Cash and short term deposits
Liabilities and Shareholders' Equity
Long term debt (Note 8)
Lines of credit (Note 8)
Unearned revenue
Accounts payable and accrued liabilities
Shareholders' Equity
Share capital (Note 9)
Dividends paid (Note 9)
Contributed surplus (Note 9)
Deficit
Commitments and Contingencies (Note 15)
Subsequent Events (Note 16)
2016
2015
$
325,491,723
$
163,461,926
3,425,090
-
1,354,796
662,080
11,869,892
3,427,490
1,384,253
560,828
270,590
2,381,390
$
342,803,581
$
171,486,477
$
164,023,513
$
88,136,041
18,483,081
1,202,785
3,406,008
23,483,083
320,884
982,551
187,115,387
112,922,559
185,768,388
(1,795,638)
2,243,239
(30,527,795)
155,688,194
66,867,412
-
1,034,865
(9,338,359)
58,563,918
$
342,803,581
$
171,486,477
Common Share Capital
Balance, beginning of the period
Common shares issued, net of issuance costs
Common shares repurchased
Balance, end of the period
Contributed Surplus
Balance, beginning of the period
Stock based compensation (Note 9)
Balance, end of the period
Deficit
Balance, beginning of the period
Net loss
Balance, end of the period
2016
2015
$
66,867,412
118,973,026
(72,050)
185,768,388
$
7,421,324
59,446,088
-
66,867,412
$
1,034,865
1,208,374
2,243,239
$
573,408
461,457
1,034,865
$
(9,338,359)
(21,189,436)
(30,527,795)
$
(4,763,149)
(4,575,210)
(9,338,359)
Approved on behalf of the Board:
"signed" Steven Scott
"signed" Iqbal Khan
Director
Director
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
2016 Annual Report
13
StorageVault Canada Inc.
Consolidated Statements of Income (Loss) & Comprehensive Income (Loss)
For the Years Ended December 31
Revenue
Storage and related services
Expenses
Operating costs
Acquisition and integration costs
Selling, general and administrative
Stock based compensation (Note 9)
Depreciation, amortization and goodwill adjustment (Notes 6, 7)
Interest
2016
2015
$
27,824,544
$
11,140,587
10,800,018
1,928,429
2,240,692
1,208,374
27,328,122
5,508,345
49,013,980
5,302,289
1,266,635
1,052,121
461,457
5,485,940
2,147,355
15,715,797
Net income (loss) and Comprehensive income (loss)
$
(21,189,436)
$
(4,575,210)
Net income (loss) per common share
Basic
Diluted
$
$
(0.104)
(0.104)
$
$
(0.060)
(0.060)
Weighted average number of common shares outstanding
Basic
Diluted
204,660,864
204,660,864
75,781,610
75,781,610
The accompanying notes are an integral part of these consolidated financial statements.
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2016 Annual Report
StorageVault Canada Inc.
For the Years Ended December 31
Consolidated Statements of Income (Loss) & Comprehensive Income (Loss)
StorageVault Canada Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31
Revenue
Storage and related services
Expenses
Operating costs
Acquisition and integration costs
Selling, general and administrative
Stock based compensation (Note 9)
Depreciation, amortization and goodwill adjustment (Notes 6, 7)
Interest
2016
2015
$
27,824,544
$
11,140,587
10,800,018
1,928,429
2,240,692
1,208,374
27,328,122
5,508,345
49,013,980
5,302,289
1,266,635
1,052,121
461,457
5,485,940
2,147,355
15,715,797
Net income (loss) and Comprehensive income (loss)
$
(21,189,436)
$
(4,575,210)
Net income (loss) per common share
Basic
Diluted
Basic
Diluted
Weighted average number of common shares outstanding
$
(0.104)
$
(0.060)
$
(0.104)
$
(0.060)
204,660,864
204,660,864
75,781,610
75,781,610
Cash provided by (used for) the following activities:
Operating activities
Net income (loss)
Adjustment for non-cash items:
Depreciation, amortization and goodwill adjustment (Notes 6, 7)
Amortization of deferred financing costs
Amortization of bond premiums
Stock based compensation (Note 9)
Stock dividend classified as interest
Gain on disposal of property and equipment
Cash flow from operations before non-cash working capital balances
Net change in non-cash working capital balances
Accounts receivable
Prepaid expenses and other current assets
Accounts payable and accrued liabilities
Unearned revenue
Financing activities
Common shares issued, net of issuance costs (Note 9)
Repurchase of common shares
Dividends paid
Advances from long term debt
Repayment of long term debt
Redemption of bond
Debt issuance costs
Investing activities
Acquisitions (Note 5)
Additions to property and equipment (Note 6)
Non-operating accounts receivable
Proceeds on disposal of property and equipment
Maturity of short term investments
2016
2015
$
(21,189,436)
$
(4,575,210)
27,328,122
376,164
5,253
1,208,374
-
(221,675)
7,506,802
(113,330)
(391,490)
1,699,526
881,901
9,583,409
59,841,873
(72,050)
(743,342)
81,454,290
(10,736,723)
1,373,074
-
131,117,122
(127,903,000)
(2,952,792)
(675,712)
319,475
-
(131,212,029)
5,485,940
98,687
11,216
461,457
90,892
-
1,572,982
(379,643)
53,498
697,888
237,928
2,182,653
16,489,709
-
-
116,484,509
(24,747,897)
-
(750,960)
107,475,361
(105,475,718)
(2,382,149)
-
20,775
106,000
(107,731,092)
Increase (decrease) in cash and short term deposits
9,488,502
1,926,922
Cash and short term deposits balance, beginning of period
2,381,390
454,468
Cash and short term deposits balance, end of period
11,869,892
2,381,390
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
2016 Annual Report
15
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
1. Description of Business
The consolidated financial statements of StorageVault Canada Inc. and its subsidiary (the “Corporation”)
as at December 31, 2016 were authorized for issuance by the Board of Directors of the Corporation on
March 31, 2017. The Corporation is incorporated under the Business Corporations Act of Alberta and is
domiciled in Canada. Its shares are publicly traded on the TSX Venture Exchange (“Exchange”). The
address of its registered office is 1000 – 250 2nd Street SW, Calgary, AB, T2P 0C1.
The Corporation’s primary business is owning, operating and leasing storage to individual and
commercial customers across Canada.
2. Basis of Presentation
These consolidated financial statements and the notes thereto present the Corporation’s financial results
of operations and financial position under International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board (“IASB”) effective as at January 1, 2016.
The consolidated financial statements have been prepared under the historical cost method, except for the
revaluation of certain financial assets and financial liabilities to fair value. The consolidated financial
statements were prepared on a going concern basis, and are presented in Canadian dollars, which is the
Corporation’s functional currency.
3. Accounting policies
Basis of Consolidation
The consolidated financial statements include the accounts of StorageVault Canada Inc. and the
consolidated entity 1712066 Alberta Ltd. (“1712066”), both of which are headquartered in Toronto, ON.
The financial statements for the consolidated entity are prepared for the same reporting period as
StorageVault Canada Inc. using consistent accounting policies. All intercompany transactions and
balances have been eliminated in the preparation of these consolidated financial statements.
Consolidated Entity
StorageVault Canada Inc. established 1712066 for the purpose of refinancing a mortgage on its Regina, SK
property using a defeasance process. StorageVault Canada Inc. does not have any direct or indirect
shareholdings in 1712066. An entity is consolidated if, based on an evaluation of the substance of its
relationship with StorageVault Canada Inc. it is determined that StorageVault Canada Inc. has rights,
either directly through ownership or indirectly through contractual arrangements, to direct the relevant
activities of the other entity. 1712066 was established under terms that impose strict limitations on the
decision making powers of its management and that results in StorageVault Canada Inc. receiving the
majority of the benefits related to its operations and net assets, being exposed to the majority of the risks
incident to its activities, and retaining the majority of the residual or ownership risks related to its assets.
16
2016 Annual Report
Notes: 1
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 3 – Continued
Revenue Recognition
Revenue comprises all rendering of services and sales of goods at the fair value of consideration received
or receivable after the deduction of any trade discounts and excluding sales taxes. Revenue is recognized
when it can be measured reliably and the significant risks and rewards of ownership are transferred to
the customer.
Storage units are rented to customers pursuant to rental agreements which provide for weekly or
monthly rental terms with non-refundable rental payments. The rental agreements may be terminated by
the customer without further obligation or cost upon vacating the storage unit. Revenue from rental
agreements is recognized over the rental term pursuant to the rental agreement. Non-refundable
customer deposits, which are received to hold a unit for rent at a future date, are deferred and recognized
as revenue upon commencement of the rental agreement. Receipts of rental fees for future periods are
deferred and recognized as revenue when each respective monthly period commences. Provision is
made for expected allowances as necessary.
Revenue from the sale of merchandise, including locks, boxes, packing supplies and equipment, is
recognized when the merchandise is delivered to the customer. Revenue from investments is recognized
when earned.
Business Combinations
All business combinations are accounted for by applying the acquisition method. On acquisition, the
assets (including intangible assets), liabilities and contingent liabilities acquired are measured at their fair
value. The Corporation recognizes intangible assets as part of business combinations at fair value at the
date of acquisition. The determination of these fair values is based upon management’s judgment and
includes assumptions on the timing and amount of future incremental cash flows generated by the assets
acquired and the selection of an appropriate cost of capital. Acquisition and integration costs are
recognized in profit or loss as incurred.
Goodwill represents the excess of the identifiable cost of an acquisition over the fair value of the
Corporation's share of the net assets/net liabilities acquired at the date of acquisition. If the identifiable
cost of acquisition is less than the fair value of the Corporation's share of the net assets/net liabilities
acquired (i.e. a discount on acquisition) the difference is credited to the Consolidated Statements of
Income (Loss) and Comprehensive Income (Loss) in the period of acquisition. At the acquisition date,
goodwill acquired is recognized as an asset and is allocated to each cash-generating unit (“CGU”)
expected to benefit from the business combination’s synergies and to the lowest level at which
management monitors the goodwill.
If the initial accounting for a business combination is incomplete by the end of the reporting period in
which the combination occurs, the Corporation reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted retrospectively during the
measurement period, or additional assets or liabilities are recognized, to reflect new information obtained
about facts and circumstances that existed as of the acquisition date that, if known, would have affected
the amounts recognized as of that date. The measurement period is the period from the date of
2016 Annual Report
17
Notes: 2
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 3 – Continued
acquisition to the date the Corporation obtains complete information about facts and circumstances that
existed as of the acquisition date up to a maximum of one year.
Significant Accounting Estimates and Judgments
The preparation of the consolidated financial statements requires management to make judgments,
estimates and assumptions that affect the application of policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under the circumstances, the
results of which form the basis of making judgments about carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from these estimates. The estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the revision affects only that period or in the
period of the revision and future periods if the revision affects both current and future periods.
Estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year include, but are not necessarily limited to:
-
Property and equipment – The Corporation determines the carrying value of its property and
equipment based on policies that incorporate estimates, assumptions and judgments relative to the
useful lives and residual values of the assets.
Impairment of non-financial assets - Impairment exists when the carrying value of an asset or cash
generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of
disposal and its value in use. The fair value less costs of disposal calculation is based on available
data from binding sales transactions in an arm’s length transaction of similar assets or observable
market prices less incremental costs for disposing of the asset. The value in use calculation is based
on a discounted cash flow model. The estimated future cash flows are derived from management
estimates, budgets and past performance and do not include activities that the Company is not yet
committed to or significant future investments that will enhance the asset’s performance of the cash
generating unit being tested. The recoverable amount is sensitive to the discount rate used for the
discounted cash flow model as well as the expected future cash flows and the growth rate used for
extrapolation purposes.
Purchase price allocations – Estimates are made in determining the fair value of assets and liabilities,
including the valuation of separately identifiable intangibles acquired as part of an acquisition. These
estimates may be further based on management’s best assessment of the related inputs used in
valuation models, such as future cash flows and discount rates.
Bad debts – The Corporation estimates potential bad debts based on an analysis of historical
collection activity and specific identification of overdue accounts. Actual bad debts may differ from
estimates made.
Income taxes - Income taxes are subject to measurement uncertainty due to the possibility of changes
in tax legislation or changes in the characterization of income sources.
Stock based compensation – Compensation costs accrued for stock based compensation plans are
subject to the estimation of the ultimate payout using pricing models such as the Black-Scholes model
which is based on significant assumptions such as volatility, dividend yield and expected term.
-
-
-
-
-
18
2016 Annual Report
Notes: 3
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 3 – Continued
Management judgments that may affect reported amounts of assets and liabilities, income and expenses
include but are not necessarily limited to:
-
For the purpose of assessing impairment of tangible and intangible assets, assets are grouped at the
lowest level of separately identified cash inflows which make up the CGU. Determination of what
constitutes a CGU is subject to management judgment. The asset composition of the CGU can
directly impact the recoverability of the assets included within the CGU.
The determination of which entities require consolidation is subject to management judgment
regarding levels of control, assumptions of risk and other factors that may ultimately include or
exclude an entity from the classification of a subsidiary or other entity requiring consolidation.
For the purpose of recording asset acquisitions, management must exercise judgment to determine if
the acquisition meets the definition of a business. Such determination may affect the recorded
amounts of specific assets and liabilities, goodwill and/or transaction costs.
-
-
Cash and Short Term Deposits
Cash and short term deposits on these Consolidated Statements of Financial Position are comprised of
cash at bank and on hand, and short term, highly liquid deposits with an original maturity of 3 months or
less. For the purpose of these Consolidated Statements of Cash Flows, cash and short term deposits are
defined as above, net of outstanding bank overdrafts, except where no right of set-off exists.
Short Term Investments
Short term investments consist of Government of Canada bonds with maturities greater than three
months.
Property and Equipment
Property and equipment are stated at historical cost less accumulated depreciation and any impairment
in value. Historical cost includes expenditures that are directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Corporation and the cost of the item can be measured reliably. The carrying amount of the replaced
part is derecognized. All other repairs and maintenance are charged to the Consolidated Statements of
Income (Loss) and Comprehensive Income (Loss) during the financial period in which they are incurred.
Once an asset is available for use in the location and condition intended by management, it is depreciated
to its residual value using the appropriate depreciation rate set forth by management. Land is not
depreciated.
2016 Annual Report
19
Notes: 4
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 3 – Continued
Depreciation is calculated using the declining balance method to depreciate the cost of property and
equipment to their residual values over their estimated useful lives, as follows:
Land, Yards, Buildings & Improvements -
Buildings
4%
20%
Leasehold improvements
Business operating equipment 10%
8%
Fences and parking lots
Storage Containers –
Storage containers
10%
Vehicles -
Vehicles
Truck decks and cranes
30% to 40%
20%
Office and Computer Equipment -
Furniture and equipment
Computer equipment
20%
45%
The residual value and useful lives of property and equipment are reviewed, and adjusted if appropriate,
at each Consolidated Statement of Financial Position date. An asset’s carrying value is written down to its
recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. These
impairment losses are recognized in the Consolidated Statements of Income (Loss) and Comprehensive
Income (Loss). Following the recognition of an impairment loss, the depreciation charge applicable to the
asset is adjusted prospectively in order to systematically allocate the revised carrying amount, net of any
residual value, over the remaining useful life.
Goodwill and Other Intangible Assets
Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable assets
and liabilities acquired at the date of acquisition. Goodwill is carried at cost less accumulated impairment
losses. Goodwill is reviewed for impairment at least annually by assessing the recoverable amount of
each CGU to which the goodwill relates. The recoverable amount is the higher of fair value less costs of
disposal, and value in use. When the recoverable amount of the CGU is less than the carrying amount, an
impairment loss is recognized. Any impairment is recognized immediately in the Consolidated
Statements of Income (Loss) and Comprehensive Income (Loss) and is not subsequently reversed.
Other intangible assets are carried at cost less accumulated amortization and accumulated impairment
losses. Amortization begins when an asset is available for use and is calculated on a straight-line basis to
allocate the cost of assets over their estimated useful lives as follows: Franchise Agreements - 10 years;
Tenant Relationships – 22 to 48 months; Website Development Costs – 12 months.
20
2016 Annual Report
Notes: 5
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 3 – Continued
Leases
A lease is defined as an agreement whereby the lessor conveys to the lessee, in return for a payment or a
series of payments, the right to use a specific asset for an agreed period of time. Where the Corporation is
a lessee and has substantially all the risks and rewards of ownership of an asset, the arrangement is
considered a finance lease. Assets held under a finance lease are recognized as assets of the Corporation
within property and equipment at the inception of the lease at the lower of fair value and the present
value of the minimum lease payments. Assets held under finance leases are amortized on a basis
consistent with similar owned assets. Payments made under finance leases are apportioned between
capital repayments and interest expense charged to the Consolidated Statements of Income (Loss) and
Comprehensive Income (Loss). Other leases where the Corporation is a lessee are treated as operating
leases. Payments made under operating leases are recognized in the Consolidated Statements of Income
(Loss) and Comprehensive Income (Loss) on a straight-line basis over the term of the lease.
Income Taxes
Income tax is comprised of current tax and deferred tax. Income tax is recognized in the Consolidated
Statements of Income (Loss) and Comprehensive Income (Loss) except to the extent that it relates to items
recognized directly in equity, in which case it is recognized in equity.
Current tax is the tax expected to be payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
years.
Deferred tax is recognized using the liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. Deferred tax is not recognized on the initial recognition of assets or liabilities in a
transaction that is not a business combination. In addition, deferred tax is not recognized for taxable
temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax
rates that are expected to be applied to temporary differences when they reverse, based on the laws that
have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are
offset if there is a legally enforceable right to offset, and they relate to income taxes levied by the same tax
authority on the same taxable entity, or on different tax entities, but they intend to settle current tax
liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be
available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will
be realized.
Stock Based Compensation
The fair value of stock options issued to directors, officers and consultants under the Corporation’s stock
option plan is estimated at the date of issue using the Black-Scholes option pricing model, and charged to
Consolidated Statement of Income (Loss) and Comprehensive Income (Loss) and contributed surplus.
Each tranche in an award is considered a separate award with its own vesting period and grant date fair
2016 Annual Report
21
Notes: 6
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 3 – Continued
value. On the exercise of options, the cash consideration received and the fair value of the option
previously credited to contributed surplus are credited to share capital.
The fair value of options issued to advisors in conjunction with financing transactions is estimated at the
date of issue using the fair value of the goods and services received first, if determinable, then by the
Black-Scholes option pricing model, and charged to share capital and contributed surplus over the
vesting period. On the exercise of agent options, the cash consideration received and the fair value of the
option previously credited to contributed surplus are credited to share capital.
Where stock options are cancelled, it is treated as if the stock options had vested on the date of
cancellation and any expense not yet recognized for the award is recognized immediately. However, if a
new option is substituted for the cancelled option and is designated as a replacement option on the date
that it is granted, the cancelled and the new options are treated as if they were a modification of the
original option.
Option pricing models require the input of highly subjective assumptions, including the expected price
volatility. Changes in these assumptions can materially affect the fair value estimate and, therefore, the
existing models do not necessarily provide a reliable single measure of the fair value of the Corporation’s
share purchase options. Forfeitures are estimated for each reporting period and adjusted as required to
reflect actual forfeitures that have occurred in the period.
Income (Loss) per Share
Basic income (loss) per common share is computed by dividing the net income (loss) by the weighted
average number of common shares outstanding during the period. Diluted net income (loss) per share is
calculated by dividing the net earnings by the weighted average number of shares outstanding as
adjusted for the potential dilution that would occur if outstanding stock options, subordinated
debentures, preferred shares or other potentially dilutive financial instruments were exercised or
converted to common shares. The weighted average number of diluted shares is calculated in accordance
with the treasury stock method. The treasury stock method assumes that the proceeds received from the
exercise of all potentially dilutive instruments are used to repurchase common shares at the average
market price.
Share Capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of shares are
shown in equity as a deduction from the proceeds received.
Segment Reporting
An operating segment is a component of the Corporation that engages in business activities from which it
may earn revenues and incur expenses. All operating segments’ operating results are reviewed regularly
by the Corporation’s CEO and or CFO in order to make decisions regarding the allocation of resources to
the segment. Segment results include items directly attributable to a segment as well as those that can be
allocated on a reasonable basis.
22
2016 Annual Report
Notes: 7
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 3 – Continued
Financial Instruments
Financial assets can be classified as “fair value through profit or loss” (“FVTPL”), “loans and
receivables”, “available-for-sale” or “held-to-maturity”. Financial liabilities can be classified as FVTPL or
“other financial liabilities”.
All financial instruments are initially measured at fair value plus transaction costs on initial recognition
of the instrument with the exception of financial instruments classified at FVTPL, which are measured at
fair value and any associated transaction costs are expensed as incurred.
Financial assets and liabilities are offset and the net amount is presented in the Consolidated Statements
of Financial Position when, and only when, the Corporation has a legal right to offset the amounts and
intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
The effective interest method is used for financial instruments measured at amortized cost and allocates
interest over the relevant period. The effective interest rate is the rate that discounts estimated future
cash flows (including all fees paid or received that form an integral part of the effective interest rate,
transaction costs and other premiums and discounts) through the expected life of the instrument, to the
net carrying amount on initial recognition.
Financial assets at FVTPL
Financial assets are classified as FVTPL when acquired principally for the purpose of trading, if so
designated by management, or if they are derivative assets. Financial assets classified as FVTPL are
measured at fair value, with changes recognized in the Consolidated Statements of Income (Loss) and
Comprehensive Income (Loss).
The Corporation’s FVTPL assets consist of cash and short term deposits.
Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not
quoted in an active market are classified as loans and receivables. Subsequent to initial recognition loans
and receivables are measured at amortized cost using the effective interest method, less any impairment
losses.
The Corporation’s loans and receivables consist of accounts receivable.
Available-for-sale financial assets
Available-for-sale-financial assets are non-derivative financial assets that are designated as available for
sale and that are not classified in any other category. Subsequent to initial recognition, they are measured
at fair value and changes therein, other than impairment losses, are recognized in other comprehensive
income and presented within equity in the fair value reserve. When an available for sale financial asset is
derecognized, the cumulative gain or loss in other comprehensive income is transferred to profit or loss.
The Corporation currently has no assets which are designated as available for sale.
2016 Annual Report
23
Notes: 8
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 3 – Continued
Held-to-maturity financial assets
If the Corporation has the positive intent and ability to hold certain financial assets to maturity, then such
financial assets are classified as held to maturity. Subsequent to initial recognition they are measured at
amortized cost using the effective interest method, less any impairment losses.
The Corporation’s held to maturity financial assets consist of short term investments. These investments
are comprised of Government of Canada bonds and cash substituted for mortgage security under
defeasance arrangements.
Financial liabilities at FVTPL
Financial assets are classified as FVTPL if they are designated as such by management, or they are
derivatives. Financial liabilities classified as FVTPL are measured at fair value, with changes recognized
in the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss).
The Corporation does not have any financial liabilities at FVTPL at the end of year.
Other financial liabilities
Other financial liabilities are financial liabilities that are not classified as FVTPL. Subsequent to initial
recognition, other financial liabilities are measured at amortized cost using the effective interest method.
Financing fees and other costs incurred in connection with debt financing are deducted from the cost of
the debt and amortized using the effective interest method.
The Corporation‘s other financial liabilities consist of accounts payable and accrued liabilities, lines of
credit, and long term debt.
Future Accounting Pronouncements
The Corporation has reviewed new and revised accounting pronouncements that have been issued but
are not yet effective and determined that the following may have an impact on the Corporation:
IFRS 15, "Revenue from contracts with customers"
On May 28, 2014 the IASB issued IFRS 15, "Revenue from contracts with customers". IFRS 15 will replace
existing standards and interpretations on revenue recognition. The standard is effective for annual
periods beginning on or after January 1, 2018, with early adoption permitted. The standard outlines a
single comprehensive model for entities for revenue recognition arising from contracts with customers.
The Corporation is still evaluating the impact the adoption of this standard will have on its consolidated
financial statements. The Corporation expects to apply the standard with its mandatory effective date.
24
2016 Annual Report
Notes: 9
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 3 – Continued
IFRS 9, "Financial instruments"
On November 12, 2009, the IASB issued IFRS 9, "Financial instruments" ("IFRS 9"), which will replace IAS
39 "Financial Instruments: Recognition and Measurement" ("IAS 39"). The standard is effective for annual
periods beginning on or after January 1, 2018, with early adoption permitted. IFRS 9 applies to
classification and measurement of financial assets as defined in IAS 39. It uses a single approach to
determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple
classification options in IAS 39. The Corporation is still evaluating the impact the adoption of this
standard will have on its consolidated financial statements. The Corporation expects to apply the
standard with its mandatory effective date.
IFRS 16, "Leases"
On January 13, 2016, the IASB published a new standard, IFRS 16, "Leases". The new standard brings
most leases on-balance sheet for lessees under a single model, eliminating the distinction between
operating and finance leases. The standard is effective for annual periods beginning on or after January 1,
2019, with early application permitted but only if the entity is also applying IFRS 15, "Revenue from
contracts with customers". Under the new standard, a lessee recognizes a right-of-use asset and a lease
liability. The right-of-use asset is treated similarly to other non-financial assets and depreciated
accordingly. The liability accrues interest. The Corporation is still evaluating the impact the adoption of
this standard will have on its consolidated financial statements. The Corporation expects to apply the
standard with its mandatory effective date.
Change in Consolidated Statement of Financial Presentation
According to IAS 1.60, an entity shall present current and non-current assets, and current and non-
current liabilities, as separate classifications in its consolidated statement of financial position except
when a presentation based on liquidity provides information that is reliable and more relevant. During
review of the consolidated financial statements performed by the management of the Corporation, it was
concluded that presentation of assets and liabilities by liquidity would be more relevant since its
operating assets and liabilities will be recovered or settled over very long periods. Therefore, a liquidity
presentation was concluded to be more relevant. This change in presentation resulted in current portion
of long-term debt being no longer presented in the consolidated statement of financial position. Certain
comparative figures have been reclassified to conform to the current year presentation.
2016 Annual Report
25
Notes: 10
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
4.
2015 Acquisitions
During the prior year ended December 31, 2015, the Corporation completed the below transactions that
met the definition of a business under IFRS 3 – Business Combinations. At the time that the December 31,
2015 consolidated financial statements were authorized for issue, the Corporation had not yet completed
the accounting for these acquisitions, as allowed for under IFRS 3. In particular, the fair values of the
assets acquired had only been provisionally determined. During the year ended December 31, 2016, the
Corporation completed its final assessment of the fair value of assets acquired. Below are the finalized
allocations of the 2015 acquisitions:
Acquisition 1:
On April 28, 2015, the Corporation acquired four self storage locations, portable storage containers,
vehicles and chattels for $26,475,000.
A summary of the assets and liabilities acquired are as follows:
Land, Yards, Buildings & Improvements
Portable storage containers and vehicles
Tenant relationship
Goodwill
Net Assets Acquired
$
13,538,531
7,618,000
3,496,393
1,822,076
26,475,000
$
Upon completion of the final assessment of the fair value of assets acquired, the fair value of land, yards,
buildings and improvements and portable storage containers and vehicles decreased by $2,011,469 and
$3,307,000 respectively. In addition, tenant relationship of $3,496,393 and goodwill of $1,822,076 have
been recognised. The goodwill arises as a result of the synergies existing with the acquired business and
also the synergies expected to be achieved as a result of combining the acquisitions with the Corporations
excising portable storage segment.
Acquisition 2:
On September 11, 2015 the Corporation completed the acquisition of four self storage locations. The
purchase price was $52,466,000.
A summary of the assets and liabilities acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant relationship
Vehicles and equipment
Net Assets Acquired
$
44,512,822
7,681,978
271,200
52,466,000
$
Upon completion of the final assessment of the fair value of assets acquired, the fair value of land, yards,
buildings and improvements and portable storage containers decreased by $7,681,978. In addition, tenant
relationship of $7,681,978 has been recognised.
26
2016 Annual Report
Notes: 11
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 4 – Continued
Acquisition 3:
On October 7, 2015 the Corporation completed the acquisition of three self storage locations for
$27,155,000.
A summary of the assets and liabilities acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant relationship
Net Assets Acquired
$
23,320,572
3,834,428
27,155,000
$
Upon completion of the final assessment of the fair value of assets acquired, the fair value of land, yards,
buildings and improvements and portable storage containers decreased by $3,834,428. In addition, tenant
relationship of $3,834,428 has been recognised.
Acquisition 4:
On December 9, 2015 the Corporation completed the acquisition of three self storage locations for
$7,800,000.
A summary of the assets and liabilities acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant relationship
Net Assets Acquired
$
$
6,362,239
1,437,761
7,800,000
Upon completion of the final assessment of the fair value of assets acquired, the fair value of land, yards,
buildings and improvements and portable storage containers decreased by $1,437,761. In addition, tenant
relationship of $1,437,761 has been recognised.
Acquisition 5 and 6:
On December 16 and 30, 2015 the Corporation completed the acquisitions of four self storage locations for
$24,375,000.
A summary of the assets and liabilities acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant relationship
Net Assets Acquired
$
$
21,021,631
3,353,369
24,375,000
Upon completion of the final assessment of the fair value of assets acquired, the fair value of land, yards,
buildings and improvements and portable storage containers decreased by $3,353,369. In addition, tenant
relationship of $3,353,369 has been recognised.
2016 Annual Report
27
Notes: 12
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 4 – Continued
Acquisition 7:
On December 31, 2015 the Corporation completed the acquisition of one self storage location for
$5,600,000.
A summary of the assets and liabilities acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant relationship
Net Assets Acquired
$
$
4,778,070
821,930
5,600,000
Upon completion of the final assessment of the fair value of assets acquired, the fair value of land, yards,
buildings and improvements and portable storage containers decreased by $821,930. In addition, tenant
relationship of $821,930 has been recognised.
28
2016 Annual Report
Notes: 13
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
5.
2016 Acquisitions
During the year ended December 31, 2016, the Corporation completed the below transactions that met the
definition of a business under IFRS 3 – Business Combinations. These acquisitions have been accounted
for using the acquisition method with the results of the operations being included in the consolidated
financial statements of the Corporation since the date of acquisition. At the time the financial statements
were authorized for issue, the Corporation had not yet completed the accounting for the acquisitions 2 to
11. In particular, the purchase allocations of the fair values of the assets acquired and consideration paid
disclosed below have only been determined provisionally as the valuations have not been finalized.
Details of the acquisitions are:
Acquisition 1:
On March 18, 2016 the Corporation completed the acquisition of one self storage location for $978,000
(subjected to customary adjustments). The acquisition was an arm's length transaction. The purchase
price was paid for by cash on hand.
A summary of the assets and liabilities acquired are as follows:
Land, Yards, Buildings & Improvements
Net Assets Acquired
$
978,000
978,000
Consideration paid for the net assets acquired was obtained from the following:
Cash
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Amortization
Net income (loss)
978,000
978,000
674,961
532,764
142,197
73,853
$
68,344
2016 Annual Report
29
Notes: 14
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 5 – Continued
Acquisition 2:
On June 17, 2016 the Corporation completed the acquisition of one self storage location for $8,240,000
(subjected to customary adjustments). The acquisition was an arm's length transaction. The purchase
price was paid for by advances from long term debt and cash on hand.
A summary of the assets and liabilities acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant Relationships
Net Assets Acquired
$
7,283,217
956,783
8,240,000
Consideration paid for the net assets acquired was obtained from the following:
Advances from long-term debt
Cash
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Amortization
Interest
Net income (loss)
5,360,000
2,880,000
8,240,000
523,962
156,170
367,792
255,473
100,919
$
11,400
30
2016 Annual Report
Notes: 15
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 5 – Continued
Acquisition 3:
On August 22, 2016 the Corporation completed the acquisition of one self storage location for $3,483,333
(subjected to customary adjustments). The acquisition was an arm's length transaction. The purchase
price was paid for by an asset swap and the issuance of shares.
A summary of the assets and liabilities acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant Relationships
Net Assets Acquired
$
3,290,320
193,013
3,483,333
Consideration paid for the net assets acquired was obtained from the following:
Asset Swap
Issuance of common shares
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Amortization
Interest
Net income (loss)
3,350,000
133,333
3,483,333
229,408
93,943
135,465
72,677
25,432
$
37,356
2016 Annual Report
31
Notes: 16
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 5 – Continued
Acquisition 4:
On August 30, 2016 the Corporation completed the acquisition of one self storage location for $14,950,000
(subjected to customary adjustments). The acquisition was an arm's length transaction. The purchase
price was paid for by advances from long term debt and cash on hand.
A summary of the assets and liabilities acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant Relationships
Net Assets Acquired
$
13,917,771
1,032,229
14,950,000
Consideration paid for the net assets acquired was obtained from the following:
Advances from long-term debt
Cash
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Amortization
Interest
Net income (loss)
9,717,500
5,232,500
14,950,000
348,617
94,839
253,778
328,144
128,007
$
(202,373)
32
2016 Annual Report
Notes: 17
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 5 – Continued
Acquisition 5:
On September 28, 2016 the Corporation completed the acquisition of two self storage locations for
$3,100,000 (subjected to customary adjustments). The acquisition was an arm's length transaction. The
purchase price was paid for by cash on hand.
A summary of the assets and liabilities acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant Relationships
Net Assets Acquired
$
2,461,365
638,635
3,100,000
Consideration paid for the net assets acquired was obtained from the following:
Cash
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Amortization
Net income (loss)
3,100,000
128,292
56,382
71,910
78,391
$
(6,481)
2016 Annual Report
33
Notes: 18
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 5 – Continued
Acquisition 6:
On September 30, 2016 the Corporation completed the acquisition of five self storage properties and one
portable storage business in Ontario and Quebec for an agreed amount of $47,985,000. The acquisition is a
non-arm's length transaction. The purchase price was paid for by advances from long term debt, issuance
of common shares and cash on hand.
A summary of the assets and liabilities acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant Relationships
Goodwill
Net Assets Acquired
$
42,171,965
5,813,035
47,985,000
2,545,454
50,530,454
Consideration paid for the net assets acquired was obtained from the following:
Advances from long-term debt
Issuance of common shares
Cash
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Amortization
Interest
Net income (loss)
9,479,029
9,545,454
31,505,971
50,530,454
1,256,611
360,697
895,914
981,213
88,600
$
(173,899)
The goodwill booked on the acquisition has resulted from the difference in the quoted market price of the
common shares at the acquisition date compared to the price of the common shares at the time of the
agreement.
34
2016 Annual Report
Notes: 19
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 5 – Continued
Acquisition 7:
On October 17, 2016 the Corporation completed the acquisition of one self storage location for an agreed
amount of $22,000,000. The acquisition was an arm's length transaction. The purchase price was paid for
by advances from long term debt and the issuance of common shares.
A summary of the assets and liabilities acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant Relationships
Goodwill
Net Assets Acquired
$
21,255,621
744,379
22,000,000
5,625,000
27,625,000
Consideration paid for the net assets acquired was obtained from the following:
Advances from long-term debt
Issuance of common shares
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Amortization
Interest
Net income (loss)
12,000,000
15,625,000
27,625,000
131,389
36,149
95,240
250,668
88,103
$
(243,531)
The goodwill booked on the acquisition has resulted from the difference in the quoted market price of the
common shares at the acquisition date compared to the price of the common shares at the time of the
agreement.
2016 Annual Report
35
Notes: 20
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 5 – Continued
Acquisition 8:
On November 3, 2016 the Corporation completed the acquisition of one self storage location for
$4,100,000 (subjected to customary adjustments). The acquisition was an arm's length transaction. The
purchase price was paid for by advances from long term debt and cash on hand.
A summary of the assets and liabilities acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant Relationships
Net Assets Acquired
$
3,245,895
854,105
4,100,000
Consideration paid for the net assets acquired was obtained from the following:
Advances from long-term debt
Cash on hand
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Amortization
Interest
Net income (loss)
2,665,000
1,435,000
4,100,000
123,089
41,140
81,949
56,087
16,236
$
9,626
36
2016 Annual Report
Notes: 21
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 5 – Continued
Acquisition 9:
On December 15, 2016 the Corporation completed the acquisition of one self storage location for
$2,300,000 (subjected to customary adjustments). The acquisition was an arm's length transaction. The
purchase price was paid for with cash on hand.
A summary of the assets and liabilities acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant Relationships
Net Assets Acquired
$
1,967,826
332,174
2,300,000
Consideration paid for the net assets acquired was obtained from the following:
Cash on hand
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Amortization
Net income (loss)
2,300,000
30,520
9,645
20,875
14,442
$
6,433
2016 Annual Report
37
Notes: 22
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 5 – Continued
Acquisition 10:
On December 16, 2016 the Corporation completed the acquisition of two self storage locations for
$4,400,000 (subjected to customary adjustments). The acquisition was an arm's length transaction. The
purchase price was paid for with cash on hand.
A summary of the assets and liabilities acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant Relationships
Net Assets Acquired
$
3,652,945
747,055
4,400,000
Consideration paid for the net assets acquired was obtained from the following:
Cash on hand
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Net income (loss)
4,400,000
16,006
5,215
$
10,791
38
2016 Annual Report
Notes: 23
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 5 – Continued
Acquisition 11:
On December 22, 2016 the Corporation completed the acquisition of five self storage locations in Ontario
and Quebec for an agreed amount of $66,850,000. The acquisition is a non-arm's length transaction. The
purchase price was paid for by advances from long term debt, issuance of common shares and cash on
hand.
A summary of the assets and liabilities acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant Relationships
Goodwill
Net Assets Acquired
$
58,785,142
8,064,858
66,850,000
3,500,000
70,350,000
Consideration paid for the net assets acquired was obtained from the following:
Advances from long-term debt
Issuance of common shares
Cash
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Interest
Net income (loss)
22,639,380
33,500,000
14,210,620
70,350,000
110,534
38,687
71,847
24,953
$
46,894
The goodwill booked on the acquisition has resulted from the difference in the quoted market price of the
common shares at the acquisition date compared to the price of the common shares at the time of the
agreement.
2016 Annual Report
39
Notes: 24
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 5 – Continued
Summary:
Selected consolidated information for the acquisitions, based upon information available to management
as of the date of this report and the preparation of these consolidated financial statements, as if the assets
were acquired as of January 1, 2016 is as follows:
Revenue
Operating costs
Amortization
Interest
Net income (loss)
$
16,660,772
6,154,480
10,506,292
13,770,373
2,736,072
(6,000,153)
$
40
Notes: 25
2016 Annual Report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
6. Real Estate and Equipment
Land, Yards,
Buildings &
Storage
Intangible
Tenant
Office &
Computer
Improvements
Containers
Relationships
Vehicles
Equipment
Total
COST
De ce mbe r 31, 2014
Additions
24,439,540
703,271
Busine ss acquisitions
113,416,865
3,954,430
1,264,781
5,643,000
De ce mbe r 31, 2015
138,559,676
10,862,211
606,000
-
20,625,859
21,231,859
459,618
1,905,663
-
Busine ss acquisitions
158,490,067
(3,009,383)
(724,396)
295,000
De ce mbe r 31, 2016
294,499,978
12,338,478
(569,390)
19,376,266
40,038,735
Additions
Disposals
2,374,603
221,751
1,975,000
4,571,354
420,813
(450,207)
235,316
171,571
388,200
795,087
166,698
31,609,889
2,361,374
142,048,924
176,020,187
2,952,792
(5,630)
(4,759,006)
-
225,000
178,386,333
4,541,960
1,181,155
352,600,306
ACCUMULATED DEPRECIATION
De ce mbe r 31, 2014
De pre ciation
De ce mbe r 31, 2015
De pre ciation
Disposals
2,821,883
2,356,613
5,178,496
7,175,565
(69,674)
2,307,096
637,108
2,944,204
697,484
(450,710)
De ce mbe r 31, 2016
12,284,387
3,190,978
606,000
1,798,405
2,404,405
6,711,976
(221,159)
8,895,222
1,191,230
604,396
1,795,626
920,348
(362,262)
2,353,712
148,512
87,018
235,530
149,895
7,074,721
5,483,540
12,558,261
15,655,268
(1,141)
(1,104,946)
384,284
27,108,583
NET BOOK VALUE
De ce mbe r 31, 2015
De ce mbe r 31, 2016
133,381,180
282,215,591
7,918,007
9,147,500
18,827,454
31,143,513
2,775,728
2,188,248
559,557
796,871
163,461,926
325,491,723
Included in Land, Yards, Buildings & Improvements is Land at a value of $89,316,407 (December 31, 2015 - $47,348,171).
Notes: 26
2016 Annual Report
41
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
7.
Goodwill and Intangible Assets
Other Intangible Assets
Franchise
Website
Goodwill
Agreements Development
Total
1,601,414
1,822,076
3,423,490
11,670,454
(11,670,454)
20,000
23,172
-
-
20,000
23,172
1,644,586
1,822,076
3,466,662
-
-
-
-
11,670,454
(11,670,454)
COST
De ce mbe r 31, 2014
Additions
De ce mbe r 31, 2015
Additions
Write down
De ce mbe r 31, 2016
3,423,490
20,000
23,172
3,466,662
ACCUMULATED AMORTIZATION
De ce mbe r 31, 2014
Amortization
De ce mbe r 31, 2015
Amortization
De ce mbe r 31, 2016
NET BOOK VALUE
De ce mbe r 31, 2015
De ce mbe r 31, 2016
-
-
-
-
-
13,600
2,400
16,000
2,400
18,400
23,172
-
23,172
-
23,172
36,772
2,400
39,172
2,400
41,572
3,423,490
3,423,490
4,000
1,600
-
-
3,427,490
3,425,090
The goodwill of $3,423,490 as at December 31, 2015 is allocated to the portable storage segment. At
December 31, 2016 and 2015, the Company conducted its annual impairment assessment of the groups of
CGU’s whose net carrying value included this goodwill. The Corporation used the fair value less costs of
disposal method to determine the recoverable amount of its CGUs determined by using discounted cash
flows. The cash flow projections included specific estimates for five years and a terminal valuation. The
discount rate used to calculate the net present value of cash flows was based on weighted average
market capitalization rates observed for comparable assets.
The most significant assumptions used in the impairment calculation are the discount rate (6.50% to
7.25%) and the estimates used in determining future expected cash flows.
No impairment has been identified on goodwill of $3,423,490 as of December 31, 2016 (2015 - $nil), and
management considers reasonably foreseeable changes in key assumptions are unlikely to produce a
goodwill impairment.
42
2016 Annual Report
Notes: 27
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 7 – Continued
The goodwill of $11,670,454 recognized during the year ended December 31, 2016 relates to the
properties purchased during the year (see Note 5) and is allocated to the underlying properties
purchased. At December 31, 2016, the Company conducted its annual impairment assessment of the
CGU’s whose net carrying value included this goodwill. The Corporation used the fair value less costs of
disposal method to determine the recoverable amount of the CGUs determined using the provisional fair
values of the assets acquired (see Note 5). As the goodwill resulted from the difference in the quoted
market price of the common shares at the acquisition date compared to the price of the common shares at
the time of the agreement a goodwill adjustment of $11,670,454 was recorded for the year ended
December 31, 2016.
8. Long Term Debt and Lines of Credit
December 31, 2016
Rate
Range
Weighted
Average
Balance
December 31, 2015
Weighted
Average
Rate
Range
Balance
Mortgages
Fixed/Variable
Other
Defeasance
Obligation
3.46% to 5.50% 4.09%
164,942,311
3.81% to 5.05% 4.21%
87,785,752
Maturity: October 2017 to January 2022
Maturity: March 2018 to August 2020
1.09%
1.09%
-
1.09%
1.09%
1,438,991
Matured in August 2016
Maturity: August 2016
Deferred financing costs net of accretion
of $635,977 (December 31, 2015 - $259,813)
(918,798)
164,023,513
(1,088,702)
88,136,041
Lines of Credit
Variable Rate
Prime plus 1.00%
or BA plus 2.75% 4.38%
18,483,081
Prime plus 1.00%
or BA plus 2.75% 4.34%
23,483,083
Maturity: April 2017 to August 2020
Maturity: April 2017 to November 2020
The bank Prime rate at December 31, 2016 was 2.70% (December 31, 2015 - 2.70%).
182,506,594
111,619,124
Mortgages are secured by a first mortgage charge on the property and equipment of the Corporation,
general security agreements covering all assets of the Corporation, general assignment of rents and leases
and assignments of insurance coverage over all assets of the Corporation. The Corporation must maintain
certain financial ratios to comply with the facilities. These covenants include a fixed charge coverage
2016 Annual Report
43
Notes: 28
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 8 – Continued
ratio, a tangible net worth ratio, and a loan to value ratio. As of December 31, 2016 and 2015, the
Corporation is in compliance with all covenants.
The defeasance obligation matured in August 2016 and was fully paid off with the short term deposit
initially set up.
The deferred financing costs are made up of fees and costs incurred to obtain the related mortgage
financing, less accumulated amortization.
Principal repayments on long term debt and lines of credit in each of the next five years are estimated as
follows:
Year 1
Year 2
Year 3
Year 4
Year 5
Thereafter
$
$
$
$
$
$
23,471,801 (includes lines of credit)
8,205,857
17,451,635
5,667,056
5,909,021
122,720,022
9. Share Capital
Authorized: Unlimited number of common, voting shares of no par value
Authorized: Unlimited number of preferred non-voting shares issuable in series at an issuance price of $1
per share
Common shares issued:
Balance, December 31, 2014
36,689,044
$
7,421,324
Number of Shares
Amount
Issued on asset acquisitions
Conversion of preferred shares
Private placement
Share issuance costs
89,696,085
15,203,657
26,337,034
-
38,395,282
4,561,097
17,119,072
(629,363)
Balance, December 31, 2015
167,925,820
$
66,867,412
Bought deal
Issued on asset acquisitions (Note 5)
Private placement
Dividend reinvestment plan
Share option redemption
Share issuance costs
Common shares repurchased
67,647,600
45,621,212
8,333,332
345,704
36,000
-
(100,000)
57,500,460
58,803,787
5,499,999
327,365
14,400
(3,172,985)
(72,050)
Balance, December 31, 2016
289,809,668
$
185,768,388
44
2016 Annual Report
Notes: 29
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 9 - Continued
Bought Deal
On August 19, 2016, the Corporation issued 67,647,600 common shares at a price of $0.85 per common
share for gross proceeds of $57.5 million.
Private Placement
On March 18, 2016, the Corporation issued 8,333,332 common shares at a price of $0.66 per common share
for gross proceeds of $5.5 million.
Dividend Reinvestment Plan
Represents common shares issued under the Corporations dividend reinvestment plan (“DRIP") for
holders of common shares approved on April 18, 2016. Under the terms of the DRIP, eligible registered
holders of a minimum of 10,000 Common Shares (the "Shareholders") may elect to automatically reinvest
their cash dividends payable in respect to the common shares to acquire additional common shares,
which will be issued from treasury or purchased on the open market. The Corporation may initially issue
up to 5,000,000 common shares under the DRIP, which number may be increased upon board approval
and TSX Venture Exchange acceptance of the increase, and upon public disclosure of the increase.
Common Shares Repurchased
Represents common shares repurchased under the Corporations Normal Course Issuer Bid ("NCIB")
policy allowing for the purchase for cancellation, during the 12-month period starting May 1, 2016, up to
8,805,382 of the common shares. The program will end on April 30, 2017 unless the maximum amount of
common shares is purchased before then or the Corporation provides earlier notice of termination.
Contributed surplus:
Opening balance
Stock based compensation
Ending balance
December 31, 2016
December 31, 2015
1,034,865
1,208,374
2,243,239
573,408
461,457
1,034,865
Stock Options and Warrants
The Board of Directors of the Corporation may from time to time, in its discretion, and in accordance with
the Exchange requirements, grant to directors, officers, employees and technical consultants of the
Corporation, non-transferable options to purchase common shares provided that i) the number of
common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares;
ii) the options are exercisable for a period of up to 10 years from the date of grant; iii) the number of
common shares reserved for issuance to any individual director or officer will not exceed 5% of the issued
and outstanding common shares; and iv) the number of common shares reserved for issuance to all
technical consultants, if any, will not exceed 2% of the issued and outstanding shares. The exercise price
for purchasing these shares cannot be less than the minimum exercise price as provided by Exchange
rules. The following table summarizes information about stock options outstanding and exercisable as at:
2016 Annual Report
45
Notes: 30
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 9 – Continued
December 31, 2016
December 31, 2015
Options
Weighted Average
Exercise Price
Opening
Exercised/Expired
Granted
Closing and Exercisable
8,561,000
(60,000)
3,000,000
11,501,000
$0.36
$0.40
$1.36
$0.62
Options
3,600,000
-
4,961,000
8,561,000
Weighted Average
Exercise Price
$0.23
-
$0.45
$0.36
The fair value of options to granted in 2016 was estimated on the date of the grant, as determined by
using the Black-Sholes option pricing model with the following assumptions:
Dividend Yield
Risk-Free Interest Rate
Expected Life of Options
Expected Volatility of the Corporation's Common Shares
0.7%
1.0%
4 Years
36.0%
Stock options exercisable and outstanding are as follows:
Exercise Price
Vesting Date
Expiry Date
December 31, 2016
December 31, 2015
$0.20
$0.23
$0.33
$0.40
$0.41
$0.50
$1.36
Nov 5, 2007
May 6, 2009
June 19, 2014
Jan 27, 2015
April 28, 2015
Sept 14, 2015
Dec 21, 2016
1,000,000
2,200,000
400,000
Nov 5, 2017
May 6, 2019
June 19, 2024
Jan 27, 2025 -
April 28, 2025
Sept 14, 2025
Dec 21, 2026
2,901,000
2,000,000
3,000,000
Options exercisable and outstanding
11,501,000
1,000,000
2,200,000
400,000
60,000
2,901,000
2,000,000
-
8,561,000
Warrants exercisable and outstanding are as follows:
Exercise Price
$0.35
$0.37
Expiry Date
Feb 25, 2018
Feb 25, 2018
Warrants exercisable and outstanding
December 31, 2016
December 31, 2015
249,999
2,833,334
3,083,333
249,999
2,833,334
3,083,333
Dividends
A dividend of $0.0025 per share was declared on December 15, 2016 and payable to shareholders of
record on December 31, 2016.
46
2016 Annual Report
Notes: 31
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
10. Income Taxes
The reconciliation of the Corporation's effective tax expense is as follows:
Loss before taxes
(21,189,436)
(4,575,210)
Combined federal and provincial statutory income tax rate
27.00%
27.00%
December 31, 2016 December 31, 2015
Income tax recovery calculated at statutory rate
Non-deductible items
Change in deferred tax assets not recognized
(5,721,148)
3,480,508
2,240,640
(1,235,307)
151,786
1,083,521
Income tax expense (recovery)
-
-
Details of deferred tax assets (liabilities) are as follows:
Deferred tax assets (liabilities):
Property, plant and equipment
Goodwill
Intangible assets
Long term debt
Non-capital loss carry forwards
December 31, 2016 December 31, 2015
(1,249,765)
(129,893)
(584,809)
(243,481)
2,207,948
(969,160)
(132,344)
-
(293,950)
1,395,454
Deferred tax asset
-
-
Details of the unrecognized deductible temporary differences are as follows:
Intangible assets
Deferred financing costs and other
Non-capital loss carry forwards
December 31, 2016 December 31, 2015
-
3,559,125
6,590,572
282,096
1,344,695
7,154,405
Unrecognized deductible temporary differences
10,149,697
8,781,196
The Corporation has non-capital losses at December 31, 2016 totaling $15,377,972 which start to expire
in 2035.
2016 Annual Report
47
Notes: 32
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
11. Financial Risk Management and Fair Value
The Corporation is required to disclose certain information concerning its financial instruments. The fair
values of the Corporation’s cash and short term deposits, accounts receivable, and accounts payable and
accrued liabilities approximate their carrying amount because of short period to scheduled receipt or
payment of cash. The fair value of the Corporation’s debt obligations is estimated based on discounted
future cash flows using discount rates that reflect current market conditions for instruments with similar
terms and risks. Such fair value estimates are not necessarily indicative of the amounts the Corporation
might pay or receive in actual market transactions. The fair value of financial assets and liabilities were as
follows:
As at December 31, 2016
As at December 31, 2015
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Financial Assets
Fair Value through Profit or Loss
Cash and short term deposits
11,869,892
11,869,892
2,381,390
2,381,390
Loans and Receivables
Accounts receivable
Held to Maturity
1,354,796
1,354,796
560,828
560,828
Short term investments
-
-
1,384,253
1,384,253
Financial Liabilities
Other Financial Liabilities
Accounts payable & accrued liabilities
3,406,008
3,406,008
982,551
982,551
Long term debt
182,506,594
182,600,607
111,619,124
112,584,218
IFRS establishes a three tier fair value hierarchy to reflect the significance of the inputs used in measuring
the fair value of the Corporation’s financial instruments. The three levels are:
Level 1 – This level includes assets and liabilities measured at fair market value based on
unadjusted quoted prices for identical assets and liabilities in active markets that the
Corporation can access on the measurement date.
Level 2 – This level includes measurements based on directly or indirectly observable inputs
other than quoted prices included in Level 1. Financial instruments in this category are
measured using valuation models or other standard valuation techniques that rely on
observable market inputs.
Level 3 – The measurements used in this level rest on inputs that are unobservable,
unavailable, or whose observable inputs do not justify the largest part of the fair value
instrument.
48
2016 Annual Report
Notes: 33
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 11 – Continued
The following table presents information on the Corporation’s assets and liabilities measured at fair value
and indicates the fair value hierarchy of the valuation techniques used to determine this fair value.
At December 31, 2016
Assets
Cash and short term deposits
At December 31, 2015
Assets
Cash and short term deposits
Level 1
Level 2
Level 3
Total
$11,869,892
$2,381,390
-
-
-
$11,869,892
$2,381,390
Financial instruments may expose the Corporation to a number of financial risks including interest rate
risk, credit risk and environmental risk.
a)
Interest rate risk – Interest rate risk arises from changes in market interest rates that may
affect the fair value of future cash flows from the Corporation’s financial assets or liabilities.
Interest rate risk may be partially mitigated by holding both fixed and floating rate debt, or
by staggering the maturities of fixed rate debt. The Corporation is exposed to interest rate
risk primarily relating to its long term debt. The Corporation will manage interest rate risk
by utilizing fixed interest rates on its mortgages where possible, staggering maturities over a
number of years to mitigate exposure to any single year, and by attempting to ensure access
to diverse sources of funding.
There is interest rate risk associated with variable rate mortgages as interest expense is
impacted by changes in the prime rate. The impact on the net income (loss) and
comprehensive income (loss) if interest rates on variable rate debt had been 1% higher or
lower for the year ended December 31, 2016 would be approximately $661,276 (December 31,
2015 - $322,200).
b) Credit risk - Credit risk arises from the possibility that customers may experience financial
difficulty and be unable to fulfill their financial obligations to the Corporation. The risk of
incurring bad debts often arises if storage customers relocate and cannot be found to enforce
payment, or if storage customers abandon their possessions. The extent of bad debts can be
mitigated by quickly following up on any unpaid amounts shortly after the due date,
enforcing late fees, denying access to any customers with delinquent accounts, and ultimately
seizing the possessions of the customer. Additionally the Corporation typically rents to
numerous customers, each of which constitutes significantly less than 5% of the
Corporation’s monthly revenue. This diversification in the customer base reduces credit risk
from any given tenant.
2016 Annual Report
49
Notes: 34
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 11 - Continued
The following table sets forth details of accounts receivable and related allowance for
doubtful accounts:
Trade Receivables
Under 60 days aged
Between 60 and 90 days (past due but
not impaired)
Over 90 days
Allowance for doubtful accounts
Non-Trade Receivables
Over 30 days aged (not impaired)
December 31, 2016
December 31, 2015
$ 625,446
$324,335
46,625
127,013
(120,000)
675,712
$1,354,796
-
86,248
(62,119)
212,364
$560,828
Change in the Corporation’s allowance for doubtful accounts is as follows:
Balance December 31, 2014
Charges or adjustments during the year
Balance December 31, 2015
Charges or adjustments during the year
Balance December 31, 2016
$54,657
7,462
$62,119
57,881
$120,000
The creation and release of the allowance for doubtful accounts has been included in property
operating costs in these Consolidated Statements of Income (Loss) and Comprehensive Income
(Loss). Amounts charged to the allowance account are generally written off when there is no
expectation of recovering additional cash.
c) Liquidity risk – Liquidity risk is the risk that the Corporation will be unable to meet its
financial obligations as they fall due. The Corporation manages liquidity risk through cash
flow forecasting and regular monitoring of cash requirements including anticipated investing
and financing activities. Typically the Corporation ensures that it has sufficient cash or liquid
investments available to meet expected operating expenses for a period of 30 days, excluding
the potential impact of extreme circumstances that cannot reasonably be predicted, such as
natural disasters. For the foreseeable future, the Corporation anticipates that cash flows from
operations, working capital, and other sources of financing will be sufficient to meet its
operating requirements, debt repayment obligations and will provide sufficient funding for
anticipated capital expenditures. Maturities of long term financial liabilities are summarized
in Note 8.
50
2016 Annual Report
Notes: 35
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 11 – Continued
d) Environmental risk – Environmental risk is inherent in the ownership of property. Various
municipal, provincial and federal regulations can result in penalties or potential liability for
remediation should hazardous materials enter the environment. The presence of hazardous
substances could also impair the Corporation’s ability to finance or sell the property, or it
might expose the Corporation to civil law suits. To mitigate such risk, the Corporation will
procure recent or updated environmental reports for all acquisitions. It also prohibits the
storage of hazardous substances as a condition of the rental contract signed by customers.
Unless otherwise noted, it is management’s opinion that the Corporation is not exposed to
significant currency risk.
12. Related Party Transactions
During the year ended December 31, 2016, the Corporation paid total management fees of $819,666
(December 31, 2015 - $376,057) to Access Results Management Services Inc. (“ARMS”), a corporation
controlled by two directors and officers of the Corporation. Pursuant to a management agreement,
ARMS is entitled to a base management fee of $189,086 for fiscal 2016, as well as an annual performance
fee of 4% of net operating income (“NOI”), defined as storage and related services revenue less property
operating costs, if the Corporation attains 85% or greater of its annual board-approved budgeted NOI for
that fiscal year.
During the year ended December 31, 2016, the Corporation reimbursed operational wages of $4,736,700
(December 31, 2015 - $1,840,941) and training, travel and related expenses of $319,895 (December 31, 2015
- $59,819) to ARMS. These expenses, reimbursed at cost, were undertaken exclusively for the benefit of
the Corporation.
During the year ended December 31, 2016, the Corporation paid loan guarantee fees of $181,616
(December 31, 2015 - $17,424) to a director of the Corporation and to a related corporation. As a condition
of the assumption of two mortgages, the director and corporation were required to provide a guarantee
for the entire outstanding principal balance of the mortgages. The loan guarantee fee is compensation for
the provision of this guarantee and is paid on a monthly basis at the annual rate of 0.5% and 0.4% of the
original mortgage principal balances.
The Corporation holds a Master Franchise from Canadian PUPS Franchises Inc. (CPFI) which provides
the Corporation with the exclusive Canadian franchise rights for the development and operation of
portable storage throughout Canada. CPFI is a corporation related to two directors and officers of the
Corporation. The Corporation pays a monthly royalty of 3.5% on the gross sales. During the year ended
December 31, 2016, the Corporation paid $182,022 (December 31, 2015 - $145,664) for royalties and
$1,329,326 (December 31, 2015- $1,472,143) for storage containers and other equipment under the Master
Franchise Agreement.
Included in accounts payable and accrued liabilities, relating to the previously noted transactions, at
December 31, 2016 was $13,797 (December 31, 2015 - $44,502) payable to CPFI and $1,191,647 (December
31, 2015 - $365,483) payable to ARMS.
2016 Annual Report
51
Notes: 36
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 12 – Continued
Key management personnel are those persons having authority and responsibility for planning, directing
and controlling the activities of the Corporation, directly and indirectly, and include directors. The
remuneration of key management personnel for employment services rendered are as follows:
Wages, management fees, bonuses and directors fees
Stock based compensation
December 31, 2016
December 31, 2015
135,608
1,013,021
1,148,629
256,273
406,292
662,565
13. Capital Risk Management
The Corporation’s objectives when managing capital are to safeguard the Corporation’s ability to
continue as a going concern in order to provide returns for shareholders and benefits for other
stakeholders. The Corporation defines capital as shareholders’ equity excluding contributed surplus, and
long term debt. The Corporation manages the capital structure and makes adjustments to it in light of
changes in economic conditions and the risk characteristics of the underlying assets. To maintain or
adjust the capital structure, the Corporation may attempt to issue new shares, issue new debt, acquire or
dispose of assets, and adjust the amount of cash and short term deposits. The Board of Directors does not
establish a quantitative return on capital criteria, but rather promotes year over year sustainable growth.
On an ongoing basis, the Corporation reviews and assesses its capital structure. The Corporation
determines the appropriate mortgage debt to be placed on properties at the time a particular property is
acquired or when an existing mortgage financing matures. Consideration is given to various factors
including, but not limited to, interest rates, financing costs, the term of the mortgage and the strength of
cash flow arising from the underlying asset. Mortgage debt is usually only secured by the underlying
asset. The Corporation monitors its capital using a debt to fair value ratio.
Except for the debt covenants described in Note 8, the Corporation is not subject to any externally
imposed capital requirements.
52
2016 Annual Report
Notes: 37
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
14. Segmented Information
The Corporation operates two reportable business segments. Each segment is a component of the
Corporation for which separate discrete financial information is available for evaluation by the chief
decision makers of the Corporation.
•
•
Self Storage – involves the customer leasing space at the Corporation’s property for short or long
term storage. Self storage may also include space for storing vehicles and use for small commercial
operations.
Portable Storage – this segment involves delivering a portable storage unit to the customer. The
customer can opt to keep the portable storage unit at their location or have it moved to another
location for further storage.
The Corporation evaluates performance and allocates resources based on earnings before interest, taxes,
depreciation, amortization and stock based compensation. Corporate costs are not allocated to the
segments and are shown separately below.
For the Year Ended December 31, 2016
Se lf
Storage
Portable
Storage
Corporate
Total
Re ve nue
$
22,462,245
$
5,362,299
$
-
$
27,824,544
Ope rating e xpe nse s
Ne t ope rating income
7,444,352
15,017,893
3,355,666
2,006,633
Acquisition and inte gration
Se lling, ge ne ral & admin.
-
-
-
-
Inte re st e xpe nse
4,902,450
289,379
Stock base d compe nsation
-
-
De pre ciation, amortization
-
-
1,928,429
2,240,692
316,516
1,208,374
10,800,018
17,024,526
1,928,429
2,240,692
5,508,345
1,208,374
and goodwill adjustme nt
24,563,310
2,690,032
74,780
27,328,122
Ne t income /(loss)
(14,447,867)
(972,778)
(5,768,791)
(21,189,436)
Additions:
Prope rty & e quip.
179,135,513
2,200,663
2,949
181,339,125
2016 Annual Report
53
Notes: 38
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Note 14 – Continued
For the Year Ended December 31, 2015
Se lf
Storage
Portable
Storage
Corporate
Total
Re ve nue
$
6,689,506
$
4,451,081
$
-
$
11,140,587
Ope rating e xpe nse s
Ne t ope rating income
2,335,967
4,353,539
2,966,322
1,484,759
Acquisition and inte gration
Se lling, ge ne ral & admin.
-
-
-
-
Inte re st e xpe nse
1,543,929
286,720
Stock base d compe nsation
-
-
De pre ciation & amortization
4,199,554
1,241,504
-
-
1,052,121
1,266,635
316,706
461,457
44,882
5,302,289
5,838,298
1,052,121
1,266,635
2,147,355
461,457
5,485,940
Ne t income /(loss)
(1,389,944)
(43,465)
(3,141,801)
(4,575,210)
Additions:
Prope rty & e quip.
133,261,071
10,589,456
559,771
144,410,298
Total Assets
Se lf
Storage
Portable
Storage
Corporate
Total
As at De ce mbe r 31, 2016
$
316,524,663
$
15,457,428
$
10,821,490
$
342,803,581
As at De ce mbe r 31, 2015
$
151,443,965
$
15,105,555
$
4,936,957
$
171,486,477
54
2016 Annual Report
Notes: 39
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
15. Commitments and Contingencies
Operating Lease Commitments
The Corporation leases buildings and lands in Winnipeg, MB, Kamloops, BC and Montreal, QC. The
leases do not contain any contingent rent clauses. They do not include any provisions for transfer of title,
nor does the Corporation participate in the residual value of the land. Therefore, these leases are
considered operating leases as the risk and reward of ownership of the lands remain with the landlords.
The leases expire between 2018 and 2054, with the leases expiring in 2027 and 2032 having up to 20 years
and 25 years of renewals, respectively, at the option of the Corporation after that time.
The future minimum lease payments, excluding incidental costs for which the Corporation is responsible,
are as follows:
Less than one year
Between one and five years
More than five years
$ 987,689
3,752,062
19,553,622
$ 24,293,373
During the year ended December 31, 2016, the Corporation recognized as an expense $441,251 (December
31, 2015 - $67,072) in operating lease payments.
Contingency
The Corporation has no legal contingency provisions at either December 31, 2016 or December 31, 2015.
16. Subsequent Events
On March 21, 2017, the Corporation acquired one self storage location for $7,400,000 (subjected to
customary adjustments). The acquisition was an arm’s length transaction. The purchase price was paid
for by cash on hand.
On March 31, 2017, the Corporation closed the transaction to internalize management of StorageVault’s
stores and acquired the third party management contracts from Access Results Management Services Inc.
for $16,000,000.
On March 31, 2017, the Corporation acquired five self storage locations for $22,000,000 (subjected to
customary adjustments). The acquisition was an arm’s length transaction. The purchase price was paid
for by cash on hand and mortgage financing.
On March 31, 2017, the Corporation acquired one self storage location for $2,800,000 (subjected to
customary adjustments). The acquisition was an arm’s length transaction. The purchase price was paid
for by cash on hand and mortgage financing.
The initial accounting for the above-mentioned acquisitions has not been completed as at the date of
authorization of these consolidated financial statements.
2016 Annual Report
55
Notes: 40
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
StorageVault Canada Inc.
OFFICERS
Steven Scott
Chief Executive Officer
Iqbal Khan
Chief Financial Officer
DIRECTORS
Steven Scott
Toronto, ON
Iqbal Khan
Toronto, ON
Rob Duguid
Regina, SK
Alan Simpson
Regina, SK
Blair Tamblyn
Toronto, ON
LEGAL COUNSEL
AUDITORS
DLA Piper (Canada LLP)
Livingston Place
1000 – 250 2nd St S.W.
Calgary, AB T2P 0C1
Telephone 403-296-4470
Facsimile 403-296-4474
MNP LLP
1500, 640 – 5th Avenue
Calgary, AB T2P 3G4
Telephone 403 263 3385
Facsimile 403-269-8450
HEAD OFFICE
REGISTRAR & TRANSFER AGENT
StorageVault Canada Inc.
100 Canadian Rd
Toronto, ON M1R 4Z5
Telephone 1-877-622-0205
Email: ir@storagevaultcanada.com
TMX Equity Transfer Services
300-5th Avenue S.W., 10th Floor
Calgary, AB T2P 3C4
Telephone 403-218-2800
Facsimile 403-265-0232
TSX VENTURE EXCHANGE LISTING:
SVI
56
2016 Annual Report
Notes: 41
Management
Discussion and Analysis
2016 Annual Report
57
StorageVault Canada Inc.
(the “Corporation”)
Form 51-102F1
Management’s Discussion and Analysis
For Three Months Ended and Fiscal Year Ended December 31, 2016
The following Management’s Discussion and Analysis (“MD&A”) provides a review of corporate and
market developments, results of operations and the financial position of StorageVault Canada Inc. (“SVI”
or “the Corporation”) for the three months ended and fiscal year ended December 31, 2016. This MD&A
should be read in conjunction with the audited fiscal 2016 consolidated financial statements and
accompanying notes contained therein, which have been prepared in Canadian dollars and in accordance
with International Financial Reporting Standards (“IFRS”). This MD&A is based on information
available to Management as of March 31, 2017.
FORWARD LOOKING STATEMENTS
This MD&A and the accompanying Letter to Shareholders contains forward-looking information. All
statements, other than statements of historical fact, included in this MD&A and the accompanying Letter
to Shareholders may be forward-looking information. Generally, forward-looking information may be
identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”,
“proposed”, “is expected”, “budgets”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or
“does not anticipate”, or “believes”, or variations of such words and phrases, or by the use of words or
phrases which state that certain actions, events or results may, could, would, or might occur or be
achieved. In particular, forward-looking information included in this MD&A and the accompanying
Letter to Shareholders includes statements with respect to: the Corporation’s outlook as to the market for
self storage and portable storage; economic conditions; the availability of credit; the expectation of cash
flows; the Corporation’s strategic objectives, growth strategies, goals and plans; potential sources of
financing including issuing additional common shares as a source financing, generally, and as a source of
financing for potential acquisitions; future expansion of existing SVI Stores; the size of potential future
acquisitions the Corporation may make in 2017; the annualized NOI and annualized FFO assuming
previous acquisitions that occurred in Fiscal 2016 were purchased on January 1, 2016; and the general
outlook for the Corporation. This forward-looking information is contained in “Highlights”, “Nature of
Business”, “Business and General Corporate Strategy”, “Outlook”, “Financial Results Overview” and
“Working Capital, Long Term Debt and Share Capital” and other sections of this MD&A.
Forward-looking information is subject to known and unknown risks, uncertainties and other factors that
may cause the actual results, level of activity, performance or achievements of the Corporation to be
materially different from those expressed or implied by such forward-looking information. Certain of
such risks are discussed in the “Risks and Uncertainties” section of this MD&A.
Although the Corporation has attempted to identify important factors that could cause actual actions,
events or results to differ materially from those described in forward-looking information, there may be
other factors that cause actions, events or results not to be as anticipated, estimated or intended. There
can be no assurance that forward-looking information will prove to be accurate, as actual results and
future events could differ materially from those anticipated in such information. Accordingly, readers
58
2016 Annual Report
should not place undue reliance on forward-looking information. The factors identified above are not
intended to represent a complete list of the factors that could affect the Corporation.
The forward-looking information in this MD&A and the accompanying Letter to Shareholders should not
be relied upon as representing the Corporation’s views as of any date subsequent to the date of this
MD&A. Such forward-looking information is based on a number of assumptions which may prove to be
incorrect, including, but not limited to: the ability of the Corporation to obtain sufficient or necessary
financing, satisfy conditions under previously announced acquisition agreements, or satisfy any
requirements of the TSX Venture Exchange with respect to these acquisitions and any related private
placement; the level of activity in the storage business and the economy generally; consumer interest in
the Corporation’s services and products; competition and SVI’s competitive advantages; trends in the
storage industry, including, increased growth and growth in the portable storage business; the
availability of attractive and financially competitive asset acquisitions in the future; the revenue from
acquisitions conducted in Fiscal 2016 being extrapolated to the entire period for 2016 and being consistent
with, and reproducible as, revenue in future periods; and anticipated and unanticipated costs. A
description of additional assumptions used to develop such forward-looking information and a
description of additional risk factors that may cause actual results to differ materially from forward-
looking information can be found in the Corporation’s disclosure documents on the SEDAR website at
www.sedar.com. The Corporation undertakes no obligation to publicly update or review any forward-
looking information, except in accordance with applicable securities laws. Historical results of operations
and trends that may be inferred from this MD&A may not necessarily indicate future results from
operations.
The amount of potential future acquisitions by the Corporations in fiscal 2017 and revenue and NOI
growth for 2017 may be considered a financial outlook, as defined by applicable securities legislation,
contained in this MD&A and the accompanying Letter to Shareholders. Such information and any other
financial outlooks or future-oriented financial information has been approved by management of the
Corporation as of the date hereof. Such financial outlook or future-oriented financial information is
provided for the purpose of presenting information about management's current expectations and goals
relating to the future business of the Corporation. Readers are cautioned that reliance on such
information may not be appropriate for other purposes.
Additional information relating to StorageVault Canada Inc. can be found at www.sedar.com.
2016 Annual Report
59
- 2 -
GLOSSARY OF TERMS
The following abbreviated terms are used in the Management Discussion & Analysis and have the
following respective meanings:
NATURE OF OUR BUSINESS
Business Overview
“Costco” means Costco Wholesale Canada Ltd.;
“Existing Self Storage” means stores that the Corporation has owned or leased since the beginning of the
previous fiscal year;
SVI has forty-nine stores across Canada, operating under the Access Storage, Storage For Your Life and
Depotium Mini-Entrepots brands, totaling 2,635,032 square feet of rentable storage space comprised of
“FFO” means net income (loss) excluding gains or losses from the sale of depreciable real estate, plus
depreciation and amortization, stock based compensation expenses, and deferred income taxes; and after
adjustments for equity accounted entities and non-controlling interests.
“IFRS” means international financial reporting standards;
“MD & A” means this management discussion and analysis disclosure document;
“New Self Storage” means stores that have not been owned or leased continuously since the beginning
of the previous fiscal year;
“NOI”, means net operating income, calculated as revenue from storage and related services less related
property operating costs;
The Storage Landscape
“Non-IFRS Measures” means operating and performance metrics that are not always calculated with
reference to IFRS, but are used commonly in the storage industry to measure operating results for assets
owned or leased;
“Q1, Q2, Q3 or Q4” means a three month fiscal quarter of the Company, ending on March 31, June 30,
September 30 and December 31 respectively;
“Revenue Management” means the operating principle of achieving optimal revenue through a
combination of rental rate increases on existing customers (increases the existing revenue base and rent
per square foot) and dynamic pricing of available inventory;
“Store” means self storage property or location or facility or site;
“Subsequent Events” means material transactions that have occurred from January 1, 2017 to March 31,
2017.
“SVI” means StorageVault Canada Inc.;
“The Company” or “The Corporation” or “We” or “Our” means StorageVault Canada Inc;
60
2016 Annual Report
- 4 -
- 5 -
The Corporation was incorporated on May 31, 2007, under the Business Corporations Act of Alberta, and
is domiciled in Canada. The common shares of the Company are publicly traded on the TSX Venture
Exchange, under the symbol ‘SVI’. The Corporation’s primary business is owning, operating and renting
self storage and portable storage space to individual and commercial customers.
24,719 rental units.
SVI’s portable storage business operates across Canada under the Cubeit and PUPS brands. Of our rental
units, 3,706 are portable storage units in service throughout Canada (120 of these units are operated
under third party licensing agreements in British Columbia and the Maritimes).
SVI’s strategic objective is to own and operate self storage and portable storage in Canada’s top markets.
The Corporation will focus on acquiring storage assets with strong existing cash flows, in strategic
markets, preferably with excess land allowing for future development and expansion of our self and
portable storage businesses. Financing for this growth is intended to come from a combination of free
cash flow from operations, mortgage financing and the issuance of additional debt or equity securities.
Demand for storage is driven by population growth, change of circumstances and smaller living areas
and work spaces. Business incubation, immigration, downsizing, renovations, moving, death, divorce,
insurance, etc. have contributed to the significant growth in demand for storage space in Canada over the
past 10 years and statistics show that this trend is expected to continue.
The Canadian storage market is estimated to be 60 million square feet across 2,500 stores, with the top 10
operators owning less than 15% of these stores; by comparison, the US market is estimated at over 2.5
billion square feet across over 52,500 stores. This translates into approximately 8.3 square feet per capita
in the US versus only 2.5 square feet per capita in Canada suggesting that Canada is an under-stored
Market Size
nation.
The market fragmentation of the Canadian storage industry combined with the low square foot per capita
provides significant consolidation, expansion and development opportunities. Our existing platform,
relationships, reputation, presence in and knowledge of the storage industry allows us to identify
accretive and strategic acquisitions and to take advantage of these opportunities.
Pricing and Occupancy
A store’s rental rates and level of occupancy are dependent upon factors such as population density and
growth (approximately 80% of customers live or work within 8 km’s of the store location), the local
economy, pricing, customer service, curb appeal, etc. We believe in managing our inventory (units)
through pricing. Since our rentals are either weekly or monthly, we are able to react to market demand
very quickly. Our objective is to maximize revenue and NOI, by increasing rent per square foot first and
maximizing occupancy second.
The following abbreviated terms are used in the Management Discussion & Analysis and have the
GLOSSARY OF TERMS
following respective meanings:
“Costco” means Costco Wholesale Canada Ltd.;
“Existing Self Storage” means stores that the Corporation has owned or leased since the beginning of the
previous fiscal year;
“FFO” means net income (loss) excluding gains or losses from the sale of depreciable real estate, plus
depreciation and amortization, stock based compensation expenses, and deferred income taxes; and after
adjustments for equity accounted entities and non-controlling interests.
“IFRS” means international financial reporting standards;
“MD & A” means this management discussion and analysis disclosure document;
“New Self Storage” means stores that have not been owned or leased continuously since the beginning
of the previous fiscal year;
property operating costs;
“NOI”, means net operating income, calculated as revenue from storage and related services less related
“Non-IFRS Measures” means operating and performance metrics that are not always calculated with
reference to IFRS, but are used commonly in the storage industry to measure operating results for assets
owned or leased;
“Q1, Q2, Q3 or Q4” means a three month fiscal quarter of the Company, ending on March 31, June 30,
September 30 and December 31 respectively;
“Revenue Management” means the operating principle of achieving optimal revenue through a
combination of rental rate increases on existing customers (increases the existing revenue base and rent
per square foot) and dynamic pricing of available inventory;
“Store” means self storage property or location or facility or site;
“Subsequent Events” means material transactions that have occurred from January 1, 2017 to March 31,
2017.
“SVI” means StorageVault Canada Inc.;
“The Company” or “The Corporation” or “We” or “Our” means StorageVault Canada Inc;
NATURE OF OUR BUSINESS
Business Overview
The Corporation was incorporated on May 31, 2007, under the Business Corporations Act of Alberta, and
is domiciled in Canada. The common shares of the Company are publicly traded on the TSX Venture
Exchange, under the symbol ‘SVI’. The Corporation’s primary business is owning, operating and renting
self storage and portable storage space to individual and commercial customers.
SVI has forty-nine stores across Canada, operating under the Access Storage, Storage For Your Life and
Depotium Mini-Entrepots brands, totaling 2,635,032 square feet of rentable storage space comprised of
24,719 rental units.
SVI’s portable storage business operates across Canada under the Cubeit and PUPS brands. Of our rental
units, 3,706 are portable storage units in service throughout Canada (120 of these units are operated
under third party licensing agreements in British Columbia and the Maritimes).
SVI’s strategic objective is to own and operate self storage and portable storage in Canada’s top markets.
The Corporation will focus on acquiring storage assets with strong existing cash flows, in strategic
markets, preferably with excess land allowing for future development and expansion of our self and
portable storage businesses. Financing for this growth is intended to come from a combination of free
cash flow from operations, mortgage financing and the issuance of additional debt or equity securities.
The Storage Landscape
Demand for storage is driven by population growth, change of circumstances and smaller living areas
and work spaces. Business incubation, immigration, downsizing, renovations, moving, death, divorce,
insurance, etc. have contributed to the significant growth in demand for storage space in Canada over the
past 10 years and statistics show that this trend is expected to continue.
Market Size
The Canadian storage market is estimated to be 60 million square feet across 2,500 stores, with the top 10
operators owning less than 15% of these stores; by comparison, the US market is estimated at over 2.5
billion square feet across over 52,500 stores. This translates into approximately 8.3 square feet per capita
in the US versus only 2.5 square feet per capita in Canada suggesting that Canada is an under-stored
nation.
The market fragmentation of the Canadian storage industry combined with the low square foot per capita
provides significant consolidation, expansion and development opportunities. Our existing platform,
relationships, reputation, presence in and knowledge of the storage industry allows us to identify
accretive and strategic acquisitions and to take advantage of these opportunities.
Pricing and Occupancy
A store’s rental rates and level of occupancy are dependent upon factors such as population density and
growth (approximately 80% of customers live or work within 8 km’s of the store location), the local
economy, pricing, customer service, curb appeal, etc. We believe in managing our inventory (units)
through pricing. Since our rentals are either weekly or monthly, we are able to react to market demand
very quickly. Our objective is to maximize revenue and NOI, by increasing rent per square foot first and
maximizing occupancy second.
- 4 -
- 5 -
2016 Annual Report
61
Competition
New development in a market impacts the occupancy and the ability to raise rates at existing stores until
the market absorbs the new space. New entrants tend to offer significant move-in specials to achieve
more rapid occupancy gains. Once the space has leased up, promotions are reduced or eliminated and the
focus switches to maximizing revenue through price increases. This can result in short term fluctuations
in occupancy and revenue per square foot at existing stores.
Seasonality
The storage business is subject to seasonality. There is naturally more activity in the warmer months and
less activity in the colder months. As a result occupancies and revenue per square foot tend to be highest
in Q2 and Q3 and lowest in Q1 and Q4. This trend is consistent with what is experienced in the Northern
US. This seasonality is more significant in the portable storage business as all of our portable units are
non-climate controlled. Also, operating costs tend to be higher during the winter months in Canada due
to heating and snow removal costs resulting in lower NOI margins in Q1 and Q4 versus Q2 and Q3.
BUSINESS AND GENERAL CORPORATE STRATEGY
SVI owns and operates storage locations offering both self storage and portable storage for rent on a
weekly or monthly basis, for personal and business use. We are focused on owning and operating
locations in the top markets in Canada with a plan to have multiple stores, where possible, in each market
we operate.
Growth Strategies
Our growth strategy is described in the following four segments: acquisitions, organic growth through
improved performance of existing stores, expansion of our existing stores to meet pent up demand and
expansion of our portable storage business.
Acquisitions
The combination of our corporate platform, our industry relationships and our storage experience
provide StorageVault with a unique advantage in the Canadian market place. This advantage allows us
to identify accretive and strategic purchasing opportunities at attractive prices that provide synergies in
operations, marketing and revenue maximization.
We intend to be disciplined purchasers, with a focus on Canada’s top markets. However, as there is more
competition to acquire existing stores, especially from US purchasers, we may not be able to find
acquisitions that meet our criteria.
Organic Growth
Scale has become increasingly important in the storage business and the increased size of SVI provides a
significant advantage in negotiating better rates on: insurance, software, office supplies, resale retail
products, merchant services, technical support and long distance transport of portable units. These
economies translate into improved margins and better results.
Efficiencies are also gained through cross promotion and marketing of the self storage and portable
storage platforms due to a larger national footprint, offering different but complementary product choices
at various price points to our customers.
The most significant evolution in the storage industry over the last three years has been in the area of
revenue management. Revenue management is the principle of achieving optimal revenue through a
combination of rental rate increases on existing customers (increases the existing revenue base and rent
per square foot) and dynamic pricing of available inventory so we are selling the right product, to the
right customer at the right time, for the right price. With a focus on revenue management, stores are able
to achieve significant top and bottom line growth even when occupancies are stable.
Existing Store Expansion
There is over 700,000 square feet of development potential on the land currently owned and operated by
SVI. When the market conditions are suitable and high occupancies indicate pent up demand, we expect
to expand a number of our existing locations.
Expansion of Portable Storage Business
The portable storage business is where the self storage business was 20 years ago and has significant
growth potential. This belief is supported by Canada’s largest pension plan purchasing the world’s
largest portable storage business in one of their long-term funds in February 2015 for over $1 billion.
While margins in the portable storage business are not as high as they are in the self storage business,
they are still very attractive. With a larger geographic and operating footprint achieved through our
growth strategy, we believe the margins will continue to improve.
Financing Strategy
We anticipate funding the capital requirements of our growth strategy through excess operating cash
flow, utilization of suitable leverage and from the issuance of equity and debt securities.
Financing With Secured Debt and Lines of Credit
The Corporation will partially fund the purchase of storage assets with debt. A number of factors are
considered when evaluating the level of debt in our capital structure, as well as the amount of debt that
will be fixed or variable rate. In making financing decisions, the factors that we consider include, but are
not limited to interest rate, amortization period, covenants and restrictions, security requirements,
prepayment rights and costs, overall debt level, maturity date in relation to existing debt, overall
percentage of fixed and variable rate debt and expected store performance.
Issuance of Common Shares
The Corporation will, from time to time, issue common shares to the public or to vendors to fund the
purchase of storage assets or pay down debt. SVI will consider issuances of additional common shares
for cash proceeds or as consideration in the purchase of storage assets in the upcoming fiscal year if
accretive to shareholders. Future issuances will be dependent upon financing needs, acquisitions and
expansion, equity market conditions at the time and transaction pricing.
62
2016 Annual Report
- 6 -
- 7 -
New development in a market impacts the occupancy and the ability to raise rates at existing stores until
the market absorbs the new space. New entrants tend to offer significant move-in specials to achieve
more rapid occupancy gains. Once the space has leased up, promotions are reduced or eliminated and the
focus switches to maximizing revenue through price increases. This can result in short term fluctuations
in occupancy and revenue per square foot at existing stores.
Competition
Seasonality
The storage business is subject to seasonality. There is naturally more activity in the warmer months and
less activity in the colder months. As a result occupancies and revenue per square foot tend to be highest
in Q2 and Q3 and lowest in Q1 and Q4. This trend is consistent with what is experienced in the Northern
US. This seasonality is more significant in the portable storage business as all of our portable units are
non-climate controlled. Also, operating costs tend to be higher during the winter months in Canada due
to heating and snow removal costs resulting in lower NOI margins in Q1 and Q4 versus Q2 and Q3.
BUSINESS AND GENERAL CORPORATE STRATEGY
SVI owns and operates storage locations offering both self storage and portable storage for rent on a
weekly or monthly basis, for personal and business use. We are focused on owning and operating
locations in the top markets in Canada with a plan to have multiple stores, where possible, in each market
we operate.
Growth Strategies
Acquisitions
Our growth strategy is described in the following four segments: acquisitions, organic growth through
improved performance of existing stores, expansion of our existing stores to meet pent up demand and
expansion of our portable storage business.
The combination of our corporate platform, our industry relationships and our storage experience
provide StorageVault with a unique advantage in the Canadian market place. This advantage allows us
to identify accretive and strategic purchasing opportunities at attractive prices that provide synergies in
operations, marketing and revenue maximization.
We intend to be disciplined purchasers, with a focus on Canada’s top markets. However, as there is more
competition to acquire existing stores, especially from US purchasers, we may not be able to find
acquisitions that meet our criteria.
Organic Growth
Scale has become increasingly important in the storage business and the increased size of SVI provides a
significant advantage in negotiating better rates on: insurance, software, office supplies, resale retail
products, merchant services, technical support and long distance transport of portable units. These
economies translate into improved margins and better results.
Efficiencies are also gained through cross promotion and marketing of the self storage and portable
storage platforms due to a larger national footprint, offering different but complementary product choices
at various price points to our customers.
The most significant evolution in the storage industry over the last three years has been in the area of
revenue management. Revenue management is the principle of achieving optimal revenue through a
combination of rental rate increases on existing customers (increases the existing revenue base and rent
per square foot) and dynamic pricing of available inventory so we are selling the right product, to the
right customer at the right time, for the right price. With a focus on revenue management, stores are able
to achieve significant top and bottom line growth even when occupancies are stable.
Existing Store Expansion
There is over 700,000 square feet of development potential on the land currently owned and operated by
SVI. When the market conditions are suitable and high occupancies indicate pent up demand, we expect
to expand a number of our existing locations.
Expansion of Portable Storage Business
The portable storage business is where the self storage business was 20 years ago and has significant
growth potential. This belief is supported by Canada’s largest pension plan purchasing the world’s
largest portable storage business in one of their long-term funds in February 2015 for over $1 billion.
While margins in the portable storage business are not as high as they are in the self storage business,
they are still very attractive. With a larger geographic and operating footprint achieved through our
growth strategy, we believe the margins will continue to improve.
Financing Strategy
We anticipate funding the capital requirements of our growth strategy through excess operating cash
flow, utilization of suitable leverage and from the issuance of equity and debt securities.
Financing With Secured Debt and Lines of Credit
The Corporation will partially fund the purchase of storage assets with debt. A number of factors are
considered when evaluating the level of debt in our capital structure, as well as the amount of debt that
will be fixed or variable rate. In making financing decisions, the factors that we consider include, but are
not limited to interest rate, amortization period, covenants and restrictions, security requirements,
prepayment rights and costs, overall debt level, maturity date in relation to existing debt, overall
percentage of fixed and variable rate debt and expected store performance.
Issuance of Common Shares
The Corporation will, from time to time, issue common shares to the public or to vendors to fund the
purchase of storage assets or pay down debt. SVI will consider issuances of additional common shares
for cash proceeds or as consideration in the purchase of storage assets in the upcoming fiscal year if
accretive to shareholders. Future issuances will be dependent upon financing needs, acquisitions and
expansion, equity market conditions at the time and transaction pricing.
- 6 -
- 7 -
2016 Annual Report
63
OUTLOOK
DESCRIPTION OF OUR OPERATIONS
The Corporation’s outlook for acquisitions, share capital, results from operations and subsequent events
are:
Acquisitions
In 2017 we expect to acquire $50 to $90 million of assets, excluding any large portfolio acquisitions such
as the $396.6 million portfolio acquisition announced on March 22, 2017. To date, we have been
successful in exceeding our acquisitions targets; however, as there is more competition to acquire existing
stores, especially from US purchasers, we may not be able to continually find acquisitions that meet our
criteria.
Share Capital
The Corporation will from time to time issue common shares to the public or to vendors to fund the
purchase of storage assets. Future issuances will be dependent upon financing needs, acquisition
opportunities, expansion plans, equity market conditions at the time and transaction pricing.
Results from Operations
We expect significant growth in revenue and net operating income in 2017 resulting from the timings of
2016 acquisitions and as we continue to streamline and integrate, implement our revenue management
systems and continue to reduce costs on assets purchased in 2015 and 2016.
The Corporation may use discounts in select markets to match competitive forces and retain its customer
base as a result of new competitors trying to jump-start their lease up periods by offering significant
discounts to new customers. This can result in short term fluctuations in occupancy and rent per square
foot at existing stores. The effect on overall revenues is not expected to be significant, but it may be
enough to slow the rate of growth in revenues experienced in past years.
Subsequent Events
The following items have been announced by the Corporation:
• On March 10, 2017 announced entering into a purchase agreement to acquire one self storage
asset in Montreal for $15.0 million
• On March 21, 2017 closed the acquisition of one self storage store in Kitchener for $7.4 million
• On March 22, 2017 announced that it has entered into a share purchase agreement to acquire all
of the shares of a private Canadian corporation from an arm's length shareholder for $396.6
million resulting in StorageVault acquiring a portfolio of storage assets
• On March 31, 2017, the Corporation closed the transaction to internalize management of
StorageVault’s stores and acquired the third party management contracts for over 55 stores from
Access Results Management Services Inc. for $16,000,000.
• On March 31, 2017 closed the acquisition of 5 stores in the Prairies for $22,000,000
• On March 31, 2017 closed the acquisition of one self storage asset in Kamloops for $2.8 million
As at December 31, 2016, the Corporation had the following self storage and portable storage operations:
Location
Acres
Stores
Units
Feet
Number of
Rentable Square
British Columbia
Alberta
Saskatchewan
Manitoba
Ontario
Quebec
Total
Portable Storage Units
24.2
23.4
16.4
4.7
70.6
10.9
9
6
4
4
19
7
4,711
2,282
533
2,019
8,239
3,349
3,586
477,640
260,040
103,409
163,569
946,319
272,940
411,115
150.2
49
24,719
2,635,032
Management is focused on increasing value and increasing NOI as follows:
Professional Management
SVI’s stores were managed by Access Results Management Services Inc. (ARMS). On March 31, 2017, SVI
internalized management of StorageVault’s stores and acquired the third party management contracts for
over 55 stores from ARMS. The management team at ARMS, and now SVI, has extensive experience in
all aspects of the storage industry including:
• management of over 100 storage locations throughout Canada
•
•
acquisition and development of over 5 million square feet of storage space
over 100 years of combined experience in the storage industry by senior management
Revenue Management
In today’s competitive climate, revenue per square foot is the greatest driver in creating value. Our
management platform has dedicated managers who understand the nuances of each local market. Their
in-depth knowledge of our customer base and the competition allows us to implement strategic rate
increases and optimize proven promotions to attract clientele that will be long-term customers, repeat
renters and strong referral sources.
Marketing
We implement specific marketing plans for the different stages and seasons of our business with
emphasis on maximizing return on investment for every dollar spent. Our strategies to attract customers
include strong search engine marketing, user friendly online presence, community connection programs
and development of large national accounts. We conduct specific store and market studies to determine
how, when and where to focus our marketing dollars with the goal of efficiently and consistently
increasing the value of our stores.
Costco Supplier
channel.
Our self storage and portable storage businesses are exclusive suppliers’ to Costco members across
Canada. This relationship provides exclusive access to Costco’s vast membership base as a marketing
64
2016 Annual Report
- 8 -
- 9 -
OUTLOOK
are:
Acquisitions
criteria.
Share Capital
In 2017 we expect to acquire $50 to $90 million of assets, excluding any large portfolio acquisitions such
as the $396.6 million portfolio acquisition announced on March 22, 2017. To date, we have been
successful in exceeding our acquisitions targets; however, as there is more competition to acquire existing
stores, especially from US purchasers, we may not be able to continually find acquisitions that meet our
The Corporation will from time to time issue common shares to the public or to vendors to fund the
purchase of storage assets. Future issuances will be dependent upon financing needs, acquisition
opportunities, expansion plans, equity market conditions at the time and transaction pricing.
Results from Operations
We expect significant growth in revenue and net operating income in 2017 resulting from the timings of
2016 acquisitions and as we continue to streamline and integrate, implement our revenue management
systems and continue to reduce costs on assets purchased in 2015 and 2016.
The Corporation may use discounts in select markets to match competitive forces and retain its customer
base as a result of new competitors trying to jump-start their lease up periods by offering significant
discounts to new customers. This can result in short term fluctuations in occupancy and rent per square
foot at existing stores. The effect on overall revenues is not expected to be significant, but it may be
enough to slow the rate of growth in revenues experienced in past years.
Subsequent Events
The following items have been announced by the Corporation:
• On March 10, 2017 announced entering into a purchase agreement to acquire one self storage
asset in Montreal for $15.0 million
• On March 21, 2017 closed the acquisition of one self storage store in Kitchener for $7.4 million
• On March 22, 2017 announced that it has entered into a share purchase agreement to acquire all
of the shares of a private Canadian corporation from an arm's length shareholder for $396.6
million resulting in StorageVault acquiring a portfolio of storage assets
• On March 31, 2017, the Corporation closed the transaction to internalize management of
StorageVault’s stores and acquired the third party management contracts for over 55 stores from
Access Results Management Services Inc. for $16,000,000.
• On March 31, 2017 closed the acquisition of 5 stores in the Prairies for $22,000,000
• On March 31, 2017 closed the acquisition of one self storage asset in Kamloops for $2.8 million
The Corporation’s outlook for acquisitions, share capital, results from operations and subsequent events
As at December 31, 2016, the Corporation had the following self storage and portable storage operations:
DESCRIPTION OF OUR OPERATIONS
Location
British Columbia
Alberta
Saskatchewan
Manitoba
Ontario
Quebec
Portable Storage Units
Total
Acres
Number of
Stores
Units
Rentable Square
Feet
24.2
23.4
16.4
4.7
70.6
10.9
9
6
4
4
19
7
4,711
2,282
533
2,019
8,239
3,349
3,586
477,640
260,040
103,409
163,569
946,319
272,940
411,115
150.2
49
24,719
2,635,032
Management is focused on increasing value and increasing NOI as follows:
Professional Management
SVI’s stores were managed by Access Results Management Services Inc. (ARMS). On March 31, 2017, SVI
internalized management of StorageVault’s stores and acquired the third party management contracts for
over 55 stores from ARMS. The management team at ARMS, and now SVI, has extensive experience in
all aspects of the storage industry including:
• management of over 100 storage locations throughout Canada
•
•
acquisition and development of over 5 million square feet of storage space
over 100 years of combined experience in the storage industry by senior management
Revenue Management
In today’s competitive climate, revenue per square foot is the greatest driver in creating value. Our
management platform has dedicated managers who understand the nuances of each local market. Their
in-depth knowledge of our customer base and the competition allows us to implement strategic rate
increases and optimize proven promotions to attract clientele that will be long-term customers, repeat
renters and strong referral sources.
Marketing
We implement specific marketing plans for the different stages and seasons of our business with
emphasis on maximizing return on investment for every dollar spent. Our strategies to attract customers
include strong search engine marketing, user friendly online presence, community connection programs
and development of large national accounts. We conduct specific store and market studies to determine
how, when and where to focus our marketing dollars with the goal of efficiently and consistently
increasing the value of our stores.
Costco Supplier
Our self storage and portable storage businesses are exclusive suppliers’ to Costco members across
Canada. This relationship provides exclusive access to Costco’s vast membership base as a marketing
channel.
- 8 -
- 9 -
2016 Annual Report
65
Storage Solution Centre
Our management platform has a Storage Solution Centre (call center) that provides call management
services designed to increase reservations and move-ins, increase productivity at the store level and
improve corporate image through professionalism, consistency of messaging and willingness to resolve
issues. Our Storage Solution Centre Experts have worked in the storage business and understand the
need to (i) introduce and greet professionally; (ii) establish rapport with customers; (iii) build trust; (iv)
ask the right questions; (v) listen; (vi) ask for the business and (vii) close the sale. The overall result is an
increased close rate leading to improved financial performance.
Technology and Software
SVI stores utilize modern and updated software, technology and security systems. We work with vendors
and developers, who have knowledge of the storage business, to take advantage of developing trends,
including: (1) exception reports that allow management to monitor key performance and fraud indicators
ensuring that management time is more effectively spent preventing and resolving issues than
identifying them; and (2) web-based software reporting that allows authorized individuals to view
specific store information in real time. The user can choose to see daily rental rates achieved and the
number of customers moving-in or moving-out. This tool allows us to adjust quickly to opportunities and
competitive threats in each marketplace.
Economies of Scale
The size and scope of our management platform, combined with the growing size of our own operations
translates into higher gross margins through the centralization of many functions such as revenue
management, property management, employee compensation and benefits programs, as well as the
development and documentation of standardized operating procedures and best practices.
FINANCIAL RESULTS OVERVIEW
In the current fiscal year, SVI added 21 stores for $178.4 million (one through an asset swap valued at $3.4
million), the majority of which ($150.7 million) closed in the last 4 months of 2016. In fiscal 2015, SVI
added 19 stores, for $146.2 million, with $111.8 million also taking place in the last 4 months. The
comparative results are significantly impacted by the timing of these acquisitions.
Selected Financial Information
(unaudited)
Three Months Ended December 31
(audited)
Fiscal
2016
2015
$
%
2016
2015
$
%
Change
Change
Storage revenue and related services
$
8,900,182
$
4,661,307
$
4,238,875
90.9%
$
27,824,544
$
11,140,587
$
16,683,957
149.8%
3,187,851
2,063,568
1,124,283
54.5%
10,800,018
5,302,289
5,497,729
103.7%
5,712,331
2,597,739
3,114,592
119.9%
17,024,526
5,838,298
11,186,228
191.6%
Operating costs
Net operating income
Less:
Acquisition and integration costs
Selling, general and administrative
Interest
Stock based compensation
Depreciation, amortization and
goodwill adjustment
979,121
815,340
1,598,201
1,208,374
532,464
485,709
982,264
446,657
329,631
615,937
83.9%
67.9%
62.7%
1,928,429
2,240,692
5,508,345
1,208,374
1,266,635
1,052,121
2,147,355
661,794
52.2%
1,188,571
113.0%
3,360,990
156.5%
-
1,208,374
N/A
461,457
746,917
161.9%
19,768,583
3,299,583
16,469,000
499.1%
27,328,122
5,485,940
21,842,182
398.1%
24,369,619
5,300,020
19,069,599
359.8%
38,213,962
10,413,508
27,800,454
267.0%
Net Income (Loss)
$
(18,657,288)
$
(2,702,281)
$
(15,955,007)
590.4%
$
(21,189,436)
$
(4,575,210)
$
(16,614,226)
363.1%
Weighted average number of common shares outstanding
Basic
Diluted
Basic
Diluted
Net income (loss) per common share
264,910,015
137,179,175
127,730,840
204,660,864
75,781,610
128,879,254
170.1%
264,910,015
137,179,175
127,730,840
204,660,864
75,781,610
128,879,254
170.1%
93.1%
93.1%
$
(0.070)
$
(0.020)
$
(0.070)
$
(0.020)
$
(0.104)
$
(0.060)
$
(0.104)
$
(0.060)
Storage revenue and related services
Revenues increased by $4.2 million, or 90.9%, for the three months ended December 31, 2016, as
compared to the same period in 2015. This results in a year over year increase of $16.7 million or 149.8%.
This increase is primarily attributable to incremental revenue from the properties acquired in 2015 and in
2016. For additional information, see “Segmented, Existing and New Self Storage and Portable Storage
Results.”
Operating costs
Operating costs for the three months and fiscal year ended December 31, 2016 were $3.2 million and $10.8
million (December 31, 2015 - $2.1 million and $5.3 million), an increase of 54.5% and 103.7%, respectively.
The increase in property operating cost relates to the stores acquired in 2015 and 2016.
66
2016 Annual Report
- 10 -
- 11 -
Our management platform has a Storage Solution Centre (call center) that provides call management
services designed to increase reservations and move-ins, increase productivity at the store level and
improve corporate image through professionalism, consistency of messaging and willingness to resolve
issues. Our Storage Solution Centre Experts have worked in the storage business and understand the
need to (i) introduce and greet professionally; (ii) establish rapport with customers; (iii) build trust; (iv)
ask the right questions; (v) listen; (vi) ask for the business and (vii) close the sale. The overall result is an
Technology and Software
SVI stores utilize modern and updated software, technology and security systems. We work with vendors
and developers, who have knowledge of the storage business, to take advantage of developing trends,
including: (1) exception reports that allow management to monitor key performance and fraud indicators
ensuring that management time is more effectively spent preventing and resolving issues than
identifying them; and (2) web-based software reporting that allows authorized individuals to view
specific store information in real time. The user can choose to see daily rental rates achieved and the
number of customers moving-in or moving-out. This tool allows us to adjust quickly to opportunities and
competitive threats in each marketplace.
Economies of Scale
The size and scope of our management platform, combined with the growing size of our own operations
translates into higher gross margins through the centralization of many functions such as revenue
management, property management, employee compensation and benefits programs, as well as the
development and documentation of standardized operating procedures and best practices.
Storage Solution Centre
FINANCIAL RESULTS OVERVIEW
In the current fiscal year, SVI added 21 stores for $178.4 million (one through an asset swap valued at $3.4
million), the majority of which ($150.7 million) closed in the last 4 months of 2016. In fiscal 2015, SVI
added 19 stores, for $146.2 million, with $111.8 million also taking place in the last 4 months. The
comparative results are significantly impacted by the timing of these acquisitions.
increased close rate leading to improved financial performance.
Selected Financial Information
(unaudited)
Three Months Ended December 31
(audited)
Fiscal
2016
2015
$
%
2016
2015
$
%
Change
Change
Storage revenue and related services
$
8,900,182
$
4,661,307
$
4,238,875
90.9%
$
27,824,544
$
11,140,587
$
16,683,957
149.8%
Operating costs
Net operating income
Less:
Acquisition and integration costs
Selling, general and administrative
Interest
Stock based compensation
Depreciation, amortization and
goodwill adjustment
3,187,851
2,063,568
1,124,283
54.5%
10,800,018
5,302,289
5,497,729
103.7%
5,712,331
2,597,739
3,114,592
119.9%
17,024,526
5,838,298
11,186,228
191.6%
979,121
815,340
1,598,201
1,208,374
532,464
485,709
982,264
446,657
329,631
615,937
83.9%
67.9%
62.7%
-
1,208,374
N/A
1,928,429
2,240,692
5,508,345
1,208,374
1,266,635
1,052,121
2,147,355
661,794
52.2%
1,188,571
113.0%
3,360,990
156.5%
461,457
746,917
161.9%
19,768,583
3,299,583
16,469,000
499.1%
27,328,122
5,485,940
21,842,182
398.1%
24,369,619
5,300,020
19,069,599
359.8%
38,213,962
10,413,508
27,800,454
267.0%
Net Income (Loss)
$
(18,657,288)
$
(2,702,281)
$
(15,955,007)
590.4%
$
(21,189,436)
$
(4,575,210)
$
(16,614,226)
363.1%
Weighted average number of common shares outstanding
Basic
Diluted
264,910,015
137,179,175
127,730,840
264,910,015
137,179,175
127,730,840
93.1%
93.1%
204,660,864
75,781,610
128,879,254
170.1%
204,660,864
75,781,610
128,879,254
170.1%
Net income (loss) per common share
Basic
Diluted
$
(0.070)
$
(0.020)
$
(0.070)
$
(0.020)
$
(0.104)
$
(0.060)
$
(0.104)
$
(0.060)
Storage revenue and related services
Revenues increased by $4.2 million, or 90.9%, for the three months ended December 31, 2016, as
compared to the same period in 2015. This results in a year over year increase of $16.7 million or 149.8%.
This increase is primarily attributable to incremental revenue from the properties acquired in 2015 and in
2016. For additional information, see “Segmented, Existing and New Self Storage and Portable Storage
Results.”
Operating costs
Operating costs for the three months and fiscal year ended December 31, 2016 were $3.2 million and $10.8
million (December 31, 2015 - $2.1 million and $5.3 million), an increase of 54.5% and 103.7%, respectively.
The increase in property operating cost relates to the stores acquired in 2015 and 2016.
- 10 -
- 11 -
2016 Annual Report
67
Net operating income
For the three months ended December 31, 2016, the Corporation had NOI, a non-IFRS measure, of $5.7
million (December 31, 2015 - $2.6 million), an increase of 119.9%. The NOI for the fiscal year ended
December 31, 2016, increased by $11.2 million or 191.6%, to $17.0 million. The increase was primarily due
to NOI from storage assets purchased in fiscal 2015 and 2016, increased rates through our revenue
management systems, streamlining and integration of operations, and reduction of costs on assets
purchased.
Acquisition and integration costs
Acquisition and integration costs include professional fees incurred to identify, qualify, close and
integrate the assets purchased and pending. In fiscal 2016, SVI closed $178.4 million of acquisitions, with
an additional $443.8 million of acquisitions closed or announced subsequent to the year end.
Selling, general and administrative
Selling, general and administrative expenses include all expenses not related to the stores including
corporate office overheads and payroll, travel and professional fees. These costs have increased as a
result of increased activity associated with the growth of the business.
Interest
Interest expense increased as the total amount of debt outstanding is higher at the end of 2016 than it was
at the end of fiscal 2015. This increase was moderately offset by a decrease in the average interest rate.
At December 31, 2016, total debt was $182.5 million compared to $111.6 million at December 31, 2015.
Depreciation, amortization and goodwill adjustment
The increase in depreciation and amortization expense is primarily due to depreciation taken on the
assets acquired in the current year and a full year of amortization on assets purchased in 2015. In
addition, we have recorded an $11.7 million adjustment to goodwill on the income statement. In certain
cases, we issued shares to acquire stores with the share price being fixed at the time of the signing of the
purchase agreement. IFRS requires us to increase the value of the purchased assets by the amount the
share price has increased between the signing date and the closing date. As our share price has
continued to increase, we were required to record an $11.7 million increase to the assets purchased in
2016. We then adjusted the assets down to the actual purchase price and as a result the amount of this
reduction was recorded as a goodwill adjustment in the income statement. All of this was required to
comply with the requirements of IFRS and has no impact on the actual value and financial results of our
business.
Net Income
The increase in net loss by $16.6 million for the current fiscal year, compared to 2015, directly relates to
the increase in depreciation and goodwill adjustment by $21.8 million relating to assets acquired in 2015
and 2016. See above for the explanation of the goodwill adjustment.
Funds from Operations (FFO)
FFO is a non-IFRS measure. It allows management and investors to evaluate the financial results of an
entity without taking into consideration the impact of non-cash items on the Consolidated Statement of
Income (Loss) and Comprehensive Income (Loss). Net income (loss) assumes that the values of our assets
diminish over time through depreciation and amortization, irrespective of the value of our real estate
assets in the open market. Other non-cash items include stock based compensation costs and deferred
income tax expenses (recoveries), if any.
FFO for the three months ended and fiscal year ended December 31, 2016 was $2.3 million and $7.3
million versus $597,302 and $1.4 million, respectively for the same period in 2015. These increases are
the result of contribution from the assets purchased in 2015 and 2016 and from improved operational
results. Included in the Corporation’s net income are acquisition and integrations costs, which are one
time in nature to the assets purchased or pending. For the fiscal 2016, these costs were $1.9 million versus
$1.3 million for fiscal 2015.
The FFO for the three months and fiscal year ended December 31, 2016 and 2015 are:
(unaudited)
Three Months Ended December 31
(audited)
Fiscal
2016
2015
Change
2016
2015
Change
$
%
$
%
Net Income (loss)
$
(18,657,288)
$
(2,702,281)
$
(15,955,007)
590.4%
$
(21,189,436)
$
(4,575,210)
$
(16,614,226)
363.1%
Adjustments:
Depreciation, amortization and
goodwill adjustment
Stock based compensation
1,208,374
-
1,208,374
-
1,208,374
461,457
746,917
161.9%
19,768,583
3,299,583
16,469,000
499.1%
27,328,122
5,485,940
21,842,182
398.1%
20,976,957
3,299,583
17,677,374
535.7%
28,536,496
5,947,397
22,589,099
379.8%
FFO
$
2,319,669
$
597,302
$
1,722,367
288.4%
$
7,347,060
$
1,372,187
$
5,974,873
435.4%
68
2016 Annual Report
- 12 -
- 13 -
Funds from Operations (FFO)
FFO is a non-IFRS measure. It allows management and investors to evaluate the financial results of an
entity without taking into consideration the impact of non-cash items on the Consolidated Statement of
Income (Loss) and Comprehensive Income (Loss). Net income (loss) assumes that the values of our assets
diminish over time through depreciation and amortization, irrespective of the value of our real estate
assets in the open market. Other non-cash items include stock based compensation costs and deferred
income tax expenses (recoveries), if any.
FFO for the three months ended and fiscal year ended December 31, 2016 was $2.3 million and $7.3
million versus $597,302 and $1.4 million, respectively for the same period in 2015. These increases are
the result of contribution from the assets purchased in 2015 and 2016 and from improved operational
results. Included in the Corporation’s net income are acquisition and integrations costs, which are one
time in nature to the assets purchased or pending. For the fiscal 2016, these costs were $1.9 million versus
$1.3 million for fiscal 2015.
corporate office overheads and payroll, travel and professional fees. These costs have increased as a
The FFO for the three months and fiscal year ended December 31, 2016 and 2015 are:
(unaudited)
Three Months Ended December 31
(audited)
Fiscal
2016
2015
Change
2016
2015
Change
$
%
$
%
Net Income (loss)
$
(18,657,288)
$
(2,702,281)
$
(15,955,007)
590.4%
$
(21,189,436)
$
(4,575,210)
$
(16,614,226)
363.1%
Adjustments:
Stock based compensation
1,208,374
-
1,208,374
-
1,208,374
461,457
746,917
161.9%
Depreciation, amortization and
goodwill adjustment
19,768,583
3,299,583
16,469,000
499.1%
27,328,122
5,485,940
21,842,182
398.1%
20,976,957
3,299,583
17,677,374
535.7%
28,536,496
5,947,397
22,589,099
379.8%
FFO
$
2,319,669
$
597,302
$
1,722,367
288.4%
$
7,347,060
$
1,372,187
$
5,974,873
435.4%
Net operating income
For the three months ended December 31, 2016, the Corporation had NOI, a non-IFRS measure, of $5.7
million (December 31, 2015 - $2.6 million), an increase of 119.9%. The NOI for the fiscal year ended
December 31, 2016, increased by $11.2 million or 191.6%, to $17.0 million. The increase was primarily due
to NOI from storage assets purchased in fiscal 2015 and 2016, increased rates through our revenue
management systems, streamlining and integration of operations, and reduction of costs on assets
purchased.
Acquisition and integration costs
Acquisition and integration costs include professional fees incurred to identify, qualify, close and
integrate the assets purchased and pending. In fiscal 2016, SVI closed $178.4 million of acquisitions, with
an additional $443.8 million of acquisitions closed or announced subsequent to the year end.
Selling, general and administrative
Selling, general and administrative expenses include all expenses not related to the stores including
result of increased activity associated with the growth of the business.
Interest
Interest expense increased as the total amount of debt outstanding is higher at the end of 2016 than it was
at the end of fiscal 2015. This increase was moderately offset by a decrease in the average interest rate.
At December 31, 2016, total debt was $182.5 million compared to $111.6 million at December 31, 2015.
Depreciation, amortization and goodwill adjustment
The increase in depreciation and amortization expense is primarily due to depreciation taken on the
assets acquired in the current year and a full year of amortization on assets purchased in 2015. In
addition, we have recorded an $11.7 million adjustment to goodwill on the income statement. In certain
cases, we issued shares to acquire stores with the share price being fixed at the time of the signing of the
purchase agreement. IFRS requires us to increase the value of the purchased assets by the amount the
share price has increased between the signing date and the closing date. As our share price has
continued to increase, we were required to record an $11.7 million increase to the assets purchased in
2016. We then adjusted the assets down to the actual purchase price and as a result the amount of this
reduction was recorded as a goodwill adjustment in the income statement. All of this was required to
comply with the requirements of IFRS and has no impact on the actual value and financial results of our
business.
Net Income
The increase in net loss by $16.6 million for the current fiscal year, compared to 2015, directly relates to
the increase in depreciation and goodwill adjustment by $21.8 million relating to assets acquired in 2015
and 2016. See above for the explanation of the goodwill adjustment.
- 12 -
- 13 -
2016 Annual Report
69
Annualized Net Operating Income and Funds from Operations
The Company purchased 21 stores, one through an asset swap, during fiscal 2016 and the revenues and
operating expenses from each acquisition are reflected in the statements from the date of acquisition
forward for these stores. In order to understand a full year of operations with the acquired assets, we
have prepared an Annualized NOI and FFO statement annualizing the revenues and expenses as if the
stores purchased in fiscal 2016, were purchased as of January 1, 2016 and owned for the entire 12 month
period.
The results of this annualized statement show that NOI and FFO would be higher by $8.5 and $6.7
million, respectively. NOI would have been $25.5 million and the FFO would be $14.0 million. The
Corporation expects to realize the full benefit of these acquisitions in fiscal 2017.
For the Year Ended December 31, 2016
Actual
Annualized Results
Incremental
Notes
Storage revenue and related services
$
27,824,544
$
41,141,335
$
13,316,791
Property operating costs
Net operating income
Less:
Acquisition and integration costs
Selling, general and administrative
Interest
10,800,018
17,024,526
1,928,429
2,240,692
5,508,345
9,677,466
15,622,810
25,518,525
1,928,429
2,240,692
7,303,787
11,472,908
4,822,792
8,493,999
-
-
1,795,442
1,795,442
1
1
2
3
4
Funds from Operations
$
7,347,060
$
14,045,617
$
6,698,557
Net Operating Income
Note 1 - the results from all stores acquired in fiscal 2016, have been adjusted as if the purchase occurred
on January 1, 2016. For revenues, we assumed achieved occupancies and rent per square foot were
repeated for the period prior to acquisition. Information regarding expenses incurred during 2016 and
prior to acquisition, has been sourced from due diligence materials received during the acquisition
process to determine a full year of operating costs.
Note 2 – these costs are one time in nature and do not change based on acquisition date.
Note 3 – these costs do not change based on the acquisition dates as we incurred the costs in anticipation
of our growth
Note 4 – annualized amount determined based on interest rate and debt outstanding at December 31,
2016.
Segmented, Existing and New Self Storage and Portable Storage Results
The Corporation operates two reportable business segments - self storage and portable storage. Self
storage involves the customer renting space at the Corporation’s property for short or long term storage.
Self storage may also include space for storing vehicles and use for small commercial operations.
Portable storage involves delivering a storage unit to the customer. The customer can choose to keep the
portable storage unit at their location or have it moved to another location.
Revenue, property operating costs and net operating income
(unaudited)
Three Months Ended December 31
(audited)
Fiscal
2016
2015
Change
2016
2015
Change
$
%
$
%
Revenue
New Self Storage
Total Self Storage
Operating Costs
New Self Storage
Total Self Storage
Existing Self Storage
$
782,899
$
703,595
79,304
11.3%
$
3,008,984
$
2,787,506
221,478
6,679,061
2,806,839
3,872,222
138.0%
19,453,261
3,901,998
15,551,263
7,461,960
3,510,434
3,951,526
112.6%
22,462,245
6,689,504
15,772,741
Portable Storage
1,438,222
1,150,873
287,349
5,362,299
4,451,083
911,216
Combined
8,900,182
4,661,307
4,238,875
27,824,544
11,140,587
16,683,957
Existing Self Storage
265,450
244,588
20,863
8.5%
1,147,112
1,149,202
(2,090)
1,937,485
930,088
1,007,397
108.3%
6,297,240
1,186,766
5,110,474
2,202,935
1,174,676
1,028,260
87.5%
7,444,352
2,335,968
5,108,384
Portable Storage
984,916
888,892
96,023
3,355,666
2,966,321
389,345
Combined
3,187,851
2,063,568
1,124,283
10,800,018
5,302,289
5,497,729
Existing Self Storage
517,449
459,007
58,442
12.7%
1,861,872
1,638,304
223,568
New Self Storage
Total Self Storage
4,741,576
1,876,751
2,864,825
152.6%
13,156,021
2,715,232
10,440,789
5,259,025
2,335,758
2,923,266
125.2%
15,017,893
4,353,536
10,664,357
Portable Storage
453,306
261,981
191,325
73.0%
2,006,633
1,484,762
521,871
Combined
$
5,712,331
$
2,597,739
3,114,592
119.9%
$
17,024,526
$
5,838,298
11,186,228
25.0%
90.9%
10.8%
54.5%
7.9%
398.5%
235.8%
20.5%
149.8%
-0.2%
430.6%
218.7%
13.1%
103.7%
13.6%
384.5%
245.0%
35.1%
191.6%
Existing Self Storage
New Self Storage
Portable Storage
Revenue and NOI increased by 7.9% and 13.6%, respectively, over the prior year resulting from increased
occupancy and execution of our revenue management program.
In the fiscal year, SVI added 21 stores with 17 occurring in the last 4 months. The Corporation purchased
19 properties in fiscal 2015, the majority occurring in the last four months as well. These additions have
resulted in significant growth in revenue and NOI year over year.
The 35.1% increase in NOI, year over year, is the result of a full year of results from the acquisition of a
portable storage business on April 28, 2015 and operational efficiencies.
70
2016 Annual Report
- 14 -
- 15 -
Annualized Net Operating Income and Funds from Operations
The Company purchased 21 stores, one through an asset swap, during fiscal 2016 and the revenues and
operating expenses from each acquisition are reflected in the statements from the date of acquisition
forward for these stores. In order to understand a full year of operations with the acquired assets, we
have prepared an Annualized NOI and FFO statement annualizing the revenues and expenses as if the
stores purchased in fiscal 2016, were purchased as of January 1, 2016 and owned for the entire 12 month
period.
The results of this annualized statement show that NOI and FFO would be higher by $8.5 and $6.7
million, respectively. NOI would have been $25.5 million and the FFO would be $14.0 million. The
Corporation expects to realize the full benefit of these acquisitions in fiscal 2017.
Storage revenue and related services
$
27,824,544
$
41,141,335
$
13,316,791
Property operating costs
Net operating income
Less:
Interest
Acquisition and integration costs
Selling, general and administrative
For the Year Ended December 31, 2016
Actual
Annualized Results
Incremental
Notes
10,800,018
17,024,526
1,928,429
2,240,692
5,508,345
9,677,466
15,622,810
25,518,525
1,928,429
2,240,692
7,303,787
11,472,908
1
1
2
3
4
4,822,792
8,493,999
-
-
1,795,442
1,795,442
Note 1 - the results from all stores acquired in fiscal 2016, have been adjusted as if the purchase occurred
on January 1, 2016. For revenues, we assumed achieved occupancies and rent per square foot were
repeated for the period prior to acquisition. Information regarding expenses incurred during 2016 and
prior to acquisition, has been sourced from due diligence materials received during the acquisition
process to determine a full year of operating costs.
Note 2 – these costs are one time in nature and do not change based on acquisition date.
Note 3 – these costs do not change based on the acquisition dates as we incurred the costs in anticipation
Note 4 – annualized amount determined based on interest rate and debt outstanding at December 31,
of our growth
2016.
Segmented, Existing and New Self Storage and Portable Storage Results
The Corporation operates two reportable business segments - self storage and portable storage. Self
storage involves the customer renting space at the Corporation’s property for short or long term storage.
Self storage may also include space for storing vehicles and use for small commercial operations.
Portable storage involves delivering a storage unit to the customer. The customer can choose to keep the
portable storage unit at their location or have it moved to another location.
Revenue, property operating costs and net operating income
(unaudited)
Three Months Ended December 31
(audited)
Fiscal
2016
2015
Change
2016
2015
Change
$
%
$
%
Revenue
Existing Self Storage
$
782,899
$
703,595
79,304
11.3%
$
3,008,984
$
2,787,506
221,478
New Self Storage
Total Self Storage
6,679,061
2,806,839
3,872,222
138.0%
19,453,261
3,901,998
15,551,263
7,461,960
3,510,434
3,951,526
112.6%
22,462,245
6,689,504
15,772,741
Portable Storage
1,438,222
1,150,873
287,349
Combined
8,900,182
4,661,307
4,238,875
25.0%
90.9%
5,362,299
4,451,083
911,216
27,824,544
11,140,587
16,683,957
Operating Costs
Existing Self Storage
265,450
244,588
20,863
8.5%
1,147,112
1,149,202
(2,090)
New Self Storage
Total Self Storage
1,937,485
930,088
1,007,397
108.3%
6,297,240
1,186,766
5,110,474
2,202,935
1,174,676
1,028,260
87.5%
7,444,352
2,335,968
5,108,384
Portable Storage
984,916
888,892
96,023
Combined
3,187,851
2,063,568
1,124,283
10.8%
54.5%
3,355,666
2,966,321
389,345
10,800,018
5,302,289
5,497,729
Funds from Operations
$
7,347,060
$
14,045,617
$
6,698,557
Net Operating Income
Existing Self Storage
517,449
459,007
58,442
12.7%
1,861,872
1,638,304
223,568
New Self Storage
Total Self Storage
4,741,576
1,876,751
2,864,825
152.6%
13,156,021
2,715,232
10,440,789
5,259,025
2,335,758
2,923,266
125.2%
15,017,893
4,353,536
10,664,357
Portable Storage
453,306
261,981
191,325
73.0%
2,006,633
1,484,762
521,871
Combined
$
5,712,331
$
2,597,739
3,114,592
119.9%
$
17,024,526
$
5,838,298
11,186,228
Existing Self Storage
Revenue and NOI increased by 7.9% and 13.6%, respectively, over the prior year resulting from increased
occupancy and execution of our revenue management program.
New Self Storage
In the fiscal year, SVI added 21 stores with 17 occurring in the last 4 months. The Corporation purchased
19 properties in fiscal 2015, the majority occurring in the last four months as well. These additions have
resulted in significant growth in revenue and NOI year over year.
Portable Storage
The 35.1% increase in NOI, year over year, is the result of a full year of results from the acquisition of a
portable storage business on April 28, 2015 and operational efficiencies.
7.9%
398.5%
235.8%
20.5%
149.8%
-0.2%
430.6%
218.7%
13.1%
103.7%
13.6%
384.5%
245.0%
35.1%
191.6%
- 14 -
- 15 -
2016 Annual Report
71
Quarterly net operating income
The Corporation’s quarterly results are affected by the timing of acquisitions, both in the current year and
prior year. SVI also incurs non-recurring initial expenses when a new location is acquired. These costs
may include labor, severance, training, travel, advertising and or office expenses.
The storage business is subject to seasonality. There is naturally more activity in the warmer months and
less activity in the colder months. Operating costs are higher during the winter months in Canada due to
heating and snow removal costs resulting in lower NOI margins in Q1 and Q4, versus Q2 and Q3. This is
consistent with that experienced in the Northern US.
Q4
Q3
Q2
Q1
Total
Q4
Q3
Q2
Q1
Fiscal 2016
Fiscal 2015
NOI
Existing Self Storage
$
517,449
$
499,352
$
417,683
$
414,886
$
1,849,370
$
459,007
$
408,115
$
340,670
$
367,551
New Self Storage
4,741,576
3,241,374
2,763,601
2,421,972
13,168,523
1,876,751
613,290
Total Self Storage
5,259,025
3,740,726
3,181,284
2,836,858
15,017,893
2,335,758
1,021,405
225,191
565,861
-
367,551
Portable Storage
453,306
739,186
581,628
232,513
2,006,633
261,981
731,412
400,449
153,881
$
5,712,331
$
4,479,912
$
3,762,912
$
3,069,371
$
17,024,526
$
2,597,739
$
1,752,817
$
966,310
$
521,432
Existing Self Storage
The increase in Q4 2016 over Q4 2015 is a result of our revenue management program.
New Self Storage
SVI added 21 stores in 2016, with 17 closing in the last 4 months. The Corporation purchased 19
properties in fiscal 2015, with the majority occurring in the last four months as well. These additions
have resulted in NOI growth quarter over quarter.
Portable Storage
Most of the increase is the result of the Corporation acquiring additional portable storage units through a
business acquisition on April 28, 2015. The portable storage business is subject to seasonality as all
portable units are non-climate controlled generally resulting in lower results in Q1 and Q4.
Summary of Quarterly Results (unaudited)
Net Income /
/ (Loss) per
Net Income /
Total
Revenue
(Loss)
(Loss) per share
Total Assets
Liabilities Dividends
Net Income
Fully diluted
Total 2016
$27,824,544
($21,189,436)
Period
2016- Q4
2016- Q3
2016- Q2
2016- Q1
2015- Q4
2015- Q3
2015- Q2
2015- Q1
$8,900,182
$7,307,070
$6,320,322
$5,296,970
($18,657,288)
($537,379)
($663,764)
($1,331,005)
$4,795,266
$3,137,527
$2,111,281
$1,096,513
($2,702,281)
($821,330)
($677,127)
($374,472)
Total 2015
$11,140,587
($4,575,210)
2014- Q4
2014- Q3
2014- Q2
2014- Q1
Total 2014
$1,229,934
$1,483,755
$1,404,725
$1,117,806
$5,236,220
($424,349)
($159,355)
($316,946)
($331,226)
($1,231,876)
share
($0.070)
($0.022)
($0.004)
($0.008)
($0.104)
($0.026)
($0.012)
($0.012)
($0.010)
($0.060)
($0.012)
($0.004)
($0.009)
($0.009)
($0.034)
($0.070)
($0.022)
($0.004)
($0.008)
($0.104)
($0.026)
($0.012)
($0.012)
($0.010)
($0.060)
($0.012)
($0.004)
($0.009)
($0.009)
($0.034)
$342,803,581
$187,115,587
$253,955,856
$131,931,530
$179,885,223
$118,343,352
$176,728,097
$114,010,014
$724,931
$630,309
$440,398
N/A
N/A
$1,795,638
$171,486,477
$112,922,559
$108,865,822
$85,594,955
$54,449,748
$25,372,609
$27,910,360
$25,033,929
N/A
N/A
$28,604,192
$25,372,609
$28,445,226
$24,789,294
$28,753,424
$24,938,137
$26,097,965
$22,068,932
N/A
N/A
-
-
-
-
-
-
-
-
-
-
-
WORKING CAPITAL, LONG TERM DEBT AND SHARE CAPITAL
Working Capital
Cash provided by operating activities was $7.5 million for fiscal 2016 compared to $1.6 million for fiscal
2015. The increase was primarily due to the operational results from stores purchased in fiscal 2015 and
2016, increased rates through our revenue management systems, streamlining and integration of
operations and reduction of costs on assets purchased in 2015.
As at December 31, 2016, the Corporation had $11.9 million of cash and short term deposits compared to
$2.4 million at December 31, 2015. The increase of cash and short term deposits is the result of increased
cash from operations.
72
2016 Annual Report
- 16 -
- 17 -
Quarterly net operating income
Summary of Quarterly Results (unaudited)
The Corporation’s quarterly results are affected by the timing of acquisitions, both in the current year and
prior year. SVI also incurs non-recurring initial expenses when a new location is acquired. These costs
may include labor, severance, training, travel, advertising and or office expenses.
The storage business is subject to seasonality. There is naturally more activity in the warmer months and
less activity in the colder months. Operating costs are higher during the winter months in Canada due to
heating and snow removal costs resulting in lower NOI margins in Q1 and Q4, versus Q2 and Q3. This is
consistent with that experienced in the Northern US.
Q4
Q3
Q2
Q1
Total
Q4
Q3
Q2
Q1
Fiscal 2016
Fiscal 2015
NOI
Existing Self Storage
$
517,449
$
499,352
$
417,683
$
414,886
$
1,849,370
$
459,007
$
408,115
$
340,670
$
367,551
New Self Storage
4,741,576
3,241,374
2,763,601
2,421,972
13,168,523
1,876,751
613,290
Total Self Storage
5,259,025
3,740,726
3,181,284
2,836,858
15,017,893
2,335,758
1,021,405
225,191
565,861
-
367,551
Portable Storage
453,306
739,186
581,628
232,513
2,006,633
261,981
731,412
400,449
153,881
$
5,712,331
$
4,479,912
$
3,762,912
$
3,069,371
$
17,024,526
$
2,597,739
$
1,752,817
$
966,310
$
521,432
The increase in Q4 2016 over Q4 2015 is a result of our revenue management program.
Existing Self Storage
New Self Storage
Portable Storage
SVI added 21 stores in 2016, with 17 closing in the last 4 months. The Corporation purchased 19
properties in fiscal 2015, with the majority occurring in the last four months as well. These additions
have resulted in NOI growth quarter over quarter.
Most of the increase is the result of the Corporation acquiring additional portable storage units through a
business acquisition on April 28, 2015. The portable storage business is subject to seasonality as all
portable units are non-climate controlled generally resulting in lower results in Q1 and Q4.
Period
2016- Q4
2016- Q3
2016- Q2
2016- Q1
Total 2016
2015- Q4
2015- Q3
2015- Q2
2015- Q1
Total 2015
2014- Q4
2014- Q3
2014- Q2
2014- Q1
Total 2014
Revenue
$8,900,182
$7,307,070
$6,320,322
$5,296,970
$27,824,544
$4,795,266
$3,137,527
$2,111,281
$1,096,513
$11,140,587
$1,229,934
$1,483,755
$1,404,725
$1,117,806
$5,236,220
Net Income /
(Loss)
($18,657,288)
($537,379)
($663,764)
($1,331,005)
($21,189,436)
Net Income
/ (Loss) per
share
($0.070)
($0.022)
($0.004)
($0.008)
($0.104)
Fully diluted
Net Income /
(Loss) per share
($0.070)
($0.022)
($0.004)
($0.008)
($0.104)
Total
Total Assets
$342,803,581
$253,955,856
$179,885,223
$176,728,097
N/A
Liabilities Dividends
$187,115,587
$131,931,530
$118,343,352
$114,010,014
N/A
$724,931
$630,309
$440,398
-
$1,795,638
($2,702,281)
($821,330)
($677,127)
($374,472)
($4,575,210)
($424,349)
($159,355)
($316,946)
($331,226)
($1,231,876)
($0.026)
($0.012)
($0.012)
($0.010)
($0.060)
($0.012)
($0.004)
($0.009)
($0.009)
($0.034)
($0.026)
($0.012)
($0.012)
($0.010)
($0.060)
($0.012)
($0.004)
($0.009)
($0.009)
($0.034)
$171,486,477
$108,865,822
$54,449,748
$27,910,360
N/A
$112,922,559
$85,594,955
$25,372,609
$25,033,929
N/A
$28,604,192
$28,445,226
$28,753,424
$26,097,965
N/A
$25,372,609
$24,789,294
$24,938,137
$22,068,932
N/A
-
-
-
-
-
-
-
-
-
-
WORKING CAPITAL, LONG TERM DEBT AND SHARE CAPITAL
Working Capital
Cash provided by operating activities was $7.5 million for fiscal 2016 compared to $1.6 million for fiscal
2015. The increase was primarily due to the operational results from stores purchased in fiscal 2015 and
2016, increased rates through our revenue management systems, streamlining and integration of
operations and reduction of costs on assets purchased in 2015.
As at December 31, 2016, the Corporation had $11.9 million of cash and short term deposits compared to
$2.4 million at December 31, 2015. The increase of cash and short term deposits is the result of increased
cash from operations.
- 16 -
- 17 -
2016 Annual Report
73
Long Term Debt and Lines of Credit
As at December 31, 2016 and December 31, 2015, the Corporation held the following debt:
Principal repayments on long term debt in each of the next five years are estimated as follows:
December 31, 2016
December 31, 2015
Rate
Range
Weighted
Average
Balance
Rate
Range
Weighted
Average
Balance
Mortgages
Fixed/Variable
Other
Defeasance
Obligation
3.46% to 5.50% 4.09%
164,942,311
3.81% to 5.05% 4.21%
87,785,752
Maturity: October 2017 to January 2022
Maturity: March 2018 to August 2020
Share Capital
Matured in August 2016
Maturity: August 2016
-
1.09%
1.09%
1,438,991
23,471,801 (includes lines of credit)
Year 1
Year 2
Year 3
Year 4
Year 5
$
$
$
$
$
8,205,857
17,451,635
5,667,056
5,909,021
Thereafter
$ 122,720,022
In the fiscal year, the Corporation issued a total of 121,883,848 common shares for $118.9 million, net of
share issuance costs, (131,236,776 common shares valued at $59,446,088 were issued in fiscal 2015) with
the proceeds used to fund acquisitions. Of these shares issued, 345,704 were issued as part of the
Corporation’s Dividend Reinvestment Plan as part of the Q2 and Q3 dividend declared and paid. In Q2,
100,000 common shares were repurchased for $72,050 as part of Corporation’s Normal Course Issuer Bid
program that was implemented on April 18, 2016. The common shares issued are:
Deferred financing costs net of accretion
of $635,977 (December 31, 2015 - $259,813)
(918,798)
164,023,513
(1,088,702)
88,136,041
Lines of Credit
Prime plus 1.00%
Variable Rate or BA plus 2.75% 4.38%
18,483,081
Prime plus 1.00%
or BA plus 2.75% 4.34%
23,483,083
Maturity: April 2017 to August 2020
Maturity: April 2017 to November 2020
182,506,594
111,619,124
The bank Prime rate at December 31, 2016 was 2.70% (December 31, 2015 - 2.70%). The weighted average
cost of debt at December 31, 2016 is 4.12% (December 31, 2015 - 4.24%).
Mortgages are secured by a first mortgage charge on the property and equipment of the Corporation,
general security agreements covering all assets of the Corporation, general assignment of rents and leases
and assignments of insurance coverage over all assets of the Corporation. The Corporation must maintain
certain financial ratios to comply with the facilities. These covenants include a fixed charge coverage
ratio, a tangible net worth ratio, and a loan to value ratio. As of December 31, 2016 and 2015, the
Corporation is in compliance with all covenants.
The defeasance obligation matured in August 2016 and was fully paid off with the short term deposit.
The deferred financing costs are made up of fees and costs incurred to obtain the related mortgage
financing, less accumulated amortization.
Balance, December 31, 2014
Issued on asset acquisitions
Conversion of preferred shares
Private placement
Share issuance costs
Balance, December 31, 2015
Bought deal
Issued on asset acquisitions
Private placement
Dividend reinvestment plan
Share option redemption
Share issuance costs
Common shares repurchased
Balance, December 31, 2016
Number of Shares
Amount
36,689,044
$
7,421,324
167,925,820
$
66,867,412
89,696,085
15,203,657
26,337,034
-
-
67,647,600
45,621,212
8,333,332
345,704
36,000
(100,000)
38,395,282
4,561,097
17,119,072
(629,363)
57,500,460
58,803,787
5,499,999
327,365
14,400
(3,172,985)
(72,050)
289,809,668
$
185,768,388
74
2016 Annual Report
- 18 -
- 19 -
Long Term Debt and Lines of Credit
As at December 31, 2016 and December 31, 2015, the Corporation held the following debt:
Principal repayments on long term debt in each of the next five years are estimated as follows:
December 31, 2016
Weighted
Rate
Range
December 31, 2015
Weighted
Rate
Range
Average
Balance
Average
Balance
Mortgages
Other
Defeasance
Obligation
Fixed/Variable
3.46% to 5.50% 4.09%
164,942,311
3.81% to 5.05% 4.21%
87,785,752
Maturity: October 2017 to January 2022
Maturity: March 2018 to August 2020
Matured in August 2016
Maturity: August 2016
-
1.09%
1.09%
1,438,991
Deferred financing costs net of accretion
of $635,977 (December 31, 2015 - $259,813)
(918,798)
164,023,513
Lines of Credit
(1,088,702)
88,136,041
Prime plus 1.00%
Prime plus 1.00%
Variable Rate or BA plus 2.75% 4.38%
18,483,081
or BA plus 2.75% 4.34%
23,483,083
Maturity: April 2017 to August 2020
Maturity: April 2017 to November 2020
182,506,594
111,619,124
The bank Prime rate at December 31, 2016 was 2.70% (December 31, 2015 - 2.70%). The weighted average
cost of debt at December 31, 2016 is 4.12% (December 31, 2015 - 4.24%).
Mortgages are secured by a first mortgage charge on the property and equipment of the Corporation,
general security agreements covering all assets of the Corporation, general assignment of rents and leases
and assignments of insurance coverage over all assets of the Corporation. The Corporation must maintain
certain financial ratios to comply with the facilities. These covenants include a fixed charge coverage
ratio, a tangible net worth ratio, and a loan to value ratio. As of December 31, 2016 and 2015, the
Corporation is in compliance with all covenants.
The defeasance obligation matured in August 2016 and was fully paid off with the short term deposit.
The deferred financing costs are made up of fees and costs incurred to obtain the related mortgage
financing, less accumulated amortization.
Year 1
Year 2
Year 3
Year 4
Year 5
Thereafter
23,471,801 (includes lines of credit)
$
8,205,857
$
17,451,635
$
5,667,056
$
$
5,909,021
$ 122,720,022
Share Capital
In the fiscal year, the Corporation issued a total of 121,883,848 common shares for $118.9 million, net of
share issuance costs, (131,236,776 common shares valued at $59,446,088 were issued in fiscal 2015) with
the proceeds used to fund acquisitions. Of these shares issued, 345,704 were issued as part of the
Corporation’s Dividend Reinvestment Plan as part of the Q2 and Q3 dividend declared and paid. In Q2,
100,000 common shares were repurchased for $72,050 as part of Corporation’s Normal Course Issuer Bid
program that was implemented on April 18, 2016. The common shares issued are:
Balance, December 31, 2014
Issued on asset acquisitions
Conversion of preferred shares
Private placement
Share issuance costs
Balance, December 31, 2015
Bought deal
Issued on asset acquisitions
Private placement
Dividend reinvestment plan
Share option redemption
Share issuance costs
Common shares repurchased
Balance, December 31, 2016
Number of Shares
Amount
36,689,044
$
7,421,324
89,696,085
15,203,657
26,337,034
-
38,395,282
4,561,097
17,119,072
(629,363)
167,925,820
$
66,867,412
67,647,600
45,621,212
8,333,332
345,704
36,000
-
(100,000)
57,500,460
58,803,787
5,499,999
327,365
14,400
(3,172,985)
(72,050)
289,809,668
$
185,768,388
- 18 -
- 19 -
2016 Annual Report
75
Stock Options and Warrants
A total of 11,501,000 options were outstanding as at December 31, 2016 (December 31, 2015 – 8,561,000).
Of the outstanding amount, 11,501,000 options were exercisable (December 31, 2015 – 8,561,000). The
details are as follows:
Contingency
The Corporation has no legal contingency provisions at either December 31, 2016 or December 31, 2015.
Off-Balance Sheet Arrangements
The Corporation is not party to any industry contracts or arrangements other than the contractual
Stock options exercisable and outstanding are as follows:
arrangement noted in “Related Party Transactions” below.
Exercise Vesting
Price
Date
$0.20
$0.23
$0.33
$0.40
$0.41
$0.50
$1.36
Nov 5, 2007
May 6, 2009
June 19, 2014
Jan 27, 2015
April 28, 2015
Sept 14, 2015
Dec 21, 2016
Expiry
Date
Outstanding
December 31, 2016 December 31, 2015
Outstanding
1,000,000
2,200,000
400,000
Nov 5, 2017
May 6, 2019
June 19, 2024
Jan 27, 2025 -
April 28, 2025
Sept 14, 2025
Dec 21, 2026
2,901,000
2,000,000
3,000,000
11,501,000
1,000,000
2,200,000
400,000
60,000
2,901,000
2,000,000
-
8,561,000
Warrants exercisable and outstanding are as follows:
Exercise
Price
Expiry
Date
$0.35
$0.37
Feb 25, 2018
Feb 25, 2018
Outstanding
December 31, 2016
Outstanding
December 31, 2015
249,999
2,833,334
3,083,333
249,999
2,833,334
3,083,333
The Board of Directors of the Corporation may from time to time, at its discretion, and in accordance with
the Exchange requirements, grant to directors, officers, employees and consultants of the Corporation,
non-transferable options to purchase common shares.
CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
Operating Lease Commitments
The Corporation leases buildings and lands in Winnipeg, MB, Kamloops, BC and Montreal, QC. The
leases do not contain any contingent rent clauses. They do not include any provisions for transfer of title,
nor does the Corporation participate in the residual value of the land. Therefore, these leases are
considered operating leases as the risk and reward of ownership of the lands remain with the landlords.
The leases expire between 2018 and 2054, with the leases expiring in 2027 and 2032 having up to 20 years
and 25 years of renewals, respectively, at the option of the Corporation.
The future minimum lease payments, excluding incidental costs for which the Corporation is responsible,
are as follows:
Less than one year
Between one and five years
More than five years
$ 987,689
3,752,062
19,553,622
$ 24,293,373
76
2016 Annual Report
- 20 -
- 21 -
RELATED PARTY TRANSACTIONS
During the year ended December 31, 2016, the Corporation paid total management fees of $819,666
(December 31, 2015 - $376,057) to Access Results Management Services Inc. (“ARMS”), a corporation
controlled by two directors and officers of the Corporation. Pursuant to a management agreement,
ARMS is entitled to a base management fee of $189,086 for fiscal 2016, as well as an annual performance
fee of 4% of net operating income (NOI), defined as storage and related services revenue less property
operating costs, if the Corporation attains 85% or greater of its annual board-approved budgeted NOI for
that fiscal year.
the Corporation.
During the year ended December 31, 2016, the Corporation reimbursed operational wages of $4,736,700
(December 31, 2015 - $1,840,941) and training, travel and related expenses of $319,895 (December 31, 2015
- $59,819) to ARMS. These expenses, reimbursed at cost, were undertaken exclusively for the benefit of
During the year ended December 31, 2016, the Corporation paid loan guarantee fees of $181,616
(December 31, 2015 - $17,424) to a director of the Corporation and to a related corporation. As a condition
of the assumption of two mortgages, the director and corporation were required to provide a guarantee
for the entire outstanding principal balance of the mortgages. The loan guarantee fee is compensation for
the provision of this guarantee and is paid on a monthly basis at the annual rate of 0.5% and 0.4% of the
original mortgage principal balances.
The Corporation holds a Master Franchise Agreement from Canadian PUPS Franchises Inc. (CPFI) which
provides the Corporation with the exclusive Canadian franchise rights for the development and
operation of portable storage throughout Canada. CPFI is a corporation related to two directors and
officers of the Corporation. The Corporation pays a monthly royalty of 3.5% on the gross sales. During
the year ended December 31, 2016, the Corporation paid $182,022 (December 31, 2015 - $145,664) for
royalties and $1,329,326 (December 31, 2015- $1,472,143) for storage containers and other equipment
under the Master Franchise Agreement.
Included in accounts payable and accrued liabilities, relating to the previously noted transactions, at
December 31, 2016 was $13,797 (December 31, 2015 - $44,502) payable to CPFI and $1,191,647 (December
31, 2015 - $365,483) payable to ARMS.
Stock Options and Warrants
details are as follows:
A total of 11,501,000 options were outstanding as at December 31, 2016 (December 31, 2015 – 8,561,000).
Of the outstanding amount, 11,501,000 options were exercisable (December 31, 2015 – 8,561,000). The
Stock options exercisable and outstanding are as follows:
Exercise Vesting
Price
Date
$0.20
$0.23
$0.33
$0.40
$0.41
$0.50
$1.36
Nov 5, 2007
May 6, 2009
June 19, 2014
Jan 27, 2015
April 28, 2015
Sept 14, 2015
Dec 21, 2016
Expiry
Date
Outstanding
Outstanding
December 31, 2016 December 31, 2015
Nov 5, 2017
1,000,000
May 6, 2019
2,200,000
June 19, 2024
400,000
Jan 27, 2025 -
April 28, 2025
2,901,000
Sept 14, 2025
2,000,000
Dec 21, 2026
3,000,000
11,501,000
1,000,000
2,200,000
400,000
60,000
2,901,000
2,000,000
-
8,561,000
Warrants exercisable and outstanding are as follows:
Exercise
Expiry
Outstanding
Outstanding
Price
$0.35
$0.37
Date
Feb 25, 2018
Feb 25, 2018
December 31, 2016
December 31, 2015
249,999
2,833,334
3,083,333
249,999
2,833,334
3,083,333
The Board of Directors of the Corporation may from time to time, at its discretion, and in accordance with
the Exchange requirements, grant to directors, officers, employees and consultants of the Corporation,
non-transferable options to purchase common shares.
CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
Operating Lease Commitments
The Corporation leases buildings and lands in Winnipeg, MB, Kamloops, BC and Montreal, QC. The
leases do not contain any contingent rent clauses. They do not include any provisions for transfer of title,
nor does the Corporation participate in the residual value of the land. Therefore, these leases are
considered operating leases as the risk and reward of ownership of the lands remain with the landlords.
The leases expire between 2018 and 2054, with the leases expiring in 2027 and 2032 having up to 20 years
and 25 years of renewals, respectively, at the option of the Corporation.
The future minimum lease payments, excluding incidental costs for which the Corporation is responsible,
are as follows:
Less than one year
Between one and five years
More than five years
$ 987,689
3,752,062
19,553,622
$ 24,293,373
Contingency
The Corporation has no legal contingency provisions at either December 31, 2016 or December 31, 2015.
Off-Balance Sheet Arrangements
The Corporation is not party to any industry contracts or arrangements other than the contractual
arrangement noted in “Related Party Transactions” below.
RELATED PARTY TRANSACTIONS
During the year ended December 31, 2016, the Corporation paid total management fees of $819,666
(December 31, 2015 - $376,057) to Access Results Management Services Inc. (“ARMS”), a corporation
controlled by two directors and officers of the Corporation. Pursuant to a management agreement,
ARMS is entitled to a base management fee of $189,086 for fiscal 2016, as well as an annual performance
fee of 4% of net operating income (NOI), defined as storage and related services revenue less property
operating costs, if the Corporation attains 85% or greater of its annual board-approved budgeted NOI for
that fiscal year.
During the year ended December 31, 2016, the Corporation reimbursed operational wages of $4,736,700
(December 31, 2015 - $1,840,941) and training, travel and related expenses of $319,895 (December 31, 2015
- $59,819) to ARMS. These expenses, reimbursed at cost, were undertaken exclusively for the benefit of
the Corporation.
During the year ended December 31, 2016, the Corporation paid loan guarantee fees of $181,616
(December 31, 2015 - $17,424) to a director of the Corporation and to a related corporation. As a condition
of the assumption of two mortgages, the director and corporation were required to provide a guarantee
for the entire outstanding principal balance of the mortgages. The loan guarantee fee is compensation for
the provision of this guarantee and is paid on a monthly basis at the annual rate of 0.5% and 0.4% of the
original mortgage principal balances.
The Corporation holds a Master Franchise Agreement from Canadian PUPS Franchises Inc. (CPFI) which
provides the Corporation with the exclusive Canadian franchise rights for the development and
operation of portable storage throughout Canada. CPFI is a corporation related to two directors and
officers of the Corporation. The Corporation pays a monthly royalty of 3.5% on the gross sales. During
the year ended December 31, 2016, the Corporation paid $182,022 (December 31, 2015 - $145,664) for
royalties and $1,329,326 (December 31, 2015- $1,472,143) for storage containers and other equipment
under the Master Franchise Agreement.
Included in accounts payable and accrued liabilities, relating to the previously noted transactions, at
December 31, 2016 was $13,797 (December 31, 2015 - $44,502) payable to CPFI and $1,191,647 (December
31, 2015 - $365,483) payable to ARMS.
- 20 -
- 21 -
2016 Annual Report
77
Key management personnel are those persons having authority and responsibility for planning, directing
and controlling the activities of the Corporation, directly and indirectly, and include directors. The
remuneration of key management personnel for employment services rendered are as follows:
i.
Net Operating Income (“NOI”) – NOI is defined as storage and related services less operating
costs. NOI does not include interest expense or income, depreciation and amortization, selling,
general and administrative costs, acquisition and integration costs, stock based compensation
costs or taxes. NOI assists management in assessing profitability and valuation from principal
December 31, 2016
December 31, 2015
business activities.
Wages, management fees, bonuses and directors fees
Stock based compensation
135,608
1,013,021
1,148,629
256,273
406,292
662,565
ACQUISITION COMMITTEE AND ACQUISITION COMMITTEE MANDATE
The Corporation may, from time to time, purchase assets from parties related to the Corporation, and in
particular, assets or shares owned or controlled by management of the Corporation or Access Self Storage
Inc. (Access) or any of its subsidiaries or affiliates. To govern such potential related party transactions the
Corporation has established an Acquisition Committee and an Acquisition Committee Mandate.
The Acquisition Committee is comprised of nine voting members, seven members being independently
appointed and independent of management and two of which are appointed by Access. Acquisition
Committee members who are deemed to be in a conflict of interest position with respect to related party
transactions are required to abstain from voting on such related party transactions.
The mandate of the Corporation’s Acquisition Committee is to review, evaluate, and approve the terms of
proposed acquisitions in the context of the current strategic direction of the Corporation. In particular,
and with respect to all related party transactions, the Acquisition Committee has the authority to appoint
appraisers, environmental consultants, and professional advisors to evaluate and report to the
Acquisition Committee on the suitability of such transactions. Thereafter, the Acquisition Committee
provides its recommendation as to whether the Board of Directors should approve an acquisition.
The Board of Directors of the Corporation must accept the recommendations that the Acquisition
Committee makes with respect to any related party transaction, and in particular, an acquisition
involving assets or shares of Access or any of its subsidiaries or affiliates.
ACCOUNTING POLICIES
The Corporation’s significant accounting policies are summarized in Note 3 to the December 31, 2016
annual audited consolidated financial statements. There has been no change in significant accounting
policies from the Corporation’s audited consolidated annual financial statements from December 31,
2015. In addition, there has been no change in the Company’s financial instrument risks.
Non-IFRS Financial Measures
Management uses both IFRS and Non-IFRS Measures to assess the Corporation’s operating performance.
In this MD&A, management uses the following terms and ratios which do not have a standardized
meaning under IFRS and are unlikely to be comparable to similar measures presented by other
companies:
ii.
Funds from Operations (“FFO”) – FFO is defined as net income (loss) excluding gains or losses
from the sale of depreciable real estate, plus depreciation and amortization, stock based
compensation expenses, and deferred income taxes; and after adjustments for equity accounted
entities and non-controlling interests. FFO should not be viewed as an alternative to cash from
operating activities, net income, or other measures calculated in accordance with IFRS. The
Corporation believes that FFO can be a beneficial measure, when combined with primary IFRS
measures, to assist in the evaluation of the Corporation’s ability to generate cash and evaluate its
return on investments as it excludes the effects of real estate amortization and gains and losses
from the sale of real estate, all of which are based on historical cost accounting and which may be
of limited significance in evaluating current performance.
iii.
Existing Self Storage and New Self Storage performance – “Existing Self Storage” are defined as
those that the Corporation has owned or leased for the entirety of the 2016 and 2015 fiscal years.
“New Self Storage” are those that have not been owned or leased continuously since the
beginning of the previous fiscal year. We believe the use of this metric combined with primary
IFRS measures is beneficial in understanding the full operating performance of our operations
during a growth period. Comparative figures for the New Self Storage and Existing Self Storage
categories may differ from amounts reported in previous MD&A reports.
Recent and Future Accounting Pronouncements
The IASB and the International Financial Reporting Interpretations Committee have issued a number of
new or revised standards or interpretations that will become effective for future periods and have a
potential implication for the Corporation. There have been no pronouncements in addition to those
disclosed in the December 31, 2016 annual audited consolidated financial statements.
Disclosure Controls and Procedures
Pursuant to National Instrument 52-109, which requires certification of disclosure in an issuer’s annual
and interim filings, the Chief Executive Officer and the Chief Financial Officer have evaluated the
effectiveness of the Corporation’s internal disclosure controls and procedures for the three months and
fiscal year ended December 31, 2016, including the design of internal controls over financial reporting, to
provide reasonable assurance regarding the reliability of financial reporting in accordance with IFRS.
These officers have concluded that the Corporation’s disclosure controls and procedures are designed
effectively to ensure that information required to be disclosed in reports that are filed or submitted under
Canadian securities legislation are recorded, processed and reported within the time specified in those
rules.
There have been no changes in the Corporation’s internal controls over financial reporting that have
materially affected or are reasonably likely to affect the Coproration’s internal controls over financial
reporting for the three months and fiscal year ended December 31, 2016.
78
2016 Annual Report
- 22 -
- 23 -
Key management personnel are those persons having authority and responsibility for planning, directing
and controlling the activities of the Corporation, directly and indirectly, and include directors. The
remuneration of key management personnel for employment services rendered are as follows:
Wages, management fees, bonuses and directors fees
Stock based compensation
December 31, 2016
December 31, 2015
135,608
1,013,021
1,148,629
256,273
406,292
662,565
ACQUISITION COMMITTEE AND ACQUISITION COMMITTEE MANDATE
The Corporation may, from time to time, purchase assets from parties related to the Corporation, and in
particular, assets or shares owned or controlled by management of the Corporation or Access Self Storage
Inc. (Access) or any of its subsidiaries or affiliates. To govern such potential related party transactions the
Corporation has established an Acquisition Committee and an Acquisition Committee Mandate.
The Acquisition Committee is comprised of nine voting members, seven members being independently
appointed and independent of management and two of which are appointed by Access. Acquisition
Committee members who are deemed to be in a conflict of interest position with respect to related party
transactions are required to abstain from voting on such related party transactions.
The mandate of the Corporation’s Acquisition Committee is to review, evaluate, and approve the terms of
proposed acquisitions in the context of the current strategic direction of the Corporation. In particular,
and with respect to all related party transactions, the Acquisition Committee has the authority to appoint
appraisers, environmental consultants, and professional advisors to evaluate and report to the
Acquisition Committee on the suitability of such transactions. Thereafter, the Acquisition Committee
provides its recommendation as to whether the Board of Directors should approve an acquisition.
The Board of Directors of the Corporation must accept the recommendations that the Acquisition
Committee makes with respect to any related party transaction, and in particular, an acquisition
involving assets or shares of Access or any of its subsidiaries or affiliates.
ACCOUNTING POLICIES
The Corporation’s significant accounting policies are summarized in Note 3 to the December 31, 2016
annual audited consolidated financial statements. There has been no change in significant accounting
policies from the Corporation’s audited consolidated annual financial statements from December 31,
2015. In addition, there has been no change in the Company’s financial instrument risks.
Non-IFRS Financial Measures
Management uses both IFRS and Non-IFRS Measures to assess the Corporation’s operating performance.
In this MD&A, management uses the following terms and ratios which do not have a standardized
meaning under IFRS and are unlikely to be comparable to similar measures presented by other
companies:
i.
ii.
iii.
Net Operating Income (“NOI”) – NOI is defined as storage and related services less operating
costs. NOI does not include interest expense or income, depreciation and amortization, selling,
general and administrative costs, acquisition and integration costs, stock based compensation
costs or taxes. NOI assists management in assessing profitability and valuation from principal
business activities.
Funds from Operations (“FFO”) – FFO is defined as net income (loss) excluding gains or losses
from the sale of depreciable real estate, plus depreciation and amortization, stock based
compensation expenses, and deferred income taxes; and after adjustments for equity accounted
entities and non-controlling interests. FFO should not be viewed as an alternative to cash from
operating activities, net income, or other measures calculated in accordance with IFRS. The
Corporation believes that FFO can be a beneficial measure, when combined with primary IFRS
measures, to assist in the evaluation of the Corporation’s ability to generate cash and evaluate its
return on investments as it excludes the effects of real estate amortization and gains and losses
from the sale of real estate, all of which are based on historical cost accounting and which may be
of limited significance in evaluating current performance.
Existing Self Storage and New Self Storage performance – “Existing Self Storage” are defined as
those that the Corporation has owned or leased for the entirety of the 2016 and 2015 fiscal years.
“New Self Storage” are those that have not been owned or leased continuously since the
beginning of the previous fiscal year. We believe the use of this metric combined with primary
IFRS measures is beneficial in understanding the full operating performance of our operations
during a growth period. Comparative figures for the New Self Storage and Existing Self Storage
categories may differ from amounts reported in previous MD&A reports.
Recent and Future Accounting Pronouncements
The IASB and the International Financial Reporting Interpretations Committee have issued a number of
new or revised standards or interpretations that will become effective for future periods and have a
potential implication for the Corporation. There have been no pronouncements in addition to those
disclosed in the December 31, 2016 annual audited consolidated financial statements.
Disclosure Controls and Procedures
Pursuant to National Instrument 52-109, which requires certification of disclosure in an issuer’s annual
and interim filings, the Chief Executive Officer and the Chief Financial Officer have evaluated the
effectiveness of the Corporation’s internal disclosure controls and procedures for the three months and
fiscal year ended December 31, 2016, including the design of internal controls over financial reporting, to
provide reasonable assurance regarding the reliability of financial reporting in accordance with IFRS.
These officers have concluded that the Corporation’s disclosure controls and procedures are designed
effectively to ensure that information required to be disclosed in reports that are filed or submitted under
Canadian securities legislation are recorded, processed and reported within the time specified in those
rules.
There have been no changes in the Corporation’s internal controls over financial reporting that have
materially affected or are reasonably likely to affect the Coproration’s internal controls over financial
reporting for the three months and fiscal year ended December 31, 2016.
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2016 Annual Report
79
RISKS AND UNCERTAINTIES
Credit Risk
As our primary business consists of owning and operating storage real estate, we are exposed to risks
related to such ownership and operations that can adversely impact our business and financial position.
The following is a brief review of some of the potential risks and the potential impacts these risks and
uncertainties may have on the operations of the Corporation:
Real Estate Industry
Real estate investments are subject to varying degrees of risk depending on the nature of each property.
Such investments are affected by general economic conditions, local real estate markets, supply and
demand for rental space, competition from others with similar developments, the perceived
“attractiveness” of a given property and various other factors.
Liquidity Risk
Liquidity risk is the risk that the Corporation will be unable to meet its financial obligations as they fall
due. The Corporation manages liquidity risk through cash flow forecasting and regular monitoring of
cash requirements including anticipated investing and financing activities. Typically the Corporation
ensures that it has sufficient cash or liquid investments available to meet expected operating expenses for
a period of 30 days, excluding the potential impact of extreme circumstances that cannot reasonably be
predicted, such as natural disasters. For the foreseeable future, the Corporation anticipates that cash
flows from operations, working capital, and other sources of financing will be sufficient to meet its
operating requirements, debt repayment obligations and will provide sufficient funding for anticipated
capital expenditures.
Refinancing Risk
There is no certainty that financing will be available upon the maturity of any existing mortgage at terms
that are as favorable as the expiring mortgage, or at all. If the Corporation is unable to refinance an
existing indebtedness on favorable terms, the Corporation may need to dispose of one or more properties
on disadvantageous terms. Prevailing interest rates, limited availability of credit or other factors at the
time of refinancing could increase interest expense and ultimately decrease the return to investors.
Economic Conditions
Even though storage is less susceptible to changes in the local economy, as storage space is often needed
during times of both growth and recession, downturns in a local economy could negatively affect our
revenues and NOI. A significant portion of storage customers use storage during periods of moving from
one residence to another or when a residence is being renovated. In times of economic downturn, the
level of activity in housing sales and housing renovation could decrease, thereby decreasing storage
rental demand.
Environmental Risk
Environmental risk is inherent in the ownership of property. Various municipal, provincial and federal
regulations can result in penalties or potential liability for remediation, to the extent that hazardous
materials enter the environment. The presence of hazardous substances could also impair the
Corporation’s ability to finance or sell the property, and might expose the Corporation to civil law suits.
To mitigate such risk, the Corporation procures recent or updated environmental reports for all
acquisitions to ascertain the risk, if any, that exist at a property. It also prohibits the storage of hazardous
substances as a condition of the rental contract signed by customers.
Credit risk arises from the possibility that customers may experience financial difficulty and be unable to
fulfill their financial obligations to the Corporation. The risk of incurring bad debts often arises if storage
customers relocate and cannot be found to enforce payment, or if storage customers abandon their
possessions. The extent of bad debts can be mitigated by quickly following up on any unpaid amounts
shortly after the due date, enforcing late fees, denying access to any customers with delinquent accounts,
and ultimately seizing the possessions of the customer. Additionally the Corporation typically rents to
numerous customers, each of which constitutes significantly less than 5% of the Corporation’s monthly
revenue. This diversification in the customer base reduces credit risk from any given customer.
Other Self Storage Operators or Storage Alternatives
The Corporation competes with other individuals, corporations and institutions which currently own, or
are anticipating owning a similar property in a given region. Competitive forces could have a negative
effect on occupancy levels, rental rates or operating costs such as marketing.
Acquisition of Future Locations
Competition also exists when the Corporation attempts to grow through acquisitions of storage locations.
An increase in the availability of investment funds in the general market, and a subsequent increase in
demand for storage locations would have a tendency to increase the price for future acquisitions of
storage locations and reduce the yields thereon.
Anticipated Results from New Acquisitions
The realization of anticipated results and value from acquisitions can be jeopardized from unexpected
circumstances in integrating new stores into our existing operations, from situations we did not detect
during our due diligence or from increased property tax following reassessment of newly acquired
locations.
Increase in Operating Costs
prices.
Q1 and Q4.
Our operating margins can be negatively impacted from increases in operating costs such as property tax,
staffing costs, insurance premiums, repairs and maintenances costs, utility costs and others due to
various factors such as the need for governments to raise funds, natural disasters, commodity and energy
Climate and Natural Disasters
The storage industry in Canada can be cyclical. Due to the climate, demand for storage is generally
weaker in winter months with an increase in operating costs resulting in potentially lower NOI during
Natural disasters, such as floods, earthquakes or severe winter storms may result in damage and business
interruption losses that are greater than the aggregate limits of our insurance coverage. We maintain a
comprehensive insurance policy to cover such events, however some insurance coverage may be or
become unavailable or cost prohibitive.
Litigation
Legal claims may arise from the ordinary course of our business. Resolution of these claims would divert
resources from the Corporation such cash to pay expenses and damages and the diversion of
management’s time and attention from the Corporation’s business. The impact and results from
litigation cannot be predicted with certainty and can have a material adverse effect on the business.
80
2016 Annual Report
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RISKS AND UNCERTAINTIES
As our primary business consists of owning and operating storage real estate, we are exposed to risks
related to such ownership and operations that can adversely impact our business and financial position.
The following is a brief review of some of the potential risks and the potential impacts these risks and
uncertainties may have on the operations of the Corporation:
Real Estate Industry
Real estate investments are subject to varying degrees of risk depending on the nature of each property.
Such investments are affected by general economic conditions, local real estate markets, supply and
demand for rental space, competition from others with similar developments, the perceived
“attractiveness” of a given property and various other factors.
Liquidity Risk
Liquidity risk is the risk that the Corporation will be unable to meet its financial obligations as they fall
due. The Corporation manages liquidity risk through cash flow forecasting and regular monitoring of
cash requirements including anticipated investing and financing activities. Typically the Corporation
ensures that it has sufficient cash or liquid investments available to meet expected operating expenses for
a period of 30 days, excluding the potential impact of extreme circumstances that cannot reasonably be
predicted, such as natural disasters. For the foreseeable future, the Corporation anticipates that cash
flows from operations, working capital, and other sources of financing will be sufficient to meet its
operating requirements, debt repayment obligations and will provide sufficient funding for anticipated
capital expenditures.
Refinancing Risk
There is no certainty that financing will be available upon the maturity of any existing mortgage at terms
that are as favorable as the expiring mortgage, or at all. If the Corporation is unable to refinance an
existing indebtedness on favorable terms, the Corporation may need to dispose of one or more properties
on disadvantageous terms. Prevailing interest rates, limited availability of credit or other factors at the
time of refinancing could increase interest expense and ultimately decrease the return to investors.
Economic Conditions
Even though storage is less susceptible to changes in the local economy, as storage space is often needed
during times of both growth and recession, downturns in a local economy could negatively affect our
revenues and NOI. A significant portion of storage customers use storage during periods of moving from
one residence to another or when a residence is being renovated. In times of economic downturn, the
level of activity in housing sales and housing renovation could decrease, thereby decreasing storage
rental demand.
Environmental Risk
Environmental risk is inherent in the ownership of property. Various municipal, provincial and federal
regulations can result in penalties or potential liability for remediation, to the extent that hazardous
materials enter the environment. The presence of hazardous substances could also impair the
Corporation’s ability to finance or sell the property, and might expose the Corporation to civil law suits.
To mitigate such risk, the Corporation procures recent or updated environmental reports for all
acquisitions to ascertain the risk, if any, that exist at a property. It also prohibits the storage of hazardous
substances as a condition of the rental contract signed by customers.
Credit Risk
Credit risk arises from the possibility that customers may experience financial difficulty and be unable to
fulfill their financial obligations to the Corporation. The risk of incurring bad debts often arises if storage
customers relocate and cannot be found to enforce payment, or if storage customers abandon their
possessions. The extent of bad debts can be mitigated by quickly following up on any unpaid amounts
shortly after the due date, enforcing late fees, denying access to any customers with delinquent accounts,
and ultimately seizing the possessions of the customer. Additionally the Corporation typically rents to
numerous customers, each of which constitutes significantly less than 5% of the Corporation’s monthly
revenue. This diversification in the customer base reduces credit risk from any given customer.
Other Self Storage Operators or Storage Alternatives
The Corporation competes with other individuals, corporations and institutions which currently own, or
are anticipating owning a similar property in a given region. Competitive forces could have a negative
effect on occupancy levels, rental rates or operating costs such as marketing.
Acquisition of Future Locations
Competition also exists when the Corporation attempts to grow through acquisitions of storage locations.
An increase in the availability of investment funds in the general market, and a subsequent increase in
demand for storage locations would have a tendency to increase the price for future acquisitions of
storage locations and reduce the yields thereon.
Anticipated Results from New Acquisitions
The realization of anticipated results and value from acquisitions can be jeopardized from unexpected
circumstances in integrating new stores into our existing operations, from situations we did not detect
during our due diligence or from increased property tax following reassessment of newly acquired
locations.
Increase in Operating Costs
Our operating margins can be negatively impacted from increases in operating costs such as property tax,
staffing costs, insurance premiums, repairs and maintenances costs, utility costs and others due to
various factors such as the need for governments to raise funds, natural disasters, commodity and energy
prices.
Climate and Natural Disasters
The storage industry in Canada can be cyclical. Due to the climate, demand for storage is generally
weaker in winter months with an increase in operating costs resulting in potentially lower NOI during
Q1 and Q4.
Natural disasters, such as floods, earthquakes or severe winter storms may result in damage and business
interruption losses that are greater than the aggregate limits of our insurance coverage. We maintain a
comprehensive insurance policy to cover such events, however some insurance coverage may be or
become unavailable or cost prohibitive.
Litigation
Legal claims may arise from the ordinary course of our business. Resolution of these claims would divert
resources from the Corporation such cash to pay expenses and damages and the diversion of
management’s time and attention from the Corporation’s business. The impact and results from
litigation cannot be predicted with certainty and can have a material adverse effect on the business.
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2016 Annual Report
81
Use and Dependency on Information Technology Systems
Our business is heavily dependent on the use of information technology, with the majority of our new
customers communicating and transacting with us electronically or over the phone. Commerce over the
internet and the nature of our business requires us to retain private information about our customers.
Significant aspects of these systems are centrally managed, such as our financial information and some
are managed by third party vendors. These systems may be subject to telecommunication failures,
cyber-attack, computer worms and viruses and other disruptive security breaches. All of which could
materially impact our operations, resulting in additional costs and or in legal action either by
governments agencies or private individuals.
StorageVault Canada Inc.
OFFICERS
Steven Scott
Chief Executive Officer
Iqbal Khan
Chief Financial Officer
DIRECTORS
Steven Scott
Toronto, ON
Iqbal Khan
Toronto, ON
Rob Duguid
Regina, SK
Alan Simpson
Regina, SK
Blair Tamblyn
Toronto, ON
LEGAL COUNSEL
DLA Piper (Canada LLP)
Livingston Place
1000 – 250 2nd St S.W.
Calgary, AB T2P 0C1
Telephone 403-296-4470
Facsimile 403-296-4474
AUDITORS
MNP LLP
Royal Bank Building
Suite 900, 2010 – 11th Avenue
Regina, SK S4P 0J3
Telephone 306-790-7900
Facsimile 306-790-7990
HEAD OFFICE
REGISTRAR & TRANSFER AGENT
StorageVault Canada Inc.
100 Canadian Rd
Toronto, ON M1R 4Z5
Telephone 1-877-622-0205
Email: ir@storagevaultcanada.com
TMX Equity Transfer Services
300-5th Avenue S.W., 10th Floor
Calgary, AB T2P 3C4
Telephone 403-218-2800
Facsimile 403-265-0232
TSX VENTURE EXCHANGE LISTING
SVI
82
2016 Annual Report
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Use and Dependency on Information Technology Systems
Our business is heavily dependent on the use of information technology, with the majority of our new
customers communicating and transacting with us electronically or over the phone. Commerce over the
internet and the nature of our business requires us to retain private information about our customers.
Significant aspects of these systems are centrally managed, such as our financial information and some
are managed by third party vendors. These systems may be subject to telecommunication failures,
cyber-attack, computer worms and viruses and other disruptive security breaches. All of which could
materially impact our operations, resulting in additional costs and or in legal action either by
governments agencies or private individuals.
StorageVault Canada Inc.
OFFICERS
Steven Scott
Chief Executive Officer
Iqbal Khan
Chief Financial Officer
DIRECTORS
Steven Scott
Toronto, ON
Iqbal Khan
Toronto, ON
Rob Duguid
Regina, SK
Alan Simpson
Regina, SK
Blair Tamblyn
Toronto, ON
LEGAL COUNSEL
AUDITORS
DLA Piper (Canada LLP)
Livingston Place
1000 – 250 2nd St S.W.
Calgary, AB T2P 0C1
Telephone 403-296-4470
Facsimile 403-296-4474
MNP LLP
Royal Bank Building
Suite 900, 2010 – 11th Avenue
Regina, SK S4P 0J3
Telephone 306-790-7900
Facsimile 306-790-7990
HEAD OFFICE
REGISTRAR & TRANSFER AGENT
StorageVault Canada Inc.
100 Canadian Rd
Toronto, ON M1R 4Z5
Telephone 1-877-622-0205
Email: ir@storagevaultcanada.com
TMX Equity Transfer Services
300-5th Avenue S.W., 10th Floor
Calgary, AB T2P 3C4
Telephone 403-218-2800
Facsimile 403-265-0232
TSX VENTURE EXCHANGE LISTING
SVI
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2016 Annual Report
83
Corporate information
Phone: 1-877-622-0205
Website: storagevaultcanada.com
Email: ir@storagevaultcanada.com
Address: 100 Canadian Road,
Scarborough , Ontario, M1R 4Z5