2017 ANNUAL REPORT
TABLE
of Contents
Financial Highlights
Letter to the Shareholders
Our Stores
Board of Directors
Financial Statements
Management Discussion and Analysis
3
4
6
7
8
53
Corporate Information
Phone: 1-877-622-0205
Web site: storagevaultcanada.com
Email: ir@storagevaultcanada.com
Address: 100 Canadian Road, Toronto, Ontario, M1R 4Z5
2
Annual report FINANCIAL
Highlights
ASSET OVERVIEW - GROWTH
10 STORES
Q4/2014
14 STORES*
29 STORES
49 STORES
90 STORES
Q2/2015
*New Management
Q4/2015
Q4/2016
Q4/2017
REVENUE
NOI
AFFO
122%
138%
129%
83%
SHARE PRICE
INCREASE YOY
3.0
2.0
1.0
$0
2015
2016
2017
2018
STORAGEVAULT WAS
RECOGNIZED AS A TSX
VENTURE 50TM COMPANY
IN 2018 FOR 2ND YEAR
TSX Venture 50 is a trademark of TSX Inc. and is used under license.
3
Annual report WE GREW TO OVER
5.0 MILLION SQFT OF
RENTABLE SPACE IN
46,000 STORAGE UNITS
$485M IN ACQUISITIONS
DURING 2017
LETTER
to our Shareholders
Dear Fellow Shareholders,
We achieved a number of important milestones in 2017.
Even though the market for acquisitions has tightened, we
Revenues exceeded $60 million, net operating income
were able to acquire $485 million of assets (42 stores) in
increased to over $40 million and AFFO grew to $21 million, all
2017, widely eclipsing our projection of $50 to $90 million
more than double 2016 results. Net operating income grew
in acquisitions. We now own 90 stores and manage an
by over $23 million, with same store net operating income
additional 58 stores, for a total of 148 stores across Canada,
growing by 10.1%, which was well in excess of our 2017 target
more than double the size of the country’s next largest
of 4 to 6 % growth.
competitor.
4
Annual report While we are pleased with our 2017 share price performance,
us to acquire assets at good value and realize upside through
an increase of 83%, our focus remains on increasing free cash
our operating platform. We expect to continue to take
flow and long term wealth creation. We are also proud to
advantage of these opportunities as they present themselves
be recognized as one of the Top 50 performers on the TSX
going forward.
Venture Exchange for the second year in a row.
Over the past 3 year years, we have exceeded our 10 year
putting us in position to achieve our goal of $70 to $90
plan. This has been achieved through a combination of over
million in acquisitions in 2018. Operationally, we are off to a
10% annual organic growth and closing over $800 million of
solid start, building on last year’s successes.
We have acquired $20 million in assets already in 2018,
accretive acquisitions.
We have built a best in class portfolio and platform with an
with a continued focus on increasing cash flows on a per
enterprise value well in excess of $1 billion.
share basis and creating sustainable long term growth.
We are committed to being the leader in storage in Canada
We continue to find opportunities despite a competitive
Sincerely,
market due to our advantages of size, industry relationships
and our operating platform. These advantages have allowed
Steven Scott
Chief Executive Officer$___MILLION
REVENUE GROWTH OF
122% TO $61.9 MILLION
FROM $27.8 MILLION
NOI GROWTH OF
138% TO $40.6 MILLION
FROM $17.0 MILLION
ACQUIRED 24 STORES
WITH SENTINEL
PORTFOLIO ACQUISITION
EXPECTING $70 TO $90 MILLION IN
ACQUISITIONS FOR 2018
50,000 SQFT OF EXISTING STORE
EXPANSION EXPECTED TO COME ONLINE
IN 2018
5
Annual report 148 STORES
(OWNED AND MANAGED)
17
30
8
7
55
27
4
OUR BRANDS
6
Annual report Our Board Members
MEET OUR
BOARD
MEMBERS
STEVEN SCOTT
Director
CEO
Mr. Simpson is a co-founder
and former president and CEO
of StorageVault Canada, and
currently serves as Executive
Vice Chairman of the Board.
He was vital in transitioning
StorageVault to a publically
traded company on the TSX
Venture Exchange.
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
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
Partner in PFM Capital entities;
Mr. Duguid holds the positions
of Vice President, Investments
and Chief Financial Officer
for the general partner of
Prairie Ventures Fund Limited
Partnership.
ROB DUGUID
Director
BLAIR TAMBLYN
Director
Managing Director, CEO and
Co-Founder of Timbercreek
Asset Management. Chairman
of the Board for Timbercreek
Mortgage Investment
Corporation and Timbercreek
Senior Mortgage Investment
Corporation.
We are committed to
being the leader in
storage in Canada with
a continued focus on
increasing cash flows
on a per share basis and
creating sustainable long
term growth.
7
Annual report StorageVault Canada Inc.
Consolidated Financial Statements
For the Years ended December 31, 2017 and 2016
8
Annual report
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, 2018
“signed” Steven Scott
Chief Executive Officer
“signed” Iqbal Khan _
Chief Financial Officer
9
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, 2017 and December 31, 2016, 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, 2017, December 31, 2016 and its financial performance and its cash flows for
the years then ended in accordance with International Financial Reporting Standards.
Calgary, Alberta
March 31, 2018
Chartered Professional Accountants
10
Annual report StorageVault Canada Inc.
Consolidated Statements of Financial Position
As at December 31
Assets
Real estate and equipment, net (Note 5)
Goodwill and intangible assets, net (Note 6)
Cash and short term deposits
Investment in Joint Venture (Note 14)
Prepaid expenses and other current assets
Accounts receivable
Liabilities and Shareholdersʹ Equity
Long term debt (Note 7)
Lines of credit (Note 7)
Deferred tax liability (Note 10)
Accounts payable and accrued liabilities
Unearned revenue
Shareholdersʹ Equity
Share capital (Note 8)
Dividends paid (Note 8)
Contributed surplus (Note 8)
Deficit
Commitments and Contingencies (Note 15)
Subsequent Events (Note 16)
2017
2016
$
780,024,751
72,060,892
16,152,428
14,635,305
8,710,680
3,912,325
$
325,491,723
3,425,090
11,869,892
‐
662,080
1,354,796
$
895,496,381
$
342,803,581
$
230,945,255
332,153,083
49,156,628
10,784,409
4,381,889
627,421,264
$
164,023,513
18,483,081
‐
3,406,008
1,202,785
187,115,387
319,571,781
(5,070,304)
3,540,210
(49,966,570)
268,075,117
185,768,388
(1,795,638)
2,243,239
(30,527,795)
155,688,194
$
895,496,381
$
342,803,581
Approved on behalf of the Board:
ʺsignedʺ Steven Scott
Director
ʺsignedʺ Iqbal Khan
Director
The accompanying notes are an integral part of these consolidated financial statements.
11
Annual report
2017
2016
$
185,768,388
134,303,177
(499,784)
319,571,781
$
66,867,412
118,973,026
(72,050)
185,768,388
$
2,243,239
(237,315)
1,534,286
3,540,210
$
1,034,865
‐
1,208,374
2,243,239
$
(30,527,795)
(5,586,143)
(13,852,632)
(49,966,570)
$
(9,338,359)
‐
(21,189,436)
(30,527,795)
$
$
StorageVault Canada Inc.
Consolidated Statements of Changes in Equity
For the Years Ended December 31
Common Share Capital
Balance, beginning of the period
Common shares issued, net of issuance costs (Note 8)
Common shares repurchased (Note 8)
Balance, end of the period
Contributed Surplus
Balance, beginning of the period
Retirement of stock options and warrants (Note 8)
Stock based compensation (Note 8)
Balance, end of the period
Deficit
Balance, beginning of the period
Retirement of stock options and warrants
Net income (loss) and Comprehensive income (loss)
Balance, end of the period
The accompanying notes are an integral part of these consolidated financial statements.
12
Annual report
StorageVault Canada Inc.
Consolidated Statements of Income (Loss) & Comprehensive Income (Loss)
For the Years Ended December 31
Revenue
Storage and related services
Management fees
Expenses
Operating costs
Acquisition and integration costs
Selling, general and administrative
Stock based compensation (Note 8)
Share of loss in joint venture (Note 14)
Depreciation, amortization and goodwill
Interest
2017
2016
$
60,671,031
1,217,483
61,888,514
$
27,824,544
‐
27,824,544
21,294,478
5,373,955
4,038,559
1,534,286
157,278
38,608,471
15,639,157
86,646,184
10,800,018
1,928,429
2,240,692
1,208,374
‐
27,328,122
5,508,345
49,013,980
Net income (loss) and Comprehensive income (loss) before tax
Deferred tax recovery (Note 10)
$
(24,757,670)
10,905,038
$
(21,189,436)
‐
Net income (loss) and Comprehensive income (loss) after tax
$
(13,852,632)
$
(21,189,436)
Net income (loss) per common share
Basic
Diluted
Weighted average number of common shares outstanding
Basic
Diluted
$
$
(0.044)
(0.044)
$
$
(0.104)
(0.104)
317,487,007
317,487,007
204,660,864
204,660,864
The accompanying notes are an integral part of these consolidated financial statements.
13
Annual report
StorageVault Canada Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31
Cash provided by (used for) the following activities:
Operating activities
Net income (loss) and comprehensive income (loss) after tax
Adjustment for non‐cash items:
Deferred tax recovery (Notes 10)
Depreciation, amortization and goodwill adjustment (Notes 5, 6)
Amortization of deferred financing costs
Amortization of bond premiums
Stock based compensation (Note 8)
Gain on disposal of real estate 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 8)
Repurchase of common shares (Note 8)
Dividends paid
Advances from long term debt and lines of credit
Repayment of long term debt and lines of credit
Cancellation of share options and warrants
Investing activities
Cash paid in business combinations (Note 4)
Additions to real estate and equipment (Note 5, 6)
Non‐operating accounts receivable
Proceeds on disposal of real estate and equipment
Increase in cash and short term deposits
Cash and short term deposits balance, beginning of period
2017
2016
$
(13,852,632)
$
(21,189,436)
(10,905,038)
38,608,471
740,866
‐
1,534,286
(147,910)
15,978,043
(1,664,429)
(6,871,244)
3,066,967
91,461
10,600,798
‐
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
83,471,772
(499,785)
(2,394,337)
483,553,119
(103,702,241)
(5,823,458)
454,605,070
59,841,873
(72,050)
(743,342)
81,454,290
(10,736,723)
1,373,074
131,117,122
(457,532,033)
(5,185,319)
‐
1,794,020
(460,923,332)
(127,903,000)
(2,952,792)
(675,712)
319,475
(131,212,029)
4,282,536
9,488,502
11,869,892
2,381,390
Cash and short term deposits balance, end of period
$
16,152,428
$
11,869,892
The accompanying notes are an integral part of these consolidated financial statements.
14
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
1. Description of Business
The consolidated financial statements of StorageVault Canada Inc. and its subsidiary (the “Corporation”)
as at December 31, 2017 were authorized for issuance by the Board of Directors of the Corporation on
March 31, 2018. 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, 2017.
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., its wholly owned
subsidiary, Sentinel Self‐Storage Corporation, and the consolidated entity 1712066 Alberta
Ltd.(“1712066”), all of which are headquartered in Toronto, ON. The financial statements for the
consolidated entities 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.
The entity was dissolved on January 19, 2017.
15
Annual report StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 3 – Continued
Interest in Joint Venture
The Corporation has an interest in a joint venture, through its wholly owned subsidiary Sentinel Self‐
Storage Corporation, Spyhill Ltd. (“JV”), which is a jointly controlled entity. The Corporation recognizes
its interest in the JV using the equity method of accounting.
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. A 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. Upon 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
Corporationʹs 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 Corporationʹs 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.
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Annual report StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 3 – Continued
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
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:
‐
Real estate and equipment – The Corporation determines the carrying value of its real estate 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 Corporation 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.
‐
‐
‐
17
Annual report StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 3 – Continued
‐
‐
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.
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.
The Corporation applies judgment in determining control over the JV where the Corporation holds
50% equity ownership. The judgment is based on a review of all contractual agreements to determine
if the Corporation has control over the activities, projects, financial and operating policies of the JV.
Through a shareholder agreement, the Corporation is guaranteed 50% of seats on the board of the JV
and participates in all significant financial and operating decisions. Joint control is established by the
shareholder arrangement that requires unanimous agreement on decisions made on relevant
activities.
‐ Management has applied judgment in assessing that the management contracts acquired have an
indefinite useful life because the Corporation purchased a complete system to operationally manage
its own business and that of other self storage businesses. The Corporation has acquired substantial
know how and expertise in managing stores owned by third parties, including long term
relationships, which the Corporation will have the benefit of for an indefinite period of time. The
management contracts have therefore been deemed to have an indefinite useful life.
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.
Real Estate and Equipment
Real Estate 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
18
Annual report StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 3 – Continued
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.
Depreciation is calculated using the declining balance method to depreciate the cost of real estate and
equipment to their residual values over their estimated useful lives, as follows:
Land, Yards, Buildings & Improvements ‐
4%
Buildings
Leasehold improvements
20%
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 real estate 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 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.
Infinite life 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.
19
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 3 – Continued
Indefinite life intangible assets, consisting of management contracts, are carried at cost and are not
amortized.
Goodwill and indefinite life intangibles are reviewed for impairment annually by assessing the
recoverable amount of each CGU to which it relates, where applicable. 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.
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 real estate 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.
20
Annual report StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 3 – Continued
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
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.
21
Annual report StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 3 – Continued
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.
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.
22
Annual report StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 3 – Continued
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 the
consolidated statement of income (loss).
The Corporation currently has no assets which are designated as available‐for‐sale.
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 currently has no assets which are designated as held‐to‐maturity.
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.
23
Annual report StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 3 – Continued
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, ʺRevenue from contracts with customersʺ
On May 28, 2014 the IASB issued IFRS 15, ʺRevenue from contracts with customersʺ. 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 has completed its assessment of the impact of IFRS 15. The assessment indicates that the
revenue recognition for the Corporation will remain unchanged.
IFRS 9, ʺFinancial instrumentsʺ
On November 12, 2009, the IASB issued IFRS 9, ʺFinancial instrumentsʺ (ʺIFRS 9ʺ), which will replace IAS
39 ʺFinancial Instruments: Recognition and Measurementʺ (ʺIAS 39ʺ). 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 has completed its assessment of the impact of IFRS 9 on
its financial statements and is not expecting any reclassifications to occur during the transition to IFRS 9,
or thereafter. The Corporation will assess on a case by case basis, as needed, in the future. The
corporation will adopt this standard as of January 1, 2018.
IFRS 16, ʺLeasesʺ
On January 13, 2016, the IASB published a new standard, IFRS 16, ʺLeasesʺ. 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, ʺRevenue from
contracts with customersʺ. 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.
24
Annual report StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
4. Acquisitions
During the year ended December 31, 2017, 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 5 to
9. 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 21, 2017 the Corporation completed the acquisition of one self storage location for $7,400,000.
The acquisition was an armʹs length transaction. The purchase price was paid for by cash on hand.
A summary of the assets acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant Relationships
Net Assets Acquired
$
5,892,916
1,507,084
7,400,000
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
Interest
Net income (loss)
7,400,000
798,892
299,558
499,334
546,883
130,803
(178,352)
25
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 4 – Continued
Acquisition 2:
On March 31, 2017 the Corporation completed the acquisition of one self storage location for $2,800,000.
The acquisition was an armʹs 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 acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant Relationships
Goodwill
Net Assets Acquired
$
2,190,961
609,039
2,800,000
76,470
2,876,470
Consideration paid for the net assets acquired was obtained from the following:
Advances from long term debt
Issuance of common shares (147,058 shares)
Cash
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Amortization
Interest
Net income (loss)
1,539,488
326,470
1,010,512
2,876,470
237,388
100,678
136,710
241,452
32,938
$
(137,680)
26
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 4 – Continued
Acquisition 3:
On March 31, 2017 the Corporation completed the acquisition of five self storage locations for $22,000,000.
The acquisition was an armʹs 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
Goodw ill
Net Assets Acquired
$
18,809,012
3,190,988
22,000,000
1,920,000
23,920,000
Consideration paid for the net assets acquired w as obtained from the following:
Advances from long term debt
Issuance of common shares (2,666,667 shares)
Cash
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Amortization
Interest
Net income (loss)
12,969,242
5,920,000
5,030,758
23,920,000
1,563,179
727,870
835,309
1,482,342
465,652
$
(1,112,685)
27
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 4 – Continued
Acquisition 4:
On March 31, 2017 the Corporation completed an acquisition to internalize management of the
Corporation’s stores and acquired third party management contracts for over 55 stores for
$16,000,000. The acquisition was a non‐armʹs length transaction. The purchase price was paid for by the
issuance of common shares and a promissory note.
A summary of the assets acquired are as follows:
Management Contracts
Goodwill
Net Assets Acquired
$
16,000,000
3,364,706
19,364,706
Consideration paid for the net assets acquired was obtained from the following:
Issuance of common shares (6,470,588 shares)
Promissory note
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Net income (loss)
14,364,706
5,000,000
19,364,706
1,217,483
‐
$
1,217,483
The promissory note of $5,000,000 was repaid during the year.
28
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 4 – Continued
Acquisition 5:
On June 22, 2017 the Corporation completed the acquisition of one self storage location for
$8,000,000. The acquisition was an armʹs length transaction. The purchase price was paid for by cash on
hand.
A summary of the assets acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant Relationships
Net Assets Acquired
$
7,339,387
660,613
8,000,000
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
Interest
Net income (loss)
8,000,000
293,898
175,061
118,837
331,575
10,946
$
(223,684)
29
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 4 – Continued
Acquisition 6:
On July 31, 2017 the Corporation completed a share acquisition of Sentinel Self‐Storage Corporation
which included 24 self‐storage locations for a stated purchase price of $396,600,000 adjusted for working
capital and deferred tax assumed and inherent in the transaction, for a total consideration of $395,495,190.
The acquisition was an arm’s length transaction. The purchase was paid for by cash, issuance of shares,
credit line and mortgage financing.
A summary of the assets acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant Relationships
Investment in Joint Venture
Working capital adjustment
Deferred tax
Goodwill
Net Assets Acquired
$
370,806,259
29,944,436
12,058,338
412,809,033
(4,228,403)
(60,061,685)
46,976,245
395,495,190
Consideration paid for the net assets acquired was obtained from the following:
Cash advances from long term debt
Issuance of common shares (11,764,706 shares)
Additional payments
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Amortization
Interest
Net income (loss)
367,330,269
27,058,824
1,106,097
395,495,190
12,206,800
3,164,421
9,042,379
8,640,387
5,141,590
$
(4,739,598)
30
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 4 – Continued
Acquisition 7:
On August 11, 2017 the Corporation completed the acquisition of six self storage locations for
$34,225,000. The acquisition was a non‐armʹs length transaction. The purchase price was paid for by the
issuance of common shares, long term debt and cash on hand.
A summary of the assets acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant Relationships
Net Assets Acquired
$
29,664,911
4,560,089
34,225,000
Consideration paid for the net assets acquired was obtained from the following:
Advances from long term debt
Issuance of common shares (714,286 shares)
Cash
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Amortization
Interest
Net income (loss)
4,461,565
2,000,000
27,763,435
34,225,000
1,234,030
457,517
776,513
1,115,862
101,858
$
(441,207)
31
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 4 – Continued
Acquisition 8:
On August 31, 2017 the Corporation completed the acquisition of one self storage location for $ 8,600,000.
The acquisition was an armʹs length transaction paid for by the issuance of common shares and cash on
hand.
A summary of the assets acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant Relationships
Net Assets Acquired
$
7,740,405
859,595
8,600,000
Consideration paid for the net assets acquired was obtained from the following:
Issuance of common shares (200,000 shares)
Cash
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Amortization
Interest
Net income (loss)
500,000
8,100,000
8,600,000
302,364
121,871
180,493
253,132
131,132
$
(203,771)
32
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 4 – Continued
Acquisition 9:
On November 16, 2017 the Corporation completed the acquisition of one self storage location for
$5,825,000 (subjected to customary adjustments). The acquisition was an armʹs length transaction paid for
by the issuance of common shares and cash on hand.
A summary of the assets acquired are as follows:
Land, Yards, Buildings & Improvements
Tenant Relationships
Net Assets Acquired
$
4,934,052
890,948
5,825,000
Consideration paid for the net assets acquired was obtained from the following:
Issuance of common shares (394,191 shares)
Cash
Selected information for the acquisition, since its acquisition date:
Revenue
Operating costs
Amortization
Interest
Net income (loss)
950,000
4,875,000
5,825,000
63,728
32,532
31,196
45,575
‐
$
(14,379)
33
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
5. Real Estate and Equipment
Land, Yards,
Buildings &
Storage
Intangible
Tenant
Office &
Computer
Improvements
Containers
Relationships
Vehicles
Equipment
Total
COST
De ce mbe r 31, 2015
138,559,676
10,862,211
21,231,859
4,571,354
Additions
Disposals
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
Additions
Disposals
3,932,281
(1,687,946)
Busine ss acquisitions
447,252,899
364,712
‐
‐
De ce mbe r 31, 2017
743,997,212
12,703,190
(569,390)
19,376,266
40,038,735
‐
‐
42,222,792
82,261,527
420,813
(450,207)
795,087
166,698
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
385,443
(34,323)
502,883
5,185,319
(443)
(1,722,712)
‐
125,000
489,600,691
4,893,080
1,808,595
845,663,604
ACCUMULATED DEPRECIATION
De ce mbe r 31, 2015
De pre ciation
Disposals
De ce mbe r 31, 2016
De pre ciation
Disposals
5,178,496
7,175,565
(69,674)
12,284,387
21,912,620
(43,482)
2,944,204
697,484
(450,710)
3,190,978
2,404,405
6,711,976
(221,159)
8,895,222
928,054
14,778,113
‐
‐
1,795,626
920,348
(362,262)
2,353,712
738,781
(33,097)
235,530
149,895
12,558,261
15,655,268
(1,141)
(1,104,946)
384,284
249,303
27,108,583
38,606,871
(22)
(76,601)
De ce mbe r 31, 2017
34,153,525
4,119,032
23,673,335
3,059,396
633,565
65,638,853
NET BOOK VALUE
De ce mbe r 31, 2016
De ce mbe r 31, 2017
282,215,591
709,843,687
9,147,500
8,584,158
31,143,513
58,588,192
2,188,248
1,833,684
796,871
325,491,723
1,175,030
780,024,751
Included in Land, Yards, Buildings & Improvements is Land at a value of $245,377,231 (December 31,
2016 ‐ $89,613,407).
34
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
6. Goodwill and Intangible Assets
Other Intangible Assets
Management
Franchise
Website
Goodwill
Contracts
Agreements Development
Total
COST
Decembe r 31, 2015
Additions
Write down
Decembe r 31, 2016
Additions
Business acquisitions (Note 4)
Decembe r 31, 2017
3,423,490
11,670,454
(11,670,454)
3,423,490
‐
52,337,402
55,760,892
‐
‐
‐
‐
300,000
16,000,000
16,300,000
20,000
23,172
3,466,662
‐
‐
‐
‐
11,670,454
(11,670,454)
20,000
23,172
3,466,662
‐
‐
‐
‐
300,000
68,337,402
20,000
23,172
72,104,064
ACCUMULATED AMORTIZATION
Decembe r 31, 2015
Amortization
Decembe r 31, 2016
Amortization
Decembe r 31, 2017
NET BOOK VALUE
Decembe r 31, 2016
Decembe r 31, 2017
‐
‐
‐
‐
‐
3,423,490
‐
‐
‐
‐
‐
‐
55,760,892
16,300,000
16,000
2,400
18,400
1,600
20,000
23,172
‐
23,172
‐
23,172
39,172
2,400
41,572
1,600
43,172
1,600
‐
‐
‐
3,425,090
72,060,892
The goodwill of $52,337,402 recognized during the year ended December 31, 2017 relates to the
acquisitions completed during the year (see Note 4).
In the Corporation’s nine month interim financial statements, the Corporation incorrectly determined
that the goodwill impairment test was triggered at the acquisition dates and recorded a $12,420,000
impairment. The goodwill impairment test that was performed at the acquisition dates should have been
performed at the year end. The goodwill impairment originally taken was not as a result of IFRS as had
been previously stated. The impact of this reversal of the $12,420,000 goodwill impairment on the 2017
financial statements is to reinstate the previously recognized goodwill of $12,420,000 and reduce the
cumulative loss by $12,420,000 from what was previously recorded.
35
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 6 – Continued
As at December 31, 2017, the Corporation performed its annual impairment test on goodwill and its
indefinite‐life intangible assets. Goodwill is allocated to the group of CGU’s that benefited from the
synergies of the business combination on which the goodwill arose. The Corporation used the fair value
less costs of disposal method to determine the recoverable amount of the CGUs. Based on the
impairment test performed, the Corporation concluded that no impairment exists on its goodwill and
indefinite‐life intangible assets.
Information regarding each impairment test is as follows:
Manitoba and Saskatchewan group of CGU’s
‐
‐
The cash flow projection includes specific estimates based on the expected life of the properties,
with a growth rate of 2% which is consistent with management’s knowledge of the local market
and is lower than the CGU’s recent historical growth rate.
Cash flows were discounted at a pre‐tax rate of 6.73% based on management’s experience in this
geographic region.
Kamloops, BC group of CGU’s
‐
‐
The cash flow projection includes specific estimates based on the expected life of the properties,
with a growth rate of 4%. The Corporation has seven stores in the region and is able to disburse
costs and operate more efficiently.
Cash flows were discounted at a pre‐tax rate of 8.78% based on management’s experience in this
geographic region and the fact that the properties are on leased land.
London, ON group of CGU’s
‐
‐
The cash flow projection includes specific estimates based on the expected life of the property,
with a growth rate of 2% which is consistent with management’s knowledge of the local market.
Cash flows were discounted at a pre‐tax rate of 6.73% based on management’s experience in this
geographic region.
Sentinel Storage group of CGU’s
‐
‐
The cash flow projection includes specific estimates based on the expected life of the properties,
with a growth rate of 4%. Given the location of the stores in this portfolio, over 20 stores in major
markets and highly desirable locations in Canada, management believes that this growth rate is
sustainable.
Cash flows were discounted at a pre‐tax rate of 6.38% based on management’s experience and the
superior quality and location of these properties.
36
Annual report StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 6 – Continued
Portable Storage group of CGU’s
‐
‐
The cash flow projection includes specific estimates based on the expected life of storage
containers, with a growth rate of 7% based on management’s experience and the exclusive
marketing channels the Corporation has for this product type.
Cash flows were discounted at a pre‐tax rate of 6.89% based on management’s experience in
these markets.
Management Division group of CGU
‐
‐
The cash flow projection includes specific estimates for five years with a terminal growth rate of
4%, which management feels would be representative of the future indefinite cash flows from
this asset.
Cash flows were discounted at a pre‐tax rate of 20% based on what management deemed
appropriate for the nature of this type of revenue stream.
The most sensitive inputs to the value in use model used for these groups of CGU’s are the growth rate
and the discount rate:
‐ A 1% decrease in the growth rate would only result in an impairment of the Sentinel Storage
group of CGU’s of $14,427,448.
‐ A 1% decrease in the discount rate would only result in an impairment of the Sentinel Storage
group of CGU’s of $12,002,417.
Group of CGUʹs
Goodwill
Carrying Value
Re cove rable
Amount
Manitoba and Saskatche wan
Kamloops, BC
London, ON
Se ntine l Storage
Portable Storage
Manage me nt Division
2,621,716
76,470
142,807
30,450,978
8,928,408
2,280,789
34,373,217
11,553,794
4,049,697
46,976,225
415,765,343
456,747,448
2,578,968
3,364,706
13,241,924
16,000,000
21,390,000
20,042,610
55,760,892
486,667,442
548,156,767
37
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
7. Long Term Debt and Lines of Credit
December 31, 2017
Weighted
Average
Balance
Rate
Range
December 31, 2016
Weighted
Average
Balance
Rate
Range
Mortgages
Fixed/Variable
3.18% to 5.5%
4.21%
233,190,726
3.46% to 5.50% 4.09%
164,942,311
Maturity: March 2018 to March 2025
Maturity: October 2017 to January 2022
Deferred financing costs net of accretion
of $1,376,845 (December 31, 2016 ‐ $635,977)
(2,245,471)
230,945,255
Lines of Credit
(918,798)
164,023,513
Prime plus 1.00%
Prime plus 1.00%
Variable Rate or BA plus 2.75% 4.21%
332,153,083
or BA plus 2.75% 4.38%
18,483,081
Maturity: March 2018 to August 2020
Maturity: April 2017 to August 2020
563,098,338
182,506,594
The bank Prime rate at December 31, 2017 was 3.20% (December 31, 2016 ‐ 2.70%).
Mortgages are secured by a first mortgage charge on the real estate 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 debt service ratio, fixed
charge coverage ratio, a tangible net worth ratio, and a loan to value ratio. As of December 31, 2017 and
2016, the Corporation is in compliance with all covenants.
The deferred financing costs consist 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
$
$
$
$
$
$
341,601,721 (includes lines of credit)
18,528,294
44,305,118
8,181,180
22,455,273
130,272,223
38
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
8. 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, 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
Bought deal
Issued on asset acquisitions
Dividend reinvestment plan
Stock option redemption
Share issuance costs
Common shares repurchased
Balance, December 31, 2017
Number of Shares
Amount
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
32,076,000
22,520,098
529,268
526,000
‐
(234,100)
85,001,400
51,320,000
1,055,801
197,750
(3,271,774)
(499,784)
345,226,934
$
319,571,781
Bought Deal
On July 19, 2017, the Corporation issued 32,076,000 common shares at a price of $2.65 per common share
for gross proceeds of $85,001,400.
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 $57,500,460.
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 $5,499,999.
39
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 8 ‐ Continued
Dividend Reinvestment Plan
Represents common shares issued under the Corporation’s dividend reinvestment plan (“DRIPʺ) 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 ʺShareholdersʺ) 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 may be increased upon Board of Directors
approval, acceptance of the increase by the Exchange, and upon public disclosure of the increase.
Common Shares Repurchased
Represents common shares repurchased under the Corporation’s Normal Course Issuer Bid (ʺNCIBʺ)
policy allowing for the purchase for cancellation, during the 12‐month period starting August 18, 2017,
up to 17,198,962 of the common shares.
Contributed surplus:
December 31, 2017
December 31, 2016
Opening balance
Stock based compensation
Retirement of stock options and warrants
Ending balance
2,243,239
1,534,286
(237,315)
3,540,210
1,034,865
1,208,374
‐
2,243,239
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.
40
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 8 – Continued
The following table summarizes information about stock options outstanding and exercisable as at:
December 31, 2017
December 31, 2016
Options
Weighted Average
Exercise Price
Weighted Average
Exercise Price
Options
Opening
Exercised/Expired
Granted
Closing and Exercisable
11,501,000
(2,945,150)
3,000,000
11,555,850
$0.62
$0.29
$1.78
$1.01
8,561,000
(60,000)
3,000,000
11,501,000
$0.36
$0.40
$1.36
$0.62
The fair value of options granted in 2017 was estimated on the date of the grant, as determined by using
the Black‐Scholes option pricing model with the following assumptions:
Dividend Yield
Risk‐Free Interest Rate
Expected Life of Options
Expected Volatility of the Corporationʹs Common Shares
0.6%
1.1%
4 Years
37.1%
Stock options exercisable and outstanding are as follows:
Exercise Price
Vesting Date
Expiry Date
December 31, 2017
December 31, 2016
$0.20
$0.23
$0.33
$0.41
$0.50
$1.36
$1.78
May 5, 2007
May 6, 2009
June 19, 2014
April 28, 2015
Sept 14, 2015
Dec 21, 2016
Mar 16, 2017
Nov 5, 2017
May 6, 2019
June 19, 2024
April 28, 2025
Sept 14, 2025
Dec 21, 2026
Mar 15, 2027
‐
1,210,000
220,000
2,390,850
1,760,000
2,975,000
3,000,000
1,000,000
2,200,000
400,000
2,901,000
2,000,000
3,000,000
‐
Options exercisable and outstanding
11,555,850
11,501,000
Warrants exercisable and outstanding are as follows:
Exercise Price
Expiry Date
December 31, 2017
December 31, 2016
$0.35
$0.37
Feb 25, 2018
Feb 25, 2018
Warrants exercisable and outstanding
16,666
2,533,334
2,550,000
249,999
2,833,334
3,083,333
Dividends
A cash dividend of $0.00255 per share was declared on December 15, 2017 and payable to shareholders of
record on December 29, 2017.
41
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
9. 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, promissory note 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, 2017
As at December 31, 2016
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Financial Assets
Fair Value through Profit or Loss
Cash and short term deposits
16,152,428
16,152,428
11,869,892
11,869,892
Loans and Receivables
Accounts receivable
Financial Liabilities
Other Financial Liabilities
3,912,325
3,912,325
1,354,796
1,354,796
Accounts payable & accrued liabilities
10,784,409
10,784,409
3,406,008
3,406,008
Long term debt
563,098,338
561,867,534
182,506,594
182,600,607
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.
42
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 9 – 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, 2017
Assets
Level 1
Level 2
Level 3
Total
Cash and short term deposits
$16,152,428
At December 31, 2016
Assets
Cash and short term deposits
$11,869,892
‐
‐
‐
$16,152,428
$11,869,892
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 and lines of credit as
interest expense is impacted by changes in the prime rate and bankers’ acceptance 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, 2017 would be
approximately $4,215,097 (December 31, 2016 ‐ $661,276).
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.
43
Annual report StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 9 ‐ 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 (not impaired)
Over 90 days (impaired)
Allowance for doubtful accounts
Non‐Trade Receivables
Over 30 days aged (not impaired)
December 31, 2017
December 31, 2016
$ 2,835,508
$625,446
366,639
125,111
295,486
(298,178)
587,759
$3,912,325
46,625
‐
127,013
(120,000)
675,712
$1,354,796
Change in the Corporation’s allowance for doubtful accounts is as follows:
Balance December 31, 2015
Charges or adjustments during the year
Balance December 31, 2016
Charges or adjustments during the year
Balance December 31, 2017
$62,119
57,881
$120,000
178,178
$298,178
The creation and release of the allowance for doubtful accounts has been included in 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 7.
44
Annual report StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 9 – 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.
10. Income Taxes
The reconciliation of the Corporationʹs effective tax expense is as follows:
2017
2016
Loss before taxes
(24,757,670)
(21,189,436)
Combined federal and provincial statutory income tax rate
26.75%
27.00%
Income tax re cove ry calculate d at statutory rate
Non‐de ductible ite ms
Change in tax rate and othe r ite ms
Change in de fe rre d tax asse ts not re cognize d
(6,622,677)
(5,721,148)
(43,954)
3,480,508
(1,548,737)
‐
(2,689,670)
2,240,640
Income tax e xpe nse (re cove ry)
(10,905,038)
‐
Movements in deferred tax assets (liabilities) related to temporary differences during the year are as
follows:
De ce mbe r 31,
2016
Re cognize d on
acquisitions
(Note 4)
Re cognize d in
De ce mbe r 31,
e arnings
2017
Prope rty, plant and e quipme nt
(1,249,765)
(52,006,613)
(3,781,910)
(57,038,288)
Goodwill
Intangible asse ts
Long te rm de bt
Non‐capital loss carry forwards
(129,893)
(584,809)
(243,481)
‐
De fe rre d tax asse t not re cognise d
2,207,948
‐
(8,055,053)
‐
‐
‐
(230,171)
2,248,867
(357,445)
1,832,915
(360,064)
(6,390,995)
(600,926)
1,832,915
11,192,782
13,400,730
De fe rre d tax asse t (liabilitie s)
‐
(60,061,666)
10,905,038
(49,156,628)
45
Annual report StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
11. Related Party Transactions
During the year ended December 31, 2017, the Corporation paid total management fees of $293,321
(December 31, 2016 ‐ $819,666) to Access Results Management Services Inc. (“ARMS”), a corporation
controlled by Steven Scott and Iqbal Khan. Pursuant to a management agreement, ARMS is entitled to a
base management fee of $194,758 for fiscal 2017, 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.
On March 31, 2017, the Corporation purchased all management contracts from ARMS (see Note 4) and
therefore, the management agreement has ceased.
During the year ended December 31, 2017, the Corporation reimbursed operational wages of $1,545,892
(December 31, 2016 ‐ $4,736,700) and training, travel and related expenses of $16,804 (December 31, 2016 ‐
$319,895) to ARMS. These expenses, reimbursed at cost, were undertaken exclusively for the benefit of
the Corporation.
During the year ended December 31, 2017, the Corporation paid loan guarantee fees of $127,500
(December 31, 2016 ‐ $181,616) to Access Self Storage Inc., a large shareholder of the Corporation, related
to Steven Scott and Iqbal Khan. 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. A portion
of the loan guarantee payments ceased in August 2016, while the remainder ceased in September 2017.
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 Steven Scott and Iqbal Khan who
are directors of the Corporation. The Corporation pays a monthly royalty of 3.5% on the gross sales.
During the year ended December 31, 2017, the Corporation paid $216,710 (December 31, 2016 ‐ $182,022)
for royalties and $1,535,160 (December 31, 2016‐ $1,329,326) 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, 2017 was $33,808 (December 31, 2016 ‐ $13,797) payable to CPFI and $nil (December 31,
2016 ‐ $1,191,647) payable to ARMS.
On March 31, 2017 the Corporation completed an acquisition to internalize management of the
Corporation’s stores and acquired third party management contracts for over 55 stores for $16,000,000
from Access Results Management Services Inc., a corporation related to Steven Scott, Iqbal Khan, and
Access Self Storage Inc. (Note 4).
On August 11, 2017 the Corporation completed the acquisition of six self storage locations for $34,225,000
from Access Self Storage Inc., a corporation related to Steven Scott and Iqbal Khan (Note 4).
46
Annual report StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 11 – 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, 2017
December 31, 2016
129,800
1,293,914
1,423,714
135,608
1,013,021
1,148,629
12. 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 7, the Corporation is not subject to any externally
imposed capital requirements.
47
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
13. 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.
Management Division – involves revenues generated from the management of stores owned by third
parties.
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, 2017
Se lf
Portable
Manage me nt
Storage
Storage
Division
Corporate
Total
Re ve nue
$
54,653,224
$
6,017,807
$
1,217,483
$
Ope rating e xpe nse s
Ne t ope rating income
17,403,935
37,249,289
3,890,543
2,127,264
‐
1,217,483
Acquisition and inte gration
Se lling, ge ne ral & admin.
‐
‐
‐
‐
Inte re st e xpe nse
15,300,178
338,979
Stock base d compe nsation
‐
‐
De pre ciation, amortization
36,628,061
1,908,597
Share of loss in joint ve nture
157,278
De fe rre d tax re cove ry
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
5,373,955
4,038,559
$
61,888,514
21,294,478
40,594,036
5,373,955
4,038,559
‐
15,639,157
1,534,286
1,534,286
71,813
38,608,471
‐
157,278
(10,905,038)
(10,905,038)
Ne t income /(loss)
(14,836,228)
(120,312)
1,217,483
(113,575)
(13,852,632)
Additions:
Re al e state and e quipme nt
493,782,394
887,953
‐
115,663
494,786,010
48
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
Note 13 – Continued
For the Year Ended December 31, 2016
Se lf
Portable
Manage me nt
Storage
Storage
Division
Corporate
Total
Re ve nue
$
22,462,245
$
5,362,299
$
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
5,218,966
289,379
Stock base d compe nsation
‐
‐
De preciation, amortization
and goodwill adjustme nt
24,563,310
2,690,032
Share of loss in joint ve nture
‐
‐
Ne t income /(loss)
(14,764,383)
(972,778)
Additions:
Re al estate and e quipment
179,135,513
2,200,663
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
$
‐
‐
‐
$
27,824,544
10,800,018
17,024,526
1,928,429
2,240,692
‐
1,208,374
1,928,429
2,240,692
5,508,345
1,208,374
74,780
27,328,122
‐
‐
(5,452,275)
(21,189,436)
2,949
181,339,125
Total Assets
Se lf
Storage
Portable
Storage
Manage me nt
Division
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, 2017
$
837,350,008
$
24,770,062
$
19,353,316
$
14,022,995
$
895,496,381
49
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
14. Investment in Joint Venture
As at December 31, 2017 the Corporation has a 50% interest in a joint venture. The investment in the JV is
accounted for using the equity method in accordance with IAS 28.
Financial statements for the JV are as follows:
Assets
Liabilities
Total net assets
Proportion of ownership interest held by the Corporation
December 31, 2017
$
37,720,440
(8,449,831)
29,270,609
50%
Carrying amount of investment in joint venture
$
14,635,305
Revenues
Expenses
Operating costs
Interest
Depreciation and amortization
Total Expenses
Loss for the period
Proportion of ownership interest held by the Corporation
August 1, 2017 to
December 31, 2017
$
1,123,703
493,960
46,672
897,627
1,438,259
(314,556)
50%
Corporationʹs share of loss for the period
$
(157,278)
50
Annual report
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
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
$ 1,227,614
4,658,483
21,213,005
$ 27,099,102
During the year ended December 31, 2017, the Corporation recognized as an expense $1,101,757
(December 31, 2016 ‐ $441,251) in operating lease payments.
Bank Letter of Guarantee
The Corporation has various letters of guarantee in the amount of $474,691 which are due within one
year.
Contingency
The Corporation has no legal contingency provisions at either December 31, 2017 or December 31, 2016.
16. Subsequent Events
On February 1, 2018 the Corporation completed the acquisition of the remaining 50% interest in two
Calgary stores from its joint venture partner for $17.2 million.
On February 1, 2018 the Corporation completed the purchase of 400 portable storage units, equipment
and repurchased the license to operate our Cubeit brand in British Columbia for $2,290,000.
51
Annual report StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2017 and 2016
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
52
Annual report StorageVault Canada Inc.
(the “Corporation”)
Form 51-102F1
Management’s Discussion and Analysis
For Three Months Ended and Fiscal Year Ended December 31, 2017
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 and fiscal year ended December 31, 2017. This MD&A should
be read in conjunction with the audited fiscal 2017 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, 2018.
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 2018; the annualized net operating income (NOI), a non-IFRS
measure, and annualized funds from operations (FFO), a non-IFRS measure, assumes acquisitions that
occurred in Fiscal 2017 were purchased on January 1, 2017; 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
53
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
financing; 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 2017 being extrapolated to the entire period for 2017 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 2018 and revenue and NOI
growth for 2018 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.
54
Annual report TABLE OF CONTENTS
GLOSSARY OF TERMS
NATURE OF OUR BUSINESS
BUSINESS AND GENERAL CORPORATE STRATEGY
OUTLOOK
DESCRIPTION OF OUR OPERATIONS
FINANCIAL RESULTS OVERVIEW
WORKING CAPITAL, LONG TERM DEBT AND SHARE CAPITAL
CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
RELATED PARTY TRANSACTIONS
USE OF PROCEEDS FROM JULY 2017 BOUGHT DEAL FINANCING
ACQUISITION COMMITTEE AND ACQUISITION COMMITTEE MANDATE
ACCOUNTING POLICIES
RISKS AND UNCERTAINTIES
CORPORATE CONTACT INFORMATION
56
57
58
60
61
63
70
73
74
76
76
76
78
81
55
Annual report GLOSSARY OF TERMS
The following abbreviated terms are used in the Management Discussion & Analysis and have the
following respective meanings:
“AFFO” means FFO plus acquisition and integration costs. Acquisition and integration costs are one
time in nature to the specific assets purchased in the current period or pending and are expensed under
IFRS. AFFO is a non-IFRS measure – see Accounting Policies Non-IFRS Measures.
“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; Existing Self Storage is a non-IFRS measure – see Accounting Policies Non-IFRS
Measures.
“FFO” means net income (loss) excluding gains or losses from the sale of depreciable real estate, plus
depreciation, amortization and goodwill adjustment, 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; New Self Storage is a non-IFRS measure – see Accounting Policies Non-IFRS
Measures.
“NOI”, means net operating income, calculated as revenue from storage and related services less related
property operating costs; NOI is a non-IFRS measure – see Accounting Policies Non-IFRS Measures.
“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, 2018 to March 31,
2018.
“SVI” means StorageVault Canada Inc.;
“The Company” or “The Corporation” or “We” or “Our” means StorageVault Canada Inc;
56
Annual report 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 owns 90 stores and 3,586 portable storage units across Canada, for a total of 5,007,419 square feet of
rentable storage space and 46,377 rental units. The stores operate under the Access Storage, Depotium
Mini-Entrepots, Sentinel Storage and Storage For Your Life brands. Our portable storage business
operates under the Cubeit and PUPS brands.
In addition to the stores owned, SVI manages an additional 58 stores that are owned by third parties and
operated by us in exchange for a management fee, bringing the total number of operating stores which
we own and or manage to 148.
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 51,475 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.
57
Annual report 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
provides 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 a disciplined purchaser, 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.
58
Annual report The most significant evolution in the storage industry 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 800,000 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 and currently have 50,000 square feet under construction.
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.
59
Annual report OUTLOOK
The Corporation’s outlook for acquisitions, share capital, results from operations and subsequent events
are:
Acquisitions
In 2018 we expect to acquire $70 to $90 million of assets. In the past, we have been successful in meeting
or exceeding our acquisition targets; however, as there is more competition to acquire existing stores,
especially from foreign purchasers, we may not be able to 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 2018 resulting from the timing of
2017 and 2018 acquisitions and as we continue to streamline and integrate operations, implement our
revenue management systems and continue to control costs on the $663.8 million of assets purchased in
2016 and 2017.
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 or purchased by the Corporation:
• On February 1, 2018 the Corporation completed the acquisition of the remaining 50% interest in
two Calgary stores from its joint venture partner for $17.2 million.
• On February 1, 2018 the Corporation completed the purchase of 400 portable storage units,
equipment and repurchased the license to operate our Cubeit brand in British Columbia for
$2,290,000.
60
Annual report DESCRIPTION OF OUR OPERATIONS
As at December 31, 2017, the Corporation owned the following self storage and portable storage
operations:
Acres
Number of
Stores
Units
Rentable Square
Feet
Location
British Columbia
Alberta
Saskatchewan
Manitoba
Ontario
Quebec
Nova Scotia
Portable Storage Units
31.7
67.5
21.4
19.6
94.1
24.3
15.0
Total
273.6
16
19
7
8
24
12
4
90
8,007
10,746
1,453
3,728
11,091
6,198
1,568
3,586
46,377
741,787
1,167,861
207,508
354,596
1,394,756
573,032
156,764
411,115
5,007,419
Management is focused on increasing value and increasing NOI as follows:
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.
Professional Management
On March 31, 2017, SVI internalized management of StorageVault’s stores and acquired third party
management contracts for over 55 stores from Access Results Management Services (ARMS). The
management team at SVI has extensive experience in all aspects of the storage industry including:
• management of over 140 storage locations throughout Canada
•
•
acquisition, development and management of over 8 million square feet of storage space
over 100 years of combined experience in the storage industry by senior management
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 storage business is the exclusive supplier to Costco members across Canada. This relationship
provides exclusive access to Costco’s vast membership base as a marketing channel.
61
Annual report 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
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.
62
Annual report FINANCIAL RESULTS OVERVIEW
In the current fiscal year, SVI added 42 stores for $485.4 million (two through a joint venture) and
disposed of one land asset in fiscal 2017 for $1.8 million. In the prior fiscal year, SVI added 21 stores for
$178.4 million (one through an asset swap valued at $3.4 million), the majority of which closed in the last
4 months of 2016. In fiscal 2015, SVI added 19 stores, for $146.2 million, with the majority also taking
place in the last 4 months. Therefore, the comparative results are significantly impacted by the timing of
these acquisitions.
Selected Financial Information
(unaudited)
Three Months Ended December 31
(audited)
Fiscal
2017
2016
$
%
2017
2016
$
%
Change
Change
Storage revenue and related services
$
20,366,043
$
8,900,182
$
11,465,861
128.8%
$
60,671,031
$
27,824,544
$
32,846,487
118.0%
Management fees
378,067
$
-
378,067
-
1,217,483
$
-
1,217,483
-
Operating costs
Net operating income
1
Less:
Acquisition and integration costs
Selling, general and administrative
Interest
Share of net loss from joint venture
Stock based compensation
Depreciation, amortization and
goodwill adjustment
20,744,110
8,900,182
11,843,928
6,760,316
3,187,851
3,572,465
133.1%
112.1%
61,888,514
27,824,544
34,063,970
122.4%
21,294,478
10,800,018
10,494,460
97.2%
13,983,794
5,712,331
8,271,463
144.8%
40,594,036
17,024,526
23,569,510
138.4%
979,121
815,340
886,499
1,929,613
5,873,705
117,242
(92,622)
-9.5%
5,373,955
1,928,429
3,445,526
178.7%
1,598,201
4,275,504
1,114,273
136.7%
267.5%
4,038,559
2,240,692
1,797,867
80.2%
15,639,157
5,508,345
10,130,812
183.9%
-
117,242
-
157,278
-
-
1,208,374
(1,208,374)
-100.0%
1,534,286
1,208,374
157,278
325,912
-
27.0%
13,158,268
19,768,583
(6,610,315)
-33.4%
38,608,471
27,328,122
11,280,349
41.3%
Goodwill impairment reversal
(12,420,000)
-
(12,420,000)
9,545,327
24,369,619
(14,824,292)
-
-60.8%
-
-
-
65,351,706
38,213,962
27,137,744
-
71.0%
Net Income (Loss) before taxes
4,438,467
(18,657,288)
23,095,755
-123.8%
(24,757,670)
(21,189,436)
(3,568,234)
16.8%
Deferred tax recovery
10,905,038
-
10,905,038
-
10,905,038
-
10,905,038
-
Net Income (Loss)
$
15,343,505
$
(18,657,288)
$
34,000,793
-182.2%
$
(13,852,632)
$
(21,189,436)
$
7,336,804
-34.6%
Weighted average number of common shares outstanding
Basic
Diluted
345,003,901
264,910,015
80,093,886
345,003,901
264,910,015
80,093,886
30.2%
30.2%
317,487,007
204,660,864
112,826,143
317,487,007
204,660,864
112,826,143
55.1%
55.1%
Net income (loss) per common share
Basic
Diluted
1
Non-IFRS Measure.
$
$
0.044
$
(0.070)
0.044
$
(0.070)
$
(0.044)
$
(0.104)
$
(0.044)
$
(0.104)
63
Annual report
Storage revenue and related services
Revenues increased by $11.5 million, or 128.8%, for the three months ended December 31, 2017, as
compared to the same period in 2016. This results in a year to date increase over the prior year of $32.8
million. This increase is primarily attributable to incremental revenue from the 63 stores acquired in 2017
and 2016. For additional information, see “Segmented, Existing and New Self Storage and Portable
Storage Results.”
Management fees
New stream of revenue from management contracts acquired from Access Results Management Services
on March 31, 2017.
Operating costs
Operating costs for the three months and fiscal year ended December 31, 2017 were $6.7 million and $21.3
million (December 31, 2016 - $3.2 million and $10.8 million), an increase of 112.1% and 97.2%,
respectively. The increase in property operating cost relates to the stores acquired in 2017 and 2016.
Net Income
Our net loss of $13.9 million for the current fiscal year is a result of $38.6 million of depreciation,
amortization and which was offset by a deferred tax recovery of $10.9 million.
Net operating income
For the three months ended December 31, 2017, the Corporation had net operating income (NOI), a non-
IFRS measure, of $14.0 million (December 31, 2016 - $5.7 million), an increase of 144.8%. The NOI for the
fiscal year ended December 31, 2017, increased by $23.6 million or 138.4%, to $40.6 million. The increase
was primarily due to the NOI from storage assets purchased in fiscal 2017 and 2016, streamlining and
integration of operations, increased rates through our revenue management systems, new management
fee revenue stream and control 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 2017, SVI closed $485.4 million of acquisitions, with
an additional $17.2 million of acquisitions closed 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 increased with the 2017 and 2016
acquisitions. As at December 31, 2017, our total debt was $563.1 million compared to $182.5 million at
December 31, 2016.
Depreciation, amortization and goodwill impairment reversal
The increase in depreciation and amortization expense is primarily due to depreciating the additional
assets that were acquired.
The goodwill impairment reversal represents the reversal of $12.4 million of goodwill impairment taken
in Q1 2017 and Q3 2017. The Corporation incorrectly determined that the goodwill impairment test was
64
Annual report triggered at the acquisition dates. The goodwill impairment test that was performed at the acquisition
dates should have been performed at the year end. The goodwill impairment originally taken was not as
a result of IFRS as had been previously stated. Had the goodwill impairment testing been conducted at
the year end instead of on the acquisition dates, no goodwill impairment would have resulted. The
impact of this reversal of the $12.4 million goodwill impairment on the 2017 annual financial statements
is to reinstate the previously recognized goodwill of $12.4 million and reduce the cumulative loss by $12.4
million from what was previously recorded. The Q1 2017 goodwill impairment that was recorded was
$5.4 million, and as a result, Q1 2017 net loss would have been $5.4 million without such goodwill
impairment. The Q3 2017 goodwill impairment that was recorded was $7.0 million, and as a result, Q3
2017 net income would have been $8.3 million without such goodwill impairment. The result is that
there is no goodwill impairment recorded in the 2017 annual financial statements. There were no
changes to previously reported NOI, FFO and AFFO figures resulting from these reversals.
65
Annual report Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO)
FFO and AFFO are non-IFRS measures. It allows management and investors to evaluate the financial
results of an entity without taking into consideration the impact of non-cash items and non-recurring
acquisition and integrations costs 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 and non-recurring capital items include stock based compensation costs, deferred income
tax expenses (recoveries) and acquisition and integration costs, if any. Acquisition and integration costs,
included in our AFFO, are one time in nature to the specific assets purchased in the current period or
pending. While the specific acquisition and integration costs may vary from period to period, given that
the Corporation is planning to continue to complete acquisitions as part of its growth strategy, these costs
will continue to be included as an adjustment in determining AFFO (i.e. the amount of the costs are "non-
recurring" but the actual adjustment for these type of costs is "recurring").
FFO for the three months and fiscal year ended December 31, 2017 was $5.4 million and $15.8 million
versus $2.3 million and $7.3 million, respectively for the same period in 2016. These increases are the
result of contributions from the assets purchased in fiscal 2017 and 2016 and improvements in operational
results.
AFFO for the three months and fiscal year ended December 31, 2017 was $6.3 million and $21.2 million
versus $3.3 million and $9.3 million, respectively for the same period in 2016.
The FFO and AFFO for the three months and fiscal year ended December 31, 2017 and 2016 are:
(unaudited)
Three Months Ended December 31
(audited)
Fiscal
2017
2016
Change
2017
2016
Change
$
%
$
%
Net Income (loss)
$
15,343,505
$
(18,657,288)
$
34,000,793
-182.2%
$
(13,852,632)
$
(21,189,436)
$
7,336,804
-34.6%
Adjustments:
Stock based compensation
-
1,208,374
(1,208,374)
Deferred tax recovery
(10,905,038)
-
-
(10,905,038)
267,340
-
-
-
1,534,286
1,208,374
325,912
27.0%
(10,905,038)
448,813
-
-
(10,905,038)
448,813
-
-
267,340
738,268
19,768,583
(19,030,315)
-96.3%
38,608,471
27,328,122
11,280,349
41.3%
(9,899,430)
20,976,957
(30,876,387)
-147.2%
29,686,532
28,536,496
1,150,036
4.0%
$
5,444,075
$
2,319,669
$
3,124,406
134.7%
$
15,833,900
$
7,347,060
$
8,486,840
115.5%
886,499
979,121
(92,622)
-9.5%
5,373,955
1,928,429
3,445,526
178.7%
$
6,330,574
$
3,298,790
$
3,031,784
91.9%
$
21,207,855
$
9,275,489
$
11,932,366
128.6%
Depreciation and
amortization from joint
venture
Depreciation, amortization
and goodwill adjustment
FFO 1
Adjustments:
Acquisition and
integrations costs
AFFO 1
1 Non-IFRS Measure.
66
Annual report
Annualized Net Operating Income and Funds from Operations
The Company purchased 42 stores during fiscal 2017 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, FFO
and AFFO (all non-IFRS measures) statement annualizing the revenues and expenses as if the stores
purchased in fiscal 2017, were purchased as of January 1, 2017 and owned for the entire 12 month period.
The results of this annualized statement show that NOI, FFO and AFFO would be higher by $16.0, $8.2
million and $8.2 million, respectively. NOI would have been $56.6 million, FFO would be $24.0 million
and the AFFO would be $29.4 million. The Corporation expects to realize the full benefit of these
acquisitions in fiscal 2018.
For the Year Ended December 31, 2017
Actual
Annualized Results
Incremental
Notes
Storage revenue and related services
$
60,671,031
$
84,583,806
$
23,912,775
Management fees
1,217,483
$
1,623,310
Property operating costs
Net operating income
Adjustments:
NOI less interest from joint venture
Acquisition and integration costs
Selling, general and administrative
Interest
Funds from Operations
Adjustment:
Acquisition and integration costs
Adjusted Funds from Operations
61,888,514
21,294,478
40,594,036
(291,535)
5,373,955
4,038,559
15,639,157
24,760,136
15,833,900
5,373,955
21,207,855
86,207,116
29,635,381
56,571,735
(720,675)
5,373,955
4,038,559
23,833,294
32,525,133
24,046,602
5,373,955
29,420,557
405,827
24,318,602
8,340,903
15,977,699
(429,140)
-
-
8,194,137
7,764,997
8,212,702
-
8,212,702
1
1
2
3
4
Note 1 - the results from all stores acquired in fiscal 2017, have been adjusted as if the purchase occurred
on January 1, 2017. For revenues, we assumed achieved occupancies and rent per square foot were
repeated for the period prior to acquisition. Information regarding expenses incurred during 2017 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,
2017.
67
Annual report
Segmented, Existing and New Self Storage and Portable Storage Results
The Corporation operates three reportable business segments - self storage, portable storage and
management fees. Self storage involves the customer renting space at the Corporation’s property for
short or long term storage. 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. Management fees are revenues generated from the management of stores owned by third
parties.
Revenue, property operating costs and net operating income
(unaudited)
Three Months Ended December 31
(audited)
Fiscal
2017
2016
Change
2017
2016
Change
$
%
$
%
Revenue
Existing Self Storage 1
New Self Storage 1
$
5,286,771
$
4,924,934
361,837
7.3%
$
20,702,923
$
18,968,663
1,734,260
9.1%
13,709,373
2,537,026
11,172,347
440.4%
33,950,301
3,493,582
30,456,719
871.8%
Total Self Storage
18,996,144
7,461,960
11,534,184
154.6%
54,653,224
22,462,245
32,190,979
143.3%
Portable Storage
1,369,899
1,438,222
(68,323)
-4.8%
6,017,807
5,362,299
655,508
12.2%
Management fees
378,067
-
378,067
-
1,217,483
-
1,217,483
-
Combined
20,744,110
8,900,182
11,843,928
133.1%
61,888,514
27,824,544
34,063,970
122.4%
Operating Costs
Existing Self Storage
1,496,176
1,381,842
114,334
8.3%
6,537,387
6,105,260
432,127
7.1%
New Self Storage
Total Self Storage
4,311,184
821,093
3,490,091
425.1%
10,866,548
1,339,092
9,527,456
711.5%
5,807,360
2,202,935
3,604,425
163.6%
17,403,935
7,444,352
9,959,583
133.8%
Portable Storage
952,956
984,916
(31,960)
-3.2%
3,890,543
3,355,666
534,877
Combined
6,760,316
3,187,851
3,572,465
112.1%
21,294,478
10,800,018
10,494,460
15.9%
97.2%
Net Operating Income 1
Existing Self Storage
3,790,595
3,543,092
247,503
7.0%
14,165,536
12,863,403
1,302,133
10.1%
New Self Storage
9,398,189
1,715,933
7,682,256
447.7%
23,083,753
2,154,490
20,929,263
971.4%
Total Self Storage
13,188,784
5,259,025
7,929,759
150.8%
37,249,289
15,017,893
22,231,396
148.0%
Portable Storage
Management fees
416,943
378,067
453,306
(36,363)
-8.0%
2,127,264
2,006,633
120,631
6.0%
-
378,067
-
1,217,483
-
1,217,483
-
Combined
$
13,983,794
$
5,712,331
8,271,463
144.8%
$
40,594,036
$
17,024,526
23,569,510
138.4%
1 Non -IFRS Measure.
Existing Self Storage
For the three months ended December 31, 2017, Revenue and NOI increased by 7.3% and 7.0%,
respectively, over the same prior year period. The revenue increase was substantially driven from
continued execution of our revenue management program, as occupancy remained stable. We were able
to control advertising and staffing costs, but there were increases to utilities and snow clearing costs
resulting from a colder winter.
New Self Storage
Increases are the result of acquiring 63 stores in 2017 (42 stores) and 2016 (21 stores).
Portable Storage
Produced stable results, both in occupancy and revenue. Q4 was impacted by a colder winter.
68
Annual report
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.
Fiscal 2017 ('000)
Fiscal 2016 ('000)
Q4
Q3
Q2
Q1
Total
Q4
Q3
Q2
Q1
Total
1
NOI
Existing Self Storage
$
3,791
$
3,801
$
3,466
$
3,108
$
14,166
$
3,543
$
3,427
$
3,091
$
2,802
$
12,863
New Self Storage
Total Self Storage
Portable Storage
Management fees
9,398
13,189
417
378
7,565
3,427
2,693
11,366
6,893
5,801
748
423
612
416
350
-
23,083
37,249
2,127
1,217
1,716
314
90
34
5,259
3,741
3,181
2,837
2,154
15,018
453
739
582
233
2,007
$
13,984
$
12,537
$
7,922
$
6,151
$
40,594
$
5,712
$
4,480
$
3,763
$
3,069
$
17,025
1 Non-IFRS Measure
Existing Self Storage
The increase in Q4 2017 over Q4 2016 was substantially driven from continued execution of our revenue
management program, while occupancy remained stable. While being able to control costs such as
advertising and staffing costs, there were increases to utilities and snow clearing costs resulting from the
winter weather experienced.
New Self Storage
SVI added 42 stores in 2017 and 21 stores in fiscal 2016. These additions have resulted in NOI growth
quarter over quarter as we commenced reporting results.
Portable Storage
NOI was lower in Q4 compared to 2016, both in occupancy and revenue, the result of a colder winter.
Even with a slower Q4 we achieved a 6.0% NOI year over year growth in 2017. 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.
69
Annual report
Summary of Quarterly Results (unaudited)
Revenue
$20,744,110
$18,453,960
$12,557,306
$10,133,138
$61,888,514
$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
Net Income /
(Loss)
$15,343,505
($15,402,377)
($2,995,895)
($10,797,865)
($13,852,632)
($18,657,288)
($537,379)
($663,764)
($1,331,005)
($21,189,436)
($2,702,281)
($821,330)
($677,127)
($374,472)
($4,575,210)
Net Income
/ (Loss) per
share
$0.044
($0.046)
($0.010)
($0.037)
N/A
Fully diluted
Net Income /
(Loss) per share
$0.044
($0.046)
($0.010)
($0.037)
N/A
($0.070)
($0.022)
($0.004)
($0.008)
N/A
($0.026)
($0.012)
($0.012)
($0.010)
N/A
($0.070)
($0.022)
($0.004)
($0.008)
N/A
($0.026)
($0.012)
($0.012)
($0.010)
N/A
Total
Total Assets
$895,496,381
$839,525,204
$400,216,946
$404,743,767
N/A
Liabilities Dividends
$627,421,264
$585,777,091
$237,005,503
$238,025,850
N/A
$880,328
$879,376
$765,016
$749,946
$3,274,666
$342,803,581
$253,955,856
$179,885,223
$176,728,097
N/A
$187,115,587
$131,931,530
$118,343,352
$114,010,014
N/A
$724,931
$630,309
$440,398
-
$1,795,638
$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
-
-
-
-
-
Period
2017- Q4
2017- Q3 1
2017- Q2
2017- Q1 1
Total 2017
2016- Q4
2016- Q3
2016- Q2
2016- Q1
Total 2016
2015- Q4
2015- Q3
2015- Q2
2015- Q1
Total 2015
Note 1:
As discussed in the Depreciation, amortization and goodwill impairment reversal section in the Financial
Results Overview, the Corporation reversed $12,420,000 of goodwill impairment taken in Q1 2017 and Q3
2017.
The Q1 2017 goodwill impairment that was recorded was $5,361,176, and as a result, Q1 2017 previously
reported net loss of $10,797,865, would have been $5,436,689 without such goodwill impairment. The Q3
2017 goodwill impairment that was recorded was $7,058,823 million, and as a result, Q3 2017 reported net
loss of $15,402,377 would have been $8,343,553 without such goodwill impairment.
The previously reported Total Assets for Q1 2017 of $404,743,767 would have been $410,104,943. The
previously reported Total Assets for Q2 2017 of $400,216,946 would have been $405,578,122. The
previously reported Total Assets for Q3 2017 of $839,525,204 would have been $851,945,204.
WORKING CAPITAL, LONG TERM DEBT AND SHARE CAPITAL
Working Capital
Cash provided by operating activities was $16.0 million for fiscal 2017 compared to $7.5 million for fiscal
2016. The increase was primarily due to the operational results from stores purchased in fiscal 2016 and
2017, increased rates through our revenue management systems, continued streamlining and integration
of operations and controlling costs on assets purchased.
As at December 31, 2017, the Corporation had $16.0 million of cash compared to $11.9 million at
December 31, 2016. The increase is due to increase in cash generated through the Corporation’s operating
activities and allows the Corporation to meet its obligations and growth strategies. The Corporation
expects its cash flow from operations to improve as the full benefit of the stores purchased in the year are
realized. In addition, the Corporation, to fund acquisitions and its expansion plans, the Corporation will
borrow against low levered assets.
70
Annual report Long Term Debt and Lines of Credit
As at December 31, 2017 and December 31, 2016, the Corporation held the following debt:
December 31, 2017
Weighted
Average
Balance
Rate
Range
December 31, 2016
Weighted
Average
Balance
Rate
Range
Mortgages
Fixed/Variable
3.18% to 5.5%
4.21%
233,190,726
3.46% to 5.50% 4.09%
164,942,311
Maturity: March 2018 to March 2025
Maturity: October 2017 to January 2022
Deferred financing costs net of accretion
of $1,376,845 (December 31, 2016 - $635,977)
(2,245,471)
230,945,255
Lines of Credit
(918,798)
164,023,513
Prime plus 1.00%
Prime plus 1.00%
Variable Rate or BA plus 2.75% 4.21%
332,153,083
or BA plus 2.75% 4.38%
18,483,081
Maturity: March 2018 to August 2020
Maturity: April 2017 to August 2020
563,098,338
182,506,594
The bank prime rate at December 31, 2017 was 3.20% (December 31, 2016 - 2.70%). The weighted average
cost of debt at December 31, 2017 is 4.21% (December 31, 2016 - 4.12%). The increase is due to increase
the prime rate. The Corporation will look to reduce its variable interest rate exposure by entering into
additional fixed interest rate term debt to replace lines of credit.
Mortgages are secured by a first mortgage charge on the real estate 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 debt service coverage
ratios, a tangible net worth ratio, and a loan to value ratio. As of December 31, 2017 and 2016, the
Corporation is in compliance with all covenants.
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
$
$
$
$
$
$
341,601,721 (includes lines of credit)
18,528,294
44,305,118
8,181,180
22,455,273
130,272,223
71
Annual report
Of the principal repayments shown in Year 1, $6.5 million are required under our amortizing term debt
mortgages, $3.0 million relates to a loan due in the upcoming year that is expected to be refinanced and
$332.2 million relates to our lines of credit. Our lines of credit are covenant based (debt service coverage
ratios, tangible net worth ratios, and loan to value ratios) and do not require repayment as long as the
covenants are met. As of December 31, 2017 and 2016, the Corporation is in compliance with all
covenants.
Given that our lines of credit are short term in nature, the Corporation will term out assets supporting the
lines when deemed appropriate, which includes determination that the Corporation has been able to
implement its operating system to increase the value of the assets and to ensure that the Corporation has
an appropriate mix of assets under our lines of credit and term mortgages.
Share Capital
For the fiscal year ended December 31, 2017, the Corporation issued a total of 55,417,266 common shares
for $133.6 million, net of share issuance costs, (121,883,848 common shares valued at $118.9 million were
issued in fiscal 2016). The common shares issued are:
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
Bought deal
Issued on asset acquisitions
Dividend reinvestment plan
Stock option redemption
Share issuance costs
Common shares repurchased
Balance, December 31, 2017
Number of Shares
Amount
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
32,076,000
22,520,098
529,268
526,000
-
(234,100)
85,001,400
51,320,000
1,055,801
197,750
(3,271,774)
(499,784)
345,226,934
$
319,571,781
Bought Deal
On July 19, 2017, the Corporation issued 32,076,000 common shares at a price of $2.65 per
common share for gross proceeds of $85,001,400.
Dividend Reinvestment Plan
Represents common shares issued under the Corporation’s 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
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Annual report
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 may be increased upon Board of Directors approval, acceptance of the increase by the
Exchange, and upon public disclosure of the increase.
Common Shares Repurchased
Represents common shares repurchased under the Corporation’s Normal Course Issuer Bid
("NCIB") policy allowing for the purchase for cancellation, during the 12-month period starting
August 18, 2017, of up to 17,198,962 of the common shares.
Stock Options and Warrants
A total of 11,555,850 options were outstanding as at December 31, 2017 (December 31, 2016 – 11,501,000).
Of the outstanding amount, 11,555,850 options were exercisable (December 31, 2016 – 11,501,000). The
details are as follows:
Exercise Price
Vesting Date
Expiry Date
December 31, 2017 December 31, 2016
May 5, 2007
May 6, 2009
June 19, 2014
April 28, 2015
Sept 14, 2015
Dec 21, 2016
$0.20
$0.23
$0.33
$0.41
$0.50
$1.36
$1.78 Mar 16, 2017
Nov 5, 2017
May 6, 2019
June 19, 2024
April 28, 2025
Sept 14, 2025
Dec 21, 2026
Mar 15, 2027
Options exercisable and outstanding
Warrants exercisable and outstanding are as follows:
-
1,210,000
220,000
2,390,850
1,760,000
2,975,000
3,000,000
11,555,850
1,000,000
2,200,000
400,000
2,901,000
2,000,000
3,000,000
-
11,501,000
Exercise Price
Expiry Date December 31, 2017 December 31, 2016
$0.35
$0.37
Feb 25, 2018
Feb 25, 2018
16,666
2,533,334
Warrants exercisable and outstanding
2,550,000
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.
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Annual report 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
$ 1,227,614
4,658,483
____1,213,005
$ 27,099,102
Bank Letter of Guarantee
The Corporation has various letters of guarantee in the amount of $474,691 which are due within one
year.
Contingency
The Corporation has no legal contingency provisions at either December 31, 2017 or December 31, 2016.
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, 2017, the Corporation paid total management fees of $293,321
(December 31, 2016 - $819,666) to Access Results Management Services Inc. (“ARMS”), a corporation
controlled by Steven Scott and Iqbal Khan. Pursuant to a management agreement, ARMS is entitled to a
base management fee of $194,758 for fiscal 2017, 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.
On March 31, 2017, the Corporation purchased all management contracts from ARMS (see note 4 of
audited fiscal 2017 consolidated financial statements) and therefore, the management agreement has
ceased.
During the year ended December 31, 2017, the Corporation reimbursed operational wages of $1,545,892
(December 31, 2016 - $4,736,700) and training, travel and related expenses of $16,804 (December 31, 2016 -
$319,895) to ARMS. These expenses, reimbursed at cost, were undertaken exclusively for the benefit of
the Corporation.
During the year ended December 31, 2017, the Corporation paid loan guarantee fees of $127,500
(December 31, 2016 - $181,616) to Access Self Storage Inc., a large shareholder of the Corporation and a
corporation related to Steven Scott and Iqbal Khan (see note 4 of audited fiscal 2017 consolidated financial
statements). 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. A portion of the loan guarantee
payments ceased in August 2016, while the remainder ceased in September 2017.
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Annual report 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 Steven Scott and Iqbal Khan who
are directors of the Corporation. The Corporation pays a monthly royalty of 3.5% on the gross sales.
During the year ended December 31, 2017, the Corporation paid $216,710 (December 31, 2016 - $182,022)
for royalties and $1,535,160 (December 31, 2016- $1,329,326) 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, 2017 was $33,808 (December 31, 2016 - $13,797) payable to CPFI and $nil (December 31,
2016 - $1,191,647) payable to ARMS.
On March 31, 2017 the Corporation completed an acquisition to internalize management of the
Corporation’s stores and acquired third party management contracts for over 55 stores for $16,000,000
from Access Results Management Services Inc., a corporation related to Steven Scott, Iqbal Khan, and
Access Self Storage Inc. (see note 4 of audited fiscal 2017 consolidated financial statements).
On August 11, 2017 the Corporation completed the acquisition of six self storage locations for $34,225,000
from Access Self Storage Inc., a corporation related to Steven Scott and Iqbal Khan (see note 4 of audited
fiscal 2017 consolidated financial statements).
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:
December 31, 2017
December 31, 2016
Wages, management fees, bonuses and directors fees
Stock based compensation
$
129,800
1,293,914
1,423,714
$
$
135,608
1,013,021
1,148,629
$
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Annual report
USE OF PROCEEDS FROM JULY 2017 BOUGHT DEAL FINANCING
On July 19, 2017, the Corporation completed a bought deal financing from which the Corporation issued
32,076,000 common shares at a price of $2.65 per common share for gross proceeds of $85,001,400. The
Corporation used the net proceeds of $81,729,625 from the financing as follows:
Repayment of debt incurred under lines of credit
Fund cash portion of previously announced acquisitions
Potential future acquisition opportunities
Use of Proceeds
(as Disclosed)
Use of Proceeds
(Actual)
$
19,752,594
49,598,750
11,180,000
$
80,531,344
$
9,000,000
64,179,942
8,549,683
$
81,729,625
Net proceeds were higher than expected due to lower share issuance costs.
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, 2017
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,
2016. In addition, there has been no change in the Company’s financial instrument risks.
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Annual report
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.
iv.
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, amortization and goodwill adjustment,
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.
Adjusted Funds from Operations (“AFFO”) – AFFO is defined as FFO plus acquisition and
integration costs. Acquisition and integration costs are one time in nature to the specific assets
purchased in the current period or pending and are expensed under IFRS.
Existing Self Storage and New Self Storage performance – “Existing Self Storage” are defined as
those that the Corporation has owned or leased since the beginning of the previous fiscal year or
as of January 1, 2016. “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, 2017 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, 2017, 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
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Annual report 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, 2017.
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.
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Annual report 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
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Annual report 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.
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.
80
Annual report 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
TSX Trust Company
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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Annual report
Corporate Information
Phone: 1-877-622-0205
Web site: storagevaultcanada.com
Email: ir@storagevaultcanada.com
Address: 100 Canadian Road, Toronto, Ontario, M1R 4Z5