PERFORMANCE THROUGH
INTEGRATION
CANADA SELF STORAGE CENTRES
ANNUAL
REPORT
2019
STORAGEVAULT WAS
RECOGNIZED AS A
TSX VENTURE 50™
COMPANY IN 2020
FOR THE 3RD TIME
2
Annual Report 2019CANADA SELF STORAGE CENTRES TABLE
OF CONTENTS
Highlights
Letter to Our Shareholders
Our National Footprint
Our Board Members
Financial Statements
Management Discussion and Analysis
5
6
8
10
11
47
CORPORATE INFORMATION
Phone:
1.877.622.0205
Web:
storagevaultcanada.com
Email:
ir@storagevaultcanada.com
Address:
100 Canadian Road
Toronto, ON
M1R 4Z5
3
Annual Report 2019CANADA SELF STORAGE CENTRES
SVI‘S MANAGEMENT TEAM IS
KNOWN FOR ITS EXECUTION
AND DISCIPLINE RESULTING
IN PERFORMANCE
4
Annual Report 2019CANADA SELF STORAGE CENTRES HIGHLIGHTS
New Management
10 STORES
Q4/2014
29 STORES
Q4/2015
49 STORES
Q4/2016
90 STORES
Q4/2017
105 STORES
Q4/2018
151 STORES
Q4/2019
REVENUE
NOI
AFFO
19%
AFFO
37%
40%
NOI AND AFFO
LET’S TALK GROWTH:
NOI
90 MM
80 MM
70 MM
60 MM
50 MM
40 MM
30 MM
20 MM
10 MM
$ 0
40 MM
35 MM
30 MM
25 MM
20 MM
15 MM
10 MM
5 MM
$ 0
2014 2015 2016 2017
2018
2019
2014 2015 2016 2017
2018 2019
5
Annual Report 2019CANADA SELF STORAGE CENTRES LETTER TO OUR
SHAREHOLDERS
Dear Fellow Shareholders,
StorageVault continued its strong performance in 2019 with
portfolio and operating platform in Canada. Combine this with
over $373 million in acquisitions and over 7% same store
our disciplined operating team, and the result is a tremendous
revenue and NOI growth.
competitive advantage that we will continue to leverage.
SVI landed its second whale in as many years with the
acquisition of Real Storage, the fourth largest operator in
Other notable accomplishments include:
• Recognition as one of the Top 50TM performing companies
Canada, for $275 million. Real Storage owned and operated
on the TSX-V (3rd time in last 4 years).
38 stores throughout Ontario, Manitoba, Alberta and
• A diversity leader in gender, ethnicity and experience.
British Columbia and had been one of SVI’s most significant
• Philanthropically, we
supported more
than
150
competitors in the acquisition market. Of the 27 markets Real
organizations
in communities from coast to coast,
Storage operated in, SVI had existing operations in many of
partnering in initiatives related to health care, education,
them and as a result we expect significant synergies to be
sport and quality of life.
realized over the next 24 months. SVI also acquired $98 million
• Commitment to environmental responsibility through
of additional assets in the year with a focus on infilling our
initiatives such as roof top solar, solar walls, motion-sensor
current markets.
LED lighting, low-flow plumbing fixtures, in-floor radiant
heating and an upgrade program for older stores to install
While we are now almost triple the size of our next closest
light sensors, LED lighting, efficient doors and more.
competitors with over 200 stores across Canada, we are still
confident that we can acquire an additional $50 to $75 million
As with last year, we continue to capitalize on historically low
of assets in 2020 and beyond.
interest rates by moving to fixed rate debt; 93% of our debt is
Operationally, we have had an equally successful year achieving
now fixed.
over 7% same store revenue and NOI growth and a 19% AFFO
We are committed to growing cash flow and creating long
growth for the year. These strong results stem from our
term wealth for our shareholders.
performance driven culture, a dynamic revenue management
platform, the successful integration of acquisitions and
We appreciate your ongoing support.
exceeding our acquisition targets.
Sincerely,
Steven Scott
Chief Executive Officer
February 27, 2020
Our commitment to innovation and investment in intelligent
software has allowed us to achieve a best in class reservation
centre and
revenue management system.
Through
automation and data analytics, these initiatives have allowed
us to enhance revenues, control customer acquisition costs
and other operating expenses while improving the customer
experience. As a result, we have built the best storage
6
Annual Report 2019CANADA SELF STORAGE CENTRES WE GREW TO OVER
8 MILLION SQFT
OF RENTABLE SPACE
IN 73,000 STORAGE
UNITS
$372.7 MILLION IN
ACQUISITIONS
RESULTING IN
46 STORES BEING
ADDED IN 2019
REVENUE GROWTH
OF 40% TO $135.0
MILLION FROM
$96.4 MILLION
NOI GROWTH OF
37% TO $90.1 MILLION
FROM $65.9 MILLION
EXPECTING $50 TO
$75 MILLION IN
ACQUISITIONS
IN 2020
756% 5 YEAR
TOTAL SHAREHOLDER
RETURN
7
Annual Report 2019CANADA SELF STORAGE CENTRES OUR NATIONAL
FOOTPRINT
41
8
9
18
OUR BRANDS
8
Annual Report 2019CANADA SELF STORAGE CENTRES 200+ locations owned and managed
across Canada and growing!
Proudly
Canadian
97
24
4
9
Annual Report 2019CANADA SELF STORAGE CENTRES OUR BOARD MEMBERS
MEET OUR
BOARD
MEMBERS
JAY LYNNE FLEMING
Director
Chairman and CEO of the
Corporation, Mr. Scott has
been a Principal and Chief
Executive Officer of The Access
Group of Companies focusing
on the ownership, acquisition,
development and management
of self storage and other real
estate assets.
IQBAL KHAN
Director
CFO
President and CEO of CVL
Investments Ltd., and founder
of Storage for Your Life, which
she sold to StorageVault in
2015. Ms. Fleming currently
serves as Chair of the
Corporation’s Governance
Committee and also serves on
both the Audit and Acquisition
Committees.
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 as well
as records management.
STEVEN SCOTT
Director
CEO
Mr. Simpson is a co-founder
and former president and
CEO of the Corporation, and
currently serves as a director
and as Chair of the Acquisition
Committee. He was vital in
transitioning StorageVault to a
publically traded company on
the TSX Venture Exchange.
ALAN SIMPSON
Director
BLAIR TAMBLYN
Director
Mr. Tamblyn is the Co-
Founder, Chief Executive
Officer of Timbercreek Asset
Management, and Chairman
of the Board for Timbercreek
Financial. Mr. Tamblyn serves
as Chair of the Corporation’s
Audit Committee.
We will continue to
increase our cash flow
through integration
and revenue
management.
10
Annual Report 2019CANADA SELF STORAGE CENTRES StorageVault Canada Inc.
Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
11
Annual Report 2019CANADA SELF STORAGE CENTRES
Independent Auditor's Report
To the Shareholders of StorageVault Canada Inc.:
Opinion
We have audited the consolidated financial statements of StorageVault Canada Inc. and its subsidiaries (the "Company"), which
comprise the consolidated statements of financial position as at December 31, 2019 and December 31, 2018, and the consolidated
statements of income (loss) and other comprehensive income (loss), changes in equity and cash flows for the years then ended, and
notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial
position of the Company as at December 31, 2019 and December 31, 2018, and its consolidated financial performance and its
consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards.
Basis for Opinion
We conducted our audits in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are
independent of the Company in accordance with the ethical requirements that are relevant to our audits of the consolidated financial
statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other Information
Management is responsible for the other information. The other information comprises Management's Discussion and Analysis and the
Annual Report (but does not include the consolidated financial statements and our auditor's report thereon).
Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of
assurance conclusion thereon.
In connection with our audits of the consolidated financial statements, our responsibility is to read the other information identified above
and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audits or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed on
the other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We
have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the work we will perform on
this other information, we conclude that there is a material misstatement therein, we are required to communicate the matter to those
charged with governance.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
12
Annual Report 2019CANADA SELF STORAGE CENTRES Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
Obtain an understanding of internal control relevant to the audit 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 Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's
report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and
whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair
presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits and
significant audit findings, including any significant deficiencies in internal control that we identify during our audits.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor's report is Sean Du Plessis.
Calgary, Alberta
February 26, 2020
Chartered Professional Accountants
13
Annual Report 2019CANADA SELF STORAGE CENTRES 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
Prepaid expenses and other current assets
Accounts receivable (Note 9)
Liabilities and Shareholdersʹ Equity
Debt (Note 7)
Interest rate swaps (Note 7)
Lease liability (Note 14)
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 14)
The accompanying notes are an integral part of these consolidated financial statements.
2019
2018
$
1,246,187,751
113,827,924
24,460,186
2,985,805
5,404,296
$
915,442,044
77,526,826
19,695,873
5,191,801
4,934,873
$
1,392,865,962
$
1,022,791,417
$
1,043,788,392
9,291,210
25,491,060
64,063,076
12,458,892
7,025,354
1,162,117,984
355,585,663
(12,529,361)
8,812,227
(121,120,551)
230,747,978
$
702,411,156
‐
‐
47,026,009
7,394,616
5,033,079
761,864,860
338,552,701
(8,726,868)
5,218,589
(74,117,865)
260,926,557
$
1,392,865,962
$
1,022,791,417
Approved on behalf of the Board:
ʺsignedʺ Steven Scott
Director
ʺsignedʺ Iqbal Khan
Director
__________________________________________________________________________________________
14
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Consolidated Statements of Changes in Equity
For the Years Ended December 31
Share Capital
Balance, beginning of the period
Common shares issued, net of issuance costs (Note 8)
Balance, end of the period
Dividends Paid
Balance, beginning of the period
Dividends paid in the year
Balance, end of the period
Contributed Surplus
Balance, beginning of the period
Redemption of stock options and warrants
Stock based compensation (Note 8)
Balance, end of the period
Deficit
Balance, beginning of the period
IFRS 16 equity adjustment (Note 3)
Deferred tax recognized on adoption of IFRS 16 (Note 10)
Net income (loss) and comprehensive income (loss)
Balance, end of the period
The accompanying notes are an integral part of these consolidated financial statements.
2019
2018
$
338,552,701
17,032,962
355,585,663
$
319,571,781
18,980,920
338,552,701
(8,726,868)
(3,802,493)
(12,529,361)
(5,070,304)
(3,656,564)
(8,726,868)
5,218,589
‐
3,593,638
8,812,227
3,540,210
(223,252)
1,901,631
5,218,589
(74,117,865)
(49,966,570)
(1,207,122)
322,905
‐
‐
(46,118,469)
(24,151,295)
$
(121,120,551)
$
(74,117,865)
__________________________________________________________________________________________
15
Annual Report 2019CANADA SELF STORAGE CENTRES
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)
Depreciation and amortization (Note 5)
Interest
Unrealized loss on interest rate swap contracts (Note 7)
Net income (loss) and comprehensive income (loss) before tax
Deferred tax recovery (Note 10)
2019
2018
$
133,212,736
1,750,304
134,963,040
$
94,666,809
1,716,790
96,383,599
44,865,099
6,982,983
11,214,718
3,593,638
79,206,355
42,189,684
9,291,210
30,523,949
2,248,751
6,192,383
1,901,631
58,857,132
28,875,906
‐
197,343,687
128,599,752
(62,380,647)
(32,216,153)
16,262,178
8,064,858
Net income (loss) and comprehensive income (loss)
$
(46,118,469)
$
(24,151,295)
Net income (loss) per common share
Basic
Diluted
Weighted average number of common shares outstanding
Basic
Diluted
The accompanying notes are an integral part of these consolidated financial statements.
$
(0.128)
$
(0.069)
$
(0.128)
$
(0.069)
360,468,060
360,468,060
351,893,667
351,893,667
__________________________________________________________________________________________
16
Annual Report 2019CANADA SELF STORAGE CENTRES
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)
Adjustment for non‐cash items:
Deferred tax recovery (Note 10)
Depreciation, amortization (Note 5)
Amortization of deferred financing costs
Stock based compensation (Note 8)
Unrealized loss on interest rate swap contracts (Note 7)
(Gain) loss 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)
Dividends paid (Note 8)
Principal lease payments (Note 14)
Debt issuance costs
Advances from long term debt (Note 7)
Repayment of long term debt (Note 7)
Investing activities
Cash paid in business combinations (Note 4)
Additions to real estate and equipment (Note 5, 6)
Proceeds on disposal of real estate and equipment
2019
2018
$
(46,118,469)
$
(24,151,295)
(16,262,178)
79,206,355
1,142,637
3,593,638
9,291,210
4,436
30,857,629
(469,424)
2,205,996
5,064,278
1,992,275
39,650,754
285,684
(2,317,974)
(311,830)
(2,504,247)
536,106,032
(193,377,587)
337,880,078
(335,246,364)
(37,530,977)
10,822
(372,766,519)
(8,064,858)
58,857,132
1,137,473
1,901,631
‐
(352,184)
29,327,899
(1,022,548)
3,518,879
(7,752,575)
651,190
24,722,845
1,598,020
(2,113,765)
‐
(1,397,298)
420,840,336
(281,267,693)
137,659,600
(140,263,193)
(18,611,830)
36,023
(158,839,000)
Increase in cash and short term deposits
Cash and short term deposits balance, beginning of period
4,764,313
3,543,445
19,695,873
16,152,428
Cash and short term deposits balance, end of period
$
24,460,186
$
19,695,873
The accompanying notes are an integral part of these consolidated financial statements.
__________________________________________________________________________________________
17
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
1. Description of Business
The consolidated financial statements of StorageVault Canada Inc. and its subsidiaries (the “Corporation”)
as at and for the year ended December 31, 2019, were authorized for issuance by the Board of Directors of
the Corporation on February 26, 2020. 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, managing and renting self storage and portable storage
space to individual and commercial customers. The Corporation also stores, shreds, and manages
documents and records for customers.
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”) as at January 1, 2019.
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
subsidiaries, Sentinel Self‐Storage Corporation and Spyhill Ltd., all of which are headquartered in Toronto,
Ontario. 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.
Interest in Joint Venture
The Corporation had an interest in a joint venture, through its wholly owned subsidiary Sentinel Self‐
Storage Corporation, Spyhill Ltd. (“JV”), which was a jointly controlled entity. The Corporation recognized
its interest in the JV using the equity method of accounting. As at February 1, 2018, the Corporation wholly
owned the JV through the purchase of the remaining 50% of its shares.
Revenue Recognition
Revenue from the rendering of services and sales of goods are recognized at the fair value of consideration
received or receivable after the deduction of any trade discounts and excluding sales taxes.
The Corporation’s revenue comprises the renting of storage units to customers, information and records
management, managing storage facilities on behalf of third parties and sale of merchandise, including
locks, boxes, packing supplies and equipment.
18
Notes: 1
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 3 – Continued
Revenue earned from the renting of storage units is accounted for under IFRS 16 – Leases. 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.
The Corporation earns a management fee based on a percentage of gross revenues of the operations for
managing storage facilities for third parties. Revenue is recognized over time when the services are
rendered.
Revenue for other storage related services is recognized in the month the respective services are
provided. Receipts of fees for other storage related services 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 at a point in time when the merchandise is delivered to the customer.
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 cash flows generated by the assets acquired and
the selection of an appropriate discount rate. 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 and 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 allocated to each cash‐generating unit (“CGU”) expected to benefit
from the business combination’s synergies and to the lowest level at which management monitors the
goodwill.
If the initial accounting for a business combination is incomplete by the end of the reporting period in
which the combination occurs, the Corporation reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted retrospectively during the
measurement period, or additional assets or liabilities are recognized, to reflect new information obtained
Notes: 2
19
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 3 – Continued
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.
Cash and Short Term Deposits
Cash and short term deposits on the 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 three months or
less. For the purpose of the 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 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 ‐
Buildings
Leasehold
Business
Fences
improvements
4%
20%
operating equipment 10%
8%
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%
20
Notes: 3
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 3 – Continued
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.
Finite 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: Tenant Relationships ‐ 22 to 180
months.
Indefinite life intangible assets, consisting of management contracts, are carried at cost and are not
amortized. The useful life of indefinite life intangible assets are reviewed at each Consolidated Statements
of Financial Position date.
Goodwill and indefinite life intangibles are reviewed for impairment annually by assessing the recoverable
amount of each CGU to which it relates. The recoverable amount is the higher of fair value less costs of
disposal, and value in use. When the recoverable amount of the CGU is less than the carrying amount, an
impairment loss is recognized. Any impairment is recognized immediately in the Consolidated Statements
of Income (Loss) and Comprehensive Income (Loss). Any impairment recognized on goodwill is not
subsequently reversed.
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.
Notes: 4
21
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 3 – Continued
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 taxable entities,
but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will
be realized simultaneously.
A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available
against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Stock Based Compensation
The fair value of stock options issued to directors, officers and consultants under the Corporation’s stock
option plan is estimated at the date of issue using the Black‐Scholes option pricing model, and charged to
the Consolidated Statements 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.
When 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.
22
Notes: 5
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
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
a) Financial assets ‐ Pursuant to IFRS 9, the classification of financial assets is based on the Corporation’s
assessment of its business model for holding financial assets. The classification categories are as
follows:
‐
Financial assets measured at amortized cost: assets that are held within a business model
whose objective is to hold assets to collect contractual cash flows and its contractual terms give
rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding. The Corporation classifies the following financial assets as
measured at amortized cost: cash and short term deposits and accounts receivable.
Financial assets at fair value through other comprehensive income: assets that are held within
a business model whose objective is achieved by both collecting contractual cash flows and
selling financial assets and its contractual terms give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal amount outstanding. The
Corporation has no financial assets classified in this category.
Financial assets at fair value through profit or loss: assets that do not meet the criteria for
amortized cost or fair value through other comprehensive income. The Corporation has no
financial assets classified in this category.
‐
‐
Financial assets measured at amortized cost are measured at cost using the effective interest method.
For assessing impairment of financial assets measure at amortized cost the Corporation applied the
simplified approach and has calculated expected credit losses based on lifetime expected credit losses.
Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying
amounts of the assets and the loss is recognized in the Consolidated Statements of Income (Loss) and
Comprehensive Income (Loss). When a trade receivable is uncollectible, it is written off against the
allowance for expected credit losses.
Financial assets are derecognized when the contractual rights to the cash flows from the financial asset
expire or when the contractual rights to those assets are transferred.
b) Financial liabilities ‐ The classification of financial liabilities is determined by the Corporation at initial
recognition. The classification categories are as follows:
Notes: 6
23
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 3 – Continued
‐
‐
Financial liabilities measured at amortized cost: financial liabilities initially measured at fair
value less directly attributable transaction costs and are subsequently measured at amortized
cost using the effective interest method. Interest expense is recognized in the Consolidated
Statements of Income (Loss) and Comprehensive Income (Loss). The Corporation classifies the
following financial liabilities as measured at amortized cost: debt and accounts payable and
accrued liabilities.
Financial liabilities measured at fair value through profit or loss: financial liabilities measured
at fair value with changes in fair value and interest expense recognized in the Consolidated
Statements of Income (Loss) and Comprehensive Income (Loss). The Corporation classifies the
following financial liabilities as measured at amortized cost: interest rate swap liability.
Financial liabilities are derecognized when the obligation is discharged, cancelled or expired.
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 CGU
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 the disposal 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 CGU 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 a business
combination. 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.
24
Notes: 7
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 3 – Continued
‐
‐
‐
Expected credit losses – Financial assets measured at amortized cost are stated after evaluation as to
their collectability and an appropriate allowance for expected credit losses is provided where
considered necessary. The Corporation uses a provision matrix to calculate expected credit losses for
accounts receivable which is based on the Corporation’s historical credit loss experience adjusted for
forward‐looking factors specific to the debtors and the economic environment. Actual losses may differ
from estimates made.
Income taxes ‐ Income taxes are subject to measurement uncertainty due to the possibility of changes
in tax legislation or changes in the characterization of income sources.
Stock based compensation ‐ Compensation costs accrued for stock based compensation plans are
subject to the estimation of the ultimate payout using pricing models such as the Black‐Scholes model
which is based on significant assumptions such as volatility, dividend yield and expected term.
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. Management has identified each location as a
separate CGU. 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 applied judgment in determining control over the JV where the Corporation held 50%
equity ownership. The judgment was 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 was guaranteed 50% of seats on the board of the
JV and participated in all significant financial and operating decisions. Joint control was established by
the shareholder arrangement that required 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.
Notes: 8
25
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 3 – Continued
Changes in Accounting Policies
The Corporation has adopted the following new and revised standards effective January 1, 2019:
IFRS 16 – Leases
The Corporation adopted the requirements of IFRS 16 ‐ Leases as of January 1, 2019. IFRS 16 replaces IAS
17 ‐ Leases and results in almost all leases, where the Corporation is the lessee, being recognized on the
Consolidated Statement of Financial Position, as the distinction between operating and finance leases is
removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay
rentals are recognized. The lease liability is measured at present value of the lease payments that are not
paid at the balance date and is unwound over time using the interest rate implicit in the lease repayments
where available, or the Corporationʹs incremental borrowing rate. Accounting for the lessors remains
unchanged under the new standard.
The right‐of‐use asset comprises the initial lease liability amount, initial direct costs incurred when entering
into the lease less any lease incentives received. The asset is depreciated over the term of the lease. The new
standard replaces the Corporation’s operating lease expense with an interest and depreciation expense.
The Corporation applied the new standard IFRS 16 using the “Modified Retrospective” approach which
recognizes the cumulative effect of initial application as an adjustment to the opening balance of retained
earnings at January 1, 2019, without having to adjust comparatives in the current year reporting. The
Corporation recognized the right‐of‐use assets based on the value they would have been at the
commencement date and the lease liabilities based on their value at the date of initial application, resulting
in an adjustment to the retained earnings of $1,207,122.
The Corporation elected to use the practical expedient to not recognize a right‐of‐use asset or a lease liability
for leases for which the lease term ends within 12 months of the date of initial application. The Corporation
has also elected not to recognize right‐of‐use assets and lease liabilities for short‐term leases and leases of
low‐value assets. Options (extension/termination) on lease contracts are assessed on a case by case basis.
The weighted average incremental borrowing rate at the date of initial application was 4.33%. This has been
applied to the liabilities recognized at the date of initial application where there is no implicit rate.
As of January 1, 2019, the Corporation had $18,174,269 of right‐of‐use leased assets and $19,381,391 in lease
liabilities.
A reconciliation of the operating lease commitments as of December 31, 2018 to the opening balance of lease
liabilities at the date of adoption is as follows:
Operating lease commitments as of December 31, 2018
$
26,249,853
Lease liabilities recognized as of January 1, 2019
‐
Effect of discounting using the incremental borrowing rate
(6,868,462)
Lease liabilities recognized as of January 1, 2019
$
19,381,391
26
Notes: 9
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
4. Acquisitions
During the year ended December 31, 2019, 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 dates of acquisition. Details of the acquisitions are:
First Quarter Acquisitions:
During the first quarter, the Corporation completed the acquisition of two self storage locations in Ontario
for $10,460,000 (subjected to customary adjustments). These acquisitions were arm’s length transactions
and have been accounted for as business combinations. The purchases were paid for by cash on hand.
A summary of the acquisitions are as follows:
Acquisition date :
Land, Yards, Buildings & Improve me nts
Tenant Re lationships
Ne t assets acquire d
Conside ration paid for the ne t asse ts acquired was obtaine d from the following:
Cash
Se le cte d information for the acquisitions, since the ir acquisition date s:
Re ve nue
Ope rating costs
Amortization
Inte rest
Net income (loss)
Two Self Storage
Locations
Fe bruary 20, 2019
$
9,192,522
1,267,478
10,460,000
10,460,000
1,197,635
430,200
767,435
709,939
307,718
$
(250,222)
Notes: 10
27
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 4 – Continued
Second Quarter Acquisitions:
During the second quarter, the Corporation completed the acquisition of 42 self storage locations and an
information and records management business for $336,000,000 (subjected to customary adjustments).
These acquisitions consisted of both arm’s length and non ‐ arm’s length transactions. The purchases were
paid for by advances from long term debt, issuance of common shares, promissory notes and cash on hand.
A summary of the acquisitions are as follows:
Three Self
One Self
Storage Locations
38 Self Storage
Storage
and RecordXpress
Locations
Location
Total
Acquisition date :
April 12, 2019
April 15, 2019 May 29, 2019
Land, Yards, Buildings & Improve me nts
$
24,339,429
$
252,446,366
$
25,827,893
$
302,613,688
Te nant Re lationships
De fe rre d tax
Goodwill
Ne t asse ts acquire d
5,481,623
29,821,052
‐
2,678,948
32,500,000
22,553,634
2,672,107
30,707,364
275,000,000
28,500,000
333,321,052
(33,622,150)
33,622,150
‐
‐
(33,622,150)
36,301,098
275,000,000
28,500,000
336,000,000
Conside ration paid for the ne t asse ts acquire d was obtaine d from the following:
Issuance of common share s
8,300,000
‐
Cash
De bt
Promissory note
‐
38,000,000
7,000,000
500,000
15,300,000
38,500,000
7,086,364
17,113,636
32,500,000
237,000,000
16,000,000
260,086,364
‐
5,000,000
22,113,636
275,000,000
28,500,000
336,000,000
Se le cte d information for the acquisitions, since the ir acquisition date s:
Re ve nue
Ope rating costs
Amortization
Inte re st
Ne t income (loss)
3,499,397
2,316,143
1,183,254
2,165,429
1,091,016
15,237,951
1,350,274
5,906,083
9,331,868
14,739,720
6,386,195
457,182
893,092
777,739
678,054
20,087,622
8,679,408
11,408,214
17,682,888
8,155,265
$
(2,073,191)
$
(11,794,047)
$
(562,701)
$
(14,429,939)
28
Notes: 11
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 4 – Continued
Fourth Quarter Acquisitions:
During the fourth quarter, the Corporation completed the acquisition of two self storage locations for
$26,200,000 (subjected to customary adjustments). These acquisitions were both arm’s length transactions.
The purchases were paid for by advances from long term debt and cash on hand.
A summary of the acquisitions are as follows:
Acquisition date :
Land, Yards, Buildings & Improve me nts
Te nant Re lationships
Ne t asse ts acquire d
Conside ration paid for the ne t asse ts acquire d was obtaine d from the following:
Cash
De bt
Se le cte d information for the acquisitions, since the ir acquisition date s:
Re ve nue
Ope rating costs
Amortization
Inte re st
Ne t income (loss)
Two Self Storage
Locations
Octobe r 1, 2019
$
23,950,624
2,249,376
26,200,000
24,200,000
2,000,000
26,200,000
436,678
184,263
252,415
539,223
196,711
$
(483,519)
Notes: 12
29
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
5. Real Estate and Equipment
Land, Yards,
Buildings &
Storage
Intangible
Tenant
Office &
Computer
Improvements
Containers
Relationships
Vehicles
Equipment
Total
COST
De ce mber 31, 2017
$
743,997,212
$
12,703,190
$
82,261,527
$
4,893,080
$
1,808,595
$
845,663,604
Additions
Disposals
11,524,966
6,026,887
(10,648)
(17,500)
Busine ss acquisitions
160,099,529
‐
De ce mber 31, 2018
915,611,059
18,712,577
Additions
Disposals
Busine ss acquisitions
38,542,148
(46,200)
335,756,834
49,157
(5,000)
‐
‐
15,600,471
97,861,998
‐
‐
205,573
(28,159)
‐
5,070,494
166,721
(275,627)
‐
34,224,218
‐
854,404
‐
‐
2,662,999
1,273,869
‐
‐
18,611,830
(56,307)
175,700,000
1,039,919,127
40,031,895
(326,827)
369,981,052
De ce mber 31, 2019
$
1,289,863,841
$
18,756,734
$
132,086,216
$
4,961,588
$
3,936,868
$
1,449,605,247
ACCUMULATED DEPRECIATION
De ce mber 31, 2017
$
34,153,525
$
4,119,032
$
23,673,335
$
3,059,396
$
633,565
$
65,638,853
De pre ciation
Disposals
De ce mber 31, 2018
De pre ciation
Disposals
34,427,544
1,257,998
22,178,673
(213)
(271)
‐
68,580,856
49,445,309
(12,941)
5,376,759
1,315,008
(118)
45,852,008
27,435,403
‐
581,547
(18,418)
3,622,525
441,761
(252,883)
411,370
‐
1,044,935
568,874
‐
58,857,132
(18,902)
124,477,083
79,206,355
(265,942)
De ce mber 31, 2019
$
118,013,224
$
6,691,649
$
73,287,411
$
3,811,403
$
1,613,809
$
203,417,496
NET BOOK VALUE
De ce mber 31, 2018
De ce mber 31, 2019
847,030,203
1,171,850,617
13,335,818
12,065,085
52,009,990
58,798,805
1,447,969
1,150,185
1,618,064
2,323,059
915,442,044
1,246,187,751
Included in Land, Yards, Buildings & Improvements is Land at a value of $412,304,800 (December 31, 2018
‐ $298,882,932; December 31, 2017 – $245,377,231).
Included in Land, Yards, Buildings & Improvements is $16,102,351 (December 31, 2018 ‐ $7,770,200;
December 31, 2017 ‐ $1,189,411) of construction in process that is not being depreciated.
Included in Land, Yards, Buildings & Improvements are right‐of‐use assets at a value of $23,772,865
(December 31, 2018 ‐ $nil; December 31, 2017 ‐ $nil), net of accumulated depreciation of $910,371 (December
31, 2018 ‐ $nil; December 31, 2017 ‐ $nil). The continuity of the right‐of‐use assets is as follows:
Self Storage Properties
Balance, January 1, 2019
$
18,174,269
Additions
Depreciation charge for the year
6,508,967
(910,371)
Balance, December 31, 2019
$
23,772,865
30
Notes: 13
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
6. Goodwill and Intangible Assets
Management
Goodwill
Contracts
Total
COST
December 31, 2017
$
55,760,892
$
16,300,000
$
72,060,892
Business acquisitions
5,465,934
‐
5,465,934
December 31, 2018
61,226,826
16,300,000
77,526,826
Business acquisitions
36,301,098
‐
36,301,098
December 31, 2019
$
97,527,924
$
16,300,000
$
113,827,924
ACCUMULATED AMORTIZATION
December 31, 2017
$
‐
$
‐
$
‐
Amortization
December 31, 2018
Amortization
‐
‐
‐
‐
‐
‐
‐
‐
‐
December 31, 2019
$
‐
$
‐
$
‐
NET BOOK VALUE
December 31, 2018
61,226,826
16,300,000
77,526,826
December 31, 2019
97,527,924
16,300,000
113,827,924
At December 31, 2019, 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 net operating income 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 5.98% based on management’s judgement in this
geographic region.
Notes: 14
31
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 6 – Continued
Kamloops, BC group of CGU’s
‐ The cash flow projection includes specific estimates based on the expected life of the properties,
with a net operating income 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 6.89% 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 net operating income 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 5.98% based on management’s experience in this
geographic region.
Sentinel Self‐Storage group of CGU’s
‐ The cash flow projection includes specific estimates based on the expected life of the properties,
with a net operating income 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, and is consistent with the CGU’s historical growth rate.
‐ Cash flows were discounted at a pre‐tax rate of 4.80% based on management’s experience and the
superior quality and location of these properties.
Portable Storage group of CGU’s
‐ The cash flow projection includes specific estimates based on the expected life of storage containers,
with a net operating income growth rate of 4.6% 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 6.39% based on management’s experience in these
markets.
Real Storage group of CGU’s
‐ The cash flow projection includes specific estimates based on the expected life of the properties,
with a net operating income growth rate of 5% during the first three years and 4% thereafter.
Given the location of the stores in this portfolio and with SVI already operating in many of the 27
markets that the stores are located in, management believes that this growth rate is sustainable.
‐ Cash flows were discounted at a pre‐tax rate of 5.00% based on management’s experience and
location of these properties.
32
Notes: 15
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 6 – Continued
Management Division 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.
RecordXpress Division CGU
‐ The cash flow projection includes specific estimates for five years with a growth rate of 1%, which
management feels would be representative of the future cash flows from these assets.
‐ Cash flows were discounted at a pre‐tax rate of 7.5% based on management’s experience in the
records management business.
The most sensitive inputs to the value in use model used for these group of CGU’s are the growth rate and
the discount rate:
‐ A 1% increase or decrease in the growth rate would not result in an impairment of these groups of
CGU’s.
‐ A 1% increase or decrease in the discount rate would not result in an impairment of these groups
of CGU’s.
Group of CGUʹs
Goodwill
Carrying Value
Manitoba and Saskatche wan
$
2,621,716
$
26,759,487
Kamloops, BC
London, ON
Se ntine l Se lf‐Storage
Portable Storage
Re al Storage
Manage me nt Division
Re cordXpre ss Division
76,470
142,807
52,442,159
2,578,968
33,622,150
3,364,706
2,678,948
7,844,970
2,113,312
435,047,242
14,502,185
260,260,280
16,300,000
7,934,692
$
97,527,924
$
770,762,168
Notes: 16
33
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
7. Debt
Mortgages
December 31, 2019
Weighted
Average
Balance
Rate
Range
December 31, 2018
Weighted
Average
Balance
Rate
Range
Fixed/Variable
3.18% to 5.00%
4.21%
662,333,188
3.18% to 5.20% 4.24%
555,183,118
Maturity: Jul 2020 to Nov 2029
Maturity: Jan 2019 to Dec 2028
Deferred financing costs, net of accretion
of $3,656,956 (Dec 31, 2018 ‐ $2,514,319)
Lines of Credit and Promissory Notes
(3,856,505)
658,476,683
(2,505,296)
552,677,822
Variable
Fixed
Maturity: Aug 2020 to Dec 2022
Maturity: Jul 2019 to Apr 2021
4.78%
72,413,656
4.47%
149,733,334
Maturity: Feb 2020 to Apr 2022
4.00%
312,898,053
‐
4.12%
385,311,709
4.47%
149,733,334
4.18%
1,043,788,392
4.29%
702,411,156
Reconciliation of Debt
The following table reconciles the changes in cash flows from financing activities for the
Corporationʹs debt:
Debt, beginning of period
Advances from debt
Repayment of debt
Total cash flow from debt financing activities
December 31,
December 31,
2019
2018
$
702,411,156
$
563,975,987
536,106,032
(193,377,587)
342,728,445
420,840,336
(281,267,693)
139,572,643
Change in deferred financing costs
(1,351,209)
(1,137,474)
Debt, end of period
$
1,043,788,392
$
702,411,156
The bank prime rate at December 31, 2019 was 3.95% (December 31, 2018 – 3.95%).
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 debt service coverage ratios,
a fixed charge coverage ratio, a tangible net worth ratio, and a loan to value ratio. As of December 31, 2019,
the Corporation is in compliance with all covenants.
34
Notes: 17
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 7 – Continued
The deferred financing costs consist of fees and costs incurred to obtain the related mortgage financing,
less accumulated amortization.
Principal repayments on mortgages 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
$
$
$
$
$
$
455,965,637 (includes lines of credit of $372.4 million)
81,662,231
141,284,984
43,444,435
14,603,686
310,683,924
The Corporation entered into interest rate swap contracts during the year in order to fix the interest rate on
$600 million of debt at a weighted average rate of 4.07%. The swaps mature between April 2026 and
November 2029.
As at December 31, 2019, the swap had an unrealized fair value loss of $9,291,210 (December 31, 2018 ‐ $nil)
and a total fair value of $9,291,210.
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, 2017
345,226,934
$
319,571,781
Number of Shares
Amount
Issued on asset acquisitions
Dividend reinvestment plan
Share option and warrant redemption
Share issuance costs
Balance, December 31, 2018
Issued on acquisitions
Dividend reinvestment plan
Share option redemption
Share issuance costs
Balance, December 31, 2019
6,313,955
613,694
3,568,391
‐
15,661,727
1,497,892
1,906,263
(84,962)
355,722,974
338,552,701
5,464,286
537,795
1,080,000
‐
15,300,000
1,447,278
350,350
(64,666)
362,805,055
$
355,585,663
Notes: 18
35
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
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.
Contributed surplus:
December 31, 2019
December 31, 2018
Opening balance
Stock based compensation
Redemption of stock options and warrants
Ending balance
$
5,218,589
3,593,638
‐
$
8,812,227
$
$
3,540,210
1,901,631
(223,252)
5,218,589
Stock Options
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 technical consultants of the
Corporation, non‐transferable options to purchase common shares provided that: i) the number of common
shares reserved for issuance will not exceed 10% of the issued and outstanding common shares; ii) the
options are exercisable for a period of up to 10 years from the date of grant; iii) the number of common
shares reserved for issuance to any individual director or officer will not exceed 5% of the issued and
outstanding common shares; and iv) the number of common shares reserved for issuance to all technical
consultants, if any, will not exceed 2% of the issued and outstanding shares. The exercise price for
purchasing these shares cannot be less than the minimum exercise price as provided by Exchange rules.
The following table summarizes information about stock options outstanding and exercisable as at:
December 31, 2019
December 31, 2018
Weighted Average
Exercise Price
Options
Options
Weighted Average
Exercise Price
Opening
Exercised/Expired
Granted
Closing and Exercisable
13,537,450
(1,095,000)
6,000,000
18,442,450
$1.36
0.37
2.90
$1.92
11,555,850
(1,018,400)
3,000,000
13,537,450
$1.01
0.73
2.52
$1.36
36
Notes: 19
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 8 – Continued
The fair value of options granted in 2019 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
0.10%
1.49%
4 Years
19.20%
Stock options exercisable and outstanding are as follows:
Exercise Price
0.23
$
$
0.33
0.41
$
$
0.50
$
1.36
$
1.78
$
2.52
$
2.90
Options exercisable and outstanding
Vesting Date
May 6, 2009
Jun. 19, 2014
Apr. 28, 2015
Sep. 14, 2015
Dec. 21, 2016
Mar. 16, 2017
May 4, 2018
May 28, 2019
Expiry Date
May 6, 2019
Jun. 19, 2024
Apr. 28, 2025
Sep. 14, 2025
Dec. 21, 2026
Mar. 16, 2027
May 4, 2028
May 28, 2029
December 31, 2019
‐
140,000
2,122,450
1,570,000
2,810,000
2,850,000
3,000,000
5,950,000
18,442,450
December 31, 2018
990,000
180,000
2,122,450
1,570,000
2,825,000
2,850,000
3,000,000
‐
13,537,450
Equity Incentive Plan
Under the Corporation’s Equity Incentive Plan passed on May 30, 2018 (the “Plan”), directors, employees
and consultants are eligible to receive awards, in the form of Restricted Share Units (“RSU’s”), Deferred
Share Units (“DSU’s”) and Named Executive Officer Restricted Share Units (“Neo RSU’s”), as and when
granted by the Board, at its sole discretion. The maximum number of awards that may be issued under the
Plan is 17,545,677. The maximum number of shares that may be reserved for issuance under the Plan,
together with any of the Corporation’s other share‐based compensation arrangements, may not exceed 10%
of the issued shares of the Corporation.
The RSU’s and DSU’s that are granted vest in equal annual amounts over three years. The Neo RSU’s vest
three years after the date of grant. RSU’s, DSU’s and Neo RSU’s are entitled to be credited with dividend
equivalents in the form of additional RSU’s, DSU’s and Neo RSU’s, respectively.
With certain exceptions, the Plan provides that (i) the maximum number of awards that may be granted to
any one participant together with any other share‐based compensation arrangements, in any 12 month
period, may not exceed 5% of the issued shares, and, in the case of any consultant, may not exceed 2% of
the issued shares; and (ii) the total value of all securities that may be issued to any non‐employee director
under all of the Corporation’s security based compensation arrangements may not exceed $150,000 per
annum.
Notes: 20
37
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 8 – Continued
The Corporation entered into total return swaps (“TRS”) as economic hedges of the Corporation’s DSUs
and RSUs. Under the terms of the TRS, a bank has the right to purchase the Corporation’s shares in the
marketplace as a hedge against the returns in the TRS. At December 31, 2019, 618,652 TRS units were
outstanding.
At December 31, 2019, 100% of the combined DSU and RSU exposures were economically hedged
(December 31, 2018 ‐ nil%). Hedge accounting is not applied for the DSU/RSU hedging program.
Under the Plan, 240,980 common shares at a value of $894,038 have been issued as at December 31, 2019.
Dividends
A cash dividend of $0.002614 per common share was declared on March 15, 2019 and paid to shareholders
of record on March 29, 2019.
A cash dividend of $0.002627 per common share was declared on June 21, 2019 and paid to shareholders
of record on June 28, 2019.
A cash dividend of $0.002640 per common share was declared on September 16, 2019 and paid to
shareholders of record on September 30, 2019.
A cash dividend of $0.002653 per common share was declared on December 17, 2019 and payable to
shareholders of record on December 31, 2019.
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 and accounts payable and
accrued liabilities approximate their carrying amount due to the relatively short periods to maturity of
these financial instruments. 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.
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.
38
Notes: 21
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 9 – Continued
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.
The fair value of financial liabilities was as follows:
As at December 31, 2019
As at De ce mbe r 31, 2018
Fair Value
Carrying
Hie rarchy
Amount
Fair
Value
Carrying
Amount
Fair
Value
Financial Liabilitie s:
De bt
Le ve l 2
1,043,788,392
1,049,023,737
702,411,156
686,639,088
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, entering into interest rate swap
contracts, 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. The impact on the Statements of 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, 2019 would have been approximately
$1,369,745 (December 31, 2018 ‐ $1,539,550).
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.
The Corporation has approximately $670,000 of receivables from related parties at December
31, 2019. Management believes there is low credit risk associated with these related party
balances due to the nature of the relationship and the historical loss rates.
Notes: 22
39
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 9 – Continued
Change in the Corporation’s allowance for expected credit losses is as follows:
Balance December 31, 2017
Charges or adjustments during the year
Balance December 31, 2018
Charges or adjustments during the year
Balance December 31, 2019
$298,178
(47,520)
250,658
98,968
$349,626
The creation and release of the allowance for expected credit losses has been included in operating
costs in the 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. It is the Corporation’s intention to renew any debt coming
due in the next fiscal year. The maturities of long term financial liabilities are summarized in
Note 7.
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 may
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.
40
Notes: 23
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
10. Income Tax
2019
2018
Loss before taxes
(62,380,647)
(32,216,153)
Combined federal and provincial statutory income tax rate
26.75%
26.75%
Income tax recovery calculated at statutory rate
Non‐deductible items
Change in tax rate and other items
Income tax expense (recovery)
(16,686,823)
(8,617,821)
2,325,303
(1,900,658)
502,554
50,409
(16,262,178)
(8,064,858)
Movements in deferred tax assets (liabilities) related to temporary differences during the year are as
follows:
December 31,
Recognized on
2018
acquisitions
IFRS 16
Transition
Adjustment
Recognized in
December 31,
earnings
2019
Property, plant and equipment
(59,768,535)
(27,607,095)
(4,861,617)
(4,078,485)
(96,315,732)
Goodwill and intangible assets
(4,868,083)
(6,015,055)
Long term debt
Interest rate swaps
Lease liability
(641,839)
‐
‐
Deferred tax assets not recognized
1,585,951
Non‐capital loss carry forwards
16,666,497
‐
‐
‐
‐
‐
‐
‐
‐
5,184,522
‐
‐
9,483,698
(362,210)
2,456,596
1,555,314
(77,904)
7,285,169
(1,399,440)
(1,004,049)
2,456,596
6,739,836
1,508,047
23,951,666
Deferred tax asset (liability)
(47,026,009)
(33,622,150)
322,905
16,262,178
(64,063,076)
Notes: 24
41
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
11. Related Party Transactions
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, 2019, the Corporation paid $291,152 (December 31, 2018 ‐ $237,725) for royalties and
$82,585 (December 31, 2018 ‐ $920,071) 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, 2019 was $73,783 (December 31, 2018 ‐ $22,461) payable to CPFI.
The Corporation has management agreements with Access Self Storage Inc. and related companies
(“Access Group”). These companies are related to Steven Scott and Iqbal Khan who are directors of the
Corporation. The Corporation invoices the Access Group for management fees as well as additional
services it provides as part of the management agreements. During the year ended December 31, 2019, the
Corporation received $7,559,825 (December 31, 2018 – $6,103,873) in payments and reimbursements related
to the management agreement.
Included in accounts payable and accrued liabilities was $292,132 (December 31, 2018 ‐ $517,993) payable
to the Access Group. Included in accounts receivable was $671,452 (December 31, 2018 ‐ $1,206,855)
receivable from the Access Group.
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, 2019
December 31, 2018
Wages, management fees, bonuses and directors fees
Stock based compensation
12. Capital Risk Management
$
539,196
2,220,877
2,760,073
$
$
390,194
1,625,895
2,016,089
$
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.
42
Notes: 25
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 12 – Continued
The Corporation reviews and assesses its capital structure on an ongoing basis. 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.
13. Segmented Information
The Corporation operates three 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 boxes, 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.
Notes: 26
43
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 13 – Continued
For the Year Ended December 31, 2019
Se lf
Portable
Manage me nt
Storage
Storage
Division
Corporate
Total
Re ve nue
$
125,764,839
$
7,447,897
$
1,750,304
$
‐
$
134,963,040
Ope rating e xpe nse s
Ne t ope rating income
39,730,109
86,034,730
5,134,990
2,312,907
‐
1,750,304
‐
‐
44,865,099
90,097,941
Acquisition and inte gration
Se lling, ge ne ral & admin.
‐
‐
Inte re st e xpe nse
42,189,684
Unre alize d loss on swaps
Stock base d compe nsation
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
6,982,983
6,982,983
11,214,718
11,214,718
‐
42,189,684
9,291,210
3,593,638
9,291,210
3,593,638
De pre ciation & amortization
76,804,172
1,867,949
365,308
168,926
79,206,355
De fe rre d tax re cove ry
‐
‐
‐
(16,262,178)
(16,262,178)
Ne t income (loss)
$
(32,959,126)
$
444,958
$
1,384,996
$
(14,989,297)
$
(46,118,469)
Additions:
Re al e state and e quipme nt
409,430,685
334,753
‐
247,509
410,012,947
For the Year Ended December 31, 2018
Se lf
Portable
Manage ment
Storage
Storage
Division
Corporate
Total
Re ve nue
$
88,202,008
$
6,464,800
$
1,716,791
$
‐
$
96,383,599
Ope rating e xpense s
Ne t ope rating income
26,269,735
61,932,273
4,254,214
2,210,586
‐
1,716,791
Acquisition and inte gration
Se lling, ge ne ral & admin.
‐
‐
Inte re st e xpense
28,875,906
Stock base d compe nsation
‐
‐
‐
‐
‐
De pre ciation & amortization
56,755,567
1,953,230
De ferre d tax re cove ry
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
2,248,751
6,192,383
30,523,949
65,859,650
2,248,751
6,192,383
‐
28,875,906
1,901,631
1,901,631
148,335
58,857,132
(8,064,858)
(8,064,858)
Ne t income (loss)
$
(23,699,200)
$
257,356
$
1,716,791
$
(2,426,242)
$
(24,151,295)
Additions:
Re al e state and e quipme nt
187,602,427
6,232,460
‐
476,943
194,311,830
44
Notes: 27
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Note 13 – Continued
Total Assets
Se lf
Storage
Portable
Storage
Manage me nt
Division
Corporate
Total
As at De ce mbe r 31, 2018
$
967,246,443
$
19,827,440
$
17,795,589
$
17,921,945
$
1,022,791,417
As at De ce mbe r 31, 2019
$
1,334,810,756
$
17,946,452
$
17,408,039
$
22,700,715
$
1,392,865,962
14. Commitments and Contingencies
Lease Liabilities
The Corporation leases buildings and lands in Kamloops, BC, Montreal, QC, Toronto, ON and Winnipeg,
MB. The leases expire between 2023 and 2054, with the leases expiring in 2023 and 2027 having up to 15
years and 20 years of renewals, respectively, which are expected to be exercised by the Corporation.
The lease liabilities are measured at the present value of the lease payments that are not paid at the balance
sheet date. Lease payments are apportioned between interest expense and a reduction of the lease liability
using the Corporation’s incremental borrowing rate to achieve a constant rate of interest on the remaining
balances of the liability.
For the year ended December 31, 2019, the Corporation recognized $1,019,236 (December 31, 2018 ‐ $nil) in
interest expense related to its lease liabilities. As a result of the adoption of IFRS 16, for the year ended
December 31, 2019, the Corporation recognized $nil (December 31, 2018 ‐ $1,255,333) in operating lease
payments.
A reconciliation of the lease liabilities from the date of adoption of IFRS 16 to December 31, 2019 is as
follows:
Self Storage
Properties
Balance, January 1, 2019
$
19,381,391
Additions
Cash Payments
Interest
6,508,967
(1,418,534)
1,019,236
Balance, December 31, 2019
$
25,491,060
Contingency
The Corporation has no legal contingency provisions at either December 31, 2019 or December 31, 2018.
Notes: 28
45
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
StorageVault Canada Inc.
DIRECTORS
OFFICERS
Steven
Chief
Iqbal
Chief
Scott
Executive Officer
Khan
Financial Officer
Jay Lynne Fleming
Vancouver, BC
Iqbal Khan
Toronto, ON
Steven Scott
Toronto, ON
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
1500,
Calgary,
Telephone
Facsimile
LLP
640 – 5th Avenue
AB T2P 3G4
403‐263‐3385
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
300‐
Calgary,
Telephone
Trust
5th Avenue S.W., 10th Floor
AB T2P 3C4
403‐218‐2800
Facsimile 403‐265‐0232
TSX VENTURE EXCHANGE LISTING:
SVI
46
Notes: 29
Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
(the “Corporation”)
Form 51-102F1
Management’s Discussion and Analysis
For Three Months Ended and Fiscal Year Ended December 31, 2019
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, 2019. This MD&A should
be read in conjunction with the audited fiscal 2019 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 February 27, 2020.
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, portable storage and third party management fees; 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 2020; 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 2019 were purchased on January 1, 2019; 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 should not
47
Annual Report 2019CANADA SELF STORAGE CENTRES
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 completed in Fiscal 2019 being
extrapolated to the entire period for 2019 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 Corporation in fiscal 2020 and revenue and NOI growth
for 2020 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.
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Annual Report 2019CANADA SELF STORAGE CENTRES
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
ACQUISITION COMMITTEE AND ACQUISITION COMMITTEE MANDATE
ACCOUNTING POLICIES
RISKS AND UNCERTAINTIES
CORPORATE CONTACT INFORMATION
50
51
52
54
55
57
64
68
68
69
70
71
74
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Annual Report 2019CANADA SELF STORAGE CENTRES
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;
“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 and amortization, stock based compensation expenses, unrealized gains or losses on interest
rate swaps, 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, 2020 to February 27,
2020
“SVI” means StorageVault Canada Inc.;
“The Company” or “The Corporation” or “We” or “Our” means StorageVault Canada Inc.
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Annual Report 2019CANADA SELF STORAGE CENTRES
GLOSSARY OF TERMS
following respective meanings:
The following abbreviated terms are used in the Management Discussion & Analysis and have the
“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;
“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 and amortization, stock based compensation expenses, unrealized gains or losses on interest
rate swaps, 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, 2020 to February 27,
2020
“SVI” means StorageVault Canada Inc.;
“The Company” or “The Corporation” or “We” or “Our” means StorageVault Canada Inc.
NATURE OF OUR BUSINESS
Business Overview
The Corporation’s primary business is owning, managing and renting self storage and portable storage
space to individual, governments and commercial customers. The Corporation also stores, shreds, and
manages documents and records for customers. The common shares of the Company are publicly traded
on the TSX Venture Exchange, under the symbol ‘SVI’.
As of December 31, 2019, SVI owned 151 stores and 4,613 portable storage units across Canada, for a total
of 8,177,060 square feet of rentable storage space in 73,632 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. Our records management business operates
under the RecordXpress brand.
In addition to our owned stores, SVI manages 50 stores that are owned by third parties for a management
fee, bringing the total number of stores owned and managed to 201.
SVI’s objective is to own and manage storage assets in Canada’s top markets. The Corporation will focus
on acquiring storage assets with strong existing cash flows, in strategic markets, preferably with excess
capacity and land allowing for future development and expansion of our self, portable and information
and records management 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, last mile storage and distribution, 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 90 million square feet across 3,000 stores, with the top 10
operators owning less than 15% of these stores; by comparison, the US market is estimated at over 2.7
billion square feet across over 51,000 plus 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 and knowledge of the storage industry allows us to identify and take advantage
of accretive and strategic acquisition opportunities.
Pricing and Occupancy
A store’s rental rates and level of occupancy are dependent upon factors such as population density and
growth, the local economy, pricing, customer service and curb appeal. 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 NOI through revenue, by increasing rent per
square foot first and maximizing occupancy second.
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Annual Report 2019CANADA SELF STORAGE CENTRES
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 manages storage locations offering both self storage and portable storage for rent on a weekly
or monthly basis, for personal and commercial 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 track record of closing transactions, our industry
relationships and our storage experience provides SVI 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. 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 is important and the increased size of SVI provides a significant advantage in negotiating better rates
on: marketing, 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 our national footprint, offering different but complementary product choices at various
price points to our customers.
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
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Annual Report 2019CANADA SELF STORAGE CENTRES
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 1,000,000 square feet of development potential on excess land currently owned and operated
by SVI. When the market conditions are suitable and high occupancies and leads indicate pent up demand,
we expect to expand a number of our existing locations. In 2018, we completed 73,500 square feet of
expansion and currently have another 50,000 square feet under construction expected to be completed in
2020.
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.
Expansion of Information and Records Management Business
The records management business is a complementary vertical in the storage space, much like portable
storage, and fills up excess space, and delivers strong "sticky" cash flows. By virtue of consolidation in the
records management industry, RecordXpress has become one of the largest Canadian records management
companies in Canada and as part of SVI, it is the only company that can provide a national platform. This
is a significant competitive advantage as government organizations such as hospitals and charities do not
want their confidential information in foreign hands.
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.
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Annual Report 2019CANADA SELF STORAGE CENTRES
OUTLOOK
The Corporation’s outlook for acquisitions, share capital, results from operations and subsequent events
are:
Acquisitions
In 2020 we expect to acquire $50 to $75 million of assets.
To date, 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 growth in revenue and NOI in 2020 resulting from the timing of 2019 and 2020 acquisitions and
as we continue to streamline and integrate operations, implement our revenue management systems and
continue to control costs on the $1.3 billion of assets purchased in the past five years.
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.
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Annual Report 2019CANADA SELF STORAGE CENTRES
DESCRIPTION OF OUR OPERATIONS
As at December 31, 2019, 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
43
109
26
25
232
30
15
18
30
8
9
68
14
4
Total
480
151
9,514
15,939
1,766
4,145
28,977
7,110
1,568
4,613
73,632
935,574
1,847,990
238,201
408,248
3,349,217
674,784
157,483
565,563
8,177,060
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 increasing NOI and creating
value. Our management platform has intelligent software, supported by dedicated personnel, that
understands the nuances of each local market. Our 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
The management team at SVI has extensive experience in all aspects of the storage industry including:
• delivering results
• management of over 200 storage locations throughout Canada
•
• over 200 years of combined experience in the storage industry by senior management
acquisition, development and management of over 15 million square feet of storage space
Marketing
We implement specific marketing plans for the different localities, 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 to fulfill their last mile storage needs. We conduct specific
store and market analysis 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 Wholesale Canada Ltd. (Costco) members across
Canada. This relationship provides exclusive access to Costco’s vast membership base as a marketing
channel.
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Annual Report 2019CANADA SELF STORAGE CENTRES
Reservation Centre
Our management platform includes a Reservation Centre (call centre) that provides call management
services designed to increase reservations and move-ins, increase productivity at the store level and
improve our corporate image through professionalism, consistency of messaging and willingness to
resolve issues. Our Reservation Centre agents have training in the storage business and understand the
need to introduce and greet professionally, establish rapport with customers, build trust, ask the right
questions, listen, ask for the business and close the sale. The overall result is an increased close rate leading
to improved financial performance.
Technology and Software
SVI stores utilize modern and intelligent 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: (i) 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 (ii) 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.
56
- 10 -
Annual Report 2019CANADA SELF STORAGE CENTRES
FINANCIAL RESULTS OVERVIEW
In fiscal 2019, SVI acquired 46 stores and an information and records management business for $372.7
million. In fiscal 2018, SVI completed $161.4 million of acquisitions. The comparative results are impacted
by the timing of these acquisitions.
Selected Financial Information
(unaudited)
Three Months Ended December 31
(audited)
Fiscal
2019
2018
$
%
2019
2018
$
%
Change
Change
Storage revenue and related services
$
36,712,435
$
26,094,031
$
10,618,404
40.7%
$
133,212,736
$
94,666,808
$
38,545,928
40.7%
Management fees
461,930
468,398
(6,468)
-1.4%
1,750,304
1,716,791
33,513
Operating costs
Net operating income 1
Less:
37,174,365
26,562,429
10,611,936
12,493,978
8,272,355
4,221,623
24,680,387
18,290,074
6,390,313
40.0%
51.0%
34.9%
134,963,040
96,383,599
38,579,441
44,865,099
30,523,949
14,341,150
90,097,941
65,859,650
24,238,291
2.0%
40.0%
47.0%
36.8%
Acquisition and integration costs
687,286
877,302
(190,016)
-21.7%
6,982,983
2,248,751
4,734,232
210.5%
Selling, general and administrative
3,788,657
2,054,325
1,734,332
Interest
11,502,474
8,233,488
3,268,986
Stock based compensation
Unrealized loss on interest rate
swap contracts
-
9,291,210
-
-
-
9,291,210
84.4%
39.7%
-
-
11,214,718
6,192,383
5,022,335
42,189,684
28,875,906
13,313,778
3,593,638
1,901,631
1,692,007
81.1%
46.1%
89.0%
9,291,210
-
9,291,210
-
Depreciation and amortization
22,602,353
16,033,627
6,568,726
41.0%
79,206,355
58,857,132
20,349,223
34.6%
47,871,980
27,198,742
20,673,238
76.0%
152,478,588
98,075,803
54,402,785
55.5%
Net Income (Loss) before taxes
(23,191,593)
(8,908,668)
(14,282,925)
160.3%
(62,380,647)
(32,216,153)
(30,164,494)
93.6%
Deferred tax recovery
11,627,715
8,064,858
3,562,857
44.2%
16,262,178
8,064,858
8,197,320
101.6%
Net Income (Loss)
$
(11,563,878)
$
(843,810)
$
(10,720,068)
1270.4%
$
(46,118,469)
$
(24,151,295)
$
(21,967,174)
91.0%
Weighted average number of common shares outstanding
Basic
Diluted
362,759,780
355,429,257
7,330,523
362,759,780
355,429,257
7,330,523
2.1%
2.1%
360,468,060
351,893,667
8,574,393
360,468,060
351,893,667
8,574,393
2.4%
2.4%
Net income (loss) per common share
Basic
Diluted
1 Non-IFRS Measure.
$
(0.032)
$
(0.002)
$
(0.128)
$
(0.069)
$
(0.032)
$
(0.002)
$
(0.128)
$
(0.069)
Storage revenue and related services
For the three months ended December 31, 2019, the Corporation had revenues of $36.7 million (December
31, 2018 - $26.1 million), an increase of 40.7%. The revenues for the fiscal year ended December 31, 2019,
increased by $38.6 million or 40.7%, to $133.2 million. This increase is attributable to incremental revenue
from the stores acquired in the current and prior fiscal years and from organic revenue growth. For
additional information, see “Segmented, Existing and New Self Storage and Portable Storage Results.”
- 11 -
57
Annual Report 2019CANADA SELF STORAGE CENTRES
Management fees
The three months ended December 31, 2019 results changed by 1.4% compared to the same prior year
period as a result of the Corporation acquiring managed stores reducing the number of stores in our third
party management platform.
Operating costs
Operating costs for the three months and fiscal year ended December 31, 2019 were $12.5 million and $44.9
million (December 31, 2018 - $8.3 million and $30.5 million). The increase relates to stores acquired in 2018
and 2019 and increases in advertising, property taxes and wages. These increases were slightly muted by
the adoption of IFRS 16 - Leases for leasing costs. The Corporation has elected to apply the modified
retrospective approach where comparative figures were not restated. For the three months and fiscal year
ended December 31, 2018, leasing expense included in operating costs equaled $270,727 and $1,102,024,
respectively.
Net income (loss)
Our net loss of $46.1 million for fiscal year ended December 31, 2019 results from non-cash items of $79.2
million of depreciation and amortization, $9.3 million of unrealized loss on interest rate swap contracts and
$3.6 million in stock based compensation, and which are offset by deferred tax recovery of $16.3 million.
Net operating income
For the three months ended December 31, 2019, the Corporation had net operating income (NOI), a non-
IFRS measure, of $24.7 million (December 31, 2018 - $18.3 million), an increase of 34.9%. The NOI for the
fiscal year ended December 31, 2019, increased by $24.2 million or 36.8%, to $90.1 million. The increase
was due to the NOI from assets purchased throughout fiscal 2018 and 2019, streamlining and integration
of operations, increased occupancy, increased rates through our revenue management systems and
controlling costs.
Acquisition and integration costs
Acquisition and integration costs include costs and professional fees incurred to identify, qualify, close and
integrate the assets purchased and pending. SVI has closed $372.7 million of acquisitions in fiscal 2019,
following closing $161.4 million of acquisitions in fiscal 2018 and $485.4 million in fiscal 2017.
Selling, general and administrative
Selling, general and administrative expenses include all expenses not related to the stores including
corporate office overhead and payroll, operational management platform development and professional
fees. These costs have increased as a result of increased activity associated with the growth and anticipated
future growth of the business.
Interest
Interest expense increased as the total amount of debt outstanding increased with current and prior year
acquisitions. As at December 31, 2019, our total debt was $1.0 billion compared to $702.4 million at
December 31, 2018.
Unrealized loss on interest rate swap contracts
The Corporation entered into interest rate swap contracts to fix the interest rate on its debt. Based on
market rates as at December 31, 2019, the interest rate swaps had unrealized losses of $9.3 million. Of this,
$8.5 million relates to fixed long term debt with a weighted years to maturity of 9.24.
Depreciation and amortization
The increase in depreciation and amortization expense is primarily due to depreciating the additional
assets acquired throughout fiscal 2018 and 2019.
58
- 12 -
Annual Report 2019CANADA SELF STORAGE CENTRES
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 integration 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), unrealized loss on swap contracts and acquisition and integration costs, if any.
Acquisition and integration costs, adjusted for in our AFFO, are one time in nature to the specific assets
purchased 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, 2019 was $8.7 million and $29.7 million versus
$7.1 million and $28.5 million, respectively for the same period in 2018. The FFO increase has been
impacted by the acquisition and integration costs incurred ($7.0 million for the fiscal year ended December
31, 2019 versus $2.2 million for the same period in 2018) for the $372.7 million of acquisitions closed in fiscal
2019 ($161.4 million in 2018).
AFFO for the three months and fiscal year ended December 31, 2019 was $9.4 million and $36.7 million
versus $8.0 million and $30.8 million, respectively for the same period in 2018. These increases are the
result of contributions from the assets purchased and strong operational performance.
The FFO and AFFO for the three months and fiscal year ended December 31, 2019 and 2018 are:
(unaudited)
Three Months Ended December 31
(audited)
Fiscal
2019
2018
Change
2019
2018
Change
$
%
$
%
Net Income (loss)
$
(11,563,878)
$
(843,810)
$
(10,720,068)
1270.4%
$
(46,118,469)
$
(24,151,295)
$
(21,967,174)
91.0%
Adjustments:
Stock based compensation
-
Unrealized loss on interest rate
swap contracts
9,291,210
-
-
-
9,291,210
-
-
3,593,638
1,901,631
1,692,007
89.0%
9,291,210
-
9,291,210
-
Deferred tax recovery
(11,627,715)
(8,064,858)
(3,562,857)
44.2%
(16,262,178)
(8,064,858)
(8,197,320)
101.6%
Depreciation and amortization
22,602,353
16,033,627
6,568,726
41.0%
79,206,355
58,857,132
20,349,223
34.6%
FFO 1
Adjustments:
20,265,848
7,968,769
12,297,079
154.3%
75,829,025
52,693,905
23,135,120
43.9%
$
8,701,970
$
7,124,959
$
1,577,011
22.1%
$
29,710,556
$
28,542,610
$
1,167,946
4.1%
Acquisition and integrations costs
687,286
877,302
(190,016)
-21.7%
6,982,983
2,248,751
4,734,232
210.5%
AFFO 1
1 Non-IFRS Measure.
$
9,389,256
$
8,002,261
$
1,386,995
17.3%
$
36,693,539
$
30,791,361
$
5,902,178
19.2%
- 13 -
59
Annual Report 2019CANADA SELF STORAGE CENTRES
Annualized Net Operating Income and Funds from Operations
The Company completed the purchase of 46 stores and an information and records management business
during fiscal 2019 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, utilizing historical data, 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 2019, were purchased as of January 1, 2019 and owned for the entire 12 month period.
The results of this annualized statement show that NOI, FFO and AFFO would be higher by $6.7 million,
$3.6 million and $3.6 million, respectively. NOI would have been $96.8 million, FFO would be $33.3 million
and the AFFO would be $40.3 million. The Corporation expects to realize the full benefit of these
acquisitions in fiscal 2019.
For the Year Ended December 31, 2019
Actual
Annualized Results
Incremental
Notes
Storage revenue and related services
Management fees
Property operating costs
Net operating income
Adjustments:
Acquisition and integration costs
Selling, general and administrative
Interest
Funds from Operations
Adjustment:
Acquisition and integration costs
Adjusted Funds from Operations
$
133,212,736
1,750,304
134,963,040
44,865,099
90,097,941
$
141,106,483
1,750,304
142,856,787
46,030,057
96,826,730
6,982,983
11,214,718
42,189,684
60,387,385
29,710,556
6,982,983
36,693,539
6,982,983
12,004,093
44,524,908
63,511,984
33,314,746
6,982,983
40,297,729
$
7,893,747
-
7,893,747
1,164,958
6,728,789
-
789,375
2,335,224
3,124,599
3,604,190
-
3,604,190
1
1
2
3
4
2
Note 1 - the results from all stores acquired in fiscal 2019, have been adjusted as if the purchase occurred
on January 1, 2019. For revenues, we assumed achieved occupancies and rent per square foot were
repeated from the period prior to acquisition. Information regarding expenses incurred during 2019 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 – based on existing scale and management infrastructure.
Note 4 – annualized amount determined based on interest rate and debt outstanding at December 31,
2019.
60
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Annual Report 2019CANADA SELF STORAGE CENTRES
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 customers 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 one of our location.
Management fees are revenues generated from the management of stores owned by third parties.
Revenue, operating costs and net operating income
(unaudited)
Three Months Ended December 31
(audited)
Fiscal
2019
2018
Change
2019
2018
Change
$
%
$
%
Revenue
Existing Self Storage 1
New Self Storage 1
$
22,114,626
$
20,721,821
$
1,392,805
6.7%
$
86,351,490
$
80,614,463
$
5,737,027
7.1%
12,803,869
3,817,754
8,986,115
235.4%
39,413,349
7,587,545
31,825,804
419.4%
Total Self Storage
34,918,495
24,539,575
10,378,920
42.3%
125,764,839
88,202,008
37,562,831
42.6%
Portable Storage
Management fees
Combined
1,793,940
1,554,456
239,484
461,930
468,398
(6,468)
37,174,365
26,562,429
10,611,936
15.4%
-1.4%
40.0%
5.8%
-
7,447,897
6,464,800
983,097
15.2%
1,750,304
1,716,791
33,513
2.0%
134,963,040
96,383,599
38,579,441
40.0%
24,160,064
22,662,188
1,497,876
6.6%
-
1,102,024
(1,102,024)
-
6,036,315
5,704,129
332,186
-
270,727
(270,727)
5,168,539
1,188,659
3,979,880
334.8%
15,570,045
2,505,523
13,064,522
521.4%
11,204,854
7,163,515
4,041,339
56.4%
39,730,109
26,269,735
13,460,374
51.2%
16.3%
51.0%
7.1%
-
5,134,990
4,254,214
880,776
44,865,099
30,523,949
14,341,150
20.7%
47.0%
62,191,426
57,952,275
4,239,151
7.3%
-
(1,102,024)
1,102,024
-
16,078,311
15,017,692
1,060,619
-
(270,727)
270,727
7,635,330
2,629,095
5,006,235
190.4%
23,843,304
5,082,022
18,761,282
369.2%
23,713,641
17,376,060
6,337,581
36.5%
86,034,730
61,932,273
24,102,457
38.9%
504,816
461,930
445,616
468,398
59,200
(6,468)
13.3%
-1.4%
2,312,907
2,210,586
1,750,304
1,716,791
102,321
33,513
4.6%
2.0%
Operating Costs
Existing Self Storage
Impact of IFRS 16 on Costs 2
New Self Storage
Total Self Storage
Net Operating Income 1
Existing Self Storage
Impact of IFRS 16 on NOI 2
New Self Storage
Total Self Storage
Portable Storage
Management fees
Portable Storage
1,289,124
1,108,840
180,284
Combined
12,493,978
8,272,355
4,221,623
Combined
$
24,680,387
$
18,290,074
$
6,390,313
34.9%
$
90,097,941
$
65,859,650
$
24,238,291
36.8%
1 Non -IFRS Measure.
2 For comparative purposes, due to the Corporation applying IFRS 16 - Leases on a modified retrospective basis where the Corporation will not restate
comparative figures, the Corporation has separated out the leasing expense incurred for the three months and fiscal year ended December 31, 2018.
Existing Self Storage
For the three months ended December 31, 2019, revenue and NOI increased by 6.7% and 7.1%, respectively,
over the same prior year period, resulting in revenue and NOI increasing by 7.1% and 7.3% for the full
year. The revenue increase was driven by continued execution of our revenue management program and
increased occupancy. While controlling costs through operational efficiencies continues to be a priority,
we experienced increases in advertising, property taxes and wages.
- 15 -
61
Annual Report 2019CANADA SELF STORAGE CENTRES
New Self Storage
Increase is a result of acquiring stores throughout 2018 and 2019 resulting in NOI growth quarter over
quarter as we commenced reporting results.
Portable Storage
Increase in revenue per unit rented and occupancy resulted in revenue and NOI growth over the same
prior year period.
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 due to heating and
snow removal costs resulting in lower NOI margins in Q1 and Q4, versus Q2 and Q3. This is consistent
with results experienced in the Northern US.
Fiscal 2019 ('000)
Fiscal 2018 ('000)
Q4
Q3
Q2
Q1
Total
Q4
Q3
Q2
Q1
Total
NOI 1
Existing Self Storage
$
16,078
$
16,561
$
15,718
$
13,835
$
62,191
$
14,747
$
15,193
$
14,378
$
12,532
$
56,850
New Self Storage
7,635
7,019
6,389
2,800
23,843
2,629
1,608
505
340
5,082
Total Self Storage
23,714
23,580
22,106
16,635
86,035
17,376
16,802
14,883
12,872
61,932
Portable Storage
Management Fees
505
462
779
469
642
400
387
419
2,313
1,750
446
468
760
442
627
417
377
389
2,211
1,716
$
24,680
$
24,828
$
23,148
$
17,441
$
90,098
$
18,290
$
18,004
$
15,927
$
13,638
$
65,859
1 Non-IFRS Measure
Existing Self Storage
The increase in Q4 2019 over Q4 2018 was substantially driven from continued execution of our revenue
management program, occupancy increase and controlling costs through operational efficiencies.
New Self Storage
SVI acquired 15 stores in 2018 and 46 stores in 2019. These additions have resulted in NOI growth quarter
over quarter as we commenced reporting results.
Portable Storage
Increase in revenue per unit and occupancy resulted in revenue and NOI growth over the same prior year
period.
62
- 16 -
Annual Report 2019CANADA SELF STORAGE CENTRES
Summary of Quarterly Results (unaudited)
Revenue
$37,174,365
$37,310,765
$34,255,855
$26,222,055
$134,963,040
Net Income /
(Loss)
($11,563,878)
($9,399,776)
($16,310,988)
($8,843,827)
($46,118,469)
Net Income /
(Loss) per
share
($0.032)
($0.026)
($0.045)
($0.025)
N/A
$26,562,429
$25,733,852
$23,173,856
$20,913,462
$96,383,599
($843,810)
($6,355,654)
($9,158,368)
($7,793,463)
($24,151,295)
$20,744,110
$18,453,960
$12,557,306
$10,133,138
$61,888,514
$15,343,505
($15,402,377)
($2,995,895)
($10,797,865)
($13,852,632)
$8,900,182
$7,307,070
$6,320,322
$5,296,970
$27,824,544
($18,657,288)
($537,379)
($663,764)
($1,331,005)
($21,189,436)
$4,795,266
$3,137,527
$2,111,281
$1,096,513
$11,140,587
($2,702,281)
($821,330)
($677,127)
($374,472)
($4,575,210)
($0.002)
($0.018)
($0.026)
($0.022)
N/A
$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
Period
2019- Q4
2019- Q3
2019- Q2
2019- Q1
Total 2019
2018- Q4
2018- Q3
2018- Q2
2018- Q1
Total 2018
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
Fully
diluted Net
Income /
(Loss) per
share
($0.032)
($0.026)
($0.045)
($0.025)
N/A
($0.002)
($0.018)
($0.026)
($0.022)
N/A
$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
Total Assets
$1,392,865,962
$1,377,237,690
$1,385,491,977
$1,044,914,091
N/A
$1,022,791,417
$990,262,630
$959,256,102
$922,656,903
N/A
$895,496,381
$839,525,204
$400,216,946
$404,743,767
N/A
$342,803,581
$253,955,856
$179,885,223
$176,728,097
N/A
$171,486,477
$108,865,822
$54,449,748
$27,910,360
N/A
Total
Liabilities
$1,162,117,984
$1,134,721,033
$1,132,963,923
$794,584,280
N/A
$761,864,860
$731,939,098
$694,025,713
$661,214,665
N/A
$627,421,264
$585,777,091
$237,005,503
$238,025,850
N/A
$187,115,587
$131,931,530
$118,343,352
$114,010,014
N/A
$112,922,559
$85,594,955
$25,372,609
$25,033,929
N/A
Dividends
$961,654
$958,230
$952,321
$930,288
$3,802,493
$925,235
$920,981
$920,562
$889,786
$3,656,564
$880,328
$879,376
$765,016
$749,946
$3,274,666
$724,931
$630,309
$440,398
-
$1,795,638
-
-
-
-
-
Note 1:
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.
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Annual Report 2019CANADA SELF STORAGE CENTRES
WORKING CAPITAL, LONG TERM DEBT AND SHARE CAPITAL
Working Capital
Cash provided by operating activities was $30.9 million for the fiscal year ended December 31, 2019,
compared to $29.3 million for the same prior year period. The current year’s balance is muted as a result
of acquisition and integration costs incurred ($7.0 million for the fiscal year ended December 31, 2019 versus
$2.2 million for the same period in 2018) for the $372.7 million of acquisitions closed in fiscal 2019 ($161.4
million in fiscal 2018). These costs offset the increases in operational results achieved from increased rates
through our revenue management systems, increased occupancy, controlling costs and continued
streamlining and integration of operations.
As at December 31, 2019, the Corporation had $24.4 million of cash compared to $19.7 million at December
31, 2018. The cash will be used to pay down debt and fund future acquisitions. The Corporation expects
its cash flow from operations to continue to increase as the full benefit of stores purchased are realized. In
addition, the Corporation will borrow against existing assets to fund acquisitions and its expansion plans.
Debt
As at December 31, 2019 and December 31, 2018, the Corporation held the following debt:
December 31, 2019
Rate
Range
Weighted
Average
Balance
Rate
Range
December 31, 2018
Weighted
Average
Balance
Mortgages
Fixed/Variable
3.18% to 5.00%
4.21%
$
662,333,188
3.18% to 5.20%
4.24%
$
555,183,118
Maturity: Jul 2020 to Nov 2029
Maturity: Jan 2019 to Dec 2028
Deferred financing costs net of accretion
of $3,656,956 (Dec 31, 2018 - $2,514,319)
Lines of Credit and Promissory Note
(3,856,505)
658,476,683
(2,505,296)
552,677,822
Variable
Fixed
Maturity: Aug 2020 to Dec 2022
Maturity: Jul 2019 to Apr 2021
4.78%
72,413,656
4.47%
149,733,334
Maturity: Feb 2020 to Apr 2022
4.00%
312,898,053
-
4.12%
385,311,709
4.47%
149,733,334
4.18%
$
1,043,788,392
4.29%
$
702,411,156
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Annual Report 2019CANADA SELF STORAGE CENTRES
Reconciliation of Debt
The following table reconciles the changes in cash flows from financing activities for the Corporation's debt:
Debt, beginning of period
Advances from debt
Repayment of debt
Total cash flow from debt financing activities
December 31,
2019
December 31,
2018
$
702,411,156
$
563,975,987
536,106,032
(193,377,587)
342,728,445
420,840,336
(281,267,693)
139,572,643
Change in deferred financing costs
(1,351,209)
(1,137,474)
Debt, end of period
$
1,043,788,392
$
702,411,156
The bank prime rate at December 31, 2019 was 3.95% (December 31, 2018 - 3.95%). The weighted average
cost of debt at December 31, 2019 is 4.18% (December 31, 2018 - 4.29%). The Corporation reduced its
variable interest rate exposure by entering into fixed interest rate debt. The Corporation entered into
interest rate swap contracts during the year in order to fix the interest rate on $600 million of debt. The debt
matures between April 2026 and November 2029. As at December 31, 2019, the swap had an unrealized
fair value loss of $9,291,210 (December 31, 2018 - $nil).
The weighted years to maturity, excluding lines of credit, at December 31, 2019 is 5.72 years (December 31,
2018 – 6.18 years).
Mortgages are secured by a first mortgage charge on the real estate and equipment of the Corporation,
general security agreements, assignment of rents and leases and assignments of insurance coverages. The
Corporation must maintain certain financial ratios to comply with the facilities. These covenants include
debt service coverage ratios, a tangible net worth ratio, and a loan to value ratio. As of December 31, 2019
and December 31, 2018, 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 into income of these costs.
Principal repayments on 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
$
$
$
$
$
$
455,965,637 (includes $372.4 million lines of credit)
81,662,231
141,284,984
43,444,435
14,603,686
310,683,924
Of the repayments shown in Year 1, $14.0 million are required under our amortizing term debt mortgages,
$69.5 million relates to loans due in the upcoming twelve months that are expected to be refinanced and
$372.4 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, 2019 and December 31, 2018, the Corporation is in compliance with
all covenants.
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Annual Report 2019CANADA SELF STORAGE CENTRES
The Corporation terms out assets on our lines of credit when deemed appropriate, which includes
determination that the Corporation has been able to implement its operating systems to increase the value
of the assets and that the Corporation has an appropriate mix of assets supporting our lines of credit.
The Corporation’s detailed debt maturity profile as at December 31, 2019 is:
Year of debt
maturity
Mortgages
Payable
2020
$
69,509,937
2021
2022
2023
2024
69,498,730
134,138,768
34,868,081
4,060,804
Thereafter
363,154,923
$
675,231,242
Contractural Mortgage Maturities and Interest Rates
Weighted
Average
Interest
Rate
4.48%
4.31%
4.07%
4.74%
4.95%
4.14%
4.21%
Weighted
Average
Interest Rate
Total Debt
Lines of Credit
$
9,733,333
5.20%
$
79,243,270
-
-
69,498,730
362,680,324
4.09%
496,819,092
-
-
-
-
-
-
34,868,081
4,060,804
363,154,923
$
372,413,657
4.12%
1,047,644,899
Weighted
Average
Interest
Rate
4.57%
4.31%
4.09%
4.74%
4.95%
4.14%
4.18%
Deferred financing costs net of accretion
Balance
(3,856,505)
$
1,043,788,394
Share Capital
The common shares issued are:
Balance, December 31, 2017
345,226,934
$
319,571,781
Number of Shares
Amount
Issued on asset acquisitions
Dividend reinvestment plan
Share option and warrant redemption
Share issuance costs
Balance, December 31, 2018
Issued on acquisitions
Dividend reinvestment plan
Share option redemption
Share issuance costs
Balance, December 31, 2019
6,313,955
613,694
3,568,391
-
15,661,727
1,497,892
1,906,263
(84,962)
355,722,974
338,552,701
5,464,286
537,795
1,080,000
-
15,300,000
1,447,278
350,350
(64,666)
362,805,055
$
355,585,663
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 automatically reinvest
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Annual Report 2019CANADA SELF STORAGE CENTRES
The Corporation terms out assets on our lines of credit when deemed appropriate, which includes
determination that the Corporation has been able to implement its operating systems to increase the value
of the assets and that the Corporation has an appropriate mix of assets supporting our lines of credit.
The Corporation’s detailed debt maturity profile as at December 31, 2019 is:
Contractural Mortgage Maturities and Interest Rates
maturity
Payable
Rate
Lines of Credit
Interest Rate
Total Debt
2020
$
69,509,937
$
9,733,333
5.20%
$
79,243,270
Weighted
Average
362,680,324
4.09%
496,819,092
-
-
-
-
-
-
-
-
69,498,730
34,868,081
4,060,804
363,154,923
(3,856,505)
$
1,043,788,394
Weighted
Average
Interest
Rate
4.57%
4.31%
4.09%
4.74%
4.95%
4.14%
4.18%
$
675,231,242
$
372,413,657
4.12%
1,047,644,899
Year of debt
Mortgages
2021
2022
2023
2024
69,498,730
134,138,768
34,868,081
4,060,804
Thereafter
363,154,923
Weighted
Average
Interest
4.48%
4.31%
4.07%
4.74%
4.95%
4.14%
4.21%
Deferred financing costs net of accretion
Balance
Share Capital
The common shares issued are:
Balance, December 31, 2017
Issued on asset acquisitions
Dividend reinvestment plan
Share option and warrant redemption
Share issuance costs
Balance, December 31, 2018
Issued on acquisitions
Dividend reinvestment plan
Share option redemption
Share issuance costs
Balance, December 31, 2019
Number of Shares
Amount
345,226,934
$
319,571,781
355,722,974
338,552,701
6,313,955
613,694
3,568,391
5,464,286
537,795
1,080,000
-
-
15,661,727
1,497,892
1,906,263
(84,962)
15,300,000
1,447,278
350,350
(64,666)
362,805,055
$
355,585,663
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 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.
Stock Options
A total of 18,442,450 options were outstanding as at December 31, 2019 (December 31, 2018 – 13,537,450).
Of the outstanding amount, 18,442,450 options were exercisable (December 31, 2018 – 13,537,450). The
details are as follows:
Exercise Price
$
0.23
$
0.33
$
0.41
$
0.50
$
1.36
$
1.78
$
2.52
$
2.90
Options exercisable and outstanding
Vesting Date
May 6, 2009
June 19, 2014
April 28, 2015
Sept 14, 2015
Dec 21, 2016
Mar 16, 2017
May 4, 2018
May 28, 2019
Expiry Date
May 6, 2019
June 19, 2024
April 28, 2025
Sept 14, 2025
Dec 21, 2026
Mar 16, 2027
May 4, 2028
May 28, 2029
December 31, 2019
-
140,000
2,122,450
1,570,000
2,810,000
2,850,000
3,000,000
5,950,000
18,442,450
December 31, 2018
990,000
180,000
2,122,450
1,570,000
2,825,000
2,850,000
3,000,000
-
13,537,450
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.
Equity Incentive Plan
Under the Corporation’s Equity Incentive Plan passed on May 30, 2018 (the “Plan”), directors, employees
and consultants are eligible to receive awards, in the form of Restricted Share Units (“RSU’s”), Deferred
Share Units (“DSU’s”) and Named Executive Officer Restricted Share Units (“Neo RSU’s”), as and when
granted by the Board, in its sole discretion. The maximum number of awards that may be issued under the
Plan is 17,545,677. The maximum number of shares that may be reserved for issuance under the Plan,
together with any of the Corporation’s other share-based compensation arrangements, may not exceed 10%
of the issued shares of the Corporation.
The RSU’s and DSU’s that are granted vest in equal annual amounts over three years. The Neo RSU’s vest
three years after the date of grant. RSU’s, DSU’s and Neo RSU’s are entitled to be credited with dividend
equivalents in the form of additional RSU’s, DSU’s and Neo RSU’s, respectively.
The Corporation entered into total return swaps (“TRS”) as economic hedges of the Corporation’s DSUs
and RSUs. Under the terms of the TRS, a bank has the right to purchase the Corporation’s shares in the
marketplace as a hedge against the returns in the TRS. At December 31, 2019, 618,652 TRS units were
outstanding. At December 31, 2019, 100% of the combined DSU and RSU exposures were economically
hedged (December 31, 2018 - nil%). Hedge accounting is not applied for the DSU/RSU hedging program.
Under the Plan, 240,980 common shares at a value of $894,038 have been issued as at December 31, 2019.
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Annual Report 2019CANADA SELF STORAGE CENTRES
CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
Lease Liabilities
The Corporation leases buildings and lands in Kamloops, BC, Montreal, QC, Toronto, ON and Winnipeg,
MB. The leases expire between 2023 and 2054, with the leases expiring in 2023 and 2027 having up to 15
years and 20 years of renewals, respectively, which are expected to be exercised by the Corporation.
The lease liabilities are measured at the present value of the lease payments that are not paid at the balance
sheet date. Lease payments are apportioned between interest expense and a reduction of the lease liability
using the Corporation’s incremental borrowing rate to achieve a constant rate of interest on the remaining
balances of the liability.
For the year ended December 31, 2019, the Corporation recognized $1,019,236 (December 31, 2018 - $nil) in
interest expense related to its lease liabilities. As a result of the adoption of IFRS 16, the Corporation
recognized $nil and $nil (December 31, 2018 - $1,255,333) in operating lease payments.
A reconciliation of the lease liabilities from the date of adoption of IFRS 16 to December 31, 2019 is as
follows:
Self Storage
Properties
Balance, January 1, 2019
$
19,381,391
Additions
Cash Payments
Interest
6,508,967
(1,418,534)
1,019,236
Balance, December 31, 2019
$
25,491,060
Contingency
The Corporation has no legal contingency provisions at either December 31, 2019 or December 31, 2018.
Off-Balance Sheet Arrangements
The Corporation is not party to any industry contracts or arrangements other than those disclosed in the
consolidated financial statements.
RELATED PARTY TRANSACTIONS
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, 2019, the Corporation paid $291,152 (December 31, 2018 - $237,725) for royalties and
$82,585 (December 31, 2018 - $920,071) for storage containers and other equipment under the Master
Franchise Agreement.
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Annual Report 2019CANADA SELF STORAGE CENTRES
Included in accounts payable and accrued liabilities, relating to the previously noted transactions, at
December 31, 2019 was $73,783 (December 31, 2018 - $22,461) payable to CPFI.
The Corporation has management agreements with Access Self Storage Inc. and related companies
(“Access Group”). These companies are related to Steven Scott and Iqbal Khan who are directors of the
Corporation. The Corporation invoices the Access Group for management fees as well as additional
services it provides as part of the management agreements. During the year ended December 31, 2019, the
Corporation received $7,559,825 (December 31, 2018 – $6,103,873) in payments and reimbursements related
to the management agreement.
Included in accounts payable and accrued liabilities was $292,132 (December 31, 2018 - $517,993) payable
to the Access Group. Included in accounts receivable was $671,452 (December 31, 2018 - $1,206,855)
receivable from the Access Group.
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:
Year Ended
December 31, 2019
Year Ended
December 31, 2018
Wages, management fees, bonuses and directors fees
Stock based compensation
$
539,196
2,220,877
2,760,073
$
$
390,194
1,625,895
2,016,089
$
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 eight voting members, six 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 related party property acquisitions, 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.
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Annual Report 2019CANADA SELF STORAGE CENTRES
ACCOUNTING POLICIES
The Corporation’s significant accounting policies are summarized in Note 3 to the December 31, 2019
annual audited consolidated financial statements. Except for the adoption of IFRS 16 – Leases, there has
been no change in significant accounting policies from the Corporation’s audited consolidated annual
financial statements from December 31, 2018. In addition, there has been no change in the Company’s
financial instrument risks.
Non-IFRS Financial Measures
Management uses both IFRS and Non-IFRS Measures to assess the Corporation’s operating performance.
In this MD&A, management uses the following terms and ratios which do not have a standardized meaning
under IFRS and are unlikely to be comparable to similar measures presented by other companies:
i. 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.
ii.
Funds from Operations (“FFO”) – FFO is defined as net income (loss) excluding gains or losses
from the sale of depreciable real estate, plus depreciation and amortization, unrealized gains or
losses from interest rate swaps, stock based compensation expenses, and deferred income taxes;
and after adjustments for equity accounted entities and non-controlling interests. FFO should not
be viewed as an alternative to cash from operating activities, net income, or other measures
calculated in accordance with IFRS. The Corporation believes that FFO can be a beneficial measure,
when combined with primary IFRS measures, to assist in the evaluation of the Corporation’s ability
to generate cash and evaluate its return on investments as it excludes the effects of real estate
amortization and gains and losses from the sale of real estate, all of which are based on historical
cost accounting and which may be of limited significance in evaluating current performance.
iii. 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.
iv.
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.
“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, 2019 annual audited consolidated financial statements.
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Annual Report 2019CANADA SELF STORAGE CENTRES
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, 2019, including the design of internal controls over financial reporting, to provide reasonable
assurance regarding the reliability of financial reporting in accordance with IFRS. These officers have
concluded that the Corporation’s disclosure controls and procedures are designed effectively to ensure that
information required to be disclosed in reports that are filed or submitted under Canadian securities
legislation are recorded, processed and reported within the time specified in those rules.
There have been no changes in the Corporation’s internal controls over financial reporting that have
materially affected or are reasonably likely to affect the Corporation’s internal controls over financial
reporting for the three months and fiscal year ended December 31, 2019.
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.
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
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Annual Report 2019CANADA SELF STORAGE CENTRES
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, entering into floating-to-fixed
interest rate swaps, 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.
Economic Conditions
Even though storage is less susceptible to changes in the local economy, as storage space is often needed
during times of both growth and recession, downturns in a local economy could negatively affect our
revenues and NOI. A significant portion of storage customers use storage during periods of moving from
one residence to another or when a residence is being renovated. In times of economic downturn, the level
of activity in housing sales and housing renovation could decrease, thereby decreasing storage rental
demand.
Environmental Risk
Environmental risk is inherent in the ownership of property. Various municipal, provincial and federal
regulations can result in penalties or potential liability for remediation, to the extent that hazardous
materials enter the environment. The presence of hazardous substances could also impair the
Corporation’s ability to finance or sell the property, and might expose the Corporation to civil law suits.
To mitigate such risk, the Corporation procures recent or updated environmental reports for all acquisitions
to ascertain the risk, if any, that exist at a property. It also prohibits the storage of hazardous substances as
a condition of the rental contract signed by customers.
Credit Risk
Credit risk arises from the possibility that customers may experience financial difficulty and be unable to
fulfill their financial obligations to the Corporation. The risk of incurring bad debts often arises if storage
customers relocate and cannot be found to enforce payment, or if storage customers abandon their
possessions. The extent of bad debts can be mitigated by quickly following up on any unpaid amounts
shortly after the due date, enforcing late fees, denying access to any customers with delinquent accounts,
and ultimately seizing the possessions of the customer. Additionally, the Corporation typically rents to
numerous customers, each of which constitutes significantly less than 5% of the Corporation’s monthly
revenue. This diversification in the customer base reduces credit risk from any given customer.
Other Self Storage Operators or Storage Alternatives
The Corporation competes with other individuals, corporations and institutions which currently own, or
are anticipating owning a similar property in a given region. Competitive forces could have a negative
effect on occupancy levels, rental rates or operating costs such as marketing.
Acquisition of Future Locations
Competition also exists when the Corporation attempts to grow through acquisitions of storage locations.
An increase in the availability of investment funds in the general market, and a subsequent increase in
demand for storage locations would have a tendency to increase the price for future acquisitions of storage
locations and reduce the yields thereon.
Anticipated Results from New Acquisitions
The realization of anticipated results and value from acquisitions can be jeopardized from unexpected
circumstances in integrating 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.
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Annual Report 2019CANADA SELF STORAGE CENTRES
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, and energy prices.
Climate and Natural Disasters
The storage industry in Canada can be cyclical. Due to the climate, demand for storage is generally weaker
in winter months with an increase in operating costs resulting in potentially lower NOI during Q1 and Q4.
Natural disasters, such as floods, earthquakes or severe winter storms may result in damage and business
interruption losses that are greater than the aggregate limits of our insurance coverage. We maintain a
comprehensive insurance policy to cover such events, however some insurance coverage may be or become
unavailable or cost prohibitive.
Litigation
Legal claims may arise from the ordinary course of our business. Resolution of these claims would divert
resources from the Corporation such cash to pay expenses and damages and the diversion of management’s
time and attention from the Corporation’s business. The impact and results from litigation cannot be
predicted with certainty and can have a material adverse effect on the business.
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.
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Annual Report 2019CANADA SELF STORAGE CENTRES
StorageVault Canada Inc.
OFFICERS
Steven Scott
Chief Executive Officer
Iqbal Khan
Chief Financial Officer
DIRECTORS
Jay Lynne Fleming
Vancouver, BC
Iqbal Khan
Toronto, ON
Steven Scott
Toronto, ON
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
300-5th Avenue S.W., 10th Floor
Calgary, AB T2P 3C4
Telephone 403-218-2800
Facsimile 403-265-0232
TSX VENTURE EXCHANGE LISTING
SVI
74
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Annual Report 2019CANADA SELF STORAGE CENTRES
Corporate Information
Phone:
1.877.622.0205
Web:
Email:
storagevaultcanada.com
ir@storagevaultcanada.com
Address:
100 Canadian Road, Toronto, ON, M1R 4Z5