Global Self Storage: Subscription Rights Offer Opportunity For Deeper Discount

Summary

• Global Self Storage is proposing to finance up to $11.6M to fund expansion thru selling offering to existing owners as of 18-Nov.
• SELF is under contract to purchase a 12th property in West Henrietta, NY for $6.2M which will close in Q4 subject to due diligence.
• Share offering will be dilutive to share holders declining to exercise their rights but is a good way to finance the purchase depending on where purchase price is set.
• Undervalued Thesis remains fundamentally In-Tact. Patient investors will be rewarded and Subscription Exercise provides additional discount.

Earlier this year, I contributed Seeking Alpha articles titled Buying Properties At A Steep Discount and Global Self Storage Value Just Got More Attractive. Both articles quantified a steep and rising discount to market valuation at which shares of Global Self Storage (NASDAQ: NASDAQ:SELF) were trading at the time of publication. The thesis presented in those articles remains fundamentally in-tact. However, since 16-Aug, there have been several material developments that warrant brief commentary.

What are these events?

1. On 4-October, SELF entered into a contract to purchase a 12^th storage property, Erie Station Storage, LLC located in West Henrietta, NY for $6.2M. Purchase is currently under due diligence and is expected to close this year.
2. SELF announced a Share Holder Rights offering for November to raise $11.6 million through sale of newly issued shares of common stock for the purpose of financing the West Henrietta property purchase and other expansion projects or acquisitions.
3. SELF launched a 3^rd Party Management Storage Property management service and secured their first customer in Edmond, Oklahoma.

This article is a brief update primarily focused on examining the impact the Share Holder Rights Offering and answering questions that followers have asked. As the final prospectus is not yet available, the article will by necessity have to make certain assumptions as to the final share pricing in the offer. These assumptions and estimates could be wildly wrong. But I’ve attempted to show the rationale behind the assumptions. A more comprehensive update can be provided following the Q3 earnings release and after a final prospectus is made available.

About the Property:

Listing Highlights

• Facility Less than 3-years-old
• 57,300 gross SF
• 46,850 NRSF
• 458 rental units (230 climate control)
• 5.4-acre parcel
• 7,600 SF single-story

Description

Erie Station Storage is less than 3-years-old, with a 57,300 gross SF; 46,850 NRSF; 458 rental

Analyst’s Disclosure:I am/we are long SELF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.