Argus Management Platform And Improving Storage Supply Conditions Will Support Long Term Earnings Upside

Catalysts

About SmartStop Self Storage REIT

SmartStop Self Storage REIT owns, operates and manages self storage properties across the U.S. and Canada, with a growing platform that combines owned, joint venture and third party managed assets.

What are the underlying business or industry changes driving this perspective?

• The Argus third party management acquisition nearly doubles the operating footprint, expands the data set for dynamic pricing and creates a captive pipeline of off market deals, which should support higher revenue growth and fee income as the platform scales.
• Improving self storage supply conditions in the U.S., alongside evidence of natural absorption in key markets, positions SmartStop to translate its occupancy focused strategy into stronger achieved rates over time, supporting same store revenue and NOI expansion.
• Concentrated clustering in major North American metros, particularly the Greater Toronto Area and select U.S. MSAs, is expected to deliver operating leverage through shared marketing, staffing and local brand density, driving higher net margins in markets where the company exceeds 10 properties.
• Growth of the managed REIT and DST programs, combined with bridge and preferred lending to owners, adds multiple recurring fee and interest income streams that require limited incremental capital, enhancing FFO and earnings resiliency across cycles.
• Recently executed balance sheet improvements, including low coupon Maple bonds and lower cost Canadian JV debt, lock in predominantly fixed rate financing and reduce interest expense, setting up higher FFO conversion from revenue growth.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming SmartStop Self Storage REIT's revenue will grow by 8.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.1% today to 8.6% in 3 years time.
• Analysts expect earnings to reach $30.2 million (and earnings per share of $0.53) by about June 2029, up from $8.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 83.9x on those 2029 earnings, down from 213.4x today. This future PE is greater than the current PE for the US Specialized REITs industry at 29.4x.
• Analysts expect the number of shares outstanding to decline by 0.14% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.38%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The self storage sector is only slowly recovering from the largest new supply wave in its history, and while management expects conditions to improve in 2026, any renewed supply surge or weaker than expected absorption in key U.S. and Canadian markets could cap achieved move in rates and in place rents, limiting revenue growth.
• SmartStop is pursuing an occupancy focused strategy that includes greater use of concessions at certain times, and if competitive pressure forces prolonged discounting to defend occupancy levels of 92 percent or higher, the company may not be able to fully offset this with existing customer rent increases, compressing net operating income margins.
• The Argus third party management acquisition and broader managed REIT and DST platforms depend on continued deal flow, owner retention and fundraising. If economic uncertainty or higher for longer capital costs slow transaction activity or lead owners to leave the platform, the expected high margin fee and interest income streams would fall short, reducing earnings resilience.
• SmartStop has leaned heavily into growth in Canada, particularly the Greater Toronto Area and other major metros where development charges are high and new projects are capital intensive. If immigration, housing turnover or consumer demand normalize at a lower level than anticipated, recently delivered and planned properties could face slower lease up, weighing on revenue and returns on invested capital.
• Although management has significantly improved the balance sheet with low coupon Maple bonds and largely fixed rate debt, leverage is still managed toward the mid 5 times range and future external growth may require equity issuance or joint ventures. If the share price remains weak or capital markets stay volatile, SmartStop could be forced to slow acquisitions or accept less accretive structures, limiting growth in funds from operations per share.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $36.1 for SmartStop Self Storage REIT based on their expectations of its future earnings growth, profit margins and other risk factors.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $40.0, and the most bearish reporting a price target of just $32.0.
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be $352.9 million, earnings will come to $30.2 million, and it would be trading on a PE ratio of 83.9x, assuming you use a discount rate of 8.4%.
• Given the current share price of $32.78, the analyst price target of $36.1 is 9.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.