I have serious ethical concerns about the Parent Company’s business practices, based on my personal experience. While I am not in a position to determine legality, I observed conduct that, in my opinion, falls far short of what I consider ethical or transparent in a financial reporting context.
Specifically, I noticed what I would characterize as highly aggressive and unconventional accounting practices — especially around the excessive capitalization and amortization of operating expenses, as well as the potential exclusion of overhead and third party fees. In my view, the company capitalizes expenses far beyond what is typical under generally accepted accounting principles - resulting in what could reasonably be perceived as inflated operating metrics and overstated profitability.
I also formed the opinion that internal appraisal values used for NAV and AUM calculations may reflect highly optimistic assumptions. These appraisals are commissioned by the company itself and may be influenced by internal targets or performance benchmarks. In my experience, the values used in marketing materials and investor updates appear materially disconnected from what I would expect in a real market transaction — especially given the geographic and asset profile of the underlying portfolio (mainly tertiary, Class C self-storage assets). There are also several non-IFRS measures used, including in “sNOI” calculations, that aid in determining fair value under the direct capitalization method that I do not believe do a good job in fairly presenting the true value of the pool of assets.
Additionally, the OM lists portfolio occupancy at 85.2% as of Q4 2024, which I believe is inconsistent with internal data I’ve seen. My understanding is that occupancy fluctuated in the low-to-mid 70% range across the same-store portfolio over this 3 month time period. Investors should review Management History and Occupancy History reports at the site and consolidated level to validate this.
Based on back-of-the-envelope math from public documents (e.g. Offering Memorandums), the reported $75M TTM NOI as of March 31, 2024 seems materially overstated. Applying conventional GAAP adjustments — accounting for fully baked site-level expenses, high vacancy and delinquency rates, and overall market conditions — I personally estimated NOI closer to $40M. If accurate, that would imply a valuation multiple that I consider highly unrealistic, particularly in the current cap rate environment.
If these assets were subject to true market price discovery, I believe many would trade at a 7%+ cap rate in today’s market (even higher in some tertiary regions). Based on that, my personal estimate of the company’s true AUM would be in the range of ~$550-$575M — well below the ~$2.0B reportedly marketed. These are, of course, my own calculations and assumptions, and I welcome correction if more complete and transparent financials are disclosed.
A few additional considerations:
1) Fees are huge and nearly all fees are paid to an affiliate of the sponsor (Mini Mall, Avenue Living). Based on the OM, If you invest $100, up to $6 goes to sales commissions and marketing fees. Another $1.25 per year is paid to Avenue Living for managing the assets, plus one-time fees like $1 for buying properties and $0.25 for arranging financing. Other fees like property management take a small share of income over time. After all fees, about $90 of your investment is actively working in the self-storage portfolio. In my view, this creates a conflict of interest whereby decisions could be made to maximize fee generation to the benefit of insiders rather than investor returns.
2) Distributions can be funded by new investor capital. In other words, cash distributions may not come from fund generated income, but rather from new investor capital or debt. This raises sustainability concerns if performance lags. E.g. Mini Mall Mini appears to have a material working capital deficiency (over $250M between US and Canadian Partnerships) that raises questions about the sustainability of its distributions, particularly if they continue to be funded through return of capital, using new investor capital or rolling short term callable debt.
I want to be clear: I am not making any accusations of fraud or illegality. Rather, I am sharing my opinion based on firsthand experience and publicly available documents. Investors should conduct their own due diligence, ask tough questions, and seek independent valuation assessments before committing capital.
I strongly encourage transparency and open-book disclosure from company management. If management disagrees with any of the above, I encourage them to publish detailed, site-level financials that reconcile non-GAAP and non-IFRS metrics, such as "NOI" and "sNOI," to independently verifiable assumptions and valuations.
These are my personal views, based on my own experience. Others may reasonably come to different conclusions.
