SmartStop Self Storage REIT: A BBB-Bonded Play for Steady Income and Growth

The recent BBB credit rating assigned to SmartStop Self Storage REIT (SMA) by Morningstar DBRS marks a pivotal moment for this self-storage specialist. With a “Stable” outlook, the rating underscores SMA's transition into investment-grade territory—a critical step for a REIT aiming to attract institutional capital and lower its cost of debt. For income-focused investors, this is more than just a technical milestone: it's a signal that SMA is now a low-risk, high-reward play in a sector primed for growth. Here's why this rating, paired with the company's strategic assets and ESG-driven initiatives, makes SMA a top-tier REIT to buy now.

The BBB Rating: Stability at the Core

Morningstar DBRS's BBB rating applies to both SmartStop's issuer rating and its 2032 Private Placement Notes, signaling confidence in the company's ability to meet financial obligations. The key here is the guarantee structure: any future senior unsecured debt issued by SmartStop OP, L.P., will be fully guaranteed by the REIT and its subsidiaries. This means SMA's debt obligations are not just unsubordinated but equally ranked with other unsecured liabilities—a critical feature that reduces default risk and could allow the company to access cheaper capital.

For investors, this stability is non-negotiable. Self-storage demand has proven resilient through economic cycles, but the BBB rating now acts as a buffer, making SMA a safer bet than many of its high-yield peers.

A North American Powerhouse with Scale

SMA's footprint spans 220 properties across 23 U.S. states and Canada, totaling 17.7 million rentable square feet. In Canada alone, it manages 41 properties with 3.5 million square feet—a strategic expansion into a fast-growing market. This geographic diversity isn't just about size; it's about risk mitigation.

Consider occupancy rates: SMA maintained a robust 92.3% occupancy in Q4 2024, down just 0.1% year-over-year—a testament to its ability to retain tenants even as new supply enters the market. In key markets like the Greater Toronto Area, same-store net operating income (NOI) surged 13.1% year-over-year, demonstrating pricing power in high-demand regions.

Debt Refinancing: A Lever to Boost Returns

The BBB rating opens the door to refinancing existing debt at lower rates. With $175 million in new credit lines secured in early 2025 and plans to expand into markets like New York and Nashville, SMA can now pursue accretive acquisitions without overleveraging.

The math here is compelling. Lower interest costs could free up capital for dividends or reinvestment. For context, SMA's Q4 2024 net loss narrowed to $3.7 million, while same-store NOI rose 1.0% despite rising expenses—a sign that margins are stabilizing.

ESG as a Growth Multiplier

While SMA lacks formal ESG ratings, its environmental initiatives speak volumes. Over $12.7 million has been invested in solar panels at 65 properties, reducing grid reliance by 8.7 GWh annually. LED lighting and motion sensors now cover 75% of its facilities, cutting energy use by up to 75%. Even its corporate office is LEED Gold-certified, with EV charging stations and solar integration.

These moves aren't just “greenwashing”—they're cost-cutting strategies. Lower energy bills and water conservation (via xeriscaping) reduce operational expenses, boosting NOI. For income investors, this means fewer earnings shocks and a more sustainable dividend stream.

The Bottom Line: SMA Is Built to Outlast

SMA isn't just a beneficiary of the BBB rating—it's a REIT that's earned it. Its disciplined acquisitions (e.g., $214 million in 2024 deals in prime markets), diversified footprint, and ESG-aligned efficiency improvements position it to thrive in 2025. With reduced new supply growth and stabilized demand, the self-storage sector is ripe for rental rate hikes, which could supercharge NOI and dividends.

For income seekers, SMA's current yield (based on recent payouts) is competitive, and the BBB rating ensures this cash flow remains reliable. This isn't a gamble—it's a bet on a REIT that's built to outlast cycles.

Action Item: Buy SMA now. The BBB rating, combined with its fortress balance sheet and smart growth strategy, makes this a rare blend of safety and upside. The self-storage sector's fundamentals are strong, and SMA is primed to capitalize.

The clock is ticking. With debt refinancing on the horizon and a pipeline of accretive acquisitions, SMA's next move could be its biggest yet. Don't miss the train.