SmartStop Self Storage, Inc. - FORM 10-Q

SmartStop Self Storage, Inc. - FORM 10-Q - August 11, 2011

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Attached files

SmartStop Self Storage, Inc. Reports

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EXCEL - IDEA: XBRL DOCUMENT - SmartStop Self Storage, Inc.	Financial_Report.xls
EX-32.2 - CERTIFICATION OF PFO - SmartStop Self Storage, Inc.	dex322.htm
EX-31.2 - CERTIFICATION OF PFO - SmartStop Self Storage, Inc.	dex312.htm
EX-31.1 - CERTIFICATION OF PEO - SmartStop Self Storage, Inc.	dex311.htm
EX-32.1 - CERTIFICATION OF PEO - SmartStop Self Storage, Inc.	dex321.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-53644

Strategic Storage Trust, Inc.

(Exact name of Registrant as specified in its charter)

Maryland

32-0211624

(State or other jurisdiction of

incorporation or organization)

(IRS Employer Identification No.)

111 Corporate Drive, Suite 120, Ladera Ranch, California 92694

(Address of principal executive offices)

(877) 327-3485

(Registrant’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of August 8, 2011: 32,056,771, $0.001 par value per share.

FORM 10-Q

STRATEGIC STORAGE TRUST, INC.

TABLE OF CONTENTS


		Page No.
PART I.	FINANCIAL INFORMATION

	Cautionary Note Regarding Forward-Looking Statements		3

Item 1.	Financial Statements:		4

	Consolidated Balance Sheets as of June 30, 2011 (unaudited) and December 31, 2010 (unaudited)		5

	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2011 and 2010 (unaudited)		6

	Consolidated Statement of Stockholders’ Equity and Comprehensive Loss for the Six Months Ended June 30, 2011 (unaudited)		7

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010 (unaudited)		8

	Notes to Consolidated Financial Statements (unaudited)		9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		33

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		48

Item 4.	Controls and Procedures		48

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		49

Item 1A.	Risk Factors		49

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		49

Item 3.	Defaults Upon Senior Securities		50

Item 4.	(Removed and Reserved)		50

Item 5.	Other Information		50

Item 6.	Exhibits		50

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-Q of Strategic Storage Trust, Inc., other than historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable. Such statements include, in particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, including known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the Securities and Exchange Commission. We cannot guarantee the accuracy of any such forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Any such forward-looking statements are subject to risks, uncertainties, and other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or impossible to predict accurately. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations and provide distributions to stockholders, and our ability to find suitable investment properties, may be significantly hindered. See the risk factors identified in the “Risk Factors” section of our 2010 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, and Part II, Item 1A in this Form 10-Q for a discussion of some, although not all, of the risks and uncertainties that could cause actual results to differ materially from those presented in our forward-looking statements.

PART I. FINANCIAL INFORMATION

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS

The information furnished in the accompanying consolidated balance sheets and related consolidated statements of operations, stockholders’ equity and comprehensive loss, and cash flows reflects all adjustments that are, in management’s opinion, necessary for a fair and consistent presentation of the aforementioned financial statements.

The accompanying financial statements should be read in conjunction with the notes to our financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this report on Form 10-Q. The accompanying financial statements should also be read in conjunction with our financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Form 10-K for the year ended December 31, 2010. Our results of operations for the three and six months ended June 30, 2011 are not necessarily indicative of the operating results expected for the full year.

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2011			December 31, 2010
ASSETS
Cash and cash equivalents	$	14,571,250		$	6,438,091
Real estate facilities:
Land		119,657,490			89,547,785
Buildings		231,715,365			166,256,905
Site improvements		29,498,605			18,763,510

		380,871,460			274,568,200
Accumulated depreciation		(10,701,358	)		(6,677,014	)

		370,170,102			267,891,186
Construction in process		1,358,936			540,966

Real estate facilities, net ($17,157,635 and $17,186,388, respectively, related to VIEs)		371,529,038			268,432,152
Deferred financing costs, net of accumulated amortization		3,727,474			2,326,519
Intangible assets, net of accumulated amortization		17,613,347			14,153,572
Restricted cash		3,745,943			1,921,058
Investments in unconsolidated joint ventures		8,718,651			11,528,669
Other assets		3,417,989			2,561,152

Total assets	$	423,323,692		$	307,361,213

LIABILITIES AND STOCKHOLDERS’ EQUITY
Secured promissory notes ($10,185,491 and $10,161,523, respectively, related to VIEs)	$	213,352,099		$	119,811,948
Accounts payable and accrued liabilities		10,214,203			4,690,570
Due to affiliates		840,041			746,108
Distributions payable		1,775,040			1,557,367

Total liabilities		226,181,383			126,805,993
Commitments and contingencies (Note 7)
Redeemable common stock		1,131,346			4,330,297
Stockholders’ equity:
Strategic Storage Trust, Inc. stockholders’ equity:
Common stock, $0.001 par value; 700,000,000 shares authorized; 31,187,710 and 26,658,061 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively		31,188			26,659
Additional paid-in capital		251,503,627			211,685,569
Distributions		(30,797,328	)		(20,734,778	)
Accumulated deficit		(32,062,834	)		(21,598,004	)
Accumulated other comprehensive income		238,297			124,412

Total Strategic Storage Trust, Inc. stockholders’ equity		188,912,950			169,503,858

Noncontrolling interests in Operating Partnership		796,199			39,598
Other noncontrolling interests		6,301,814			6,681,467

Total noncontrolling interests		7,098,013			6,721,065

Total stockholders’ equity		196,010,963			176,224,923

Total liabilities and stockholders’ equity	$	423,323,692		$	307,361,213

See notes to consolidated financial statements.

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Revenues:
Self storage rental income	$	11,121,469		$	6,161,245		$	20,732,555		$	11,212,373
Ancillary operating income		250,391			151,688			443,918			250,792

Total revenues		11,371,860			6,312,933			21,176,473			11,463,165

Operating expenses:
Property operating expenses		4,507,269			2,406,193			8,537,084			4,518,684
Property operating expenses - affiliates		1,311,650			661,166			2,384,541			1,123,543
General and administrative		547,187			720,010			1,369,114			1,564,374
Depreciation		2,186,742			1,230,685			4,063,723			2,254,958
Intangible amortization expense		3,477,317			1,961,451			6,528,242			3,677,444
Property acquisition expenses - affiliates		1,110,722			703,523			2,343,881			1,324,242
Other property acquisition expenses		754,730			131,165			1,330,045			616,182

Total operating expenses		13,895,617			7,814,193			26,556,630			15,079,427

Operating loss		(2,523,757	)		(1,501,260	)		(5,380,157	)		(3,616,262	)
Other income (expense):
Interest expense		(2,737,374	)		(1,347,012	)		(5,125,168	)		(2,613,494	)
Deferred financing amortization expense		(128,920	)		(57,222	)		(461,024	)		(106,166	)
Equity in earnings of real estate ventures		201,754			218,422			446,710			446,788
Interest income		592			700			809			1,064
Other		(211,371	)		(22,347	)		(222,065	)		(95,829	)

Net loss		(5,399,076	)		(2,708,719	)		(10,740,895	)		(5,983,899	)
Less: Net loss attributable to the noncontrolling interests in our Operating Partnership		37,321			700			51,627			1,700
Net loss attributable to other noncontrolling interests		112,988			118,463			224,438			224,652

Net loss attributable to Strategic Storage Trust, Inc.	$	(5,248,767	)	$	(2,589,556	)	$	(10,464,830	)	$	(5,757,547	)

Net loss per share - basic	$	(0.17	)	$	(0.13	)	$	(0.36	)	$	(0.30	)
Net loss per share - diluted	$	(0.17	)	$	(0.13	)	$	(0.36	)	$	(0.30	)

Weighted average shares outstanding - basic		30,077,883			20,548,296			28,991,912			19,178,952
Weighted average shares outstanding - diluted		30,077,883			20,548,296			28,991,912			19,178,952

See notes to consolidated financial statements.

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF

STOCKHOLDERS’ EQUITY AND COMPREHENSIVE LOSS

(Unaudited)


	Number of Shares			Common Stock Par Value			Additional Paid-in Capital			Distributions			Accumulated Deficit			Accumulated Other Comprehensive Income		Noncontrolling Interests in Operating Partnership			Total
Balance as of December 31, 2010		26,658,061		$	26,659		$	211,685,569		$	(20,734,778	)	$	(21,598,004	)	$	124,412	$	6,721,065		$	176,224,923
Gross proceeds from issuance of common stock		4,530,686			4,530			45,223,509			—			—			—		—			45,228,039
Offering costs		—			—			(5,418,473	)		—			—			—		(70,570	)		(5,489,043	)
Additions to redeemable common stock		—			—			112,631			—			—			—		—			112,631
Redemptions of common stock		(439,019	)		(439	)		(4,249,266	)		—			—			—		—			(4,249,705	)
Issuance of restricted stock		2,500			3			—			—			—			—		—			3
Distributions ($0.70 per share)		—			—			—			(10,062,550	)		—			—		—			(10,062,550	)
Distributions for noncontrolling interests		—			—			—			—			—			—		(180,345	)		(180,345	)
Issuance of shares for distribution reinvestment plan		435,482			435			4,136,639			—			—			—		—			4,137,074
Issuance of limited partnership units in our Operating Partnership		—			—			—			—			—			—		903,928			903,928
Stock based compensation expense		—			—			13,018			—			—			—		—			13,018
Comprehensive loss:
Net loss attributable to Strategic Storage Trust, Inc.		—			—			—			—			(10,464,830	)		—		—			(10,464,830	)
Net loss attributable to the noncontrolling interests		—			—			—			—			—			—		(276,065	)		(276,065	)
Foreign currency translation adjustment		—			—			—			—			—			113,885		—			113,885

Total comprehensive loss		—			—			—			—			—			—		—			(10,627,010	)

Balance as of June 30, 2011		31,187,710		$	31,188		$	251,503,627		$	(30,797,328	)	$	(32,062,834	)	$	238,297	$	7,098,013		$	196,010,963

See notes to consolidated financial statements.

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30, 2011			Six Months Ended June 30, 2010
Cash flows from operating activities:
Net loss	$	(10,740,895	)	$	(5,983,899	)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization expense		11,052,989			6,050,076
Noncash interest expense		179,259			117,253
Expense related to issuance of restricted stock		13,021			9,896
Foreign currency exchange gain		(35,359	)		—
Increase (decrease) in cash from changes in assets and liabilities:
Restricted cash		(1,819,237	)		282,597
Other assets		(722,113	)		(6,093	)
Accounts payable and other accrued liabilities		1,981,627			508,826
Due to affiliates		271,401			(157,598	)

Net cash flows provided by operating activities		180,693			821,058

Cash flows from investing activities:
Purchases of real estate		(78,598,272	)		(44,175,304	)
Additions to construction in process		(817,970	)		(500,823	)
Additions to real estate facilities		(2,024,362	)		(463,630	)
Return of investment in unconsolidated joint ventures		41,000			61,790
Deposits on acquisition of real estate facilities		(9,902	)		—
Additional investment in unconsolidated joint venture		—			(265,000	)
Additional investment in noncontrolling interest		—			(184,251	)

Net cash flows used in investing activities		(81,409,506	)		(45,527,218	)

Cash flows from financing activities:
Principal payments on secured promissory notes		(797,273	)		(257,176	)
Repayment of secured promissory notes		(9,939,555	)		(3,255,000	)
Proceeds from issuance of secured promissory notes		72,700,900			—
Deferred financing costs		(1,861,473	)		(814,654	)
Gross proceeds from issuance of common stock		45,228,039			50,938,746
Redemptions of common stock		(4,249,705	)		(1,100,313	)
Offering costs		(5,489,043	)		(5,703,289	)
Escrow receivable		(123,850	)		(205,924	)
Due to affiliates		(150,971	)		194,908
Distributions paid		(5,707,803	)		(3,699,731	)
Distributions paid to noncontrolling interests		(180,345	)		(162,308	)

Net cash flows provided by financing activities		89,428,921			35,935,259

Effect of exchange rate changes on cash		(66,949	)		—
Increase (decrease) in cash and cash equivalents		8,133,159			(8,770,901	)
Cash and cash equivalents, beginning of period		6,438,091			23,778,458

Cash and cash equivalents, end of period	$	14,571,250		$	15,007,557

Supplemental cash flow and non-cash transactions:
Cash paid for interest	$	4,668,618		$	2,490,879
Interest capitalized	$	112,450		$	—
Distributions payable	$	1,775,040		$	1,237,415
Issuance of shares pursuant to distribution reinvestment plan	$	4,137,074		$	2,697,706
Seller notes payable issued in connection with purchase of real estate facilities	$	—		$	4,800,000
Assumption of notes payable issued in connection with purchase of real estate facilities	$	31,291,119		$	3,199,696
Issuance of limited partnership units in connection with the purchase of real estate facilities	$	903,928		$	—

See notes to consolidated financial statements.

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

Note 1. Organization

Strategic Storage Trust, Inc., a Maryland corporation (the “Company”), was formed on August 14, 2007 under the Maryland General Corporation Law for the purpose of engaging in the business of investing in self storage facilities. The Company’s year end is December 31. As used in this report, “we” “us” and “our” refer to Strategic Storage Trust, Inc.

Strategic Capital Holdings, LLC, a Virginia limited liability company (our “Sponsor”), is the sponsor of our initial public offering. Our Sponsor was formed in 2004 to engage in private structured offerings of limited partnerships and other entities with respect to the acquisition, management and disposition of commercial real estate assets. Our Sponsor owns a majority of Strategic Storage Holdings, LLC, which is the sole member of our advisor and our property manager.

Our advisor is Strategic Storage Advisor, LLC, a Delaware limited liability company (our “Advisor”) which was formed on August 13, 2007. Our Advisor is responsible for managing our affairs on a day-to-day basis and identifying and making acquisitions and investments on our behalf under the terms of an advisory agreement we have with our Advisor (our “Advisory Agreement”). Some of the officers of our Advisor are also officers of our Sponsor and of us.

On August 24, 2007, our Advisor purchased 100 shares of our common stock for $1,000 and became our initial stockholder. Our Second Articles of Amendment and Restatement authorize 700,000,000 shares of common stock with a par value of $0.001 and 200,000,000 shares of preferred stock with a par value of $0.001. We are currently offering a maximum of 110,000,000 shares of common stock, consisting of 100,000,000 shares for sale to the public (the “Primary Offering”) and 10,000,000 shares for sale pursuant to our distribution reinvestment plan (collectively, the “Offering”).

On March 17, 2008, the Securities and Exchange Commission (“SEC”) declared our registration statement effective. On May 22, 2008, we satisfied the minimum offering requirements of the Primary Offering and commenced formal operations. As of June 30, 2011, in connection with our Offering, we had issued approximately 25.8 million shares of our common stock for gross proceeds of approximately $257 million. We intend to invest a substantial amount of the net proceeds from the Offering primarily in self storage facilities and related self storage real estate investments. We may continue to sell shares in the Offering until the earlier of 180 days after the third anniversary of the effective date of the Offering, September 17, 2011, or the effective date of the registration statement for our follow-on offering (SEC Registration No. 333-168905), which we initially filed with the SEC on August 17, 2010. We also reserve the right to terminate the Offering at any time. In addition to the Offering, in September 2009 we also issued approximately 6.2 million shares in connection with two mergers with private real estate investment trusts sponsored by our Sponsor.

Our dealer manager, U.S. Select Securities LLC, a Virginia limited liability company (our “Dealer Manager”) is an affiliate of our Sponsor. Our Dealer Manager is responsible for marketing our shares being offered pursuant to the Offering.

Our operating partnership, Strategic Storage Operating Partnership, L.P., a Delaware limited partnership (our “Operating Partnership”), was formed on August 14, 2007. On August 24, 2007, our Advisor purchased a limited partnership interest in our Operating Partnership for $200,000 and on August 24, 2007, we contributed the initial $1,000 capital contribution we received to our Operating Partnership in exchange for the general partner interest. Our Operating Partnership owns, directly or

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

indirectly through one or more special purpose entities, all of the self storage properties that we have acquired. As of June 30, 2011, we owned 99.35% of the limited partnership interests of our Operating Partnership. The remaining limited partnership interests are owned by our Advisor (0.06%) and unaffiliated third parties (0.59%). As the sole general partner of our Operating Partnership, we have the exclusive power to manage and conduct the business of our Operating Partnership. We will conduct certain activities (such as selling packing supplies and locks and renting trucks or other moving equipment) through our taxable REIT subsidiary (the “TRS”), which is our wholly-owned subsidiary.

Our property manager is Strategic Storage Property Management, LLC, a Delaware limited liability company (our “Property Manager”), which was formed in August 2007 to manage our properties. Our Property Manager derives substantially all of its income from the property management services it performs for us.

As we accept subscriptions for shares of our common stock, we transfer substantially all of the net proceeds of the Offering to our Operating Partnership as capital contributions in exchange for additional units of interest in our Operating Partnership. However, we are deemed to have made capital contributions in the amount of the gross offering proceeds received from investors and the Operating Partnership is deemed to have simultaneously paid the sales commissions and other costs associated with the Offering. In addition, our Operating Partnership is structured to make distributions with respect to limited partnership units (except for Class D units) that will be equivalent to the distributions made to holders of our common stock. In March 2011, we adopted Amendment No. 1 to our Operating Partnership’s First Amended and Restated Limited Partnership Agreement, which established Class D Units, and our Operating Partnership issued approximately 114,000 Class D Units in connection with our acquisition of the Las Vegas VII and Las Vegas VIII properties. The Class D Units have all of the rights, powers, duties and preferences of the Operating Partnership’s other limited partnership units, except that they are subject to an annual distribution limit (initially zero percent) and the holders of the Class D Units have agreed to modified exchange rights that prevent them from exercising their exchange rights until the occurrence of a specified event (see Note 7). Finally, a limited partner in our Operating Partnership may later exchange his or her limited partnership units in our Operating Partnership for shares of our common stock at any time after one year following the date of issuance of their limited partnership units, subject to certain restrictions as outlined in the limited partnership agreement. Our Advisor is prohibited from exchanging or otherwise transferring its limited partnership units so long as it is acting as our Advisor pursuant to our Advisory Agreement.

On September 25, 2008, we acquired our first two self storage facilities. As of June 30, 2011, we owned 72 self storage facilities located in 17 states and Canada, comprising approximately 47,040 units and approximately 5.9 million rentable square feet. As of June 30, 2011, we also had minority interests in nine additional self storage facilities through preferred equity and/or minority interests. Of those interests, one has been deemed to be a controlling interest and is therefore consolidated in our consolidated financial statements as discussed in Note 2. Additionally, we have an interest in a net leased industrial property in California with 356,000 rentable square feet leased to a single tenant.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim consolidated financial statements have been prepared by our management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC. Certain information and

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim period. Operating results for the three and six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

Effective September 15, 2009, the ASC was established as the single source of authoritative nongovernmental GAAP. Prior to the issuance of the ASC, all GAAP pronouncements were issued in separate topical pronouncements in the form of statements, staff positions or Emerging Issues Task Force Abstracts, and were referred to as such. While the ASC does not change GAAP, it introduces a new structure and supersedes all previously issued non-SEC accounting and reporting standards. In addition to the ASC, the Company is still required to follow SEC rules and regulations relating to the preparation of financial statements. The Company’s accounting policies are consistent with the guidance set forth by both ASC and the SEC.

Reclassifications

Certain amounts previously reported in our 2010 financial statements have been reclassified to conform to the fiscal 2011 presentation.

Principles of Consolidation

Our financial statements, the financial statements of our Operating Partnership, including its wholly-owned subsidiaries, the financial statements of Self Storage REIT, LLC (“REIT I”) and Self Storage REIT II, LLC (“REIT II”), and the accounts of variable interest entities (VIEs) for which we are the primary beneficiary are consolidated in the accompanying consolidated financial statements. The portion of these entities not wholly-owned by us is presented as noncontrolling interests both as of and during the periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation.

Consolidation Considerations for Our Investments in Joint Ventures

Recently amended accounting guidance provides a framework for identifying VIEs and determining when a company should include the assets, liabilities, noncontrolling interests, and results of activities of the VIE in its consolidated financial statements. In general, a VIE is an entity or other legal structure used to conduct activities or hold assets that either (1) has an insufficient amount of equity to carry out its principal activities without additional subordinated financial support, (2) has a group of equity owners that are unable to make significant decisions about its activities, or (3) has a group of equity owners that do not have the obligation to absorb losses or the right to receive returns generated by its operations. Generally, a VIE should be consolidated if a party with an ownership, contractual, or other financial interest in the VIE (a variable interest holder) has the power to direct the VIE’s most significant activities and the obligation to absorb losses or right to receive benefits of the VIE that could be significant to the VIE. A variable interest holder that consolidates the VIE is called the primary beneficiary. Upon consolidation, the primary beneficiary generally must initially record all of the VIE’s assets, liabilities, and noncontrolling interest at fair value and subsequently account for the VIE as if it were consolidated based on majority voting interest. As of June 30, 2011 and December 31, 2010, we had entered into contracts/interests that are deemed to be variable interests in VIEs. Those variable interests include both lease agreements and equity investments. We have evaluated those variable

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

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interests against the criteria for consolidation and determined that we are not the primary beneficiary of certain investments discussed further in the “Equity Investments” section of this note.

As of June 30, 2011 and December 31, 2010, we had an equity interest in a self storage property located in San Francisco, California (“SF property”) that was deemed to be a VIE of which we are the primary beneficiary. As such, the SF property has been consolidated in our consolidated financial statements since we acquired our interest in the property through our merger with REIT I. In January 2010, we acquired an approximately 2% additional interest in the SF property, bringing our total interest to approximately 12%. The SF property is owned by a Delaware Statutory Trust (DST), and by virtue of the trust agreement the investors in the trust have no direct or indirect ability through voting rights to make decisions about the DST’s significant activities. The REIT I operating partnership (the “REIT I Operating Partnership”) has also entered into a lease agreement for the SF property, in which the REIT I Operating Partnership is the tenant, which exposes it to losses of the VIE that could be significant to the VIE and also allows it to direct activities of the VIE that determine its economic performance by means of its operation of the leased facility. The lease has an initial term of 10 years which commenced on December 19, 2006. The initial term of the lease may be extended at the option of the REIT I Operating Partnership for up to four successive five year terms. As of June 30, 2011, the consolidated joint venture had net real estate assets of approximately $17.2 million and net intangible assets of approximately $0.2 million. Such assets are only available to satisfy the obligations of the SF property. We have also consolidated approximately $10.2 million of secured promissory notes and approximately $6.3 million of noncontrolling interest related to this entity. The lenders of the secured promissory notes have no recourse to other Company assets. Our Sponsor has entered into an agreement to indemnify us for any losses as a result of potential shortfalls in the lease payments required to be made by the REIT I Operating Partnership. Despite such indemnification, we continue to be deemed the primary beneficiary as our Sponsor is not deemed to have a variable interest in the SF property.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. Management adjusts such estimates when facts and circumstances dictate. The most significant estimates made include the allocation of property purchase price to tangible and intangible assets acquired and liabilities assumed at fair value, the determination if certain entities should be consolidated, the evaluation of potential impairment of long-lived assets and of assets held by equity method investees, and the useful lives of real estate assets and intangibles. Actual results could materially differ from those estimates.

Cash and Cash Equivalents

We consider all short-term, highly liquid investments that are readily convertible to cash with a maturity of three months or less at the time of purchase to be cash equivalents.

We may maintain cash equivalents in financial institutions in excess of insured limits, but believe this risk is mitigated by only investing in or through major financial institutions.

Restricted Cash

Restricted cash consists of impound reserve accounts for property taxes, insurance and capital improvements in connection with the requirements of certain of our loan agreements.

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

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June 30, 2011

Real Estate Purchase Price Allocation

We account for acquisitions in accordance with amended accounting guidance which requires that we allocate the purchase price of the property to the tangible and intangible assets acquired and the liabilities assumed based on estimated fair values. This guidance requires us to make significant estimates and assumptions, including fair value estimates, as of the acquisition date and to adjust those estimates as necessary during the measurement period (defined as the period, not to exceed one year, in which we may adjust the provisional amounts recognized for an acquisition). Acquisitions of portfolios of facilities are allocated to the individual facilities based upon an income approach or a cash flow analysis using appropriate risk adjusted capitalization rates which take into account the relative size, age, and location of the individual facility along with current and projected occupancy and rental rate levels or appraised values, if available. Allocations to the individual assets and liabilities are based upon comparable market sales information for land and estimates of depreciated replacement cost of equipment, building and site improvements. In allocating the purchase price, we determine whether the acquisition includes intangible assets or liabilities. Substantially all of the leases in place at acquired properties are at market rates, as the majority of the leases are month-to-month contracts. Accordingly, to date we have not allocated any portion of the purchase price to above or below market leases. We also consider whether in-place, market leases represent an intangible asset. We preliminarily allocated approximately $10 million of purchase price to intangible assets to recognize the value of in-place leases related to our acquisitions in the first six months of 2011. We do not expect, nor to date have we recorded, intangible assets for the value of tenant relationships because we will not have concentrations of significant tenants and the average tenant turnover is fairly frequent. Our acquisition-related transaction costs are required to be expensed as incurred. During the three and six months ended June 30, 2011 we expensed approximately $1.9 million and $3.7 million, respectively, of acquisition related transaction costs and during the three and six months ended June 30, 2010 we expensed approximately $0.8 million and $1.9 million, respectively of acquisition related transaction costs.

Should the initial accounting for an acquisition be incomplete by the end of a reporting period that falls within the measurement period, we report provisional amounts in our financial statements. During the measurement period, we adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date and we record those adjustments to our financial statements. We apply those measurement period adjustments that we determine to be significant retrospectively to comparative information in our financial statements, potentially including adjustments to interest, depreciation and amortization expense.

Land, Building, Site Improvements and Depreciation

Land is recorded at historical cost. Buildings and site improvements are recorded at cost and depreciated over estimated useful lives using the straight-line method.

Our management is required to make subjective assessments as to the useful lives of our depreciable assets. We consider the period of future benefit of the asset to determine the appropriate useful lives.

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June 30, 2011

Depreciation of our real property assets is charged to expense on a straight-line basis over the estimated useful lives as follows:


Description		Standard Depreciable Life
Land		Not Depreciated
Buildings		25 to 40 years
Site Improvements		7 to 15 years

Evaluation of Possible Impairment of Long-Lived Assets

Management will continually monitor events and changes in circumstances that could indicate that the carrying amounts of our long-lived assets, including those held through joint ventures, may not be recoverable. When indicators of potential impairment are present that indicate that the carrying amounts of the assets may not be recoverable, we will assess the recoverability of the assets by determining whether the carrying value of the long-lived assets will be recovered through the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying value, we will adjust the value of the long-lived assets to the fair value and recognize an impairment loss. As of June 30, 2011 and December 31, 2010, no impairment losses have been recognized.

Depreciation of Personal Property Assets

Personal property assets, consisting primarily of furniture, fixtures and equipment, are depreciated on a straight-line basis over the estimated useful lives ranging from 3 to 5 years, and are included in other assets on our consolidated balance sheets.

Intangible Assets

We have allocated a portion of our real estate purchase price to in-place leases. We are amortizing in-place leases on a straight-line basis over the estimated future benefit period. As of June 30, 2011 and December 31, 2010, accumulated amortization of in-place lease intangibles totaled approximately $17.5 million and $10.9 million, respectively.

Equity Investments

Our investments in unconsolidated real estate joint ventures and VIEs in which we are not the primary beneficiary, where we have significant influence, but not control, are recorded under the equity method of accounting in the accompanying consolidated financial statements. Under the equity method, our investments in real estate ventures are stated at cost and adjusted for our share of net earnings or losses and reduced by distributions. Equity in earnings of real estate ventures is generally recognized based on the allocation of cash distributions upon liquidation of the investment in accordance with the joint venture agreements.

Investments representing passive preferred equity and/or minority interests (less than 20%) are accounted for under the cost method. Under the cost method, our investments in real estate ventures are carried at cost and adjusted for other-than-temporary declines in fair value, distributions representing a return of capital and additional investments.

Through the mergers with REIT I and REIT II, we acquired five preferred equity and/or minority interests in unconsolidated joint ventures (one of which became wholly-owned in 2011. See Note 3), all

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June 30, 2011

of which were deemed to be VIEs. We have evaluated each variable interest against the amended criteria for consolidation and determined that we are not the primary beneficiary, generally due to our inability to direct significant activities that determine the economic performance of the VIE. Three of those investments are passive or limited partner interests in self storage facilities (two of which properties are owned by DSTs, and by virtue of the related trust agreements, the investors have no direct or indirect ability through voting rights to make decisions about each DST’s significant activities) and are therefore accounted for under the cost method; our aggregate investment therein is approximately $0.7 million. Individually our ownership interest in those investments ranges from .28% to 11.5%, the carrying value of the investments ranged from approximately $27,000 to $610,000 and our risk of loss is limited to our individual investment therein.

The remaining interest is in a net leased industrial property (“Hawthorne property”) located in California with 356,000 rentable square feet leased to a single tenant. This investment is accounted for under the equity method of accounting and our risk of loss is limited to our investment, including our maximum exposure under the terms of a debt guarantee. We own a 12% interest in Westport LAX LLC, the joint venture that acquired the Hawthorne property, the carrying value in such investment is approximately $1.4 million. Hawthorne LLC, an affiliate of our Sponsor, owns 78% of Westport LAX LLC, and we have a preferred equity interest in Hawthorne LLC that entitles us to distributions equal to 10% per annum on our investment of approximately $6.6 million. The preferred equity interest has a redemption date in November 2011, subject to extension at our sole discretion. The preferred equity interest may be called at any time in whole or part by Hawthorne LLC or redeemed at any time by us. The remaining 10% interest in Westport LAX LLC is owned by a third party, who is also the co-manager, along with our Sponsor, of the Hawthorne property. Such third party is the acting property manager and directs the operating activities of the property that determine its economic performance. We, along with other non-affiliated parties, are guarantors on the approximately $19.7 million loan secured by the Hawthorne property. The loan has a maturity date of August 1, 2020. As of June 30, 2011, our maximum exposure to loss as a result of our involvement with this VIE, consisting of our investment balance and our guarantee of the secured debt, totaled approximately $27.7 million.

Revenue Recognition

Management believes that all of our leases are operating leases. Rental income is recognized in accordance with the terms of the leases, which generally are month-to-month. Revenues from any long-term operating leases are recognized on a straight-line basis over the term of the lease. The excess of rents received over amounts contractually due pursuant to the underlying leases is included in accounts payable and accrued liabilities in our consolidated balance sheets and contractually due but unpaid rent is included in other assets.

Allowance for Doubtful Accounts

Tenant accounts receivable are reported net of an allowance for doubtful accounts. Management’s estimate of the allowance is based upon a review of the current status of tenant accounts receivable. It is reasonably possible that management’s estimate of the allowance will change in the future.

Amortization of Deferred Financing Costs

Costs incurred in connection with obtaining financing are deferred and amortized on a straight-line basis over the term of the related loan, which is not materially different than the effective interest method. As of June 30, 2011 and December 31, 2010, accumulated amortization of deferred financing costs totaled approximately $0.7 million and $0.4 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

Organization and Offering Costs

Our Advisor may fund organization and offering costs on our behalf. We are required to reimburse our Advisor for such organization and offering costs; provided, however, our Advisor must reimburse us within 60 days after the end of the month in which the Offering terminates to the extent we paid or reimbursed organization and offering costs (excluding sales commissions and dealer manager fees) in excess of 3.5% of the gross offering proceeds from the Primary Offering. Such costs will be recognized as a liability when we have a present responsibility to reimburse our Advisor, which is defined in our Advisory Agreement as the date we satisfied the minimum offering requirements of the Primary Offering (which occurred on May 22, 2008). If at any point in time we determine that the total organization and offering costs are expected to exceed 3.5% of the gross proceeds anticipated to be received from the Primary Offering, we will recognize such excess as a capital contribution from our Advisor. As of June 30, 2011, we do not believe total organization and offering costs will exceed 3.5% of the gross proceeds anticipated to be received from the Primary Offering. Offering costs are recorded as an offset to additional paid-in capital, and organization costs are recorded as an expense.

Redeemable Common Stock

We have adopted a share redemption program that may enable stockholders to submit their shares to us for redemption in limited circumstances.

There are several limitations on our ability to redeem shares under the share redemption program including, but not limited to:

•

Unless the shares are being redeemed in connection with a stockholder’s death, “qualifying disability” (as defined under the share redemption program) or bankruptcy, we may not redeem shares until the stockholder has held his or her shares for one year.

•

During any calendar year, we will not redeem in excess of 5% of the weighted-average number of shares outstanding during the prior calendar year.

•

The cash available for redemption is limited to the proceeds from the sale of shares pursuant to our distribution reinvestment plan.

•

We have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibit distributions that would cause a corporation to fail to meet statutory tests of solvency.

See Note 7 for further discussion of our share redemption program.

Our board of directors may amend, suspend or terminate the share redemption program upon 30 days’ notice to our stockholders. We may provide this notice by including such information in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC, or by a separate mailing to our stockholders.

We record amounts that are redeemable under the share redemption program as redeemable common stock in the accompanying consolidated balance sheets since the shares are mandatorily redeemable at the option of the holder and therefore their redemption is outside our control. The maximum amount redeemable under our share redemption program is limited to the number of shares we could repurchase with the amount of the net proceeds from the sale of shares under the distribution reinvestment plan. However, accounting guidance states that determinable amounts that can become redeemable but that are contingent on an event that is likely to occur (e.g., the passage of time) should be presented as redeemable when such amount is known. Therefore, the net proceeds from the distribution

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June 30, 2011

reinvestment plan are considered to be temporary equity and are presented as redeemable common stock in the accompanying consolidated balance sheets.

In addition, current accounting guidance requires, among other things, that financial instruments that represent a mandatory obligation of us to repurchase shares be classified as liabilities and reported at settlement value. Our redeemable common shares are contingently redeemable at the option of the holder. When we determine we have a mandatory obligation to repurchase shares under the share redemption program, we will reclassify such obligations from temporary equity to a liability based upon their respective settlement values.

During the six months ended June 30, 2011, we redeemed approximately 439,000 shares of common stock for approximately $4.2 million. As of June 30, 2011, there were approximately 316,000 shares related to redemption requests to be processed subsequent to June 30, 2011. On July 29, 2011, we satisfied all of the eligible redemption requests. The redemption of these shares totaled approximately $3.1 million and was reclassified from redeemable common stock to accounts payable and accrued liabilities in the consolidated balance sheets as of June 30, 2011.

Foreign Currency Translation

For non-U.S. functional currency operations, assets and liabilities are translated to U.S. dollars at current exchange rates. Revenues and expenses are translated at the average rates for the period. All related adjustments are recorded in other comprehensive income (loss) as a separate component of stockholders’ equity. Transactions denominated in a currency other than the functional currency of the related operation are recorded at rates of exchange in effect at the date of the transaction. Gains or losses on foreign currency transactions are recorded in other income (expense). For the three and six months ended June 30, 2011, there was a net loss recorded of approximately $16,000 and a net gain recorded of approximately $35,000, respectively.

Accounting for Equity Awards

The cost of restricted stock is required to be measured based on the grant-date fair value and the cost to be recognized over the relevant service period.

Fair Value Measurements

The accounting standard for fair value measurements and disclosures defines fair value, establishes a framework for measuring fair value, and provides for expanded disclosure about fair value measurements. Fair value is defined by the accounting standard for fair value measurements and disclosures as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels. The following summarizes the three levels of inputs and hierarchy of fair value we use when measuring fair value:

•

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access;

•

Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as interest rates and yield curves that are observable at commonly quoted intervals; and

•

Level 3 inputs are unobservable inputs for the assets or liabilities that are typically based on an entity’s own assumptions as there is little, if any, related market activity.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the fair value measurement will fall within the lowest level that is significant to the fair value measurement in its entirety.

The accounting guidance for fair value measurements and disclosures provides a framework for measuring fair value and establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value. Considerable judgment is necessary to interpret Level 2 and 3 inputs in determining fair value of our financial and non-financial assets and liabilities. Accordingly, there can be no assurance that the fair values we present herein are indicative of amounts that may ultimately be realized upon sale or other disposition of these assets.

Financial and non-financial assets and liabilities measured at fair value on a non-recurring basis in our consolidated financial statements consist of real estate and related assets, investments in unconsolidated joint ventures, and assumed liabilities as well as common stock and limited partnership units issued related to our acquisitions. The fair values of these assets, liabilities, common stock and limited partnership units were determined as of the acquisition dates using widely accepted valuation techniques, including (i) discounted cash flow analysis, which considers, among other things, leasing assumptions, growth rates, discount rates and terminal capitalization rates, (ii) income capitalization approach, which considers prevailing market capitalization rates, and (iii) comparable sales activity. In general, we consider multiple valuation techniques when measuring fair values. However, in certain circumstances, a single valuation technique may be appropriate. All of the fair values of the assets, liabilities, common stock and limited partnership units as of the acquisition dates were derived using Level 3 inputs.

The carrying amounts of cash and cash equivalents, tenant accounts receivable, other assets, accounts payable and accrued liabilities, distributions payable and amounts due to affiliates approximate fair value because of the relatively short-term nature of these instruments.

The table below summarizes our fixed rate notes payable at June 30, 2011. The estimated fair value of financial instruments is subjective in nature and is dependent on a number of important assumptions, including discount rates and relevant comparable market information associated with each financial instrument. The fair value of the fixed rate notes payable was estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented below are not necessarily indicative of the amounts we would realize in a current market exchange.


	June 30, 2011
	Fair Value		Carrying Value
Fixed Rate Secured Promissory Notes	$	209,079,000	$	206,185,499

Noncontrolling Interests in Consolidated Entities

We account for the noncontrolling interests in our Operating Partnership in accordance with amended accounting guidance. Due to our control through our general partnership interest in our Operating Partnership and the limited rights of the limited partners, our Operating Partnership, including

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

its wholly-owned subsidiaries, is consolidated with the Company and the limited partners’ interest is reflected as noncontrolling interests in the accompanying consolidated balance sheets. In addition, we account for the noncontrolling interest in the SF property in accordance with the amended accounting guidance. The noncontrolling interests shall continue to be attributed their share of income and losses, even if that attribution results in a deficit noncontrolling interest balance.

Income Taxes

We made an election to be taxed as a Real Estate Investment Trust (“REIT”), under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2008. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to currently distribute at least 90% of the REIT’s ordinary taxable income to stockholders. As a REIT, we generally will not be subject to federal income tax on taxable income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will then be subject to federal income taxes on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the IRS grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to stockholders. However, we believe that we will be organized and operate in such a manner as to qualify for treatment as a REIT and intend to operate in the foreseeable future in such a manner that we will remain qualified as a REIT for federal income tax purposes. We have concluded that there are no significant uncertain tax positions requiring recognition or disclosure in our consolidated financial statements.

Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, and federal income and excise taxes on our undistributed income.

We have filed an election to treat our TRS as a taxable REIT subsidiary. In general, the TRS may perform additional services for our tenants and generally may engage in any real estate or non-real estate related business. The TRS is subject to corporate federal and state income tax. The TRS follows accounting guidance which requires the use of the asset and liability method. Deferred income taxes will represent the tax effect of future differences between the book and tax bases of assets and liabilities.

Per Share Data

Basic earnings per share attributable for all periods presented are computed by dividing net income (loss) by the weighted average number of shares outstanding during the period. Diluted earnings per share are computed by dividing net income (loss) by the weighted average number of shares outstanding, including all restricted stock grants as though fully vested. For both the three and six months ended June 30, 2011 and 2010, 6,875 and 6,875 shares, respectively, of unvested restricted stock were not included in the diluted weighted average shares as such shares were antidilutive. Our Operating Partnership units are convertible to shares based on certain restrictions. For both the three and six months ended June 30, 2011, 203,663 units were not included in the diluted weighted average shares as such shares were antidilutive. For both the three and six months ended June 30, 2010, 20,000 units, were not included in the diluted weighted average shares as such shares were antidilutive.

Recently Issued Accounting Guidance

Accounting Standards Update (“ASU”) No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”), was

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

issued in May 2011. This ASU represents the converged guidance of the FASB and the International Accounting Standards Board (the “Boards”) on fair value measurement. ASU 2011-04 sets forth common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term “fair value.” The amendments in this ASU are to be applied prospectively. For public entities, this ASU becomes effective during interim and annual periods beginning after December 15, 2011. Early adoption by public entities is not permitted. We expect to adopt the provisions of ASU 2011-04 for the interim period ending March 31, 2012. We are in process of evaluating the impact of this guidance on our consolidated financial statements.

ASU No. 2011-05, “Presentation of Comprehensive Income” (“ASU 2011-05”), was issued in June 2011 to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income in either a single continuous statement of comprehensive income or two separate but consecutive statements. Under either option, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. ASU 2011-05 does not change the items that are required to be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income and is required to be applied retrospectively. For public entities, this ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2011. Early adoption is permitted. We do not anticipate the adoption of this ASU to have a material impact on our consolidated financial statements.

Note 3. USA Self Storage I, DST Acquisition

On February 1, 2011, we, through an indirect wholly-owned subsidiary, closed on the purchase of an additional 73.824% in beneficial interests (“Interests”) in USA Self Storage I, DST (the “DST”), a Delaware Statutory Trust sponsored by our Sponsor, from 36 third-party sellers pursuant to separate purchase agreements with each seller. None of the purchases was contingent upon any of the others. The agreed upon purchase price of the properties relating to the Interests acquired was approximately $27.7 million ($37.55 million total purchase price multiplied by 73.824%), consisting of $10.2 million in cash and the ratable portion of approximately $17.5 million of three separate bank loans held by the three property owning subtrusts (the “Subtrusts”) of the DST (the “Bank of America Loans”).

The acquisition brought our ownership of the DST to 93.577%, including 19.753% in Interests that were acquired previously in unrelated transactions. We closed on the purchase of the remaining 6.423% in Interests on February 15, 2011, with the majority of the consideration being provided in the form of approximately 70,000 limited partnership units in our Operating Partnership. We paid our Advisor approximately $377,000 in acquisition fees in connection with these acquisitions.

The DST, through the Subtrusts, owns 10 self storage facilities located in Georgia, North Carolina and Texas with an aggregate of approximately 5,440 units and 726,000 rentable square feet.

The three Subtrusts lease their respective properties to master tenants (the “Tenants”) on a triple-net basis pursuant to master leases (the “Leases”) that have terms of 10 years and expire on November 1, 2015. The Tenants are owned by affiliates of the Sponsor. Under the Leases, the Tenants pay a stated monthly rent equivalent to the monthly debt service payment under the Bank of America Loans, which is paid directly to the lender on behalf of the Subtrusts, a monthly stated rent equivalent to an investor return

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June 30, 2011

of 7.0% per annum, and may pay certain annual bonus rent per the terms of the Leases, both of which stated rent and bonus rent are remitted to the Subtrusts. As an Interest holder, we are entitled to our pro rata share of the total rent less the debt service under the Bank of America Loans. The Tenants are entitled to retain any cash flow in excess of these rent payments. Upon acquiring 100% of the Interests, we initiated the process to seek lender approval to terminate the Leases. In any event, we and our Sponsor have agreed to assign 100% of the economic benefits and obligations from these properties to us in exchange for indemnification by us for any potential liability incurred subsequent to the assignment by the Sponsor in connection with the Leases.

The properties owned by the Subtrusts are subject to the three Bank of America Loans, which had an aggregate principal balance of approximately $23.8 million as of February 1, 2011. The Bank of America Loans bear a fixed interest rate of 5.18%, had original terms of 10 years and mature on November 1, 2015. The Bank of America Loans required monthly interest-only payments during the first three years of their terms and now require monthly principal-and-interest payments based on a 30-year amortization period. Each of the Bank of America Loans is secured only by the properties owned by the respective Subtrust that obtained such loan.

Note 4. Real Estate Facilities

The following summarizes our activity in real estate facilities during the six months ended June 30, 2011:


Real estate facilities
Balance at December 31, 2010	$	274,568,200
Facility acquisitions		103,980,429
Impact of foreign exchange rate changes		298,469
Improvements and additions		2,024,362

Balance at June 30, 2011	$	380,871,460

Accumulated depreciation
Balance at December 31, 2010	$	(6,677,014	)
Depreciation expense		(4,024,344	)

Balance at June 30, 2011	$	(10,701,358	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

The following table summarizes the preliminary purchase price allocation for our acquisitions for the six months ended June 30, 2011:


Property	Acquisition Date		Real Estate Assets		Intangibles		Total (1)		Debt Assumed or Issued (2) (3)		2011 Revenue (4)		2011 Property Operating Income (4) (5)
Concord – NC(6)		2/1/2011	$	2,809,179	$	290,000	$	3,099,179	$	2,262,355	$	159,224	$	74,155
Hickory – NC(6)		2/1/2011		3,068,239		300,000		3,368,239		2,116,866		178,102		110,543
Morganton – NC(6)		2/1/2011		2,479,875		420,000		2,899,875		2,458,764		170,723		98,995
El Paso II – TX(6)		2/1/2011		4,028,337		560,000		4,588,337		2,493,626		236,145		143,858
El Paso III – TX(6)		2/1/2011		5,584,356		510,000		6,094,356		3,312,103		299,299		199,110
El Paso IV – TX(6)		2/1/2011		3,394,766		300,000		3,694,766		2,007,996		182,654		105,002
El Paso V – TX(6)		2/1/2011		3,535,809		420,000		3,955,809		2,149,865		208,160		129,294
Dallas – TX(6)		2/1/2011		4,108,217		450,000		4,558,217		2,477,257		272,431		126,983
Lawrenceville I – GA(6)		2/1/2011		1,529,603		150,000		1,679,603		1,493,828		122,849		51,059
Lawrenceville II – GA(6)		2/1/2011		2,832,445		260,000		3,092,445		2,750,402		143,461		66,514
Mississauga – Mississauga – Ontario, Canada(7) (8)		3/11/2011		5,662,250		—		5,662,250		—		—		(1,533	)
El Paso – TX(9)		3/17/2011		1,560,000		40,000		1,600,000		—		31,449		(13,772	)
Las Vegas VII – NV(10)		3/25/2011		4,589,867		460,000		5,049,867		—		149,061		73,855
Las Vegas VIII – NV(10)		3/25/2011		4,919,309		390,000		5,309,309		—		162,513		90,725
SF Bay Area – Morgan Hill – CA		3/30/2011		5,654,098		680,000		6,334,098		3,089,522		202,081		120,713
SF Bay Area – Vallejo – CA		3/30/2011		7,266,974		670,000		7,936,974		4,678,535		231,766		129,356
Peachtree City – GA		6/10/2011		4,890,000		520,000		5,410,000		2,645,000		35,016		16,723
Buford – GA		6/10/2011		2,357,000		200,000		2,557,000		1,350,000		27,525		12,122
Jonesboro – GA		6/10/2011		2,295,000		200,000		2,495,000		1,100,000		31,021		13,606
Ellenwood – GA		6/10/2011		2,114,225		196,775		2,311,000		1,260,000		23,828		9,253
Marietta II – GA		6/10/2011		2,452,200		227,800		2,680,000		1,200,000		22,956		5,862
Collegeville – PA		6/10/2011		2,835,500		263,500		3,099,000		1,515,000		31,332		11,640
Skippack – PA		6/10/2011		2,113,000		280,000		2,393,000		1,170,000		28,069		11,449
Ballston Spa – NY		6/10/2011		4,706,760		437,240		5,144,000		2,515,000		47,484		27,428
Trenton – NJ		6/10/2011		6,993,000		800,000		7,793,000		3,810,000		56,392		28,674
Fredericksburg – VA		6/10/2011		3,911,625		363,375		4,275,000		2,090,000		37,134		20,668
Sandston – VA		6/10/2011		6,288,795		584,205		6,873,000		3,360,000		50,268		30,864

Total			$	103,980,429	$	9,972,895	$	113,953,324	$	53,306,119	$	3,140,943	$	1,693,146

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

(1)	The allocations noted above are based on a preliminary determination of the fair value of the total consideration provided. Such valuations may change as we complete our purchase price accounting.

(2)	See Note 5 for specific terms of the debt.

(3)	Amounts include the estimated preliminary fair value adjustment of debt.

(4)	The operating results of the facilities acquired above have been included in the Company’s statement of operations since their respective acquisition date.

(5)	Property operating income excludes corporate general and administrative expenses, asset management fees, interest expense, depreciation, amortization and acquisition expenses.

(6)	See Note 3 for additional information related to the acquisition of these properties.

(7)	Allocation (excludes estimated conversion costs) based on Canadian/U.S. exchange rate as of the date of acquisition.

(8)	Property is under construction; therefore the property generated no revenue or operating income as of June 30, 2011.

(9)	Acquisition is subject to an “earn out” provision. The allocation above includes the estimated fair value of such “earn out.”

(10)	Consideration provided included approximately 114,000 Class D Units.

The purchase price allocations included above are preliminary and therefore, subject to change upon the completion of our analysis of appraisals and other information related to the acquisitions. We anticipate finalizing the purchase price allocations by December 31, 2011 along with supplementary pro forma information.

All of the above transactions were acquired from unaffiliated third parties. Acquisition fees paid to our Advisor for the three and six months ended June 30, 2011 totaled approximately $1.1 million and $2.3 million, respectively.

Note 5. Secured Promissory Notes

The Company’s secured promissory notes are summarized as follows:


	Carrying value as of:
Encumbered Property	June 30, 2011		December 31, 2010		Stated Interest Rate			Maturity Date
Crescent Springs	$	800,000	$	800,000		5.00	%		2/11/2014
Florence, Walton		3,700,000		3,700,000		5.00	%		2/11/2014
Biloxi, Gulf Breeze(1)		—		4,939,555		6.50	%		4/1/2012
Montgomery		2,872,190		2,905,005		6.42	%		7/1/2016
Seabrook		4,616,344		4,648,475		5.73	%		1/1/2016
Greenville		2,313,283		2,329,399		5.65	%		3/1/2016
Kemah		9,031,181		9,086,648		6.20	%		6/1/2016
Memphis		2,555,233		2,572,089		5.67	%		12/1/2016
Tallahassee		7,650,000		7,650,000		6.16	%		8/1/2016
Houston		2,070,870		2,087,590		5.67	%		2/1/2017
San Francisco (consolidated VIE)		10,500,000		10,500,000		5.84	%		12/1/2016

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011


	Carrying value as of:
Encumbered Property	June 30, 2011			December 31, 2010			Stated Interest Rate			Maturity Date
Lake Forest		18,000,000			18,000,000			6.47	%		10/1/2017
Las Vegas I		1,540,000			1,540,000			5.72	%		6/1/2017
Pearland		3,500,000			3,500,000			5.93	%		7/1/2017
Daphne		1,772,300			1,844,445			5.47	%		8/1/2020
Mesa		3,130,780			3,161,123			5.38	%		4/1/2015
Riverdale		4,800,000			4,800,000			4.00	%		5/14/2014
Prudential Portfolio Loan(2)		32,253,172			32,475,887			5.42	%(3)		9/5/2019
Long Beach(1)		—			5,000,000			10.00	%		1/31/2011
Dufferin – Toronto – Ontario, Canada		7,166,600			—			5.20	%(4)		12/15/2013
Citi Loan(5)		29,002,839			—			5.77	%		2/6/2021
Bank of America Loan – 1(6)		4,509,834			—			5.18	%		11/1/2015
Bank of America Loan – 2(7)		6,833,607			—			5.18	%		11/1/2015
Bank of America Loan – 3(8)		12,282,707			—			5.18	%		11/1/2015
Prudential – Long Beach(9)		6,784,458			—			5.27	%		9/5/2019
SF Bay Area – Morgan Hill – CA		3,029,698			—			5.75	%		4/1/2013
SF Bay Area – Vallejo – CA		4,521,238			—			6.04	%		6/1/2014
Citi Las Vegas Loan(10)		7,700,000			—			5.26	%		6/6/2021
ING Loan(11)		22,015,000			—			5.47	%		7/1/2021
Net fair value adjustment		(1,599,235	)		(1,728,268	)

Total mortgage loans and notes payable	$	213,352,099		$	119,811,948

(1)	These loans were repaid in their entirety in January 2011.

(2)	This portfolio loan is comprised of 11 discrete mortgage loans on 11 respective properties (Manassas, Marietta, Erlanger, Pittsburgh, Weston, Fort Lee, Oakland Park, Tempe, Phoenix II, Davie, Las Vegas II). Each of the individual loans is cross-collateralized by the other ten.

(3)	Ten of the loans in this portfolio loan bear an interest rate of 5.43% and the remaining loan bears an interest rate of 5.31%. The weighted average interest rate of this portfolio is 5.42%.

(4)	On January 12, 2011, we encumbered the Toronto property with a Canadian dollar denominated loan of $7 million which bears interest at the bank’s floating rate plus 3.5% (subject to a reduction in certain circumstances). The rate in effect at June 30, 2011 was 5.20%.

(5)	This portfolio loan encumbers 11 properties (Biloxi, Gulf Breeze I, Alpharetta, Florence II, Jersey City, West Mifflin, Chicago – 95^th St. Chicago – Western Ave., Chicago – Ogden Ave., Chicago – Roosevelt Rd. and Las Vegas IV).

(6)	This loan encumbers the Lawrenceville I and II properties.

(7)	This loan encumbers the Concord, Hickory and Morganton properties.

(8)	This loan encumbers the El Paso II, III, IV & V properties as well as the Dallas property.

(9)	This loan is cross-collateralized by the 11 properties discussed in (2).

(10)	This loan encumbers the Las Vegas VII and Las Vegas VIII properties.

(11)

This portfolio loan is comprised of 11 discrete mortgage loans on 11 respective properties (Peachtree City, Buford, Jonesboro, Ellenwood, Marietta II, Collegeville, Skippack, Ballston Spa, Trenton, Fredericksburg and Sandston). Each of the individual loans has a term of 30 years and matures on July 1, 2041. ING has the option to require payment of the loan in full every five years beginning on July 1, 2021.

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

On January 28, 2011, we encumbered eleven of our self storage facilities (the “Encumbered Properties”) in connection with a loan obtained from The Citigroup Global Markets Realty Corp. (the “Citi Loan”) in the principal amount of approximately $29.1 million. The proceeds from the Citi Loan were used to repay the existing debt obligations of approximately $5 million related to two of our existing Encumbered Properties, to make future acquisitions of self storage facilities and for other general corporate purposes. The Citi Loan has a term of ten years and matures on February 6, 2021. The Citi Loan bears a fixed rate of 5.77% per annum on a 30-year amortization schedule. Payments of principal and interest are due on a monthly basis. We may prepay the Citi Loan without penalty in the last three months of the ten-year term. We have guaranteed the obligations under the Citi loan in limited circumstances set forth in the loan documents. The Citi loan contains a number of other customary terms and covenants. The net book value of the Encumbered Properties as of June 30, 2011 was approximately $52 million. Such amounts are only available to satisfy the obligations of the Citi Loan.

On May 25, 2011, we, through two special purpose entities, encumbered the Las Vegas VII property and the Las Vegas VIII property with a loan from The Citigroup Global Markets Realty Corp. (the “Citi Las Vegas Loan”). in the total principal amount of approximately $7.7 million The Citi Las Vegas Loan bears interest at a rate of 5.26% per annum and has a term of 10 years.

On June 10, 2011, in connection with our acquisition of a portfolio of 11 self storage properties located in five states (the “B&B Portfolio”), we, through 11 special purpose entities, entered into a loan agreement and various promissory notes and other loan documents for 11 individual loans obtained from ING Life Insurance and Annuity Company in the principal amount of approximately $22 million (collectively, the “ING Loan”). The proceeds from the ING Loan were used to help fund the acquisition of the B&B Portfolio. Each of the individual loans comprising the ING Loan has a term of 30 years and matures on July 1, 2041. ING has the option to require payment of the loan in full every five years beginning on July 1, 2021. Each of the loans bears a fixed interest rate of 5.47%, based on a 30-year amortization schedule. Payments of principal and interest are due on a monthly basis, and we may prepay the ING Loan after July 1, 2012 upon 60 days’ written notice to ING, subject to a prepayment premium.

The ING Loan is secured by interests in the 11 properties constituting the B&B Portfolio (Peachtree City, Buford, Jonesboro, Ellenwood, Marietta II, Collegeville, Skippack, Ballston Spa, Trenton, Fredericksburg and Sandston). The security instruments for each encumbered property are cross-collateralized and cross-defaulted with those related to the other encumbered properties. In addition, each of the 11 property-owning special purpose entities has guaranteed the obligations under each of the other 10 loans and granted a junior security interest in the encumbered property owned by the respective special purpose entity.

We have guaranteed the obligations of the 11 special purpose entities under the ING Loan in certain limited circumstances set forth in the loan documents. The ING Loan contains a number of other customary terms and covenants.

As of June 30, 2011 and December 31, 2010, the Company’s secured promissory notes shown above were secured by the properties shown above, which properties had net book values of approximately $340 million and $193 million, respectively.

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

The following table presents the future principal payment requirements on outstanding secured promissory notes as of June 30, 2011:


2011	$	1,209,519
2012		5,424,376
2013		12,716,879
2014		13,993,512
2015		27,638,428
2016 and thereafter		153,968,620

Total payments		214,951,334
Unamortized fair value adjustment		(1,599,235	)

Total	$	213,352,099

We record the amortization of debt discounts related to fair value adjustments to interest expense. The weighted average interest rate of the Company’s fixed rate debt as of June 30, 2011 was approximately 5.6%.

Note 6. Related Party Transactions

Fees to Affiliates

Our Advisory Agreement with our Advisor and dealer manager agreement (“Dealer Manager Agreement”) with our Dealer Manager entitle our Advisor and our Dealer Manager to specified fees upon the provision of certain services with regard to the Offering and investment of funds in real estate properties, among other services, as well as reimbursement for organizational and offering costs incurred by our Advisor on our behalf and reimbursement of certain costs and expenses incurred by our Advisor in providing services to us.

Organization and Offering Costs

Organization and offering costs of the Offering may be paid by our Advisor on our behalf and will be reimbursed to our Advisor from the proceeds of the Offering. Organization and offering costs consist of all expenses (other than sales commissions and the dealer manager fee) to be paid by us in connection with the Offering, including our legal, accounting, printing, mailing and filing fees, charges of our escrow holder and other accountable offering expenses, including, but not limited to, (i) amounts to reimburse our Advisor for all marketing related costs and expenses such as salaries and direct expenses of employees of our Advisor and its affiliates in connection with registering and marketing our shares; (ii) technology costs associated with the Offering; (iii) our costs of conducting our training and education meetings; (iv) our costs of attending retail seminars conducted by participating broker-dealers; and (v) payment or reimbursement of bona fide due diligence expenses. Our Advisor must reimburse us within 60 days after the end of the month which the Offering terminates to the extent we paid or reimbursed organization and offering costs (excluding sales commissions and dealer manager fees) in excess of 3.5% of the gross offering proceeds from the Primary Offering.

Advisory Agreement

We do not expect to have any employees. Our Advisor is primarily responsible for managing our business affairs and carrying out the directives of our board of directors. Our Advisor receives various fees and expenses under the terms of our Advisory Agreement. As discussed above, we are required under our Advisory Agreement to reimburse our Advisor for organization and offering costs; provided, however, our Advisor must reimburse us within 60 days after the end of the month in which the Offering terminates to the extent we paid or reimbursed organization and offering costs (excluding sales

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

commissions and dealer manager fees) in excess of 3.5% of the gross offering proceeds from the Primary Offering. As of June 30, 2011, we do not believe that total organization and offering costs will exceed 3.5% of the gross proceeds anticipated to be received from the Primary Offering.

Our Advisory Agreement also requires our Advisor to reimburse us to the extent that offering expenses, including sales commissions, dealer manager fees and organization and offering expenses, are in excess of 15% of gross proceeds from the Offering. Our Advisor receives acquisition fees equal to 2.5% of the contract purchase price of each property we acquire plus reimbursement of any acquisition expenses the Advisor incurs. Our Advisor also receives a monthly asset management fee for managing our assets equal to 0.0833% of the aggregate asset value, as defined, of our assets. The monthly asset management fees for our properties acquired through our September 24, 2009 mergers and the USA Self Storage I, DST acquisition are equal to 2.0% of the gross revenues from the properties and are paid to affiliates of our Sponsor. Under our Advisory Agreement, our Advisor receives fees in an amount equal to up to one-half of the total real estate commission paid but in no event to exceed an amount equal to 3.0% of the contract sale price for each property we sell as long as our Advisor provides substantial assistance in connection with the sale. The total disposition fees paid (including fees paid to third parties) may not exceed the lesser of a competitive real estate commission or an amount equal to 6.0% of the contract sale price of the property. Our Advisor may also be entitled to various subordinated fees if we (1) list our shares of common stock on a national exchange, (2) terminate our Advisory Agreement, or (3) liquidate our portfolio. The advisors of REIT I and REIT II are entitled to various fees related to their properties if we (1) dispose of a property, (2) liquidate our portfolio, or (3) terminate their advisory agreement.

Our Advisory Agreement provides for reimbursement of our Advisor’s direct and indirect costs of providing administrative and management services to us (see footnote ⁽¹⁾below for a discussion of the Advisor’s permanent waiver of certain reimbursements for the three months ended June 30, 2011). Beginning October 1, 2009 (four fiscal quarters after the acquisition of our first real estate asset), our Advisor must pay or reimburse us the amount by which our aggregate annual operating expenses, as defined, exceed the greater of 2% of our average invested assets or 25% of our net income, as defined, unless a majority of our independent directors determine that such excess expenses were justified based on unusual and non-recurring factors. For any fiscal quarter for which total operating expenses for the 12 months then ended exceed the limitation, we will disclose this fact in our next quarterly report or within 60 days of the end of that quarter and send a written disclosure of this fact to our stockholders. In each case the disclosure will include an explanation of the factors that the independent directors considered in arriving at the conclusion that the excess expenses were justified. For the 12 months ended June 30, 2011, our aggregate annual operating expenses, as defined, did not exceed the thresholds described above.

Dealer Manager Agreement

Our Dealer Manager receives a sales commission of up to 7.0% of gross proceeds from sales in the Primary Offering and a dealer manager fee equal to up to 3.0% of gross proceeds from sales in the Primary Offering under the terms of our Dealer Manager Agreement. Our Dealer Manager has entered into participating dealer agreements with certain other broker-dealers which authorizes them to sell our shares. Upon sale of our shares by such broker-dealers, our Dealer Manager will re-allow all of the sales commissions paid in connection with sales made by these broker-dealers. Our Dealer Manager may also re-allow to these broker-dealers a portion of the 3.0% dealer manager fee as marketing fees, reimbursement of certain costs and expenses of attending training and education meetings sponsored by our Dealer Manager, payment of attendance fees required for employees of our Dealer Manager or other affiliates to attend retail seminars and public seminars sponsored by these broker-dealers, or to defray other distribution-related expenses. Our Dealer Manager also receives reimbursement of bona fide due diligence expenses up to 0.5% of the gross proceeds from sales in the Primary Offering.

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

Property Management Agreement

Our Property Manager receives a fee for its services in managing our properties, except for those properties acquired in the REIT I merger transaction and the USA Self Storage I, DST acquisition, generally equal to 6.0% of the gross revenues from the properties plus reimbursement of the direct costs of managing the properties under our property management agreement. The properties acquired in the REIT I merger transaction and USA Self Storage I, DST acquisition are managed by an affiliate of our Sponsor. As a condition of the REIT II merger transaction, the monthly property management fees for properties acquired from REIT II have been waived until the FFO of the properties acquired from REIT II, as defined in the merger agreement relating to the REIT II merger transaction, reaches $0.70 per share. In the event that our Property Manager assists with the development or redevelopment of a property, we may pay a separate market-based fee for such services.

Pursuant to the terms of the agreements described above, the following summarizes the related party costs incurred for the three and six months ended June 30, 2011 and 2010:


	Three Months Ended June 30, 2011 Incurred		Three Months Ended June 30, 2010 Incurred		Six Months Ended June 30, 2011 Incurred		Six Months Ended June 30, 2010 Incurred
Expensed
Reimbursement of operating expenses (including organizational costs)(1)	$	32,672	$	184,130	$	303,319	$	388,849
Asset management fees		681,581		338,786		1,246,927		583,741
Property management fees		630,069		322,380		1,137,614		539,802
Acquisition expenses		1,110,722		703,523		2,343,881		1,324,242
Additional Paid-in Capital
Selling commissions		1,526,887		1,828,138		3,081,698		3,501,162
Dealer Manager fee		654,381		783,488		1,320,728		1,500,498
Reimbursement of offering costs		144,370		90,540		264,127		195,834

Total	$	4,780,682	$	4,250,985	$	9,698,294	$	8,034,128

(1)

For the three months ended June 30, 2011, the Advisor permanently waived certain reimbursable indirect costs, primarily payroll and related overhead costs, related to administrative and management services, totaling approximately $250,000. Such amounts were waived permanently and accordingly, will not be paid to the Advisor.

As of June 30, 2011 and December 31, 2010, we had amounts due to affiliates totaling $840,041 and $746,108, respectively.

Note 7. Commitments and Contingencies

Distribution Reinvestment Plan

We have adopted a distribution reinvestment plan that allows our stockholders to have distributions otherwise distributable to them invested in additional shares of our common stock. We have registered 10,000,000 shares of common stock for sale pursuant to the distribution reinvestment plan. The plan became effective on the effective date of our initial public offering. The purchase price per share is to be the higher of $9.50 per share or 95% of the fair market value of a share of our common stock. No sales commission or dealer manager fee will be paid on shares sold through the distribution reinvestment plan. We may amend or terminate the distribution reinvestment plan for any reason at any time upon 10

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

days’ prior written notice to stockholders. As of June 30, 2011 we have sold approximately 1.3 million shares through our distribution reinvestment plan.

Share Redemption Program

We have adopted a share redemption program that enables our stockholders to sell their stock to us in limited circumstances. As long as our common stock is not listed on a national securities exchange or over-the-counter market, our stockholders who have held their stock for at least one year may be able to have all or any portion of their shares of stock redeemed by us. We may redeem the shares of stock presented for redemption for cash to the extent that we have sufficient funds available to fund such redemption. The amount that we may pay to redeem stock is expected to be the redemption price set forth in the following table which is based upon the number of years the stock is held:


Number Years Held		Redemption Price
Less than 1		No Redemption Allowed
1 or more but less than 2		92.5% of purchase price
2 or more but less than 3		95.0% of purchase price
3 or more but less than 4		97.5% of purchase price
4 or more		100.0% of purchase price

The purchase price shall equal the amount paid for the shares until the price in the Primary Offering changes or a net asset value is calculated. The redemption price is subject to adjustment as determined from time to time by our board of directors. At no time will the redemption price exceed the price at which we are offering our common stock for sale.

See Note 2 for further discussion of redeemable common stock and our share redemption program, also see Note 11 for a description of an amendment to our share redemption program.

Operating Partnership Redemption Rights

The limited partners of our Operating Partnership have the right to cause our Operating Partnership to redeem their limited partnership units for cash equal to the value of an equivalent number of our shares, or, at our option, we may purchase their limited partnership units by issuing one share of our common stock for each limited partnership unit redeemed. The holders of the Class D Units have agreed to modified exchange rights that prevent them from exercising their exchange rights: (1) until the earlier of (a) a listing of our shares or (b) our merger into another entity whereby our stockholders receive securities listed on a national securities exchange; or (2) until FFO of the properties contributed by the holders of the Class D Units reaches $0.70 per share, based on our fully-loaded cost of equity. These rights may not be exercised under certain circumstances that could cause us to lose our REIT election. Furthermore, limited partners may exercise their redemption rights only after their limited partnership units have been outstanding for one year. Our Advisor is prohibited from exchanging or otherwise transferring its limited partnership units so long as our Sponsor is acting as our sponsor.

Las Vegas III and VI Properties

We purchased these properties through judicial foreclosure proceedings. We have been advised by local counsel that, although the court ordered that the original property owners (the “borrowers”) would have no right of redemption, pursuant to Nevada law, the borrowers may still have the right to elect to redeem the properties during a one-year period following the date the properties were sold at foreclosure. Should either borrower elect to redeem their properties within one year following the foreclosure sale, we may be obligated to return the property to the borrower, provided certain other

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

conditions are met, including repayment of our purchase price. Although the borrowers may have a right to redeem, we believe that it is highly unlikely that this will occur.

Los Angeles – La Cienega Conditional Use Permit

Our use of the Los Angeles – La Cienega property as a self storage facility is subject to a Conditional Use Permit granted by the Los Angeles County Department of Regional Planning which must be renewed six months prior to the current termination date in 2012. We and the seller of the La Cienega - LA property have entered into agreements whereby it is the seller’s responsibility to apply for and obtain approval of the permit renewal. If the renewal application is not approved, we may force the seller to repurchase the property from us on certain terms and conditions. As part of the permit renewal process and right to purchase, the seller has put $500,000 into an escrow account, which amounts may be withdrawn subject to certain conditions.

Note 8. Declaration of Distributions

On June 16, 2011, our board of directors declared a distribution rate for the third quarter of 2011 of $0.00191781 per day per share on the outstanding shares of common stock (equivalent to an annual distribution rate of 7% assuming the share was purchased for $10) payable to stockholders of record of such shares as shown on our books at the close of business on each day during the period commencing on July 1, 2011 and continuing on each day thereafter through and including September 30, 2011.

Note 9. Selected Quarterly Data

The following is a summary of quarterly financial information for the periods shown below:


	Three months ended
	June 30, 2010			September 30, 2010			December 31, 2010			March 31, 2011			June 30, 2011
Total revenues	$	6,312,933		$	6,937,875		$	7,760,142		$	9,804,613		$	11,371,860
Total operating expenses	$	7,814,193		$	7,850,442		$	11,079,116		$	12,661,013		$	13,895,617
Net loss	$	(2,708,719	)	$	(2,310,354	)	$	(4,952,762	)	$	(5,341,819	)	$	(5,399,076	)
Net loss attributable to the Company	$	(2,589,556	)	$	(2,199,012	)	$	(4,834,256	)	$	(5,216,063	)	$	(5,248,767	)
Net loss per share-basic and diluted	$	(0.13	)	$	(0.10	)	$	(0.19	)	$	(0.19	)	$	(0.17	)

Note 10. Potential Acquisition

We have entered into a purchase and sale agreement for one additional self storage facility. We expect to close such acquisition before the end of the third quarter of 2011:

Property

Date of
Purchase
and Sale
Agreement

Acquisition
Price

Year Built/
Converted

Approx.
Units

Approx.
Rentable
Sq. Ft. (net)

SF Bay Area – Gilroy – CA

9/14/10

6,560,000

1999

610

63,500

There can be no assurance that we will complete such acquisition. In some circumstances, if we fail to complete such acquisition, we may forfeit earnest money as a result.

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

Note 11. Subsequent Events

Acquisitions

We closed on the acquisitions of the following properties subsequent to June 30, 2011 from unaffiliated third parties:


Property	Acquisition Date	Acquisition Price(1)			Year Built	Approx. Units		Approx. Sq. Ft. (net)		Acquisition Fees Paid to Our Advisor
Ladera Ranch – CA	7/6/2011	$	20,900,000	⁽²⁾	2003		980		114,000	$	522,000
SF Bay Area – San Lorenzo – CA	7/15/2011	$	2,850,000		2000		640		62,000	$	71,250
Hampton – VA	7/20/2011	$	4,900,000		2007		640		70,200	$	122,500
Las Vegas V – NV	7/21/2011	$	4,470,000		1997		790		88,000	$	111,750

Total		$	33,120,000				3,050		334,200	$	827,500

(1)	The acquisition prices noted above are based on a preliminary determination of the fair value of the total consideration provided. Such valuations may change as we complete our purchase price accounting.

(2)	Includes an adjoining parcel of vacant land, which had an acquisition price of approximately $3.9 million.

Financing

KeyBank Credit Facility

On July 1, 2011, we obtained a delayed draw credit facility (the “KeyBank Credit Facility”) from KeyBank, National Association, as administrative agent (“KeyBank”). The total principal amount of commitments available under the KeyBank Credit Facility is $22.0 million, of which $15.0 million was initially drawn on July 1, 2011 in one loan secured by our Las Vegas III, Las Vegas VI and La Cienega-LA properties. We used a portion of this initial $15.0 million draw on the KeyBank Credit Facility to assist in financing the acquisition of the Ladera Ranch property. On July 20, 2011 in connection with closing the Hampton property an additional draw of $3.0 million was made. We intend to draw the remaining $4.0 million at a later date to finance the closing of our pending acquisition of the SF Bay Area – Gilroy property.

The KeyBank Credit Facility has a term of 90 days and matures on September 29, 2011, subject to a 90-day extension at our option upon meeting certain conditions set forth in the credit agreement. We may prepay or terminate the KeyBank Credit Facility, in whole or in part, at any time without fees or penalty, subject to certain limitations set forth in the credit agreement. Commencing on September 1, 2011, if the outstanding amount due under the KeyBank Credit Facility at any time is greater than 60% of the aggregate acquisition cost of the encumbered properties, 100% of the net proceeds of our public offering (after selling commissions, the dealer manager fee and offering expenses) must be applied on a weekly basis to reduce the outstanding amount due under the KeyBank Credit Facility to no greater than 60% of the aggregate acquisition cost of the encumbered properties. The loans under the KeyBank Credit Facility bear a variable interest rate that equaled 3.19% per annum on the loan date. Pursuant to a guaranty, we serve as a guarantor of the obligations of the Operating Partnership and the related property-holding special purpose entities for the loans under the KeyBank Credit Facility, and, pursuant to a pledge and security agreement, we pledged the net proceeds from our public offering to secure the loans under certain circumstances. The KeyBank Credit Facility is subject to a number of other customary fees, terms and covenants.

STRATEGIC STORAGE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

Ladera Ranch Mortgage Loan

In connection with the acquisition of the Ladera Ranch property, we assumed a mortgage loan with a principal balance of approximately $7.0 million. The assumed loan matures on June 1, 2016 and bears a fixed interest rate of 5.84% per annum on a 30-year amortization schedule.

San Lorenzo Mortgage Loan

In connection with the acquisition of the San Lorenzo property, we assumed a mortgage loan with a principal balance of approximately $2.2 million. The assumed loan matures on January 1, 2014 and bears a fixed interest rate of 6.068% per annum on a 30-year amortization schedule.

Las Vegas V Mortgage Loan

In connection with the acquisition of the Las Vegas V property, we assumed a mortgage loan with a principal balance of approximately $1.7 million. The assumed loan matures on July 1, 2015 and bears a fixed interest rate of 5.02% per annum on a 30-year amortization schedule.

Offering Status

As of August 8, 2011, in connection with our Offering we have issued approximately 27 million shares of our common stock for gross proceeds of approximately $269 million.

Share Redemption Program

Our board of directors has amended the terms of our share redemption program; such amendment will be effective as of October 1, 2011. The material terms of our share redemption program will remain the same, except we have (1) changed the redemption price per share after one year from the purchase date to 90.0% (from 92.5%) of the purchase price; after two years from the purchase date to 92.5% (from 95.0%) of the purchase price; and after three years from the purchase date to 95.0% (from 97.5%) of the purchase price; (2) clarified that we will not accept redemption requests for shares subject to liens or encumbrances, and (3) clarified our procedures for redemption requests from stockholders subject to long-term care facilities, bankruptcy, qualifying disabilities and death. In all other respects our share redemption program remains the same. The complete terms of our share redemption program, as so revised, are described in detail in our Form S-11/A Registration Statement (Commission File No. 333-168905) filed with the SEC on January 24, 2011.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Result of Operations should be read in conjunction with our financial statements and notes thereto contained elsewhere in this report. The following Management’s Discussion and Analysis of Financial Condition and Result of Operations should also be read in conjunction with our financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Form 10-K for the year ended December 31, 2010. See also “Cautionary Note Regarding Forward Looking Statements” preceding Part I.

Overview

Strategic Storage Trust, Inc., a Maryland Corporation (the “Company”), was formed on August 14, 2007 for the purpose of engaging in the business of investing in self storage facilities. The Company made an election to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2008. As used in this report, “we” “us” and “our” refer to Strategic Storage Trust, Inc.

We are currently offering a maximum of 110,000,000 shares of common stock, consisting of 100,000,000 shares for sale to the public (the “Primary Offering”) and 10,000,000 shares for sale pursuant to our distribution reinvestment plan (collectively, the “Offering”).

On March 17, 2008, the Securities and Exchange Commission (“SEC”) declared our registration statement effective. On May 22, 2008, we satisfied the minimum offering requirements of the Primary Offering and commenced formal operations. As of June 30, 2011, we had sold approximately 25.8 million shares of our common stock, including shares sold through our distribution reinvestment plan, for gross offering proceeds of approximately $257 million. We intend to invest a substantial amount of the net proceeds from the Offering primarily in self storage facilities and related self storage real estate investments. We may continue to sell shares in the Offering until the earlier of 180 days after the third anniversary of the effective date of the Offering, September 17, 2011, or the effective date of the registration statement for our follow-on offering (SEC Registration No. 333-168905), which we initially filed with the SEC on August 17, 2010. We also reserve the right to terminate the Offering at any time.

As of June 30, 2011, we owned 72 self storage facilities located in 17 states and Canada, comprising approximately 47,040 units and approximately 5.9 million rentable square feet. As of June 30, 2011, we also had minority interests in nine additional self storage facilities through preferred equity and/or minority interests. Additionally, we have an interest in a net leased industrial property in California with 356,000 rentable square feet leased to a single tenant. As of June 30, 2010, we owned 34 self storage facilities located in 14 states, comprising approximately 23,485 units and approximately 2.9 million rentable square feet.

Strategic Storage Operating Partnership, L.P. (our “Operating Partnership”) was formed on August 14, 2007. Our Operating Partnership owns, directly or indirectly through one or more special purpose entities, all of the self storage properties that we have acquired.

Strategic Capital Holdings, LLC (our “Sponsor”) is the sponsor of our Offering. Our Sponsor was formed in 2004 to engage in private structured offerings of limited partnerships and other entities with respect to the acquisition, management and disposition of commercial real estate assets. Our Sponsor owns a majority of Strategic Storage Holdings, LLC, which is the sole member of our advisor, Strategic Storage Advisor, LLC (our “Advisor”), and our property manager, Strategic Storage Property Management, LLC (our “Property Manager”).

We have no paid employees. Our Advisor is responsible for managing our affairs on a day-to-day basis and identifying and making acquisitions and investments on our behalf under the terms of an advisory agreement with our Advisor. Our Advisor was formed on August 13, 2007.

Our Property Manager was organized in August 2007 to manage our properties. Our Property Manager derives substantially all of its income from the property management services it performs for us. Our Property Manager may enter into sub-property management agreements with third party management companies and pay part of its management fee to such sub-Property Manager.

As of June 30, 2011, our self storage portfolio was comprised as follows:


State	No. of Properties		Units		Sq. Ft. (net)			% of Total Rentable Sq. Ft.			Physical Occupancy %(1)			Climate Controlled %(2)			Revenue % (3)
Alabama (4)		2		1,075		144,500			2.5	%		68.1	%		49.1	%		1.7	%
Arizona		4		1,970		242,850			4.1	%		70.4	%		21.8	%		3.2	%
California (4)		5		4,250		561,700			9.5	%		83.3	%		19.8	%		16.1	%
Florida		6		5,850		602,150			10.2	%		75.5	%		59.5	%		13.9	%
Georgia		9		4,870		663,200			11.3	%		76.4	%		29.5	%		4.7	%
Illinois		4		2,475		370,400	⁽⁵⁾		6.3	%		69.5	%		7.0	%		6.4	%
Kentucky		5		2,800		401,000			6.8	%		84.1	%		2.0	%		6.6	%
Mississippi		1		600		66,600			1.1	%		62.0	%		12.2	%		0.8	%
Nevada		7		3,920		475,700			8.1	%		72.8	%		71.0	%		10.2	%
New Jersey		4		3,560		336,000			5.7	%		77.3	%		55.1	%		10.0	%
New York		1		690		82,800			1.4	%		93.8	%		20.2	%		0.0	%
North Carolina		3		1,580		178,900			3.0	%		83.2	%		20.7	%		2.8	%
Ontario, Canada(6)		2		1,860		211,000			3.6	%		60.9	%		96.7	%		2.8	%
Pennsylvania		4		2,220		269,900			4.6	%		72.2	%		17.1	%		2.5	%
South Carolina		1		460		65,200			1.1	%		92.0	%		66.0	%		1.4	%
Tennessee		1		800		100,400			1.7	%		87.7	%		0.0	%		1.4	%
Texas(4)		10		6,250		933,300			15.8	%		85.2	%		19.2	%		14.1	%
Virginia		3		1,810		187,600			3.2	%		83.9	%		49.9	%		1.4	%

Total		72		47,040		5,893,200			100	%		78.2	%		32.4	%		100	%

(1)	Represents the occupied square feet of all facilities we own in a state divided by total rentable square feet of all the facilities we own in such state as of June 30, 2011.

(2)	Represents the percentage of rentable square feet in climate-controlled units as of June 30, 2011 for each state.

(3)	Represents rental income (excludes administrative fees, late fees, and other ancillary income) for all facilities we owned in a state divided by our total rental income for the month ended June 30, 2011.

(4)

Does not include properties in which we own a minority interest, including the interests owned in the Montgomery County Self Storage, DST properties, the San Francisco Self Storage DST property, the Hawthorne property, the WP Baltimore Self Storage property and the Southwest Colonial, DST properties.

(5)	Includes approximately 85,000 rentable square feet of industrial warehouse/office space at the Chicago – Ogden Ave. property.

(6)	The Mississauga property is currently vacant, while under construction, thus the related occupancy statistics exclude this property.

The map below shows the geographic location of our self storage portfolio as of June 30, 2011.

LOGO

As of June 30, 2011, we owned the following preferred equity and/or minority interests:


Property	% Owned			Acquisition Date (1)	Year Built	Approx. Units		Approx. Sq. Ft. (net)		% Physical Occupancy(2)			% Climate Controlled(3)
WP Baltimore Self Storage – MD		11.5	%	9/24/2009	2004		500		70,900		84.5	%		0.0	%
San Francisco Self Storage DST – CA		12.26	%	9/24/2009 and 1/07/2010	1909/2000		1,100		77,900		79.1	%		0.0	%
Hawthorne Property (4) – CA		12.0	%	9/24/2009	1943-1966		n/a		356,000		100.0	%		n/a
Southwest Colonial, DST –TX		0.28	%	9/24/2009	1981-2007		2,850		369,600		84.6	%		12.1	%
Montgomery County Self Storage, DST – AL		1.49	%	9/24/2009	1997-2005		1,600		152,900		82.4	%		100.0	%

Total							6,050		1,027,300		83.5	%		18.9	%

(1)	Represents the date we acquired the interest in such property.

(2)	Represents occupied square feet divided by total rentable square feet as of June 30, 2011.

(3)	Represents the percentage of rentable square feet in climate-controlled units as of June 30, 2011.

(4)	Not a self storage facility. We have a 12% direct investment in Westport LAX LLC, the entity owning this property, and an indirect interest in Westport LAX LLC through a preferred equity investment in Hawthorne LLC, which has a direct investment in Westport LAX LLC.

A summary of the wholly-owned facilities that we have acquired through June 30, 2011 is as follows:

Our Facilities by Year Acquired – Average Physical Occupancy


	As of June 30, 2011				As of June 30, 2010				Average Physical Occupancy % (1)
	Number of Facilities		Current Rentable Square Feet		Number of Facilities		Current Rentable Square Feet		For the Six Months Ended June 30,
Year Acquired	Number of Facilities		Current Rentable Square Feet		Number of Facilities		Current Rentable Square Feet		2011			2010
2008		3		196,500		3		196,500		82	%		84	%
2009		23		2,147,050		23		2,147,050		83	%		79	%
2010		19		1,605,950		8		559,250		72	%		80	%
2011(2)		27		1,943,700		—		—		85	%		—

All Facilities Owned		72		5,893,200		34		2,902,800		80	%		80	%

(1)	Determined by dividing the sum of the month-end occupied square feet for the applicable group of facilities for each applicable period by the sum of their month-end rentable square feet for the period.

(2)	The average physical occupancy data excludes the Mississauga property. All other related data is based on estimates of when the construction on such property is complete.

Our Facilities by Year Acquired – Rent Per Occupied Square Foot


	As of June 30, 2011				As of June 30, 2010				Rent Per Occupied Square Foot (1)
	Number of Facilities		Current Rentable Square Feet		Number of Facilities		Current Rentable Square Feet		For the Six Months Ended June 30,
Year Acquired	Number of Facilities		Current Rentable Square Feet		Number of Facilities		Current Rentable Square Feet		2011		2010
2008		3		196,500		3		196,500	$	0.86	$	0.81
2009		23		2,147,050		23		2,147,050		0.72		0.74
2010		19		1,605,950		8		559,250		1.11		1.46
2011(2)		27		1,943.700		—		—		0.66		—

All Facilities Owned		72		5,893,200		34		2,902,800	$	0.83	$	0.81

(1)

Determined by dividing the aggregate rental revenue for each applicable month by the aggregate of the month-end occupied square feet for the period. Properties are included in the calculation in their first full month of operations. Rental revenue includes rental income, but excludes ancillary income, administrative and late fees.

(2)	The rent per occupied square foot data excludes the Mississauga property. All other related data is based on estimates of when the construction on such property is complete.

Our Facilities by Year Acquired – Rental Income


	As of June 30, 2011				As of June 30, 2010				Rent by Year of Acquisition(1)
	Number of Facilities		Current Rentable Square Feet		Number of Facilities		Current Rentable Square Feet		For the Six Months Ended June 30,
Year Acquired	Number of Facilities		Current Rentable Square Feet		Number of Facilities		Current Rentable Square Feet		2011		2010
2008		3		196,500		3		196,500	$	833,771	$	805,777
2009		23		2,147,050		23		2,147,050		7,612,928		7,536,676
2010		19		1,605,950		8		559,250		7,705,830		1,481,058
2011		27		1,943,700		—		—		2,545,189		—

All Facilities Owned		72		5,893,200		34		2,902,800	$	18,697,718	$	9,823,511

(1)	The rental income attributable to our consolidated joint venture is excluded from the above table. Rental revenue includes rental income, but excludes ancillary income, administrative and late fees.

Below are comparisons of rental income and operating income for the 29 wholly-owned self storage facilities that were owned for the entire three month period ended June 30, 2011 and 2010, respectively:

2011

Revenue (2)

2010

Revenue (2)

Increase
%

2011

Operating
Income(1)

2010

Operating
Income(1)

Increase
%

No. Of
Facilities

$5,300,379

$5,224,428

1.4%

$3,078,815

$3,013,907

2.1%

(1)	Operating income excludes asset management fees, interest expense, depreciation, amortization expense and acquisition expenses.

(2)	Revenue includes rental income, ancillary income, administrative and late fees.

The weighted average capitalization rate at acquisition for the 72 self storage facilities we owned as of June 30, 2011 was approximately 7.65%. The weighted average capitalization rate is calculated as the estimated first year annual net operating income at the respective property divided by the property purchase price, exclusive of offering costs, closing costs and fees paid to the advisor. Estimated first year net operating income on our real estate investments is total estimated revenues, generally derived from the terms of in-place leases at the time we acquire the property, less property operating expenses generally based on the operating history of the property. In instances where management determines that historical amounts will not be representative of first year revenues or property operating expenses, management uses its best faith estimate of such amounts based on anticipated property operations. Estimated first year net operating income excludes interest expense, asset management fees, depreciation, amortization expense, acquisition expenses and our Company-level general and administrative expenses. Historical operating income for these properties is not necessarily indicative of future operating results. This calculation includes several properties in their lease-up period. Upon stabilization of these properties, we expect the weighted average capitalization rate to increase.

We derive revenues principally from rents received from our customers who rent units at our self storage facilities under month-to-month leases. Therefore, our operating results depend significantly on our ability to retain our existing customers and lease our available self storage units to new customers, while maintaining and, where possible, increasing the prices for our self storage units. Additionally, our operating results depend on our customers making their required rental payments to us. We believe that

our Property Manager’s approach to the management and operation of our facilities, which emphasizes local market oversight and control, results in quick and effective response to changes in local market conditions, including increasing rents and/or increasing occupancy levels where appropriate.

Competition in the market areas in which we operate is significant and affects the occupancy levels, rental rates, rental revenues and operating expenses of our facilities. Development of any new self storage facilities would intensify competition of self storage operators in markets in which we operate.

We believe that we will experience minor seasonal fluctuations in the occupancy levels of our facilities, which we believe will be slightly higher over the summer months due to increased moving activity.

Critical Accounting Estimates

We have established accounting policies which conform to generally accepted accounting principles (“GAAP”). Preparing financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. Following is a discussion of the estimates and assumptions used in setting accounting policies that we consider critical in the presentation of our financial statements. Many estimates and assumptions involved in the application of GAAP may have a material impact on our financial condition or operating performance, or on the comparability of such information to amounts reported for other periods, because of the subjectivity and judgment required to account for highly uncertain items or the susceptibility of such items to change. These estimates and assumptions affect our reported amounts of assets and liabilities, our disclosure of contingent assets and liabilities at the dates of the financial statements and our reported amounts of revenue and expenses during the period covered by this report. If management’s judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied or different amounts of assets, liabilities, revenues and expenses would have been recorded, thus resulting in a materially different presentation of the financial statements or materially different amounts being reported in the financial statements. Additionally, other companies may use different estimates and assumptions that may impact the comparability of our financial condition and results of operations to those companies.

We believe that our critical accounting policies include the following: real estate purchase price allocations; the evaluation of whether any of our long-lived assets have been impaired; the determination of the useful lives of our long-lived assets; and the evaluation of the consolidation of our interests in joint ventures. The following discussion of these policies supplements, but does not supplant the description of our significant accounting policies, as contained in Note 2 of the Notes to the Consolidated Financial Statements included in this report, and is intended to present our analysis of the uncertainties involved in arriving upon and applying each policy.

Real Estate Purchase Price Allocation

We allocate the purchase prices of acquired properties based on a number of estimates and assumptions. We allocate the purchase prices to the tangible and intangible assets acquired and the liabilities assumed based on estimated fair values. These estimated fair values are based upon comparable market sales information for land and estimates of depreciated replacement cost of equipment, building and site improvements. Acquisitions of portfolios of properties are allocated to the individual properties based upon an income approach or a cash flow analysis using appropriate risk adjusted capitalization rates which we estimate based upon the relative size, age, and location of the individual property along with actual historical and estimated occupancy and rental rate levels, and other relevant factors. If available, and determined by management to be appropriate, appraised values are used, rather than these estimated values. Because we believe that substantially all of the leases in place at properties we will acquire will

be at market rates, as the majority of the leases are month-to-month contracts, we do not expect to allocate any portion of the purchase prices to above or below market leases. The determination of market rates is also subject to a number of estimates and assumptions. Our allocations of purchase prices could result in a materially different presentation of the financial statements or materially different amounts being reported in the financial statements, as such allocations may vary dramatically based on the estimates and assumptions we use.

Impairment of Long-Lived Assets

The majority of our assets consist of long-lived real estate assets as well as intangible assets related to our acquisitions. We will continually evaluate such assets for impairment based on events and changes in circumstances that may arise in the future and that may impact the carrying amounts of our long-lived assets. When indicators of potential impairment are present, we will assess the recoverability of the particular asset by determining whether the carrying value of the asset will be recovered, through an evaluation of the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. This evaluation is based on a number of estimates and assumptions. Based on this evaluation, if the expected undiscounted future cash flows do not exceed the carrying value, we will adjust the value of the long-lived asset and recognize an impairment loss. Our evaluation of the impairment of long-lived assets could result in a materially different presentation of the financial statements or materially different amounts being reported in the financial statements, as the amount of impairment loss, if any, recognized may vary based on the estimates and assumptions we use.

Estimated Useful Lives of Long-Lived Assets

We assess the useful lives of the assets underlying our properties based upon a subjective determination of the period of future benefit for each asset. We will record depreciation expense with respect to these assets based upon the estimated useful lives we determine. Our determinations of the useful lives of the assets could result in a materially different presentation of the financial statements or materially different amounts being reported in the financial statements, as such determinations, and the corresponding amount of depreciation expense, may vary dramatically based on the estimates and assumptions we use.

Consolidation of Investments in Joint Ventures

We evaluate the consolidation of our investments in joint ventures in accordance with relevant accounting guidance. This evaluation requires us to determine whether we have a controlling interest in a joint venture through a means other than voting rights, and, if so, such joint venture may be required to be consolidated in our financial statements. Our evaluation of our joint ventures under such accounting guidance could result in a materially different presentation of the financial statements or materially different amounts being reported in the financial statements, as the entities included in our financial statements may vary based on the estimates and assumptions we use.

REIT Qualification

We made an election under Section 856(c) of the Code to be taxed as a REIT commencing with the taxable year ended December 31, 2008. By qualifying as a REIT for federal income tax purposes, we generally will not be subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which our qualification is denied. Such an event could materially and adversely affect our net income and could have a material adverse impact on our financial condition and results of operations. However, we believe that we are organized and will operate

in a manner that will enable us to qualify for treatment as a REIT for federal income tax purposes commencing with the year ended December 31, 2008, and we intend to continue to operate as to remain qualified as a REIT for federal income tax purposes.

Results of Operations

Overview

As of June 30, 2011, we owned 72 self storage facilities located in 17 states and Canada, comprising approximately 47,040 units and approximately 5.9 million rentable square feet. As of June 30, 2010, we wholly-owned 34 self storage facilities, located in 14 states, comprising approximately 23,485 units and approximately 2.9 million rentable square feet.

As of June 30, 2011 and 2010, we owned 72 and 34 self storage facilities, respectively. The comparability of our results of operations is significantly affected by acquisition activity in 2011 and 2010 as listed below.

•

In the six months ended June 30, 2011, we acquired 27 self storage facilities for consideration of approximately $114 million.

•

In the six months ended June 30, 2010, we acquired 8 self storage facilities for consideration of approximately $52.2 million.

•

The three and six months ended June 30, 2011 includes additional activity related to 11 facilities that were acquired between July 1, 2010 and December 31, 2010 for consideration of approximately $74.3 million.

Below is a table intended to illustrate the growth in our facilities owned to provide additional context to the changes in revenues and expenses discussed below:


	2011		2010		Change
January 1,		45		26		+19
March 31,		61		29		+32
June 30,		72		34		+38

Due to the increase in the number of self storage facilities we owned, we believe there is little basis for comparison between the three and six months ended June 30, 2011 and 2010.

Comparison of Operating Results for the Three Months Ended June 30, 2011 and 2010

Self Storage Rental Income

Rental income for the three months ended June 30, 2011, was approximately $11.4 million, as compared to rental income for the three months ended June 30, 2010 of approximately $6.3 million. The increase in rental income arises primarily from the increase in the number of self storage facilities we owned. We expect rental income to increase in future periods as we derive rental income for an entire quarter for properties acquired during the second quarter of 2011 and as we acquire additional operating facilities.

Property Operating Expenses

Property operating expenses for the three months ended June 30, 2011 were approximately $5.8 million, as compared to property operating expenses for the three months ended June 30, 2010 of approximately $3.1 million. Property operating expenses include the costs to operate our facilities including payroll, utilities, insurance, real estate taxes, marketing, property management fees and asset management fees. The increase in property operating expenses arises primarily from the increase in the number of self storage facilities we owned. For the three months ended June 30, 2011 and 2010, approximately $1.3 million and $0.7 million, respectively, of total operating expenses were paid to affiliates. We expect property operating expenses to increase in future periods as we acquire additional operating facilities and as we have property operating expenses for an entire quarter for properties acquired during the second quarter of 2011.

General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2011 were approximately $0.5 million, compared to approximately $0.7 million for the three months ended June 30, 2010. Such expenses consist primarily of legal expenses, accounting fees, directors’ and officers’ insurance expense and board of directors’ related costs. The decrease is primarily due to the Advisor’s permanent waiver of certain reimbursable amounts due pursuant to the Advisory Agreement; such amounts totaled approximately $250,000 for the three months ended June 30, 2011. We expect general and administrative costs to increase in future periods as we make additional investments, but expect such expenses to decrease as a percentage of total revenues.

Depreciation and Amortization Expenses

Depreciation and amortization expenses for the three months ended June 30, 2011 were approximately $5.7 million, compared to approximately $3.2 million for the three months ended June 30, 2010. Depreciation expense consists primarily of depreciation on the buildings and site improvements at our properties. Amortization expense consists of the amortization of intangible assets resulting from our acquisitions. The increase in depreciation and amortization expenses is attributable to the increase in the number of self storage facilities we owned. We expect depreciation and amortization expenses to increase in future periods as we acquire additional operating facilities.

Property Acquisition Expenses

Property acquisition expenses for the three months ended June 30, 2011 were approximately $1.9 million, compared to approximately $0.8 million for the three months ended June 30, 2010. The increase between 2010 and 2011 is due to increased acquisition activity related to facilities acquired during the three months ended June 30, 2011 and facilities to be acquired during the third quarter of 2011. We expect that such costs will fluctuate in future commensurate with our acquisition activity.

Interest Expense

Interest expense for the three months ended June 30, 2011 was approximately $2.7 million, compared to approximately $1.3 million for the three months ended June 30, 2010 and relates to interest incurred on the promissory notes we have entered into to fund portions of our acquisitions and refinance certain of our self storage facilities. The increase between 2010 and 2011 is due to increased debt levels. We expect interest expense to increase in future periods as we have interest expense for an entire quarter for debt transactions completed during the second quarter of 2011 and if we acquire additional operating facilities through the issuance or assumption of promissory notes.

Other expense

Other expense for the three months ended June 30, 2011 was approximately $0.2 million compared to approximately $0.0 million for the three months ended June 30, 2010. The increase primarily relates to approximately $70,000 of costs related to an unsuccessful debt financing transaction and various other miscellaneous costs.

Comparison of Operating Results for the Six Months Ended June 30, 2011 and 2010

Self Storage Rental Income

Rental income for the six months ended June 30, 2011, was approximately $21.2 million, as compared to rental income for the six months ended June 30, 2010 of approximately $11.5 million. The increase in rental income arises primarily from the increase in the number of self storage facilities we owned. We expect rental income to increase in future periods as we derive rental income for the entire period for properties acquired during the first and second quarters of 2011 and as we acquire additional operating facilities.

Property Operating Expenses

Property operating expenses for the six months ended June 30, 2011 were approximately $10.9 million, as compared to property operating expenses for the six months ended June 30, 2010 of approximately $5.6 million. Property operating expenses include the costs to operate our facilities including payroll, utilities, insurance, real estate taxes, marketing, property management fees and asset management fees. The increase in property operating expenses arises primarily from the increase in the number of self storage facilities we owned. For the six months ended June 30, 2011 and 2010, approximately $2.4 million and $1.1 million, respectively, of total operating expenses were paid to affiliates. We expect property operating expenses to increase in future periods as we acquire additional operating facilities and as we have property operating expenses for the entire period for properties acquired during the first and second quarters of 2011.

General and Administrative Expenses

General and administrative expenses for the six months ended June 30, 2011 were approximately $1.4 million, compared to approximately $1.6 million for the six months ended June 30, 2010. Such expenses consist primarily of legal expenses, accounting fees, directors’ and officers’ insurance expense and board of directors’ related costs. The decrease is primarily due to the Advisor’s permanent waiver of certain reimbursable amounts due pursuant to the Advisory Agreement; such amounts totaled approximately $250,000 for the six months ended June 30, 2011. We expect general and administrative costs to increase in future periods as we make additional investments, but expect such expenses to decrease as a percentage of total revenues.

Depreciation and Amortization Expenses

Depreciation and amortization expenses for the six months ended June 30, 2011 were approximately $10.6 million, compared to approximately $5.9 million for the six months ended June 30, 2010. Depreciation expense consists primarily of depreciation on the buildings and site improvements at our properties. Amortization expense consists of the amortization of intangible assets resulting from our acquisitions. The increase in depreciation and amortization expenses is attributable to the increase in the number of self storage facilities we owned. We expect depreciation and amortization expenses to increase in future periods as we acquire additional operating facilities.

Property Acquisition Expenses

Property acquisition expenses for the six months ended June 30, 2011 were approximately $3.7 million, compared to approximately $1.9 million for the six months ended June 30, 2010. The increase between 2010 and 2011 is due to increased acquisition activity related to facilities acquired during the six months ended June 30, 2011 and facilities to be acquired during the third quarter of 2011. We expect that such costs will fluctuate in future periods commensurate with our acquisition activity.

Interest Expense

Interest expense for the six months ended June 30, 2011 was approximately $5.1 million, compared to approximately $2.6 million for the six months ended June 30, 2010 and relates to interest incurred on the promissory notes we have entered into to fund portions of our acquisitions and refinance certain of our self storage facilities. The increase between 2010 and 2011 is primary due to increased debt levels. We expect interest expense to increase in future periods as we have interest expense for the entire period for debt transactions completed during the first and second quarters of 2011 and if we acquire additional operating facilities through the issuance or assumption of promissory notes.

Other expense

Other expense for the six months ended June 30, 2011 was approximately $0.2 million compared to approximately $0.1 million for the three months ended June 30, 2010. The increase primarily relates to approximately $70,000 of costs related to an unsuccessful debt financing transaction and various other miscellaneous costs.

Funds From Operations

We believe that funds from operations (“FFO”) provides relevant and meaningful information about our operating performance that is necessary, along with net income and cash flows, for an understanding of our operating results. Because FFO calculations exclude such factors as depreciation and amortization of real estate assets and gains from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful life estimates), they facilitate comparisons of operating performance between periods and between other REITs. We believe that historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. Other REITs may not define FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition or may interpret the current NAREIT definition differently from us.

Our calculation of FFO, and reconciliation to net loss, which is the most directly comparable GAAP financial measure, is presented in the following table for the three and six months ended June 30, 2011 and 2010:


	Three Months Ended						Six Months Ended
	June 30, 2011			June 30, 2010			June 30, 2011			June 30, 2010
Net loss attributable to Strategic Storage Trust, Inc.	$	(5,248,767	)	$	(2,589,556	)	$	(10,464,830	)	$	(5,757,547	)
Add:
Depreciation		2,166,520			1,216,784			4,024,344			2,227,966
Amortization of intangible assets		3,477,317			1,961,451			6,528,242			3,677,444
Deduct:
Adjustment for noncontrolling interests(1)		(215,285	)		(188,839	)		(407,440	)		(375,558	)

FFO	$	179,785		$	399,840		$	(319,684	)	$	(227,695	)

(1)

Relates to our consolidated joint venture and the noncontrolling interests in our Operating Partnership. The noncontrolling interest holders’ share of our consolidated real estate depreciation and amortization of intangible assets was $68,490 and $146,795, respectively, for the three months ended June 30, 2011, and $127,340 and $280,100, respectively, for the six months ended June 30, 2011.

Cash Flows

A comparison of cash flows for operating, investing and financing activities for the six months ended June 30, 2011 and 2010 is as follows:


	Six Months Ended
	June 30, 2011			June 30, 2010			Change
Net cash flow provided by (used in):
Operating activities	$	180,693		$	821,058		$	(640,365	)
Investing activities		(81,409,506	)		(45,527,218	)		(35,882,288	)
Financing activities		89,428,921			35,935,259			53,493,662

Cash flows provided by operating activities for the six months ended June 30, 2011 and 2010 were approximately $0.2 million and $0.8 million, respectively, an increase in the use of cash of approximately $0.6 million. The increased use of cash is primarily the result of a favorable improvement in the net loss adjusted for depreciation and amortization of $0.2 million, off-set by changes in working capital.

Cash flows used in investing activities for the six months ended June 30, 2011 and 2010 were approximately $81.4 million and $45.5 million, respectively, an increase in the use of cash of approximately $35.9 million. The increase compared to the prior period primarily relates to the increased amount spent on acquisitions in the current period as compared with the same period of the prior year.

Cash flows provided by financing activities for the six months ended June 30, 2011 and 2010 were approximately $89.4 million and $35.9 million, respectively, an increase of approximately $53.5 million. The increase in cash provided by financing activities over the prior period primarily relates to an increase in proceeds from new debt.

Liquidity and Capital Resources

Short-Term Liquidity and Capital Resources

We generally expect that we will meet our short-term operating liquidity requirements from the combination of proceeds of the Offering, proceeds from secured or unsecured financing from banks or other lenders, net cash provided by property operations and advances from our Advisor which will be repaid, without interest, as funds are available after meeting our current liquidity requirements, subject to the limitations on reimbursement set forth in our Advisory Agreement with our Advisor. Per the Advisory Agreement, all advances from our Advisor shall be reimbursed no less frequently than monthly, although our Advisor has indicated that it may waive such a requirement on a month-by-month basis. The organization and offering costs associated with the Offering will initially be paid by us or our Advisor. Our Advisor must reimburse us within 60 days after the end of the month in which the Offering terminates to the extent we paid or reimbursed organization and offering costs (excluding sales commissions and dealer manager fees) in excess of 3.5% of the gross offering proceeds from the Primary Offering. Operating cash flows are expected to increase as properties are added to our portfolio.

Distribution Policy and Distributions

Our board of directors will determine the amount and timing of distributions to our stockholders and will base such determination on a number of factors, including funds available for payment of distributions, financial condition, capital expenditure requirements and annual distribution requirements needed to maintain our status as a REIT under the Code. Distributions will be paid to our stockholders as of the record date selected by our board of directors. We declare and pay distributions monthly based on daily declaration and record dates so that investors may be entitled to distributions immediately upon purchasing our shares. We expect to continue to regularly pay distributions unless our results of operations, our general financial condition, general economic conditions, or other factors inhibit us from doing so. Distributions will be authorized at the discretion of our board of directors, which will be directed, in substantial part, by its obligation to cause us to comply with the REIT requirements of the Code. The funds we receive from operations that are available for distribution may be affected by a number of factors, including the following:

•

the amount of time required for us to invest the funds received in the offering;

•

our operating and interest expenses;

•

the amount of distributions or dividends received by us from our indirect real estate investments;

•

our ability to keep our properties occupied;

•

our ability to maintain or increase rental rates;

•

capital expenditures and reserves for such expenditures;

•

the issuance of additional shares; and

•

financings and refinancings.

The following data supplements, and should be read in conjunction with our prospectus dated April 27, 2011 and the section captioned “Description of Shares – Distribution Policy.”


	Three Months Ended
	June 30, 2011				March 31, 2011					December 31, 2010					September 30, 2010				June 30, 2010
Distributions paid in cash	$	3,015,369			$	2,692,434				$	2,463,666				$	2,266,448			$	2,003,364
Distributions reinvested		2,173,281				1,963,793					1,823,230					1,661,398				1,463,181

Total distributions	$	5,188,650			$	4,656,227				$	4,286,896				$	3,927,846			$	3,466,545

Source of distributions
Cash flows provided by (used in) operations	$	554,599	10.7	%	$	(373,906	)	(8.1	%)	$	(1,263,697	)	(29.5	%)	$	1,386,895	35.3	%	$	940,956	27.1	%
Proceeds from issuance of common stock		2,460,770	47.4	%		3,066,340		65.9	%		3,727,363		86.9	%		879,553	22.4	%		1,062,408	30.7	%
Distributions reinvested		2,173,281	41.9	%		1,963,793		42.2	%		1,823,230		42.5	%		1,661,398	42.3	%		1,463,181	42.2	%

Total sources	$	5,188,650	100.0	%	$	4,656,227		100.0	%	$	4,286,896		100.0	%	$	3,927,846	100.0	%	$	3,466,545	100.0	%

(1)

Percentages listed in the table above were calculated by dividing the total sources of distributions by the source indicated. Where negative percentages exist, we used, rather than generated, cash flows from operations. At these times, the percentage of cash flows provided by operations used as a source of distributions appears as a negative number.

Cash flows provided by (used in) operations for the three months ended June 30, 2011, March 31, 2011, December 31, 2010, September 30, 2010 and June 30, 2010 include approximately $1.9 million, $1.8 million, $2.8 million, $0.5 million and $0.8 million, respectively, of real estate acquisition related expenses expensed in accordance with GAAP. We consider the real estate acquisition related expenses to have been funded by proceeds from our ongoing public offering of shares of our common stock because the expenses were incurred to acquire our real estate investments.

During our Offering, when we may raise capital more quickly than we acquire income-producing assets, and for some period after our Offering, we may not be able to pay distributions from our cash flows from operations, in which case distributions may be paid in part from debt financing or from proceeds from the issuance of common stock.

From our inception through June 30, 2011, we paid cumulative distributions of approximately $30.8 million, as compared to cumulative FFO of approximately $(5.3) million. The payment of distributions from sources other than FFO may reduce the amount of proceeds available for investment and operations or cause us to incur additional interest expense as a result of borrowed funds.

Over the long-term, we expect that a greater percentage of our distributions will be paid from cash flows from operations. However, our operating performance cannot be accurately predicted and may deteriorate in the future due to numerous factors, including our ability to raise and invest capital at favorable yields, the financial performance of our investments in the current real estate and financial environment and the types and mix of investments in our portfolio. As a result, future distributions declared and paid may exceed cash flow from operations.

Indebtedness

As of June 30, 2011, we had approximately $215 million of outstanding consolidated indebtedness (excluding net unamortized debt discounts of approximately $1.6 million). The weighted average interest rate on our consolidated fixed rate indebtedness as of June 30, 2011 was approximately 5.6%. Certain future potential acquisitions may be partially funded by the assumption of existing loans. Additionally, certain future potential acquisitions may be partially funded by proceeds from the issuance of new promissory notes. Thus, if such acquisitions are completed, we expect our indebtedness to increase.

Long-Term Liquidity and Capital Resources

On a long-term basis, our principal demands for funds will be for property acquisitions, either directly or through equity interests, for the payment of operating expenses and distributions, and for the payment of interest on our outstanding indebtedness. Generally, cash needs for items, other than property acquisitions, will be met from operations and proceeds received from the Offering. However, there may be a delay between the sale of our shares and our purchase of properties that could result in a delay in the benefits to our stockholders, if any, of returns generated from our investment operations. Our Advisor will evaluate potential additional property acquisitions and engage in negotiations with sellers on our behalf. After a purchase contract is executed that contains specific terms, the property will not be purchased until the successful completion of due diligence, which includes, among other items, review of the title insurance commitment, an appraisal and an environmental analysis. In some instances, the proposed acquisition will require the negotiation of final binding agreements, which may include financing documents. During this period, we may decide to temporarily invest any unused proceeds from the Offering in certain investments that could yield lower returns than the properties. These lower returns may affect our ability to make distributions.

Potential future sources of capital include proceeds from the Offering, proceeds from secured or unsecured financings from banks or other lenders, proceeds from the sale of properties and undistributed funds from operations. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures. To the extent we are not able to secure additional financing in the form of a credit facility or other third party source of liquidity, we will be heavily dependent upon the proceeds of the Offering and income from operations in order to meet our long-term liquidity requirements and to fund our distributions.

Contractual Obligations

The following table summarizes our contractual obligations as of June 30, 2011:


	Payments due by period:
			Less than						More than
	Total		1 Year		1-3 Years		3- 5 Years		5 Years
Mortgage interest(1)	$	87,853,972	$	6,093,099	$	23,536,812	$	20,657,480	$	37,566,581
Mortgage principal		214,951,334		1,209,519		18,141,255		41,631,940		153,968,620

Total contractual obligations	$	302,805,306	$	7,302,618	$	41,678,067	$	62,289,420	$	191,535,201

(1)	Interest expense was calculated based upon the contractual rates. The interest expense on variable rate debt was calculated based on the rate currently in effect. Foreign currency obligations have been converted at the conversion rate in effect as of the end of the period.

Off-Balance Sheet Arrangements

Except as disclosed in the Note 2 of the Notes to the Consolidated Financial Statements accompanying this report, we do not currently have any relationships with unconsolidated entities or financial partnerships. Such entities are often referred to as structured finance or special purposes entities, which typically are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, except as disclosed in the Notes to the Consolidated Financial Statements, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitments or intent to provide funding to any such entities.

Subsequent Events

Please see Note 11 of the Notes to the Consolidated Financial Statements accompanying this report.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business plan, we expect that the primary market risk to which we will be exposed is interest rate risk.

As of June 30, 2011, our debt consisted of approximately $207.8 million in fixed rate debt and approximately $7.2 million in variable rate debt (excluding net unamortized debt discounts of approximately $1.6 million). As of December 31, 2010, our debt consisted of approximately $116.6 million in fixed rate debt and approximately $4.9 million in variable rate debt. These instruments were entered into for other than trading purposes. Changes in interest rates have different impacts on the fixed and variable portions of our debt portfolio. A change in interest rates on the fixed portion of our debt portfolio impacts its fair value but has no impact on interest incurred or cash flows. A change in interest rates on the variable portion of our debt portfolio could impact the interest incurred and cash flows and its fair value.

The following table summarizes annual debt maturities, average interest rates and estimated fair values on our outstanding debt as of June 30, 2011:


	Year Ending December 31,
	2011			2012			2013			2014			2015			Thereafter		Total		Fair Value
Fixed rate debt	$	1,209,519		$	5,210,284		$	5,764,371		$	13,993,512		$	27,638,428		$	153,968,620	$	207,784,734	$	209,079,000
Average interest rate		5.59	%		5.60	%		5.50	%		5.62	%		5.67	%		—		—		—
Variable rate debt ⁽¹⁾		—		$	214,092		$	6,952,508			—			—			—	$	7,166,600	$	7,166,600
Average interest rate ⁽²⁾		5.20	%		5.20	%		5.20	%		—			—			—		—

(1)	Foreign currency obligations have been converted at the conversion rate in effect as of the end of the period.

(2)	The interest rate reflected is the rate currently in effect as of June 30, 2011.

In the future, we may be exposed to the effects of interest rate changes primarily as a result of borrowings used to maintain liquidity and fund acquisition, expansion, and financing of our real estate investment portfolio and operations. Our interest rate risk management objectives will be to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve our objectives, we may borrow at fixed rates or variable rates. We may also enter into derivative financial instruments such as interest rate swaps and caps in order to mitigate our interest rate risk on a related financial instrument or foreign currency hedges to mitigate our risk to foreign currency exposure. We will not enter into derivative or interest rate transactions for speculative purposes.

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this report, management, including our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon this evaluation, our chief executive officer and chief

financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

None.

ITEM 1A.

RISK FACTORS

There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2010.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)

None.

(b)

We registered 110,000,000 shares of our common stock in the Offering (SEC File No. 333-146959, effective March 17, 2008), of which we registered 100,000,000 shares at $10.00 per share to be offered to the public in the Primary Offering and 10,000,000 shares offered to our investors pursuant to our distribution reinvestment plan at $9.50 per share. As of June 30, 2011, we had issued approximately 25.8 million shares of common stock in our Offering, raising gross offering proceeds of approximately $257 million. From this amount, we paid approximately $7.2 million in acquisition fees to our Advisor, approximately $24.2 million in selling commissions and dealer manager fees to our Dealer Manager (of which approximately $19.3 million was reallowed to third-party broker dealers), and approximately $3.6 million in organization and offering costs to our Advisor. With the net offering proceeds and indebtedness, we acquired (exclusive of the REIT I Merger Transaction and REIT II Merger Transaction) approximately $236 million in self storage facilities and made the other payments reflected under “Cash Flows from Financing Activities” in our consolidated statements of cash flows.

(c)

As noted in Notes 2 and 7 to the consolidated financial statements included in this report, and more fully described in our prospectus, as supplemented from time to time, our board of directors adopted a share redemption program on February 25, 2008, which enables our stockholders to have their shares redeemed by us, subject to the significant conditions and limitations described in our prospectus. Our share redemption program has no set termination date, but our ability to redeem shares under the program is limited as described in the prospectus. We honored all eligible redemption requests submitted during the six month period ended June 30, 2011. During the six month period ended June 30, 2011, we had redeemed approximately

439,000 shares for approximately $4.2 million ($9.68 per share). We have funded all redemptions using proceeds from the sale of shares pursuant to our distribution reinvestment plan. As of June 30, 2011, there were approximately 316,000 shares related to redemption requests to be processed subsequent to June 30, 2011. On July 29, 2011, we satisfied all of the eligible redemption requests. The redemption of these shares totaled approximately $3.1 million and was reclassified from redeemable common stock to accounts payable and accrued liabilities in the consolidated balance sheets as of June 30, 2011. Our board of directors may choose to amend, suspend or terminate our share redemption program upon 30 days’ written notice at any time.

During the three months ended June 30, 2011, we redeemed shares as follows:


Month Ended	Total Number of Shares Redeemed	Average Price Paid Per Share	Total Number of Shares Redeemed as Part of Publicly Announced Plans or Programs
April 30, 2011	439,019	$9.68	439,019
May 31, 2011	—		—
June 30, 2011	—		—

	439,019		439,019

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

(REMOVED AND RESERVED)

ITEM 5.

OTHER INFORMATION

(a)	During the second quarter of 2011, there was no information required to be disclosed in a report on Form 8-K which was not disclosed in a report on Form 8-K.

(b)	During the second quarter of 2011, there were no material changes to the procedures by which security holders may recommend nominees to our board of directors.

ITEM 6.

EXHIBITS

The exhibits required to be filed with this report are set forth on the Exhibit Index hereto and incorporated by reference herein.

EXHIBIT INDEX

The following exhibits are included in this report on Form 10-Q for the period ended June 30, 2011 (and are numbered in accordance with Item 601 of Regulation S-K).


Exhibit No.		Description

3.1		Second Articles of Amendment and Restatement of Strategic Storage Trust, Inc., incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on June 21, 2011, Commission File No. 000-53644

3.2		Bylaws of Strategic Storage Trust, Inc., incorporated by reference to Exhibit 3.2 to Pre-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11, filed on March 7, 2008, Commission File No. 333-146959

4.1		Form of Subscription Agreement and Subscription Agreement Signature Page, incorporated by reference to Appendix B to the Company’s Prospectus dated April 27, 2011, Commission File No. 333-146959

10.1		Loan Agreement by and among ING Life Insurance and Annuity Company, 11 Special-Purpose Entities, and Strategic Storage Trust, Inc. dated June 10, 2011 (“ING Loan”), incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed on June 14, 2011, Commission File No. 000-53644

10.2		Form of Mortgage, Deed of Trust or Deed to Secure Debt for ING Loan, incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K, filed on June 14, 2011, Commission File No. 000-53644

10.3		Form of Security Agreement for ING Loan, incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K, filed on June 14, 2011, Commission File No. 000-53644

10.4		Form of Promissory Note for ING Loan, incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K, filed on June 14, 2011, Commission File No. 000-53644

10.5		Form of Assignment of Leases and Rents for ING Loan, incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K, filed on June 14, 2011, Commission File No. 000-53644

10.6		Form of Guaranty of Affiliate Loans for ING Loan, incorporated by reference to Exhibit 10.6 to the Company’s Form 8-K, filed on June 14, 2011, Commission File No. 000-53644

10.7		Form of Limited Guaranty for ING Loan, incorporated by reference to Exhibit 10.7 to the Company’s Form 8-K, filed on June 14, 2011, Commission File No. 000-53644

31.1*		Certification of Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

101**		Unaudited Financial Statements from the Quarterly Report on Form 10-Q of Strategic Storage Trust, Inc. for the Quarter Ended June 30, 2011, filed on August 11, 2011, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statement if Stockholder’s Equity, (iv) Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements.

*	Filed herewith.

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	STRATEGIC STORAGE TRUST, INC. (Registrant)

Dated: August 11, 2011	By:	/s/ Michael S. McClure
		Michael S. McClure
		Executive Vice President, Chief Financial Officer and Treasurer

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