Nov. 27, 2024
Successful Completion of the Special Meeting Regarding the Re-organization of 6 NationWide Funds
Dear Unitholder:
Since the Special Meeting held in the spring wherein investors overwhelmingly voted in favor of re-organizing the 6 Nationwide funds into one diversified pure play self-storage master Trust and one diversified pure play car wash master Trust, management has been working closely with our legal, engineering, architectural team and the various municipalities.
To enact such re-organization, the various funds’ prerequisite is the stratification of the self-storage and car wash businesses/assets. As our legal team worked their way through this stratification, one of the requirements (unanticipated) imposed by the City of Vancouver was for a new Building Permit (BP) to be applied for. This requires upgrading the building to the new building codes standards (even though the building is only 1.5 years old) and, also, for the stratification to be an air space strata. The City of Kamloops also required upgrades to meet the need for building codes and a BP.
We were unable to persuade these municipalities to withdraw their demands and as a result we are now having to undertake the application for BP’s and air space strata.
These newly imposed requirements of the municipalities will delay the completion of the re-organization until the spring of 2025.
While we work through this unanticipated process, we remain focused on managing the 8 businesses efficiently and maximizing revenues and value for investors.
To recap, the benefits and reasoning behind this proposed restructuring are summarized below.
The reorganization represents important next steps in maximizing value and preparing the assets for sale. It is integral to the next phase of our value creation process, focusing on operational efficiencies, intending to provide increased net operating income (“NOI”), earnings before interest and depreciation (“EBITDA”) and funds from operations (“FFO”). Importantly, this structural transformation aligns with the preferences of potential buyers of the properties and enhances the overall value and attractiveness of the assets and your investment.
Re-Organization Overview
There currently are six separate closed-end Nationwide Trusts. Each Trust was mandated to build and operate self-storage and/or car wash properties. Spread over the six Trusts, there are four self-storage businesses and four car wash businesses operating on five separate properties. Construction is complete on all properties; all eight businesses are operating as of March 15th, 2024. The businesses/properties, as per the chart below, have all enjoyed strong increases in value as determined by independent valuations. These valuations will be updated at Dec 31, 2024 and such updated valuation will be available in late spring 2025.
| PROPERTY | AVERAGE PRICE PAID PER UNIT | CURRENT VALUE PER UNIT 4 | RETURNS TO DATE | ANNUALIZED RETURNS 5 | YEARS SINCE CAPITAL RAISED |
| Pender1 | $ 107.27 | $ 180.10 | 72.83 % | 10.4% | 7.02 |
| Kamloops1,2 | $ 100.00 | $ 213.01 | 113.01 % | 19.5% | 5.80 |
| Boundary1,2 | $ 99.92 | $ 180.46 | 80.54 % | 13.8% | 5.84 |
| Surrey1,2 | $ 97.04 | $ 154.45 | 57.41 % | 14.2% | 4.04 |
| Coquitlam2 | $ 92.85 | $ 124.44 | 31.59 % | 10.8% | 2.92 |
| NationWide VI Trust3 | $ 89.47 | $ 113.46 | 23.99 % | 15.9% | 1.51 |
| (1) Colliers Market Valuation as of December 31, 2023, for Kamloops. William Wright Commercial Real Estate Services for Pender, Boundary, Surrey as of December 31, 2023. (2) Evans and Evans Indicative Pricing Analysis as of February 28, 2024. (3) Value of Nationwide Trust II Units based on asset values net of funded debt. (4) Current value per unit is based on current assets values less the amount of funded debt, divided by current units outstanding. (5) Annualized returns are based on Returns to Date since the midpoint date that the original capital was raised. |
As the properties are all relatively new, 2 of the self-storage properties are in their ‘lease-up’ stage and 2 of the car wash properties in their market awareness/growth stage. As such, they typically take around 3 years to mature and generate strong positive cash flow. The ideal time to sell the Properties (at maximum value) is when they are mature, cash-flowing, and, ideally, in a low-interest rate environment, providing for a low cap rate.
The re-structuring, when complete, is anticipated to have several key value creation benefits for investors as follows:
- Increased Trust Unit values due to the new structure being more operationally efficient – estimated operational savings of 4% – 6%, thereby increasing NOI, EBITDA and FFO.
- It provides an excellent platform for the manager to undertake continuous capital raises. This is key because proceeds could be used for redemptions, cash distributions, and liquidity upon the sale of the properties.
- Accelerated and improved liquidity and redemption capabilities.
- Increased cash distributions from increased operational efficiencies.
- Much more attractive structure to an institutional buyer wanting to acquire the entire self-storage or car wash portfolio – as a pure play.
- Reduced investor risk through efficiency, scale, and geographic and demographic portfolio diversification.
- Improved profit-sharing percentage of 80%/20% from 70%/30%.
- The anticipated increase in Trust Unit value as a result of a larger and more efficient portfolio is estimated at approximately a $8mm-$10mm portfolio gain.
- On top of Cap Rate compression from improved efficiency, there is also potential for materially increased terminal asset value of $20mm – $25mm from Cap Rate compression due to the creation of the pure play storage and pure play car wash Trusts because this broadens the pool of potential buyers and makes the assets more attractive. For example, if the cap rate decreased from 4% to 3.5%, this 50bps decrease in Cap rates could add a very significant $20mm- $25mm to the portfolio’s.
On behalf of the Trusts, I would like to express our sincere gratitude for your ongoing support, patience, and commitment to maximizing your investment’s value, cash distributions, and liquidity.
We will commence cash distributions just a soon as cash flow permits.
We will provide investors with a general update on the 2024 year at the sites in Spring 2025, or sooner if we have any significant new information, or upon the completion of the reorganization.
Sincerely,
Hugh Cartwright
Trustee of the Trust, Chairman and Director of the Administrator
NationWide Self Storage
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