CUBESMART “The year got off to a strong start in the first quarter as we saw a continuation of positive trends from 2021,” commented President and Chief Executive Officer
Key Highlights for the First Quarter
- Reported earnings per share (“EPS”) attributable to the Company’s common shareholders of
$0.17 . - Reported funds from operations (“FFO”) per share, as adjusted, of
$0.58 . - Increased same-store (523 stores) net operating income (“NOI”) 21.4% year over year, driven by 15.6% revenue growth and a 2.9% increase in property operating expenses.
- Same-store occupancy during the quarter averaged 93.6% and ended the quarter at 94.1%.
- Closed on one property acquisition for
$32.0 million . - Added 33 stores to our third-party management platform during the quarter, bringing our total third-party managed store count to 664.
Financial Results
Net income attributable to the Company’s common shareholders was
FFO, as adjusted, was
Investment Activity
Acquisition Activity
During the three months ended
Disposition Activity
During the three months ended
Development Activity
As of
Unconsolidated Real Estate Venture Activity
The Company’s joint venture, HVP V, is under contract to purchase a property located in
Third-Party Management
As of
Same-Store Results
The Company’s same-store portfolio at
Same-store physical occupancy as of
Operating Results
As of
Revenues increased
Interest expense increased from
Net income was also impacted by transaction-related expenses associated with the acquisition of
Financing Activity
During the three months ended
Quarterly Dividend
On
2022 Financial Outlook
“The solid start to the year has improved our expectations for 2022 and led to an increase in our key guidance ranges,” commented Chief Financial Officer
The Company estimates that its fully diluted earnings per share for the year will be between
| Current Ranges for | ||||||||||||||||||||
| 2022 Full Year Guidance Range Summary | Annual Assumptions | Prior Guidance(1) | ||||||||||||||||||
| Same-store revenue growth | 8.75 | % | to | 10.25 | % | 8.00 | % | to | 10.00 | % | ||||||||||
| Same-store expense growth | 5.50 | % | to | 6.50 | % | 5.50 | % | to | 7.00 | % | ||||||||||
| Same-store NOI growth | 10.25 | % | to | 11.75 | % | 9.50 | % | to | 11.50 | % | ||||||||||
| Acquisition of consolidated operating properties | $ | 100.0M | to | $ | 300.0M | $ | 100.0M | to | $ | 300.0M | ||||||||||
| New development openings | $ | 54.9M | to | $ | 54.9M | $ | 54.9M | to | $ | 54.9M | ||||||||||
| Dispositions | $ | 0.0M | to | $ | 50.0M | $ | 0.0M | to | $ | 50.0M | ||||||||||
| Accretion from Storage West transaction | $ | 0.02 | to | $ | 0.03 | $ | 0.02 | to | $ | 0.03 | ||||||||||
| Dilution from properties in lease-up | $ | (0.05 | ) | to | $ | (0.06 | ) | $ | (0.05 | ) | to | $ | (0.06 | ) | ||||||
| Property management fee income | $ | 30.5M | to | $ | 32.5M | $ | 30.5M | to | $ | 32.5M | ||||||||||
| General and administrative expenses | $ | 54.0M | to | $ | 56.0M | $ | 54.0M | to | $ | 56.0M | ||||||||||
| Interest and loan amortization expense | $ | 99.0M | to | $ | 101.0M | $ | 99.0M | to | $ | 101.0M | ||||||||||
| Full year weighted average shares and units | 227.6M | 227.6M | 227.1M | 227.1M | ||||||||||||||||
| Earnings per diluted share allocated to common shareholders | $ | 0.95 | to | $ | 1.00 | $ | 0.93 | to | $ | 1.00 | ||||||||||
| Plus: real estate depreciation and amortization | 1.37 | 1.37 | 1.37 | 1.37 | ||||||||||||||||
| Plus: transaction-related expenses | 0.05 | 0.05 | 0.05 | 0.05 | ||||||||||||||||
| FFO per diluted share, as adjusted | $ | 2.37 | to | $ | 2.42 | $ | 2.35 | to | $ | 2.42 | ||||||||||
(1) Prior guidance as included in our fourth quarter earnings release dated
| 2nd Quarter 2022 Guidance | Range or Value | |||||||||
| Earnings per diluted share allocated to common shareholders | $ | 0.23 | to | $ | 0.24 | |||||
| Plus: real estate depreciation and amortization | 0.36 | to | 0.36 | |||||||
| FFO per diluted share, as adjusted | $ | 0.59 | to | $ | 0.60 | |||||
Conference Call
Management will host a conference call at
A live webcast of the conference call will be available online from the investor relations page of the Company’s corporate website at www.cubesmart.com. Telephone participants may avoid any delays in joining the conference call by pre-registering for the call using the following link to receive a special dial-in number and PIN: https://www.incommglobalevents.com/registration/q4inc/10698/cubesmart-first-quarter-2022-earnings-call/.
Telephone participants who are unable to pre-register for the conference call may join on the day of the call using 1-844-200-6205 for domestic callers, +1-929-526-1599 for international callers, and 1-833-950-0062 for callers in
After the live webcast, the call will remain available on CubeSmart’s website for 15 days. In addition, a telephonic replay of the call will be available through
Supplemental operating and financial data as of
About CubeSmart
CubeSmart is a self-administered and self-managed real estate investment trust. The Company's self-storage properties are designed to offer affordable, easily accessible and, in most locations, climate-controlled storage space for residential and commercial customers. According to the 2022 Self-Storage Almanac, CubeSmart is one of the top three owners and operators of self-storage properties in
Non-GAAP Financial Measures
Funds from operations (“FFO”) is a widely used performance measure for real estate companies and is provided here as a supplemental measure of operating performance. The
Management uses FFO as a key performance indicator in evaluating the operations of the Company's stores. Given the nature of its business as a real estate owner and operator, the Company considers FFO a key measure of its operating performance that is not specifically defined by accounting principles generally accepted in
FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of the Company’s performance. FFO does not represent cash generated from operating activities determined in accordance with GAAP and is not a measure of liquidity or an indicator of the Company’s ability to make cash distributions. The Company believes that to further understand its performance, FFO should be compared with its reported net income and considered in addition to cash flows computed in accordance with GAAP, as presented in its Consolidated Financial Statements.
FFO, as adjusted represents FFO as defined above, excluding the effects of acquisition related costs, gains or losses from early extinguishment of debt, and other non-recurring items, which the Company believes are not indicative of the Company’s operating results.
The Company defines net operating income, which it refers to as “NOI,” as total continuing revenues less continuing property operating expenses. NOI also can be calculated by adding back to net income (loss): interest expense on loans, loan procurement amortization expense, loss on early extinguishment of debt, acquisition related costs, equity in losses of real estate ventures, other expense, depreciation and amortization expense, general and administrative expense, and deducting from net income (loss): equity in earnings of real estate ventures, gains from sales of real estate, net, other income, gains from remeasurement of investments in real estate ventures and interest income. NOI is not a measure of performance calculated in accordance with GAAP.
Management uses NOI as a measure of operating performance at each of its stores, and for all of its stores in the aggregate. NOI should not be considered as a substitute for net income, cash flows provided by operating, investing and financing activities, or other income statement or cash flow statement data prepared in accordance with GAAP. The Company believes NOI is useful to investors in evaluating operating performance because it is one of the primary measures used by management and store managers to evaluate the economic productivity of the Company’s stores, including the ability to lease stores, increase pricing and occupancy, and control property operating expenses. Additionally, NOI helps the Company’s investors meaningfully compare the results of its operating performance from period to period by removing the impact of its capital structure (primarily interest expense on outstanding indebtedness) and depreciation of the basis in its assets from operating results.
Forward-Looking Statements
This presentation, together with other statements and information publicly disseminated by CubeSmart (“we,” “us,” “our” or the “Company”), contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act.” Forward-looking statements include statements concerning the Company’s plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions and other information that is not historical information. In some cases, forward-looking statements can be identified by terminology such as “believes,” “expects,” “estimates,” “may,” “will,” “should,” “anticipates,” or “intends” or the negative of such terms or other comparable terminology, or by discussions of strategy. Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Although we believe the expectations reflected in these forward-looking statements are based on reasonable assumptions, future events and actual results, performance, transactions or achievements, financial and otherwise, may differ materially from the results, performance, transactions or achievements expressed or implied by the forward-looking statements. As a result, you should not rely on or construe any forward-looking statements in this presentation, or which management or persons acting on their behalf may make orally or in writing from time to time, as predictions of future events or as guarantees of future performance. We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this presentation or as of the dates otherwise indicated in such forward-looking statements. All of our forward-looking statements, including those in this presentation, are qualified in their entirety by this statement.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this presentation. Any forward-looking statements should be considered in light of the risks and uncertainties referred to in Item 1A. “Risk Factors” in our Annual Report on Form 10-K and in our other filings with the
These risks include, but are not limited to, the following:
- adverse changes in economic conditions in the real estate industry and in the markets in which we own and operate self-storage properties;
- the effect of competition from existing and new self-storage properties and operators on our ability to maintain or raise occupancy and rental rates;
- the failure to execute our business plan;
- adverse impacts from the COVID-19 pandemic, other pandemics, quarantines and stay at home orders, including the impact on our ability to operate our self-storage properties, the demand for self-storage, rental rates and fees and rent collection levels;
- reduced availability and increased costs of external sources of capital;
- increases in interest rates and operating costs;
- financing risks, including the risk of over-leverage and the corresponding risk of default on our mortgage and other debt and potential inability to refinance existing or future debt;
- increases in interest rates and operating costs;
- counterparty non-performance related to the use of derivative financial instruments;
- risks related to our ability to maintain our qualification as a real estate investment trust (“REIT”) for federal income tax purposes;
- the failure of acquisitions and developments to close on expected terms, or at all, or to perform as expected;
- increases in taxes, fees and assessments from state and local jurisdictions;
- the failure of our joint venture partners to fulfill their obligations to us or their pursuit of actions that are inconsistent with our objectives;
- reductions in asset valuations and related impairment charges;
- cyber security breaches, cyber or ransomware attacks or a failure of our networks, systems or technology, which could adversely impact our business, customer and employee relationships or result in fraudulent payments;
- changes in real estate, zoning, use and occupancy laws or regulations;
- risks related to or a consequence of natural disasters or acts of violence, pandemics, active shooters, terrorism, insurrection or war that affect the markets in which we operate;
- potential environmental and other liabilities;
- governmental, administrative and executive orders and laws, which could adversely impact our business operations, customer and employee relationships;
- uninsured or uninsurable losses and the ability to obtain insurance coverage or recovery from insurance against risks and losses;
- our ability to attract and retain talent in the current labor market;
- other factors affecting the real estate industry generally or the self-storage industry in particular; and
- other risks identified in Item 1A of our Annual Report on Form 10-K and, from time to time, in other reports that we file with the
SEC or in other documents that we publicly disseminate.
Given these uncertainties, we caution readers not to place undue reliance on forward-looking statements. We undertake no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise except as may be required in securities laws.
Contact:
CubeSmart
Vice President, Finance
(610) 535-5700
| CUBESMART AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data) | ||||||||
| 2022 | 2021 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Storage properties | $ | 7,232,103 | $ | 7,183,494 | ||||
| Less: Accumulated depreciation | (1,130,001 | ) | (1,085,824 | ) | ||||
| Storage properties, net (including VIE assets of | 6,102,102 | 6,097,670 | ||||||
| Cash and cash equivalents | 7,890 | 11,140 | ||||||
| Restricted cash | 2,573 | 2,178 | ||||||
| Loan procurement costs, net of amortization | 2,074 | 2,322 | ||||||
| Investment in real estate ventures, at equity | 117,025 | 119,751 | ||||||
| Assets held for sale | 3,324 | 49,313 | ||||||
| Other assets, net | 226,553 | 265,705 | ||||||
| Total assets | $ | 6,461,541 | $ | 6,548,079 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Unsecured senior notes, net | $ | 2,769,245 | $ | 2,768,209 | ||||
| Revolving credit facility | 185,400 | 209,900 | ||||||
| Mortgage loans and notes payable, net | 166,489 | 167,676 | ||||||
| Lease liabilities - finance leases | 65,783 | 65,801 | ||||||
| Accounts payable, accrued expenses and other liabilities | 197,685 | 199,985 | ||||||
| Distributions payable | 97,439 | 97,417 | ||||||
| Deferred revenue | 38,493 | 37,144 | ||||||
| Security deposits | 1,086 | 1,065 | ||||||
| Liabilities held for sale | 475 | 2,502 | ||||||
| Total liabilities | 3,522,095 | 3,549,699 | ||||||
| Noncontrolling interests in the | 75,991 | 108,220 | ||||||
| Commitments and contingencies | ||||||||
| Equity | ||||||||
| Common shares | 2,244 | 2,239 | ||||||
| Additional paid-in capital | 4,112,183 | 4,088,392 | ||||||
| Accumulated other comprehensive loss | (551 | ) | (570 | ) | ||||
| Accumulated deficit | (1,266,804 | ) | (1,218,498 | ) | ||||
| Total CubeSmart shareholders’ equity | 2,847,072 | 2,871,563 | ||||||
| Noncontrolling interests in subsidiaries | 16,383 | 18,597 | ||||||
| Total equity | 2,863,455 | 2,890,160 | ||||||
| Total liabilities and equity | $ | 6,461,541 | $ | 6,548,079 | ||||
| CUBESMART AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share data) (unaudited) | ||||||||
| Three Months Ended | ||||||||
| 2022 | 2021 | |||||||
| REVENUES | ||||||||
| Rental income | $ | 208,371 | $ | 162,476 | ||||
| Other property related income | 22,280 | 19,304 | ||||||
| Property management fee income | 7,914 | 7,061 | ||||||
| Total revenues | 238,565 | 188,841 | ||||||
| OPERATING EXPENSES | ||||||||
| Property operating expenses | 70,567 | 61,228 | ||||||
| Depreciation and amortization | 82,557 | 53,810 | ||||||
| General and administrative | 14,525 | 10,916 | ||||||
| Total operating expenses | 167,649 | 125,954 | ||||||
| OTHER (EXPENSE) INCOME | ||||||||
| Interest: | ||||||||
| Interest expense on loans | (22,824 | ) | (19,234 | ) | ||||
| Loan procurement amortization expense | (957 | ) | (1,035 | ) | ||||
| Equity in earnings of real estate ventures | 294 | 20 | ||||||
| Other | (9,163 | ) | 677 | |||||
| Total other expense | (32,650 | ) | (19,572 | ) | ||||
| NET INCOME | 38,266 | 43,315 | ||||||
| NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS | ||||||||
| Noncontrolling interests in the | (292 | ) | (1,549 | ) | ||||
| Noncontrolling interest in subsidiaries | 181 | (34 | ) | |||||
| NET INCOME ATTRIBUTABLE TO THE COMPANY’S COMMON SHAREHOLDERS | $ | 38,155 | $ | 41,732 | ||||
| Basic earnings per share attributable to common shareholders | $ | 0.17 | $ | 0.21 | ||||
| Diluted earnings per share attributable to common shareholders | $ | 0.17 | $ | 0.21 | ||||
| Weighted average basic shares outstanding | 224,663 | 199,160 | ||||||
| Weighted average diluted shares outstanding | 225,737 | 200,233 | ||||||
| Same-Store Facility Results (523 stores) (in thousands, except percentage and per square foot data) (unaudited) | |||||||||||
| Three Months Ended | |||||||||||
| Percent | |||||||||||
| 2022 | 2021 | Change | |||||||||
| REVENUES | |||||||||||
| Rental income | $ | 178,074 | $ | 154,074 | 15.6 | % | |||||
| Other property related income | 7,204 | 6,184 | 16.5 | % | |||||||
| Total revenues | 185,278 | 160,258 | 15.6 | % | |||||||
| OPERATING EXPENSES | |||||||||||
| Property taxes(1) | 20,201 | 19,575 | 3.2 | % | |||||||
| Personnel expense | 12,035 | 12,233 | (1.6 | )% | |||||||
| Advertising | 2,592 | 2,443 | 6.1 | % | |||||||
| Repair and maintenance | 1,750 | 1,693 | 3.4 | % | |||||||
| Utilities | 5,076 | 4,912 | 3.3 | % | |||||||
| Property insurance | 1,667 | 1,507 | 10.6 | % | |||||||
| Other expenses | 7,886 | 7,421 | 6.3 | % | |||||||
| Total operating expenses | 51,207 | 49,784 | 2.9 | % | |||||||
| Net operating income(2) | $ | 134,071 | $ | 110,474 | 21.4 | % | |||||
| Gross margin | 72.4 | % | 68.9 | % | |||||||
| Period end occupancy | 94.1 | % | 94.2 | % | |||||||
| Period average occupancy | 93.6 | % | 93.6 | % | |||||||
| Total rentable square feet | 36,945 | ||||||||||
| Realized annual rent per occupied square foot(3) | $ | 20.59 | $ | 17.82 | 15.5 | % | |||||
| Reconciliation of Same-Store Net Operating Income to Operating Income | |||||||||||
| Same-store net operating income(2) | $ | 134,071 | $ | 110,474 | |||||||
| Non same-store net operating income(2) | 21,947 | 5,842 | |||||||||
| Indirect property overhead(4) | 11,980 | 11,297 | |||||||||
| Depreciation and amortization | (82,557 | ) | (53,810 | ) | |||||||
| General and administrative expense | (14,525 | ) | (10,916 | ) | |||||||
| Interest expense on loans | (22,824 | ) | (19,234 | ) | |||||||
| Loan procurement amortization expense | (957 | ) | (1,035 | ) | |||||||
| Equity in earnings of real estate ventures | 294 | 20 | |||||||||
| Other | (9,163 | ) | 677 | ||||||||
| Net income | $ | 38,266 | $ | 43,315 | |||||||
(1) For comparability purposes, current year amounts related to the expiration of certain real estate tax abatements have been excluded from the same-store portfolio results (
(2) Net operating income (“NOI”) is a non-GAAP (generally accepted accounting principles) financial measure. The above table reconciles same-store NOI to GAAP Net income.
(3) Realized annual rent per occupied square foot is computed by dividing rental income by the weighted average occupied square feet for the period.
(4) Includes property management income earned in conjunction with managed properties.
| Non-GAAP Measure – Computation of Funds From Operations (in thousands, except percentage and per share data) (unaudited) | ||||||||
| Three Months Ended | ||||||||
| 2022 | 2021 | |||||||
| Net income attributable to the Company's common shareholders | $ | 38,155 | $ | 41,732 | ||||
| Add: | ||||||||
| Real estate depreciation and amortization: | ||||||||
| Real property | 81,503 | 52,852 | ||||||
| Company's share of unconsolidated real estate ventures | 2,538 | 1,873 | ||||||
| Noncontrolling interests in the | 292 | 1,549 | ||||||
| FFO attributable to common shareholders and OP unitholders | $ | 122,488 | $ | 98,006 | ||||
| Add: | ||||||||
| Loss on early repayment of debt(1) | — | 423 | ||||||
| Transaction-related expenses(2) | 9,408 | — | ||||||
| FFO, as adjusted, attributable to common shareholders and OP unitholders | $ | 131,896 | $ | 98,429 | ||||
| Earnings per share attributable to common shareholders - basic | $ | 0.17 | $ | 0.21 | ||||
| Earnings per share attributable to common shareholders - diluted | $ | 0.17 | $ | 0.21 | ||||
| FFO per share and unit - fully diluted | $ | 0.54 | $ | 0.47 | ||||
| FFO, as adjusted per share and unit - fully diluted | $ | 0.58 | $ | 0.47 | ||||
| Weighted average basic shares outstanding | 224,663 | 199,160 | ||||||
| Weighted average diluted shares outstanding | 225,737 | 200,233 | ||||||
| Weighted average diluted shares and units outstanding | 227,453 | 207,617 | ||||||
| Dividend per common share and unit | $ | 0.43 | $ | 0.34 | ||||
| Payout ratio of FFO, as adjusted | 74.1 | % | 72.3 | % | ||||
(1) For the three months ended
(2) Transaction-related expenses include severance expenses (
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