CubeSmart (NYSE: CUBE) today announced its operating results for
the three and six months ended June 30, 2023.
“Following two years of record sector performance, 2023 has been
a year of inconsistent trends as operating fundamentals adjust to
the evolving macro environment,” commented President and Chief
Executive Officer Christopher P. Marr. “Overall, New York City and
other urban markets have seen more stable performance with solid
results across key metrics while demand in markets throughout the
Sun Belt has normalized off post-pandemic highs. Occupancy trends
have typified the inconsistent environment as we saw same-store
portfolio occupancy grow in July to 92.9% following a slower June,
ending the month 140 basis points behind 2022.”
Key Highlights for the Second Quarter
- Reported earnings per share (“EPS”) attributable to the
Company’s common shareholders of $0.43.
- Reported funds from operations (“FFO”) per share of $0.66.
- Increased same-store (593 stores) net operating income (“NOI”)
5.0% year over year, driven by 4.6% revenue growth and a 3.6%
increase in property operating expenses.
- Averaged same-store occupancy of 92.7% during the quarter and
ended the quarter at 92.7%.
- Added 58 stores to our third-party management platform during
the quarter, bringing our total third-party managed store count to
727.
Financial Results
Net income attributable to the Company’s common shareholders was
$97.9 million for the second quarter of 2023, compared with $58.4
million for the second quarter of 2022. A significant driver of the
year over year increase was decreased amortization of in-place
lease intangibles related to stores acquired in 2021. EPS
attributable to the Company’s common shareholders was $0.43 for the
second quarter of 2023, compared with $0.26 for the same period
last year.
FFO, as adjusted, was $149.5 million for the second quarter of
2023, compared with $140.2 million for the second quarter of 2022.
FFO per share, as adjusted, increased 6.5% to $0.66 for the second
quarter of 2023, compared with $0.62 for the same period last
year.
Investment Activity
Development Activity
The Company has agreements with developers for the construction
of self-storage properties in high-barrier-to-entry locations. As
of June 30, 2023, the Company had three joint venture
development properties under construction. The Company anticipates
investing a total of $75.2 million related to these projects and
had invested $33.4 million of that total as of June 30, 2023. The
stores are located in New Jersey (1) and New York (2) and are
expected to open at various times between the first and fourth
quarters of 2024.
Third-Party Management
As of June 30, 2023, the Company’s third-party management
platform included 727 stores totaling 48.0 million rentable square
feet. During the three and six months ended June 30, 2023, the
Company added 58 stores and 83 stores, respectively, to its
third-party management platform.
Same-Store Results
The Company’s same-store portfolio at June 30, 2023 included 593
stores containing 42.4 million rentable square feet, or
approximately 96.2% of the aggregate rentable square feet of the
Company’s 611 consolidated stores. These same-store properties
represented approximately 97.3% of property NOI for the three
months ended June 30, 2023.
Same-store physical occupancy as of June 30, 2023 and 2022 was
92.7% and 94.4%, respectively. Same-store revenues for the second
quarter of 2023 increased 4.6% and same-store operating expenses
increased 3.6% from the same quarter in 2022. Same-store NOI
increased 5.0% from the second quarter of 2022 to the second
quarter of 2023.
Operating Results
As of June 30, 2023, the Company’s total
consolidated portfolio included 611 stores containing 44.1 million
rentable square feet and had physical occupancy of 92.0%.
Revenues increased $12.1 million and property operating expenses
increased $1.3 million in the second quarter of 2023, as compared
to the same period in 2022. Increases in revenues were primarily
attributable to increased rental rates on our same-store portfolio.
Increases in property operating expenses were primarily
attributable to increases in expenses from same-store properties
primarily related to advertising costs and property insurance
premiums.
Interest expense increased from $23.1 million during the
three months ended June 30, 2022 to $23.5 million during the three
months ended June 30, 2023, an increase of $0.4 million. The
increase was attributable to higher interest rates during the 2023
period compared to the 2022 period, partially offset by a decrease
in the average outstanding debt balance. The weighted average
effective interest rate on our outstanding debt increased to 3.05%
for the three months ended June 30, 2023 compared to 2.91% during
the three months ended June 30, 2022. The average outstanding debt
balance decreased to $3.04 billion during the three months ended
June 30, 2023 as compared to $3.16 billion during the three months
ended June 30, 2022.
Financing Activity
During the three months ended June 30, 2023, the
Company did not sell any common shares of beneficial interest
through its at-the-market (“ATM”) equity program. As of June 30,
2023, the Company had 5.8 million shares available for issuance
under the existing equity distribution agreements.
Quarterly Dividend
On May 16, 2023, the Company declared a quarterly dividend of
$0.49 per common share. The dividend was paid on July 17, 2023 to
common shareholders of record on July 3, 2023.
2023 Financial Outlook
“We have remained disciplined in our investment approach as few
transactions in the market have met both our quality standards and
our return thresholds. As fundamentals have become more challenging
for smaller operators, many of them are choosing the CubeSmart
operating platform to maximize performance of their assets,
creating a robust pipeline for growth in our third-party management
business,” commented Chief Financial Officer Tim Martin. “With the
busy rental season coming to an end, pricing to new customers has
been on the more conservative end of our expectations, leading us
to tighten the high end of our guidance ranges to best reflect
current market conditions.”
The Company estimates that its fully diluted earnings per share
for the year will be between $1.77 and $1.81 (previously $1.77 to
$1.84), and that its fully diluted FFO per share, as adjusted, for
2023 will be between $2.64 and $2.68 (previously $2.64 to $2.71).
Due to uncertainty related to the timing and terms of transactions,
the impact of any potential future speculative investment activity
is excluded from guidance. For 2023, the same-store pool consists
of 593 properties totaling 42.4 million rentable square feet.
|
|
Current Ranges for |
|
Current Ranges for |
2023 Full Year Guidance Range Summary |
|
Current Ranges for Annual Assumptions |
|
Prior Guidance (1) |
Same-store revenue growth |
|
|
4.00 |
% |
|
to |
|
4.50 |
% |
|
|
4.00 |
% |
|
to |
|
5.50 |
% |
Same-store expense growth |
|
|
3.00 |
% |
|
to |
|
4.00 |
% |
|
|
4.00 |
% |
|
to |
|
5.00 |
% |
Same-store NOI growth |
|
|
4.00 |
% |
|
to |
|
5.00 |
% |
|
|
4.00 |
% |
|
to |
|
6.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of consolidated operating properties |
|
$ |
100.0M |
|
|
to |
$ |
200.0M |
|
|
$ |
100.0M |
|
|
to |
$ |
200.0M |
|
Dilution from properties in lease-up |
|
$ |
(0.02 |
) |
|
to |
$ |
(0.03 |
) |
|
$ |
(0.02 |
) |
|
to |
$ |
(0.03 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property management fee income |
|
$ |
36.0M |
|
|
to |
$ |
38.0M |
|
|
$ |
36.0M |
|
|
to |
$ |
38.0M |
|
General and administrative expenses |
|
$ |
55.5M |
|
|
to |
$ |
57.5M |
|
|
$ |
55.5M |
|
|
to |
$ |
57.5M |
|
Interest and loan amortization expense |
|
$ |
99.0M |
|
|
to |
$ |
101.0M |
|
|
$ |
99.0M |
|
|
to |
$ |
101.0M |
|
Full year weighted average shares and units |
|
|
227.5M |
|
|
|
|
227.5M |
|
|
|
227.5M |
|
|
|
|
227.5M |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per diluted share allocated to common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders |
|
$ |
1.77 |
|
|
to |
$ |
1.81 |
|
|
$ |
1.77 |
|
|
to |
$ |
1.84 |
|
Plus: real estate depreciation and amortization |
|
|
0.88 |
|
|
|
|
0.88 |
|
|
|
0.88 |
|
|
|
|
0.88 |
|
Less: gains from sales of real estate |
|
|
(0.01 |
) |
|
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
|
(0.01 |
) |
FFO per diluted share, as adjusted |
|
$ |
2.64 |
|
|
to |
$ |
2.68 |
|
|
$ |
2.64 |
|
|
to |
$ |
2.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Prior guidance as included in our first quarter earnings
release dated April 27, 2023. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3rd Quarter 2023 Guidance |
|
|
|
Range |
Earnings per diluted share allocated to common shareholders |
|
$ |
0.44 |
|
|
to |
$ |
0.46 |
|
Plus: real estate depreciation and amortization |
|
|
|
|
|
|
|
|
|
0.22 |
|
|
|
|
0.22 |
|
FFO per diluted share, as adjusted |
|
|
|
|
|
|
|
|
$ |
0.66 |
|
|
to |
$ |
0.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conference Call
Management will host a conference call at 11:00 a.m. ET on
Friday, August 4, 2023 to discuss financial results for the three
months ended June 30, 2023.
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 join on the day of
the call by dialing 1-888-886-7786 and using access code
08844301.
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 August 18, 2023 by dialing
1-877-674-7070 using conference number 844301.
Supplemental operating and financial data as of June 30, 2023 is
available in the Investor Relations section of the Company’s
corporate website.
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 2023 Self-Storage Almanac,
CubeSmart is one of the top three owners and operators of
self-storage properties in the United States.
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 April 2002
National Policy Bulletin of the National Association of Real Estate
Investment Trusts (the “White Paper”), as amended, defines FFO as
net income (computed in accordance with GAAP), excluding gains (or
losses) from sales of real estate and related impairment charges,
plus real estate depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures.
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
the United States. The Company believes that FFO is useful to
management and investors as a starting point in measuring its
operational performance because FFO excludes various items included
in net income that do not relate to or are not indicative of its
operating performance such as gains (or losses) from sales of real
estate, gains from remeasurement of investments in real estate
ventures, impairments of depreciable assets, and depreciation,
which can make periodic and peer analyses of operating performance
more difficult. The Company’s computation of FFO may not be
comparable to FFO reported by other REITs or real estate
companies.
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
a measure of performance that is not 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
Securities and Exchange Commission (“SEC”).
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;
- 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:
CubeSmartJosh SchutzerVice President, Finance(610) 535-5700
|
CUBESMART AND SUBSIDIARIESCONSOLIDATED
BALANCE SHEETS(in thousands, except share data) |
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2023 |
|
2022 |
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
Storage properties |
|
$ |
7,323,638 |
|
|
$ |
7,295,778 |
|
Less: Accumulated
depreciation |
|
|
(1,333,907 |
) |
|
|
(1,247,775 |
) |
Storage properties, net
(including VIE assets of $142,326 and $167,180, respectively) |
|
|
5,989,731 |
|
|
|
6,048,003 |
|
Cash and cash equivalents |
|
|
9,220 |
|
|
|
6,064 |
|
Restricted cash |
|
|
1,925 |
|
|
|
2,861 |
|
Loan procurement costs, net of
amortization |
|
|
4,591 |
|
|
|
5,182 |
|
Investment in real estate
ventures, at equity |
|
|
101,482 |
|
|
|
105,993 |
|
Assets held for sale |
|
|
2,063 |
|
|
|
3,745 |
|
Other assets, net |
|
|
172,137 |
|
|
|
153,982 |
|
Total assets |
|
$ |
6,281,149 |
|
|
$ |
6,325,830 |
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
|
Unsecured senior notes,
net |
|
$ |
2,774,420 |
|
|
$ |
2,772,350 |
|
Revolving credit facility |
|
|
63,200 |
|
|
|
60,900 |
|
Mortgage loans and notes
payable, net |
|
|
130,070 |
|
|
|
162,918 |
|
Lease liabilities - finance
leases |
|
|
65,727 |
|
|
|
65,758 |
|
Accounts payable, accrued
expenses and other liabilities |
|
|
214,733 |
|
|
|
213,297 |
|
Distributions payable |
|
|
111,280 |
|
|
|
111,190 |
|
Deferred revenue |
|
|
40,245 |
|
|
|
38,757 |
|
Security deposits |
|
|
1,086 |
|
|
|
1,087 |
|
Liabilities held for sale |
|
|
1,402 |
|
|
|
1,773 |
|
Total liabilities |
|
|
3,402,163 |
|
|
|
3,428,030 |
|
|
|
|
|
|
|
|
Noncontrolling interests in
the Operating Partnership |
|
|
63,352 |
|
|
|
57,419 |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
Common shares $.01 par value, 400,000,000 shares authorized,
224,797,239 and 224,603,462 shares issued and outstanding at June
30, 2023 and December 31, 2022, respectively |
|
|
2,248 |
|
|
|
2,246 |
|
Additional paid-in capital |
|
|
4,132,621 |
|
|
|
4,125,478 |
|
Accumulated other comprehensive loss |
|
|
(451 |
) |
|
|
(491 |
) |
Accumulated deficit |
|
|
(1,333,148 |
) |
|
|
(1,301,030 |
) |
Total CubeSmart shareholders’ equity |
|
|
2,801,270 |
|
|
|
2,826,203 |
|
Noncontrolling interests in subsidiaries |
|
|
14,364 |
|
|
|
14,178 |
|
Total equity |
|
|
2,815,634 |
|
|
|
2,840,381 |
|
Total liabilities and equity |
|
$ |
6,281,149 |
|
|
$ |
6,325,830 |
|
CUBESMART AND SUBSIDIARIESCONSOLIDATED
STATEMENTS OF OPERATIONS(in thousands, except share
data)(unaudited) |
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
Rental income |
|
$ |
225,910 |
|
|
$ |
216,133 |
|
|
$ |
449,494 |
|
|
$ |
424,504 |
|
Other property related income |
|
|
25,760 |
|
|
|
23,861 |
|
|
|
50,144 |
|
|
|
46,141 |
|
Property management fee income |
|
|
9,135 |
|
|
|
8,670 |
|
|
|
17,695 |
|
|
|
16,584 |
|
Total revenues |
|
|
260,805 |
|
|
|
248,664 |
|
|
|
517,333 |
|
|
|
487,229 |
|
OPERATING
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses |
|
|
74,821 |
|
|
|
73,472 |
|
|
|
145,948 |
|
|
|
144,039 |
|
Depreciation and amortization |
|
|
50,358 |
|
|
|
79,046 |
|
|
|
100,687 |
|
|
|
161,603 |
|
General and administrative |
|
|
14,325 |
|
|
|
13,725 |
|
|
|
28,999 |
|
|
|
28,250 |
|
Total operating expenses |
|
|
139,504 |
|
|
|
166,243 |
|
|
|
275,634 |
|
|
|
333,892 |
|
OTHER (EXPENSE)
INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
Interest: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense on loans |
|
|
(23,544 |
) |
|
|
(23,055 |
) |
|
|
(47,235 |
) |
|
|
(45,879 |
) |
Loan procurement amortization expense |
|
|
(1,041 |
) |
|
|
(959 |
) |
|
|
(2,081 |
) |
|
|
(1,916 |
) |
Equity in earnings of real estate ventures |
|
|
790 |
|
|
|
680 |
|
|
|
3,341 |
|
|
|
974 |
|
Other |
|
|
777 |
|
|
|
(493 |
) |
|
|
501 |
|
|
|
(9,656 |
) |
Total other expense |
|
|
(23,018 |
) |
|
|
(23,827 |
) |
|
|
(45,474 |
) |
|
|
(56,477 |
) |
NET
INCOME |
|
|
98,283 |
|
|
|
58,594 |
|
|
|
196,225 |
|
|
|
96,860 |
|
NET (INCOME) LOSS
ATTRIBUTABLE TO
NONCONTROLLING INTERESTS |
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests in the Operating Partnership |
|
|
(616 |
) |
|
|
(379 |
) |
|
|
(1,230 |
) |
|
|
(671 |
) |
Noncontrolling interest in subsidiaries |
|
|
212 |
|
|
|
143 |
|
|
|
450 |
|
|
|
324 |
|
NET INCOME
ATTRIBUTABLE TO THE COMPANY’S
COMMON SHAREHOLDERS |
|
$ |
97,879 |
|
|
$ |
58,358 |
|
|
$ |
195,445 |
|
|
$ |
96,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
attributable to common shareholders |
|
$ |
0.43 |
|
|
$ |
0.26 |
|
|
$ |
0.87 |
|
|
$ |
0.43 |
|
Diluted earnings per share
attributable to common shareholders |
|
$ |
0.43 |
|
|
$ |
0.26 |
|
|
$ |
0.86 |
|
|
$ |
0.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic shares
outstanding |
|
|
225,388 |
|
|
|
224,960 |
|
|
|
225,342 |
|
|
|
224,812 |
|
Weighted average diluted
shares outstanding |
|
|
226,275 |
|
|
|
225,895 |
|
|
|
226,238 |
|
|
|
225,820 |
|
Same-Store Facility Results (593 stores)(in
thousands, except percentage and per square foot
data)(unaudited) |
|
|
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
|
|
|
June 30, |
|
Percent |
June 30, |
|
Percent |
|
|
2023 |
|
2022 |
|
Change |
2023 |
|
2022 |
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income |
|
$ |
219,122 |
|
|
$ |
210,423 |
|
|
4.1 |
% |
$ |
436,504 |
|
|
$ |
414,608 |
|
|
5.3 |
% |
Other property related income |
|
|
9,969 |
|
|
|
8,634 |
|
|
15.5 |
% |
|
19,320 |
|
|
|
16,618 |
|
|
16.3 |
% |
Total revenues |
|
|
229,091 |
|
|
|
219,057 |
|
|
4.6 |
% |
|
455,824 |
|
|
|
431,226 |
|
|
5.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property taxes(1) |
|
|
24,375 |
|
|
|
24,022 |
|
|
1.5 |
% |
|
49,063 |
|
|
|
47,842 |
|
|
2.6 |
% |
Personnel expense |
|
|
13,304 |
|
|
|
13,822 |
|
|
(3.7 |
)% |
|
26,441 |
|
|
|
27,589 |
|
|
(4.2 |
)% |
Advertising |
|
|
6,569 |
|
|
|
5,396 |
|
|
21.7 |
% |
|
9,911 |
|
|
|
8,439 |
|
|
17.4 |
% |
Repair and maintenance |
|
|
2,555 |
|
|
|
2,493 |
|
|
2.5 |
% |
|
4,900 |
|
|
|
4,513 |
|
|
8.6 |
% |
Utilities |
|
|
5,147 |
|
|
|
5,062 |
|
|
1.7 |
% |
|
10,926 |
|
|
|
10,983 |
|
|
(0.5 |
)% |
Property insurance |
|
|
2,609 |
|
|
|
2,022 |
|
|
29.0 |
% |
|
4,745 |
|
|
|
3,935 |
|
|
20.6 |
% |
Other expenses |
|
|
8,777 |
|
|
|
8,315 |
|
|
5.6 |
% |
|
17,424 |
|
|
|
17,299 |
|
|
0.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
63,336 |
|
|
|
61,132 |
|
|
3.6 |
% |
|
123,410 |
|
|
|
120,600 |
|
|
2.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income(2) |
|
$ |
165,755 |
|
|
$ |
157,925 |
|
|
5.0 |
% |
$ |
332,414 |
|
|
$ |
310,626 |
|
|
7.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
72.4 |
% |
|
|
72.1 |
% |
|
|
|
|
72.9 |
% |
|
|
72.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period end occupancy |
|
|
92.7 |
% |
|
|
94.4 |
% |
|
|
|
|
92.7 |
% |
|
|
94.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period average occupancy |
|
|
92.7 |
% |
|
|
94.2 |
% |
|
|
|
|
92.1 |
% |
|
|
93.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rentable square feet |
|
|
42,398 |
|
|
|
|
|
|
|
|
42,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized annual rent per occupied square foot(3) |
|
$ |
22.30 |
|
|
$ |
21.07 |
|
|
5.8 |
% |
$ |
22.35 |
|
|
$ |
20.89 |
|
|
7.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Same-Store Net Operating Income to Operating Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-store net operating
income(2) |
|
$ |
165,755 |
|
|
$ |
157,925 |
|
|
|
|
$ |
332,414 |
|
|
$ |
310,626 |
|
|
|
|
Non same-store net operating
income(2) |
|
|
4,601 |
|
|
|
4,039 |
|
|
|
|
|
9,210 |
|
|
|
6,550 |
|
|
|
|
Indirect property
overhead(4) |
|
|
15,628 |
|
|
|
13,228 |
|
|
|
|
|
29,761 |
|
|
|
26,014 |
|
|
|
|
Depreciation and
amortization |
|
|
(50,358 |
) |
|
|
(79,046 |
) |
|
|
|
|
(100,687 |
) |
|
|
(161,603 |
) |
|
|
|
General and administrative
expense |
|
|
(14,325 |
) |
|
|
(13,725 |
) |
|
|
|
|
(28,999 |
) |
|
|
(28,250 |
) |
|
|
|
Interest expense on loans |
|
|
(23,544 |
) |
|
|
(23,055 |
) |
|
|
|
|
(47,235 |
) |
|
|
(45,879 |
) |
|
|
|
Loan procurement amortization
expense |
|
|
(1,041 |
) |
|
|
(959 |
) |
|
|
|
|
(2,081 |
) |
|
|
(1,916 |
) |
|
|
|
Equity in earnings of real
estate ventures |
|
|
790 |
|
|
|
680 |
|
|
|
|
|
3,341 |
|
|
|
974 |
|
|
|
|
Other |
|
|
777 |
|
|
|
(493 |
) |
|
|
|
|
501 |
|
|
|
(9,656 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
98,283 |
|
|
$ |
58,594 |
|
|
|
|
$ |
196,225 |
|
|
$ |
96,860 |
|
|
|
|
(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 ($164k and $329k for the
three and six months ended June 30, 2023, respectively).(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 |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to the Company’s common shareholders |
|
$ |
97,879 |
|
|
$ |
58,358 |
|
|
$ |
195,445 |
|
|
$ |
96,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add (deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate depreciation and
amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real property |
|
|
48,898 |
|
|
|
77,989 |
|
|
|
97,814 |
|
|
|
159,492 |
|
Company’s share of unconsolidated real estate ventures |
|
|
2,115 |
|
|
|
2,368 |
|
|
|
4,249 |
|
|
|
4,906 |
|
Gains from sales of real
estate, net(1) |
|
|
— |
|
|
|
— |
|
|
|
(1,713 |
) |
|
|
— |
|
Noncontrolling interests in
the Operating Partnership |
|
|
616 |
|
|
|
379 |
|
|
|
1,230 |
|
|
|
671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO attributable to common
shareholders and OP unitholders |
|
$ |
149,508 |
|
|
$ |
139,094 |
|
|
$ |
297,025 |
|
|
$ |
261,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction-related
expenses(2) |
|
|
— |
|
|
|
1,138 |
|
|
|
— |
|
|
|
10,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO, as adjusted, attributable
to common shareholders and OP unitholders |
|
$ |
149,508 |
|
|
$ |
140,232 |
|
|
$ |
297,025 |
|
|
$ |
272,128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
attributable to common shareholders - basic |
|
$ |
0.43 |
|
|
$ |
0.26 |
|
|
$ |
0.87 |
|
|
$ |
0.43 |
|
Earnings per share
attributable to common shareholders - diluted |
|
$ |
0.43 |
|
|
$ |
0.26 |
|
|
$ |
0.86 |
|
|
$ |
0.43 |
|
FFO per share and unit - fully
diluted |
|
$ |
0.66 |
|
|
$ |
0.61 |
|
|
$ |
1.30 |
|
|
$ |
1.15 |
|
FFO, as adjusted per share and
unit - fully diluted |
|
$ |
0.66 |
|
|
$ |
0.62 |
|
|
$ |
1.30 |
|
|
$ |
1.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic shares
outstanding |
|
|
225,388 |
|
|
|
224,960 |
|
|
|
225,342 |
|
|
|
224,812 |
|
Weighted average diluted
shares outstanding |
|
|
226,275 |
|
|
|
225,895 |
|
|
|
226,238 |
|
|
|
225,820 |
|
Weighted average diluted
shares and units outstanding |
|
|
227,694 |
|
|
|
227,355 |
|
|
|
227,659 |
|
|
|
227,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend per common share and
unit |
|
$ |
0.49 |
|
|
$ |
0.43 |
|
|
$ |
0.98 |
|
|
$ |
0.86 |
|
Payout ratio of FFO, as
adjusted |
|
|
74.2 |
% |
|
|
69.4 |
% |
|
|
75.4 |
% |
|
|
71.7 |
% |
(1) Represents
distributions made to the Company in excess of its investment in
the 191 IV CUBE Southeast LLC ("HVPSE") unconsolidated real estate
venture. HVPSE sold all 14 of its properties on August 30, 2022.
The distributions during the six months ended June 30, 2023 relate
to proceeds that were held back at the time of the sale. This gain
is included in the Company’s share of equity in earnings of real
estate ventures.(2) For the three months ended June 30, 2022,
transaction-related expenses represent severance expenses. For the
six months ended June 30, 2022, transaction-related expenses
include severance expenses ($10.3 million) and other transaction
expenses ($0.2 million). Prior to our acquisition of LAACO, Ltd. on
December 9, 2021, the predecessor company entered into severance
agreements with certain employees, including members of their
executive team. These costs were known to us and the assumption of
the obligation to make these payments post-closing was contemplated
in our net consideration paid in the transaction. In accordance
with GAAP, and based on the specific details of the arrangements
with the employees prior to closing, these costs are considered
post-combination compensation expenses. Transaction-related
expenses are included in the component of other income (expense)
designated as Other. |
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