MALVERN, PA — CubeSmart (NYSE: CUBE) recently announced its operating results for the three and twelve months ended December 31, 2020.
“The fourth quarter was a strong conclusion to a challenging year that showcased the strength of the CubeSmart platform as robust operating fundamentals lead to a further acceleration of growth trends. Our team demonstrated its resilience by adapting to the many unique challenges faced throughout the year, while their innovative spirit positions us well heading into 2021,” commented President and Chief Executive Officer Christopher P. Marr. “Our strong liquidity and capital position will allow us to continue executing on our external growth objectives.”
Key Highlights for the Fourth Quarter
- Reported earnings per share (“EPS”) attributable to the Company’s common shareholders of $0.22.
- Reported funds from operations (“FFO”) per share, as adjusted, of $0.47.
- Increased same-store (475 stores) net operating income (“NOI”) 5.1% year over year, driven by 3.4% revenue growth and a 0.8% decrease in property operating expenses.
- Same-store occupancy during the quarter averaged 93.8% and ended the quarter at 93.4%.
- Closed on 18 property acquisitions totaling $661.2 million.
- Closed on one property disposition totaling $12.8 million.
- Issued $450 million of unsecured senior notes in seventh public bond offering.
- Redeemed $250 million of unsecured senior notes.
- Increased the quarterly dividend 3.0% to an annualized rate of $1.36 per common share from the previous annualized rate of $1.32 per common share.
- Added 38 stores to their third-party management platform during the quarter.
Net income attributable to the Company’s common shareholders was $42.3 million for the fourth quarter of 2020, compared with $42.0 million for the fourth quarter of 2019. EPS attributable to the Company’s common shareholders was $0.22 for the fourth quarter of 2020 and 2019.
Net income attributable to the Company’s common shareholders for the year ended December 31, 2020 was $165.6 million, compared with $169.1 million for the year ended December 31, 2019. EPS decreased 4.5% to $0.85 for the year ended December 31, 2020 compared with $0.89 for the prior year.
FFO, as adjusted, was $92.9 million for the fourth quarter of 2020, compared with $82.9 million for the fourth quarter of 2019. FFO per share, as adjusted, increased 11.9% to $0.47 for the fourth quarter of 2020, compared with $0.42 for the same period last year.
FFO, as adjusted, for the year ended December 31, 2020 was $339.1 million, compared with $326.3 million for the year ended December 31, 2019. FFO per share, as adjusted, increased 1.8% to $1.72 for the year ended December 31, 2020, compared with $1.69 for the year ended December 31, 2019.
During December 2020, the Company acquired a portfolio of eight open and operating self-storage properties for an aggregate purchase price of approximately $540.0 million. The properties are located in Brooklyn, NY, Long Island City, NY, Flushing (Queens), NY, College Point (Queens), NY and Bronx, NY. Consideration for the properties consisted of approximately $210.5 million payable in cash, approximately $175.1 million payable in OP Units and the assumption of approximately $154.4 million of existing fixed-rate secured debt.
During the quarter ended December 31, 2020, the Company acquired ten additional stores located in Florida (5), Nevada (1), New York (1), Texas (2) and Virginia (1) for $121.2 million. For the year ended December 31, 2020, the Company acquired 21 stores for $735.9 million.
During the three months and full year ended December 31, 2020, the Company sold one property located in New York for $12.8 million.
The Company has agreements with developers for the construction of Class A self-storage properties in high-barrier-to-entry locations. During the year ended December 31, 2020, the Company opened for operation one development property located in New York for a total investment of $45.9 million.
As of December 31, 2020, the Company had six joint venture development properties under construction. The Company anticipates investing a total of $143.8 million related to these projects and had invested $71.6 million of that total as of December 31, 2020. These stores are located in Massachusetts (1), New York (2), Pennsylvania (1) and Virginia (2) and are expected to open at various times between the first quarter of 2021 and the second quarter of 2022.
As of December 31, 2020, the Company’s third-party management program included 723 stores totaling 48.5 million square feet. During the three and twelve months ended December 31, 2020, the Company added 38 stores and 168 stores, respectively, to its third-party management platform.
The Company’s same-store portfolio at December 31, 2020 included 475 stores containing approximately 33.2 million rentable square feet, or approximately 86.1% of the aggregate rentable square feet of the Company’s 543 owned stores. These same-store properties represented approximately 90.1% and 91.6% of property NOI for the three and twelve months ended December 31, 2020, respectively.
Same-store physical occupancy as of December 31, 2020 and 2019 was 93.4% and 91.2%, respectively. Same-store revenues for the fourth quarter of 2020 increased 3.4% and same-store operating expenses decreased 0.8% from the same quarter in 2019. Same-store NOI increased 5.1% from the fourth quarter of 2019 to the fourth quarter of 2020.
For the year ended December 31, 2020, same-store revenues increased 0.8%, same-store operating expenses increased 2.4% and same-store NOI increased 0.1%, as compared with the year ended December 31, 2019.
As of December 31, 2020, the Company’s total owned portfolio included 543 stores containing 38.5 million rentable square feet and had physical occupancy of 92.3%.
Revenues increased $13.3 million and property operating expenses increased $0.7 million in the fourth quarter of 2020, as compared to the same period in 2019. Increases in revenues were primarily attributable to revenues generated from property acquisitions and recently opened development properties as well as increased property management fee income resulting from additional stores under management.
Increases in property operating expenses were primarily attributable to a $1.0 million increase from the stores acquired or opened in 2019 and 2020 included in their non-same store portfolio, offset by a $0.4 million decrease in same-store expenses primarily due to lower property taxes and personnel costs.
Interest expense increased from $18.7 million during the three months ended December 31, 2019 to $19.2 million during the three months ended December 31, 2020, an increase of $0.5 million. The increase is attributable to a higher amount of outstanding debt during the 2020 period. To fund a portion of the Company’s growth, the average outstanding debt balance increased $287.7 million to $2,219.2 million during the three months ended December 31, 2020 as compared to $1,931.5 million during the three months ended December 31, 2019. The weighted average effective interest rate on their outstanding debt for the three months ended December 31, 2020 and 2019 was 3.50% and 3.97%, respectively.
On October 6, 2020, the Operating Partnership issued $450 million in aggregate principal amount of unsecured senior notes due February 15, 2031, which bear interest at a rate of 2.00% per annum (the “2031 Notes”). The 2031 Notes were priced at 99.074% of the principal amount with a yield to maturity of 2.100%. Net proceeds from the offering were used to redeem $250 million of outstanding 4.800% Senior Notes due 2022 (the “2022 Notes”), repay all of the outstanding indebtedness incurred under their unsecured revolving credit facility maturing in June 2024 and for working capital and other general corporate purposes. On October 30, 2020, the Operating Partnership completed the redemption of the 2022 Notes.
During the three and twelve months ended December 31, 2020, the Company sold 3.6 million common shares of beneficial interest through its at-the-market (“ATM”) equity program at an average sales price of $33.69 per share, resulting in net proceeds of $120.7 million, after deducting offering costs. As of December 31, 2020, the Company had 10.9 million shares available for issuance under the existing equity distribution agreements.
On December 8, 2020, the Company declared a dividend of $0.34 per common share, a 3.0% increase compared to the Company’s previously declared quarterly dividend of $0.33 per common share. The dividend was paid on January 15, 2021 to common shareholders of record on January 4, 2021.
2021 Financial Outlook
“It was a robust quarter from a capital raising and investment perspective, as we acquired $661.2 million of high-quality stores across their core markets while raising $570.7 million of attractively priced long-term debt and equity capital,” commented Chief Financial Officer Tim Martin. “Looking forward to 2021, despite continued macroeconomic uncertainty due to the pandemic, the resilience of storage fundamentals have put us in position to reintroduce guidance.”
The Company estimates that its fully diluted earnings per share for the year will be between $0.71 and $0.77, and that its fully diluted FFO per share, as adjusted, for 2021 will be between $1.77 and $1.83. Due to uncertainty related to the timing and terms of transactions, the impact of any potential future speculative investment activity is excluded from guidance. For 2021, the same-store pool will consist of 511 properties totaling 35.7 million square feet.
|Current Ranges for|
|2021 Full Year Guidance Range Summary||Annual Assumptions|
|Same-store revenue growth||3.75||%||to||5.00||%|
|Same-store expense growth||4.00||%||to||5.50||%|
|Same-store NOI growth||3.75||%||to||5.00||%|
|Acquisition of wholly-owned operating properties||$||100.0M||to||$||200.0M|
|Acquisition of properties at C/O||$||$|
|New development openings||$||88.9M||to||$||88.9M|
|Dilution from properties in lease-up||$||(0.05||)||to||$||(0.06||)|
|Property management fee income||$||27.5M||to||$||29.5M|
|General and administrative expenses||$||45.0M||to||$||46.0M|
|Interest and loan amortization expense||$||80.0M||to||$||82.0M|
|Full year weighted average shares and units||206.0M||206.0M|
|Earnings per diluted share allocated to common shareholders||$||0.71||to||$||0.77|
|Plus: real estate depreciation and amortization||$||1.06||$||1.06|
|FFO per diluted share, as adjusted||$||1.77||to||$||1.83|
|1st Quarter 2021 Guidance||Range or Value|
|Earnings per diluted share allocated to common shareholders||$||0.18||to||$||0.20|
|Plus: real estate depreciation and amortization||0.27||0.27|
|FFO per diluted share, as adjusted||$||0.45||to||$||0.47|
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