MALVERN, PA — CubeSmart (NYSE: CUBE) recenlty announced its operating results for the three and six months ended June 30, 2022.
“The rental season got off to a solid start, generating strong performance through the second quarter as all aspects of the operating platform worked effectively to maximize cash flows,” commented President and Chief Executive Officer Christopher P. Marr. “We believe that the demand characteristics created by the attractive demographics of our portfolio position us to perform well through all macroeconomic backdrops.”
Key Highlights for the Second Quarter
- Reported earnings per share (“EPS”) attributable to the Company’s common shareholders of $0.26.
- Reported funds from operations (“FFO”) per share, as adjusted, of $0.62.
- Increased same-store (523 stores) net operating income (“NOI”) 19.0% year over year, driven by 14.0% revenue growth and a 2.5% increase in property operating expenses.
- Same-store occupancy during the quarter averaged 95.1% and ended the quarter at 95.3%.
- Closed on one property acquisition for $23.0 million.
- Opened for operation one development project for a total cost of $21.8 million.
- Added 35 stores to the Company’s third-party management platform during the quarter, bringing their total third-party managed store count to 680.
Net income attributable to the Company’s common shareholders was $58.4 million for the second quarter of 2022, compared with $48.8 million for the second quarter of 2021. EPS attributable to the Company’s common shareholders was $0.26 for the second quarter of 2022, compared with $0.24 for the same period last year.
FFO, as adjusted, was $140.2 million for the second quarter of 2022, compared with $105.4 million for the second quarter of 2021. FFO per share, as adjusted, increased 24.0% to $0.62 for the second quarter of 2022, compared with $0.50 for the same period last year.
During the three months ended June 30, 2022, the Company acquired one wholly-owned store in Texas for $23.0 million. Subsequent to June 30, 2022, the Company acquired one wholly-owned store in Georgia for $20.7 million. In total for the year through the date of this press release, the Company has acquired three stores for $75.7 million.
The Company has agreements with developers for the construction of self-storage properties in high-barrier-to-entry locations. During the three months ended June 30, 2022, the Company opened for operation one development project in Virginia for a total cost of $21.8 million. The project is in close proximity to an existing store and has been combined with the existing store in the Company’s store count, as well as for operational and reporting purposes.
As of June 30, 2022, the Company had two joint venture development properties under construction. The Company anticipates investing a total of $78.0 million related to these projects and had invested $37.7 million of that total as of June 30, 2022. Both stores are located in New York and are expected to open at various times between the third quarter of 2022 and the fourth quarter of 2023.
Unconsolidated Real Estate Venture Activity
During the second quarter of 2022, the Company’s joint venture, HVP V, acquired a property located in New Jersey for $33.2 million.
As of June 30, 2022, the Company’s third-party management platform included 680 stores totaling 45.9 million rentable square feet. During the three and six months ended June 30, 2022, the Company added 35 stores and 68 stores, respectively, to its third-party management platform.
The Company’s same-store portfolio at June 30, 2022 included 523 stores containing approximately million rentable square feet, or approximately of the aggregate rentable square feet of the Company’s 609 consolidated stores. These same-store properties represented approximately of property NOI for the three months ended June 30, 2022.
Same-store physical occupancy as of June 30, 2022 and 2021 was 95.3% and 96.0%, respectively. Same-store revenues for the second quarter of 2022 increased 14.0% and same-store operating expenses increased 2.5% from the same quarter in 2021. Same-store NOI increased 19.0% from the second quarter of 2021 to the second quarter of 2022.
As of June 30, 2022, the Company’s total consolidated portfolio included 609 stores containing 43.9 million rentable square feet and had physical occupancy of 93.6%.
Revenues increased $49.4 million and property operating expenses increased $9.7 million in the second quarter of 2022, as compared to the same period in 2021. Increases in revenues were primarily attributable to increased rental rates on the Company’s same-store portfolio as well as revenues generated from property acquisitions and recently opened development properties. Increases in property operating expenses were primarily attributable to a $7.1 million increase from stores acquired or opened in 2021 and 2022 included in the Company’s s non-same store portfolio as well as increases in expenses from same-store properties primarily related to property taxes.
Interest expense increased from $19.1 million during the three months ended June 30, 2021 to $23.1 million during the three months ended June 30, 2022, an increase of $4.0 million. The increase was attributable to a higher amount of outstanding debt that was used to fund a portion of the Company’s growth. This increase was partially offset by lower interest rates during the 2022 period. The average outstanding debt balance was $3.16 billion during the three months ended June 30, 2022 as compared to $2.25 billion during the three months ended June 30, 2021. The weighted average effective interest rate on the Company’s outstanding debt for the three months ended June 30, 2022 and 2021 was 2.91% and 3.41%, respectively.
During the three months ended June 30, 2022, the Company did not sell any common shares of beneficial interest through its at-the-market (“ATM”) equity program. As of June 30, 2022, the Company had 5.9 million shares available for issuance under the existing equity distribution agreements.
On May 17, 2022, the Company declared a quarterly dividend of $0.43 per common share. The dividend was paid on July 15, 2022 to common shareholders of record on July 1, 2022.
2022 Financial Outlook
“Strong second quarter results have further improved our outlook for the balance of 2022 which is reflected in the increases to our same store and FFO guidance ranges,” commented Chief Financial Officer Tim Martin. “Our investment-grade balance sheet is well positioned in this volatile interest rate environment, with 94.6% of our debt fixed and no major debt maturities until 2024.”
The Company estimates that its fully diluted earnings per share for the year will be between $1.05 and $1.09 (previously $0.95 to $1.00), and that its fully diluted FFO per share, as adjusted, for 2022 will be between $2.47 and $2.51 (previously $2.37 to $2.42). 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 2022, the same-store pool consists of 523 properties totaling 37.0 million rentable square feet.
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