Business Context and Reporting Period
This Form 8-K Current Report was filed by CubeSmart and CubeSmart, L.P. on December 11, 2013, covering events occurring on December 10, 2013. The filing details the execution of a material definitive agreement for a public debt offering and the completion of a significant acquisition of self-storage facilities.
Key Financial Metrics and Transactions
- Debt Offering: Entered into an underwriting agreement for the public offering of $250.0 million aggregate principal amount of 4.375% senior notes due 2023.
- Acquisition: Completed the acquisition of 36 self-storage facilities (29 in Texas, 1 in North Carolina) containing approximately 2.1 million rentable square feet.
- Acquisition Cost: Aggregate purchase price was approximately $326.2 million, plus $0.7 million in closing costs.
- Acquisition Funding: Funded via $158.2 million in cash from a joint venture partner, cash on hand, and $161.0 million in borrowings under the revolving credit facility. A $25 million earnest money deposit was also applied.
- Guarantee: CubeSmart has fully and unconditionally guaranteed the payment of principal and interest on the new senior notes.
Material Changes and Use of Proceeds
The primary material change is the expansion of the company's asset base through the acquisition of 36 new facilities. Regarding liquidity and debt management, the company intends to use the net proceeds from the $250.0 million note offering to:
- Repay all outstanding indebtedness under the unsecured term loan portion of the credit facility maturing in 2014.
- Repay a portion of the outstanding indebtedness incurred under the revolving credit facility used to finance the acquisition.
The acquisition was structured such that 35 facilities were acquired through a new 50/50 joint venture with an institutional investor, while one facility in Houston was purchased directly by the Operating Partnership.
Outlook, Risks, and Management Commentary
The offering and sale of the notes and related guarantee were expected to be completed on December 17, 2013. The filing notes that affiliates of the underwriters act as lenders under the company's credit facility and may receive a portion of the offering proceeds through the repayment of those borrowings. The filing does not provide specific forward-looking revenue guidance or margin projections for the upcoming fiscal period.
Investor Verification Checklist
- Verify the final closing date and actual net proceeds of the $250.0 million senior notes offering.
- Confirm the exact amount of the 2014 term loan and revolving credit facility debt repaid using the new proceeds.
- Review the joint venture agreement terms regarding the 50% ownership interest in the 35 acquired facilities.
- Assess the impact of the new 4.375% interest rate on the company's overall cost of capital compared to the refinanced debt.
- Check subsequent filings for the integration status and initial performance metrics of the 2.1 million square feet of new rentable space.