CubeSmart 2021 Q2 Form 10-Q Summary
Business and period: CubeSmart is a self-storage REIT operating through CubeSmart, L.P. This filing covers the quarter and six months ended June 30, 2021, compared with the same periods in 2020. At quarter-end, it owned or partially owned 547 stores in 24 states and the District of Columbia, and managed 718 third-party stores.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Change |
|---|---|---|---|
| Total revenue | $199.2 million | $163.8 million | +21.6% |
| Net income | $50.4 million | $38.9 million | +29.4% |
| Net income attributable to common shareholders | $48.8 million | $38.5 million | +26.6% |
| Diluted EPS | $0.24 | $0.20 | +20.0% |
| Net operating income (NOI), a non-GAAP measure | $135.5 million | $108.5 million | +24.9% |
- Q2 revenue growth reflected same-store rental income up 13.4%, principally from higher rental rates and occupancy, as well as income from acquired and developed stores. Same-store period-end occupancy was 96.1%, up from 93.7%; realized annual rent per occupied square foot increased 9.8%.
- Q2 NOI margin was approximately 68.0% of revenue, compared with 66.2% a year earlier. Net margin was approximately 25.3%, versus 23.8%.
- For the first six months, revenue was $388.1 million (+18.4%), net income $93.7 million (+21.3%), common-shareholder net income $90.5 million (+18.4%), diluted EPS $0.45 (from $0.39), and NOI $263.1 million (+21.4%). Six-month operating cash flow was $217.4 million, versus $188.5 million.
- Six-month investing cash outflow was $88.0 million, including $31.5 million for acquisitions, $18.5 million for property additions and improvements, and $33.1 million for development. Financing cash outflow was $129.4 million. Cash, cash equivalents and restricted cash totaled $6.2 million at period-end.
Debt, liquidity and capital
- At June 30, 2021, debt excluding finance-lease liabilities was approximately $2.23 billion: $2.05 billion principal on unsecured senior notes, $157.6 million mortgage principal and $24.6 million drawn on the revolver. The $750 million revolver had $724.8 million available, including the effect of a letter of credit. Total debt carrying value on the balance sheet also includes $65.8 million of finance-lease liabilities.
- Debt excluding finance leases was lower than year-end 2020, when principal balances totaled approximately $2.37 billion. The company reported covenant compliance; the revolver matures in June 2024 and senior notes mature from 2023 through 2031.
- CubeSmart issued 3.9 million shares through its at-the-market program in the first half, generating $142.1 million net proceeds; 7.0 million shares remained available under the program. Common distributions paid in the first half were $135.7 million.
- Management said operating cash flow, equity access and revolver availability were expected to provide adequate liquidity for its current business plan. Remaining-2021 estimates included $4–9 million of recurring capital expenditures, $4–9 million of planned improvements and upgrades, and $8.5–18.5 million for new-store development.
Changes, outlook and risks
- Q2 operating expenses rose 23.6% to $129.5 million. Depreciation and amortization increased 35.7%, primarily due to acquired and developed stores; property operating costs and personnel expenses also increased. Interest expense rose modestly despite a lower weighted-average debt rate, as average debt outstanding increased.
- Two stores were acquired in the first half for an aggregate $34.1 million. Three development projects were underway, with total expected construction costs of $75.0 million and completion expected by Q2 2022. Two additional properties in New Jersey and Pennsylvania were acquired after quarter-end for $33.0 million.
- No specific earnings, revenue or FFO guidance is provided in the supplied filing text. Management continues to focus on internal growth and selective acquisitions and development.
- Management cautioned that COVID-19’s duration and economic effects could affect operations, demand, rents, collections, access to capital and share price. Other stated risks include local economic conditions, competition, interest rates and operating costs, financing availability, acquisitions and development execution, and REIT qualification.
- Management reported no material impairment losses in the periods presented, no stores held for sale at quarter-end, and no material legal proceedings beyond ordinary-course matters. The filing notes ordinary-course claims and potential loss exposure; management considers its provisions adequate.
Important facts for investors to verify
- Whether strong same-store rent growth and occupancy levels persist, and how much growth comes from existing stores versus acquisitions and development.
- NOI and FFO trends alongside GAAP net income, including the impact of higher depreciation and share issuance on per-share results.
- Debt maturities, revolver availability, covenant headroom, and the effect of interest-rate or capital-market changes.
- Actual spending and delivery timelines for development projects and the performance of recently acquired properties.
- Any subsequent update to management’s COVID-19, operating-cost, liquidity or capital-access assessments; the filing gives no quantified full-year earnings outlook.