CubeSmart Q1 2021 Form 10-Q Summary
Business context and reporting period
Quarter ended March 31, 2021; comparative results are for the three months ended March 31, 2020. CubeSmart is a self-storage REIT operating through CubeSmart, L.P. It owned 543 stores across 24 states and the District of Columbia, and managed 701 third-party stores. The company reports one operating segment.
Financial and operating performance
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenue | $188.8 million | $164.1 million | +15.1% |
| Net income | $43.3 million | $38.3 million | +13.0% |
| Net income attributable to common shareholders | $41.7 million | $37.9 million | +10.1% |
| Diluted EPS | $0.21 | $0.20 | +5.0% |
| Cash from operations | $98.2 million | $80.9 million | +$17.2 million |
| Net cash used in investing | $20.5 million | $34.8 million | $14.3 million less used |
- Same-store revenue rose 6.7% to $153.3 million; same-store NOI increased 8.9% to $105.5 million. Total portfolio NOI was $127.6 million, up 17.8%. Same-store average occupancy improved to 93.8% from 91.0%; period-end occupancy was 94.4% versus 91.3%.
- Realized annual rent per occupied square foot in the same-store portfolio increased to $17.60 from $16.94. Company-wide period-end occupancy rose to 93.0% from 90.2%.
- Operating expenses increased 17.8% overall, including depreciation and amortization up 31.8% to $53.8 million, mainly reflecting acquisitions and developments. Interest expense increased 3.0% to $19.2 million. The filing does not provide a single operating margin figure; same-store NOI margin was approximately 68.8%, calculated from reported same-store NOI and revenue.
- At March 31, 2021, total assets were $4.75 billion and total liabilities were $2.59 billion. Balance-sheet debt included $2.031 billion of unsecured senior notes, $52.8 million drawn on the revolver, $171.2 million of mortgage loans and notes payable, and $65.7 million of finance lease liabilities.
- Cash and cash equivalents were $3.7 million, with $2.3 million restricted. Revolver availability was $696.6 million; the $750 million facility matures in June 2024. The company reported compliance with applicable debt covenants.
- Cash used in financing was $77.9 million. The company issued 2.8 million shares through its at-the-market program, generating $99.7 million net proceeds, and paid $67.4 million in common-share distributions.
Material changes versus the prior period
- Revenue growth reflected higher same-store occupancy and rental income, plus $11.6 million of additional rental income from acquired or newly opened stores. Total rental income rose 15.2% to $162.5 million.
- Same-store property operating expenses rose 2.0%, primarily due to $0.8 million more snow removal costs. Across the total portfolio, property operating expenses rose 9.8%.
- Average outstanding debt increased by $382.2 million year over year to $2.326 billion, largely to fund growth; the weighted-average effective interest rate fell to 3.39% from 3.96%.
- Operating cash flow increased, while investing outflows declined because no wholly owned store acquisitions closed in Q1 2021; the comparable 2020 quarter included a $9.0 million acquisition.
- Two secured loans totaling approximately $44.0 million were repaid in Q1 2021. Reported net income attributable to common shareholders also reflects a higher allocation to noncontrolling OP-unit holders than in Q1 2020.
Outlook, risks, contingencies, and unusual items
- For the remainder of 2021, management expected recurring capital expenditures of $8–$13 million, planned improvements and upgrades of $7–$12 million, and new-store development costs of $20–$30 million. Scheduled debt principal payments were approximately $1.7 million.
- Five joint-venture development projects were underway, with estimated total construction costs of $124.3 million and expected completion by Q2 2022. Costs incurred through March 31 were $85.7 million.
- Management said cash from operations, equity-market access, and revolver availability were expected to support the current business plan. It cautioned that future access to debt and equity capital is not assured.
- COVID-19’s future duration and economic effects could affect operations, demand, collections, financial results, access to capital, and share price. Other stated risks include competition, economic conditions, interest rates, leverage and refinancing, acquisitions and developments, labor availability, cyber risks, regulation, and REIT qualification.
- The company reported no impairment losses in the quarter and no stores held for sale. It described ordinary-course claims and said management considered its provisions adequate; no material adverse effect from pending legal matters was expected.
- Depreciation and amortization included approximately $12.1 million of amortization related to acquired Storage Deluxe in-place leases. A $0.4 million early debt-repayment loss was included in the FFO reconciliation. No formal earnings or full-year revenue guidance is stated in the supplied filing text.
Most important facts for investors to verify
- Whether same-store occupancy and rental-rate growth persist, and how pricing changes affect future occupancy and customer retention.
- How much of reported growth and NOI improvement is attributable to same-store operations versus acquisitions, development, and management-fee activity.
- Debt maturities, refinancing needs, interest-rate exposure, covenant headroom, and the difference between debt principal and balance-sheet carrying values.
- Execution, remaining cost, and returns of the development pipeline and joint ventures, including put/call obligations and related-party financing commitments.
- Future capital spending, distributions, and equity issuance needs; 8.1 million shares remained available under the ATM program at quarter-end.