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Section 1: 8-K (8-K)

cube_Current folio_8K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 8-K

 

CURRENT REPORT PURSUANT TO

SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of report (Date of earliest event reported): October 26, 2018  (October 25, 2018)

 

CUBESMART

CUBESMART L.P.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

 

 

 

Maryland (CubeSmart)
Delaware (CubeSmart, L.P.)

001-32324

000-54462

20-1024732
34-1837021

(State or Other Jurisdiction of Incorporation)

 

(Commission File Number)

(IRS Employer Identification No.)

 

 

 

5 Old Lancaster Road

Malvern, Pennsylvania 19355

 

 

(Address of Principal Executive Offices)

 

 

(610) 535-5000

(Registrant’s telephone number, including area code)

 

Not applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2). 

 

Emerging Growth Company (CubeSmart) ☐

Emerging Growth Company (CubeSmart, L.P.) ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

CubeSmart ☐

CubeSmart, L.P. ☐


 

Item 2.02    Results of Operations and Financial Condition.

 

On October 25, 2018, CubeSmart (the “Company”) announced its financial results for the three and nine months ended September 30, 2018.  A copy of the Company’s earnings press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

 

Item 7.01    Regulation FD Disclosure. 

 

The information included in this Current Report on Form 8-K (including Exhibit 99.1 hereto) shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing made by the Company under the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

 

The Company believes that certain statements in the information attached as Exhibit 99.1 may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are made on the basis of management’s views and assumptions regarding future events and business performance as of the time the statements are made. Actual results may differ materially from those expressed or implied. Information concerning factors that could cause actual results to differ materially from those in forward-looking statements is contained from time to time in the Company’s filings with the Securities and Exchange Commission.

 

Item 9.01    Financial Statements and Exhibits.

 

(a)           Not applicable.

 

(b)           Not applicable.

 

(c)           Not applicable.

 

(d)           Exhibits. The following exhibit is being furnished herewith to this Current Report on Form 8-K.

 

 

 

 

Exhibit No.

 

Description

99.1 

 

CubeSmart Earnings Press Release, dated October 25, 2018, announcing the financial results for the three and nine months ended September  30, 2018

 

 

 

 

 

2

 


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

CUBESMART

 

 

 

 

By:

/s/ Timothy M. Martin

 

Name:

Timothy M. Martin

 

Title:

Chief Financial Officer

 

 

 

 

 

 

 

CUBESMART, L.P.

 

 

 

 

By:

/s/ Timothy M. Martin

 

Name:

Timothy M. Martin

 

Title:

Chief Financial Officer

 

Date: October 26, 2018

 

 

3

 


 

EXHIBIT INDEX

 

 

 

 

Exhibit No.

 

Description

99.1 

 

CubeSmart Earnings Press Release, dated October  25, 2018, announcing the financial results for the three and nine months ended September  30, 2018 

 

4

 


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Section 2: EX-99.1 (EX-99.1)

cube_Ex_99-1

Exhibit 99.1

News Release – October 25, 2018

 

CubeSmart Reports Third Quarter 2018 Results

 

MALVERN, PA -- (Globe Newswire) – October 25,  2018 -- CubeSmart (NYSE: CUBE) today announced its operating results for the three and nine months ended September 30, 2018.

 

“Third-quarter performance continues to reflect healthy demand trends and a competitive pricing environment,” commented President and Chief Executive Officer Christopher P. Marr. “Our scalable, sophisticated operating platform and customer service focus generated solid results across our portfolio. We remain active and disciplined in pursuing growth opportunities that deliver attractive, risk-adjusted returns to our shareholders.”

   

Key Highlights for the Quarter

 

·

Reported earnings per share (“EPS”) attributable to the Company’s common shareholders of $0.23.

·

Reported funds from operations (“FFO”) per share, as adjusted, of $0.43, representing a year over year increase of 2.4%.

·

Increased same-store (458 stores) net operating income (“NOI”) 3.9% year over year, driven by 3.0% revenue growth and a 0.6% increase in property operating expenses.

·

Same-store occupancy during the quarter averaged 93.3% and ended the quarter at 92.7%.  

·

Closed on three property acquisitions totaling $59.6 million.

·

Opened for operation one development property for a total cost of $91.5 million.

·

Sold 0.4 million common shares at an average sales price of $31.38 per share, resulting in net proceeds of $12.9 million.

·

Added 60 stores to our third-party management platform during the quarter, bringing our total third-party managed store count to 582.

 

Financial Results

 

Net income attributable to the Company’s common shareholders was $42.9 million for the third quarter of 2018, compared with $37.3 million for the third quarter of 2017. EPS attributable to the Company’s common shareholders was $0.23 for the third quarter of 2018, compared to $0.21 for the same period last year.

 

FFO, as adjusted, was $80.7 million for the third quarter of 2018, compared with $77.2 million for the third quarter of 2017. FFO per share, as adjusted, increased 2.4% to $0.43 for the third quarter of 2018, compared with $0.42 for the same period last year. 

 

Investment Activity

 

Acquisition Activity

   

The Company acquired three stores in Washington, D.C., Nevada and North Carolina for $59.6 million during the three months ended September 30, 2018 and subsequent to quarter-end, acquired two stores in California and Texas for $76.4 million. In total for the year to date through this press release, the Company has acquired seven properties for $167.2 million and currently has two additional properties under contract for $41.3 million.

 

 

 

 

Third Quarter 2018

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Unconsolidated Joint Venture Activity

 

During the third quarter of 2018, the Company’s joint venture, HVP IV, acquired two properties located in Florida and Georgia for $20.5 million. Year to date through the date of this release, HVP IV has acquired ten properties for $114.4 million, of which the Company has contributed $14.1 million. Additionally, HVP IV has two properties under contract for $15.1 million that are expected to close during the fourth quarter of 2018. 

 

On August 15, 2018, HVP IV received a second advance of $24.4 million on its $107.0 million loan facility, which encumbers an additional five stores that were acquired by the venture, bringing the total outstanding debt balance to $68.1 million as of September 30, 2018. The loan bears interest at LIBOR plus 1.70% and matures on May 16, 2021 with options to extend the maturity date through May 16, 2023, subject to satisfaction of certain conditions and payment of the extension fees as stipulated in the loan agreement.

 

Development Activity

 

The Company has agreements with developers for the construction of Class A self-storage properties. These agreements are structured as either purchases at completion of construction and issuance of certificate of occupancy (“C/O”) or as joint venture developments. During the three and nine months ended September 30, 2018, the Company opened for operation one joint venture development property in New York for a total cost of $91.5 million.

 

As of September 30, 2018, the Company had one property under contract to purchase at C/O for a total acquisition price of $19.2 million.  The store is located in California and closing is expected to occur during the fourth quarter of 2018. This acquisition is subject to due diligence and other customary closing conditions, and no assurance can be provided that the acquisition will be completed on the terms described, or at all.

   

As of September 30, 2018, the Company had six joint venture development properties under construction. The Company anticipates investing a total of $160.0 million related to these projects and had invested $70.1 million of that total as of September 30, 2018. These stores are located in New York (3), Massachusetts (2), and New Jersey. The six projects are expected to open at various times between the first quarter of 2019 and the fourth quarter of 2019.

   

Third-Party Management

 

As of September 30, 2018, the Company’s third-party management program included 582 stores totaling 38.8 million square feet. During the three and nine months ended September 30, 2018, the Company added 60 stores and 148 stores, respectively, to its third-party management program.

 

Same-Store Results

 

The Company’s same-store portfolio at September 30, 2018 included 458 stores containing approximately 31.6 million rentable square feet, or approximately 91.8% of the aggregate rentable square feet of the Company’s 490 owned stores.  These same-store properties represented approximately 94.7% of property net operating income for the quarter ended September 30, 2018.

 

Same-store physical occupancy at period end for the third quarter of 2018 was 92.7%, compared with 93.5% for the same quarter of last year. In the 2017 quarter, ending occupancy was positively impacted by rentals from hurricanes Harvey and Irma. Same-store revenues for the third quarter of 2018 increased 3.0% and same-store

 

Third Quarter 2018

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operating expenses increased 0.6% from the same quarter in 2017. Same-store net operating income increased 3.9%, as compared with the same period in 2017.

 

Operating Results

 

As of September 30, 2018, the Company’s total owned portfolio included 490 stores containing 34.5 million rentable square feet and had a physical occupancy of 90.4%.

 

Revenues increased $9.5 million and property operating expenses increased $1.6 million in the third quarter of 2018, as compared with the same period in 2017.  Increases in revenues were primarily attributable to increased net effective rents in the 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 $0.2 million increase in same-store expenses driven by higher property taxes and a $1.3 million increase in expenses associated with newly acquired or developed stores.

 

Financing Activity

 

During the third quarter, the Company sold 0.4 million common shares of beneficial interest through its “at-the-market” equity program (“ATM”) at an average sales price of $31.38 per share, resulting in net proceeds of $12.9 million, after deducting offering costs. As of September 30, 2018, the Company had 11.2 million shares available for issuance under the existing equity distribution agreements.

 

On July 23, 2018, 58,400 preferred OP units that were originally issued on April 12, 2017 were exchanged for an aggregate of 46,322 common units of the Operating Partnership.

 

Quarterly Dividend

 

On August 7, 2018, the Company declared a dividend of $0.30 per common share. The dividend was paid on October 15, 2018 to common shareholders of record on October 1, 2018.

 

2018 Financial Outlook

 

“Based on our solid performance to date, we have increased the midpoint of our FFO per share guidance and provided an improved outlook on certain same store operating metrics,” commented Chief Financial Officer Tim Martin. “We remain selective and disciplined in pursuing external growth opportunities.  During the third quarter, we added 60 stores to the third party management platform, opened for operation one new development property, and acquired three properties on balance sheet as well as two properties in a joint venture.”

 

Fully diluted EPS allocated to common shareholders for 2018 is now expected to be between $0.83 and $0.84 (previously between $0.80 and $0.84). Fully diluted FFO per share, as adjusted, for 2018 is now expected to be between $1.63 and $1.64 (previously of between $1.61 and $1.65). We have also adjusted other guidance assumptions to reflect third quarter results. Due to uncertainty related to the timing and terms of transactions, the financial impact of any potential future investment activity is excluded from guidance.  For 2018, the same store pool consists of 458 properties totaling 31.6 million square feet.

 

Third Quarter 2018

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Current Ranges for

 

 

 

 

 

2018 Full Year Guidance Range Summary

    

 

 

Annual Assumptions

 

 

 

Prior Guidance(1)

 

Same-store revenue growth

 

 

 

 

3.00%

 

to

 

 

3.25%

 

 

 

 

2.75%

 

to

 

 

3.25%

 

Same-store expense growth

 

 

 

 

3.0%

 

to

 

 

3.5%

 

 

 

 

3.5%

 

to

 

 

4.5%

 

Same-store NOI growth

 

 

 

 

2.75%

 

to

 

 

3.25%

 

 

 

 

2.0%

 

to

 

 

3.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition of wholly-owned operating properties

 

 

 

$

167.0M

 

to

 

$

172.0M

 

 

 

$

100.0M

 

to

 

$

150.0M

 

Acquisition of properties at C/O

 

 

 

$

19.2M

 

 

 

 

$

19.2M

 

 

 

$

40.0M

 

 

 

 

$

40.0M

 

New development openings

 

 

 

$

91.5M

 

 

 

 

$

91.5M

 

 

 

$

90.0M

 

 

 

 

$

90.0M

 

Dispositions

 

 

 

$

0

 

to

 

$

25.0M

 

 

 

$

0

 

to

 

$

50.0M

 

Dilution from properties in lease-up

 

 

 

$

(0.06)

 

to

 

$

(0.07)

 

 

 

$

(0.06)

 

to

 

$

(0.07)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property management fee income

 

 

 

$

19.5M

 

to

 

$

20.5M

 

 

 

$

19.0M

 

to

 

$

21.0M

 

General and administrative expenses

 

 

 

$

35.5M

 

to

 

$

36.5M

 

 

 

$

35.5M

 

to

 

$

36.5M

 

Interest and loan amortization expense

 

 

 

$

65.5M

 

to

 

$

66.5M

 

 

 

$

65.5M

 

to

 

$

67.5M

 

Weighted average shares and units

 

 

 

 

187.5M

 

 

 

 

 

187.5M

 

 

 

 

187.3M

 

 

 

 

 

187.3M

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per diluted share allocated to common shareholders

 

 

 

$

0.83

 

to

 

$

0.84

 

 

 

$

0.80

 

to

 

$

0.84

 

Plus: real estate depreciation and amortization

 

 

 

$

0.80

 

 

 

 

$

0.80

 

 

 

$

0.81

 

 

 

 

$

0.81

 

FFO per diluted share, as adjusted

 

 

 

$

1.63

 

to

 

$

1.64

 

 

 

$

1.61

 

to

 

$

1.65

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Prior guidance as included in our second quarter earnings release dated July 26, 2018.

 

 

 

 

 

 

 

 

 

 

 

 

4th Quarter 2018 Guidance

    

Range or Value

 

Earnings per diluted share allocated to common shareholders

 

$

0.20

 

to

 

$

0.21

 

Plus: real estate depreciation and amortization

 

 

0.21

 

 

 

 

0.21

 

FFO per diluted share, as adjusted

 

$

0.41

 

to

 

$

0.42

 

 

 

 

 

 

 

 

 

 

 

 

Conference Call

 

Management will host a conference call at 11:00 a.m. ET on Friday, October 26, 2018 to discuss financial results for the three and nine months ended September 30, 2018.

 

A live webcast of the conference call will be available online from the investor relations page of the Company's corporate website at www.cubesmart.com.  Telephone participants may avoid any delays in joining the conference call by pre-registering for the call using the following link to receive a special dial-in number and PIN: http://dpregister.com/10124809.  

 

Telephone participants who are unable to pre-register for the conference call may join on the day of the call using 1-877-506-3281 for domestic callers, +1-412-902-6677 for international callers, or 1-855-669-9657 for callers in Canada.   After the live webcast, the call will remain available on CubeSmart's website for 30 days.  In addition, a telephonic replay of the call will be available through November 26, 2018.  The replay numbers are 1-877-344-7529 for domestic callers, +1-412-317-0088 for international callers, and 1-855-669-9658 for callers in Canada.  For callers accessing a telephonic replay, the conference number is 10124809.

 

 

Third Quarter 2018

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Supplemental operating and financial data as of September 30, 2018 is available on the Company’s corporate website under Investor Relations - Financial Information - Financial Reports.

 

About CubeSmart

 

CubeSmart is a self-administered and self-managed real estate investment trust.  The Company's self-storage properties are designed to offer affordable, easily accessible and secure storage space for residential and commercial customers.  According to the 2018 Self-Storage Almanac, CubeSmart is one of the top three owners and operators of self-storage properties in the United States.

 

Non-GAAP Financial Measures

 

Funds from operations (“FFO”) is a widely used performance measure for real estate companies and is provided here as a supplemental measure of operating performance.  The April 2002 National Policy Bulletin of the National Association of Real Estate Investment Trusts (the “White Paper”), as amended, defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of real estate and related impairment charges, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.   

 

Management uses FFO as a key performance indicator in evaluating the operations of the Company's stores. Given the nature of its business as a real estate owner and operator, the Company considers FFO a key measure of its operating performance that is not specifically defined by accounting principles generally accepted in the United States. The Company believes that FFO is useful to management and investors as a starting point in measuring its operational performance because FFO excludes various items included in net income that do not relate to or are not indicative of its operating performance such as gains (or losses) from sales of real estate, gains from remeasurement of investments in real estate ventures, impairments of depreciable assets, and depreciation, which can make periodic and peer analyses of operating performance more difficult. The Company’s computation of FFO may not be comparable to FFO reported by other REITs or real estate companies.  

 

FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of the Company’s performance. FFO does not represent cash generated from operating activities determined in accordance with GAAP and is not a measure of liquidity or an indicator of the Company’s ability to make cash distributions. The Company believes that to further understand its performance, FFO should be compared with its reported net income and considered in addition to cash flows computed in accordance with GAAP, as presented in its Consolidated Financial Statements.

 

FFO, as adjusted represents FFO as defined above, excluding the effects of acquisition related costs, gains or losses from early extinguishment of debt, and other non-recurring items, which the Company believes are not indicative of the Company’s operating results.

 

The Company defines net operating income, which it refers to as “NOI,” as total continuing revenues less continuing property operating expenses.  NOI also can be calculated by adding back to net income (loss): interest expense on loans, loan procurement amortization expense, loan procurement amortization expense – early repayment of debt, acquisition related costs, equity in losses of real estate ventures, other expense, depreciation and amortization expense, general and administrative expense, and deducting from net income (loss): gains from sale of real estate, net, other income, gains from remeasurement of investments in real estate ventures and interest income.  NOI is not a measure of performance calculated in accordance with GAAP.

 

 

Third Quarter 2018

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Management uses NOI as a measure of operating performance at each of its stores, and for all of its stores in the aggregate. NOI should not be considered as a substitute for operating income, net income, cash flows provided by operating, investing and financing activities, or other income statement or cash flow statement data prepared in accordance with GAAP. The Company believes NOI is useful to investors in evaluating operating performance because it is one of the primary measures used by management and store managers to evaluate the economic productivity of the Company’s stores, including the ability to lease stores, increase pricing and occupancy, and control property operating expenses. Additionally, NOI helps the Company’s investors meaningfully compare the results of its operating performance from period to period by removing the impact of its capital structure (primarily interest expense on outstanding indebtedness) and depreciation of the basis in its assets from operating results.

 

Forward-Looking Statements

 

This presentation, together with other statements and information publicly disseminated by CubeSmart (“we,” “us,” “our” or the “Company”), contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act.” Forward-looking statements include statements concerning the Company’s plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions and other information that is not historical information. In some cases, forward-looking statements can be identified by terminology such as “believes,” “expects,” “estimates,” “may,” “will,” “should,” “anticipates,” or “intends” or the negative of such terms or other comparable terminology, or by discussions of strategy. Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Although we believe the expectations reflected in these forward-looking statements are based on reasonable assumptions, future events and actual results, performance, transactions or achievements, financial and otherwise, may differ materially from the results, performance, transactions or achievements expressed or implied by the forward-looking statements. As a result, you should not rely on or construe any forward-looking statements in this presentation, or which management may make orally or in writing from time to time, as predictions of future events or as guarantees of future performance. We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this presentation or as of the dates otherwise indicated in the statements. All of our forward-looking statements, including those in this presentation, are qualified in their entirety by this statement.

 

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this presentation. Any forward-looking statements should be considered in light of the risks and uncertainties referred to in Item 1A. “Risk Factors” in our Annual Report on Form 10-K and in our other filings with the Securities and Exchange Commission (“SEC”). These risks include, but are not limited to, the following:

 

national and local economic, business, real estate and other market conditions;

the competitive environment in which we operate, including our ability to maintain or raise occupancy and rental rates;

the execution of our business plan;

the availability of external sources of capital;

financing risks, including the risk of over-leverage and the corresponding risk of default on our mortgage and other debt and potential inability to refinance existing indebtedness;

 

Third Quarter 2018

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increases in interest rates and operating costs;

counterparty non-performance related to the use of derivative financial instruments;

our ability to maintain our status as a real estate investment trust (“REIT”) for federal income tax purposes;

acquisition and development risks;

increases in taxes, fees, and assessments from state and local jurisdictions;

the failure of our joint venture partners to fulfill their obligations to us or their pursuit of actions that are inconsistent with our objectives;

reductions in asset valuations and related impairment charges;

security breaches or a failure of our networks, systems or technology, which could adversely impact our business, customer and employee relationships;

changes in real estate and zoning laws or regulations;

risks related to natural disasters;

potential environmental and other liabilities;

other factors affecting the real estate industry generally or the self-storage industry in particular; and

other risks identified in Item 1A of our Annual Report on Form 10-K and, from time to time, in other reports that we file with the SEC or in other documents that we publicly disseminate.

Given these uncertainties, we caution readers not to place undue reliance on forward-looking statements.  We undertake no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise except as may be required in securities laws.

Contact:   

                              

CubeSmart                            

Charles Place

Director, Investor Relations

(610) 535-5700

 

 

 

Third Quarter 2018

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CUBESMART AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

 

    

2018

    

2017

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Storage properties

 

$

4,323,372

 

$

4,161,715

 

Less: Accumulated depreciation

 

 

(838,325)

 

 

(752,925)

 

Storage properties, net (including VIE assets of $312,286 and $291,496, respectively)

 

 

3,485,047

 

 

3,408,790

 

Cash and cash equivalents

 

 

3,387

 

 

5,268

 

Restricted cash

 

 

3,092

 

 

3,890

 

Loan procurement costs, net of amortization

 

 

1,134

 

 

1,592

 

Investment in real estate ventures, at equity

 

 

98,156

 

 

91,206

 

Other assets, net

 

 

49,234

 

 

34,590

 

Total assets

 

$

3,640,050

 

$

3,545,336

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Unsecured senior notes, net

 

$

1,143,258

 

$

1,142,460

 

Revolving credit facility

 

 

94,250

 

 

81,700

 

Unsecured term loans, net

 

 

299,699

 

 

299,396

 

Mortgage loans and notes payable, net

 

 

109,058

 

 

111,434

 

Accounts payable, accrued expenses and other liabilities

 

 

153,185

 

 

143,344

 

Distributions payable

 

 

56,584

 

 

55,297

 

Deferred revenue

 

 

23,072

 

 

21,529

 

Security deposits

 

 

476

 

 

486

 

Total liabilities

 

 

1,879,582

 

 

1,855,646

 

 

 

 

 

 

 

 

 

Noncontrolling interests in the Operating Partnership

 

 

58,446

 

 

54,320

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Common shares $.01 par value, 400,000,000 shares authorized, 186,304,300 and 182,215,735 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively

 

 

1,863

 

 

1,822

 

Additional paid-in capital

 

 

2,472,839

 

 

2,356,620

 

Accumulated other comprehensive income

 

 

 —

 

 

 3

 

Accumulated deficit

 

 

(779,533)

 

 

(729,311)

 

Total CubeSmart shareholders’ equity

 

 

1,695,169

 

 

1,629,134

 

Noncontrolling interests in subsidiaries

 

 

6,853

 

 

6,236

 

Total equity

 

 

1,702,022

 

 

1,635,370

 

Total liabilities and equity

 

$

3,640,050

 

$

3,545,336

 

 

 

Third Quarter 2018

Picture 10 

Page  8

 


 

CUBESMART AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

 

 

    

2018

    

2017

    

2018

    

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

132,476

 

$

125,699

 

$

384,480

 

$

363,980

 

Other property related income

 

 

15,494

 

 

14,241

 

 

44,788

 

 

41,104

 

Property management fee income

 

 

5,400

 

 

3,925

 

 

14,794

 

 

10,377

 

Total revenues

 

 

153,370

 

 

143,865

 

 

444,062

 

 

415,461

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses

 

 

48,755

 

 

47,152

 

 

147,037

 

 

136,847

 

Depreciation and amortization

 

 

35,239

 

 

35,971

 

 

105,251

 

 

110,826

 

General and administrative

 

 

9,780

 

 

8,228

 

 

26,865

 

 

26,522

 

Acquisition related costs

 

 

 —

 

 

235

 

 

 —

 

 

1,062

 

Total operating expenses

 

 

93,774

 

 

91,586

 

 

279,153

 

 

275,257

 

OPERATING INCOME

 

 

59,596

 

 

52,279

 

 

164,909

 

 

140,204

 

OTHER (EXPENSE) INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense on loans

 

 

(15,191)

 

 

(14,454)

 

 

(45,797)

 

 

(42,028)

 

Loan procurement amortization expense

 

 

(578)

 

 

(577)

 

 

(1,735)

 

 

(2,059)

 

Equity in losses of real estate ventures

 

 

(292)

 

 

(280)

 

 

(785)

 

 

(1,305)

 

Other

 

 

(233)

 

 

741

 

 

260

 

 

941

 

Total other expense

 

 

(16,294)

 

 

(14,570)

 

 

(48,057)

 

 

(44,451)

 

NET INCOME

 

 

43,302

 

 

37,709

 

 

116,852

 

 

95,753

 

NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interests in the Operating Partnership

 

 

(476)

 

 

(490)

 

 

(1,285)

 

 

(1,194)

 

Noncontrolling interest in subsidiaries

 

 

74

 

 

78

 

 

166

 

 

182

 

NET INCOME ATTRIBUTABLE TO THE COMPANY’S COMMON SHAREHOLDERS

 

$

42,900

 

$

37,297

 

$

115,733

 

$

94,741

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share attributable to common shareholders

 

$

0.23

 

$

0.21

 

$

0.63

 

$

0.53

 

Diluted earnings per share attributable to common shareholders

 

$

0.23

 

$

0.21

 

$

0.63

 

$

0.52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average basic shares outstanding

 

 

186,074

 

 

180,304

 

 

184,036

 

 

180,218

 

Weighted-average diluted shares outstanding

 

 

186,916

 

 

181,286

 

 

184,829

 

 

181,225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter 2018

Picture 10 

Page  9

 


 

Same-Store Facility Results (458 stores)

(in thousands, except percentage and per square foot data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

Nine Months Ended

 

 

 

 

 

September 30, 

 

Percent 

 

September 30, 

 

Percent 

 

    

2018

    

2017

    

Change

 

2018

    

2017

    

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

124,017

 

$

120,500

 

2.9

%  

 

$

362,264

 

$

350,662

 

3.3

%

Other property related income

 

 

12,794

 

 

12,386

 

3.3

%  

 

 

37,672

 

 

36,379

 

3.6

%

Total revenues

 

 

136,811

 

 

132,886

 

3.0

%  

 

 

399,936

 

 

387,041

 

3.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property taxes

 

 

13,742

 

 

13,039

 

5.4

%  

 

 

42,080

 

 

40,355

 

4.3

%

Personnel expense

 

 

10,848

 

 

10,721

 

1.2

%  

 

 

32,168

 

 

31,723

 

1.4

%

Advertising

 

 

2,246

 

 

1,990

 

12.9

%  

 

 

6,401

 

 

6,010

 

6.5

%

Repair and maintenance

 

 

1,277

 

 

1,528

 

(16.4)

%  

 

 

4,283

 

 

4,465

 

(4.1)

%

Utilities

 

 

4,090

 

 

4,395

 

(6.9)

%  

 

 

11,960

 

 

11,742

 

1.9

%

Property insurance

 

 

691

 

 

688

 

0.4

%  

 

 

2,046

 

 

2,111

 

(3.1)

%

Other expenses

 

 

5,047

 

 

5,372

 

(6.0)

%  

 

 

16,110

 

 

15,986

 

0.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

37,941

 

 

37,733

 

0.6

%  

 

 

115,048

 

 

112,392

 

2.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income (1)

 

$

98,870

 

$

95,153

 

3.9

%  

 

$

284,888

 

$

274,649

 

3.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

72.3

%  

 

71.6

%  

 

 

 

 

71.2

%  

 

71.0

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period end occupancy (2)

 

 

92.7

%  

 

93.5

%  

 

 

 

 

92.7

%  

 

93.5

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period average occupancy (3)

 

 

93.3

%  

 

93.8

%  

 

 

 

 

93.0

%  

 

93.1

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total rentable square feet

 

 

31,616

 

 

 

 

 

 

 

 

31,616

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized annual rent per occupied square foot (4)

 

$

16.81

 

$

16.26

 

3.4

%  

 

$

16.44

 

$

15.88

 

3.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Same-Store Net Operating Income to Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-store net operating income (1)

 

$

98,870

 

$

95,153

 

 

 

 

$

284,888

 

$

274,649

 

 

 

Non same-store net operating income (1)

 

 

5,549

 

 

3,227

 

 

 

 

 

14,350

 

 

7,714

 

 

 

Indirect property overhead (5)

 

 

196

 

 

(1,667)

 

 

 

 

 

(2,213)

 

 

(3,749)

 

 

 

Depreciation and amortization

 

 

(35,239)

 

 

(35,971)

 

 

 

 

 

(105,251)

 

 

(110,826)

 

 

 

General and administrative expense

 

 

(9,780)

 

 

(8,228)

 

 

 

 

 

(26,865)

 

 

(26,522)

 

 

 

Acquisition related costs

 

 

 -

 

 

(235)

 

 

 

 

 

 -

 

 

(1,062)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

$

59,596

 

$

52,279

 

 

 

 

$

164,909

 

$

140,204

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


(1)Net operating income (NOI) is a non-GAAP (generally accepted accounting principles) financial measure that excludes from operating income the impact of depreciation and general & administrative expense.

(2)Represents occupancy at September  30 of the respective year.

(3)Represents the weighted average occupancy for the period.

(4)Realized annual rent per occupied square foot is computed by dividing rental income by the weighted average occupied square feet for the period.

(5)Includes property management income earned in conjunction with managed properties.

 

Third Quarter 2018

Picture 10 

Page  10

 


 

Non-GAAP Measure – Computation of Funds From Operations

(in thousands, except per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30, 

 

September 30, 

 

 

 

2018

 

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to the Company's common shareholders

 

$

42,900

 

$

37,297

 

$

115,733

 

$

94,741

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate depreciation and amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

Real property

 

 

34,537

 

 

35,271

 

 

103,142

 

 

108,825

 

Company's share of unconsolidated real estate ventures

 

 

2,752

 

 

2,457

 

 

7,763

 

 

7,716

 

Noncontrolling interests in the Operating Partnership

 

 

476

 

 

490

 

 

1,285

 

 

1,194

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO attributable to common shareholders and OP unitholders

 

$

80,665

 

$

75,515

 

$

227,923

 

$

212,476

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan procurement amortization expense - early repayment of debt

 

 

 —

 

 

 —

 

 

 —

 

 

190

 

Acquisition related costs

 

 

 —

 

 

235

 

 

 —

 

 

1,062

 

Property damage related to hurricanes, net of expected insurance proceeds (1)

 

 

 —

 

 

1,424

 

 

 —

 

 

1,424

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO, as adjusted, attributable to common shareholders and OP unitholders

 

$

80,665

 

$

77,174

 

$

227,923

 

$

215,152

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to common shareholders - basic

 

$

0.23

 

$

0.21

 

$

0.63

 

$

0.53

 

Earnings per share attributable to common shareholders - diluted

 

$

0.23

 

$

0.21

 

$

0.63

 

$

0.52

 

FFO per share and unit - fully diluted

 

$

0.43

 

$

0.41

 

$

1.22

 

$

1.16

 

FFO, as adjusted per share and unit - fully diluted

 

$

0.43

 

$

0.42