CubeSmart Reports Third Quarter 2013 Results; FFO per Share Grows 32%; Same-Store NOI Increases 10.0%

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    CubeSmart (NYSE: CUBE) today announced its operating results for the three and nine months ended September 30, 2013.

    CubeSmart Chief Executive Officer Dean Jernigan commented, “I am extremely pleased by the underlying fundamental strength we have continued to see across our platform. The CubeSmart team continues to execute on all phases of our business plan, and as I look toward our leadership succession at the end of the year, I have never been more confident in the people and systems that we have in place.”

    Key Highlights for the Quarter

    • Reported funds from operations (“FFO”) per share, as adjusted, of $0.25, representing a year-over-year increase of 32%.
    • Increased same-store (299 facilities) net operating income (“NOI”) 10.0% year over year, driven by 7.2% revenue growth and a 1.8% increase in property operating expenses.
    • Same-store occupancy averaged 90.5% during the quarter, up 500 basis points year over year; ended the quarter with same-store occupancy of 90.0%.
    • Closed on four property acquisitions totaling $38.8 million, including locations in the New York City, Dallas, and Phoenix markets.
    • Disposed of eight properties in Knoxville, TN for combined proceeds of $25.0 million.

    Funds from Operations

    FFO, as adjusted, was $35.1 million for the third quarter of 2013, compared with $24.4 million for the third quarter of 2012. FFO per share, as adjusted, increased 32% to $0.25 for the third quarter of 2013, compared with $0.19 for the same period last year.

    “We remain focused on delivering attractive long-term growth for our shareholders through a combination of sound operational execution and disciplined capital allocation,” said Christopher Marr, President, Chief Operating Officer, and Chief Investment Officer. “Organic growth remains robust, as highlighted by a continuation of double-digit same-store NOI growth and all-time-high occupancy levels. Meanwhile, we have continued to improve the quality of our portfolio. We have exceeded our full-year acquisition volume targets in our core markets and have opportunistically reduced exposure to non-core investment markets.”

    Investment Activity

    The Company acquired four assets for $38.8 million during the three months ended September 30, 2013. These acquisitions included two assets in Arizona, one in New York, and one Texas.

    Subsequent to the end of the quarter, the Company acquired one asset in the Washington, DC market for $15.4 million. In total for the year to date, the Company has acquired 15 assets for $148.5 million.

    As previously announced, on October 28, 2013, the Company entered into purchase and sale agreements to acquire 36 assets located in Houston and Austin, TX and Charlotte, NC for a combined price of $326 million. The Company expects that the assets will be held in a joint venture with an institutional investor, with the Company having a 50% ownership interest.

    During the quarter, the Company sold eight assets in the Knoxville, TN market for total proceeds of $25.0 million and recognized a gain of $9.3 million. Gains from the sales of property are excluded from the Company’s calculation of FFO and FFO, as adjusted.

    Subsequent to September 30, 2013, the Company sold 22 facilities located in California, Ohio, Tennessee, Texas, and Wisconsin for $90.0 million. Year to date, the Company has sold 35 assets for total proceeds of $126.4 million. Our dispositions year to date represent a considerable reduction of exposure to the Company’s non-core investment markets, including a complete exit from the Memphis and Knoxville, TN markets and a 35% square footage reduction in the Inland Empire.

    Third-Party Management

    During the quarter, the Company was awarded four new management contracts. At September 30, 2013, the Company’s third-party management program included 136 properties totaling 8.0 million square feet. Year to date through September 30, 2013, the Company has been awarded 14 new management contracts and has acquired nine assets from the third-party management platform.

    Same-Store Results

    The Company’s same-store portfolio at September 30, 2013 represented 299 facilities containing approximately 19.9 million rentable square feet and included approximately 82.0% of the aggregate rentable square feet of the Company’s 361 owned facilities. These same-store facilities represented approximately 78.2% of property net operating income for the quarter ended September 30, 2013.

    Same-store physical occupancy at period end for the third quarter of 2013 was 90.0%, compared with 85.2% for the same quarter of last year. Same-store net rental income for the third quarter of 2013 increased 6.9%, same-store total revenues increased 7.2%, and same-store operating expenses increased 1.8% from the same quarter in 2012. Same-store net operating income increased 10.0%, as compared with the same period in 2012.

    Operating Results

    At September 30, 2013, the Company’s total owned portfolio, represented 361 facilities containing 24.3 million rentable square feet and had a physical occupancy of 89.6%.

    Total revenues increased $13.5 million and total property operating expenses increased $3.0 million in the third quarter of 2013, as compared with the same period in 2012. Increases in total revenues are primarily attributable to increased occupancy levels in the same-store portfolio and revenues generated from property acquisitions. Increases in total property operating expenses are attributable to the impact of newly acquired properties and an increase of 1.8% in same-store expenses.

    Interest expense decreased from $11.1 million during the three months ended September 30, 2012 to $10.0 million during the three months ended September 30, 2013, a decrease of $1.1 million.

    The Company reported net income attributable to the Company’s common shareholders of $14.8 million, or $0.11 per common share, in the third quarter of 2013, compared with net income attributable to the Company’s common shareholders of $0.1 million, or $0.00 per share, in the third quarter of 2012.

    Balance Sheet

    During the quarter, the Company sold 1.9 million common shares of beneficial interest through its “at-the-market” equity program at an average sales price of $17.41 per share, resulting in net proceeds of $32.1 million. At September 30, 2013, the Company had 9.0 million shares available for issuance under the existing equity distribution agreements.

    Quarterly Dividend

    On August 7, 2013, the Company declared a dividend of $0.11 per common share. The dividend was paid on October 15, 2013 to common shareholders of record on October 1, 2013.

    Also on August 7, 2013, the Company declared a dividend of $0.484375 for the 7.75% Series A Cumulative Redeemable Preferred Shares. The dividend was paid on October 15, 2013 to holders of record on October 1, 2013.

    2013 Financial Outlook

    “Based on a continuation of robust operating results, we are raising the midpoint of our guidance ranges for FFO per share and same-store performance metrics,” noted Chief Financial Officer Tim Martin. “We remain delighted with our balance sheet positioning, as we maintain a significant degree of financial flexibility to support our broader business objectives.”

    The Company is adjusting its previously issued estimates as well as underlying assumptions, and now expects that its fully diluted FFO per share for 2013 will be between $0.90 and $0.91 (previously between $0.86 and $0.90), and that its fully diluted earnings per share for the period will be between $0.12 and $0.13. The Company’s estimate is based on the following key assumptions:

    • For 2013, a same-store pool consisting of 299 assets totaling 19.9 million square feet
    • Same-store net operating income (“NOI”) growth of 8.75% to 9.25% over 2012 (previously 7.5% to 8.5%), driven by revenue growth of 7.0% to 7.5% (previously 6.5% to 7.0%) and expense growth of 3.5% to 4.0% (previously 4.0% to 4.5%)
    • General and administrative expenses of approximately $29.0 million to $30.0 million

    Due to uncertainty related to the timing and terms of transactions, the impact of any unannounced investment activity is excluded from guidance.

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    About CubeSmart

    CubeSmart is a self-administered and self-managed real estate company focused on the ownership, operation, acquisition and development of self-storage facilities in the United States. Our self-storage facilities are designed to offer affordable, easily accessible and secure storage space for residential and commercial customers. As a national owner and operator, we continually enhance our business by applying our management expertise and best practices to each facility.

    According to the Self-Storage Almanac*, CubeSmart is the fourth largest owner and operator of self-storage facilities in the United States. The industry in the United States consists of approximately 45,000 facilities with 2.1 billion rentable square feet, out of which the top ten operators collectively own approximately 14.8% of the aggregate rentable square footage market share. Our strategy is to grow our property portfolio by being a consolidator in the highly fragmented self-storage industry. We believe these acquisitions will offer the Company economies of scale by spreading our management expertise and operating efficiency across a larger portfolio. We look to maximize the cash flow from our facilities by increasing rents, increasing occupancy levels, controlling operating expenses, and expanding and improving the facilities. For more information, please visit: https://www.cubesmart.com/

    (via MarketWired)

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