One word applies to CubeSmart’s acquisition strategy for 2021: disciplined.
During the self-storage REIT’s first-quarter earnings call on April 30, two executives — Chris Marr, president and CEO, and Tim Martin, chief financial officer — repeatedly referred to CubeSmart’s disciplined approach to purchasing facilities in 2021.
CubeSmart’s projected dollar amount for wholly owned acquisitions this year ($100 million to $200 million) reflects that measured approach. By contrast, rival self-storage REIT Public Storage envisions spending $2.7 billion on acquisitions this year.
On the hunt for deals
In the first quarter, Malvern, PA-based CubeSmart acquired no wholly owned facilities. However, the REIT recently picked up ownership stakes in several facilities through joint ventures.
CubeSmart is hunting for acquisition opportunities in a sizzling market. Marr said interest in self-storage assets has been driven up by the strong performance of the industry along with a “relatively attractive” cash-on-cash yield compared with other property types.
Martin said that although CubeSmart sees “almost every deal” that comes on the market, no deals in the first quarter hit the company’s “strike zone” for wholly owned acquisitions. In some cases, CubeSmart didn’t move to the second round of bidding on assets because the deals failed to meet the REIT’s standards for underwriting and returns, he said.
“I’m optimistic that we will find opportunities as the year progresses,” Martin told Wall Street analysts.
CubeSmart executives are comfortable taking their time in finding the right opportunities, though.
“If you go back over the past five years, there are certainly deals that we wish in retrospect we had been more aggressive on as we see how that market performed or that asset had performed,” Martin said. “But [in] the overwhelming majority of the cases, we go back and look at that data, and it proves out the fact that our disciplined approach paid off and we made the right call from our perspective.”
Highlights of CubeSmart’s first-quarter results include:
- Same-store revenue rose 6.7% compared with the same period in 2020.
- Same-store NOI jumped 8.9%.
- Same-store operating expenses increased 2%.
- Same-store occupancy averaged 93.8% and ended the quarter at 94.4%.
Buoyed by solid performance in the first quarter, CubeSmart has adjusted its full-year forecast by:
- Increasing guidance for same-store revenue to a range of 4.75% to 5.75%, compared with the previous outlook of 3.75% to 5%.
- Increasing guidance for same-store NOI to a range of 5.25% to 6.25%, compared with the previous outlook of 3.75% to 5%.
- Narrowing guidance for same-store operating expenses to a range 4% to 5%, compared with the previous outlook of 4% to 5.5%.