CubeSmart is easing up considerably on its acquisition activity this year.
In 2014, the publicly traded self-storage REIT bought 52 facilities for $530.2 million. This year, however, CubeSmart is planning only $100 million to $150 million worth of out-right acquisitions. That doesn’t include deals done through joint ventures or “certificate of occupancy” agreements.
In 2014, most of CubeSmart’s acquisition activity focused on six markets, according to Chief Financial Officer Tim Martin: New York City, NY; Chicago, IL; Dallas and Austin, TX; Washington, DC; and Boston, MA.
CubeSmart’s biggest acquisition last year was its August deal for 26 facilities managed by Harrison Street Real Estate Capital. The REIT already has purchased 22 of those facilities at a cost of $195.5 million. Acquisition of the four remaining facilities — all in Illinois — is scheduled for this year, with a price tag of $27.5 million. In addition, CubeSmart has two facilities under contract, in Arizona and Tennessee, for $14.5 million.
Deals in 2015
In a Feb. 27 conference call with Wall Street analysts, Chris Marr, president and CEO of CubeSmart, said he couldn’t pinpoint a timetable for acquisitions in 2015. However, Marr did say that most sellers become motivated in the spring and early summer, as their facilities’ occupancy rates are rising. Under that scenario, he said, acquisition deals often close in September or October.
On the development front, CubeSmart has several “certificate of occupancy” deals underway. As of Dec. 31, the REIT had four such facilities under contract to buy once construction is finished. The total cost: $85.2 million. Three of the facilities are in Texas and one facility is New York.
Those deals are set to be wrapped up in 2015 or early 2016.
Also in CubeSmart’s development pipeline are five facilities under construction through joint ventures. CubeSmart’s investment in those facilities adds up to $111.9 million. Four of those facilities are in New York and one facility is in Virginia. The projects are scheduled to be finished in 2015 and 2016.
CubeSmart heads into 2015 with a financial tailwind at its back.
The REIT closed 2014 with revenue of $377 million, up 18 percent from the previous year. However, profit fell 43 percent in 2014, to $20.4 million.
“We think 2015 is going to be another great year for the self-storage industry,” Marr said.
On a same-store basis, revenue climbed 7 percent in 2014, to $323.9 million. Average same-store occupancy grew from 88.2 percent in 2013 to 90.8 percent in 2014.
Marr said same-store revenue growth was particularly strong in these markets: Denver, CO; Atlanta, GA; Philadelphia, PA; Chicago; and Florida.
In the fourth quarter, revenue rose 21 percent, to $100.3 million, while profit fell 81 percent, to $21.4 million. Same-store revenue for the quarter jumped 6.6 percent, to $82.1 million. Average same-storage occupancy in the fourth quarter went from 89.3 percent to 90.7 percent.
Top photo courtesy of Flickr/David Valenzuela