As developers pursue self-storage projects across the country, many are getting bogged down by red tape, according to CubeSmart CEO Christopher Marr.
“I think it is just incredibly difficult to get things done,” Marr said during a conference call with analysts.
“We see it on the third-party [management] side where we have contracts in hand to manage stores when they are complete that are getting further and further behind getting their approvals and permits,” Marr said.
Marr said CubeSmart is also experiencing lags on its joint venture developments and even when renovating existing stores.
Finding new deals is a challenge
As of September 30, CubeSmart had four facilities under contract to purchase from developers upon completion for a total of $90.2 million. Two of the certificate of occupancy projects are located in Texas, one is in New York and one is in Florida.
The company also had five joint venture projects under development, in which it will invest a total of $122.9 million. Four of the facilities are in New York and one is in Washington DC.
The current development pipeline remains unchanged from the second quarter; CubeSmart didn’t add any new projects during the third quarter.
“It is becoming a little more challenging to find deals that make sense,” Marr said. “We are in the process of a good number of things that we are underwriting and taking a look at.”
Riding out of El Paso
During the quarter, CubeSmart sold seven properties in El Paso (pictured at top), exiting the market in the process.
“We are always looking at the portfolio,” Marr said. “We’ve sold just shy of half a billion dollars of assets since 2010. It is a constant evaluation in terms of exiting markets,” Marr said, adding that there weren’t any more exits currently on his radar.
Marr said that the El Paso market no longer fit the company’s criteria. CubeSmart sold the El Paso properties along with a location in Jacksonville, FL. The new owner retained CubeSmart to manage the facilities.
The company also sold a facility it owned in London, England during the quarter. The aggregate sales price for all of the company’s dispositions totaled $47.1 million.
Operating Results and Acquisitions
CubeSmart continued to buy during the quarter, however, picking up five properties in Maryland, Texas, New York and New Jersey for $75.2 million. The company has four facilities under contract for $60.2 million.
CubeSmart generated $116 million in total revenue during the quarter, up 19.4 percent compared to the period last year.
Net income more than doubled with $18.6 million earned during the third quarter, compared with $8.6 million last year.
At its same-store locations, CubeSmart had an average occupancy of 93.4 percent during the quarter— up from 92.2 percent last year. Realized rent reached $14.93 per square foot, up from $14.04 the previous year.