CubeSmart “well positioned” for busy season; increases guidance

John Egan
Published April 30, 2018

The competition is stiffer, but CubeSmart’s outlook just got a little rosier.

The publicly traded storage company has sketched out a slightly more optimistic outlook for its financial performance in 2018.

In an April 27 earnings call with Wall Street analysts, executives at the Malvern, PA-based self-storage REIT bumped up their forecast for two key performance indicators — same-store revenue growth and same-store NOI growth.

In February, CubeSmart executives told analysts they anticipated same-store revenue growth this year of 2 percent to 3 percent. Now, that outlook has been adjusted to a range of 2.25 percent to 3.25 percent.

As for same-store NOI growth, executives previously had pegged a 2018 range of 1.5 percent to 3 percent. Today, that range is 1.75 percent to 3 percent.

‘Well positioned’ for busy season

Timothy Martin, chief financial officer of CubeSmart, said the REIT’s results for the first quarter and most of April led to the adjusted guidance for 2018. First-quarter results “were very much in line with our expectations,” Martin said, as demand remained steady despite heightened competition due to new supply in some submarkets.

“We feel that we are very well positioned operationally and financially as we head into the seasonally busiest part of the calendar for our business,” Martin told Wall Street analysts.

First-quarter highlights

Among the financial highlights for the first quarter of 2018 are:

  • A 4 percent lift in same-store NOI compared with the first quarter of 2017.
  • A 3.8 percent increase in same-store revenue compared with the first quarter of 2017.
  • A slight increase in same-store physical occupancy rate, from 92.3 percent at the end of the first quarter of 2017 to 92.5 percent at the end of the same period in 2018.

Chris Marr, president and CEO of CubeSmart, said same-store growth for the first quarter was strongest in Northern California and Southern California as well as along Florida’s Gulf Coast, while the weakest growth was in the Chicago, IL; Charlotte, NC; and Denver, CO, markets.

Busy quarter for third-party management

The first quarter saw the addition of 47 facilities to CubeSmart’s third-party management program. The total number of third-party properties operated by CubeSmart is nearing 500.

In the first quarter, CubeSmart was far more active on the third-party management front than the acquisition front. The REIT made one outright acquisition for $12.2 million and four joint venture acquisitions for which the REIT contributed $10.3 million. Marr cited a “lack of compelling investment opportunities” as one of the reasons for tepid acquisition activity in the first quarter.

‘Disciplined’ growth

In terms of ground-up development, Marr said “a decent amount” of private equity capital is chasing new projects now. CubeSmart’s development pipeline for this year is around $300 million. As of March 31, the company had seven joint venture projects under construction.

“There certainly is no shortage of folks who are interested in developing. I think, today, it’s significantly more difficult — if you’re honest with yourself — to make the numbers work,” Marr said.

Nonetheless, Martin said CubeSmart continues to “actively pursue” acquisition and development opportunities in targeted markets.

“Our investment-grade balance sheet is well positioned to support our disciplined growth strategy going forward,” he said in a news release.

John Egan

John is a freelance writer and editor. He first moved to Austin in 1999, when downtown Austin wasn't nearly as lively as it is today. John's loves include pizza, University of Kansas basketball and puns.

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