CubeSmart is issuing up to 7.5 million share of common stock to finance its bigger-than-expected pipeline of acquisitions.

The Malvern, PA-based REIT is poised to raise between $125 million and $140 million, with the stock priced at $19.33 per share. A total of 6.5 million shares are being offered to the public, with the option to buy 975,000 additional shares extended to the underwriters, Barclays Capital Inc. and Jefferies LLC.

The proceeds will help CubeSmart pay for the $369 million worth of acquisitions it has under contract.

Robust pipeline

The biggest pending deal for CubeSmart is the purchase of a 26-facility portfolio owned by Harrison Street Real Estate.

CubeSmart is under contract to buy the portfolio, which it already manages, for $223 million. The company is set to close on 22 of the facilities by Nov. 3, according to the recently released prospectus for the stock offering. CubeSmart will close on the four other facilities by next March.

One way to fund expansion is through equity, and CubeSmart is doing that at a price that makes sense.
— Ryan Burke, analyst at Green Street Advisors

The company has another eight facilities under contract, including three newly built locations, for a total of $146 million. Another four acquisitions were completed during the third quarter, totaling nearly $46.7 million.

Combined with its activity from the first two quarters of this year, CubeSmart’s year-to-date acquisition tab comes to about $545 million. That’s well above the $250 million to $300 million the company had said it was targeting this year.

Analyst: Equity ‘makes sense’

“One way to fund expansion is through equity, and CubeSmart is doing that at a price that makes sense,” said Ryan Burke, an analyst at Green Street Advisors, a REIT research firm. CubeSmart’s stock closed Oct. 15 at $19.48 a share; a day earlier, the stock hit a 52-week high of $19.73.

Given the current stock price, “their cost of equity capital is much more attractive than the use of debt,” Burke said.

CubeSmart still will finance part of its pending acquisitions with debt, in an amount that’s consistent with previous activity, according to Burke.

Additional funds raised

Since June 30, the company has sold more than 8 million shares of common stock through its at-the-market offering program. An at-the-market offering is one in which shares are sold incrementally over an extended period. Selling at an average share price of $18.62, the company raised $147.1 million after sales commissions, fees and expenses.

CubeSmart will tap that money to help pay for its recent wave of acquisitions.

At-the-market offerings are an easy way to finance acquisitions in smaller volumes and smaller dollar amounts, according to Burke.

“When you get into the size of the acquisitions they have on their plate, they have to do a follow-on equity offering, which is what they did,” Burke said.

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Alexander Harris