As fellow self-storage REIT Extra Space Storage already has done, Malvern, PA-based CubeSmart is predicting lackluster financial performance in 2020.
On Feb. 20, CubeSmart projected same-store revenue growth of 0 percent to 1 percent this year compared with last year, same-store NOI growth of -1.5 percent to 0 percent and same-store operating expense growth of 4 percent to 5 percent.
Last year, CubeSmart’s same-store revenue grew 1.9 percent compared with 2018, same-store NOI increased 1.1 percent and same-store operating expenses rose 4 percent.
“2020 will be a year of transition as our industry absorbs the new supply delivered over the last several years,” Chris Marr, president and CEO of CubeSmart, told Wall Street analysts Feb. 21.
Getting over the hump
“Our outlook for the future remains positive, as our current supply data for our top 12 markets points to 2019 being the peak year for new deliveries,” Marr added. “Markets that experienced the impact of new supply early in the cycle are seeing a solid slowdown in expected future deliveries.”
In CubeSmart’s news release about 2019 earnings, Chief Financial Officer Tim Martin said the 2020 outlook reflects continued headwinds from new supply coupled with higher real estate taxes and customer acquisition costs.
As it copes with those pressures, CubeSmart expects to spend only $75 million to $150 million on acquisitions this year, down from $246.6 million in 2019.
“We’re not targeting necessarily any particular type of acquisition. We’re targeting attractive risk-adjusted returns, and if we don’t find any, we won’t buy anything,” Miller told Wall Street analysts. “If we find $500 million worth of attractive opportunities, then that’s what we’ll do. … It’s going to depend upon what we can find on an attractive risk-adjusted basis.”
CubeSmart foresees a “tremendous amount” of acquisition opportunity over the next two to three years, Marr said, although that opportunity might not present itself in 2020.
Other highlights of CubeSmart’s 2019 earnings:
- The company added 199 facilities to its third-party management program in 2019, closing the year with 649 managed properties.
- As of Dec. 31, same-store occupancy was 91.2 percent, compared with 91.1 percent on the same date in 2018.
- At the end of 2019, CubeSmart had five joint venture projects under construction.