sts
美國證券交易委員會
華盛頓特區20549
表格
(做一個標記) | |
根據1934年的《證券交易法》第13條或15(d)條的季度報告 | |
截至季度結束 | |
或 | |
根據1934年的《證券交易法》第13條或15(d)條的過渡報告 | |
到 天從發票日期計算，被視為商業合理。 . | |
委員會文件號碼：
（根據其章程所指定的正式名稱）
(成立或組織的州或其他轄區) | （聯邦稅號） | |
（總部地址） | （郵政編碼） |
(
(註冊人的電話號碼，包括區號)
根據法案第12(b)條註冊的證券：
每個班級的標題 | 交易標的（s） | 註冊的每個交易所的名稱 | ||
請以核取符號指示，登記者（1）是否已在過去12個月（或要求登記者提交報告的更短期間）內依據1934年證券交易法第13或15（d）條的要求提交所有報告，並且（2）在過去90天內一直受到該等報告要求的限制。
cubesmart | |
Cubesmart, L.P. |
請勾選以下選項，以指示是否在過去12個月內（或在要求提交此類檔案的較短時段內）向交易所管理辦法S-t第405條規定的每個互動數據檔案進行了電子提交。
cubesmart | |
cubesmart，有限合夥企業。 |
請用勾選符號指示註冊者是大型快速申報人、快速申報人、非快速申報人、較小型報告公司或新興成長公司。 詳見《交易所法》第120億2條中“大型快遞報告商”、“快速申報商”、“較小型報告事業”和“新興成長公司”的定義。
cubesmart: | ||||
加速進入文件 ☐ | 非加速申報者 ☐ | 較小的報告公司 | 新興成長型公司 | |
cubesmart, L.P.: | ||||
大型快速進入文件 ☐ | 加速進入文件 ☐ | 較小的報告公司 | 新興成長型公司 |
如果一家新興成長型公司，請用勾選標記表示該申報人已選擇不使用根據證交所法案13(a)條款提供的任何新的或修訂過的財務會計準則的延長過渡期。
cubesmart | ◻ |
cubesmart，有限合夥 | ◻ |
在Check Mark中指示註冊公司是否為空殼公司（根據交易所法規第120億2條的定義）。
cubesmart | 是 |
cubesmart, L.P. | 是 |
請在最近可行日期指明發行人每個普通股類別的流通股數：
Class A普通股 | 截至2024年10月30日止的未清償 | |
cubesmart的每股普通股，面值每股0.01美元 |
解說說明
本報告結合了2024年9月30日結束的CubeSmart（“母公司”或“CubeSmart”）和CubeSmart，L.P.（“營運夥伴”）的季度報告Form 10-Q。母公司是馬里蘭州的一家房地產投資信托（REIT），通過德拉瓦州有限合夥企業營運夥伴及其子公司持有其資產並進行業務。母公司、營運夥伴及其合併子公司在本報告中統稱為“公司”。此外，在本報告中使用的“我們”可能指的是該公司、母公司或營運夥伴。
母公司是營運夥伴的唯一普通合夥人，截至2024年9月30日，持有營運夥伴99.5%的股權。剩餘的0.5%股權是指限制合夥利益普通單位，這些單位由營運夥伴發行給第三方，以交換其對營運夥伴的物業投資。作為營運夥伴的唯一普通合夥人，母公司對營運夥伴的日常業務和管理享有完整的權力。
管理層將母公司和營運夥伴視為一個企業運營。母公司和營運夥伴的管理團隊相同，他們的組成員既是母公司的高級管理人員，也是營運夥伴的高級管理人員。
在這份報告中，母公司和營運夥伴之間有幾個不同之處，這些差異反映在附註中。公司認為了解母公司和營運夥伴之間的差異很重要，因為這些實體作為一個合併企業運作。母公司是一家股權房地產投資信託(reits)，其唯一重要資產是持有營運夥伴的合夥利益。因此，母公司本身並不經營業務，除了作為營運夥伴的唯一普通合夥人外，不時發行公開股權並保證營運夥伴的債務。營運夥伴持有公司幾乎所有資產，並直接或間接持有公司房地產項目的所有權。營運夥伴進行公司業務的運作，並以合夥形式組織，沒有公開交易的股權。除了母公司透過股權發行籌集的淨收益（轉換成合夥單位後交換給營運夥伴），營運夥伴通過營運夥伴的運營、營運夥伴直接或間接承擔的負債或通過營運夥伴的合夥單位或子公司股權發行來產生公司業務所需的資本。
母公司和營運夥伴提交的申報之間的實質差異在於母公司是一家具有公開股權的股權房地產投資信託(reits)，而營運夥伴是一家沒有公開交易的合夥企業。在合併財務報表中，這種差異主要反映在合併資產負債表的股權（或營運夥伴的資本）部分以及合併權益（或資本）表中。除了不同的股權處理方式外，母公司和營運夥伴的未經審計的合併財務報表幾乎完全相同。
公司認為將母公司和營運合夥公司的季度10-Q報告合併為一份報告將有助於：
| ● | 通過讓投資者以與管理層看待和經營業務的方式相同的方式來查看母公司和營運夥伴，從而促進投資者對業務的更好理解； |
| ● | 在考慮到大部分揭露適用於母公司和營運夥伴兩者的情況下，刪除重複的披露並提供更為直接的呈現方式； |
| ● | 透過準備一份合併報告，而非兩份獨立報告，可節省時間和成本。 |
2
為了突顯母公司和營運夥伴之間的差異，在本報告中為母公司和營運夥伴專門設立了獨立部分，具體指稱母公司和營運夥伴。在合併揭露母公司和營運夥伴的部分中，本報告將這些揭露稱為公司的揭露。雖然營運夥伴通常是直接或間接進入合約和房地產企業並持有資產和債務的實體，但提及公司是恰當的，因爲業務是一個企業，而母公司通過營運夥伴運營業務。
作为控制營運夥伴的普通合伙人，母公司出於財務報告目的合併營運夥伴，並且母公司除了在營運夥伴中的投資外，並沒有任何重要資產。因此，母公司和營運夥伴的資產和負債在各自的合併財務報表上是相同的。應該一併閱讀本報告中有關母公司和營運夥伴的獨立討論，以理解公司營運的綜合基礎和管理層如何運營公司的結果。
本報告還包括獨立的第4條 - 控制和程序部分，母公司和營運夥伴的簽名頁面以及附件31和32的認證，以確認母公司的首席執行官和財務長以及營運夥伴的首席執行官和財務長已作出必要的認證，並且母公司和營運夥伴符合經修訂的1934年證券交易法第13a-15條或15d-15條和18 U.S.C. §1350條款。
3
前瞻性陳述
這份第10-Q表格的季度報告，或稱為“本報告”，連同母公司和經營合夥公司公開傳播的其他陳述和信息，包含根據1933年證券法第27A條修訂，以及1934年證券交易法第21E條修訂，或“交易法”意義之前瞻性陳述。前瞻性陳述包括有關公司計劃、目標、目標、策略、未來事件、未來收入或業績、資本支出、融資需求、收購相關計劃或意向以及其他非歷史信息的陳述。在某些情況下，前瞻性陳述可以通過“相信”，“預期”，“估計”，“可能”，“將”，“應該”，“預測”或“意圖”等術語，或者其他相應術語的否定形式或討論戰略來識別。這些陳述基於可能未能實現的假設和期望，並天然地受風險、不確定性和許多無法準確預測的其他因素的影響，其中有些甚至可能未被預見。儘管我們認為這些前瞻性陳述反映的期望是基於合理假設，但未來事件和實際結果、業績、交易或成就，無論是財務或其他方面，都可能與前瞻性陳述所表達或暗示的結果、業績、交易或成就有實質差異。因此，您不應依賴於本報告中的任何前瞻性陳述，或者管理層或代表他們的人可能隨時以口頭或書面形式加以表述的前瞻性陳述，作為對未來事件的預測或對未來業績的保證。我們提醒您，不應過度依賴前瞻性陳述，這些陳述僅在本報告的日期或在此類前瞻性陳述中另行指明的日期起效。我們所有的前瞻性陳述，包括本報告中的陳述，在其整體內容上均受到本聲明規定的限制。
有很多風險和不確定因素可能導致我們的實際結果與本報告中所包含或討論的前瞻性陳述有實質差異。任何前瞻性陳述應當考慮到父公司和營運夥伴合併的《第1A項風險因素》中提到的風險和不確定因素。 2023年12月31日結束的年度報告第10-k表格，以及我們與證券交易委員會（SEC）的其他申報。 這些風險包括但不限於:
| ● | 房地產業和我們擁有和經營自存儲物業的市場中經濟狀況惡化。 |
| ● | 現有和新的自存倉物業和運營商競爭對我們維持或提高出租率和租金水平的影響； |
| ● | 未能執行我們的業務計劃； |
| ● | 大流行病、隔離和居家令對我們經營自存倉物業、自存倉需求、租金率和費用以及租金收取水平的不利影響； |
| ● | 外部資本來源的供應減少，成本上升； |
| ● | 利率期貨和營運成本增加； |
| ● | 資金融通風險，包括過度槓桿的風險以及對我們的房貸和其他債務違約的風險，以及可能無法再融資現有或未來債務的風險； |
| ● | 與衍生金融工具使用相關的交易對手未履行風險； |
| ● | 與我們保持母公司符合聯邦所得稅法格為房地產信託(REIT)資格相關的風險； |
| ● | 收購和開發未按預期條件完成，或完全未被完成，或未能如預期般運作； |
| ● | 來自州和地方政府的稅收、費用和評估增加； |
| ● | 我們的合資夥伴未能履行他們對我們的義務，或採取與我們目標不一致的行動； |
| ● | 資產估值下降和相關的減損費用； |
| ● | 網絡安全概念遭受侵犯，網絡或勒索軟件攻擊或我們網絡、系統或科技出現故障，可能對我們的業務、客戶和員工關係產生負面影響，或導致欺詐付款； |
5
| ● | changes in real estate, zoning, use and occupancy laws or regulations; |
| ● | risks related to or consequences of earthquakes, hurricanes, windstorms, floods, other natural disasters or acts of violence, pandemics, active shooters, terrorism, insurrection or war that impact the markets in which we operate; |
| ● | potential environmental and other material liabilities; |
| ● | governmental, administrative and executive orders, regulations and laws, which could adversely impact our business operations and customer and employee relationships; |
| ● | uninsured or uninsurable losses and the ability to obtain insurance coverage, indemnity or recovery from insurance against risks and losses; |
| ● | our ability to attract and retain talent in the current labor market; |
| ● | other factors affecting the real estate industry generally or the self-storage industry in particular; and |
| ● | other risks identified in the Parent Company’s and the Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2023 and, from time to time, in other reports that we file with the SEC or in other documents that we publicly disseminate. |
Given these uncertainties and the other risks identified elsewhere in this Report, we caution readers not to place undue reliance on forward-looking statements. We undertake no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise except as may be required by securities laws. Because of the factors referred to above, the future events discussed in or incorporated by reference in this Report may not occur and actual results, performance or achievement could differ materially from that anticipated or implied in the forward-looking statements.
6
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CUBESMART AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 30, | December 31, | |||||
| 2024 |
| 2023 | |||
(unaudited) | ||||||
ASSETS | ||||||
Storage properties | $ | | $ | | ||
Less: Accumulated depreciation |
| ( |
| ( | ||
Storage properties, net (includes VIE amounts of $ |
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Cash and cash equivalents (includes VIE amounts of $ |
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Restricted cash |
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Loan procurement costs, net of amortization |
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Investment in real estate ventures, at equity |
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Other assets, net |
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Total assets | $ | | $ | | ||
LIABILITIES AND EQUITY | ||||||
Unsecured senior notes, net | $ | | $ | | ||
Revolving credit facility |
| — |
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Mortgage loans and notes payable, net |
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Lease liabilities - finance leases | | | ||||
Accounts payable, accrued expenses and other liabilities |
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Distributions payable |
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Deferred revenue |
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Total liabilities |
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Noncontrolling interests in the Operating Partnership |
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Commitments and contingencies | ||||||
Equity | ||||||
Common shares $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
| ( |
| ( | ||
Accumulated deficit |
| ( |
| ( | ||
Total CubeSmart shareholders’ equity |
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Noncontrolling interests in subsidiaries |
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Total equity |
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Total liabilities and equity | $ | | $ | | ||
See accompanying notes to the unaudited consolidated financial statements.
7
CUBESMART AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
REVENUES | ||||||||||||
Rental income | $ | | $ | | $ | | $ | | ||||
Other property related income |
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Property management fee income |
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Total revenues |
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OPERATING EXPENSES | ||||||||||||
Property operating expenses |
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Depreciation and amortization |
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General and administrative |
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Total operating expenses |
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OTHER (EXPENSE) INCOME | ||||||||||||
Interest: | ||||||||||||
Interest expense on loans |
| ( |
| ( |
| ( |
| ( | ||||
Loan procurement amortization expense |
| ( |
| ( |
| ( |
| ( | ||||
Equity in earnings of real estate ventures |
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Other |
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| ( |
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Total other expense |
| ( |
| ( |
| ( |
| ( | ||||
NET INCOME |
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Net income attributable to noncontrolling interests in the Operating Partnership |
| ( | ( | ( |
| ( | ||||||
Net loss attributable to noncontrolling interests in subsidiaries |
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NET INCOME ATTRIBUTABLE TO THE COMPANY | $ | | $ | | $ | | $ | | ||||
Basic earnings per share attributable to common shareholders | $ | | $ | | $ | | $ | | ||||
Diluted earnings per share attributable to common shareholders | $ | | $ | | $ | | $ | | ||||
Weighted average basic shares outstanding | | | | | ||||||||
Weighted average diluted shares outstanding | | | | | ||||||||
See accompanying notes to the unaudited consolidated financial statements.
8
CUBESMART AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
NET INCOME | $ | | $ | | $ | | $ | | ||||
Other comprehensive income: | ||||||||||||
Reclassification of realized losses on interest rate swaps |
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OTHER COMPREHENSIVE INCOME: |
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COMPREHENSIVE INCOME |
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Comprehensive income attributable to noncontrolling interests in the Operating Partnership |
| ( |
| ( |
| ( |
| ( | ||||
Comprehensive loss attributable to noncontrolling interests in subsidiaries |
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COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY | $ | | $ | | $ | | $ | | ||||
See accompanying notes to the unaudited consolidated financial statements.
9
CUBESMART AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)
(unaudited)
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| Noncontrolling |
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Additional | Accumulated Other | Total CubeSmart | Noncontrolling | Interests in the |
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Common Shares | Paid-in | Comprehensive | Accumulated | Shareholders’ | Interests in | Total | Operating |
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Number | Amount | Capital | (Loss) Income | Deficit | Equity | Subsidiaries | Equity | Partnership |
| ||||||||||||||||||
Balance at December 31, 2023 |
| | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | | $ | | |||||||||
Contributions from noncontrolling interests in subsidiaries | |
| | ||||||||||||||||||||||||
Distributions paid to noncontrolling interests in subsidiaries | ( | ( | |||||||||||||||||||||||||
Issuance of common shares, net |
| ( |
| ( |
| ( | |||||||||||||||||||||
Issuance of restricted shares |
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Conversion from units to shares |
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| ( | ||||||||||||||||||
Exercise of stock options |
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Amortization of restricted shares | |
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Share compensation expense | |
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Adjustment for noncontrolling interests in the Operating Partnership | |
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Net income (loss) | |
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| ( |
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Other comprehensive income, net | | | | ||||||||||||||||||||||||
Common share distributions ($ | ( |
| ( |
| ( |
| ( | ||||||||||||||||||||
Balance at March 31, 2024 |
| | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | | $ | | |||||||||
Distributions paid to noncontrolling interests in subsidiaries | ( | ( | |||||||||||||||||||||||||
Issuance of common shares, net |
| ( |
| ( |
| ( | |||||||||||||||||||||
Issuance of restricted shares |
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Conversion from units to shares |
| | | |
| |
| |
| ( | |||||||||||||||||
Exercise of stock options |
| | | |
| |
| | |||||||||||||||||||
Amortization of restricted shares | |
| |
| | ||||||||||||||||||||||
Share compensation expense | |
| |
| | ||||||||||||||||||||||
Adjustment for noncontrolling interests in the Operating Partnership | |
| |
| |
| ( | ||||||||||||||||||||
Net income (loss) | |
| |
| ( |
| |
| | ||||||||||||||||||
Other comprehensive income, net | | | | ||||||||||||||||||||||||
Common share distributions ($ | ( |
| ( |
| ( |
| ( | ||||||||||||||||||||
Balance at June 30, 2024 |
| | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | | $ | | |||||||||
Distributions paid to noncontrolling interests in subsidiaries | ( | ( | |||||||||||||||||||||||||
Issuance of common shares, net |
| | | |
| |
| | |||||||||||||||||||
Issuance of restricted shares |
| |
|
| |||||||||||||||||||||||
Conversion from units to shares |
| | |
| |
| |
| ( | ||||||||||||||||||
Exercise of stock options |
| | | |
| |
| | |||||||||||||||||||
Amortization of restricted shares | |
| |
| | ||||||||||||||||||||||
Share compensation expense | |
| |
| | ||||||||||||||||||||||
Adjustment for noncontrolling interests in the Operating Partnership | ( |
| ( |
| ( |
| | ||||||||||||||||||||
Net income (loss) | |
| |
| ( |
| |
| | ||||||||||||||||||
Other comprehensive income, net | | | | ||||||||||||||||||||||||
Common share distributions ($ | ( |
| ( |
| ( |
| ( | ||||||||||||||||||||
Balance at September 30, 2024 | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | | $ | | ||||||||||
See accompanying notes to the unaudited consolidated financial statements.
10
CUBESMART AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Noncontrolling |
| |||||||||
Additional | Accumulated Other | Total CubeSmart | Noncontrolling | Interests in the |
| ||||||||||||||||||||||
Common Shares | Paid-in | Comprehensive | Accumulated | Shareholders’ | Interests in | Total | Operating |
| |||||||||||||||||||
Number | Amount | Capital | (Loss) Income | Deficit | Equity | Subsidiaries | Equity | Partnership |
| ||||||||||||||||||
Balance at December 31, 2022 |
| | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | | $ | | |||||||||
Distributions paid to noncontrolling interests in subsidiaries | ( | ( | |||||||||||||||||||||||||
Issuance of common shares, net |
| ( |
| ( |
| ( | |||||||||||||||||||||
Issuance of restricted shares |
| |
|
| |||||||||||||||||||||||
Conversion from units to shares |
| | |
| |
| |
| ( | ||||||||||||||||||
Exercise of stock options |
| | | |
| |
| | |||||||||||||||||||
Amortization of restricted shares | |
| |
| | ||||||||||||||||||||||
Share compensation expense | |
| |
| | ||||||||||||||||||||||
Adjustment for noncontrolling interests in the Operating Partnership | ( |
| ( |
| ( |
| | ||||||||||||||||||||
Net income (loss) | |
| |
| ( |
| |
| | ||||||||||||||||||
Other comprehensive income, net | | | | ||||||||||||||||||||||||
Common share distributions ($ | ( |
| ( |
| ( |
| ( | ||||||||||||||||||||
Balance at March 31, 2023 |
| | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | | $ | | |||||||||
Contributions from noncontrolling interests in subsidiaries | |
| | ||||||||||||||||||||||||
Distributions paid to noncontrolling interests in subsidiaries | ( | ( | |||||||||||||||||||||||||
Issuance of common shares, net |
| ( |
| ( |
| ( | |||||||||||||||||||||
Issuance of restricted shares |
| |
|
| |||||||||||||||||||||||
Exercise of stock options |
| | | |
| |
| | |||||||||||||||||||
Amortization of restricted shares | |
| |
| | ||||||||||||||||||||||
Share compensation expense | |
| |
| | ||||||||||||||||||||||
Adjustment for noncontrolling interest in the Operating Partnership | |
| |
| |
| ( | ||||||||||||||||||||
Net income (loss) | |
| |
| ( |
| |
| | ||||||||||||||||||
Other comprehensive income, net | | | | ||||||||||||||||||||||||
Common share distributions ($ | ( |
| ( |
| ( |
| ( | ||||||||||||||||||||
Balance at June 30, 2023 |
| | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | | $ | | |||||||||
Distributions paid to noncontrolling interests in subsidiaries | ( | ( | |||||||||||||||||||||||||
Issuance of common shares, net |
| ( |
| ( |
| ( | |||||||||||||||||||||
Issuance of restricted shares |
| |
|
| |||||||||||||||||||||||
Conversion from units to shares |
| | | |
| |
| |
| ( | |||||||||||||||||
Amortization of restricted shares | |
| |
| | ||||||||||||||||||||||
Share compensation expense | |
| |
| | ||||||||||||||||||||||
Adjustment for noncontrolling interest in the Operating Partnership | |
| |
| |
| ( | ||||||||||||||||||||
Net income (loss) | |
| |
| ( |
| |
| | ||||||||||||||||||
Other comprehensive income, net | | | | ||||||||||||||||||||||||
Common share distributions ($ | ( |
| ( |
| ( |
| ( | ||||||||||||||||||||
Balance at September 30, 2023 | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | | $ | | ||||||||||
See accompanying notes to the unaudited consolidated financial statements.
11
CUBESMART AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended September 30, | ||||||
| 2024 |
| 2023 | |||
Operating Activities | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||
Depreciation and amortization, including amortization of loan procurement costs |
| |
| | ||
Non-cash portion of interest expense related to finance leases | ( | ( | ||||
Equity in earnings of real estate ventures |
| ( |
| ( | ||
Cash distributed from real estate ventures | | | ||||
Equity compensation expense |
| |
| | ||
Accretion of fair market value adjustment of debt |
| ( |
| ( | ||
Changes in other operating accounts: | ||||||
Other assets |
| ( |
| ( | ||
Accounts payable and accrued expenses |
| |
| | ||
Other liabilities |
| |
| | ||
Net cash provided by operating activities | $ | | $ | | ||
Investing Activities | ||||||
Acquisitions of storage properties | ( | — | ||||
Additions and improvements to storage properties |
| ( |
| ( | ||
Development costs |
| ( |
| ( | ||
Investments in real estate ventures |
| ( |
| ( | ||
Cash distributed from real estate ventures |
| |
| | ||
Proceeds from sale of real estate, net |
| — |
| | ||
Net cash used in investing activities | $ | ( | $ | ( | ||
Financing Activities | ||||||
Proceeds from: | ||||||
Revolving credit facility | | | ||||
Principal payments on: | ||||||
Revolving credit facility |
| ( |
| ( | ||
Mortgage loans and notes payable |
| ( |
| ( | ||
Loan procurement costs |
| — |
| ( | ||
Issuance of common shares, net |
| |
| ( | ||
Cash paid upon vesting of restricted shares | ( | ( | ||||
Exercise of stock options |
| |
| | ||
Contributions from noncontrolling interests in subsidiaries |
| |
| | ||
Distributions paid to noncontrolling interests in subsidiaries | ( | ( | ||||
Distributions paid to common shareholders |
| ( |
| ( | ||
Distributions paid to noncontrolling interests in Operating Partnership |
| ( |
| ( | ||
Net cash used in financing activities | $ | ( | $ | ( | ||
Change in cash, cash equivalents and restricted cash |
| |
| | ||
Cash, cash equivalents and restricted cash at beginning of period |
| | | |||
Cash, cash equivalents and restricted cash at end of period | $ | | $ | | ||
Supplemental Cash Flow and Noncash Information | ||||||
Cash paid for interest, net of interest capitalized | $ | | $ | | ||
Supplemental disclosure of noncash activities: | ||||||
Derivative valuation adjustment | $ | | $ | | ||
See accompanying notes to the unaudited consolidated financial statements.
12
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, | December 31, | |||||
| 2024 |
| 2023 | |||
(unaudited) | ||||||
ASSETS | ||||||
Storage properties | $ | | $ | |||
Less: Accumulated depreciation |
| ( |
| ( | ||
Storage properties, net (includes VIE amounts of $ | |
| ||||
Cash and cash equivalents (includes VIE amounts of $ |
| |
| |||
Restricted cash |
| |
| |||
Loan procurement costs, net of amortization |
| |
| |||
Investment in real estate ventures, at equity |
| |
| |||
Other assets, net |
| |
| |||
Total assets | $ | | $ | |||
LIABILITIES AND CAPITAL | ||||||
Unsecured senior notes, net | $ | | $ | |||
Revolving credit facility |
| — |
| | ||
Mortgage loans and notes payable, net |
| |
| |||
Lease liabilities - finance leases | | | ||||
Accounts payable, accrued expenses and other liabilities |
| |
| |||
Distributions payable |
| |
| |||
Deferred revenue |
| |
| |||
Total liabilities |
| |
| | ||
Limited Partnership interests of third parties |
| |
| |||
Commitments and contingencies | ||||||
Capital | ||||||
General Partner |
| |
| |||
Accumulated other comprehensive loss |
| ( |
| ( | ||
Total CubeSmart, L.P. capital |
| |
| |||
Noncontrolling interests in subsidiaries |
| |
| |||
Total capital |
| |
| |||
Total liabilities and capital | $ | | $ | |||
See accompanying notes to the unaudited consolidated financial statements.
13
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per common unit data)
(unaudited)
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
2024 |
| 2023 |
| 2024 |
| 2023 | ||||||
REVENUES | ||||||||||||
Rental income | $ | | $ | | $ | | $ | | ||||
Other property related income |
| |
| |
| |
| | ||||
Property management fee income |
| |
| |
| |
| | ||||
Total revenues |
| |
| |
| |
| | ||||
OPERATING EXPENSES | ||||||||||||
Property operating expenses |
| |
| |
| |
| | ||||
Depreciation and amortization |
| |
| |
| |
| | ||||
General and administrative |
| |
| |
| |
| | ||||
Total operating expenses |
| |
| |
| |
| | ||||
Interest: | ||||||||||||
Interest expense on loans |
| ( |
| ( |
| ( |
| ( | ||||
Loan procurement amortization expense |
| ( |
| ( |
| ( |
| ( | ||||
Equity in earnings of real estate ventures |
| |
| |
| |
| | ||||
Other |
| |
| ( |
| |
| | ||||
Total other expense |
| ( |
| ( |
| ( |
| ( | ||||
NET INCOME |
| |
| |
| |
| | ||||
Net loss attributable to noncontrolling interests in subsidiaries |
| |
| |
| |
| | ||||
NET INCOME ATTRIBUTABLE TO CUBESMART L.P. | $ | | $ | | $ | | $ | | ||||
|
|
|
|
|
|
|
|
| ||||
Basic earnings per unit attributable to CubeSmart, L.P. | $ | | $ | | $ | | $ | | ||||
Diluted earnings per unit attributable to CubeSmart, L.P. | $ | | $ | | $ | | $ | | ||||
Weighted average basic units outstanding |
| | | | | |||||||
Weighted average diluted units outstanding |
| | | | | |||||||
See accompanying notes to the unaudited consolidated financial statements.
14
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
NET INCOME | $ | | $ | | $ | | $ | | ||||
Other comprehensive income: | ||||||||||||
Reclassification of realized losses on interest rate swaps |
| |
| |
| |
| | ||||
OTHER COMPREHENSIVE INCOME: |
| |
| |
| |
| | ||||
COMPREHENSIVE INCOME |
| |
| |
| |
| | ||||
Comprehensive loss attributable to noncontrolling interests in subsidiaries |
| |
| |
| |
| | ||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUBESMART, L.P. | $ | | $ | | $ | | $ | | ||||
See accompanying notes to the unaudited consolidated financial statements.
15
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITAL
(in thousands)
(unaudited)
Total | Limited |
| |||||||||||||||||||
General Partner | Accumulated Other | CubeSmart | Noncontrolling | Partnership |
| ||||||||||||||||
OP Units | Comprehensive | L.P. | Interests in | Total | Interests |
| |||||||||||||||
Outstanding | Amount | (Loss) Income | Capital | Subsidiaries | Capital | of Third Parties |
| ||||||||||||||
Balance at December 31, 2023 |
| |
| $ | |
| $ | ( |
| $ | |
| $ | |
| $ | |
| $ | | |
Contributions from noncontrolling interests in subsidiaries | | | |||||||||||||||||||
Distributions paid to noncontrolling interests in subsidiaries | ( | ( | |||||||||||||||||||
Issuance of OP units, net |
| ( | ( | ( | |||||||||||||||||
Issuance of restricted OP units |
| | | | | ||||||||||||||||
Conversion from OP units to shares |
| | | | | ( | |||||||||||||||
Exercise of OP unit options |
| | | | | ||||||||||||||||
Amortization of restricted OP units | | | | ||||||||||||||||||
OP unit compensation expense | | | | ||||||||||||||||||
Adjustment for Limited Partnership interests of third parties | | | | ( | |||||||||||||||||
Net income (loss) | | | ( | | | ||||||||||||||||
Other comprehensive income, net | | | | ||||||||||||||||||
OP unit distributions ($ | ( | ( | ( | ( | |||||||||||||||||
Balance at March 31, 2024 |
| |
| $ | | $ | ( | $ | | $ | | $ | | $ | | ||||||
Distributions to noncontrolling interests in subsidiaries | ( | ( | |||||||||||||||||||
Issuance of OP units, net |
| ( | ( | ( | |||||||||||||||||
Issuance of restricted OP units |
| | |||||||||||||||||||
Conversion from OP units to shares |
| | | | | ( | |||||||||||||||
Exercise of OP unit options |
| | | | | ||||||||||||||||
Amortization of restricted OP units | | | | ||||||||||||||||||
OP unit compensation expense | | | | ||||||||||||||||||
Adjustment for Limited Partnership interests of third parties | | | | ( | |||||||||||||||||
Net income (loss) | | | ( | | | ||||||||||||||||
Other comprehensive income, net | | | | ||||||||||||||||||
OP unit distributions ($ | ( | ( | ( | ( | |||||||||||||||||
Balance at June 30, 2024 |
| |
| $ | | $ | ( | $ | | $ | | $ | | $ | | ||||||
Distributions to noncontrolling interests in subsidiaries | ( | ( | |||||||||||||||||||
Issuance of OP units, net |
| | | | | ||||||||||||||||
Issuance of restricted OP units |
| | |||||||||||||||||||
Conversion from OP units to shares |
| | | | | ( | |||||||||||||||
Exercise of OP unit options |
| | | | | ||||||||||||||||
Amortization of restricted OP units | | | | ||||||||||||||||||
OP unit compensation expense | | | | ||||||||||||||||||
Adjustment for Limited Partnership interests of third parties | ( | ( | ( | | |||||||||||||||||
Net income (loss) | | | ( | | | ||||||||||||||||
Other comprehensive income, net | | | | ||||||||||||||||||
OP unit distributions ($ | ( | ( | ( | ( | |||||||||||||||||
Balance at September 30, 2024 |
| |
| $ | | $ | ( | $ | | $ | | $ | | $ | | ||||||
See accompanying notes to the unaudited consolidated financial statements
16
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITAL
(in thousands)
(unaudited)
Total | Limited |
| |||||||||||||||||||
General Partner | Accumulated Other | CubeSmart | Noncontrolling | Partnership |
| ||||||||||||||||
OP Units | Operating | Comprehensive | L.P. | Interests in | Total | Interests |
| ||||||||||||||
Outstanding | Partner | (Loss) Income | Capital | Subsidiaries | Capital | of Third Parties |
| ||||||||||||||
Balance at December 31, 2022 |
| |
| $ | |
| $ | ( |
| $ | |
| $ | |
| $ | |
| $ | | |
Distributions paid to noncontrolling interests in subsidiaries | ( | ( | |||||||||||||||||||
Issuance of OP units, net |
|
| ( |
| ( |
| ( | ||||||||||||||
Issuance of restricted OP units |
| |
|
| |||||||||||||||||
Conversion from OP units to shares |
| |
| |
| |
| |
| ( | |||||||||||
Exercise of OP unit options |
| |
| |
| |
| | |||||||||||||
Amortization of restricted OP units |
| |
| |
| | |||||||||||||||
OP unit compensation expense |
| |
| |
| | |||||||||||||||
Adjustment for Limited Partnership interests of third parties |
| ( |
| ( |
| ( |
| | |||||||||||||
Net income (loss) |
| |
| |
| ( |
| |
| | |||||||||||
Other comprehensive income, net | | | | ||||||||||||||||||
OP unit distributions ($ |
| ( |
| ( |
| ( |
| ( | |||||||||||||
Balance at March 31, 2023 |
| |
| $ | | $ | ( | $ | | $ | | $ | | $ | | ||||||
Contributions from noncontrolling interests in subsidiaries | | | |||||||||||||||||||
Distributions to noncontrolling interests in subsidiaries | ( | ( | |||||||||||||||||||
Issuance of OP units, net |
| ( | ( | ( | |||||||||||||||||
Issuance of restricted OP units |
| | |||||||||||||||||||
Exercise of OP unit options |
| | | | | ||||||||||||||||
Amortization of restricted OP units | | | | ||||||||||||||||||
OP unit compensation expense | | | | ||||||||||||||||||
Adjustment for Limited Partnership interests of third parties | | | | ( | |||||||||||||||||
Net income (loss) | | | ( | | | ||||||||||||||||
Other comprehensive income, net | | | | ||||||||||||||||||
OP unit distributions ($ | ( | ( | ( | ( | |||||||||||||||||
Balance at June 30, 2023 |
| |
| $ | | $ | ( | $ | | $ | | $ | | $ | | ||||||
Distributions to noncontrolling interests in subsidiaries | ( | ( | |||||||||||||||||||
Issuance of OP units, net |
| ( | ( | ( | |||||||||||||||||
Issuance of restricted OP units |
| | |||||||||||||||||||
Conversion from units to shares |
| | | | | ( | |||||||||||||||
Amortization of restricted OP units | | | | ||||||||||||||||||
OP unit compensation expense | | | | ||||||||||||||||||
Adjustment for Operating Partnership interests of third parties | | | | ( | |||||||||||||||||
Net income (loss) | | | ( | | | ||||||||||||||||
Other comprehensive income, net | | | | ||||||||||||||||||
OP unit distributions ($ | ( | ( | ( | ( | |||||||||||||||||
Balance at September 30, 2023 |
| |
| $ | | $ | ( | $ | | $ | | $ | | $ | | ||||||
See accompanying notes to the unaudited consolidated financial statements.
17
CUBESMART, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended September 30, | ||||||
| 2024 |
| 2023 | |||
Operating Activities | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||
Depreciation and amortization, including amortization of loan procurement costs |
| |
| | ||
Non-cash portion of interest expense related to finance leases | ( | ( | ||||
Equity in earnings of real estate ventures |
| ( |
| ( | ||
Cash distributed from real estate ventures | | | ||||
Equity compensation expense |
| |
| | ||
Accretion of fair market value adjustment of debt |
| ( |
| ( | ||
Changes in other operating accounts: | ||||||
Other assets |
| ( |
| ( | ||
Accounts payable and accrued expenses |
| |
| | ||
Other liabilities |
| |
| | ||
Net cash provided by operating activities | $ | | $ | | ||
Investing Activities | ||||||
Acquisitions of storage properties |
| ( |
| — | ||
Additions and improvements to storage properties |
| ( |
| ( | ||
Development costs |
| ( |
| ( | ||
Investments in real estate ventures | ( | ( | ||||
Cash distributed from real estate ventures | |
| | |||
Proceeds from sale of real estate, net | — | | ||||
Net cash used in investing activities | $ | ( | $ | ( | ||
Financing Activities | ||||||
Proceeds from: | ||||||
Revolving credit facility | | | ||||
Principal payments on: |
| |||||
Revolving credit facility | ( | ( | ||||
Mortgage loans and notes payable | ( | ( | ||||
Loan procurement costs | — | ( | ||||
Issuance of OP units, net | | ( | ||||
Cash paid upon vesting of restricted OP units | ( | ( | ||||
Exercise of OP unit options | | | ||||
Contributions from noncontrolling interests in subsidiaries |
| | | |||
Distributions paid to noncontrolling interests in subsidiaries |
| ( | ( | |||
Distributions paid to OP unitholders | ( | ( | ||||
Net cash used in financing activities | $ | ( | $ | ( | ||
Change in cash, cash equivalents and restricted cash |
| |
| | ||
Cash, cash equivalents and restricted cash at beginning of period |
| |
| | ||
Cash, cash equivalents and restricted cash at end of period | $ | | $ | | ||
Supplemental Cash Flow and Noncash Information | ||||||
Cash paid for interest, net of interest capitalized | $ | | $ | | ||
Supplemental disclosure of noncash activities: | ||||||
Derivative valuation adjustment | $ | | $ | | ||
See accompanying notes to the unaudited consolidated financial statements.
18
CUBESMART AND CUBESMART, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF OPERATIONS
CubeSmart (the “Parent Company”) operates as a self-managed and self-administered real estate investment trust (“REIT”) with its operations conducted solely through CubeSmart, L.P. and its subsidiaries. CubeSmart, L.P., a Delaware limited partnership (the “Operating Partnership”), operates through an umbrella partnership structure, with the Parent Company, a Maryland REIT, as its sole general partner. In the notes to the unaudited consolidated financial statements, the terms “the Company”, “we” or “our” are used to refer to the Parent Company and the Operating Partnership together, unless the context indicates otherwise. As of September 30, 2024, the Company owned (or partially owned and consolidated) self-storage properties located in the District of Columbia and
As of September 30, 2024, the Parent Company owned approximately
The Company typically experiences seasonal fluctuations in the occupancy levels of its stores, which are generally slightly higher during the summer months due to increased moving activity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and, in the opinion of each of the Parent Company’s and Operating Partnership’s respective management, include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of financial position, results of operations and cash flows for each respective company for the interim periods presented in accordance with generally accepted accounting principles in the United States (“GAAP”). Accordingly, readers of this Quarterly Report on Form 10-Q should refer to the Parent Company’s and the Operating Partnership’s combined audited financial statements prepared in accordance with GAAP, and the related notes thereto, for the year ended December 31, 2023, which are included in the Parent Company’s and the Operating Partnership’s combined Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The results of operations for the three and nine months ended September 30, 2024 and 2023 are not necessarily indicative of the results of operations to be expected for any future period or the full year.
The Operating Partnership meets the criteria as a variable interest entity (“VIE”). The Parent Company’s sole significant asset is its investment in the Operating Partnership. As a result, substantially all of the Parent Company’s assets and liabilities represent those assets and liabilities of the Operating Partnership. All of the Parent Company’s debt
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is an obligation of the Operating Partnership, and the Parent Company guarantees the unsecured debt obligations of the Operating Partnership.
Reclassifications
Certain amounts within the Company’s and the Operating Partnership’s unaudited consolidated financial statements have been reclassified in prior years to conform to the current year presentation.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07 – Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amended guidance requires the disclosure of incremental segment information, including significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and a reconciliation of segment profit or loss to net income. The title and position of the CODM must also be disclosed, along with how the CODM uses the reported measures to assess segment performance and to allocate resources. Entities with a single reportable segment (such as the Company) will be required to provide the disclosures required by Topic 280, as amended. The standard became effective for the Company on January 1, 2024 and the required disclosures for the Company will begin with its Annual Report on Form 10-K for the fiscal year ending December 31, 2024. The adoption and implementation of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.
3. STORAGE PROPERTIES
The book value of the Company’s real estate assets is summarized as follows:
September 30, | December 31, | ||||||
| 2024 |
| 2023 | ||||
(in thousands) | |||||||
Land | $ | | $ | | |||
Buildings and improvements |
| |
| | |||
Equipment |
| |
| | |||
Construction in progress |
| |
| | |||
Right-of-use assets - finance leases | | | |||||
Storage properties |
| |
| | |||
Less: Accumulated depreciation |
| ( |
| ( | |||
Storage properties, net | $ | | $ | | |||
The following table summarizes the Company’s acquisition and disposition activity since January 1, 2023.
|
|
| Number of |
| Transaction Price |
| ||||
Asset/Portfolio | Metropolitan Statistical Area | Transaction Date | Stores | (in thousands) | ||||||
2024 Acquisitions: | ||||||||||
Connecticut Assets | Hartford-West Hartford-East Hartford, CT | January 2024 | $ | | ||||||
$ | ||||||||||
2023 Acquisition: | ||||||||||
New Jersey Asset | New York-Northern New Jersey-Long Island, NY-NJ-PA | December 2023 | $ | | ||||||
$ | ||||||||||
2023 Disposition: | ||||||||||
Illinois Asset (1) | Chicago-Naperville-Joliet, IL-IN-WI | December 2023 | $ | |||||||
$ | ||||||||||
| (1) | This store was subject to an involuntary conversion by the Department of Transportation of the State of Illinois. |
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4. INVESTMENT ACTIVITY
2024 Acquisitions
During the nine months ended September 30, 2024, the Company acquired a
As of September 30, 2024, the Company had made aggregate deposits of approximately $
2023 Acquisition
During the year ended December 31, 2023, the Company acquired
2023 Dispositions
In August 2023, the Company sold the California Yacht Club, which it purchased in December 2021 as part of the LAACO acquisition, for $
Additionally, in December 2023, a store was subject to an involuntary conversion by the Department of Transportation of the State of Illinois. The Company received $
Development Activity
As of September 30, 2024, the Company had invested in consolidated joint ventures to develop
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The Company, through
CubeSmart | |||||||||
Number of | Ownership | Total | |||||||
Store Location |
| Stores |
| Date Opened | Interest | Construction Costs | |||
(in thousands) | |||||||||
Astoria, NY | Q2 2024 | $ | | ||||||
Clark, NJ | Q2 2024 | | |||||||
$ | | ||||||||
5. INVESTMENTS IN UNCONSOLIDATED REAL ESTATE VENTURES
The Company’s investments in unconsolidated real estate ventures are summarized as follows (dollars in thousands):
CubeSmart | Number of Stores as of | Carrying Value of Investment as of | ||||||||||
Ownership | September 30, | December 31, | September 30, | December 31, | ||||||||
Unconsolidated Real Estate Ventures |
| Interest | 2024 | 2023 |
| 2024 | 2023 | |||||
Fontana Self Storage, LLC ("Fontana") (1) | $ | | $ | | ||||||||
Rancho Cucamonga Self Storage, LLC ("RCSS") (1) | | | ||||||||||
191 V CUBE LLC ("HVP V") | | | ||||||||||
191 IV CUBE LLC ("HVP IV") | | | ||||||||||
CUBE HHF Northeast Venture LLC ("HHFNE") | | | ||||||||||
CUBE HHF Limited Partnership ("HHF") | | | ||||||||||
$ | | $ | | |||||||||
| (1) | On December 9, 2021, the Company completed the acquisition of LAACO, which included a |
As of September 30, 2024, the Company also held a
The Company determined that Fontana, RCSS, HVP V, HVPSE, HVP IV, HHFNE and HHF (collectively, the “Ventures”) are not VIEs in accordance with the accounting standard for the consolidation of VIEs. As a result, the Company used the voting interest model under the accounting standard for consolidation in order to determine whether to consolidate the Ventures. Based upon each member’s substantive participating rights over the activities of each entity as stipulated in the operating agreements, the Ventures are not consolidated by the Company and are accounted for under the equity method of accounting. The Company’s investments in the Ventures are included in Investment in real estate ventures, at equity on the Company’s consolidated balance sheets and the Company’s earnings from its investments in the Ventures are presented in Equity in earnings of real estate ventures within the Company’s consolidated statements of operations.
22
The amounts reflected in the following table are based on the historical financial information of the Ventures. The following is a summary of the financial position of the Ventures as of September 30, 2024 and December 31, 2023.
| September 30, | December 31, | ||||
2024 |
| 2023 | ||||
Assets | (in thousands) | |||||
Storage properties, net | $ | | $ | | ||
Other assets |
| |
| | ||
Total assets | $ | | $ | | ||
Liabilities and equity | ||||||
Debt | $ | | $ | | ||
Other liabilities | | | ||||
Equity | ||||||
CubeSmart |
| | | |||
Joint venture partners |
| | | |||
Total liabilities and equity | $ | | $ | | ||
The following is a summary of results of operations of the Ventures for the three and nine months ended September 30, 2024 and 2023.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 | 2023 | ||||||
(in thousands) | ||||||||||||
Total revenues | $ | | $ | | $ | | $ | | ||||
Operating expenses |
| ( | ( |
| ( |
| ( | |||||
Other expenses | ( | | ( | ( | ||||||||
Interest expense, net |
| ( | ( |
| ( |
| ( | |||||
Depreciation and amortization |
| ( |
| ( |
| ( |
| ( | ||||
Net income | $ | | $ | | $ | | $ | | ||||
Company’s share of net income | $ | | $ | | $ | | $ | | ||||
6. OTHER ASSETS
Other assets were comprised of the following as of September 30, 2024 and December 31, 2023.
September 30, | December 31, | |||||
| 2024 |
| 2023 | |||
(in thousands) | ||||||
Intangible assets, net of accumulated amortization of $ | $ | | $ | | ||
Accounts receivable, net |
| |
| | ||
Prepaid property taxes |
| |
| | ||
Prepaid insurance |
| |
| | ||
Amounts due from affiliates (see note 15) | | | ||||
Assets related to deferred compensation arrangements | | | ||||
Right-of-use assets - operating leases | | | ||||
Ground lease receivable | | | ||||
Other |
| |
| | ||
Total other assets, net | $ | | $ | | ||
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7. UNSECURED SENIOR NOTES
The Company’s unsecured senior notes are summarized as follows (collectively referred to as the “Senior Notes”):
| September 30, | December 31, |
| Effective | Issuance | Maturity | |||||||
Unsecured Senior Notes |
| 2024 |
| 2023 |
| Interest Rate | Date | Date | |||||
(in thousands) | |||||||||||||
$300M | $ | | $ | |
| | % | Various (1) | Nov-25 | ||||
$300M | | | | % | Aug-16 | Sep-26 | |||||||
$550M | | | | % | Nov-21 | Dec-28 | |||||||
$350M | | | | % | Jan-19 | Feb-29 | |||||||
$350M | | | | % | Oct-19 | Feb-30 | |||||||
$450M | | | | % | Oct-20 | Feb-31 | |||||||
$500M | | | | % | Nov-21 | Feb-32 | |||||||
Principal balance outstanding | | | |||||||||||
Less: Discount on issuance of unsecured senior notes, net | ( | ( | |||||||||||
Less: Loan procurement costs, net | ( | ( | |||||||||||
Total unsecured senior notes, net | $ | | $ | | |||||||||
| (1) | On April 4, 2017, the Operating Partnership issued $ |
The indenture under which the Senior Notes were issued restricts the ability of the Operating Partnership and its subsidiaries to incur debt unless the Operating Partnership and its consolidated subsidiaries comply with a leverage ratio not to exceed
8. REVOLVING CREDIT FACILITY
On October 26, 2022, the Company amended and restated, in its entirety, its unsecured revolving credit agreement (the “Second Amended and Restated Credit Facility”) which, subsequent to the amendment and restatement, is comprised of an $
As of September 30, 2024, borrowings under the Revolver had an interest rate of
Under the Second Amended and Restated Credit Facility, the Company’s ability to borrow under the Revolver is subject to ongoing compliance with certain financial covenants which include, among other things, (1) a maximum total indebtedness to total asset value of
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three and nine months ended September 30, 2024, the Operating Partnership was in compliance with all financial covenants of the Second Amended and Restated Credit Facility.
9. MORTGAGE LOANS AND NOTES PAYABLE
The Company’s mortgage loans and notes payable are summarized as follows:
Carrying Value as of | |||||||||||
| September 30, | December 31, |
| Effective | Maturity | ||||||
Mortgage Loans and Notes Payable |
| 2024 |
| 2023 |
| Interest Rate | Date | ||||
(in thousands) | |||||||||||
Annapolis I, MD (1) | $ | — | $ | | | % | May-24 | ||||
Brooklyn XV, NY (1) | — | | | % | May-24 | ||||||
Long Island City IV, NY (1) | — | | | % | May-24 | ||||||
Long Island City II, NY | | | | % | Jul-26 | ||||||
Long Island City III, NY | | | | % | Aug-26 | ||||||
Flushing II, NY | | | | % | Jul-29 | ||||||
Principal balance outstanding | | | |||||||||
Plus: Unamortized fair value adjustment | |
| | ||||||||
Less: Loan procurement costs, net | ( | ( | |||||||||
Total mortgage loans and notes payable, net | $ | | $ | | |||||||
| (1) | These mortgage loans were repaid in full in May 2024. |
As of September 30, 2024 and December 31, 2023, the Company’s mortgage loans payable were secured by certain of its self-storage properties with net book values of approximately $
2024 |
| $ | |
2025 |
| | |
2026 |
| | |
2027 |
| — | |
2028 |
| — | |
2029 |
| | |
Total principal payments | $ | |
10. ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss represents unrealized losses on interest rate swaps (see note 11). The following table summarizes the changes in accumulated other comprehensive loss for the nine months ended September 30, 2024 (in thousands).
September 30, | ||
2024 | ||
(in thousands) | ||
Beginning balance at December 31, 2023 | $ | ( |
Reclassification of realized losses on interest rate swaps (1) | | |
Ending balance at September 30, 2024 | ( | |
Less: portion included in noncontrolling interests in the Operating Partnership | | |
Total accumulated other comprehensive loss included in equity | $ | ( |
| (1) | See note 11 for additional information about the effects of the amounts reclassified. |
25
11. RISK MANAGEMENT AND USE OF FINANCIAL INSTRUMENTS
The Company is exposed to credit risk with regard to its cash accounts. The Company holds deposits at certain financial institutions in excess of Federal Deposit Insurance Corporation limits. The Company’s cash accounts are held with major financial institutions and management believes that the risk of loss due to disruption at these financial institutions is low.
The Company’s use of derivative instruments is limited to the utilization of interest rate swap agreements or other instruments to manage interest rate risk exposures and not for speculative purposes. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure, as well as to hedge specific transactions. The counterparties to these arrangements are major financial institutions with which the Company and its subsidiaries may also have other financial relationships. The Company is potentially exposed to credit loss in the event of non-performance by these counterparties. However, because of the high credit ratings of the counterparties, the Company does not anticipate that any of the counterparties will fail to meet these obligations as they come due. The Company does not hedge credit or property value market risks.
The Company formally assesses, both at inception of a hedge and on an on-going basis, whether each derivative is highly effective in offsetting changes in cash flows of the hedged item. If management determines that the derivative is highly effective as a hedge, then the Company accounts for the derivative using hedge accounting, pursuant to which gains or losses inherent in the derivative do not impact the Company’s results of operations. If management determines that the derivative is not highly effective as a hedge or if a derivative ceases to be a highly-effective hedge, the Company discontinues hedge accounting prospectively and reflects within its consolidated statements of operations realized and unrealized gains and losses with respect to the derivative. As of September 30, 2024 and December 31, 2023, all derivative instruments entered into by the Company had been settled.
On December 24, 2018, the Company entered into interest rate swap agreements with notional amounts that aggregated to $
12. FAIR VALUE MEASUREMENTS
The Company applies the methods of determining fair value as described in authoritative guidance, to value its financial assets and liabilities. As defined in the guidance, fair value is based on the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, the guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
26
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs, to the extent possible, as well as considering counterparty credit risk in its assessment of fair value.
The fair values of financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, other financial instruments included in other assets, accounts payable, accrued expenses and other liabilities approximate their respective carrying values at September 30, 2024 and December 31, 2023.
The following table summarizes the carrying value and estimated fair value of the Company’s debt as of September 30, 2024 and December 31, 2023:
September 30, 2024 | December 31, 2023 | ||||
(in thousands) | |||||
Carrying value | $ | | $ | | |
Fair value | | | |||
The fair value of debt estimates were based on a discounted cash flow analysis assuming market interest rates for comparable obligations at September 30, 2024 and December 31, 2023. The Company estimates the fair value of its fixed-rate debt and the credit spreads over variable market rates on its variable-rate debt by discounting the future cash flows of each instrument at estimated market rates or credit spreads consistent with the maturity of the debt obligation with similar credit policies, which is classified within level 2 of the fair value hierarchy. Rates and credit spreads take into consideration general market conditions and maturity.
13. NONCONTROLLING INTERESTS
Interests in Consolidated Joint Ventures
Noncontrolling interests in subsidiaries represent the ownership interests of third parties in the Company’s consolidated joint ventures. All consolidated joint ventures were formed to develop, own and operate new stores with the exception of Anoka (defined below), which was formed to acquire an existing store that had commenced operations. The following table summarizes the Company’s consolidated joint ventures, each of which are accounted for as VIEs:
CubeSmart | September 30, 2024 | ||||||||||||
Number | Ownership | Total | Total | Related Party | |||||||||
Consolidated Joint Ventures |
| of Stores |
| Interest | Assets | Liabilities | Loans (1) | ||||||
(in thousands) | |||||||||||||
New Rochelle Investors, LLC ("New Rochelle") | $ | | $ | | $ | | |||||||
1074 Raritan Road, LLC ("Clark") | | | | ||||||||||
350 Main Street, LLC ("Port Chester") | | | — | ||||||||||
Astoria Investors, LLC ("Astoria") | | | | ||||||||||
CS Lock Up Anoka, LLC ("Anoka") | | | | ||||||||||
CS Valley Forge Village Storage, LLC ("VFV") | | | | ||||||||||
CS Vienna, LLC ("Vienna") | | | | ||||||||||
SH3, LLC ("SH3") | | | — | ||||||||||
$ | | $ | | $ | | ||||||||
| (1) | Related party loans represent amounts payable from the joint venture to the Company and are included in total liabilities within the table above. The loans and related party interest have been eliminated for consolidation purposes. |
27
Operating Partnership Ownership
As of September 30, 2024 and December 31, 2023,
14. COMMITMENTS AND CONTINGENCIES
Development Commitments
The Company has agreements with developers for the construction of
Litigation
From time to time, the Company is involved in claims which arise in the ordinary course of business. In accordance with applicable accounting guidance, management establishes an accrued liability for claim expenses, insurance retention and litigation costs when those matters present loss contingencies that are both probable and reasonably estimable. In such cases, there may be exposure to loss in excess of those amounts accrued. The estimated loss, if any, is based upon currently available information and is subject to significant judgment, a variety of assumptions, and known and unknown uncertainties. In the opinion of management, the Company has made adequate provisions for potential liabilities arising from any such matters, which are included in Accounts payable, accrued expenses and other liabilities on the Company’s consolidated balance sheets.
15. RELATED PARTY TRANSACTIONS
The Company provides management services to certain joint ventures and other related parties. Management agreements provide for fee income to the Company based on a percentage of revenues at the managed stores. Total management fees for unconsolidated real estate ventures or other entities in which the Company held an ownership interest totaled $
The management agreements for certain joint ventures, other related parties and third-party stores provide for the reimbursement to the Company for certain expenses incurred to manage the stores. These reimbursements consist of amounts due for management fees, payroll, and other store expenses. The amounts due to the Company were $
The HVP V, HVPSE, HVP IV and HHFNE operating agreements provide for acquisition, disposition and other fees payable from HVP V, HVPSE, HVP IV and HHFNE to the Company upon the closing of a property transaction by HVP V, HVPSE, HVP IV and HHFNE or any of their subsidiaries and completion of certain measures as defined in the operating agreements. There were
The Company serves as lessor in a ground lease related to land underlying an HVP IV property located in Texas. The Company recognized income associated with this ground lease of $
28
ended September 30, 2024 and 2023 and of $
16. EARNINGS PER SHARE AND UNIT AND SHAREHOLDERS’ EQUITY AND CAPITAL
Earnings per share and shareholders’ equity
The following is a summary of the elements used in calculating basic and diluted earnings per share:
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||
(dollars and units in thousands, except per share amounts) | ||||||||||||||
Net income |
| $ | |
| $ | | $ | | $ | | ||||
Net income attributable to noncontrolling interests in the Operating Partnership |
| ( |
| ( |
| ( |
| ( | ||||||
Net loss attributable to noncontrolling interests in subsidiaries |
| |
| |
| |
| | ||||||
Net income attributable to the Company's common shareholders | $ | | $ | | $ | | $ | | ||||||
Weighted average basic shares outstanding |
| |
| |
| |
| | ||||||
Share options and restricted share units |
| |
| |
| |
| | ||||||
Weighted average diluted shares outstanding (1) |
| |
| |
| |
| | ||||||
Basic earnings per share attributable to common shareholders | $ | | $ | | $ | | $ | | ||||||
Diluted earnings per share attributable to common shareholders (2) | $ | | $ | | $ | | $ | | ||||||
Income allocated to noncontrolling interests of the Operating Partnership has been excluded from the numerator and OP units owned by third parties have been omitted from the denominator for the purpose of computing diluted earnings per share since the effect of including these amounts in the numerator and denominator would be anti-dilutive. Weighted average outstanding OP units owned by third parties were
29
Earnings per unit and capital
The following is a summary of the elements used in calculating basic and diluted earnings per unit:
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||
(dollars and units in thousands, except per unit amounts) | ||||||||||||
Net income |
| $ | |
| $ | | $ | | $ | | ||
Net loss attributable to noncontrolling interests in subsidiaries |
| |
| |
| |
| | ||||
Net income attributable to CubeSmart, L.P. | $ | | $ | | $ | | $ | | ||||
Weighted average basic units outstanding (3) |
| |
| |
| |
| | ||||
Unit options and restricted share units |
| |
| |
| |
| | ||||
Weighted average diluted units outstanding (1) (3) |
| |
| |
| |
| | ||||
Basic earnings per unit attributable to CubeSmart, L.P. | $ | | $ | | $ | | $ | | ||||
Diluted earnings per unit attributable to CubeSmart, L.P. (2) | $ | | $ | | $ | | $ | | ||||
| (1) | For the three and nine months ended September 30, 2024, the Company declared cash dividends per common share/unit of $ |
| (2) | The amounts of anti-dilutive options that were excluded from the computation of diluted earnings per share/unit were |
| (3) | Prior period amounts have been updated to conform to current year presentation. |
The OP Units owned by the General Partner and the OP Units owned by third parties have essentially the same economic characteristics as they share equally in the total net income or loss and distributions of the Operating Partnership. OP Units owned by third parties may be redeemed for cash or, at the Company’s option, common shares of CubeSmart on a one-for-one basis. The following is a summary of OP Units outstanding:
As of September 30, | |||||
2024 | 2023 | ||||
Outstanding OP Units owned by third parties |
| | | ||
Outstanding OP Units owned by the General Partner | | | |||
30
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Report. Some of the statements we make in this section are forward-looking statements within the meaning of the federal securities laws. For a discussion of forward-looking statements, see the section in this Report entitled “Forward-Looking Statements.” Certain risk factors may cause actual results, performance or achievements to differ materially from those expressed or implied by the following discussion. For a complete discussion of such risk factors, see the section entitled “Risk Factors” in the Parent Company’s and Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2023.
Overview
We are an integrated self-storage real estate company, and as such we have in-house capabilities in the operation, design, development, leasing, management and acquisition of self-storage properties. The Parent Company’s operations are conducted solely through the Operating Partnership and its subsidiaries. The Parent Company has elected to be taxed as a REIT for U.S. federal income tax purposes. As of September 30, 2024 and December 31, 2023, we owned (or partially owned and consolidated) 615 self-storage properties containing an aggregate of approximately 44.4 million rentable square feet and 611 self-storage properties containing an aggregate of approximately 44.1 million rentable square feet, respectively. As of September 30, 2024, we owned stores in the District of Columbia and the following 24 states: Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah and Virginia. In addition, as of September 30, 2024, we managed 893 stores for third parties (including 77 stores containing an aggregate of approximately 5.6 million rentable square feet as part of six separate unconsolidated real estate ventures) bringing the total number of stores we owned and/or managed to 1,508. As of September 30, 2024, we managed stores for third parties in the District of Columbia and the following 40 states: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Virginia, Washington and Wisconsin.
We derive substantially all of our revenue from customers who lease space at our stores and fees earned from managing stores. Therefore, our operating results depend materially on our ability to retain our existing customers and lease our available self-storage cubes to new customers while maintaining and, where possible, increasing our pricing levels. In addition, our operating results depend on the ability of our customers to make required rental payments to us. Our approach to the management and operation of our stores combines centralized marketing, revenue management and other operational support with local operations teams that provide market-level oversight and management. We believe this approach allows us to respond quickly and effectively to changes in local market conditions and maximize revenues by managing rental rates and occupancy levels.
We typically experience seasonal fluctuations in the occupancy levels of our stores, which are generally slightly higher during the summer months due to increased moving activity.
Our results of operations may be sensitive to changes in overall economic conditions that impact consumer spending, including discretionary spending and moving trends, as well as to increased bad debts due to recessionary pressures. Adverse economic conditions affecting disposable consumer income, such as employment levels, business conditions, inflation, deflation, interest rates, tax rates, fuel and energy costs, and other matters could reduce consumer spending or cause consumers to shift their spending to other products and services. A general reduction in the level of discretionary spending or shifts in consumer discretionary spending could adversely affect our growth and profitability.
We continue our focus on maximizing internal growth opportunities and selectively pursuing targeted acquisitions and developments of self-storage properties.
We have one reportable segment: we own, operate, develop, manage and acquire self-storage properties.
31
Our self-storage properties are located in major metropolitan and suburban areas and have numerous customers per store. No single customer represents a significant concentration of our revenues. Our stores in New York, Florida, California and Texas provided approximately 18%, 14%, 11% and 9%, respectively, of total revenues for the nine months ended September 30, 2024.
Summary of Critical Accounting Policies and Estimates
Set forth below is a summary of the accounting policies and estimates that management believes are critical to the preparation of the unaudited consolidated financial statements included in this Report. Certain of the accounting policies used in the preparation of these unaudited consolidated financial statements are particularly important for an understanding of the financial position and results of operations presented in this Report. For additional discussion of the Company’s significant accounting policies, see note 2 to the consolidated financial statements included in the Parent Company’s and Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2023. These policies require the application of judgment and assumptions by management and, as a result, are subject to a degree of uncertainty. Due to this uncertainty, actual results could differ materially from estimates calculated and utilized by management.
Basis of Presentation
The accompanying unaudited consolidated financial statements include all of the accounts of the Company, and its majority-owned and/or controlled subsidiaries. The portion of these entities not owned by the Company is presented as noncontrolling interests as of and during the periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation.
When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed a variable interest entity (“VIE”), and if the Company is deemed to be the primary beneficiary, in accordance with authoritative guidance issued by the Financial Accounting Standards Board (“FASB”) on the consolidation of VIEs. To the extent that the Company (i) has the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and (ii) has the obligation or rights to absorb the VIE’s losses or receive its benefits, then the Company is considered the primary beneficiary. The Company may also consider additional factors included in the authoritative guidance, such as whether or not it is the partner in the VIE that is most closely associated with the VIE. When an entity is not deemed to be a VIE, the Company considers the provisions of additional FASB guidance to determine whether a general partner, or the general partners as a group, controls a limited partnership or similar entity when the limited partners have certain rights. The Company consolidates (i) entities that are VIEs and of which the Company is deemed to be the primary beneficiary and (ii) entities that are non-VIEs which the Company controls and in which the limited partners do not have substantive participating rights, or the ability to dissolve the entity or remove the Company without cause nor substantive participating rights.
Self-Storage Properties
The Company records self-storage properties at cost less accumulated depreciation. Depreciation on the buildings, improvements, and equipment is recorded on a straight-line basis over their estimated useful lives, which range from five to 39 years. Expenditures for significant renovations or improvements that extend the useful life of assets are capitalized. Repairs and maintenance costs are expensed as incurred.
When stores are acquired, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on estimated relative fair values. Allocations to land, building and improvements and equipment are recorded based upon their respective relative fair values as estimated by management. If appropriate, the Company allocates a portion of the purchase price to an intangible asset attributed to the value of in-place leases. This intangible asset is generally amortized to expense over the expected remaining term of the respective leases. Substantially all of the storage leases in place at acquired stores are at market rates, as the majority of the leases are month-to-month contracts. Accordingly, to date, no portion of the purchase price has been allocated to above- or below-market lease intangibles associated with storage leases assumed at acquisition. Above- or below- market lease intangibles associated with assumed leases in which the Company serves as lessee are recorded as an adjustment to the right-of-use asset and reflect the difference between the contractual amounts to be paid pursuant to each in-place lease and management’s estimate of fair market lease rates. These amounts are amortized over the term of the lease. To date, no intangible asset has been
32
recorded for the value of customer relationships, because the Company does not have any concentrations of significant customers and the average customer turnover is fairly frequent.
Long-lived assets classified as “held for use” are reviewed for impairment when events and circumstances such as declines in occupancy and operating results indicate that there may be an impairment. The carrying value of these long-lived assets is compared to the undiscounted future net operating cash flows, plus a terminal value, attributable to the assets to determine if the store’s basis is recoverable. If a store’s basis is not considered recoverable, an impairment loss is recorded to the extent the net carrying value of the asset exceeds the fair value. The impairment loss recognized equals the excess of net carrying value over the related fair value of the asset. There were no impairment losses recognized in accordance with these procedures during the three and nine months ended September 30, 2024 and 2023.
The Company considers long-lived assets to be “held for sale” upon satisfaction of the following criteria: (a) management commits to a plan to sell an asset (or group of assets), (b) the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets, (c) an active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated, (d) the sale of the asset is probable and transfer of the asset is expected to be completed within one year, (e) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value and (f) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
Typically these criteria are all met when the relevant asset is under contract, significant non-refundable deposits have been made by the potential buyer, the assets are immediately available for transfer and there are no contingencies related to the sale that may prevent the transaction from closing. However, each potential transaction is evaluated based on its separate facts and circumstances. Assets classified as held for sale are reported at the lesser of carrying value or fair value less estimated costs to sell and are not depreciated. There were no stores classified as held for sale as of September 30, 2024.
Investments in Unconsolidated Real Estate Ventures
The Company accounts for its investments in unconsolidated real estate ventures under the equity method of accounting when it is determined that the Company has the ability to exercise significant influence over the venture. Under the equity method, investments in unconsolidated real estate ventures are recorded initially at cost, as investments in real estate entities, and subsequently adjusted for equity in earnings (losses) and cash contributions, less cash distributions and impairments. On a periodic basis, management also assesses whether there are any indicators that the carrying value of the Company’s investments in unconsolidated real estate entities may be other than temporarily impaired. An investment is impaired only if the fair value of the investment, as estimated by management, is less than the carrying value of the investment and the decline is other than temporary. To the extent impairment that is other than temporary has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the fair value of the investment, as estimated by management. Fair value is determined through various valuation techniques, including but not limited to, discounted cash flow models, quoted market values and third-party appraisals. There were no impairment losses related to the Company’s investments in unconsolidated real estate ventures recognized during the three and nine months ended September 30, 2024 or 2023.
Differences between the Company’s net investment in unconsolidated real estate ventures and its underlying equity in the net assets of the ventures are primarily a result of the Company acquiring interests in existing unconsolidated real estate ventures. The Company’s net investment in unconsolidated real estate ventures was greater than its underlying equity in the net assets of the unconsolidated real estate ventures by an aggregate of $31.2 million and $31.8 million as of September 30, 2024 and December 31, 2023, respectively. These differences are amortized over the lives of the self-storage properties owned by the real estate ventures. This amortization is included in Equity in earnings of real estate ventures within our consolidated statements of operations.
Results of Operations
The following discussion of our results of operations should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes thereto. Historical results set forth in our consolidated statements of
33
operations reflect only the existing stores for each period presented and should not be taken as indicative of future operations. We consider our same-store portfolio to consist of only those stores owned and operated on a stabilized basis at the beginning and at the end of the applicable periods presented. We consider a store to be stabilized once it has achieved an occupancy rate that we believe, based on our assessment of market-specific data, is representative of similar self-storage assets in the applicable market for a full year measured as of the most recent January 1 and has not been significantly damaged by natural disaster or undergone significant renovation. We believe that same-store results are useful to investors in evaluating our performance because they provide information relating to changes in store-level operating performance without taking into account the effects of acquisitions, developments or dispositions. As of September 30, 2024, we owned 598 same-store properties and 17 non same-store properties. The non same-store property portfolio results include 2023 and 2024 acquisitions, dispositions, newly developed stores, stores with a significant portion of rentable square footage taken out of service or stores that have not yet reached stabilization as defined above. For analytical presentation, all percentages are calculated using the numbers presented in the unaudited consolidated financial statements contained in this Report.
Acquisition and Development Activities
The comparability of our results of operations is affected by the timing of acquisition and disposition activities during the periods reported. The following table summarizes the change in the number of owned stores from January 1, 2023 through September 30, 2024:
| 2024 |
| 2023 | |
Balance - January 1 |
| 611 |
| 611 |
Stores acquired |
| 2 |
| — |
Balance - March 31 |
| 613 |
| 611 |
Stores developed | 2 | — | ||
Balance - June 30 |
| 615 |
| 611 |
Stores acquired |
| — |
| — |
Balance - September 30 |
| 615 |
| 611 |
Stores acquired |
|
| 1 | |
Stores sold (1) |
|
| (1) | |
Balance - December 31 |
|
| 611 |
| (1) | For the quarter ended December 31, 2023, relates to one store that was subject to an involuntary conversion by the Department of Transportation of the State of Illinois. |
34
Comparison of the three months ended September 30, 2024 to the three months ended September 30, 2023 (in thousands)
Non Same-Store | Other/ |
| ||||||||||||||||||||||||||||||||
Same-Store Property Portfolio | Property Portfolio | Eliminations | Total Portfolio |
| ||||||||||||||||||||||||||||||
|
|
|
|
| % |
|
|
|
|
|
|
|
|
|
|
|
|
|
| % |
| |||||||||||||
2024 | 2023 | Change | Change | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | Change | Change |
| ||||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||||||||||||
Rental income | $ | 224,958 | $ | 227,926 | $ | (2,968) |
| (1.3) | % | $ | 5,996 | $ | 4,542 | $ | — | $ | — | $ | 230,954 | $ | 232,468 | $ | (1,514) |
| (0.7) | % | ||||||||
Other property related income |
| 11,067 |
| 9,927 |
| 1,140 |
| 11.5 | % |
| 757 |
| 215 |
| 17,444 |
| 15,715 |
| 29,268 |
| 25,857 |
| 3,411 |
| 13.2 | % | ||||||||
Property management fee income |
| — |
| — |
| — |
| 0.0 | % |
| — |
| — |
| 10,668 |
| 9,551 |
| 10,668 |
| 9,551 |
| 1,117 |
| 11.7 | % | ||||||||
Total revenues |
| 236,025 |
| 237,853 |
| (1,828) |
| (0.8) | % |
| 6,753 |
| 4,757 |
| 28,112 |
| 25,266 |
| 270,890 |
| 267,876 |
| 3,014 |
| 1.1 | % | ||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||||||||||||
Property operating expenses |
| 69,020 |
| 65,556 |
| 3,464 |
| 5.3 | % |
| 2,485 |
| 1,855 |
| 10,363 |
| 10,135 |
| 81,868 |
| 77,546 |
| 4,322 |
| 5.6 | % | ||||||||
NET OPERATING INCOME: |
| 167,005 |
| 172,297 |
| (5,292) |
| (3.1) | % |
| 4,268 |
| 2,902 |
| 17,749 |
| 15,131 |
| 189,022 |
| 190,330 |
| (1,308) |
| (0.7) | % | ||||||||
Store count |
| 598 |
| 598 |
| 17 |
| 13 |
| 615 |
| 611 | ||||||||||||||||||||||
Total square feet |
| 42,990 |
| 42,990 |
| 1,444 |
| 1,108 |
| 44,434 |
| 44,098 | ||||||||||||||||||||||
Period end occupancy |
| 90.2 | % |
| 91.3 | % |
| 74.5 | % |
| 71.2 | % |
| 89.7 | % |
| 90.7 | % | ||||||||||||||||
Period average occupancy |
| 90.8 | % |
| 92.0 | % | ||||||||||||||||||||||||||||
Realized annual rent per occupied sq. ft. (1) | $ | 23.05 | $ | 23.06 | ||||||||||||||||||||||||||||||
Depreciation and amortization |
| 51,210 |
| 49,985 |
| 1,225 |
| 2.5 | % | |||||||||||||||||||||||||
General and administrative |
| 14,265 |
| 14,060 |
| 205 |
| 1.5 | % | |||||||||||||||||||||||||
Subtotal |
| 65,475 |
| 64,045 |
| 1,430 |
| 2.2 | % | |||||||||||||||||||||||||
OTHER (EXPENSE) INCOME | ||||||||||||||||||||||||||||||||||
Interest: | ||||||||||||||||||||||||||||||||||
Interest expense on loans |
| (22,750) |
| (23,204) |
| 454 |
| 2.0 | % | |||||||||||||||||||||||||
Loan procurement amortization expense |
| (986) |
| (1,030) |
| 44 |
| 4.3 | % | |||||||||||||||||||||||||
Equity in earnings of real estate ventures |
| 418 |
| 1,141 |
| (723) |
| (63.4) | % | |||||||||||||||||||||||||
Other |
| 721 |
| (119) |
| 840 |
| 705.9 | % | |||||||||||||||||||||||||
Total other (expense) income |
| (22,597) |
| (23,212) |
| 615 |
| 2.6 | % | |||||||||||||||||||||||||
NET INCOME |
| 100,950 |
| 103,073 |
| (2,123) |
| (2.1) | % | |||||||||||||||||||||||||
Net income attributable to noncontrolling interests in the Operating Partnership |
| (551) |
| (640) |
| 89 |
| 13.9 | % | |||||||||||||||||||||||||
Net loss attributable to noncontrolling interests in subsidiaries |
| 398 |
| 212 |
| 186 |
| 87.7 | % | |||||||||||||||||||||||||
NET INCOME ATTRIBUTABLE TO THE COMPANY'S COMMON SHAREHOLDERS | $ | 100,797 | $ | 102,645 | $ | (1,848) |
| (1.8) | % | |||||||||||||||||||||||||
| (1) | Realized annual rent per occupied square foot is computed by dividing rental income by the weighted average occupied square feet for the period. |
Revenues
Revenues increased from $267.9 million for the three months ended September 30, 2023 to $270.9 million for the three months ended September 30, 2024, an increase of $3.0 million, or 1.1%. This increase was primarily attributable to additional revenues from stores acquired or opened in 2023 and 2024 included in our non same-store portfolio, an increase in fee income, increased customer storage protection plan participation at our owned and managed stores, and an increase in property management fee income due to an increase in the number of stores under management.
Operating Expenses
Property operating expenses increased from $77.5 million for the three months ended September 30, 2023 to $81.9 million for the three months ended September 30, 2024, an increase of $4.3 million, or 5.6%. This increase was primarily attributable to an increase in advertising costs within our same-store portfolio and additional expenses from stores acquired or opened in 2023 and 2024 included in our non same-store portfolio.
Other (Expense) Income
Interest expense on loans decreased from $23.2 million during the three months ended September 30, 2023 to $22.8 million during the three months ended September 30, 2024, a decrease of $0.5 million, or 2.0%. The decrease was attributable to a decrease in the average outstanding debt balance and lower interest rates during the 2024 period compared to the 2023 period. The average outstanding debt balance decreased from $3.00 billion during the three months ended September 30, 2023 to $2.94 billion during the three months ended September 30, 2024. The weighted average effective interest rate on our outstanding debt decreased from 3.04% during the three months ended September 30, 2023 to 2.99% for the three months ended September 30, 2024.
.
35
Comparison of the nine months ended September 30, 2024 to the nine months ended September 30, 2023 (in thousands)
Non Same-Store | Other/ | |||||||||||||||||||||||||||||||||
Same-Store Property Portfolio | Property Portfolio | Eliminations | Total Portfolio | |||||||||||||||||||||||||||||||
|
|
|
|
| % |
|
|
|
|
|
|
|
|
|
|
|
|
|
| % | ||||||||||||||
2024 | 2023 | Change | Change | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | Change | Change | |||||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||||||||||||
Rental income | $ | 665,743 | $ | 669,257 | $ | (3,514) |
| (0.5) | % | $ | 17,192 | $ | 12,705 | $ | — | $ | — | $ | 682,935 | $ | 681,962 | $ | 973 |
| 0.1 | % | ||||||||
Other property related income |
| 31,927 |
| 29,497 |
| 2,430 |
| 8.2 | % |
| 1,663 |
| 572 |
| 50,952 |
| 45,932 |
| 84,542 |
| 76,001 |
| 8,541 |
| 11.2 | % | ||||||||
Property management fee income |
| — |
| — |
| — |
| 0.0 | % |
| — |
| — |
| 31,028 |
| 27,246 |
| 31,028 |
| 27,246 |
| 3,782 |
| 13.9 | % | ||||||||
Total revenues |
| 697,670 |
| 698,754 |
| (1,084) |
| (0.2) | % |
| 18,855 |
| 13,277 |
| 81,980 |
| 73,178 |
| 798,505 |
| 785,209 |
| 13,296 |
| 1.7 | % | ||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||||||||||||
Property operating expenses |
| 200,268 |
| 191,012 |
| 9,256 |
| 4.8 | % |
| 6,988 |
| 5,154 |
| 34,746 |
| 27,328 |
| 242,002 |
| 223,494 |
| 18,508 |
| 8.3 | % | ||||||||
NET OPERATING INCOME: |
| 497,402 |
| 507,742 |
| (10,340) |
| (2.0) | % |
| 11,867 |
| 8,123 |
| 47,234 |
| 45,850 |
| 556,503 |
| 561,715 |
| (5,212) |
| (0.9) | % | ||||||||
Store count |
| 598 |
| 598 |
| 17 |
| 13 |
| 615 |
| 611 | ||||||||||||||||||||||
Total square footage |
| 42,990 |
| 42,990 |
| 1,444 |
| 1,108 |
| 44,434 |
| 44,098 | ||||||||||||||||||||||
Period end occupancy |
| 90.2 | % |
| 91.3 | % |
| 74.5 | % |
| 71.2 | % |
| 89.7 | % |
| 90.7 | % | ||||||||||||||||
Period average occupancy |
| 90.9 | % |
| 92.0 | % | ||||||||||||||||||||||||||||
Realized annual rent per occupied sq. ft. (1) | $ | 22.73 | $ | 22.57 | ||||||||||||||||||||||||||||||
Depreciation and amortization |
| 152,962 |
| 150,672 |
| 2,290 |
| 1.5 | % | |||||||||||||||||||||||||
General and administrative |
| 44,512 |
| 43,059 |
| 1,453 |
| 3.4 | % | |||||||||||||||||||||||||
Subtotal |
| 197,474 |
| 193,731 |
| 3,743 |
| 1.9 | % | |||||||||||||||||||||||||
OTHER (EXPENSE) INCOME | ||||||||||||||||||||||||||||||||||
Interest: | ||||||||||||||||||||||||||||||||||
Interest expense on loans |
| (68,436) |
| (70,439) |
| 2,003 |
| 2.8 | % | |||||||||||||||||||||||||
Loan procurement amortization expense |
| (3,031) |
| (3,111) |
| 80 |
| 2.6 | % | |||||||||||||||||||||||||
Equity in earnings of real estate ventures |
| 1,688 |
| 4,482 |
| (2,794) |
| (62.3) | % | |||||||||||||||||||||||||
Other |
| 744 |
| 382 |
| 362 |
| 94.8 | % | |||||||||||||||||||||||||
Total other expense |
| (69,035) |
| (68,686) |
| (349) |
| (0.5) | % | |||||||||||||||||||||||||
NET INCOME |
| 289,994 |
| 299,298 |
| (9,304) |
| (3.1) | % | |||||||||||||||||||||||||
Net income attributable to noncontrolling interests in the Operating Partnership |
| (1,616) |
| (1,870) |
| 254 |
| 13.6 | % | |||||||||||||||||||||||||
Net loss attributable to noncontrolling interests in subsidiaries |
| 910 |
| 662 |
| 248 |
| 37.5 | % | |||||||||||||||||||||||||
NET INCOME ATTRIBUTABLE TO THE COMPANY'S COMMON SHAREHOLDERS | $ | 289,288 | $ | 298,090 | $ | (8,802) |
| (3.0) | % | |||||||||||||||||||||||||
| (1) | Realized annual rent per occupied square foot is computed by dividing rental income by the weighted average occupied square feet for the period. |
Revenues
Revenues increased from $785.2 million for the nine months ended September 30, 2023 to $798.5 million for the nine months ended September 30, 2024, an increase of $13.3 million, or 1.7%. This increase was primarily attributable to additional revenues from stores acquired or opened in 2023 and 2024 included in our non same-store portfolio, an increase in fee income, increased customer storage protection plan participation at our owned and managed stores, and an increase in property management fee income due to an increase in the number of stores under management.
Operating Expenses
Property operating expenses increased from $223.5 million for the nine months ended September 30, 2023 to $242.0 million for the nine months ended September 30, 2024, an increase of $18.5 million, or 8.3%. This increase was primarily attributable to an increase in employee medical coverage, additional expenses from stores acquired or opened in 2023 and 2024 included in our non same-store portfolio, and increases in property taxes and insurance as well as advertising and personnel expense within our same-store portfolio.
Other (Expense) Income
Interest expense on loans decreased from $70.4 million during the nine months ended September 30, 2023 to $68.4 million during the nine months ended September 30, 2024, a decrease of $2.0 million, or 2.8%. The decrease was attributable to a decrease in the average outstanding debt balance and lower interest rates during the 2024 period compared to the 2023 period. The average outstanding debt balance decreased from $3.03 billion during the nine months ended September 30, 2023 to $2.97 billion during the nine months ended September 30, 2024. The weighted average effective interest rate on our outstanding debt decreased from 3.05% during the nine months ended September 30, 2023 to 3.01% for the nine months ended September 30, 2024.
36
Equity in earnings of real estate ventures decreased from $4.5 million during the nine months ended September 30, 2023 to $1.7 million for the nine months ended September 30, 2024, a decrease of $2.8 million, or 62.3%. The decrease was primarily due to distributions in excess of our equity investment in 191 IV CUBE Southeast LLC (“HVPSE”) during the nine months ended September 30, 2023. There were no such distributions during the 2024 period.
Cash Flows
Comparison of the nine months ended September 30, 2024 to the nine months ended September 30, 2023
A comparison of cash flows from operating, investing and financing activities for the nine months ended September 30, 2024 and 2023 is as follows:
Nine Months Ended September 30, |
| |||||||||
Net cash provided by (used in): |
| 2024 |
| 2023 |
| Change |
| |||
(in thousands) |
| |||||||||
Operating activities | $ | 466,408 | $ | 468,840 | $ | (2,432) | ||||
Investing activities | $ | (72,861) | $ | (58,532) | $ | (14,329) | ||||
Financing activities | $ | (356,409) | $ | (409,333) | $ | 52,924 | ||||
Cash provided by operating activities decreased from $468.8 million for the nine months ended September 30, 2023 to $466.4 million for the nine months ended September 30, 2024, reflecting a decrease of $2.4 million. The decreased cash flow from operating activities was primarily attributable to decreased net operating income levels in the same-store portfolio in the 2024 period as compared to the corresponding 2023 period. This decrease was partially offset by increased cash flow from stores acquired and developed in 2023 and 2024.
Cash used in investing activities increased from $58.5 million for the nine months ended September 30, 2023 to $72.9 million for the nine months ended September 30, 2024, reflecting an increase of $14.3 million. This change was primarily the result of a $20.6 million increase in acquisitions of storage properties. We acquired two stores during the nine months ended September 30, 2024, with no acquisitions during the corresponding 2023 period. This increase was partially offset by a $10.7 million decrease in development costs, primarily due to the payment during the 2023 period of a put liability associated with a previously consolidated joint venture.
Cash used in financing activities decreased from $409.3 million for the nine months ended September 30, 2023 to $356.4 million for the nine months ended September 30, 2024, reflecting a decrease of $52.9 million. This change was primarily the result of a $32.9 million increase in proceeds received from the issuance of common shares due to the sale of 0.6 million common shares through our at-the-market equity program during the 2024 period. There were no such transactions during the 2023 period. The change was also due to a $27.6 million reduction in net repayments on our revolving credit facility during the 2024 period as compared to the corresponding 2023 period. These changes were partially offset by a $14.2 million increase in cash distributions paid to common shareholders and noncontrolling interests in the Operating Partnership due to an increase in the common divided per share/unit.
Liquidity and Capital Resources
Liquidity Overview
Our cash flow from operations has historically been one of our primary sources of liquidity used to fund debt service, distributions and capital expenditures. We derive substantially all of our revenue from customers who lease space at our stores and fees earned from managing stores. Therefore, our ability to generate cash from operations is dependent on the rents and management fees that we are able to charge and collect from our customers and clients. We believe that the properties in which we invest, self-storage properties, are less sensitive than other real estate product types to near-term economic downturns. However, prolonged economic downturns could adversely affect our cash flows from operations.
37
In order to qualify as a REIT for federal income tax purposes, the Parent Company is required to distribute at least 90% of its REIT taxable income, excluding capital gains, to its shareholders on an annual basis, and must pay federal income tax on undistributed income to the extent it distributes less than 100% of its REIT taxable income. The nature of our business, coupled with the requirement that we distribute a substantial portion of our income on an annual basis, will cause us to have substantial liquidity needs over both the short and long term.
Our short-term liquidity needs consist primarily of funds necessary to pay operating expenses associated with our stores, refinancing of certain indebtedness, interest expense and scheduled principal payments on debt, expected distributions to limited partners and shareholders, capital expenditures and the acquisition and development of new stores. These funding requirements will vary from year to year, in some cases significantly. For the remainder of the 2024 fiscal year, we expect recurring capital expenditures to be approximately $3.0 million to $8.0 million, planned capital improvements and store upgrades to be approximately $1.5 million to $6.5 million and costs associated with the development of new stores to be approximately $2.0 to $7.0 million. Our currently scheduled principal payments on our outstanding debt are approximately $0.2 million for the remainder of 2024.
Our most restrictive financial covenants limit the amount of additional leverage we can add; however, we believe cash flows from operations, access to equity financing, including through our at-the-market equity program, and available borrowings under our Revolver (defined below) provide adequate sources of liquidity to enable us to execute our current business plan and remain in compliance with our covenants.
Our liquidity needs beyond 2024 consist primarily of contractual obligations which include repayments of indebtedness at maturity, as well as potential discretionary expenditures such as (i) non-recurring capital expenditures; (ii) redevelopment of operating stores; (iii) acquisitions of additional stores; and (iv) development of new stores. We will have to satisfy the portion of our needs not covered by cash flow from operations through additional borrowings, including borrowings under our Revolver, sales of common or preferred shares of the Parent Company and common or preferred units of the Operating Partnership and/or cash generated through store dispositions and joint venture transactions.
We believe that, as a publicly traded REIT, we will have access to multiple sources of capital to fund our long-term liquidity requirements, including the incurrence of additional debt and the issuance of additional equity. However, we cannot provide any assurance that this will be the case. Our ability to incur additional debt will be dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. In addition, dislocation in the United States debt markets may significantly reduce the availability and increase the cost of long-term debt capital, including conventional mortgage financing and commercial mortgage-backed securities financing. There can be no assurance that such capital will be readily available in the future. Our ability to access the equity capital markets will be dependent on a number of factors as well, including general market conditions for REITs and market perceptions of us.
As of September 30, 2024, we had approximately $43.5 million in available cash and cash equivalents. In addition, we had approximately $849.4 million of availability for borrowings under our Revolver.
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Unsecured Senior Notes
Our unsecured senior notes are summarized as follows (collectively referred to as the “Senior Notes”):
| September 30, | December 31, |
| Effective | Issuance | Maturity | |||||||
Unsecured Senior Notes |
| 2024 |
| 2023 |
| Interest Rate | Date | Date | |||||
(in thousands) | |||||||||||||
$300M 4.000% Guaranteed Notes due 2025 (1) | $ | 300,000 | $ | 300,000 |
| 3.99 | % | Various (1) | Nov-25 | ||||
$300M 3.125% Guaranteed Notes due 2026 | 300,000 | 300,000 | 3.18 | % | Aug-16 | Sep-26 | |||||||
$550M 2.250% Guaranteed Notes due 2028 | 550,000 | 550,000 | 2.33 | % | Nov-21 | Dec-28 | |||||||
$350M 4.375% Guaranteed Notes due 2029 | 350,000 | 350,000 | 4.46 | % | Jan-19 | Feb-29 | |||||||
$350M 3.000% Guaranteed Notes due 2030 | 350,000 | 350,000 | 3.04 | % | Oct-19 | Feb-30 | |||||||
$450M 2.000% Guaranteed Notes due 2031 | 450,000 | 450,000 | 2.10 | % | Oct-20 | Feb-31 | |||||||
$500M 2.500% Guaranteed Notes due 2032 | 500,000 | 500,000 | 2.59 | % | Nov-21 | Feb-32 | |||||||
Principal balance outstanding | 2,800,000 | 2,800,000 | |||||||||||
Less: Discount on issuance of unsecured senior notes, net | (8,908) | (10,148) | |||||||||||
Less: Loan procurement costs, net | (11,496) | (13,362) | |||||||||||
Total unsecured senior notes, net | $ | 2,779,596 | $ | 2,776,490 | |||||||||
| (1) | On April 4, 2017, the Operating Partnership issued $50.0 million of its 4.000% senior notes due 2025, which are part of the same series as the $250.0 million principal amount of the Operating Partnership’s 4.000% senior notes due November 15, 2025 issued on October 26, 2015. The $50.0 million and $250.0 million tranches were priced at 101.343% and 99.735%, respectively, of the principal amount to yield 3.811% and 4.032%, respectively, to maturity. The combined weighted average effective interest rate of the 2025 notes is 3.994%. |
The indenture under which the Senior Notes were issued restricts the ability of the Operating Partnership and its subsidiaries to incur debt unless the Operating Partnership and its consolidated subsidiaries comply with a leverage ratio not to exceed 60% and an interest coverage ratio of more than 1.5:1.0 after giving effect to the incurrence of the debt. The indenture also restricts the ability of the Operating Partnership and its subsidiaries to incur secured debt unless the Operating Partnership and its consolidated subsidiaries comply with a secured debt leverage ratio not to exceed 40% after giving effect to the incurrence of the debt. The indenture also contains other financial and customary covenants, including a covenant not to own unencumbered assets with a value less than 150% of the unsecured indebtedness of the Operating Partnership and its consolidated subsidiaries. As of and for the three and nine months ended September 30, 2024, the Operating Partnership was in compliance with all of the financial covenants under the Senior Notes.
Revolving Credit Facility
On October 26, 2022, we amended and restated, in its entirety, our unsecured revolving credit agreement (the “Second Amended and Restated Credit Facility”) which, subsequent to the amendment and restatement, is comprised of an $850.0 million unsecured revolving credit facility (the “Revolver”) maturing on February 15, 2027. Under the Second Amended and Restated Credit Facility, pricing on the Revolver is dependent upon our unsecured debt credit ratings and leverage levels. At our current unsecured debt credit ratings and leverage levels, amounts drawn under the Revolver are priced using a margin of 0.775% plus a facility fee of 0.15% over the Secured Overnight Financing Rate ("SOFR") plus a 0.10% SOFR adjustment.
As of September 30, 2024, borrowings under the Revolver had an interest rate of 5.99%. Additionally, as of September 30, 2024, $849.4 million was available for borrowing under the Revolver. The available balance under the Revolver is reduced by an outstanding letter of credit of $0.6 million.
Under the Second Amended and Restated Credit Facility, our ability to borrow under the Revolver is subject to ongoing compliance with certain financial covenants which include, among other things, (1) a maximum total indebtedness to total asset value of 60.0%, and (2) a minimum fixed charge coverage ratio of 1.5:1.0. As of and for the
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three and nine months ended September 30, 2024, the Operating Partnership was in compliance with all financial covenants of the Second Amended and Restated Credit Facility.
At-the-Market Equity Program
We maintain an at-the-market equity program that enables us to offer and sell up to 60.0 million common shares through sales agents pursuant to equity distribution agreements (the “Equity Distribution Agreements”).
During the three months ended September 30, 2024, we sold a total of 0.6 million common shares at an average sales price of $54.20 per share, resulting in net proceeds of $32.8 million, after deducting offering costs. We expect that the proceeds from the 2024 sales under the program will be used to fund the acquisition and development of self-storage properties and for general corporate purposes. As of September 30, 2024, 5.2 million common shares remained available for issuance under the Equity Distribution Agreements.
Non-GAAP Financial Measures
NOI
We define net operating income, which we refer to as “NOI”, as total continuing revenues less continuing property operating expenses. NOI also can be calculated by adding back to net income (loss): interest expense on loans, loan procurement amortization expense, loss on early extinguishment of debt, acquisition-related costs, equity in losses of real estate ventures, other expense, depreciation and amortization expense, general and administrative expense, and deducting from net income (loss): equity in earnings of real estate ventures, gains from sales of real estate, net, other income, gains from remeasurement of investments in real estate ventures and interest income. NOI is not a measure of performance calculated in accordance with GAAP.
We use NOI as a measure of operating performance at each of our stores, and for all of our stores in the aggregate. NOI should not be considered as a substitute for operating income, net income, cash flows provided by operating, investing and financing activities, or other income statement or cash flow statement data prepared in accordance with GAAP.
We believe NOI is useful to investors in evaluating our operating performance because:
| ● | it is one of the primary measures used by our management to evaluate the economic productivity of our stores, including our ability to lease our stores, increase pricing and occupancy and control our property operating expenses; |
| ● | it is widely used in the real estate and self-storage industries to measure the performance and value of real estate assets without regard to various items included in net income that do not relate to or are not indicative of operating performance, such as depreciation and amortization, which can vary depending upon accounting methods and the book value of assets; and |
| ● | it helps our investors to meaningfully compare the results of our operating performance from period to period by removing the impact of our capital structure (primarily interest expense on our outstanding indebtedness) and depreciation of our basis in our assets from our operating results. |
There are material limitations to using a measure such as NOI, including the difficulty associated with comparing results among more than one company and the inability to analyze certain significant items, including depreciation and interest expense, that directly affect our net income. We compensate for these limitations by considering the economic effect of the excluded expense items independently as well as in connection with our analysis of net income. NOI should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP, such as total revenues, total operating expenses, and net income.
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FFO
Funds from operations (“FFO”) is a widely used performance measure for real estate companies and is provided here as a supplemental measure of operating performance. The April 2002 National Policy Bulletin of the National Association of Real Estate Investment Trusts, as amended and restated, defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of real estate and related impairment charges, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures.
Management uses FFO as a key performance indicator in evaluating the operations of our stores. Given the nature of our business as a real estate owner and operator, we consider FFO a key measure of our operating performance that is not specifically defined by accounting principles generally accepted in the United States. We believe that FFO is useful to management and investors as a starting point in measuring our operational performance because FFO excludes various items included in net income that do not relate to or are not indicative of our operating performance such as gains (or losses) from sales of real estate, gains from remeasurement of investments in real estate ventures, impairments of depreciable assets, and depreciation, which can make periodic and peer analyses of operating performance more difficult. Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies.
FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance. FFO does not represent cash generated from operating activities determined in accordance with GAAP and is not a measure of liquidity or an indicator of our ability to make cash distributions. We believe that to further understand our performance, FFO should be compared with our reported net income and considered in addition to cash flows computed in accordance with GAAP, as presented in our unaudited consolidated financial statements.
The following table presents a reconciliation of net income attributable to the Company’s common shareholders to FFO attributable to the Company’s common shareholders and third-party OP unitholders for the three and nine months ended September 30, 2024 and 2023.
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Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
(in thousands) | ||||||||||||
Net income attributable to the Company’s common shareholders | $ | 100,797 | $ | 102,645 | $ | 289,288 | $ | 298,090 | ||||
Add (deduct): | ||||||||||||
Real estate depreciation and amortization: | ||||||||||||
Real property |
| 49,639 |
| 48,404 |
| 148,324 |
| 146,218 | ||||
Company’s share of unconsolidated real estate ventures |
| 2,025 |
| 2,104 |
| 6,163 |
| 6,353 | ||||
Loss (gain) from sales of real estate, net (1) |
| — |
| 236 |
| — |
| (1,477) | ||||
Net income attributable to noncontrolling interests in the Operating Partnership |
| 551 |
| 640 |
| 1,616 |
| 1,870 | ||||
FFO attributable to the Company's common shareholders and third-party OP unitholders | $ | 153,012 | $ | 154,029 | $ | 445,391 | $ | 451,054 | ||||
Weighted average diluted shares outstanding | 227,149 | 226,210 | 226,805 |
| 226,206 | |||||||
Weighted average diluted units outstanding owned by third parties | 1,237 |
| 1,404 |
| 1,262 |
| 1,415 | |||||
Weighted average diluted shares and units outstanding |
| 228,386 |
| 227,614 |
| 228,067 | 227,621 | |||||
| (1) | For the three months ended September 30, 2023, represents a loss related to the sale of the California Yacht Club, which was acquired in 2021 as part of the Company's acquisition of LAACO, Ltd. This amount is included in the component of other (expense) income designated as Other within our consolidated statements of operations. For the nine months ended September 30, 2023, includes distributions received in excess of our investment in HVPSE. This amount is included in Equity in earnings of real estate ventures within our consolidated statements of operations. |
Off-Balance Sheet Arrangements
We do not have off-balance sheet arrangements, financings or other relationships with other unconsolidated entities (other than our co-investment partnerships) or other persons, also known as variable interest entities, not previously discussed.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our future income, cash flows and fair values relevant to financial instruments depend upon prevailing market interest rates.
Market Risk
Our investment policy relating to cash and cash equivalents is to preserve principal and liquidity while maximizing returns through the investment of available funds.
Effect of Changes in Interest Rates on our Outstanding Debt
Our interest rate risk objectives are to limit the impact of interest rate fluctuations on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, we may, from time to time, choose to manage our exposure to fluctuations in market interest rates for a portion of our borrowings through the use of derivative financial instruments such as interest rate swaps or caps to mitigate our interest rate risk on a related financial instrument or to effectively lock the interest rate on a portion of our variable-rate debt. The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market interest rates. The range of changes chosen
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reflects our view of changes which are reasonably possible over a one-year period. Market values are the present value of projected future cash flows based on the market interest rates chosen.
As of September 30, 2024, our consolidated debt consisted of $2.89 billion of outstanding mortgage loans and notes payable and unsecured senior notes that are subject to fixed rates. Borrowings under our unsecured credit facility are subject to floating rates. Changes in market interest rates have different impacts on the fixed- and variable-rate portions of our debt portfolio. A change in market interest rates on the fixed portion of the debt portfolio impacts the net financial instrument position, but has no impact on interest incurred or cash flows. A change in market interest rates on the variable portion of the debt portfolio impacts the interest incurred and cash flows, but does not impact the net financial instrument position.
If market interest rates increase by 100 basis points, the fair value of our outstanding fixed-rate mortgage debt and unsecured senior notes would decrease by approximately $109.7 million. If market interest rates decrease by 100 basis points, the fair value of our outstanding fixed-rate mortgage debt and unsecured senior notes would increase by approximately $114.9 million.
ITEM 4. CONTROLS AND PROCEDURES
Controls and Procedures (Parent Company)
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Report, the Parent Company carried out an evaluation, under the supervision and with the participation of its management, including its chief executive officer and chief financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) under the Exchange Act).
Based on that evaluation, the Parent Company’s chief executive officer and chief financial officer have concluded that the Parent Company’s disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information required to be disclosed by the Parent Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the Parent Company’s management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There has been no change in the Parent Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
Controls and Procedures (Operating Partnership)
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Report, the Operating Partnership carried out an evaluation, under the supervision and with the participation of its management, including the Operating Partnership’s chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Operating Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) under the Exchange Act).
Based on that evaluation, the Operating Partnership’s chief executive officer and chief financial officer have concluded that the Operating Partnership’s disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information required to be disclosed by the Operating Partnership in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported
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within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the Operating Partnership’s management, including the Operating Partnership’s chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There has been no change in the Operating Partnership’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during its most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
To our knowledge and except as otherwise disclosed in this quarterly report, no legal proceedings are pending against us, other than routine actions and administrative proceedings, and other actions not deemed material, and which, in the aggregate, are not expected to have a material adverse effect on our financial condition, results of operations or cash flows.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Repurchases of Parent Company Common Shares
The following table provides information about repurchases of the Parent Company’s common shares during the three months ended September 30, 2024:
| Total Number of Shares Purchased (1) |
| Average |
| Total |
| Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs |
| ||
July 1 - July 31 | 643 | $ | 43.96 | N/A | 3,000,000 | |||||
August 1 - August 31 | — | $ | — | N/A | 3,000,000 | |||||
September 1 - September 30 | — | $ | — | N/A | 3,000,000 | |||||
Total |
| 643 | $ | 43.96 |
| N/A |
| 3,000,000 | ||
| (1) | Represents common shares withheld by the Parent Company upon the vesting of restricted shares to cover employee tax obligations. |
On June 26, 2007, the Board of Trustees of the Parent Company (the “Board”) approved a share repurchase program for up to 3.0 million of the Parent Company’s outstanding common shares. Unless terminated earlier by resolution of the Board, the program will expire when the number of authorized shares has been repurchased. The Parent Company has made no repurchases under this program to date.
Unregistered Sales of Equity Securities
During the three months ended September 30, 2024, the Parent Company issued 6,000 common shares upon redemption of an equal number of OP Units in the Operating Partnership held by a limited partner. The issuance of such
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common shares was effected in reliance upon an exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
ITEM 5. OTHER INFORMATION
Trading Arrangements
During the three months ended September 30, 2024, none of our trustees or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended)
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項目6. 附件
展品編號。 |
| 展覽說明 | ||
根據2002年薩班斯-豪利法案第302條，根據《交易所法案》第13a-14(a)/15d-14(a)條的規定，透過申報採納的CubeSmart首席執行官的證書。(隨附申報) | ||||
根據2002年薩班斯-豪利法案第302條，根據《交易所法案》第13a-14(a)/15d-14(a)條的規定，透過申報採納的致富金融CubeSmart財務長的證書。(隨附申報) | ||||
CubeSmart, L.P.的首席執行官的認證，根據《交易所法》第13a-14(a)/15d-14(a)條的規定，按照2002年薩班斯-豪利法案第302條的採納。 （隨附提交） | ||||
cubesmart有資本財務長的證書，依據2002年美國交易所法案第13a-14(a) / 15d-14(a)條規定採納，並根據薩班斯-奧克斯利法案第302條採納。(隨附文件) | ||||
據美國18 U.S.C.第1350條，cubesmart的首席執行官和財務長均已簽署證書，依據2002年薩班斯-奧克斯利法案第906條採納。(已提供文件) | ||||
CubeSmart, L.P.首席執行官和致富金融(臨時代碼)根據Sarbanes-Oxley Act of 2002第906條的採納，根據美國法典第1350條提出的認證（隨附文件） | ||||
101 | 以下是 cubesmart 和 cubesmart. L.P. 於2024年9月30日結束的三個月的財務信息，以內聯XBRL（可擴展商業報告語言）格式編排：（i）綜合資產負債表、（ii）綜合營運報表、（iii）綜合現金流量表，及（iv）未經審核的綜合財務報表附註，按文本塊形式提供。（附檔） | |||
104 | 封面頁互動資料文件-封面頁互動資料文件未出現在互動資料文件中，因其XBRL標籤已嵌入行內XBRL文件中 | |||
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登記人簽名
根據《證券交易法》的要求，被登記者已經按照授權人的要求在本報告上簽名。
cubesmart | |||
（註冊者） | |||
日期：2024年11月1日 | 作者： | Christopher P. Marr | |
Christopher P. Marr, 致富金融執行長 | |||
（首席行政主管） | |||
日期：2024年11月1日 | 作者： | /s/ Timothy m. Martin | |
Timothy m. Martin, Chief Financial Officer | |||
(信安金融臨時代碼官員) | |||
日期：2024年11月1日 | 作者： | /s/ 馬修D. 德納利 | |
馬修D. 德納利，財務長會計師 | |||
(主要會計主管) | |||
簽署人
根據《證券交易法》的要求，被登記者已經按照授權人的要求在本報告上簽名。
cubesmart, L.P. | |||
（註冊者） | |||
日期：2024年11月1日 | 作者： | /s/ Christopher P. Marr | |
Christopher P. Marr, Chief Executive Officer | |||
（首席行政主管） | |||
日期：2024年11月1日 | 作者： | 臨時代碼 Timothy M. Martin | |
Timothy M. Martin，財務長 | |||
(信安金融臨時代碼官員) | |||
日期：2024年11月1日 | 作者： | /s/ Matthew D. DeNarie | |
Matthew D. DeNarie，財務長 | |||
(主要會計主管) | |||
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