MALVERN, Pa., July 25, 2019 (GLOBE NEWSWIRE) -- CubeSmart (NYSE: CUBE) today announced its operating results for the three and six months ended June 30, 2019.

“We had a very active and productive second quarter. Our HVP III venture came full circle, as we and our partner each achieved our strategic objectives for the investment. The venture sold 50 of its 68 stores to an unaffiliated third-party buyer, enabling us to unlock our promoted interest and buy out our partner in the 18 assets we targeted at the outset for an attractive valuation,” commented President and Chief Executive Officer Christopher P. Marr. “Additionally, we added 59 stores to our third-party management platform during the quarter and opened two development properties. We remain focused on maintaining a disciplined approach to capital allocation and generating attractive risk-adjusted returns for shareholders.”

Key Highlights for the Quarter

• Reported earnings per share (“EPS”) attributable to the Company’s common shareholders of $0.26.
• Reported funds from operations (“FFO”) per share, as adjusted, of $0.42, representing a year-over-year increase of 2.4%.
• Increased same-store (467 stores) net operating income (“NOI”) 1.3% year over year, driven by 2.0% revenue growth and a 3.8% increase in property operating expenses.
• Same-store occupancy during the quarter averaged 93.1% and ended the quarter at 93.7%.
• Our HVP III joint venture sold 50 properties for $293.5 million.
• Acquired our partner’s 90% interest in the remaining 18 properties owned by HVP III for $128.3 million.
• Closed on three additional property acquisitions totaling $20.6 million.
• Opened for operation two development properties for a total investment of $72.6 million.
• Sold 3.4 million common shares at an average sales price of $33.30 per share, resulting in net proceeds of $110.5 million.
• Amended and restated our unsecured revolving credit facility, increasing the size from $500 million to $750 million.
• Added 59 stores to our third-party management platform during the quarter, bringing our total third-party managed store count to 648.

Financial Results

Net income attributable to the Company’s common shareholders was $49.4 million for the second quarter of 2019, compared with $38.4 million for the second quarter of 2018. A significant driver of the year over year increase was the Company’s 10% portion of the $106.7 million gain on sale of real estate recognized by our HVP III joint venture. EPS attributable to the Company’s common shareholders was $0.26 for the second quarter of 2019, compared with $0.21 for the same period last year.

FFO, as adjusted, was $81.1 million for the second quarter of 2019, compared with $75.8 million for the second quarter of 2018. FFO per share, as adjusted, increased 2.4% to $0.42 for the second quarter of 2019, compared with $0.41 for the same period last year.

Investment Activity

Acquisition Activity

During the quarter ended June 30, 2019, the Company acquired 21 stores located in Arizona (1), Florida (2), Georgia (1), Massachusetts (7), North Carolina (1), South Carolina (7), and Tennessee (2) for $148.8 million. In total for the year through the date of this press release, the Company has acquired 22 properties for $170.8 million and currently has three additional properties under contract for $66.4 million that are expected to close by the first quarter of 2020.

Unconsolidated Joint Venture Activity

On June 5, 2019, the Company’s joint venture, HVP III, sold 50 of its 68 stores to an unaffiliated third-party buyer for $293.5 million, resulting in a gain to the venture of $106.7 million. On June 6, 2019, the Company acquired its partner’s 90% ownership interest in the venture’s remaining 18 properties. The purchase price for its partner’s ownership interest was $128.3 million, comprised of cash consideration of $120.0 million plus $8.3 million of the Company’s escrowed proceeds from the venture’s sale of the 50 properties.

During the second quarter of 2019 and through the date of this press release, the Company’s joint venture, HVP IV, acquired four properties located in Florida (1), Pennsylvania (1) and Texas (2) for $42.2 million. Additionally, HVP IV has three properties under contract for $71.0 million that are expected to close during the remainder of 2019.

Development Activity

During the second quarter of 2019, the Company opened for operation two development properties, one located in New York and one located in New Jersey, for a total investment of $72.6 million. As of June 30, 2019, the Company had five joint venture development properties under construction. The Company anticipates investing a total of $126.0 million related to these projects and had invested $63.6 million of that total as of June 30, 2019. These stores are located in New York (2), Massachusetts (2), and Virginia and are expected to open at various times between the third quarter of 2019 and the first quarter of 2021.

Third-Party Management

As of June 30, 2019, the Company’s third-party management program included 648 stores totaling 42.8 million square feet. During the three and six months ended June 30, 2019, the Company added 59 stores and 105 stores, respectively, to its third-party management program.

Same-Store Results

The Company’s same-store portfolio at June 30, 2019 included 467 stores containing approximately 32.4 million rentable square feet, or approximately 89.9% of the aggregate rentable square feet of the Company’s 516 owned stores. These same-store properties represented approximately 94.2% of property net operating income for the quarter ended June 30, 2019.

Same-store physical occupancy at period end for the second quarter of 2019 was 93.7%, compared with 94.1% for the same quarter of last year. Same-store revenues for the second quarter of 2019 increased 2.0% and same-store operating expenses increased 3.8% from the same quarter in 2018. Same-store net operating income increased 1.3%, as compared with the same period in 2018.

Operating Results

As of June 30, 2018, the Company’s total owned portfolio included 516 stores containing 36.0 million rentable square feet and had a physical occupancy of 91.6%.

Revenues increased $11.2 million and property operating expenses increased $0.6 million in the second quarter of 2019, as compared with the same period in 2018. Increases in revenues were primarily attributable to increased net effective rents in the same-store portfolio as well as revenues generated from property acquisitions and recently opened development properties. Increases in property operating expenses were primarily attributable to increased expenses associated with newly acquired or developed stores.

Interest expense increased from $15.5 million during the three months ended June 30, 2018 to $18.1 million during the three months ended June 30, 2019, an increase of $2.6 million. The increase is attributable to a higher amount of outstanding debt and higher interest rates during the 2019 period. To fund a portion of the Company’s growth, the average debt balance during the three months ended June 30, 2019 increased approximately $128 million from the same period in 2018 from $1,694 million to $1,822 million. The weighted average effective interest rate on our outstanding debt increased from 3.91% for the three months ended June 30, 2018 to 4.13% for the three months ended June 30, 2019.

Financing Activity

On June 19, 2019, the Company amended and restated its unsecured revolving credit facility. The amendment increased the size of the facility from $500 million to $750 million, decreased the pricing, and extended the maturity date from April 22, 2020 to June 19, 2024. At closing, the Company used an advance on the facility to repay the outstanding indebtedness under the $100 million term loan facility that was scheduled to mature in January 2020.

During the second quarter, the Company sold 3.4 million common shares of beneficial interest through its “at-the-market” equity program (“ATM”) at an average sales price of $33.30 per share, resulting in net proceeds of $110.5 million, after deducting offering costs. As of June 30, 2019, the Company had 6.3 million shares available for issuance under the existing equity distribution agreements.

Quarterly Dividend

On May 14, 2019, the Company declared a dividend of $0.32 per common share. The dividend was paid on July 15, 2019 to common shareholders of record on July 1, 2019.

2019 Financial Outlook

“We continue to raise capital to support our disciplined growth strategy. During the quarter, we were active using the ATM and with the upsized and extended credit facility and repayment of the term loan, we have addressed the majority of our debt maturities through 2021,” commented Chief Financial Officer Tim Martin. “As demonstrated by our transaction activity during the quarter, we remain focused on pursuing attractive investment opportunities in our target markets and intend to fund our growth by utilizing a balance of cash flow, equity proceeds and unsecured borrowings in a manner consistent with our investment grade ratings.”

The Company is adjusting its previously issued estimates and now expects that its fully diluted FFO per share, as adjusted, for 2019 will be between $1.66 and $1.69 (previously between $1.65 and $1.69), and that its fully diluted earnings per share for the period will be between $0.85 and $0.88 (previously $0.85 and $0.89). Due to uncertainty related to the timing and terms of transactions, the impact of any potential future speculative investment activity is excluded from guidance. For 2019, the same store pool consists of 467 properties totaling 32.4 million square feet.

About CubeSmart

CubeSmart is a self-administered and self-managed real estate investment trust. The Company's self-storage properties are designed to offer affordable, easily accessible and secure storage space for residential and commercial customers. According to the 2019 Self-Storage Almanac, CubeSmart is one of the top three owners and operators of self-storage properties in the United States.