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CubeSmart(CUBE) - 2022 Q4 - Annual Report
CUBECubeSmart(CUBE)2023-02-23 16:00
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Corporate Governance and Shareholder Rights - Shareholders or groups of up to 20 shareholders owning 3% or more of CubeSmart's outstanding shares for at least three years can nominate trustee candidates constituting up to the greater of two or 20% of the trustees in office[38] - CubeSmart's Board of Trustees amended and restated the company's bylaws on February 22, 2023, implementing a proxy access framework[70] Debt and Financing Activities - CubeSmart issued 250millionaggregateprincipalamountof4.000250 million aggregate principal amount of 4.000% senior notes due November 15, 2025[41] - CubeSmart issued 300 million aggregate principal amount of 3.125% senior notes due September 1, 2026[41] - The company amended its credit facility to include an 850.0millionunsecuredrevolvingfacilitymaturingonFebruary15,2027,withpricingdependentoncreditratingsandleveragelevels[116]−Thecompany′sunsecuredseniornotesinclude850.0 million unsecured revolving facility maturing on February 15, 2027, with pricing dependent on credit ratings and leverage levels[116] - The company's unsecured senior notes include 50.0 million issued on April 4, 2017, with a leverage ratio not to exceed 60% and an interest coverage ratio of more than 1.5:1.0[172] - The company's revolving credit facility has an 850.0millionunsecuredrevolvingcreditfacilitymaturingonFebruary15,2027,withaninterestrateof5.33850.0 million unsecured revolving credit facility maturing on February 15, 2027, with an interest rate of 5.33% as of December 31, 2022[173] - Total mortgage loans and notes payable, net, as of December 31, 2022, amounted to 162.9 million[145] - Loan procurement costs were 53.9millionin2022,upfrom53.9 million in 2022, up from 50.1 million in 2021[156] - The company capitalized 1.3millionofinterestin2022,downfrom1.3 million of interest in 2022, down from 1.9 million in 2021 and 2.7millionin2020[158]FinancialPerformanceandMetrics−Thecompany′scashflowfromoperatingactivitiesincreasedby2.7 million in 2020[158] Financial Performance and Metrics - The company's cash flow from operating activities increased by 142.3 million to 591.5millionin2022comparedto2021[61]−Thecompany′sinvestingactivitiesshowedasignificantimprovement,witha591.5 million in 2022 compared to 2021[61] - The company's investing activities showed a significant improvement, with a 1.8 billion change from (1.85)billionin2021to(1.85) billion in 2021 to (48.8) million in 2022[61] - The company's financing activities decreased by 1.96billion,from1.96 billion, from 1.41 billion in 2021 to (547.1)millionin2022[61]−Netincomefor2022was(547.1) million in 2022[61] - Net income for 2022 was 292.47 million, a 26.7% increase from 230.81millionin2021[218]−Basicearningsperunitattributabletocommonunitholdersincreasedto230.81 million in 2021[218] - Basic earnings per unit attributable to common unitholders increased to 1.29 in 2022 from 1.10in2021[218]−Thecompany′sdebttototalmarketcapitalizationratiowasapproximately24.81.10 in 2021[218] - The company's debt to total market capitalization ratio was approximately 24.8% as of December 31, 2022, compared to 19.7% as of December 31, 2021[91] - The company's ratio of debt to the undepreciated cost of total assets was approximately 39.6% as of December 31, 2022, compared to 41.2% as of December 31, 2021[91] - Storage properties, net, amounted to 6,048,003 as of December 31, 2022, compared to 6,097,670in2021[162]−Storagepropertiesnetbalanceattheendof2022was6,097,670 in 2021[162] - Storage properties net balance at the end of 2022 was 6,048,003, compared to 6,097,670in2021and6,097,670 in 2021 and 4,505,814 in 2020[198] - Total assets for unconsolidated real estate ventures decreased to 753,271in2022from753,271 in 2022 from 885,010 in 2021[201] - Administrative and late fees totaled 27.8millionin2022,upfrom27.8 million in 2022, up from 21.3 million in 2021 and 20.0millionin2020[208]−Totalmanagementfeesforunconsolidatedrealestateventureswere20.0 million in 2020[208] - Total management fees for unconsolidated real estate ventures were 5.1 million in 2022, compared to 4.9millionin2021and4.9 million in 2021 and 3.8 million in 2020[212] - The company recognized 0.6millioninfeesassociatedwithpropertytransactionsin2022,downfrom0.6 million in fees associated with property transactions in 2022, down from 1.3 million in 2021 and 0.7millionin2020[212]−Accumulatedothercomprehensivelossfor2022was0.7 million in 2020[212] - Accumulated other comprehensive loss for 2022 was 2,996,168 thousand, compared to 3,145,785thousandin2021[147]PropertyPortfolioandOperations−CubeSmartowned611storeswith44.1millionrentablesquarefeetandanoccupancyrateof90.33,145,785 thousand in 2021[147] Property Portfolio and Operations - CubeSmart owned 611 stores with 44.1 million rentable square feet and an occupancy rate of 90.3% as of December 31, 2022[74] - The company's storage properties were valued at 6.0 billion net of accumulated depreciation as of December 31, 2022[50] - The company's self-storage properties are considered less sensitive to near-term economic downturns compared to other real estate types[62] - The company owned or partially owned and consolidated 611 self-storage properties as of December 31, 2022, with approximately 44.1 million rentable square feet[110] - Approximately 90.3% of the rentable square footage at the company's owned stores was leased to approximately 377,000 customers as of December 31, 2022[110] - The company managed 668 stores for third parties as of December 31, 2022, bringing the total number of stores owned and/or managed to 1,279[110] - The company's self-storage properties are located in 24 states and the District of Columbia as of December 31, 2022[110] - The company's self-storage properties include 510 climate-controlled cubes, representing approximately 83.5% of the owned stores[110] - Total rentable square feet across all stores was 44.11 million as of December 31, 2022[221] - Gross carrying amount of buildings and improvements was 5.48billionatDecember31,2022[221]−Accumulateddepreciationacrossallpropertieswas5.48 billion at December 31, 2022[221] - Accumulated depreciation across all properties was 1.18 billion at December 31, 2022[221] Acquisitions and Dispositions - The company's 2022 acquisition activity included the purchase of LAACO, Ltd. for 9,838perunit,acquiring57storagepropertiesandcluboperations[74]−Thecompanyacquired3self−storagepropertiesin2022foratotalpurchasepriceof9,838 per unit, acquiring 57 storage properties and club operations[74] - The company acquired 3 self-storage properties in 2022 for a total purchase price of 75.7 million[114] - The company acquired 66 self-storage properties in 2021 for a total purchase price of 1.8billion[114]−Thecompanydisposedof5self−storagepropertiesin2021foratotalsalepriceof1.8 billion[114] - The company disposed of 5 self-storage properties in 2021 for a total sale price of 43.8 million[114] - The company acquired 21 self-storage properties in 2020 for a total purchase price of 735.9million[114]−Thecompanydisposedof1self−storagepropertyin2020forasalepriceof735.9 million[114] - The company disposed of 1 self-storage property in 2020 for a sale price of 12.8 million[114] - The company acquired three wholly-owned stores in Georgia, Maryland, and Texas for a total purchase price of approximately 75.7million[116]−ThecompanycompletedconstructionandopenedtwojointventuredevelopmentpropertiesinNewYorkandVirginiaforatotalcostof75.7 million[116] - The company completed construction and opened two joint venture development properties in New York and Virginia for a total cost of 60.8 million[116] - The company has two joint venture development properties under construction in New Jersey and New York, with an expected completion by Q2 2024 and 22.7millioninvestedoutofanexpected22.7 million invested out of an expected 57.1 million[116] - An unconsolidated real estate venture, HVP V, acquired one store in New Jersey for 33.2million,withthecompanycontributing33.2 million, with the company contributing 0.1 million[116] - HVPSE, another unconsolidated real estate venture, sold 14 stores for an aggregate sales price of 235.0million,recordinggainsofapproximately235.0 million, recording gains of approximately 114.1 million[116] - Acquired 167,557 outstanding partnership units of LAACO for 9,838perunit,totalingapproximately9,838 per unit, totaling approximately 1.65 billion[138] - Acquired 57 storage properties (Storage West Assets) through LAACO acquisition, located in Arizona (17), California (20), Nevada (13), and Texas (7)[137] - Acquired three stores in Georgia, Maryland, and Texas for an aggregate purchase price of 75.7millionin2022[134]−Acquiredeightadditionalstoresin2021foranaggregatepurchasepriceofapproximately75.7 million in 2022[134] - Acquired eight additional stores in 2021 for an aggregate purchase price of approximately 140.8 million[139] - Acquired 13 stores in 2020 for an aggregate purchase price of approximately 195.9million[141]−Intangibleassetsfromin−placeleasesaggregatedto195.9 million[141] - Intangible assets from in-place leases aggregated to 11.9 million in 2021 acquisitions, with an estimated life of 12 months[139] - Sold the Los Angeles Athletic Club during 2022, with the California Yacht Club classified as held for sale as of December 31, 2022[134][137] - Total construction costs for new stores in 2022 amounted to 39,000thousandforValleyStream,NY,and39,000 thousand for Valley Stream, NY, and 21,800 thousand for Vienna, VA[136] - Total assets acquired through LAACO acquisition, including storage properties, cash, and other assets, amounted to 1.72billion[139]−ThecompanyacquiredStorageDeluxeAssetsfor1.72 billion[139] - The company acquired Storage Deluxe Assets for 540.0 million in 2020, issuing 5,272,023 OP Units valued at approximately 175.1million[148]−In2021,thecompanysoldfivestoresforanaggregatesalespriceof175.1 million[148] - In 2021, the company sold five stores for an aggregate sales price of 43.8 million, recording gains of 32.7million[168]−OnDecember22,2020,thecompanysoldaself−storagepropertyinNewYorkfor32.7 million[168] - On December 22, 2020, the company sold a self-storage property in New York for 12.8 million, recording a 6.7milliongain[170]−ThecompanycompletedtheacquisitionofLAACO,recognizingdifferencesof6.7 million gain[170] - The company completed the acquisition of LAACO, recognizing differences of 13.1 million for Fontana and 19.6millionforRCSSasofDecember31,2022[171]EmployeeandTeammateEngagement−Thecompany′steammateengagementsurveyparticipationratewas8819.6 million for RCSS as of December 31, 2022[171] Employee and Teammate Engagement - The company's teammate engagement survey participation rate was 88% in 2022, with 73% of previously underperforming teams improving engagement[55] - The company employed 2,804 teammates as of December 31, 2022, with 89% being hourly and 11% salaried[96] - CubeSmart's average teammate tenure as of December 31, 2022, was 3.63 years[96] - The company recruited, hired, and trained 1,505 new teammates in 2022, with 20% coming from teammate referrals[149] - 446 teammates were promoted or transitioned into new roles in 2022[149] - The company provided an average of 16 hours of training per teammate in 2022[149] - As of December 31, 2022, 56% of the company's teammates were female and 44% were male[149] Share-Based Compensation and Equity - The weighted average exercise price of outstanding options excludes outstanding restricted unit awards[40] - Under the at-the-market equity program, the company sold 0.1 million common shares at an average price of 50.64 per share, resulting in net proceeds of 4.9million[118]−Thecompanyclosedanunderwrittenofferingof15.5millioncommonsharesat4.9 million[118] - The company closed an underwritten offering of 15.5 million common shares at 51.00 per share, resulting in net proceeds of 765.6millionin2021[195]−Numberofsharessoldin2022was102,000atanaveragepriceof765.6 million in 2021[195] - Number of shares sold in 2022 was 102,000 at an average price of 50.64 per share[229] - Net proceeds from share sales after deducting offering costs was 4.94millionin2022[229]−Optionsgrantedin2022totaled324,840withaweightedaveragestrikepriceof4.94 million in 2022[229] - Options granted in 2022 totaled 324,840 with a weighted average strike price of 56.91[234] - Weighted average remaining contractual term of options was 6.21 years at December 31, 2022[234] - Exercisable options at December 31, 2022 totaled 1.64 million with a weighted average strike price of 28.42[234]−Thecompanyrecognizedcompensationexpenserelatedtooptionsissuedtoemployeesandexecutivesofapproximately28.42[234] - The company recognized compensation expense related to options issued to employees and executives of approximately 2.5 million in 2022[188] - The weighted average fair value of restricted shares and performance units granted in 2022 was 61.41[191]−AsofDecember31,2022,1,941,786commonsharesremainedavailableforfutureawardsundertheshare−basedcompensationplan[188]−Thecompanyredeemed475,046OPunitsforcommonsharesin2022,comparedto5,519,233in2021and100,000in2020[207]−Theaggregateredemptionvalueofthe1,426,549OPUnitsasofDecember31,2022was61.41[191] - As of December 31, 2022, 1,941,786 common shares remained available for future awards under the share-based compensation plan[188] - The company redeemed 475,046 OP units for common shares in 2022, compared to 5,519,233 in 2021 and 100,000 in 2020[207] - The aggregate redemption value of the 1,426,549 OP Units as of December 31, 2022 was 57.4 million[178] - Non-vested shares and performance units at the end of 2022 were 340,952, down from 387,701 at the beginning of the year[216] Leasing and Real Estate Ventures - The company's cash flow from operations is primarily dependent on rents charged and collected from customers leasing storage space[62] - The company experiences seasonal fluctuations in occupancy levels, with higher occupancy during summer months due to increased moving activity[90] - Total lease costs for 2022 were 6,952,comparedto6,952, compared to 7,554 in 2021 and 4,083in2020[182]−Thepresentvalueofleaseliabilitiesforfinanceleasesis4,083 in 2020[182] - The present value of lease liabilities for finance leases is 65,758, and for operating leases is 48,664asof2022[183]−Right−of−useassetsforfinanceleasesincreasedto48,664 as of 2022[183] - Right-of-use assets for finance leases increased to 41,945 in 2022 from 40,932in2021[210]−Weightedaverageleasetermforfinanceleasesdecreasedto41.5yearsin2022from42.5yearsin2021[210]−Weightedaveragediscountrateforoperatingleasesdecreasedslightlyto4.4440,932 in 2021[210] - Weighted average lease term for finance leases decreased to 41.5 years in 2022 from 42.5 years in 2021[210] - Weighted average discount rate for operating leases decreased slightly to 4.44% in 2022 from 4.46% in 2021[210] - The company has agreements for the construction of two new self-storage properties, requiring payments of approximately 34.6 million during 2023 and 2024[185] Environmental and Risk Management - CubeSmart conducts environmental assessments for property acquisitions and carries environmental insurance coverage on certain stores[94][95] Dividends and Shareholder Returns - The company declared cash dividends per common share/unit of 1.78in2022[194]StrategicGrowthandMarketFocus−CubeSmarttargetsacquisitionsinmarketswithstrongdemographicsandgrowthpotential,focusingonmajormetropolitanregionswithintheUnitedStates[85]−Thecompanyemphasizescustomerservice,convenience,security,professionalism,andcleanlinesstocompeteeffectivelyintheself−storagemarket[92]−Thecompanyplanstopursueselectiveacquisitionsin2023inmarketswithhighbarrierstoentry,strongdemographicfundamentals,andexcessstoragedemand[119]−Thecompanyintendstodisposeofassetswithunattractiverisk−adjustedreturnsin2023anduseproceedsfortargetedacquisitionsandgeneralcorporatepurposes[119]−Thecompanyaimstogrowitsthird−partymanagementbusinessbyleveragingitsplatformandrelationshipswiththird−partyownerstosourcefutureacquisitionsandinvestmentopportunities[119]FinancialReportingandInternalControls−CubeSmart′sinternalcontroloverfinancialreportingwaseffectiveasofDecember31,2022,basedontheCOSOframework[80][81]GeographicRevenueContribution−NewYork,Florida,California,andTexasstorescontributedapproximately161.78 in 2022[194] Strategic Growth and Market Focus - CubeSmart targets acquisitions in markets with strong demographics and growth potential, focusing on major metropolitan regions within the United States[85] - The company emphasizes customer service, convenience, security, professionalism, and cleanliness to compete effectively in the self-storage market[92] - The company plans to pursue selective acquisitions in 2023 in markets with high barriers to entry, strong demographic fundamentals, and excess storage demand[119] - The company intends to dispose of assets with unattractive risk-adjusted returns in 2023 and use proceeds for targeted acquisitions and general corporate purposes[119] - The company aims to grow its third-party management business by leveraging its platform and relationships with third-party owners to source future acquisitions and investment opportunities[119] Financial Reporting and Internal Controls - CubeSmart's internal control over financial reporting was effective as of December 31, 2022, based on the COSO framework[80][81] Geographic Revenue Contribution - New York, Florida, California, and Texas stores contributed approximately 16%, 15%, 11%, and 9% respectively to CubeSmart's total revenues for the year ended December 31, 2022[87] Interest Rate and Swap Agreements - The company settled interest rate swaps for 0.8 million in 2019, which were initially entered into with notional amounts aggregating to 150.0million[146]−Thecompanyestimatesthat150.0 million[146] - The company estimates that 0.1 million will be reclassified as an increase to interest expense in 2023[175]