CubeSmart(CUBE) - 2021 Q3 - Quarterly Report

Part I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited consolidated financial statements for CubeSmart and CubeSmart, L.P. for the period ended September 30, 2021, including balance sheets, statements of operations, comprehensive income, equity, and cash flows Consolidated Statements of Operations Highlights (Three Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenues | $212,564 | $172,511 | +23.2% | | Net Income | $90,569 | $47,404 | +91.1% | | Net Income Attributable to Common Shareholders | $87,650 | $46,891 | +86.9% | | Diluted EPS | $0.43 | $0.24 | +79.2% | Consolidated Balance Sheet Highlights | Metric | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | | :--- | :--- | :--- | | Total Assets | $4,836,054 | $4,778,142 | | Total Liabilities | $2,550,996 | $2,687,880 | | Total Equity | $1,945,501 | $1,840,848 | Notes to Unaudited Consolidated Financial Statements This section details accounting policies, investment activity, debt structure, and related party transactions, noting $55.1 million in acquisitions and $2.05 billion in unsecured senior notes - During the first nine months of 2021, the Company acquired three stores for an aggregate purchase price of approximately $55.1 million[77] - In the same period, the Company sold four properties for an aggregate sales price of $38.6 million, recording gains totaling $28.8 million[79] - The company holds investments in five unconsolidated real estate ventures with a total carrying value of $111.4 million as of September 30, 2021[93][100] Unsecured Senior Notes Outstanding (as of Sep 30, 2021) | Series | Principal Balance (in thousands) | Maturity Date | | :--- | :--- | :--- | | 4.375% Notes | $300,000 | Dec-23 | | 4.000% Notes | $300,000 | Nov-25 | | 3.125% Notes | $300,000 | Sep-26 | | 4.375% Notes | $350,000 | Feb-29 | | 3.000% Notes | $350,000 | Feb-30 | | 2.000% Notes | $450,000 | Feb-31 | | Total | $2,050,000 | | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial performance, highlighting significant revenue and NOI growth driven by same-store portfolio strength, acquisitions, and liquidity - As of September 30, 2021, the company owned 545 self-storage properties and managed an additional 706 stores for third parties, totaling 1,251 stores[166] - Primary revenue sources for the nine months ended September 30, 2021, are concentrated in New York (19%), Florida (15%), Texas (9%), and California (8%)[172] Results of Operations Total revenues increased 23.2% to $212.6 million and NOI grew 28.7% to $148.5 million in Q3 2021, driven by same-store rental income growth Q3 2021 vs Q3 2020 Performance | Metric | Q3 2021 (in thousands) | Q3 2020 (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenues | $212,564 | $172,511 | +23.2% | | Same-Store Rental Income | $163,321 | $140,558 | +16.2% | | Net Operating Income (NOI) | $148,499 | $115,410 | +28.7% | | Same-Store NOI | $121,197 | $100,084 | +21.1% | - The increase in same-store rental income for Q3 2021 was primarily driven by a 14.4% increase in realized annual rent per occupied square foot[193] - Depreciation and amortization expense increased by 46.7% in Q3 2021 year-over-year, primarily due to newly acquired or developed stores[199] Liquidity and Capital Resources The company maintains strong liquidity with $20.3 million cash and $749.4 million credit facility availability, raising $200.0 million from equity program - As of September 30, 2021, the company had approximately $20.3 million in available cash and cash equivalents and $749.4 million of availability under its Amended and Restated Credit Facility[225] - During the first nine months of 2021, the company sold 5.0 million common shares through its "at-the-market" equity program, generating net proceeds of $200.0 million[235] - The company was in compliance with all financial covenants under its Senior Notes and Revolving Credit Facility as of September 30, 2021[229][233] Non-GAAP Financial Measures This section defines and reconciles non-GAAP measures, with FFO attributable to common shareholders and OP unitholders reaching $118.4 million in Q3 2021 FFO Reconciliation (Three Months Ended Sep 30) | Metric (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Net income attributable to common shareholders | $87,650 | $46,891 | | Real estate depreciation and amortization | $56,394 | $38,926 | | Gains from sales of real estate, net | ($28,815) | $0 | | Noncontrolling interests in the Operating Partnership | $3,149 | $474 | | FFO attributable to common shareholders and OP unitholders | $118,378 | $86,291 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations, with a 100 basis point increase potentially decreasing fixed-rate debt fair value by $125.9 million - The company's main market risk is from interest rate fluctuations impacting its debt portfolio[248][250] - A hypothetical 100 basis point increase in market interest rates would decrease the fair value of the company's outstanding fixed-rate debt by approximately $125.9 million[254] Controls and Procedures Management concluded that disclosure controls and procedures for both the Parent Company and Operating Partnership were effective, with no material changes in internal control - The CEO and CFO concluded that the disclosure controls and procedures for both the Parent Company and the Operating Partnership are effective to provide reasonable assurance[256][259] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[257][262] Part II. OTHER INFORMATION Legal Proceedings No material legal proceedings are pending against the company, beyond routine actions, that would adversely affect financial condition - No material legal proceedings are pending against the company, other than routine actions and administrative proceedings[263] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 841 common shares in Q3 2021 to cover employee tax obligations, with no repurchases under the 3.0 million share program Share Repurchases (Q3 2021) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 2021 | 569 | $46.30 | | August 2021 | 47 | $53.50 | | September 2021 | 225 | $54.93 | | Total | 841 | $49.01 | - The repurchased shares represent common shares withheld by the Parent Company to cover employee tax obligations upon the vesting of restricted shares[265] Exhibits This section lists Form 10-Q exhibits, including CEO and CFO certifications and financial statements in Inline XBRL format - The report includes CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[267] - Financial information is provided in Inline XBRL format as required by the SEC[267]