CubeSmart(CUBE) - 2022 Q2 - Quarterly Report

Part I. FINANCIAL INFORMATION Financial Statements Presents unaudited consolidated financial statements for CubeSmart and its Operating Partnership, including Balance Sheets, Statements of Operations, and Cash Flows CubeSmart (Parent Company) Financial Statements Presents CubeSmart's consolidated financial statements, highlighting revenue and net income growth, alongside changes in assets, liabilities, and equity CubeSmart Consolidated Statement of Operations Highlights (Three Months Ended June 30) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $248,664 | $199,247 | 24.8% | | Net Income | $58,594 | $50,366 | 16.3% | | Net Income Attributable to Common Shareholders | $58,358 | $48,752 | 19.7% | | Diluted EPS | $0.26 | $0.24 | 8.3% | CubeSmart Consolidated Balance Sheet Highlights | Metric | June 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--- | :--- | :--- | | Total Assets | $6,428,799 | $6,548,079 | | Total Liabilities | $3,526,280 | $3,549,699 | | Total CubeSmart Shareholders' Equity | $2,823,947 | $2,871,563 | - Net cash provided by operating activities for the six months ended June 30, 2022, was $284.3 million, a significant increase from $217.4 million in the same period of 2021[41] CubeSmart, L.P. (Operating Partnership) Financial Statements Presents CubeSmart, L.P.'s consolidated financial statements, which largely mirror the parent company's, with differences in capital and equity reflecting the partnership structure - The assets and liabilities of the Operating Partnership are the same as the Parent Company's, as the Parent Company's only material asset is its investment in the Operating Partnership[12] CubeSmart, L.P. Net Income Highlights (Six Months Ended June 30) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $487,229 | $388,088 | 25.5% | | Net Income | $96,860 | $93,681 | 3.4% | | Net Income Attributable to Common Unitholders | $96,513 | $90,484 | 6.7% | Notes to Unaudited Consolidated Financial Statements Provides detailed explanations of accounting policies and activities, covering organization, investment activities, debt structure, joint ventures, and EPS calculations - As of June 30, 2022, the company owned or partially owned 609 self-storage properties across 24 states and the District of Columbia[59] - In the first six months of 2022, the company acquired two stores for $55.0 million and sold the Los Angeles Athletic Club (acquired via the LAACO transaction) for $44.0 million[73][78] - The December 2021 acquisition of LAACO added 57 'Storage West' properties and was accounted for as an asset acquisition with total capitalized costs of approximately $1.72 billion[79][81][86] - As of June 30, 2022, the company had investments in 7 unconsolidated joint ventures, owning a total of 91 stores[98] - Subsequent to the quarter end, the company acquired a self-storage property in Georgia for $20.7 million[161] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Provides management's perspective on financial condition and results, covering business overview, operational analysis, cash flow, liquidity, and reconciliation of non-GAAP measures like FFO and NOI Overview The company operates as a self-storage REIT, owning 609 properties and managing 680 for third parties, with revenues concentrated in key states - As of June 30, 2022, the company owned 609 self-storage properties and managed 680 stores for third parties, bringing the total portfolio to 1,289 stores[163] - The company's revenue is geographically concentrated, with approximately 17% from New York, 15% from Florida, 11% from California, and 9% from Texas for the six months ended June 30, 2022[168] Results of Operations Compares operating results for Q2 and H1 2022 versus 2021, highlighting significant growth in rental income driven by higher rates and acquisitions, alongside increased operating expenses Q2 2022 vs. Q2 2021 Performance Comparison (in thousands) | Metric | Q2 2022 | Q2 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $248,664 | $199,247 | $49,417 | 24.8% | | Property Operating Expenses | $73,472 | $63,751 | $9,721 | 15.2% | | Net Operating Income (NOI) | $175,192 | $135,496 | $39,696 | 29.3% | | Net Income | $58,594 | $50,366 | $8,228 | 16.3% | - Same-store rental income for Q2 2022 increased by $23.0 million (14.2%) year-over-year, primarily due to a 14.5% increase in realized annual rent per occupied square foot[194] H1 2022 vs. H1 2021 Performance Comparison (in thousands) | Metric | H1 2022 | H1 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $487,229 | $388,088 | $99,141 | 25.5% | | Property Operating Expenses | $144,039 | $124,979 | $19,060 | 15.3% | | Net Operating Income (NOI) | $343,190 | $263,109 | $80,081 | 30.4% | | Net Income | $96,860 | $93,681 | $3,179 | 3.4% | - For H1 2022, same-store rental income grew by $47.0 million (14.9%) year-over-year, driven by a 15.1% increase in realized annual rent per occupied square foot[204] Liquidity and Capital Resources Discusses liquidity sources including cash flow, revolving credit facility, and equity markets, noting $5.1 million cash and $580.5 million available under its $750 million revolving credit facility - As of June 30, 2022, the company had $5.1 million in cash and cash equivalents and $580.5 million available for borrowing under its Revolver[226][233] - Total outstanding unsecured senior notes remained at $2.8 billion as of June 30, 2022, with maturities ranging from 2025 to 2032[227] - The company was in compliance with all financial covenants under its Senior Notes and Credit Facility as of June 30, 2022[231][234] - No common shares were sold under the "at-the-market" (ATM) equity program during the first six months of 2022, with 5.9 million shares remaining available for issuance[235] Non-GAAP Financial Measures Defines and reconciles non-GAAP financial measures like NOI, FFO, and FFO as adjusted, used by management to evaluate operating performance FFO Reconciliation (in thousands) | Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Income Attributable to Common Shareholders | $58,358 | $48,752 | $96,513 | $90,484 | | Real Estate Depreciation & Amortization | $80,357 | $54,761 | $164,398 | $109,486 | | FFO Attributable to Common Shareholders & OP Unitholders | $139,094 | $105,281 | $261,582 | $203,287 | | Transaction-related expenses | $1,138 | $0 | $10,546 | $0 | | FFO, as adjusted | $140,232 | $105,414 | $272,128 | $203,843 | Quantitative and Qualitative Disclosures About Market Risk Discusses market risk exposure, primarily interest rate risk, with $2.96 billion in fixed-rate debt and $168.9 million in variable-rate debt as of June 30, 2022 - The company's primary market risk is interest rate fluctuations[251] - As of June 30, 2022, consolidated debt consisted of $2.96 billion in fixed-rate instruments and $168.9 million in floating-rate borrowings[255] - A 100 basis point increase in market interest rates would increase annual interest expense on variable-rate debt by approximately $1.7 million[256] Controls and Procedures Management concluded that disclosure controls and procedures for both the Parent Company and Operating Partnership are effective, with no material changes to internal control over financial reporting - Management concluded that the disclosure controls and procedures for both the Parent Company and the Operating Partnership are effective as of the end of the period[259][263] - There were no changes in internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[261][264] Part II. OTHER INFORMATION Legal Proceedings The company reports no material legal proceedings are pending that would adversely affect its financial condition, results of operations, or cash flows - No material legal proceedings are pending against the company, only routine actions and administrative proceedings[265] Unregistered Sales of Equity Securities and Use of Proceeds Details the company's common share repurchases, noting 2,104 shares withheld for employee tax obligations and no repurchases under the 3.0 million share program - The company has a share repurchase program for up to 3.0 million common shares, under which no repurchases have been made to date[268] - In Q2 2022, 2,104 common shares were withheld at an average price of $53.27 per share to cover employee tax obligations related to vested restricted shares[267] Exhibits Lists exhibits filed with the Form 10-Q, including CEO and CFO certifications under Sarbanes-Oxley Act Sections 302 and 906, and Inline XBRL financial data - The filing includes CEO and CFO certifications as required by Rules 13a-14(a) and 15d-14(a) under the Exchange Act (Sarbanes-Oxley Act Section 302)[269] - Certifications pursuant to 18 U.S.C. Section 1350 (Sarbanes-Oxley Act Section 906) are also furnished with the report[269]