CubeSmart(CUBE)2024-11-01 18:00Financial Data and Key Metrics - Same-store revenues declined by 0.8% year-over-year, with average occupancy down 120 basis points to 90.8% [15] - Same-store operating expenses grew by 5.3% year-over-year, driven by property insurance and increased marketing spend [15] - Same-store NOI growth was negative 3.1%, with FFO per share as adjusted at 32.8 million through its at-the-market equity program at an average sales price of $54.20 per share [17] Business Line Performance - The New York MSA outperformed other markets, with rentals up year-over-year, led by a 7.4% increase in New York City boroughs, offset by an 11.6% decline in Northern New Jersey [9] - Same-store revenue growth in the New York MSA was strong, with the Bronx at 6.6% and Brooklyn at 5.8%, while Northern New Jersey lagged at negative 1.1% [10] - The DMV (District of Columbia, Maryland, Northern Virginia) showed a 3.2% year-over-year same-store revenue growth and a 110 basis point sequential improvement from Q2 [11] - Florida and Arizona markets underperformed due to new supply impacts [12] Market Performance - Lower beta urban markets, particularly New York, outperformed Sun Belt markets [8] - The New York MSA demonstrated solid demand, with rentals up year-over-year despite supply challenges in Northern New Jersey [9] - Florida and Arizona markets faced headwinds from new supply, impacting performance [12] Company Strategy and Industry Competition - The company remains disciplined in capital allocation and is prepared to act decisively on opportunities that fit its investment thesis [12] - CubeSmart continues to be a third-party manager of choice, adding 24 stores in Q3, bringing the total to 893 stores under management [17] - The company is seeing more constructive acquisition opportunities, with two stores under contract for Q4 and other transactions in progress [16] Management Commentary on Operating Environment and Future Outlook - Management noted a high beta environment with mixed demand signals, making it difficult to predict future performance with certainty [20] - The company is focused on attracting high-quality customers who are less sensitive to rate increases and tend to stay longer [27] - Management expects supply impacts to lessen in 2025, particularly in markets like New York and the DMV [64][65] Other Important Information - The company's balance sheet remains strong, with low leverage, no floating rate exposure, and full capacity on its line of credit [17] - CubeSmart celebrated its 20th anniversary as a NYSE-listed company, highlighting its long-term resilience and commitment to customer service [95] Q&A Session Summary Question: State of the market heading into 2025 - Management described the current environment as high beta, with mixed demand signals and significant volatility in interest rates [20] Question: Move-in, move-out rate spread - The churn gap was negative 27.4% in Q3 [21] Question: Marketing and pricing strategy - Marketing spend grew by 10% year-over-year for the first nine months, with web sales traffic up 26% in Q3 [24][28] - The company focuses on balancing marketing investment, price, and ECRIs to attract high-quality customers [27] Question: Competitive environment - Competition varies by market, with some stabilization in pricing but continued pressure in markets like West Coast Florida [30] Question: Customer behavior and quality - Customers who move in with significant discounts tend to have lower lengths of stay and higher credit issues, while those less sensitive to price stay longer [33] Question: Guidance and performance - The company tightened its full-year FFO per share range but maintained the midpoint, with same-store revenue and NOI guidance unchanged [36][37] Question: Acquisition market - The transaction market is becoming more constructive, with a narrowing bid-ask spread and higher-quality opportunities [42][43] Question: Impact of supply - Supply impacts have decreased, with 27% of stores affected in 2024, down from 50% in 2019 [68][69] Question: New development and capital allocation - The company is cautious about new development due to challenging market conditions but remains open to opportunities in specific markets [91][92] Question: Occupancy and ECRI trends - October occupancy was 89.9%, down 130 basis points year-over-year [60] - ECRI increases averaged in the high teens, with Street rates down 9.4% in late October [61]