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CubeSmart(CUBE) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported FFO per share as adjusted of $0.65 for the quarter, representing a 12.1% growth over the first quarter last year [51] - Same-store revenue growth was 6.9%, while same-store net operating income grew by 9.1% [51] - The balance sheet remains healthy with a leverage level of 4.4 times debt-to-EBITDA, and 98% of the debt is fixed rate [80][53] Business Line Data and Key Metrics Changes - The company experienced a 1% same-store expense growth, which was lower than expected due to a mild winter [51][105] - Vacate rates during the quarter were down 3.3% from the first quarter of last year, indicating a stickier customer base [72] - The New York MSA showed positive growth in both occupancy and net effective rents compared to the first quarter of last year, while other markets like DC and Arizona experienced below-average growth [48][74] Market Data and Key Metrics Changes - Demand trends were inconsistent, with a solid start in January and February, followed by a slowdown in March, and a return to normal in April [47][41] - The company noted that occupancy trends in March were mostly in line with last year, driven by lower vacate activity [73] - The company has seen a significant increase in rental rates, with an 8% increase since the beginning of April [109] Company Strategy and Development Direction - The company remains focused on attractive markets, particularly in the top 40 MSAs, and is looking for complementary opportunities to its existing footprint [27] - The company is actively underwriting opportunities but is facing a disconnect between seller expectations and the current cost of capital [75] - The strategic focus on quality across the portfolio positions the company well to generate long-term shareholder value [50] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the future, noting that the outlook for the second half of the year depends heavily on performance in the upcoming months [47] - The company is navigating a post-COVID environment with unusual trends, but April showed signs of stabilization in demand [7][41] - Management highlighted the resilience of customers in the current economic climate, with low unemployment and solid household balance sheets [40][45] Other Important Information - The company added 25 stores to its third-party management platform, bringing the total to 676 [79] - The company is exploring various strategies to maximize revenue, including testing customer commitment options [31][35] - The company has a healthy pipeline of new management opportunities, despite the current volatility in transaction activity [111] Q&A Session All Questions and Answers Question: Can you provide more color about where the demand is coming from in April? - Management noted that demand varies by market, with strong performance in New York and a return of moving customers in April [58][59] Question: How are you thinking about capital allocation given the lack of high-quality acquisition opportunities? - Management remains optimistic about finding external growth opportunities but would consider share repurchases if the environment persists [144][156] Question: What trends did you see in March, and were they concentrated in certain geographies? - The slowdown in March was broad-based across the portfolio, with New York being an outlier showing positive growth [119] Question: How do you see the impact of the current lending environment on new developments? - Management indicated that while there are issues with certain banks, self-storage remains a strong product type, and the fundamentals are still solid [152]