CubeSmart Q3 FY2024 earnings call

Store Performance

• Store performance was in line with expectations entering the quarter. Urban markets (lower beta) outperformed the Sun Belt. New York MSA outperformed despite tough comps, with rentals up Y/Y and same-store revenue growth led by certain boroughs. DMV rebounded from new supply headwinds. Florida and Arizona were weaker due to new supply.

Growth and Management

• 2024 is the 8th straight year of adding 130 or more stores annually. Disciplined in capital allocation. In the third quarter, same-store revenues declined 0.8%, occupancy was 90.8%, operating expenses grew 5.3% (driven by property insurance and marketing). External growth: under contract to acquire 2 stores in Q4, active on other transactions. Third-party management: 893 stores under management at quarter end. Raised $32.8M via at-the-market equity program.

In the third quarter, store performance was in line with expectations. The New York MSA had rentals up year-over-year, with NYC boroughs up 7.4% and Northern New Jersey down 11.6%. Same-store revenue growth in the New York MSA was led by the Bronx at 6.6% and Brooklyn at 5.8%, while Northern New Jersey lagged at negative 1.1%. The DMV (District of Columbia, Maryland, Northern Virginia) had 3.2% year-over-year same-store revenue growth and 110 basis point sequential improvement. Florida and Arizona were weaker performing markets due to new supply impact. Revenue contribution details weren't explicitly given in absolute terms beyond the mentioned growth/decline figures.

Third quarter results were in line with expectations. Full year FFO per share range was narrowed while maintaining the midpoint. Remainder of the year continues to track within prior ranges. Acquisition activity is becoming more constructive, with some transactions under contract and others actively pursued.

Competitive pricing environment for new customers, slower rental volumes. New supply in certain markets (e.g., West Coast of Florida) impacting pricing. Macro factors like housing market conditions and interest rate volatility affecting results.

Q: Jeffrey Spector asked about the state of the market as 2024 finishes and heads into 2025.

A: Chris Marr said it's a high beta environment, with weeks showing green shoots but others uncertain, influenced by interest rates and Fed actions.

Q: Michael Goldsmith asked about competition fading.

A: Chris Marr said it's market-specific, some stabilization in competitive pricing, but some markets like West Coast Florida still affected by new supply.

Q: Juan Sanabria asked about customer behavior and discounting.

A: Chris Marr said customers attracted by free/money-off offers are lower quality, while non-price-sensitive customers stay longer. Guidance ranges were discussed with the low end off the table, focusing on mid and high ends.

Q: Unidentified Analyst asked about transaction markets becoming more constructive.

A: Tim Martin said there's an attractive opportunity set with compression in bid-ask spread, making it more constructive for external growth.

Q: Daniel Tricarico asked about the housing market and ECRI program.

A: Chris Marr said housing market is worse than 2023 but Cube's resilience is due to self-storage's long-term strength. Promotional dollars and move-in rates were discussed.

Q: Todd Thomas asked about Q4 FFO range and October occupancy.

A: Tim Martin said the range captures volatility, and October occupancy was 89.9% in same-store pool, 130 basis points behind last year.

Q: Omotayo Okusanya asked about ECRI increases and Street rates.

A: Chris Marr said Street rates were down to ~9.4% in late October from 11% in Q3, ECRI increases were high teens average.

Q: Ki Bin Kim asked about supply impact.

A: Tim Martin said percentage of stores impacted by new supply peaked at 50% in 2019, down to 27% in 2024, and will update for 2025 in February.

Q: Mike Mueller asked about acquisitions.

A: Tim Martin said acquired stores had ~70-75% occupancy, expected yields around 6% at stabilization.

Q: Eric Luebchow asked about acquisition pipeline and funding.

A: Tim Martin said pipeline has various deals, balance sheet has capacity for debt, and they can use equity as needed.

Q: Brendan Lynch asked about New York Metro stores and new development.

A: Chris Marr said acquired stores were in line with expectations, appetite for new development depends on site economics.