CubeSmart Reports First Quarter 2013 Results; Same-Store NOI Increases 7.6%; FFO per Share Grows 25%

CubeSmart Reports First Quarter 2013 Results; Same-Store NOI Increases 7.6%; 
FFO per Share Grows 25% 
WAYNE, PA -- (Marketwired) -- 05/02/13 --  CubeSmart (NYSE: CUBE)
today announced its operating results for the three months ended
March 31, 2013.  
"We have maintained the operational momentum that we experienced
throughout 2012 and have produced very significant year-over-year
gains in occupancy and revenue," commented CubeSmart Chief Executive
Officer Dean Jernigan. "We are clearly seeing signs of increased
demand across the self-storage sector and are benefiting
disproportionately due to our robust operating platform."  
Key Highlights for the Quarter 


 
--  Reported funds from operations ("FFO") per share, as adjusted, of
    $0.20, representing a year-over-year increase of 25%.
--  Increased same-store (328 facilities) net operating income ("NOI")
    7.6% year over year, driven by 6.8% revenue growth and a 5.4% increase
    in property operating expenses.
--  Gained 640 basis points year over year in period ending same-store
    occupancy, up from 79.3% at March 31, 2012 to 85.7% at March 31, 2013.
--  Closed on one property acquisition in Phoenix, AZ for $6.9 million.
--  Closed on dispositions totaling $11.4 million, including four assets
    in the Houston, TX market and one in Indianapolis, IN.

  
Funds from Operations 
FFO, as adjusted, was $27.5 million for the first quarter of 2013,
compared with $20.5 million for the first quarter of 2012. FFO per
share, as adjusted, increased 25% to $0.20 for the first quarter of
2013, compared with $0.16 for the same period last year.  
"Strong operational and financial performance continues to be driven
by occupancy gains across our same-store portfolio," noted
Christopher Marr, President, Chief Operating Officer, and Chief
Investment Officer. "Notably, we posted sequential same-store
occupancy gains of 90 basis points during what is typically a
seasonally slow first quarter, contributing to an expanded
year-over-year gain of 640 basis points. Meanwhile, our pipeline of
external growth opportunities remains steady, and we continue to
maintain a measured and disciplined investment approach." 
Investment Activity 
The Company acquired one asset located in the Phoenix, AZ market 
for
$6.9 million during the three months ended March 31, 2013. On the
disposition front during the quarter, the Company sold five assets
for total proceeds of $11.4 million. The facilities are located in
the Houston, TX and Indianapolis, IN markets. The Indianapolis
disposition completes the Company's exit from that market.  
Third-Party Management 
During the quarter, the Company was awarded nine new management
contracts. At March 31, 2013, the Company managed 140 properties
totaling 8.5 million square feet. 
Same-Store Results  
The Company's same-store portfolio at March 31, 2013 represented 328
facilities containing approximately 21.8 million rentable square feet
and included approximately 86.4% of the aggregate rentable square
feet of the Company's 377 owned facilities. These same-store
facilities represented approximately 81.3% of property net operating
income for the quarter ended March 31, 2013. 
Same-store physical occupancy at period end for the first quarter of
2013 was 85.7%, compared with 79.3% for the same quarter of last
year. Same-store net rental income for the first quarter of 2013
increased 5.4%, same-store total revenues increased 6.8%, and
same-store operating expenses increased 5.4% from the same quarter in
2012. Same-store net operating income increased 7.6%, as compared
with the same period in 2012. 
Operating Results 
Total revenues increased $14.3 million and total property operating
expenses increased $4.9 million in the first quarter of 2013, as
compared with the same period in 2012. Increases in total revenues
are primarily attributable to increased occupancy levels in the
same-store portfolio and revenues generated from property
acquisitions. Increases in total property operating expenses are
attributable to the impact of newly acquired properties and an
increase in same-store expenses that was impacted by snow removal
costs in the 2013 period compared to minimal levels of such costs in
2012.  
Interest expense increased from $9.3 million during the three months
ended March 31, 2012 to $10.4 million during the three months ended
March 31, 2013, an increase of $1.1 million. The increase is
primarily attributable to a higher amount of outstanding debt in the
2013 period to fund a portion of the Company's growth, offset by a
decrease in the effective interest rate.  
The Company's first quarter results include operating income of $0.2
million from discontinued operations and $0.2 million of gains on
disposition of discontinued operations related to the sale of five
properties during the quarter.  
The Company reported a net loss attributable to the Company's common
shareholders of $1.9 million, or $0.01 per common share, in the first
quarter of 2013, compared with a net loss attributable to the
Company's common shareholders of $5.3 million, or $0.04 per common
share, in the first quarter of 2012. 
The Company's 377 owned facilities, containing 25.2 million rentable
square feet, had a physical occupancy of 85.4% at March 31, 2013. 
"At-The-Market" Equity Program 
During the quarter, the Company sold 0.1 million common shares of
beneficial interest through its "at-the-market" equity program at an
average sales price of $15.30 per share, resulting in net proceeds of
$1.5 million. At March 31, 2013, the Company had 3.8 million shares
available for sale under the existing Sales Agreement.  
Quarterly Dividend 
On February 21, 2013, the Company declared a dividend of $0.11 per
common share. The dividend was paid on April 15, 2013 to common
shareholders of record on April 1, 2013. 
Also on February 21, 2013, the Company declared a dividend of
$0.484375 for the 7.75% Series A Cumulative Redeemable Preferred
Shares. The dividend was paid on April 15, 2013 to holders of record
on April 1, 2013.  
2013 Financial Outlook  
"Due primarily to robust same-store performance year to date, we are
raising our full-year same-store revenue and net operating income
guidance ranges, as well as the bottom end of our FFO guidance,"
noted Chief Financial Officer Tim Martin. "From a balance sheet
perspective, we remain well-positioned to support our strategic
growth objectives."  
The Company is adjusting its previously issued estimates as well as
underlying assumptions, and now expects that its fully diluted FFO
per share for 2013 will be between $0.81 and $0.86 (previously
between $0.80 and $0.86), and that its fully diluted earnings per
share for the period will be between $0.00 and $0.05. The Company's
estimate is based on the following key assumptions: 


 
--  For 2013, a same-store pool consisting of 328 assets totaling 21.8
    million square feet
--  Same-store net operating income ("NOI") growth of 5.75% to 6.75% over
    2012 (previously 5.0% to 6.0%), driven by revenue growth of 5.5% to
    6.0% (previously 4.75% to 5.25%) and expense growth of 4.0% to 5.0%
    (previously 3.5% to 4.5%)
--  General and administrative expenses of approximately $29.0 million to
    $30.0 million

  
Due to uncertainty related to the timing and terms of transactions, the
impact of anticipated investment activity is excluded from guidance.
For 2013, the Company is targeting $75 million to $125 million of
acquisitions and $20 million to $40 million of 
dispositions. 


 
                                                                            
2013 Full Year Guidance                                  Range or Value     
--------------------------------------------------- ------------------------
Earnings per diluted share allocated to common                              
 shareholders                                       $    0.00  to  $    0.05
Plus: real estate depreciation and amortization          0.81           0.81
                                                    ---------      ---------
FFO per diluted share                               $    0.81  to  $    0.86
                                                    =========      =========

 
The Company estimates that its fully diluted FFO per share for the
quarter ending June 30, 2013 will be between $0.21 and $0.22, and
that its fully diluted earnings per share for the period will be
between $0.00 and $0.01. 


 
                                                                            
2nd Quarter 2013 Guidance                                Range or Value     
--------------------------------------------------- ------------------------
Earnings per diluted share allocated to common                              
 shareholders                                       $    0.00  to  $    0.01
Plus: real estate depreciation and amortization          0.21           0.21
                                                    ---------      ---------
FFO per diluted share                               $    0.21  to  $    0.22
                                                    =========      =========

 
Conference Call  
Management will host a conference call at 11:00 a.m. ET on Friday,
May 3, 2013 to discuss financial results for the three months ended
March 31, 2013. 
A live webcast of the conference call will be available online from
the investor relations page of the Company's corporate website at
www.CubeSmart.com. The dial-in numbers are 1-888-317-6016 for
domestic callers, +1-412-317-6016 for international callers and
1-855-669-9657 for callers in Canada. After the live webcast, the
call will remain available on CubeSmart's website for 30 days. In
addition, a telephonic replay of the call will be available through
June 2, 2013. The replay dial-in number is 1-877-344-7529 for
domestic callers and +1-412-317-0088 for international callers. The
conference number for both is 10027714.  
Supplemental operating and financial data as of March 31, 2013 is
available on the Company's corporate website under Investor Relations
- Financial Information - Financial Reports. 
About CubeSmart 
CubeSmart is a self-administered and self-managed real estate
investment trust. The Company's self-storage facilities are designed
to offer affordable, easily accessible and secure storage space for
residential and commercial customers. According to the 2012
Self-Storage Almanac, CubeSmart is one of the top four owners and
operators of self-storage facilities in the United States.  
Non-GAAP Performance Measurements  
Funds from operations ("FFO") is a widely used performance measure
for real estate companies and is provided here as a supplemental
measure of operating performance. The April 2002 National Policy
Bulletin of the National Association of Real Estate Investment Trusts
(the "White Paper"), as amended, defines FFO as net income (computed
in accordance with GAAP), excluding gains (or losses) from sales of
property and real estate related impairment charges, plus real estate
depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures.  
Management uses FFO as a key performance indicator in evaluating the
operations of the Company's facilities. Given the nature of its
business as a real estate owner and operator, the Company considers
FFO a key measure of its operating performance that is not
specifically defined by accounting principles generally accepted in
the United States. The Company believes that FFO is useful to
management and investors as a starting point in measuring its
operational performance because it excludes various items included in
net income that do not relate to or are not indicative of its
operating performance such as gains (or losses) from sales of
property, gains on remeasurement of investment in real estate
ventures, impairments of depreciable assets, and depreciation, which
can make periodic and peer analyses of operating performance more
difficult. FFO should not be considered as an alternative to net
income (determined in accordance with GAAP) as an indicator of the
Company's financial performance, is not an alternative to cash flow
from operating activities (determined in accordance with GAAP) as a
measure of the Company's liquidity, and is not indicative of funds
available to fund the Company's cash needs, including its ability to
make distributions.  
FFO, as adjusted represents FFO as defined above, excluding the
effects of acquisition related costs, gains or losses from early
extinguishment of debt, and other one-time items, which we believe
are not indicative of the Company's operating results. 
We define net operating income, which we refer to as "NOI," as total
continuing revenues less continuing property operating expenses. NOI
also can be calculated by adding back to net income (loss): interest
expense on loans, loan procurement amortization expense, loan
procurement amortization expense -- early repayment of debt,
acquisition related costs, equity in losses of real estate entities,
amounts attributable to noncontrolling interests, other expense,
depreciation and amortization expense, general and administrative
expense, and deducting from net income: income from discontinued
operations, gains on disposition of discontinued operations, other
income, gain on remeasurement of investment in real estate ventures,
and interest income. NOI is not a measure of performance calculated
in accordance with GAAP. 
Management uses NOI as a measure of operating performance at each of
our facilities, and for all of our facilities in the aggregate. NOI
should not be considered as a substitute for operating income, net
income, cash flows provided by operating, investing and financing
activities, or other income statement or cash flow statement data
prepared in accordance with GAAP.  
Forward-Looking Statements  
This presentation, together with other statements and information
publicly disseminated by CubeSmart ("we," "us," "our" or the
"Company"), contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Such statements are based on assumptions and expectations that
may not be realized and are inherently subject to risks,
uncertainties and other factors, many of which cannot be predicted
with accuracy and some of which might not even be anticipated.
Although we believe the expectations reflected in these
forward-looking statements are based on reasonable assumptions,
future events and actual results, performance, transactions or
achievements, financial and otherwise, may differ materially from t
he
results, performance, transactions or achievements expressed or
implied by the forward-looking statements. Risks, uncertainties and
other factors that might cause such differences, some of which could
be material, include, but are not limited to: 


 
--  national and local economic, business, real estate and other market
    conditions;
--  the competitive environment in which we operate, including our ability
    to raise rental rates;
--  the execution of our business plan;
--  the availability of external sources of capital;
--  financing risks, including the risk of over-leverage and the
    corresponding risk of default on our mortgage and other debt and
    potential inability to refinance existing indebtedness;
--  increases in interest rates and operating costs;
--  counterparty non-performance related to the use of derivative
    financial instruments;
--  our ability to maintain our status as a real estate investment trust
    ("REIT") for federal income tax purposes;
--  acquisition and development risks;
--  increases in taxes, fees, and assessments from state and local
    jurisdictions;
--  risks of investing through joint ventures;
--  changes in real estate and zoning laws or regulations;
--  risks related to natural disasters;
--  potential environmental and other liabilities;
--  other factors affecting the real estate industry generally or the
    self-storage industry in particular; and
--  other risks identified in Item 1A of our Annual Report on Form 10-K
    and, from time to time, in other reports we file with the Securities
    and Exchange Commission (the "SEC") or in other documents that we
    publicly disseminate.

  
Given these uncertainties, we caution readers not to place undue
reliance on forward-looking statements. We undertake no obligation to
publicly update or revise these forward-looking statements, whether
as a result of new information, future events or otherwise except as
may be required in securities laws. 


 
                                                                            
                                                                            
                         CUBESMART AND SUBSIDIARIES                         
                        CONSOLIDATED BALANCE SHEETS                         
                     (in thousands, except share data)                      
                                                                            
                                                   March 31,   December 31, 
                                                     2013          2012     
                                                 ------------  ------------ 
                                                                            
ASSETS                                                                      
Storage facilities                               $  2,436,455  $  2,443,022 
Less: Accumulated depreciation                       (367,336)     (353,315)
                                                 ------------  ------------ 
Storage facilities, net                             2,069,119     2,089,707 
Cash and cash equivalents                               2,625         4,495 
Restricted cash                                         5,484         6,070 
Loan procurement costs, net of amortization             7,777         8,253 
Other assets, net                                      27,928        41,794 
                                                 ------------  ------------ 
    Total assets                                 $  2,112,933  $  2,150,319 
                                                 ============  ============ 
                                                                            
LIABILITIES AND EQUITY                                                      
                                                                            
Unsecured senior notes                           $    250,000  $    250,000 
Revolving credit facility                              30,000        45,000 
Unsecured term loans                                  500,000       500,000 
Mortgage loans and notes payable                      226,460       228,759 
Accounts payable, accrued expenses and other                                
 liabilities                                           52,405        60,708 
Distributions payable                                  16,455        16,419 
Deferred revenue                                       11,866        11,090 
Security deposits                                         437           444 
                                                 ------------  ------------ 
    Total liabilities                               1,087,623     1,112,420 
                                                 ------------  ------------ 
                                                                            
Noncontrolling interests in the Operating                                   
 Partnership                                           36,036        47,990 
                                                 ------------  ------------ 
                                                                            
Commitments and contingencies                                               
                                                                            
Equity                                                                      
  7.75% Series A Preferred shares $.01 par value,                           
   3,220,000 shares authorized, 3,100,000 shares                            
   issued and outstanding at March 31, 2013 and                             
   December 31, 2012                                       31            31 
  Common shares $.01 par value, 200,000,000                                 
   shares authorized, 133,207,939 and 131,794,547                           
   shares issued and outstanding at March 31,                               
   2013 and December 31, 2012, respectively             1,332         1,318 
  Additional paid in capital                        1,436,378     1,418,463 
  Accumulated other comprehensive loss                (18,839)      (19,796)
  Accumulated deficit                                (429,736)     (410,225)
                                                 ------------  ------------ 
    Total CubeSmart shareholders' equity              989,166       989,791 
                                                 ------------  ------------ 
  Noncontrolling interest in subsidiaries                 108           118 
                                                 ------------  ------------ 
Total equity                                          989,274       989,909 
                                                 ------------  ------------ 
Total liabilities and equity                     $  2,112,933  $  2,150,319 
                                                 ============  ============ 
                                                           
                 
                                                                            
                                                                            

 
                         CUBESMART AND SUBSIDIARIES                         
                   CONSOLIDATED STATEMENTS OF OPERATIONS                    
                     (in thousands, except share data)                      
                                                                            
                                               Three Months Ended March 31, 
                                               ---------------------------- 
                                                    2013           2012     
                                               -------------  ------------- 
                                                                            
REVENUES                                                                    
  Rental income                                $      69,618  $      57,317 
  Other property related income                        7,694          5,775 
  Property management fee income                       1,145          1,020 
                                               -------------  ------------- 
    Total revenues                                    78,457         64,112 
                                               -------------  ------------- 
OPERATING EXPENSES                                                          
  Property operating expenses                         30,821         25,943 
  Depreciation and amortization                       29,832         25,083 
  General and administrative                           7,613          6,444 
                                               -------------  ------------- 
    Total operating expenses                          68,266         57,470 
                                               -------------  ------------- 
OPERATING INCOME                                      10,191          6,642 
                                               -------------  ------------- 
OTHER (EXPENSE) INCOME                                                      
  Interest:                                                                 
    Interest expense on loans                        (10,367)        (9,321)
    Loan procurement amortization expense               (476)          (771)
  Acquisition related costs                             (115)          (551)
  Equity in losses of real estate ventures                 -           (251)
  Other                                                  (73)           (71)
                                               -------------  ------------- 
    Total other expense                              (11,031)       (10,965)
                                               -------------  ------------- 
                                                                            
LOSS FROM CONTINUING OPERATIONS                         (840)        (4,323)
 
                                                                            
DISCONTINUED OPERATIONS                                                     
  Income from discontinued operations                    184          1,065 
  Gain on disposition of discontinued                                       
   operations                                            228              - 
                                               -------------  ------------- 
    Total discontinued operations                        412          1,065 
                                               -------------  ------------- 
NET LOSS                                                (428)        (3,258)
  NET LOSS (INCOME) ATTRIBUTABLE TO                                         
   NONCONTROLLING INTERESTS                                                 
  Noncontrolling interests in the Operating                                 
   Partnership                                            35            149 
  Noncontrolling interest in subsidiaries                  1           (734)
                                               -------------  ------------- 
NET LOSS ATTRIBUTABLE TO THE COMPANY                    (392)        (3,843)
                                               -------------  ------------- 
  Distribution to Preferred Shareholders              (1,502)        (1,502)
                                               -------------  ------------- 
NET LOSS ATTRIBUTABLE TO THE COMPANY'S COMMON                               
 SHAREHOLDERS                                  $      (1,894) $      (5,345)
                                               =============  ============= 
                                                                            
Basic and diluted loss per share from                                       
 continuing operations attributable to common                               
 shareholders                                  $       (0.02) $       (0.05)
Basic and diluted e
arnings per share from                                   
 discontinued operations attributable to common                             
 shareholders                                           0.01           0.01 
Basic and diluted loss per share attributable                               
 to common shareholders                        $       (0.01) $       (0.04)
                                               =============  ============= 
Weighted-average basic and diluted shares                                   
 outstanding                                         132,951        122,266 
                                                                            
AMOUNTS ATTRIBUTABLE TO THE COMPANY'S COMMON                                
 SHAREHOLDERS:                                                              
Loss from continuing operations                $      (2,299) $      (6,384)
Total discontinued operations                            405          1,039 
                                               -------------  ------------- 
Net loss                                       $      (1,894) $      (5,345)
                                               =============  ============= 
                                                                            
                                                                            
                                                                            

 
                Same-store facility results (328 facilities)                
         (in thousands, except percentage and per square foot data)         
                                                                            
                                          Three months ended                
                                               March 31,           Percent  
                                       ------------------------             
                                           2013         2012       Change   
                           
            -----------  -----------  ---------- 
                                                                            
REVENUES                                                                    
  Net rental income                    $    56,654  $    53,764         5.4%
  Other property related income              5,908        4,819        22.6%
                                       -----------  -----------  ---------- 
    Total revenues                          62,562       58,583         6.8%
                                       -----------  -----------  ---------- 
                                                                            
OPERATING EXPENSES                                                          
  Property taxes                             7,041        6,703         5.0%
  Personnel expense                          6,624        6,409         3.4%
  Advertising                                1,364        1,385        -1.5%
  Repair and maintenance                       764          711         7.5%
  Utilities                                  2,301        2,184         5.4%
  Property insurance                           719          696         3.3%
  Other expenses                             3,343        2,926        14.3%
                                       -----------  -----------  ---------- 
                                                                       
     
  Total operating expenses                  22,156       21,014         5.4%
                                       -----------  -----------  ---------- 
                                                                            
  Net operating income (1)             $    40,406  $    37,569         7.6%
                                       ===========  ===========  ========== 
                                                                            
  Gross margin                                64.6%        64.1%            
                                                                            
  Period end occupancy (2)                    85.7%        79.3%            
                                                                            
  Period average occupancy (3)                85.2%        79.0%            
                                                                            
  Total rentable square feet                21,791       21,791             
                                                                            
  Realized annual rent per occupied                                         
   square foot (4)                     $     12.20  $     12.49        -2.3%
                                                                            
  Scheduled annual rent per square foot                                     
   (5)                                 $     13.05  $     13.39        -2.5%
                                                                            
Reconciliation of Same-Store Net Operating Income                           
 to Operating Income                                                        
                                                                            
Same-store net operating income (1)    $    40,406  $    37,569             
Non same-store net operating income (1)      9,276        2,306             
Indirect property overhead (6)              (2,046)      (1,706)            
Depreciation and amortization              (29,832)     (25,083)            
General and administrative expense          (7,613)      (6,444)            
                                       -----------  -----------             
                                                                            
Operating Income                       $    10,191  $     6,642             
                                       ===========  ===========             
                                                                            
                                                                            
(1)  Net operating income (NOI) is a non-GAAP (generally accepted accounting
     principles) financial measure that excludes from operating income the  
     impact of depreciation and general & administrative expense.           
(2)  Represents occupancy at March 31 of the respective year.               
(3)  Represents the weighted average occupancy for the period.              
(4)  Realized annual rent per occupied square foot is computed by dividing  
     rental income by the weighted average occupied square feet for the     
     period.                                                                
(5)  Scheduled annual rent per square foot represents annualized asking     
     rents per available square foot for the period.                        
(6)  Includes property management fee income earned in conjunction with     
     managed properties.                                                    
                                                                            
                                                                            
                                                                            
          Non-GAAP Measure - Computation of Funds From Operations           
                   (in thousands, except per share data)                    
                                                                            
                                                                            
                                                      Three months ended    
                                                           March 31,        
                                                   ------------------------ 
                                                       2013         2012    
                                                   -----------  ----------- 
                                                                            
                                                                            
Net loss attributable to common shareholders       $    (1,894) $    (5,345)
                                                                            
Add (deduct):                                                               
  Real estate depreciation and amortization:                                
    Real property - continuing operations               29,462       24,733 
    Real property - discontinued operations                 57          670 
    Company's share of unconsolidated real estate                           
     ventures                                                -          514 
    Noncontrolling interest's share of                                      
     consolidated real estate ventures                       -         (434)
  Gains on sale of real estate                            (228)           - 
  Noncontrolling interests in the Operating                                 
   Partnership                                             (35)        (149)
                                                                            
                                                   -----------  ----------- 
FFO                                                $    27,362  $    19,989 
                                                   ===========  =========== 
                                                                            
Add (deduct):                                                               
  Acquisition related costs                                115          551 
                                                                            
                                                   -----------  ----------- 
FFO, as adjusted                                   $    27,477  $    20,540 
                                                   ===========  =========== 
                                                                            
Earnings (loss) per share attributable to common                            
 shareholders - basic and diluted                  $     (0.01) $     (0.04)
FFO per share and unit - fully diluted             $      0.20  $      0.16 
FFO, as adjusted per share and unit - fully                                 
 diluted                                           $      0.20  $      0.16 
                                                                            
Weighted-average basic and diluted shares                                   
 outstanding                                           132,951      122,266 
Weighted-average diluted shares and units                                   
 outstanding                                           137,738      128,470 
                                                                            
Dividend per common share and unit                 $      0.11  $      0.08 
Payout ratio of FFO, as adjusted                            55%          50%

  
Contact: 
CubeSmart 
Daniel
 Ruble
Investor Relations
(610) 293-5700 
 
 
Press spacebar to pause and continue. Press esc to stop.