CubeSmart LP was an active buyer and seller of facilities in 2013, and those moves seem to be yielding positive results.
The company earned profit of $41.5 million last year, up substantially from $1.8 million in 2012. Revenue jumped 19.5 percent to $318.4 million.
Last year, the Malvern, PA-based self-storage REIT bought 20 properties for $189.8 million, while selling 35 facilities for $126.4 million. As part of the sell-off, the company exited Tennessee’s Knoxville and Memphis markets. The company gained $27.4 million from selling the 35 facilities.
In addition to the acquisitions mentioned above, CubeSmart purchased another 35 facilities through a joint venture with investment firm Heitman LLC. The total price tag for the facilities, in Texas and North Carolina, was $315.7 million. The two companies are equal partners in the venture.
Pushing Rates, Growing Occupancy
This year, the company aims to push rental rates higher while bumping up occupancy rates.
“As we move more deeply into 2014, we continue to focus on execution [by] maximizing the cash flow from our existing assets with continued growth on our occupancy and asking rents,” President and CEO Christopher Marr said during a conference call with Wall Street analysts.
Realized rents at the company’s same-store locations were sluggish last year, increasing only 1 cent to $12.62. Rates picked up during the fourth quarter by 1.4 percent, with an average realized rent of $12.74.
Marr said the company’s asking rents are 2 percent higher than they were last year.
“We think we can push further north from there, but that answer is going to unfold as we get into the busy part of our rental season,” Marr said.
The company ended the year with same-store occupancy of 88.9 percent. Marr thinks that number should peak at 92 percent to 93 percent by late July.
CubeSmart is benefiting from healthy fundamentals in the self-storage industry, including strong consumer demand and a lack of new supply, he said.
“That’s been the fabulous story about our industry for the last several years. We’re really seeing very little supply,” Marr said.
CubeSmart continued to post positive gains at its 298 same-store facilities during 2013. The company grew revenue by 7.4 percent and profit by 9.3 percent. During the fourth quarter, same-store revenue rose 6.7 percent while profit climbed 7.3 percent.
In the fourth quarter, occupancy gains helped boost revenue in metro markets like Philadelphia (revenue growth of 9.8 percent), and Houston and Austin (revenue growth of 8.8 percent each). Florida metro areas experienced the most growth, collectively posting a 9.4 percent increase in revenue.
Meanwhile, the company’s poorest-performing market was El Paso, TX, where revenue fell by 5 percent.
Marr said the El Paso market, where CubeSmart has seven facilities, is affected greatly by military moves.
“We’re closely located to the military base,” Marr said. “As our troops come home and are not being redeployed, we are in a position here where we just have net move-outs.”
CubeSmart did not report any pending acquisitions, but the company expects to spend between $150 million and $200 million on facility purchases in 2014.
Marr said the company wants to buy high-quality properties in its core markets. That could mean more one-off transactions vs. large portfolio deals. Larger portfolios lean toward having poorer-quality facilities in the mix, he said.
“We tend not to look at and spend a lot of time on deals that we think are dilutive to the quality portfolio that we have worked very hard over the last few years to assemble,” Marr said.