CUBE - Earnings call transcript Q1 2022

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Operator

Good morning. Thank you for attending today’s CubeSmart First Quarter 2022 Earnings Call. My name is Nate and I will be your moderator for today’s call. [Operator Instructions] I would like to now pass the conference over to our host, Josh Schutzer VP of Finance with CubeSmart. Josh, please go ahead.

Josh Schutzer

Nate. you, Thank everyone. Good morning, CubeSmart’s first call. to XXXX quarter Welcome earnings Chris and Chief Chief Participants Officer. on Officer President include call Martin, today’s Executive Marr, and Financial Tim

Our session. a prepared followed remarks Q&A be will by

was Securities factors and and In our from forward-looking Exchange Form will the other we cause and data forward-looking and risks uncertainties the with at Commission, may our of available filed addition is materially provided include X-K together www.cubesmart.com. Factors strategy with statements X-K the annual Form risks, actual this are section filed evening, to XX-K. the the the report in of and Relations company’s release earnings which documents certain financial Investor to differ Risk under or that could the cause supplemental our section involve issued and that that to these on release, The operating earnings statements materially company’s Form the differ to yesterday regarding earnings company specifically forward-looking actual factors website remarks company’s furnishes morning The results with statements. results the from files

include turn GAAP the non-GAAP financial call over be now reference company’s A Chris. reconciliation on measures. the between posted supplement the addition, in the In www.cubesmart.com. at and will I remarks can measures quarter non-GAAP to found first company’s website to

Chris Marr

growth business the growth per continue as as same-store consider launch one been income execute participating as Thank our very the have for FFO to share net earnings on for to by you, quarter a the evidenced quarterly XX.X% Josh. you Thank our we sector. operating XX.X% first plan. we season and self-storage We all in solid

optimistic our and of provide remained trends outlook are our demand Those the year. color positive April a financial of results and summer Tim have markets. the consumer positive improved will successful detail and Our season. all rental balance and spring very continued healthy. we into for our busy trends trends experienced across rental We demand on for

the it specifically combined that generate inflationary are and uncertain X% and a results. real lead on sector new some create in over for believe This potential In benefit only to Cube trends benefited continued self-storage in with continue an portfolios platform, Looking high-quality and correct, lower attractive quarterly headwind markets a of An our aggressive given continue uniquely to rates, financing focus environment, sufficient the with that real event self-storage pushed cost rapid from our a results, the to perhaps in We we rates into new Tim we out a hearing we believe when What currently interest Fed hypothesis, construction positioned to and me outperformed from beyond and create environment specifically classes. escalation macroeconomic environment, which range a construction believe the bit markets to that created and and that, have developments lower self-storage outperform from that performance should enjoy primary exposure sophisticated to rental have the estate has inflationary economy relative projects the owners to for with actions consumer let current assets Cube that path smooth returns. economic to recent the locations grow hard seeing the best industry is years. limit on folks climate. self-storage those bidding our can are have several sectors. developers color will quality on next of other existing should future those forma believe to to costs are if outperformance Pandemic-induced proven markets the escalated Cube the now volatility we assets in recession, over in solid rates have cycle. market during other escalate above portfolio and the combined operating rising. pro current With levels in our the should turn

Tim Martin

thank everyone your Thanks, on for the support. Chris and call continued and you to interest

the We in adjusted remain disciplined As high-end our growth growth, first after on, share Average reported of our over pursuit occupancy $XX And growth XX.X% XX.X%. Chris XX.X% XX.X% opportunities. of FFO our quarter, as the in for growth strong million. a last for in quarter, quarter per of we growth closing and extremely operating performance was external the active active of physical touched little first were quarter, and for with of store and occupancy representing Same-store quarter the guidance. results We at headline we ended of in very results owned X less included and XX.X% fourth X.X% $X.XX yielding expense wholly first remain an NOI active year. fundamentals as expected on revenue the quarter quarter. came the

XX first front, focus credit we On quarter. funding grade BBB ratings. growth our manner on the to that’s the the to third-party added stores continue a in consistent we investment BaaX in our sheet, Transitioning with management conservative balance

average shape million and in XX% XXXX maturities fixed have maturity Our of with XXXX. X.X only great maturities sheet we Over of rate debt debt of no balance in is our is and debt in years. an $XX

we at called year. will the and of bonds end XXXX recall, refinanced last our those you As

our per volatility. guidance and we well our recent really which the last spring and on is leasing Details sheet guidance were have of entering discussed are we FFO increased by positioning from perspective, of night. balance year a a be full for share the $X.XX assumptions the included our our operating to in Based earnings related release we So revised at place the strong midpoint. fundamentals season, good all XXXX positioned the have market given range

growth, growth same-store expense our detailed revenue and same-store same-store release. as for growth guidance improved also NOI We in

some XXXX. a on in us here call up questions. to this So, Thanks start time, we open joining for let’s call again are for Nate, the morning. At this the off great

Operator

Instructions] Smedes [Operator question line Rose Please first go to open. ahead. Our Citi. Smedes, is goes your with Absolutely.

Smedes Rose

– how little but Hey, interested good in perspective, in Smedes. interested initially the talked I occupancy year, maybe from levels from guys It more anticipated, seeing, of it thus in we about my have really changes kind from you the least second had like how quarter occupancy in seems are am a anything was is than previously? This now course what sticky at about thinking your thoughts? trends kind the you the hearing is over of far you morning. guess, just are I I and of occupancy

Chris Marr

Hey, Chris. it’s Smedes,

So is of basis as occupancy XX here of think the at we in as same pool, the at yesterday, year’s which would the end I – yet XX.X%, the end of same XX.X% same last basis XX the have same-store I experienced XX points points believe to the physical difference April March.

which performing since we of about So, from And about quite very occupancy last anticipated. occupancy was little has coming a than would move that for good We But about bit the has what very side, thought activity our of vacate. solid. bit perspective, don’t we an a how plan is as pace number. say again, year, we year planning and good January think vacate April. just we it little in elevated been we in again manage April, would into the again, I saw And from pricing. things the have right here strong. we a were been volume output rental It from really how as think broken record, to It’s But better year. about on on

would X, and to and almost I as constructive we X say, the first cautiously as rental noted season. go all-in-all, remarks, in pretty my into months So behind it’s for environment are get optimistic I the storage we nice opening us

Smedes Rose

down brought your just I then driving updated little anything that? was expectations a bit. And wondering, was in particular the expense guidance, in there you

Tim Martin

improvement Yes, range. little and on part of that other quarter of good estate Smedes, it’s bit a modest first first I real in quarter that, news And a the had efficiencies. taxes mean some is –

material So, overall, changes our expectations. in no

I think on a as growth in higher little the estate guidance real back pressure of going – to is end into that the the rate at of range in up the bring into the little deeper comp balance the bit we expenses of year be a tough the half pressure have taxes over closer year as bit will of then personnel continue a the year. we year the and the into

Smedes Rose

guys. Thank Okay. you,

Tim Martin

Thanks, Smedes.

Operator

Smedes. Thank you,

your Balaguer David ahead. to Street. please goes question with Green line is go David, next open Our

David Balaguer

morning. Good

moving where forward? Just re-leasing that it special sense today spread year that you last update how looks and Obviously, touch spread there us there. Can out wanted is on rates. in on positive was the to that movement was

Chris Marr

Sure. Good morning.

have here As that negative spread we we is experienced negative spread. but than a more sit of the positive slipped what spread to that historically, historical better today, pattern would

The always XX%. of first was quarter, deepest it in about terms the is quarter negative that spread. in the And

David Balaguer

wanted touch cap Have seems the in there. from for some and in stance more any rates It the lot there And Fed? seen like with a be hawkish Great. levered perhaps negative there more would buyers to rates rising cap rates, carry on just obviously, interest transaction the change rapidly you of out out market?

curious Just on that?

Chris Marr

an portfolio you market of the question. want some would little up transaction that aggressive pretty I grow it a too in would bidders out who are It’s There holdings. to a borrowing a be great – their to it’s but impact there. of At self-storage costs, still higher see it’s early think Yes, show there think point, of market. today lot

little it transaction a think I bit up market. so it will And in longer for show take the time to

David Balaguer

Great. Thank you.

Chris Marr

Thanks.

Operator

David. you, Thank

goes go BMO. to ahead. please with your Juan, open line Our question next Sanabria is Juan

Juan Sanabria

rental consumer? wanted Netflix just it, sanity hearing of we’re of bumps or check with but items back inflationary any I some whatnot. signs doesn’t the pulling ask to I stress consumers signs It if just Hi, wanted thanks. any about mean the I CRIs, like is to sound there in like

bumps? running So just curious markets react on you’re how the to rent different tests the

Chris Marr

Chris. Juan, good morning, Yes. it’s

an rent. any their in in our behavior We reaction receiving customers change have increase their in not seen to monthly

test. to continue We

pretty significantly the asking the We closed new gap the between customer. to a spread in-place have for and the

the checkout, rate said going going to a think current the gas store you you’re being another what I inflationary fact looks and $X gallon by just shocked like I’ve getting psychologically, you’re as this I increase or the before, environment. paying to of a pump think is when and bill grocery the

any communications to haven’t So other last we continue few change seen over to in the years. vacate rate point compared at seen or from customer we’ve our this test, what

Juan Sanabria

And on inflationary the given a environment lot of intro costs? curious on the CapEx really know noted budget just I the what foot dollar and then, what on get in development basis, but square attention, Great. doesn’t is a per you

Chris Marr

Yes.

foot square real to climate move. the paint repairing it, CapEx the large seal per roof cost a coating replacing or meaningful overall the the the have look big the it’s on that drive often you upon way. always portfolio depending In side, items like think terms every at about of then increases, when any dollar has changed are so aisles. seen across and When are you nothing certainly, no number but that We’ve really in the Those it when you drivers. three

On But a square to XX the to a basis you’re on it certainly, of costs point, to be construction doing. ago. your expensive XX% side, to even specific foot increases seeing build was to you’re more again, gotten months than per the overall, yes, XX% type in it’s lot construction construction

Tim Martin

lighting recurring and the our relatively payback to disclosed upgrades of our addition with air we some some both investments periods CapEx, consistent, past time. focused in ESG, ESG do investments systems, provide specially as X some which in years, condition are that some then the solar efforts, short and part cost of – conditioning upgrades air had well have savings type also objectives in over we under over And system some are as

Juan Sanabria

that would inflationary if such I and may materially trying today? the understand Tim, Just costs you see environment there? relative down the equipment, what And prod payback the utility keeping HVAC solar given just to as to your

Tim Martin

materially short-term. it’s say wouldn’t I No, impacting

looking a at You’re return.

on years, investment. time, those the expenses over those to helping X, in reduce return and have conditioning costs X repair energy do on at years, on side, our the X, solar looking air maintenance investments costs. you’re on If multiple measured an certainly, Energy impact

helpful. X say but payback or quarter So margin. there that material I a it’s to helpful it’s wouldn’t the a a on year, that is

Juan Sanabria

Thank you.

Chris Marr

Thanks.

Operator

Thank you, Juan.

of Bank go goes open question line Spector next your ahead. Our to with is Jeff America. Jeff, please

Jeff Spector

portfolio now. with length a What’s Good morning. now the I happening that’s the on years follow-up questions. the What in length-of-stay? One based prior is been of current of stay? number increasing know for

Chris Marr

Yes. Good long the morning. in it’s have how been grow thinking now, the portfolio. And kind that It’s of and existing Chris. they It in terms right in months longer of our to about about clearly, XX think years. continues been pushing of type have I than XX% And XX, customers of X And length – out of that XX range. almost that’s stay. with us customers

side, we that us of median or period of of then a when the have you with We customer, interesting. for On about a quite that trend really which short-term with and short-term XX% have been kind an in the long bunch have at who we reality whole did the see a think the increase of time. customers year end was last so

market at of was likely the it’s year. end related think I to what on last the in going housing

we’ve needed whatever delays bit month being they be homes remodeling it a in think self-storage lot for normalized And college X. year new in I or the we expect, saw as as we was gotten normalized more had certain customers then who and in homes a their into markets, unexpectedly completed back a or or XXXX. student a here That’s of way well. that do will this

Jeff Spector

assuming And dig Chris. – the the of market guess thanks, guidance the into into April, And maybe the above the tying maybe then, bit estimate. a I’m bit is year as will more if little because But continues? that transpire we in new the guidance was Okay, clearly, – is what our guidance well Chris, increase a concerned could Street. core same-store I

Chris Marr

again, – days the XX April guidance. we what, Yes. since have, I provided we initially mean

when provided. that in our customers the margin, that of from that our lower vacates of end at move-in not comfort support nature area the we’ve line So seen together in range been the seen with expectations. side originally on back we’ve gives business in we’re expectations that and our July. is have we That is of likely Obviously, us

the different Feeling question. We rates, rental the back behavior and will as significantly have a year – here were more it rest of goes. last noted of to – elevated. we certainty the was quite continuously as customer how about year think as I in The year pushed good half

a sense over and June updating going So of a what I that just that rental rate out the what season May market the from and year. how we play think for will play here is half like to perspective, will is giving how guidance out, for summer the about us back looks influence think

Jeff Spector

than Okay, benefited watch that you. you my last And thank the then Chris, question, few markets? over more commented some any particular markets years have past others, may

Chris Marr

think concept No, demographic larger, experienced the can in I Tucson. greater And macro. have I think that just smaller markets is that than better volatility The you markets. see the and thesis

that. you head, You coming can like with the my markets – markets in not up see off that other top boy, of smaller in. we’re But see I’m in can

volatility be from are the way have demographic in current economy think to think I forward, you shaping to the likely seems up. better less the if that the I environment, markets look benefit

Jeff Spector

you. Thank Great.

Operator

Thank you, Jeff.

Evercore. goes with question open. Please Samir is next to your Samir, Our ahead. line go Khanal

Samir Khanal

much. so Thanks

So views New Chris, a for well and in last just out have that kind both pretty to provide guidance quarter. balance at of a your you see the first the held it standpoint? occupancy time bit when more on if year, growth Just maybe And from plays look an York color MSA trying rate York, I how the up the from of New think provided you just changed here.

Chris Marr

the Yes. Thanks question. for

a margin, XX the would York been better view our bit New what ago. days performing So than at have is

into XX strength points again, basis which continued boroughs. the so, over nicely the continue the I the across last April, be is occupancies XX, each to think – consumer MSA or year, up entire here of rolling for and of

us So, that’s some comfort. given

You to in continue Queens. have supply pressure

in pressure are we supply that. new, have You navigating and nothing Brooklyn, through

with York, the a had that acceleration I basis in from New is to the we points perspective, think from same-store performance pool. XX in QX of change QX

I the old gone of points, we QX, have right we think to think here XX me, look or data direction, I but would other pool XX the of in have I had points if basis the would have QX basis that so front at don’t deceleration.

going year, York pretty minus that growth New I think And XX% throughout pretty at recognizing feel of And to stores specifically the continue constructive supply performing growth in are at plus have that. the this point, those So New impact line from XX%, revenue the perspective. I the when does X% about than those top good us of about year are boroughs. in the to Again, said before, same-store are or a decelerate about feel that we York. that rapid it an think had more through we about we the rest pace have pace and markets you at navigating that the shape two

Samir Khanal

maybe guess my second coming you hasn’t change this changes of are the sort product any much look, more know of load who I off little but products on to this cap have is transactions. on to you seeing what but time of some And seen you nine down sort months? a then these sellers the rates sort come months market point, I valuations have Are said bit, question to at been where around there is saying, assets the now? six come market into because next over of happens knows may

Tim Martin

We is – are Tim. this still

they quantity the know Last very, underwrite somebody was active an awful exceptional an are still and is still as volume. to level hard far year. seeing very when there question lot from it selling. a your quite But potential very opportunity still of say last We as But evaluate certainly, as why are to standpoint. was at a stuff is the a level everybody’s there. into deeper year acquisitions. I get bit of it’s It’s motivation that’s out to why of to don’t market very, – it’s selling, active motivation, Not

will volatility market think in others as more think the utilization about the I it’s progresses. there like. there here an of And their buyers going market. be that lot how of is backdrop because some than their some come interesting to returns, some to and will And that’s to impact as leverage the portfolios year at point, a they

that the all portfolios stores going to to through couple So, the here see work it’s an of process. be the out interesting of and there, months how are

Samir Khanal

very Thanks much.

Chris Marr

Thanks.

Operator

Samir. Thank you,

Kim Truist. go your open. Ki, next is to question Bin Ki with goes line Our Please ahead.

Ki Bin Kim

Thanks.

back to you prior When the deceleration, actually to were go pool same-store in-store Just in a City, XX there question. point to revenue? XX basis point a referring in for basis change after you said was adjusting New the York to

Chris Marr

Yes.

Ki Bin Kim

you Okay. New COVID-induced of level, demand you And that’s terms And how out included, in are any seeing year in year, are from quicker? what notable changing? guess higher last the I seeing just, the people moving prior trends and City York

Chris Marr

as rate the with No. line that’s think especially and Again, vacate here across about in April all in the right our year-to-date, markets. we budget

expect will the before, XXXX And we moved that year, slightly have attribute are been then customer, I that customers to we short-term as a last in, those in the So, housing period portfolio market. elevated again, we of we just quite mentioned which saw time. given the is in that in pace uptick for of seeing, the

activity you a we lot of of – or of pace impact Downtown just back think York the some more variant quite of didn’t I January, in the in markets. see New Boston, the see City, if be the tends COVID move-ins. to didn’t So, overall, urban about think LA, Chicago we

any You didn’t move-outs. see

started a go you and expectation I the we days kind of that’s kind normal brighter ahead. here. bit – more of our as to a market And return As to the Hopefully, think of forward that’s that wane, variant impact are patterns. saw

product across think pressure in than they So, getting an country, other as folks are to impact we the it just ancillary that see to I the rents smaller no trends in using starting naturally see roommate, that at itself in to foot think is are I this and point continue most impact positive you multifamily our etcetera, apartments, use. markets that a lends living from square

Ki Bin Kim

have And missed and Street on did might maybe but I April? you this, comment in the year-over-year quarter rates in

Chris Marr

trend don’t rates and think that. gets I first about think asked up year, quarter. last tougher. that moved were then tougher We year-over-year around the anybody No, the you comp as we how And that in pattern – XX% of

So, as to pretty April, flat XX% sit it’s we up here about XX% XXXX. to in still

Ki Bin Kim

Thank you. Okay.

Operator

Thank you, Ki.

JPMorgan. go with Our final is line question goes ahead. open. to Mike, Mike Mueller your Please

Mike Mueller

Hi. Yes. Thanks.

I the you budgeting So, you expectation you – two developments relative are returns? opening quarter. underwrite changed looks initially think how return And for do they like stabilized to to are what curious have am started you this that when that has projects?

Tim Martin

years typically about been ago, have But what consistent. for you probably had a than and that’s wider that Nothing been What development basis you that’s XXX time cost. new be X rate really years, to over changed. have cap that. we I on our market. points go of X XXX to we yield years, points has a changes relatively than haven’t target last are would And the higher basis X couple in a a if for is projects any developments that’s in been would back say stabilized would that years. we The material have spread where achieve able

has cash XX with have months flow we happened of fundamentals or last committed to given here from a when market here and bit expectation over rates the improved would those projects what’s Our so. little and occupancy

from an the getting things much They in through planned. originally offset other is little bit or of would take But we So, for bit very all has longer costs. are and many to than get flow us probably than in tended to Timing growth governments a issues local they a quarters labor line. projects have two with issue quarter and and growth aspects, then to in been expectation more cash approved a deal others done. the little have

Mike Mueller

Got it.

you. Thank it. was That Okay.

Chris Marr

you. Thank

Operator

you, Thank Mike.

Kim ahead. with Truist. Please Ki, line from open. Bin Ki is have follow-up go We a question your

Ki Bin Kim

back. Thanks me for taking

being tough. to rate one Longer you flat when term, a your quick back in little think when a to we to perform not question, just actually rate XX%, even need to ‘XX. going back sector the rate come know comps up grow growth as really bit to I well, of the continue real Just off down for I year. this compare but XXXX, that’s But rate want April. growth are we comps, right, to versus you to here. growth Eventually through compare it back, come we

what’s what for year-over-year? the to Given continue sector macro you in picture the produce is rate do happening and trends this to seeing, real think that you are probability growth

Chris Marr

to Yes. that to Ki Feel environment, in in we the there that now that, Bin, about opportunity of right good grow. terms is that inflationary are certainly continue

you growth go kind back overall about post-recession back January back the you and has say, going if compound what of growth think ‘XX. time in saying, to to, If been of

In have X% terms of it’s same-store then, revenues, indexed the X% to range. if you in to back

it’s in think – trends the about like still consumer. you consumer not to has that if perspective, outpaced we the costs from So, have broader

So, how I the real continue sector. have rates, the period the good grow forward. there I as think to comfort where are don’t not know to relative spot over that amount the the we necessarily in But for to a growth quantify ability we to I rates, go is rates prior are

Ki Bin Kim

again. you Thank Okay.

Operator

further no are There Ki. you, time. registered at this questions Thank

So, turn management over to I the the any team back will closing conference for remarks.

Chris Marr

forward results you forward the very the tours that seeing we sector conferences all of and of at and our months as earnings quarter the as participating are be you self-storage life other several day. great and launch next much, And at little the to look to you coming talking many starts you first thank We are Well, that sunnier. up on we going end thank all to a things to quarter of second over Okay. season. a look And have call. for

Operator

CubeSmart participation. today’s call. concludes earnings XXXX for Thank first That your quarter you

now can disconnect. You

CubeSmart 29 Apr 222022 Q1 Earnings call transcript