Self-Storage REITs Release Financial Results for First-Quarter 2016

The four largest publicly traded, U.S.-based self-storage real estate investment trusts (REITs)—CubeSmart, Extra Space Storage Inc., Public Storage Inc. and Sovran Self Storage Inc.—have released financial statements for the quarter that ended March 31, 2016. In general, all four entities showed gains in key areas, particularly funds from operations (FFO) and net operating income (NOI), while also achieving increases in occupancy.

"We are off to a great start in 2016, with record-high occupancy and solid growth in revenue and NOI,” said Spencer F. Kirk, CEO of Extra Space Storage. “This resulted in impressive FFO growth of 25 percent per share. Our acquisition and third-party management pipelines are robust, and we continue to strengthen and diversify our national platform."

Christopher P. Marr, CEO of CubeSmart, was also enthusiastic about the start of the fiscal year. "Our first-quarter performance speaks to the continued fundamental strength of the storage business and our operating platform's ability to generate strong financial results during what is considered a seasonally slow period of the year," he said. "As we head into the busy rental season, we are focused on delivering strong property level results while pursuing external growth opportunities that create attractive long-term shareholder value."

CubeSmart

CubeSmart reported FFO per share of $0.32 during the quarter, a 14.3 percent year-over-year increase. Same-store NOI at its 407 facilities grew 12.9 percent year over year. The company attributed this to an 8.4 percent growth in revenue and a 1 percent decrease in property operating expenses. Same-store locations contributed 93.2 percent of the REIT’s property NOI during the quarter.

The operation gained 130 basis points in physical occupancy compared with the same quarter the previous year. The same-store physical occupancy was 92.3 percent as of March 31. The company’s total-owned portfolio, representing 456 facilities and comprising 31.4 million square feet of rentable space, had a physical occupancy of 90.3 percent at the end of the first quarter.

CubeSmart acquired nine storage facilities for $135.9 million during the quarter. Four facilities are in Texas, three in Florida and one each in Connecticut and Washington, D.C.

On March 30, the REIT agreed to acquire a 31-property portfolio for an aggregate purchase price of $115.5 million through an unconsolidated joint venture called HVP. The facilities were previously managed by CubeSmart. The assets include 21 in South Carolina, five in Georgia, four in North Carolina and one in Michigan. CubeSmart’s contribution to the acquisition was $5.3 million as of March 31, with its total expected contribution expected to be $5.4 million.

HVP was formed last December to acquire 37 facilities from Storage Pros Management LLC in a deal worth $242.5 million. CubeSmart’s financial contribution in this deal is expected to be $10.5 million.

On Feb. 16, the company declared a dividend of 21 cents per common share, which was equal to the dividend issued the previous quarter. The dividend was paid on April 15 to common shareholders of record on April 1. The REIT also declared a dividend of $0.48 for the 7.75 percent Series A Cumulative Redeemable Preferred Shares that was paid on April 15 to holders of record on April 1.

CubeSmart owns or manages 708 self-storage facilities across the United States. Its operating portfolio comprises 47.3 million square feet.

Extra Space Storage Inc.

Same-store revenue increased 9.1 percent and NOI rose 12.3 percent compared to the same period in 2015. FFO was 86 cents per diluted share, resulting in 24.6 percent growth compared to the first quarter the previous year.

Same-store occupancy grew by 70 basis points to 92.8 percent as of March 31, compared to 92.1 percent at the same time in 2015.

During the quarter, the company acquired 21 wholly owed facilities and two properties at the completion of construction for approximately $225.2 million. It also acquired two facilities at the completion of construction through a joint venture for about $34.5 million.

The company paid a quarterly dividend of 59 cents per common share on March 31 to common shareholders of record on March 15.

Headquartered in Salt Lake City, Extra Space owns or operates 1,371 self-storage properties in 37 states; Washington, D.C.; and Puerto Rico. The company’s properties comprise approximately 910,000 units and 103 million square feet of rentable space.

Public Storage Inc.

Revenue for same-store facilities increased 6.5 percent, or $30.8 million, in the quarter, as compared to the same period in 2015, primarily because of higher realized annual rent per occupied square foot. Cost of operations for the same-store facilities decreased 2.6 percent, or $3.8 million, during the period compared to the previous year.

FFO was $2.10 per diluted common share, compared to $1.91 for the same period the previous year. NOI increased $45.3 million compared to the same period in 2015, including $34.6 million for same-store facilities.

The company acquired 12 self-storage facilities during the quarter for $98 million. Seven of the properties are in Florida, three in Ohio and one each in South Carolina and Tennessee. It also completed two new developments and various expansion projects that added 300,000 net rentable square feet to its portfolio for $21 million.

The company reported a regular common quarterly dividend of $1.80 per common share, an increase of 10 cents from the previous quarter. It also declared dividends with respect to various series of preferred shares. All the dividends are payable on June 30 to shareholders of record as of June 15.

Based in Glendale, Calif., Public Storage has interests in 2,291 self-storage facilities in 38 states, with approximately 149 million net rentable square feet. Operating under the Shurgard brand name, the company also has 217 facilities in seven European countries, with approximately 12 million net rentable square feet.

Sovran Self Storage Inc. (Uncle Bob's Self Storage)

Total revenue increased 16.1 percent over the previous year, while operating costs increased 13.3 percent, resulting in an NOI increase of 17.5 percent. Same-store NOI increased 9.9 percent year over year. FFO for the quarter was $1.16 per fully diluted common share, compared to $1.07 for the same period in 2015. Adjusted FFO was $1.22, an 11.9 percent increase.

Net income available to common shareholders for the first quarter was $28.3 million, or 73 cents per fully diluted share. For the same period in 2015, net income available to common shareholders was $22.5 million, or 65 cents per fully diluted common share.

Revenue for the company’s 428 wholly owned facilities increased 6.7 percent year over year, helped by an increase in average occupancy of 90 basis points and a 5.4 percent increase in rental rates and other income. Average overall occupancy was 89.9 percent, with units renting for an average of $12.77 per square foot.

In January, Sovran entered contracts to acquire 30 facilities in 10 states for about $398 million. As of March 31, it had acquired 24 of those assets for approximately $310 million. It has since closed on five more of the properties for $78.4 million and expects to close on the remaining facility this month.

The REIT also acquired one self-storage property in Los Angeles for $17 million and another in Miami for $11 million.

The company approved a quarterly dividend of 95 cents per common share, which is an 11.8 percent increase from the previous quarter.

Based in Buffalo, N.Y., Sovran operates more than 550 self-storage facilities in 26 states under the Uncle Bob’s brand. Its portfolio of owned and managed facilities comprises more than 38.5 million square feet.