Self-Storage REITs Release Financial Results for Third-Quarter 2017

The five largest publicly traded, U.S.-based self-storage real estate investment trusts (REITs)—CubeSmart, Extra Space Storage Inc., Life Storage Inc., National Storage Affiliates Trust and Public Storage Inc.—have released financial statements for the quarter that ended Sept. 30, 2017. In general, the companies showed gains in key areas, particularly funds from operations (FFO) and net operating income (NOI), while also achieving increases in occupancy.

Each of the REITs was impacted by Hurricanes Harvey, Irma and Maria during the quarter, sustaining several millions of dollars in losses. Resulting closures and property damage forced some of the companies to remove certain facilities from same-store calculations.

"I am proud of the efforts and sacrifices our team made to take care of our customers, fellow employees and our stores during three hurricanes in the quarter,” said Joseph D. Margolis, CEO of Extra Space. “In the midst of these tragic events, we had strong execution this quarter and posted another solid result.”

Christopher P. Marr, president and CEO of CubeSmart, expressed similar sentiments. “Third-quarter performance beat our expectations primarily due to strong storage demand trends across most of our markets resulting in higher occupancies and revenue growth for our same-store and lease-up properties,” he said. “We continue to experience steady, broad-based demand and remain focused on creating long-term shareholder value by continuing to deepen the competitive advantages of our operating platform.”

CubeSmart

CubeSmart reported FFO per share of $0.42 during the quarter, a 10.5 percent year-over-year increase. Same-store NOI at its 432 facilities grew 4.1 percent year over year. The company attributed this to a 4.1 percent growth in revenue and a 4.2 percent increase in property operating expenses. Same-store locations contributed 91.7 percent of the REIT’s property NOI during the quarter.

The operation gained 60 basis points in physical occupancy compared with the same quarter the previous year. The same-store physical occupancy was 93.7 percent as of Sept. 30. The company’s total-owned portfolio, representing 480 facilities and comprising 33.4 million square feet of rentable space, had a physical occupancy of 91.9 percent at the end of the third quarter.

CubeSmart didn’t acquire any storage properties during the quarter but opened a wholly owned facility in Washington, D.C., for $27.8 million and completed a joint-venture development in New York City for $81.2 million. The REIT owns 90 percent of the New York asset. At the close of the quarter, the REIT had two properties in Florida and one in Illinois under contract to purchase at Certificate of Occupancy for $49.9 million, and seven joint-venture projects under development.

Impact from Hurricanes Harvey and Irma forced the temporary closure of 91 owned and 30 joint-venture facilities in Florida and Texas. Issues included inaccessibility, power outages and property damage. All but three properties were open within five days of each storm’s conclusion, company officials said. Net insurance proceeds for repairs was $1.4 million.

On July 25, the company declared a dividend of 27 cents per common share, which was equal to the dividend issued the previous quarter. The dividend was paid on Oct. 16 to common shareholders of record on Oct. 2.

CubeSmart owns or manages 908 self-storage facilities across the United States. Its operating portfolio comprises 61.4 million square feet.

Extra Space Storage Inc.

Same-store revenue increased 4.8 percent and NOI rose 5.5 percent compared to the same period in 2016. FFO was $1.13 per diluted share, resulting in 10.8 percent growth compared to the third quarter the previous year.

Same-store occupancy was 93.9 percent as of Sept. 30, which was a 1.5 percent increase compared to the same period in 2016.

During the quarter, the company acquired three wholly owned facilities and one at Certificate of Occupancy for approximately $31.8 million. It also made a Certificate-of-Occupancy purchase through a joint venture for about $8.8 million.

Impact from Hurricanes Harvey, Irma and Maria forced the temporary closure of 253 facilities in Florida, Georgia, Puerto Rico, South Carolina and Texas. Net insurance proceeds for repairs was estimated at $2.1 million. The REIT also recorded $2.3 million in “additional tenant re-insurance claims cost.”

The company paid a quarterly dividend of 78 cents per common share, which was equal to the previous quarter. It was paid on Sept. 29 to common shareholders of record on Sept. 15.

Headquartered in Salt Lake City, Extra Space owns or operates 1,513 self-storage properties in 38 states; Washington, D.C.; and Puerto Rico. The company’s properties comprise approximately 1.03 million units and 114 million square feet of rentable space.

Life Storage Inc. (Formerly Sovran Self Storage Inc.)

Total revenue increased 6.1 percent over the previous year, while operating costs increased 13.7 percent, resulting in an NOI increase of 2.4 percent. Same-store NOI decreased 0.5 percent year over year, which was attributed primarily to a 51.7 percent increase in Internet advertising expenses and a 7.6 percent bump in property taxes. FFO for the quarter was $1.34 per fully diluted common share, compared to $0.79 for the same period in 2016. Adjusted FFO was $1.39, a 3.7 percent increase.

Net income attributable to common shareholders for the third quarter was $35.5 million, or $0.76 per fully diluted share. For the same period in 2016, net income attributable to common shareholders was $4.7 million, or $0.10 per fully diluted common share.

Revenue for the company’s 431 wholly owned stabilized facilities increased 0.9 percent year over year, helped by an increase in average occupancy of 40 basis points and growth in tenant-insurance administrative fees. Average overall occupancy for the quarter was 91.5 percent, with units renting for an average of $13.62 per square foot.

The REIT acquired three properties in Atlanta during the quarter through a joint venture for $39.1 million, of which the company contributed $3.6 million.

Hurricanes Harvey and Irma caused an estimated $6 million in damage across 150 Life Storage facilities, including $2.8 million in uninsured costs. All affected properties have reopened except for one joint-venture facility. Four wholly owned assets sustained heavy flooding and have been removed from same-store calculations until those properties are stabilized.

Subsequent to the end of the quarter, the company approved a quarterly dividend of $1 per common share, which is equal to the previous quarter.

Based in Buffalo, N.Y., Life Storage operates more than 700 self-storage facilities in 29 states under the Life Storage and Uncle Bob’s brands. Its portfolio of owned and managed facilities comprises more than 49 million square feet.

National Storage Affiliates Trust (NSAT)

Core FFO per share was $23.8 million during the second quarter, a 13.8 percent year-over-year increase. Its net income was $11.2 million during the quarter, a 41.8 percent gain compared to the $7.9 million it reported for the same period in 2016. Same-store NOI was $30.5 million, up 6.7 percent.

Same-store revenue was $44.1 million during the quarter, a 5.4 percent increase from a year ago. This was driven by a 5.7 percent increase in average annualized rental revenue per occupied square foot. Average occupancy was 90.4 percent as of Sept. 30, down from 91 percent last year. Same-store average occupancy was 90.9 percent, down from 91.4 during the same period last year.

The company acquired 19 self-storage properties during the quarter for $123.8 million. The facilities are in nine states and comprise more than 1.3 million rentable square feet in about 10,200 units.

On Aug. 24, the company declared a quarterly dividend of $0.26 per common share, which was equal to the previous quarter. It was paid on Sept. 29 to holders of record on Sept. 15.

Headquartered in Greenwood, Colo., NSAT is a self-administered and -managed REIT focused on the acquisition, operation and ownership of self-storage properties within the top 100 U.S. Metropolitan Statistical Areas throughout the United States. The company has ownership interest in 512 storage facilities in 29 states. Its portfolio comprises approximately 32 million net rentable square feet. It's owned by its affiliate operators, who are contributing their interests in their self-storage assets over the next few years as their current mortgage debt matures.

Public Storage Inc.

Revenue for same-store facilities increased 2.4 percent, or $13 million, in the quarter, as compared to the same period in 2016, primarily because of higher realized annual rent per occupied square foot. Cost of operations for the same-store facilities increased 1.6 percent, or $2.4 million, during the period compared to the previous year.

FFO was $2.35 per diluted common share, compared to $2.51 for the same period the previous year, marking a 6.4 percent decrease. NOI increased $15.7 million compared to the same period in 2016, including $10.6 million for same-store facilities.

The company acquired seven self-storage facilities during the quarter for $47.3 million. They include two properties in Florida, two in South Carolina and one each in Kentucky, North Carolina and Ohio. Together they comprise 400,000 net rentable square feet. It also completed nine new development and various expansion projects that added 1.4 million net rentable square feet to its portfolio for $144.5 million.

Hurricanes Harvey and Irma forced temporary closure of 240 facilities in Florida and Texas. The company reported a $7.8 million casualty loss due to property damage and associated repair costs. The REIT estimates it’ll incur $10 million in expenses to complete repairs. It doesn’t expect to receive any insurance proceeds since the loss estimates are less than its insurance deductibles. Public Storage incurred $5.2 million in incremental ancillary cost of operations due to the storms. Due to damage and service disruptions, it has removed 13 facilities from its same-store pool.

The company reported a regular common quarterly dividend of $2 per common share, which was equal to the previous quarter. It also declared dividends with respect to various series of preferred shares. All the dividends are payable on Dec. 28 to shareholders of record as of Dec. 13.

Based in Glendale, Calif., Public Storage has interests in 2,374 self-storage facilities in 38 states, with approximately 157 million net rentable square feet. Operating under the Shurgard brand name, the company also has 220 facilities in seven European countries, with approximately 12 million net rentable square feet.