Self-Storage REITs Release Financial Results for Second-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 June 30, 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.

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 June 30, 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 had another exceptional quarter, growing FFO over 25 percent,” said Spencer F. Kirk, CEO of Extra Space Storage. “FFO was driven by solid property performance, our growing third-party management platform, accretive acquisitions and mutually beneficial joint ventures. This resulted in an increase in our second-quarter dividend of over 32 percent. The acquisitions landscape is competitive, but we have closed over $500 million in acquisitions, primarily through our managed and joint-venture pipelines."

Christopher P. Marr, CEO of CubeSmart, expressed similar sentiments regarding the REIT’s second-quarter performance. "Double-digit growth in both FFO per share and same-store NOI during the quarter continues to demonstrate the strength of storage fundamentals and the advantages of our sophisticated operating platform. Our team continues to pursue acquisition and development opportunities in our core markets and expand our national third-party management platform.”

CubeSmart

CubeSmart reported FFO per share of $0.36 during the quarter, a 16.1 percent year-over-year increase. Same-store NOI at its 407 facilities grew 11 percent year over year. The company attributed this to a 7.8 percent growth in revenue and a 0.5 percent decrease in property operating expenses. Same-store locations contributed 93.1 percent of the REIT’s property NOI during the quarter.

The operation gained 80 basis points in physical occupancy compared with the same quarter the previous year. The same-store physical occupancy was 94.3 percent as of June 30. The company’s total-owned portfolio, representing 464 facilities and comprising 32 million square feet of rentable space, had a physical occupancy of 91.8 percent at the end of the first quarter.

CubeSmart acquired five storage facilities for $65.6 million during the quarter. Two facilities are in Illinois, with one each in Colorado, Massachusetts and Texas.

As of June 30, the company also had three facilities under certificate-of-occupancy agreements for a total price of $43.3 million. Two of the facilities are in Illinois and one is in Florida. The REIT also has three joint-venture and two wholly owned projects under development.

On June 1, 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 July 15 to common shareholders of record on July 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 July 15 to holders of record on July 1.

CubeSmart owns or manages 741 self-storage facilities across the United States. Its operating portfolio comprises 49.1 million square feet.

Extra Space Storage Inc.

Same-store revenue increased 7.6 percent and NOI rose 9.4 percent compared to the same period in 2015. FFO was 94 cents per diluted share, resulting in 25.3 percent growth compared to the second quarter the previous year.

Same-store occupancy was 94.4 percent as of June 30, which was equal to occupancy at the same time in 2015.

During the quarter, the company acquired 20 wholly owned facilities and two properties at the completion of construction for approximately $244.3 million. It also acquired two facilities at the completion of construction through a joint venture for about $60 million.

The company paid a quarterly dividend of 78 cents per common share, a 32.2 percent increase, on June 30 to common shareholders of record on June 15.

Headquartered in Salt Lake City, Extra Space owns or operates 1,412 self-storage properties in 37 states; Washington, D.C.; and Puerto Rico. The company’s properties comprise approximately 945,000 units and 106 million square feet of rentable space.

Public Storage Inc.

Revenue for same-store facilities increased 6 percent, or $29.4 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 4.2 percent, or $5.5 million, during the period compared to the previous year.

FFO was $2.34 per diluted common share, compared to $2.15 for the same period the previous year. NOI increased $33.5 million compared to the same period in 2015, including $23.9 million for same-store facilities.

The company acquired 12 self-storage facilities during the quarter for $99 million. Six of the properties are in Ohio, with two each in South Carolina and Texas, and one each in Indiana and North Carolina. It also completed seven new developments and various expansion projects that added 1 million net rentable square feet to its portfolio for $116 million.

The company reported a regular common quarterly dividend of $1.80 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 Sept. 29 to shareholders of record as of Sept. 14.

Based in Glendale, Calif., Public Storage has interests in 2,310 self-storage facilities in 38 states, with approximately 151 million net rentable square feet. Operating under the Shurgard brand name, the company also has 218 facilities in seven European countries, with approximately 12 million net rentable square feet.

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

Total revenue increased 17.9 percent over the previous year, while operating costs increased 19.4 percent, resulting in an NOI increase of 17.3 percent. Same-store NOI increased 6.8 percent year over year. FFO for the quarter was $1.10 per fully diluted common share, compared to $1.22 for the same period in 2015. Adjusted FFO was $1.32, a 6.6 percent increase.

Net income attributable to common shareholders for the second quarter was $43.5 million, or $1.03 per fully diluted share. For the same period in 2015, net income attributable to common shareholders was $28.5 million, or 80 cents per fully diluted common share.

Revenue for the company’s 420 wholly owned facilities increased 5.7 percent year over year, helped by an increase in average occupancy of 30 basis points and a 5.2 percent increase in rental rates and other income. Average overall occupancy was 91.4 percent, with units renting for an average of $13.16 per square foot.

Sovran acquired nine facilities during the quarter for $105.7 million. Four of the properties are in New York, two in Connecticut and one each in California, Florida and Texas. Together they comprise about 640,000 square feet.

The REIT also sold eight “non-core properties” for $34 million.

Subsequent to June 30, Sovran completed its acquisition of LifeStorage LP for approximately $1.3 billion. This transaction added 84 wholly owned stores and four third-party managed locations to the company’s portfolio. With the transaction, the REIT announced its intention to operate moving forward as Life Storage Inc.

The company approved a quarterly dividend of 95 cents per common share, which is equal to the previous quarter.

Based in Buffalo, N.Y., Sovran operates approximately 650 self-storage facilities in 29 states under the Life Storage and Uncle Bob’s brands. Its portfolio of owned and managed facilities comprises about 45 million square feet.

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