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 Dec. 31, 2015. 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.

February 24, 2016

6 Min Read
Self-Storage REITs Release Financial Results for Fourth-Quarter 2015

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 Dec. 31, 2015. 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.

In its release, CubeSmart reported a same-store NOI increase of 9.6 percent for all of 2015, the third consecutive year the REIT exceeded 9 percent growth, according to Christopher P. Marr, CEO. "[Our success] speaks to the strength of storage fundamentals and our operating platform," he said. "Demand for storage continues to be steady and broad-based, with minimal impact from new supply in our core markets. Looking forward to 2016, CubeSmart is focused on generating attractive risk-adjusted returns for shareholders by continuing to execute on our internal and external growth strategies while maintaining a strong balance sheet."

Spencer F. Kirk, CEO of Extra Space Storage, echoed similar sentiments. "2015 was a record-breaking year for Extra Space in all operational categories, including occupancy, revenue, NOI growth, and the expansion of our footprint by 24 percent,” he said. “Notably, our performance and growth resulted in our inclusion in the S&P 500. Market conditions continue to be favorable for the storage sector in 2016, and we are poised to extract efficiencies from our size and scale."

CubeSmart

CubeSmart reported FFO per share of $0.33 during the quarter, a 17.9 percent year-over-year increase. Same-store NOI at its 353 facilities grew 11.1 percent year over year. The company attributed this to an 8 percent growth in revenue and a 0.9 percent increase in property operating expenses. Same-store locations contributed 82.7 percent of the REIT’s property NOI during the quarter.

The operation gained 160 basis points in physical occupancy compared with the same quarter the previous year. The same-store physical occupancy was 92 percent as of Dec. 31. The company’s total-owned portfolio, representing 445 facilities and comprising 30.4 million square feet of rentable space, had a physical occupancy of 90.2 percent at the end of the fourth quarter.

CubeSmart acquired 13 storage facilities for $124.2 million during the quarter. Three facilities are in Massachusetts, with two each in Georgia, North Carolina and Texas. Single assets were purchased in Arizona, New Jersey, New York and Tennessee. During 2015, the company acquired 29 properties for $292.4 million.

On Dec. 8, the company also established a 10 percent ownership in a newly formed joint venture, which acquired 30 properties comprising 1.8 million rentable square feet for $193.7 million. It also opened two unrelated joint-venture development properties and closed on nine property dispositions totaling $47.7 million during the quarter.

The REIT also issued $250 million in 4 percent unsecured senior notes due Nov. 15, 2025. The net proceeds were used pay down debt and help fund investments.

On Dec. 10, the company declared a dividend of 21 cents per common share, which was a 31.3 percent increase compared to the dividend issued the previous quarter. The dividend was paid on Jan. 15 to common shareholders of record on Jan. 4. The REIT also declared a dividend of $0.48 for the 7.75 percent Series A Cumulative Redeemable Preferred Shares that was paid on Jan. 15 to holders of record on Jan. 4.

CubeSmart owns or manages 672 self-storage facilities across the United States. Its operating portfolio comprises 44.8 million square feet.

Extra Space Storage Inc.

Same-store revenue increased 9.6 percent and NOI rose 11.5 percent compared to the same period in 2014. FFO was 87 cents per diluted share, resulting in 27.9 percent growth compared to the fourth quarter the previous year.

Same-store occupancy grew by 150 basis points to 92.9 percent as of Dec. 31, compared to 91.4 percent at the same time in 2014.

During the quarter, the company closed on its merger acquisition of SmartStop Self Storage Inc., adding 122 wholly owned facilities and assuming the management of 38 locations, for about $1.3 billion. It also acquired nine other storage properties for approximately $75.4 million.

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

Headquartered in Salt Lake City, Extra Space owns or operates 1,347 self-storage properties in 36 states; Washington, D.C.; and Puerto Rico. The company’s properties comprise approximately 900,000 units and 101 million square feet of rentable space.

Public Storage Inc.

Revenue for same-store facilities increased 6.6 percent, or $31.3 million, in the quarter, as compared to the same period in 2014, primarily because of higher realized annual rent per occupied square foot. Cost of operations for the same-store facilities increased 1.7 percent, or $1.8 million, during the period compared to the previous year.

FFO was $2.46 per diluted common share, compared to $2.17 for the same period the previous year. NOI increased $39.5 million compared to the same period in 2014, including $29.5 million for same-store facilities.

The company acquired seven self-storage facilities during the quarter for $71 million. Three of the properties are in Florida, with two each in California and Texas. It also completed four new developments and various expansion projects that added 400,000 net rentable square feet to its portfolio for $34 million.

The company reported a regular common quarterly dividend of $1.70 per common share. It also declared dividends with respect to various series of preferred shares. All the dividends are payable on March 31 to shareholders of record as of March 16.

Based in Glendale, Calif., Public Storage has interests in 2,277 self-storage facilities in 38 states, with approximately 148 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 11.9 percent over the previous year, while operating costs increased 10.6 percent, resulting in an NOI increase of 12.5 percent. Same-store NOI increased 7.8 percent year over year. FFO for the quarter was $1.26 per fully diluted common share, compared to $1.08 for the same period in 2014. Adjusted FFO was $1.28, a 13.3 percent increase.

Net income available to common shareholders for the fourth quarter was $30 million, or 83 cents per fully diluted share. For the same period in 2014, net income available to common shareholders was $25.7 million, or 76 cents per fully diluted common share.

Revenue for the company’s 399 wholly owned facilities increased 6.7 percent year over year, helped by an increase in average occupancy of 120 basis points and a 5 percent increase in rental rates and other income. Average overall occupancy was 89.8 percent, with units renting for an average of $12.83 per square foot.

Sovran acquired one self-storage property near Philadelphia during the quarter for $6.6 million. The company also sold two facilities in South Carolina for about $4 million. Both had been purchased as part of a larger portfolio in September 2015.

The company approved a quarterly dividend of 85 cents per common share, which is equal to the previous quarter.

Based in Buffalo, N.Y., Sovran operates more than 500 self-storage facilities in 26 states under the Uncle Bob’s brand. Its portfolio of owned and managed facilities comprises more than 36 million square feet.

Sources:

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