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Self-Storage REITs Release Financial Results for Second-Quarter 2015

The four publicly traded, U.S.-based self-storage real estate investment trusts have released financial statements for the quarter that ended June 30, 2015. In general, all four entities showed gains in key areas, particularly funds from operations and net operating income, while also achieving increases in occupancy.

August 7, 2015

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

The four 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, 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.

“The storage business is in a very good place right now, and we are taking advantage of the operating conditions,” said Spencer F. Kirk, CEO of Extra Space Storage. “Muted new supply, steady demand and our sophisticated operating platform led to the strongest revenue and NOI growth in Extra Space's history."

CubeSmart CEO Christopher P. Marr attributed “steady demand, limited new supply and attractive revenue growth” throughout the REIT’s regional markets for strong gains across the board. "Given record occupancies that reached 93.8 percent at quarter end, the company was able to accelerate positive pricing momentum while also reducing promotional activity during the quarter. Based on our strong first-half performance and positive fundamental outlook for the remainder of the year, we are raising 2015 guidance for FFO and same-store performance."

CubeSmart

CubeSmart reported FFO per share of $0.31 during the quarter, a 14.8 percent year-over-year increase. Same-store NOI at its 361 facilities grew 8.4 percent year over year. The company attributed this to 6.8 percent growth in revenue and a 3.3 percent increase in property operating expenses.

The operation gained 190 basis points in physical occupancy compared with the same quarter the previous year. The same-store physical occupancy was 93.8 percent as of June 30. The company’s total-owned portfolio, representing 433 facilities comprising 29.6 million square feet of rentable space, had a physical occupancy of 92.7 percent at the end of the first quarter.

CubeSmart acquired three storage facilities for $27.9 million during the quarter. One property is in Arizona and two in Florida. As of June 30, the REIT had four facilities under contract to purchase for $90.2 million in Florida, New York and Texas (2). The company also has five joint-venture developments under construction, with four in New York and one in Washington, D.C. The aggregate investment on these projects is estimated at $122.9 million.

On May 27, the company declared a dividend of 16 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 board of trustees 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 615 self-storage facilities across the United States. Its operating portfolio comprises 40.9 million square feet.

Extra Space Storage Inc.

Same-store revenue increased 9.4 percent and NOI rose 12.1 percent compared to the same period in 2014. FFO was 72 cents per diluted share, resulting in 17.2 percent growth compared to the second quarter the previous year.

Same-store occupancy grew by 240 basis points to 94.5 percent as of June 30, compared to 92.1 percent at the same time in 2014.

The company purchased 29 properties during the quarter for approximately $239.9 million. They are in Arizona, Florida, Georgia, North Carolina and Texas. The REIT also acquired a joint-venture partner’s 1 percent interest in an entity holding 19 facilities for approximately $1.3 million and purchased individual facilities in Illinois and Massachusetts at the completion of construction for about $22.4 million.

The company paid a quarterly dividend of 59 cents per common share on June 30 to common shareholders of record on June 15.

Headquartered in Salt Lake City, Extra Space owns or operates 1,147 self-storage properties in 35 states; Washington, D.C.; and Puerto Rico. The company’s properties comprise approximately 770,000 units and 85.1 million square feet of rentable space.

Public Storage Inc.

Revenue for same-store facilities increased 6.8 percent, or $31 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 1.1 percent, or $1.4 million, during the quarter compared to the same period last year.

FFO was $2.15 per diluted common share, compared to $1.99 for the same period the previous year. NOI increased $44.8 million compared to the same period in 2014, including $29.6 million for same-store facilities.

The company acquired four self-storage facilities comprising 300,000 square feet for $39.9 million and a lease buyout for $15.6 million. One of the assets is in California and three in Texas. The REIT is under contract to acquire nine facilities (three in Colorado and six in Florida) for $97 million. It also completed two new developments and various expansion projects that added 200,000 net rentable square feet to its portfolio for $27.9 million.

Internationally, Shurgard Europe acquired 23 facilities in The Netherlands for approximately $130 million. The assets comprise about 900,000 square feet.

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 Sept. 30 to shareholders of record as of Sept. 15.

Based in Glendale, Calif., Public Storage has interests in 2,262 self-storage facilities in 38 states, with approximately 147 million net rentable square feet. Operating under the Shurgard brand name, the company also has 216 facilities in seven European countries, with approximately 11 million net rentable square feet.

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

Total revenue increased 12.8 percent over the previous year's second quarter, while operating costs increased 9.9 percent, resulting in an NOI increase of 14.2 percent. Same-store NOI increased 7.8 percent year over year. FFO for the quarter was $1.22 per fully diluted common share, compared to $1 for the same period the previous year.

Net income available to common shareholders for the second quarter was $28.5 million, or 80 cents per fully dilated share. For the same period in 2014, net income available to common shareholders was $20.6 million, or 62 cents per fully diluted common share.

Revenue for the company’s 399 wholly owned facilities increased 5.8 percent year over year, helped by an increase in average occupancy of 130 basis points and 3.9 percent increase in rental rates. Average overall occupancy was 91.4 percent, with units renting for an average of $12.28 per square foot.

Sovran acquired nine self-storage properties during the quarter for $75 million. Two of the assets—one in Arizona and one in Massachusetts—were purchased upon completion of construction. The other seven facilities were already established, with one in Texas and six in Florida. The REIT is under contract to buy 13 additional properties for about $85 million.

The company paid a quarterly dividend of 85 cents per common share, a 13.3 percent increase from last quarter.

Sovran, which operates facilities under the brand Uncle Bob's Self Storage, operates more than 500 facilities in 25 states, with a large presence in Texas.

Sources:

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