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

The four largest publicly traded, U.S.-based self-storage real estate investment trusts (REITs)—CubeSmart, Extra Space Storage Inc., Life Storage Inc. and Public Storage Inc.—have released financial statements for the quarter that ended Sept. 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.

November 4, 2016

6 Min Read
Self-Storage REITs Release Financial Results for Third-Quarter 2016

The four largest publicly traded, U.S.-based self-storage real estate investment trusts (REITs)—CubeSmart, Extra Space Storage Inc., Life Storage Inc. and Public Storage Inc.—have released financial statements for the quarter that ended Sept. 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.

"Strong rate growth to new and existing customers drove another quarter of solid revenue and NOI growth,” said Spencer F. Kirk, CEO of Extra Space Storage. “Our same-store performance, together with accretive off-market acquisitions, led to earnings per share growth of 60 percent and FFO growth of 26 percent. This marks our 24th consecutive quarter of double-digit FFO growth."

Christopher P. Marr, CEO of CubeSmart, expressed similar sentiments regarding the REIT’s performance. "Third-quarter results reflect the quality of our portfolio, the strength of our operating platform, and our focus on providing industry-leading customer service,” he said. “We are pleased to be raising the mid-point of our FFO and same-store NOI guidance for 2016. We remain active on the external growth front, maintaining our disciplined underwriting approach as we continue to pursue investment opportunities that create long-term value for our shareholders."

CubeSmart

CubeSmart reported FFO per share of $0.38 during the quarter, an 11.8 percent year-over-year increase. Same-store NOI at its 407 facilities grew 9.3 percent year over year. The company attributed this to a 6.2 percent growth in revenue and a 0.9 percent decrease in property operating expenses. Same-store locations contributed 91 percent of the REIT’s property NOI during the quarter.

The operation gained 40 basis points in physical occupancy compared with the same quarter the previous year. The same-store physical occupancy was 93.1 percent as of Sept. 30. The company’s total-owned portfolio, representing 471 facilities and comprising 32.5 million square feet of rentable space, had a physical occupancy of 90.9 percent at the end of the third quarter.

CubeSmart acquired seven storage facilities for $79.9 million during the quarter. The properties are spread across five states, with two each in Nevada and Texas and one each in Arizona, Colorado and Minnesota.

As of Sept. 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 five joint-venture and two wholly owned projects under development.

On Aug. 2, 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 Oct. 17 to common shareholders of record on Oct. 3. The REIT also declared a dividend of $0.48 for the 7.75 percent Series A Cumulative Redeemable Preferred Shares that was paid on Oct. 17 to holders of record on Oct. 3.

CubeSmart owns or manages 762 self-storage facilities across the United States. Its operating portfolio comprises 50.6 million square feet.

Extra Space Storage Inc.

Same-store revenue increased 6.1 percent and NOI rose 7.8 percent compared to the same period in 2015. FFO was $1 per diluted share, resulting in 25.9 percent growth compared to the third quarter the previous year.

Same-store occupancy was 93 percent as of Sept. 30, which was a 0.4 percent decrease compared to the same period in 2015.

During the quarter, the company acquired 26 wholly owned facilities and one property at the completion of construction for approximately $296.4 million. It also acquired three facilities at the completion of construction through a joint venture for about $37.1 million.

The company paid a quarterly dividend of 78 cents per common share, which was equal to the previous quarter. It was paid on Sept. 30 to common shareholders of record on Sept. 15.

Headquartered in Salt Lake City, Extra Space owns or operates 1,421 self-storage properties in 38 states; Washington, D.C.; and Puerto Rico. The company’s properties comprise approximately 955,000 units and 107 million square feet of rentable space.

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

Total revenue increased 33.9 percent over the previous year, while operating costs increased 37.4 percent, resulting in an NOI increase of 32.3 percent. Same-store NOI increased 5.8 percent year over year. FFO for the quarter was $0.79 per fully diluted common share, compared to $1.29 for the same period in 2015. Adjusted FFO was $1.34, a 1.5 percent increase.

Net income attributable to common shareholders for the third quarter was a loss of $4.7 million, or $0.10 per fully diluted share. For the same period in 2015, net income attributable to common shareholders was $31.5 million, or 88 cents per fully diluted common share. The loss was attributed to the company’s acquisition of LifeStorage L.P. for $1.3 billion and related financing costs.

Revenue for the company’s 417 wholly owned facilities increased 4.5 percent year over year, helped by an increase in average occupancy of 30 basis points and a 3.7 percent increase in rental rates and other income. Average overall occupancy was 91.9 percent, with units renting for an average of $13.38 per square foot.

The REIT’s acquisition of LifeStorage added 83 wholly owned facilities and four managed properties to its portfolio. The company purchased three other facilities during the quarter for $28 million. The properties are in Colorado, Florida and South Carolina. Together they comprise about 205,000 square feet.

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

Based in Buffalo, N.Y., Life Storage operates more than 650 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 45 million square feet.

Public Storage Inc.

Revenue for same-store facilities increased 5.1 percent, or $26.6 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 increased 6.4 percent, or $8.5 million, during the period compared to the previous year.

FFO was $2.51 per diluted common share, compared to $2.27 for the same period the previous year. NOI increased $28.3 million compared to the same period in 2015, including $18.1 million for same-store facilities.

The company acquired eight self-storage facilities during the quarter for $73 million. Four of the properties are in Kentucky, with one each in Colorado, Georgia, Michigan and Utah. Together they comprise 600,000 net rentable square feet. It also completed one new development and various expansion projects that added 200,000 net rentable square feet to its portfolio for $25 million.

The company reported a regular common quarterly dividend of $2 per common share, an 11 percent increase from the previous quarter. It also declared dividends with respect to various series of preferred shares. All the dividends are payable on Dec. 29 to shareholders of record as of Dec. 14.

Based in Glendale, Calif., Public Storage has interests in 2,319 self-storage facilities in 38 states, with approximately 152 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.

Sources:

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