CubeSmart (CUBE) 6 Nov 202020 Q3 Earnings call transcript

Good morning, and welcome to the CubeSmart Third Quarter 2020 Earnings Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Josh Schutzer, Senior Director of Finance. Please go ahead.

you. Thank everyone. Hello, Malvern, from Good Pennsylvania. morning Welcome to Earnings Quarter Third XXXX Call. CubeSmart's Marr, today's Chief Chief call on President Financial include Martin, Participants Tim Chris and and Executive Officer. Officer;

by prepared Q&A Our be followed will session. remarks a

risks operating and and of regarding Risk our will report earnings Securities earnings uncertainties release include company's involve Commission, morning, factors X-K under was evening, specifically is in materially provided documents In our differ addition factors earnings the we website may Form and together that the cause the and Relations company with of Form at on company's risks, and Form to release, statements. data section Exchange to financial Investor X-K remarks section statements The or that and company's filed that the issued cause strategy results certain which furnishes actual materially this filed other forward-looking with yesterday are forward-looking annual supplemental the our to results the from the from The the available statements www.cubesmart.com. forward-looking to these Factors XX-K. the with could differ files

include turn GAAP the non-GAAP financial call over be now reference company's A Chris. reconciliation on measures. the between posted supplement In the in the addition, www.cubesmart.com. at and will I remarks can measures quarter non-GAAP to found third company's website to

convenient in third momentum second industry to of quarter, a off again significant such, self-storage the quarter. coming And November. Thanks, challenges proven our our as The and strong and continues solution business. an into Josh, the requirements, has demonstrated positive to be At and in morning, resilient good CubeSmart, exceptionally wide that best-in-class portfolio the recovery pandemic-related customers' provides efficient a range everyone. yet

average gains and remains customers October occupancies Demand and extremely consumer record-highs lower solid elevated Strong percentage XXX to percentage rate gap average physical reflected to continues the year a third occupancy net to Our of the Across end we gap at ranges remains points. stay from throughout length same-store from October, elongate. to with being year year ending year-over-year high-quality as the effective last our in last quarter. offered markets are demand, the at gap in our and positive expansion last mid-XXs. building major the occupancy continued expanding to low-teens rates. vacates basis The

stores Strong opened Our strength properties to in quarter. investment activity many New the And markets, helping supply above the continues The solid a also to had steam York environment. in portfolio number as accelerate average. trends lease-up slow during demand of the recently of growth a After pause, quarter. stabilize declines. into helped the up pipeline operating the posting very overall has occupancy that our revenue same-store quarter, have accelerated picked gradually fourth and the our outlook

Long expect our Brooklyn, we to properties earnings agreement Deluxe, announced stores Texas And in of In Island, and also our acquire X addition have by to to previously release, Storage from Nevada located in the contract. highest-quality Bronx we year-end. in and close under that additional Queens X Florida, we noted the in

all palm our comfortable. of teammates to in contact-free their rental technology will on in comments. convenient, On We quick, At a app to our our I customers their mobile for be are over impact solutions the with able having our My continue our with our We the With find serve SmartRental, operating approximately quarter, access spirit our ability that to important manage are of the through that, In to pleased to notifications initiatives and average, their tool be genuine and results. call strive coming to their offer XX% our provide codes, Tim? pay an continued over care. provides industry-leading of system. settings continues solutions summary, demonstrate customers receive the positive the CubeSmart introduced hands. most Officer, X,XXX Chief rentals thanks during gate to Financial his self-storage turn customer to innovative its that we Tim innovative manner proud industry CubeSmart, resilience. those who Martin, our the are appreciation bills, they the

fundamentals the interest you of thank had and growth and self-storage per reported for sector your decline and occupancy historically share support. power. in those a is by year, the and strong COVID-impacted Chris' a continued Chris, X.X%. of trend of the quarter the in same-store physical as growth NOI comments, negative our growth X.X%, Thanks, Demand are on quarter. up big pretty of and same-store the pricing pre-COVID portfolio X.X% in X.X% Overall, for for levels rebounded some of high there quarter, product everyone evidenced by same-store our rebounded operating revenue call in X.X% second on encouraging Picking in And we numbers. revenue way. first most followed growth $X.XX, for to the expense solid FFO heavily Same-store was lines of

X.X% operating lean with considerably a throughout existing seasonal demand driven customer and our a the point growth in sequentially, third in consumer combined rate quarter, resume So on basis the by like practices our XXX to increases normal stronger ability basis. the largely sales improvement quarter, areas

of point a fourth signs growth from continued revenue heading All perspective. the quarter these to same-store and are positive into strength

be policies customer quick been to attract teammates presented mentioned. app. had had pandemic. were online CubeSmart to quickly our fantastic, technologies and our and service the and we adjusted adapt. adapt. We adjust to to Chris program developed have with excellent had rolled Our quickly practices out business strategies from and challenges new adapt. We the provide our to SmartRental Pricing to as to customers How Long-standing marketing customer and

as shifted direction, we a things again. quickly importantly, as Just in positive more pivoted

-- pricing those upward We accordingly. of where appropriate. rate swift sales we quick in customer lean resuming and increases and consumer adjusted Our practices systems to trends were of identify were changing traditional

it for some things disruption become Sometimes and to takes these evident. more chaos

nimble portfolio. when on normal from led getting very levels last combined the cash to significant over and a relative the our close And we with We we and months. acquisitions, sector, real flows have we of diversification on up the transactions stores team, believe, quality quarter. lined growth and a In third-party basis outperformance didn't very some a high a our Collections And the have in a again, perspective, customer approach, to X of customer levels the closing historical strong quarter, the receivable added of in and returned to external sophisticated I high-quality while quality has accounts systems our third in speak XX the any amount to self-storage new platform. business. management an for busy were fourth certainly the of

partnership $XXX.X stores of $XXX.X that will transaction price, the provided found million We in by $XXX.X of detail be of the operating aggregate have last existing of we and announced form week. notably, an under good of million XX bit million. to for contract transaction in investor debt an the paid investment Of assumption presentation that million $XXX year-end, through units. the acquisition in a the of million that cash, Deluxe website. We early close on be Part can purchase our total is $XXX.X and on expect X-property Storage

with quarter $XXX in Outside of and perspective We on transaction that strong X.X%. We long have a opportunistic pieces the our we offering base. in contract. end close we create bond capacity month under transaction, to of XXXX appreciate deal Florida, to X the stores after stores from to X to that during and December. issue support million was on also maturing And are busy received maturity a demonstrates expect October Texas, X, to were from Nevada Island. external market, XX-year closed the This ongoing bond income partially yield sheet. those partially On and our a we this commitment in balance and we support growth. fixed located unsecured refinancing term additional investor a Long The of

That the our was the $XXX on payment of of were redemption to to provide revolver amounts a used balance used for repay in drawn our $XX.X million XX debut side, make-whole the X.X%. and bond On October XXXX external had proceeds we the from offering of much redemption opportunistic we've support about. growth back coupon included and that a completed of funding the on million talked proceeds

medium-term So have external commitments, attractive well we've and flexibility been and busy and of also fronts. and fund and balance the pursuit sheet on growth the to healthy We we external capacity, growth near- to positioned access capital our support additional financial opportunities. of plenty to very remain are

for today's some the So time thanks to let's Aileen, At call. point, call taking for open this up again us the for join questions.

Instructions]. [Operator

question Sanabria Capital. first BMO from comes Our Juan today with

into rate little can that. could hoping trends York and are throughout and how quarter color Street within you a those Just some trending and if specifically give trending September New on maybe how talk is you about bit the

This Chris that Sure. question. Marr. is I'll take

September, the store. about quarter. throughout about on So average same built quarter were XX%. if rents for X.X% you Hitting plus plus net basis a quarter, the the asking we effective the think average really throughout was That year-over-year number

to As we plus sit that's here be October, exact. XX%, XX.X% in about

sit just better here specifically If that City, and looking than the than referred Bronx York to up slightly the in bit Queens, suburbs, the that. about City it a York today, in And Brooklyn, numbers the you're as we're XX%, and in to. exact, in be New I we XX.X% assets New ran higher city, those

then on more And clearly, impressive. acquisition everybody up built been side. Very has the

But kind a on you've and and the stabilized bit beyond the transaction, of quarter congrats quality the guys going about Deluxe 'XX pipeline. fourth forward more into on Is more broadly if did assets assets, or that. thoughts lease-up seeing talk you're what Storage done development You already you into the rates? cap what could just of about little

Tim. Yes. it's Juan,

to to for up where pretty What time up fourth calendar. quarter. really under relates it contract we not lot given land, here, have the more the to queued enough where we is likely we're in we the announced get much fourth filled is are whole quarter, be a As

big you've things. combination picture, seen I think a of

You folks view. a listings to the put seller's time coming point from new. and out transacting of of summer have a traditionally of be together nothing when year to That's tend busier months, want

you From of the a seen haven't then a the buyer lot And cap I of low-cost side the energy seen whole for you've of here that what's of I seen, driven that us think the but flurry from that only the that's and been activity an we've combine for you spurring think stability course, on from of well. part of have is, which as debt we really equation. standpoint, think, perspective, certainly capital I the available, not others fundamental pretty operating improvement some rate here a with of movement.

think Simply going space, I to the being not the of being remaining rates new they if and further I obviously the down. that cap certainly transaction think, acquirer pushed are, where support is to

to the product incredibly will attract think product continue on a relative basis other attractive, capital types which I into sector. our to remain

continue XXXX. trends those into think early are I of part the likely to

be good sector. a it's think I time So to in the

be think I the sector. to others want in

people performance are capitalized. of think it X think is the product And was ago. the well pretty into generally I months than visibility I X better to much

that's I So and conducive interest. transactions a to of to think lot certainly be going additional

Our Capital with Thomas next Todd question comes Markets. from KeyBanc

the yield the Deluxe expect overall be on would in deal, Storage question you what XXXX? First to

Yes.

a, it. that, -- talking targeting be in at to a there be about we're at mid-Xs. believe, about been a XXXX. where been we've is to us, market we've what what cap we is haven't rate, -- we excited we're we stabilization. the really that yield what perspective, looked would we our is From which transaction for And not believe mid-Xs in expect is underwriting That We

of of the perspective, assets there X from occupancy a have fully rate X from not some stabilized in of others are a stage not the We four are perspective. physical lease-up, are X

in stabilization So aren't XXXX. a we're in yield our really in at there in and underwriting at occurring We're quite stabilized looking not XXXX either. XXXX

had really in where we're of into So and balance operating 'XX of I gets We've Queens, strategic the to how incredibly to years us FFO that XX neutral benefit the the us excited managing fits being we've the from standpoint, and Bronx a But roughly a really we're out, XXXX rest early them point be the portfolio, on for they But stages here. of Brooklyn, would it to in round and since yield that those from been market-leading the ago. our to end opened. characterize obviously, just the about position bring sheet stores. started something nicely

about think Is that debt these investments? under talk might Deluxe the investments then And Storage helpful. plan fund right. can X/X funding capitalizing debt. still to additional more pipeline? else you All that looks for what's the X/X a historically deal right funding It what little funding these Is for And You've mix? and to investments contract. like the that's funded the you investments? are about way equity be the right contemplating Or in and equity,

that. The us our consistent balance a from think about overall, in for seen mean, what appreciate very we from a long Yes, way very period time. of -- I you've sheet

We are company. metrics that the that managing for a appropriate investment-grade think And the rating. credit BBB, we sheet BaaX-rated about are within balance

sources transactions, uses that to And way so going from and kind we've disclosures. we're on close the how our a of funding in put a in

up of I close. built a that fair we're fluctuate a bit, amount the and leverage our we cash million up transaction, transactions. levels indicated tied for of right at $XXX capacity credit So metrics Deluxe the can bit closing, we down around little not obviously that to need a We've instance, in little in in

While it, any have meaningfully they're our movement sizable of on they're transactions, going balance the about metrics. excited point they're sizable sheet where to to not we're any and

we Over consistently. on we manner credit expect Ideally, time a we conservative leverage that to continue us have to side how are short amount the would period our to the you've from rating. metrics us, when we ranges a use tremendous comfortable we're that the balance seen have and as the in of for we to which and term, credit manage haul, long flexibility of the the the In sheet metrics still get ultimately in would with. for that

at advantage capital. cost valuations of are equity some debt short-term we future that to perhaps So point in despite take a disconnect and position transactions the a or in in of

other one pipeline. question the Okay. just on And development here

again Should developments added the pipeline? a activity added that given rebound is see few And Valley to think, opportunities been little seeing I additional more we've to this added you've development quarters, here in we Stream bit you a a up more seen So fundamentals? development you picking ground-up there? Are quarter. new you are sensing broadly, It's since just the property. just expect

Todd, it's Chris.

last the part question, your I not think to of yet.

shovel making the rebounded lot resilient fundamentals go business. But put to So other there quickly, a ground. that decisions pretty are into of a incredibly elements in

we that from change opportunities have our behavior not So again, in any in more that and our own from observe areas make seen then really From third-party that feedback yields for from produced markets continue are from terms owners. challenging to of our the we around find perspective, us that to be the get comfortable the the there. can and costs and sense rents

likely construction So I more as that shrink under the think have than be will expanding. not it opposed that to continues to volume we

Citigroup. Our next Smedes question comes with from Rose

thoughts picked wondering and what if you we're just I companies wanted something move-in moving kind was And do quarter. subdued you move-out But I -- activity activity seeing doesn't that? more relatively It to the think similar. of your an issue? mean maybe Or that. move-out saw to normalized you're activity other not I are up. sound that about returning that's is you hearing levels? ask in like from you would what maybe was expect

it's Smedes, Chris.

So us the has been activity lower. for move-out

to year. were vacates October, in example, about relative of last October down X% For

our moved to force is in. business of somebody reality I the once they stay have think we cannot

mean to joy the pandemic-related environment think plays However, of a them how past, the stay. shift I point, normal have business. real traditional is they all in back home it think form tend movement. to I life's we of and in don't patterns of appreciate starts whether mean, customer how don't their incredibly some have out. of have traditional all At we've know that customers revert them, see them seen assist to in and Many just we're an I and us some self-storage of Once And crowded less at the sort going finds to point. the is we've having that we our this some the seen discovered moves of forms helping a needs, in movement really and sticky the of can one to of this movement. with

the is I once as is, is think sticky. we in, what customer know very

what What you stay year the just you Okay. increasing. I of was ago the average kind mentioned around And I where mean that maybe was can is it of of put length seen. length a now? some or maybe you context have guess it

XX average around mean I increasing days over would to that's that But meaningfully And continues -- elongated the Sure. be the of probably I our of it's stay not months. over right out say months. days, by that, by course XXXX. last overall, in length

Okay.

last upward New New here, your to Just the like? just of any you that is have? forma pro exposure that limit, to Or dependent with City find to to how is guess, York thing is more if able other deals York you I moving there wanted up would exposure much you ask it are want of you kind I to

Yes.

at we really submarkets. markets, X markets markets, we're those look again, the So and that in then multiple do as within distinct distinct

own Manhattan. the and has is which each the own asset asset submarkets assets an in an and X and we So extent, unique to But it. and Staten which larger in of predominant Brooklyn unique is boroughs, the in some Island outer and Queens, manage each within Bronx, we exposure of

around no there's set So it. parameter

We have the portfolio. highest-quality

in the clustered. of boroughs significant stores be There that in very other reality share. are market tend is have to those We stores zoning a markets. The

is New there of something properties do York City. -- time, the make X continue X not we us at These MSA, really that X of -- had sense the contract those the to So a may future York or aggressively were for opportunity be from we those And perspective? would of we they and opportunities, under And are any outside parts come that in It's look at in that country. under be, there we'll that things portfolio other continue not a we'll that do up. boroughs obviously, greater at Obviously, in the over come after. have management would to in us in been expand to outside that markets opportunities New significantly us? prior. this stage really any in the set contract It expose we going to look is complement areas of submarket would submarkets fill

[Operator Instructions].

with Our Zhang next from question Hong comes JPMorgan.

I was sense wondering I how your such of occupancy guess, as been driven if you of general disruption, a direct have by, COVID home? gains work from much have

a I a extra saying, up office. their to impossible you have that could room is different -- Pretty be, to It's impossible COVID-related -- things. would need for type. But down as up of for consumers I lot we us break space have moving. tried want leases need I'm -- I I'm to COVID-related even "I certainly for to customer." it of think signing different we into am anybody I many it's free all home don't I coming information. if something characterize kinds reasons. But a that this to mean, anecdotal So COVID-related, so

to temporary over this time that their to I our for think happen we done and what creates here does many that just demonstrate have belongings. a has things And product again a consumer's store type. demand is many, that place that need a fills a product for one safe pandemic or

double rent Do of move those well. guess the how also more where And of that have were people your back rates as to middle sense digits. rents? during would you down to people a paused you long I take it in lockdowns, And increases had it. moved market during Got you time

So all all feasible, was the rate customers. September we happening increase reengaged, by of to XX. process our where that And

will probably months XX you which think those been increase If eligible rate later for about the in a in in would who point, then be customers those and at moved after X months have April, that. lowest

plus If or you where April, the rate would be increase. about minus rates dipped that second you and think rates in

where be it to probably would we if So at would look back another of of getting month to another you -- X are back to then rate take up up would take get increases par. terms kind And at are we today's them where to today, them rates. in you XX, it

would Marr Chris any like remarks. to back This closing concludes turn our question-and-answer over call to the session. for I

note, And fourth know Thanks, be you. the it's quarter, all it everybody, a But performance go I will for particularly very, as Okay. high participating. in I to long season. self-storage been for the we ended continue I'm earnings on confident into and quarter, CubeSmart's good. hope, a very of

talking you and thank safe, to look forward listening. So next year. to you Stay all for

Thank The today's now you conference concluded. has presentation. attending for

may You now disconnect.